AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 9, 2000
REGISTRATION NO. 333-88663
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 4
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
GENTIVA HEALTH SERVICES, INC. 8082 36-433-5801
(Exact name of registrant as (Primary Standard Industrial (I.R.S. Employer Identification
specified in its charter) Classification Code Number) Number)
DELAWARE
(State or other jurisdiction of
incorporation or organization of registrants)
175 BROAD HOLLOW ROAD
MELVILLE, NEW YORK 11747
(516) 844-7800
(Address, including ZIP Code, and telephone number, including area code, of
registrants' principal executive offices)
------------------------------
EDWARD A. BLECHSCHMIDT
GENTIVA HEALTH SERVICES, INC.
175 BROAD HOLLOW ROAD
MELVILLE, NEW YORK 11747
(516) 844-7800
(Name, address, including ZIP Code, and telephone number, including
area code, of registrants' agent for service)
with copies to:
KENNETH W. ORCE, ESQ. MARK R. EATON THOMAS W. DOBSON, ESQ.
CAHILL GORDON & REINDEL ADECCO, INC. LATHAM & WATKINS
80 PINE STREET 100 REDWOOD SHORES PARKWAY 633 WEST FIFTH STREET
NEW YORK, NY 10005 REDWOOD CITY, CA 94065 SUITE 4000
(212) 701-3000 (650) 610-1000 LOS ANGELES, CA 90071
(213) 891-8000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective and the merger
described in the proxy statement/prospectus is consummated. If the securities
being registered on this Form are being offered in connection with the formation
of a holding company and there is compliance with General Instruction G, check
the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PRICE PER SHARE PRICE REGISTRATION FEE
Common stock, par value $.10 per share, of
Gentiva Health Services, Inc.(1).......... 22,122,152(2) (3) (3) (3)
(1) This registration statement also pertains to Rights to purchase Series A
Participating Preferred Stock of Gentiva Health Services, Inc. The Rights
are attached to and to be issued with each share of Common Stock. Until the
occurrence of certain prescribed events, the Rights are not exercisable, are
evidenced by the certificates or the Common Stock and will be transferred
along with and only with the Common Stock. Thereafter, separate Rights
certificates will be issued representing one Right for each share of Common
Stock held, subject to adjustment pursuant to anti-dilution provisions.
(2) Based on the maximum number of shares of Gentiva Health Services common
stock to be issued in connection with the merger (the "Merger") of Olsten
Corporation and Adecco SA, based on the product of (i) 0.25, the number of
shares of Gentiva Health Services common stock issuable per share of Olsten
Corporation stock in connection with the Merger and (ii) 88,488,608, the
number of shares of Olsten Corporation stock for which consideration is
payable in the Merger.
(3) Previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY
DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED FEBRUARY 9, 2000
PROXY STATEMENT
OF
OLSTEN CORPORATION
-------------------------------
PROSPECTUS
OF
ADECCO SA
-------------------------------
PROSPECTUS
OF
GENTIVA HEALTH SERVICES, INC.
-------------------------------
Olsten Corporation is sending this proxy statement/prospectus to holders of
its common stock and class B common stock in connection with the solicitation of
proxies by the board of directors of Olsten for use at a special meeting of
holders of Olsten stock to be held at a.m., eastern time, on March , 2000,
at Olsten Corporation, 175 Broad Hollow Road, Melville, New York and at any
adjournments and postponements of the special meeting. Olsten is holding the
special meeting to consider and act upon a proposal to approve the merger of
Olsten with a wholly-owned subsidiary of Adecco SA, a societe anonyme organized
under the laws of Switzerland. Following the merger, Olsten will be a
wholly-owned subsidiary of Adecco.
As part of the merger, all of the shares of common stock of Gentiva Health
Services, Inc., a wholly-owned subsidiary of Olsten, will be issued to Olsten
stockholders. Following the merger, Gentiva Health Services will be an
independent, publicly-owned company. Gentiva Health Services has applied for its
shares to be approved for quotation on the Nasdaq National Market under the
symbol "GTIV." There is currently no public trading market for the shares of
Gentiva Health Services common stock. Olsten also seeks your approval of
executive compensation and employee benefit plans of Gentiva Health Services to
be in effect if the merger is approved.
In exchange for each share of your Olsten stock, you may elect to receive
from Adecco $8.75 in cash or 0.12472 of an Adecco American Depositary Share, or
ADS, representing one eighth of an Adecco common share. You will also receive
0.25 of a share of Gentiva Health Services common stock for each share of Olsten
stock you own. Because of the requirement under the merger agreement that half
of the Olsten stock be exchanged for cash and half for Adecco ADSs, it is
possible that you will receive a combination of cash and Adecco ADSs despite
your election. Adecco common shares are listed on the Swiss Stock Exchange under
the symbol "ADEN" and the Paris Stock Exchange under the symbol "ADE." Adecco
ADSs are quoted on the Nasdaq National Market under the symbol "ADECY" but have
been approved for listing on the New York Stock Exchange, upon which listing
they will cease to be quoted on the Nasdaq National Market.
This proxy statement/prospectus is also a prospectus of Adecco relating to
Adecco common shares, including those represented by Adecco ADSs, to be issued
to Olsten stockholders in the merger. The Gentiva Health Services Prospectus
beginning on page X-i of this proxy statement/prospectus is a prospectus
relating to the Gentiva Health Services common stock to be issued to Olsten
stockholders in the merger and is a part of this proxy statement/prospectus.
Olsten and Adecco expect that the merger will close soon after approval by
the stockholders of Olsten at the special meeting if all of the other conditions
to the merger have been satisfied.
PLEASE PAY PARTICULAR ATTENTION TO THE "RISK FACTORS" SECTION BEGINNING ON
PAGE 18 OF THIS PROXY STATEMENT/PROSPECTUS WHICH DESCRIBES RISKS THAT YOU SHOULD
CONSIDER IN DECIDING WHETHER TO VOTE FOR THE MERGER.
THE GENTIVA HEALTH SERVICES PROSPECTUS BEGINNING ON PAGE X-I OF THIS PROXY
STATEMENT/PROSPECTUS IS A PART OF THIS PROXY STATEMENT/PROSPECTUS AND SHOULD BE
ATTACHED TO THIS PROXY STATEMENT/PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES TO BE ISSUED IN THE
MERGER, NOR HAVE THEY PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN
THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This proxy statement/prospectus is dated February , 2000 and is being
first mailed to Olsten stockholders on or about February , 2000.
WHERE YOU CAN FIND MORE INFORMATION
Olsten files annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. Adecco files
annual and special reports with the Securities and Exchange Commission. This
proxy statement/prospectus is Olsten's proxy statement for the special meeting,
Adecco's prospectus for the issuance of its common shares and Gentiva Health
Services' prospectus for the issuance of its common stock. The registration
statement, of which the proxy statement/prospectus is a part, contains
additional relevant information. As allowed by Securities and Exchange
Commission rules, this proxy statement/prospectus does not contain all the
information contained in the registration statement. Adecco ADSs are registered
under a registration statement on Form F-6 filed by Morgan Guaranty Trust
Company of New York.
You may read and copy any reports, statements or other information Olsten or
Adecco files at the Securities and Exchange Commission's Public Reference Rooms
at the following locations:
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, DC 20549 New York, NY 10048 Suite 1400
Chicago, IL 60661-2511
Please call the Securities and Exchange Commission at 1-800-SEC-0330 for
further information on the operation of the public reference rooms. Olsten's and
Adecco's Securities and Exchange Commission filings are also available to the
public from commercial document retrieval services, and Olsten's filings can
also be found at the web site maintained by the Securities and Exchange
Commission at "http://www.sec.gov."
In addition, Olsten's filings can be inspected at the offices of the New
York Stock Exchange and Adecco's filings can be inspected at the offices of the
Nasdaq National Market.
INCORPORATION BY REFERENCE
The Securities and Exchange Commission allows Olsten and Adecco to
incorporate by reference information into this proxy statement/prospectus, which
means that they can disclose important information to you by referring you to
other information Olsten and Adecco have filed with the Securities and Exchange
Commission. The information incorporated by reference is deemed to be part of
this proxy statement/prospectus, except for any information superseded by
information in this proxy statement/prospectus.
ii
This proxy statement/prospectus incorporates by reference the documents set
forth below that Olsten and Adecco have previously filed with the Securities and
Exchange Commission.
OLSTEN'S SEC FILINGS (FILE NO. 1-8279) PERIOD OR DATE FILED
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Annual Report on Form 10-K except for Items 1, 3, 6,
7, 7A, 8 and 14................................... Year ended: January 3, 1999
Annual Report on Form 10-K/A containing Items 1, 3,
6, 7, 7A, 8 and 14................................ Year ended: January 3, 1999
Current Report on Form 8-K.......................... Dated: March 30, 1999
Quarterly Report on Form 10-Q....................... Quarter ended: April 4, 1999
Quarterly Report on Form 10-Q/A..................... Quarter ended: April 4, 1999
Proxy Statement..................................... Dated: April 13, 1999
Quarterly Report on Form 10-Q....................... Quarter ended: July 4, 1999
Quarterly Report on Form 10-Q/A..................... Quarter ended: July 4, 1999
Current Report on Form 8-K.......................... Dated: July 26, 1999
Quarterly Report on Form 10-Q....................... Quarter ended: October 3, 1999
Current Report on Form 8-K.......................... Dated: February 4, 2000
ADECCO'S SEC FILINGS (FILE NO. 0-25004) PERIOD OR DATE FILED
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Annual Report on Form 20-F/A........................ Year ended: January 3, 1999
Current Report on Form 6-K.......................... Dated: January 3, 1999
Current Report on Form 6-K.......................... Dated: April 5, 1999
Current Report on Form 6-K.......................... Dated: April 29, 1999
Current Report on Form 6-K.......................... Dated: May 11, 1999
Current Report on Form 6-K.......................... Dated: August 2, 1999
Current Report on Form 6-K.......................... Dated: August 18, 1999
Current Report on Form 6-K.......................... Dated: August 24, 1999
Current Report on Form 6-K.......................... Dated: August 27, 1999
Current Report on Form 6-K.......................... Dated: November 2, 1999
Current Report on Form 6-K.......................... Dated: November 11, 1999
Current Report on Form 6-K.......................... Dated: February 4, 2000
Additionally, Olsten and Adecco are incorporating by reference any
additional documents that Olsten and Adecco may file with the Securities and
Exchange Commission between the date of this proxy statement/prospectus and the
date of the meeting. These documents include periodic reports, such as, with
respect to Olsten, annual reports on Form 10-K, quarterly reports on Form 10-Q
and current reports on Form 8-K, as well as proxy statements and, with respect
to Adecco, annual reports on Form 20-F and current reports on Form 6-K.
You can request a free copy of all or any of these documents, other than the
exhibits to these documents unless those exhibits are specifically incorporated
by reference into these documents, by writing to or calling:
With respect to Olsten's filings: With respect to Adecco's filings:
Olsten Corporation Adecco SA
175 Broad Hollow Road c/o Adecco, Inc.
Melville, NY 11747 100 Redwood Shores Parkway
(516) 844-7800 Redwood City, CA 94065
(650) 610-1000
If you would like to request documents from Olsten or Adecco, please do so
by , 2000 to receive them before the special meeting.
OLSTEN HAS PROVIDED ALL INFORMATION IN THIS DOCUMENT, AND THE DOCUMENTS
INCORPORATED BY REFERENCE HEREIN, RELATING TO OLSTEN, GENTIVA HEALTH SERVICES
AND THEIR RESPECTIVE BUSINESSES. ADECCO HAS PROVIDED ALL INFORMATION IN THIS
DOCUMENT, AND THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN, RELATING TO ADECCO
AND ITS BUSINESS.
iii
TABLE OF CONTENTS
OLSTEN PROXY STATEMENT/ADECCO PROSPECTUS
PAGE
--------
Where You Can Find More Information......................... ii
Incorporation by Reference.................................. ii
Questions and Answers About the Merger...................... 1
Summary..................................................... 2
Risk Factors................................................ 18
Cautionary Statement Regarding Forward-Looking Statements... 43
Information Concerning the Olsten Special Meeting........... 44
The Transaction............................................. 51
The Merger.................................................. 75
The Principal Stockholders Agreement........................ 85
Currency Exchange Rates..................................... 88
Material Tax Consequences................................... 88
Material U.S. Federal Income Tax Consequences of the Merger
and the Split-Off......................................... 89
Material U.S. Federal Income Tax Consequences of Ownership
and Disposition of Adecco ADSs............................ 90
Swiss Tax Consequences of the Ownership of Adecco Shares.... 91
Management's Discussion and Analysis of Financial Condition
and Results of Operations of Adecco....................... 93
Business of Olsten.......................................... 101
Business of Adecco.......................................... 103
Description of Adecco Common Shares......................... 109
Description of Adecco American Depositary Shares............ 113
Comparative Rights of Stockholders of Adecco and Olsten..... 120
Security Ownership of Adecco................................ 126
Unaudited Pro Forma Consolidated Financial Information of
Adecco SA and Olsten
Corporation............................................... 127
Adecco SA Notes to the Pro Forma Consolidated Financial
Statements (Unaudited).................................... 134
Comparative Market Price and Dividend Information........... 142
Other Proposals............................................. 145
Enforceability of Civil Liabilities Under the United States
Federal Securities Law.................................... 156
Other Matters............................................... 156
Legal Matters............................................... 156
Experts..................................................... 156
Index to Adecco Financial Statements........................ F-1
iv
GENTIVA HEALTH SERVICES PROSPECTUS
PAGE
--------
Prospectus Cover............................................ X-i
Prospectus Summary.......................................... X-1
Risk Factors................................................ X-7
The Split-Off............................................... X-20
Capitalization.............................................. X-30
Dividend Policy............................................. X-31
Gentiva Health Services, Inc. and Subsidiaries Unaudited Pro
Forma Consolidated Financial Data......................... X-32
Selected Historical Consolidated Financial Data of Gentiva
Health Services, Inc. and Subsidiaries.................... X-36
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. X-38
Business.................................................... X-44
Management.................................................. X-57
Certain Relationships and Related Transactions.............. X-67
Principal Stockholders...................................... X-68
Description of Gentiva Health Services Capital Stock........ X-70
Shares Eligible for Future Sale............................. X-77
Material Tax Consequences................................... X-77
Legal Matters............................................... X-80
Experts..................................................... X-80
Additional Information...................................... X-80
Index to Consolidated Financial Statements.................. XF-1
v
ANNEXES
Annex A -- Agreement and Plan of Merger................................ A
Annex B -- Separation Agreement with Exhibits.......................... B
Annex C-1 -- Opinion of Warburg Dillon Read LLC.......................... C-1
Annex C-2 -- Opinion of Salomon Smith Barney Inc......................... C-2
Annex D -- Principal Stockholders Agreement............................ D
Annex E -- Section 262 of the Delaware General Corporation Law......... E
Annex F -- Gentiva Health Services Executive Officers Bonus Plan....... F
Annex G -- Gentiva Health Services 1999 Stock Incentive Plan........... G
Annex H -- Gentiva Health Services Stock & Deferred Compensation Plan
for Non-Employee Directors................................ H
Annex I -- Gentiva Health Services Employee Stock Purchase Plan........ I
Annex J -- Omnibus Amendment No. 1..................................... J
Annex K -- Omnibus Amendment No. 2 with Exhibits....................... K
vi
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHAT DO I NEED TO DO NOW?
A: We urge you to read this proxy
statement/ prospectus carefully,
including its annexes, and to consider
how the merger may affect you as a
stockholder. This proxy statement/
prospectus and accompanying annexes,
which was mailed to all holders of
record as of January 18, 2000, contains
important information regarding the
proposed transaction, as well as
information about Olsten and Adecco SA,
the acquiror of Olsten. You may also
want to review the documents referenced
under "Where You Can Find More
Information" on page ii. For
information about where to call to get
answers to your questions, see "What if
I Have Questions?" below.
Q: HOW DO I VOTE?
A: Just mail your completed, signed and
dated proxy card in the enclosed
postage-paid return envelope as soon as
possible so that your stock may be
represented at the special
stockholders' meeting to vote on the
merger. You may also attend the special
meeting and vote your stock in person.
The special meeting will be held on
March , 2000 at a.m., eastern
time, at Olsten Corporation, 175 Broad
Hollow Road, Mellville, New York. Even
if you plan to attend the special
meeting, we recommend that you
complete, sign and date the enclosed
proxy card and return it promptly in
the enclosed postage-paid envelope.
Olsten's board of directors unanimously
recommends stockholders vote for the
merger.
Q: WHEN MUST I VOTE?
A: In order for your vote to be counted,
we must receive your proxy at or prior
to the special meeting or you must
attend the special meeting.
Q: IF MY SHARES ARE HELD BY MY BROKER, HOW
DO I VOTE AND ELECT THE FORM OF
CONSIDERATION THAT I WANT TO RECEIVE?
A: You should contact your broker for
instructions. Your broker can tell you
if your shares are held in street name
and, if they are, how you can instruct
him or her to vote your shares and
elect the form of consideration. Your
broker may vote your shares or elect
the form of consideration only if you
provide instructions on how to vote or
elect. Please tell your broker how to
vote your shares and elect the form of
consideration.
Q: HOW DO I ELECT TO RECEIVE CASH OR
ADECCO ADSS FROM ADECCO?
A: Mail a completed, signed and dated form
of election/letter of transmittal,
together with your stock certificates,
in the enclosed return envelope.
However, if you choose to exercise your
appraisal rights, if available, you
will be deemed to have elected to
receive cash, despite any other
election you may make.
Q: WHEN MUST MY FORM OF ELECTION/LETTER OF
TRANSMITTAL BE RECEIVED?
A: Morgan Guaranty Trust Company of New
York, the exchange agent, must receive
your form of election/letter of
transmittal, together with your stock
certificates, no later than 4:00 p.m.,
March , 2000, or your election will
not be effective and you will receive
what has not been elected by the other
Olsten stockholders.
Q: WHAT IF I HAVE QUESTIONS?
A: If you have questions about the merger
or if you would like additional copies
of this proxy statement/prospectus or a
new proxy card or form of
election/letter of transmittal, you
should contact: D.F. King & Co., Inc.
by mail at 77 Water Street, New York,
New York 10005, or by telephone, toll
free, at (800) 431-9629. D.F. King &
Co., Inc. is acting as Olsten's proxy
solicitor.
SUMMARY
THE COMPANIES
ADECCO SA
1275 Cheserex
Switzerland
41 21 321 66 66
Adecco SA is the largest personnel services organization in the world in
terms of revenues, with over 3,000 offices in over 50 countries. Adecco provides
temporary personnel, places permanent employees, outsources, trains and tests
temporary and permanent employees, and provides outplacement counseling
services. Adecco provides these services by contract to businesses located
throughout North America, Europe, Australia, Asia and Latin America.
OLSTEN CORPORATION
175 Broad Hollow Road
Melville, New York 11747-8905
(516) 844-7800
Olsten Corporation is a leading supplier based on revenues of staffing
services, information technology services and health services, conducting owned,
franchised and licensed operations through over 1,500 offices in North America,
Europe and Latin America. In staffing services, Olsten provides assignment
employees with a full spectrum of skills, from entry level workers to seasoned
professionals and managers, in a variety of functions and industries. In
information technology services, Olsten provides information technology
consultants on either a project or management consulting basis to assist clients
in the design, development and maintenance of computer systems. Olsten's health
services business is operated through its subsidiary, Gentiva Health Services,
Inc., which will become an independent publicly-owned company following the
completion of the transaction.
GENTIVA HEALTH SERVICES, INC.
175 Broad Hollow Road
Melville, New York 11747-8905
(516) 844-7800
Gentiva Health Services, Inc. is the leading provider of home health care
services in the United States based on revenues. Since 1971, Gentiva Health
Services has built a reputation for providing high quality health care for its
patients. Gentiva Health Services is committed to offering a broad spectrum of
services in the home health care industry. Gentiva Health Services currently
maintains over 400 locations in the United States and Canada and serves about
450,000 patient/client accounts annually with about 70,000 caregivers and
administrative staff.
Gentiva Health Services offers high quality services through three business
lines, which are specialty pharmaceutical services, home care nursing services
and staffing services. Through these three business lines, it offers a broad
range of services including: (1) treatments for patients with chronic diseases;
(2) intravenous and oral administration of drugs, nutrients and other solutions;
(3) skilled nursing care; (4) pediatric/ maternal care programs; (5)
rehabilitation and other therapies; (6) disease management programs; and (7)
home health aide care, assistance with personal care and institutional,
occupational and alternate site staffing.
THE SPECIAL STOCKHOLDERS MEETING
Olsten is furnishing this proxy statement/ prospectus to you because
Olsten's board of directors is soliciting your proxy for a special meeting of
Olsten stockholders. The special meeting will be held on March , 2000 at
a.m., eastern time, at Olsten Corporation, 175 Broad Hollow Road, Melville, New
York. At the special meeting, Olsten's stockholders will be asked to vote for
the merger and for the executive compensation and employee benefit plans of
Gentiva Health Services. Approval of the merger is not conditioned on the
approval of any of these plans, and approval of any one plan is not conditioned
on the approval of any of the other plans. However, since the split-off of
Gentiva Health Services is part of the merger and will not occur unless the
merger is consummated, the executive compensation and employee benefit plans of
Gentiva Health Services will not take effect unless the merger is consummated.
2
Holders of record of Olsten's common stock and class B common stock as of
the close of business on January 18, 2000 may vote at the special meeting either
by attending the special meeting or by returning a proxy to Olsten with
directions as to how the represented shares should be voted. On that date, there
were 68,255,617 shares of common stock and 13,062,494 shares of class B common
stock outstanding and entitled to vote at the special meeting. Olsten
stockholders will be entitled to one vote for each share of common stock and ten
votes for each share of class B common stock. On January 18, 2000, common stock
represented 34%, and class B common stock represented 66%, of the voting power
of Olsten's outstanding stock. Appraisal rights may be available to dissenting
stockholders. However, if you exercise your appraisal rights, you will be deemed
to have made a cash election despite the form of merger consideration you elect
to receive.
REQUIRED STOCKHOLDER APPROVAL OF MERGER ALREADY COMMITTED
The holders of a majority of the voting power of Olsten's outstanding common
stock and class B common stock voting together as a single class must vote for
the merger. Stuart Olsten, chairman of the board of Olsten, and other members of
the Olsten family, owning, directly or through trusts, shares of class B common
stock and common stock representing 63% of the voting power of Olsten's stock as
of January 18, 2000, have agreed with Adecco to vote their shares for the
merger. If they do so, the Olsten stockholder vote required to approve the
merger is assured. These stockholders have not indicated to Olsten or Adecco
which form of payment they will elect to receive from Adecco.
Adecco has already obtained the approval of its shareholders necessary to
complete the merger.
THE MERGER
(SEE PAGES 75-84)
In the merger, Olsten's staffing services and information technology
services businesses will become part of Adecco, and Gentiva Health Services,
Inc., a wholly-owned subsidiary of Olsten before the merger, which operates
Olsten's health services business, will become an independent publicly-owned
company. If the merger is completed, you will receive in exchange for each share
of Olsten stock you hold either cash or Adecco ADSs, or a combination of both,
and Gentiva Health Services common stock, as described below. The merger is
expected to be completed shortly after the Olsten special meeting, which will be
held on March , 2000.
The terms of the merger are set forth in the merger agreement, attached to
this document as Annex A, and the separation agreement, attached to this
document as Annex B, both as subsequently amended by the Omnibus Amendments
attached hereto as Annexes J & K. We encourage you to read the merger agreement
and the separation agreement. The separation agreement is described more fully
under the heading "Gentiva Health Services Prospectus--The Split-Off."
To understand the transaction, you should also
read carefully the other documents to which we have referred you. See "Where You
Can Find More Information" on page ii of this proxy statement/prospectus.
WHAT YOU WILL RECEIVE IN EXCHANGE FOR YOUR OLSTEN STOCK
(SEE PAGE 75)
For each share of Olsten common stock or class B common stock you hold, you
will receive in the merger 0.25 of a share of Gentiva Health Services common
stock and either (1) $8.75 in cash, without interest, or (2) 0.12472 of an
Adecco ADS or (3) a combination of cash and Adecco ADSs. You will have the
option to elect to receive either cash or Adecco ADSs by indicating your
preference on the form of election/letter of transmittal which is being mailed
to you with this proxy statement/ prospectus, and which must be returned with
certificates for your Olsten shares to the exchange agent by 4:00 p.m. New York
time on March , 2000 to be effective. However, because Adecco and Olsten have
agreed that half of Olsten's stock will be exchanged for Adecco ADSs and half
for cash, it is possible that you will receive a combination of Adecco ADSs and
cash, despite your election. If you do
3
not make an election, you will receive your portion of the merger consideration
not allocated to the Olsten stockholders who have elected a form of merger
consideration. Based on 81,318,111 shares of Olsten common stock and class B
common stock outstanding as of January 18, 2000, Adecco would have paid about
$355.8 million in cash plus about 5.1 million Adecco ADSs as the total merger
consideration had the merger occurred on that date. Olsten stockholders who do
not vote in favor of the merger and follow all the Delaware law procedures set
out on pages 46 to 49 under "Appraisal Rights" may have appraisal rights in
connection with the merger, which is the right to be paid a cash amount per
share as determined by the Delaware Court of Chancery, which could be more, less
or the same value as the merger consideration. If you exercise your appraisal
rights, you will be deemed to have elected cash despite the form of merger
consideration you elect to receive. If you vote in favor of the merger, you will
not be entitled to appraisal rights. Even if you later withdraw your demand for
appraisal rights and receive the merger consideration, you will be irrevocably
deemed to have elected to receive the $8.75 per share cash consideration. You
can expect to receive your cash and/or Adecco ADSs and Gentiva Health Services
common stock shortly after the closing of the merger if the exchange agent has
timely received your Olsten stock certificates accompanied by a completed form
of election/ letter of transmittal. If you do not surrender your stock
certificates before the merger, the exchange agent will send you instructions
after the closing of the merger as to how to deliver your stock certificates and
receive the merger consideration.
SECURITY LISTINGS
Adecco ADSs are quoted on the Nasdaq National Market under the symbol
"ADECY." Adecco has applied to have its ADSs listed on the New York Stock
Exchange and has received approval for listing. Upon this listing, the ADSs will
no longer be quoted on the Nasdaq National Market. Adecco common shares are
listed on the Swiss Stock Exchange and the Paris Stock Exchange.
Olsten's common stock trades on the New York Stock Exchange under the symbol
"OLS." Gentiva Health Services' securities are not presently listed on any
market or exchange. Gentiva Health Services has applied to have its common stock
approved for quotation on the Nasdaq National Market under the trading symbol
"GTIV." It is a condition of the transaction that Gentiva Health Services common
stock be approved for listing on a national securities exchange or for quotation
on the Nasdaq National Market.
OLSTEN'S BOARD OF DIRECTORS HAS APPROVED THE MERGER
(SEE PAGES 53-59)
Olsten's board of directors carefully reviewed and considered the terms and
conditions of the merger, including the split-off, and, based upon its
conclusion that the merger is fair to and in the best interests of its
stockholders, unanimously recommends that Olsten's stockholders vote for the
merger. The Olsten board also reviewed the following strategic alternatives: (1)
Olsten continuing as an independent entity; (2) a sale of Olsten as a whole; (3)
a spin-off/split-off or sale of its health services business, separately or in
connection with a sale of Olsten; and (4) a disposition of assets. In arriving
at its decision, the board of directors considered a number of factors described
more fully in this proxy statement/ prospectus. The Olsten board established an
independent committee composed solely of non-management directors elected to the
board by the holders of Olsten common stock. The independent committee was given
limited authority to consider any proposal for the acquisition of all or any
portion of Olsten pursuant to which some or all of the class B common
stockholders would receive, directly or indirectly, different consideration for
their shares of stock in Olsten than the common stockholders. The independent
committee was represented by separate counsel. The independent committee
concluded that the consulting and non-competition payments to be made to
Stuart Olsten by Adecco did not provide preferential consideration for him in
his capacity as a class B common stockholder. Because, among other things,
Gentiva Health
4
Services would have one class of common stock, the independent committee was
satisfied that the consideration to be received by Olsten common stockholders
and class B common stockholders in the merger was the same.
In connection with the merger, Olsten's board of directors received separate
written opinions from Olsten's financial advisors, Warburg Dillon Read LLC and
Salomon Smith Barney Inc., as to the fairness, from a financial point of view,
of the consideration to be received in the merger, including the split-off, to
the holders of Olsten common stock and class B common stock. The full text of
Warburg Dillon Read's opinion, dated August 17, 1999, is included in this proxy
statement/prospectus as Annex C-1 and the full text of Salomon Smith Barney's
opinion, also dated August 17, 1999, is included as Annex C-2. We encourage you
to read these opinions carefully in their entirety for a description of the
assumptions made, matters considered, limitations on the review undertaken and
opinions provided. WARBURG DILLON READ'S AND SALOMON SMITH BARNEY'S OPINIONS ARE
DIRECTED TO OLSTEN'S BOARD OF DIRECTORS AND DO NOT CONSTITUTE RECOMMENDATIONS TO
ANY STOCKHOLDER AS TO HOW TO VOTE ON THE MERGER, THE FORM OF CONSIDERATION TO BE
ELECTED BY ANY STOCKHOLDER IN THE MERGER OR ANY OTHER MATTER RELATING TO THE
PROPOSED TRANSACTION.
REASONS FOR THE MERGER
(SEE PAGES 56-59)
The Adecco and Olsten boards of directors have identified various potential
benefits to the merger.
The primary benefits of the merger that the Olsten board has identified are:
- creating a combined company that will have a stronger presence in Olsten's
and Adecco's markets with greater financial and business prospects than
Olsten standing alone;
- achieving a premium for Olsten stockholders over the average market price
at which Olsten common stock traded during the twelve-month period before
Olsten announced that it was engaged in negotiations concerning a
significant transaction, which ranged from $4.56 per share to $9.44 per
share and averaged $7.24 during this period (by August 14, 1999, the date
Olsten's board approved the transaction, the market price of Olsten's
common stock was $9.69 per share); and
- allowing Olsten stockholders, if they so elect, to continue to participate
in the staffing services and information technology services businesses
through share ownership of Adecco.
The primary benefits of the merger that the Adecco board has identified are:
- making Adecco the leader, in terms of revenues, in the U.S. staffing
industry and the worldwide information technology services staffing
business;
- providing more comprehensive and diverse services to clients and
additional career prospects for employees; and
- realizing potentially improved operating leverage and other synergies.
The primary disadvantages of the merger that the Olsten board has identified
are:
- the possibility that Olsten stockholders could achieve more value over the
long-term from continued operation of Olsten as an independent company;
- that the merger will be taxable to Olsten stockholders;
- that Olsten stockholders may not receive the type of consideration they
elect;
- that holding shares of a foreign company entails risks different from
those associated with a U.S. company; and
- that the separate approval of the holders of Olsten common stock is not
necessary to approve the transaction.
The primary disadvantages of the merger the Adecco board has identified are:
- the possibility of over-valuation of Olsten by Adecco in establishing the
aggregate merger consideration;
- the potential inability of Gentiva Health Services to assume the
liabilities or to
5
satisfy obligations incurred in connection with its health care services
operations;
- the uncertainty as to the value of, or the ability to achieve, the
synergies, if any, to be realized as a result of the merger;
- the diversion of Adecco management's attention, as a result of the merger,
from general business concerns;
- the potential inability to fully assimilate the operations and corporate
culture of Olsten with those of Adecco following the merger; and
- the significant increase in Adecco's aggregate indebtedness outstanding as
a result of the Olsten indebtedness acquired by Adecco and additional debt
financings consummated in connection with the merger.
INTERESTS OF DIRECTORS AND OFFICERS IN THE MERGER HAVE CREATED CONFLICTS OF
INTEREST
(SEE PAGES 70-72)
In considering the Olsten board's recommendation that you vote for the
merger, you should be aware that a number of Olsten's directors and officers
have interests in the merger in addition to their general interests as Olsten
stockholders.
- Olsten and Adecco have entered into agreements with four of Olsten's
executive officers, Edward A. Blechschmidt, Anthony J. Puglisi, William P.
Costantini and Maureen K. McGurl, and with Stuart Olsten, chairman of the
board of Olsten, providing for termination, consulting and non-competition
payments from Adecco upon the occurrence of the merger and for four to
five years following the merger. The four executives will receive a total
of $12,355,900 and Mr. Olsten will receive a total of $10,000,000 over the
life of these agreements. Other present and former executive officers of
Olsten will receive a total of $5,656,675 under change of control
agreements with Olsten.
- Some of Olsten's directors and officers and members of the Olsten family
have committed to purchase about $20 million face amount of convertible
trust preferred securities to be issued by a trust, the common beneficial
interest of which will be wholly-owned by Gentiva Health Services, in a
private placement exempt from the registration requirements of the
Securities Act.
- Mr. Olsten will become a director of Adecco after the merger.
- All directors of Olsten, other than Miriam Olsten, and some officers of
Olsten are expected to continue with Gentiva Health Services following the
merger.
- Officers and directors of Olsten will be indemnified if the proposed
transactions give rise to liabilities.
- As of January 18, 2000, directors and officers of Olsten owned a total of
2,059,150 options to purchase Olsten common stock and 67,563 options to
purchase Olsten class B common stock. Outstanding options held by officers
and directors who are employees of Olsten will be converted into options
to purchase Adecco or Gentiva Health Services common stock, depending on
which company the option holder joins after the merger, and the options
will be adjusted to preserve their intrinsic value. Options held by
non-employee directors will be converted into options to purchase Adecco
common shares.
Stuart Olsten, Miriam Olsten, a director of Olsten and mother of
Stuart Olsten, Cheryl Olsten, daughter of Miriam Olsten and sister of Stuart
Olsten, and various trusts for the benefit of Stuart and Cheryl Olsten, entered
into a principal stockholders agreement with Adecco on August 17, 1999. These
stockholders agreed:
- to vote in favor of the merger;
- to vote against any proposal from a third party regarding an acquisition
transaction;
- to refrain from amending, converting, pledging or transferring their
ownership interest in their Olsten class B common stock and common stock;
and
6
- to refrain from soliciting proposals from third parties regarding a
business combination,
in each case, so long as the merger agreement is in effect.
These stockholders together held, as of January 18, 2000, 63% of the voting
power of the outstanding stock of Olsten. These stockholders will have the same
opportunity to elect the form of merger consideration as the other holders of
Olsten stock. For a more detailed discussion of the terms of the principal
stockholders agreement, please read the section entitled "The Principal
Stockholders Agreement," beginning on page 85. For the complete text of the
principal stockholders agreement, see Annex D.
APPRAISAL RIGHTS
(SEE PAGES 46-49)
Appraisal rights may be available to Olsten stockholders. If you do not want
to accept the merger consideration for your Olsten stock, you may seek to
exercise appraisal rights under Delaware law. If:
- holders of less than a majority of Olsten stock elect to receive cash;
- you are the record holder of the shares on the record date and the date
you make your demand for appraisal under the Delaware procedures;
- you continuously hold the shares through the date of the merger;
- you properly demand an appraisal of the value of your stock before the
Delaware Court of Chancery; and
- you do not vote in favor the merger,
the Delaware Court of Chancery will determine the fair cash value of your Olsten
stock.
REGULATORY MATTERS
(SEE PAGE 73-74)
Under U.S. antitrust laws and foreign anti-competition laws, Olsten and
Adecco have submitted information to regulatory authorities about the merger and
about Olsten and Adecco, and have made filings and taken other actions necessary
to obtain approvals from U.S. and foreign antitrust regulatory authorities in
connection with the merger. Olsten and Adecco will also make post-closing
filings with regulatory authorities in Brazil and Argentina. All other antitrust
consents and approvals have been obtained.
NO SOLICITATION
(SEE PAGE 78-79)
Olsten has agreed that it will not initiate any discussions regarding a
business combination with any other party so long as the merger agreement is in
effect. However, the board of directors will be responsive to any unsolicited
offer for an alternative business combination to the extent that the failure to
do so would result in a breach of the directors' fiduciary duties to Olsten
stockholders under applicable law.
TERMINATION RIGHTS
(SEE PAGES 81-82)
Adecco and Olsten may mutually agree to terminate the merger agreement
before the merger is completed, and either Adecco or Olsten may terminate the
merger agreement if any one of the following occurs:
- the merger has not been consummated by May 31, 2000 or, if the merger has
not been consummated by that date because all necessary governmental
consents have not been obtained, by the earlier of June 30, 2000 and the
date that all required governmental consents are obtained, but only if the
terminating party was not responsible for the merger not having been
consummated before the termination date; or
- a court or other governmental authority permanently prohibits the merger,
including any prohibition of the split-off; or
- there is a breach of the merger agreement by the other party and the
breach has not been cured for 10 days from the date the breaching party
received notice of its breach.
7
Adecco may terminate the merger agreement if any one of the following
occurs:
- the board of directors of Olsten has withdrawn or adversely modified its
original recommendation to its stockholders to adopt the merger agreement;
or
- Olsten has failed to obtain the necessary approval from its stockholders
to complete the merger; or
- the board of directors of Olsten has approved or publicly recommended a
business combination with any other party; or
- a third party initiates a tender offer or an exchange offer and the board
of directors of Olsten has not delivered a statement to its stockholders
within 10 business days from the date the tender offer or the exchange
offer is initiated that the board recommends the rejection of the tender
offer or exchange offer.
Olsten may also terminate the merger agreement if all of the following
occur:
- the board of directors of Olsten has received a proposal from a third
party for a business combination that is superior to the terms of the
merger agreement and failing to pursue the proposal would be a breach of
the board's fiduciary duty to Olsten stockholders;
- Adecco has not matched the superior proposal; and
- Olsten pays Adecco a termination fee of $40 million.
In addition, upon termination Olsten may be required to pay Adecco a
$40 million termination fee, as described in "The Merger Agreement--Termination
Rights; Termination Fee."
If the merger agreement is terminated, the separation agreement will be
automatically terminated. In addition, the parties can agree in writing to
terminate the separation agreement even if the merger agreement is not
terminated.
CONDITIONS TO THE MERGER
(SEE PAGES 83-84)
The following conditions must be satisfied prior to the completion of the
merger and cannot be waived by either Adecco or Olsten:
- approval by Olsten stockholders of the merger;
- lack of governmental action prohibiting the merger;
- the quotation of Adecco ADSs to be issued in the merger on Nasdaq or their
listing on the New York Stock Exchange;
- filing of notification of issuance with, and obtaining clearance from the
Swiss Stock Exchange with respect to the additional Adecco common shares,
if any, to be issued in the merger; and
- the listing of Gentiva Health Services' common stock on a national
securities exchange or its quotation on Nasdaq.
The following condition must also be satisfied before completion of the
merger; however, this condition may be waived by the party entitled to assert
the condition:
- performance by the other party of its obligations and agreements under the
merger agreement and the separation agreement unless failure to perform
would not have a material adverse effect on the other party's ability to
complete the merger or on the other party's business.
If material conditions which may be waived are in fact waived or amended
before the closing of the merger, Olsten will notify you and take all other
steps required by law.
THE SPLIT-OFF
(SEE PAGE 84 AND X-20 TO X-29)
Gentiva Health Services, Inc., which operates the health services business
of Olsten, will become an independent, publicly-owned company after the
split-off. Prior to the split-off, Gentiva Health Services and its subsidiaries
owned most of the assets and were obligated for most of the liabilities of the
health services
8
business of Olsten. The remaining assets to be transferred to Gentiva Health
Services before the split-off consist of some intellectual property. The
remaining liabilities to be assigned to and assumed by Gentiva Health Services
at the time of the split-off are contingent liabilities related to government
investigations and litigation, some obligations under Olsten's supplemental
executive retirement plan and some excise tax obligations, each described more
fully under the heading "Gentiva Health Services Prospectus--The Split-Off."
Gentiva Health Services and Olsten have agreed to indemnify each other after
the split-off with respect to various losses, damages, claims and liabilities
arising out of each of our businesses. Gentiva Health Services has also agreed
to indemnify Olsten for other liabilities more fully described under the heading
"Gentiva Health Services Prospectus--The Split-Off--Terms of the separation
agreement--Indemnification."
For one year after the split-off, Olsten has agreed to provide Gentiva
Health Services with some transitional services. The terms of the ongoing
relationship between Gentiva Health Services and Olsten are more fully described
under the heading "Gentiva Health Services Prospectus--The Split-Off."
ACCOUNTING TREATMENT OF THE MERGER
(SEE PAGE 73)
The merger will be accounted for using the purchase method of accounting
under U.S. generally accepted accounting principles, referred to herein as GAAP,
with Adecco as the acquiror.
COMPARATIVE RIGHTS OF STOCKHOLDERS OF ADECCO AND OLSTEN
(SEE PAGES 120-125)
Upon completion of the merger, you will no longer be a stockholder of
Olsten. Instead, you will become a stockholder of Gentiva Health Services and,
if you did not receive all cash from Adecco for your Olsten shares, you will
also be a shareholder of Adecco. There are differences between the rights of
stockholders of Olsten and Gentiva Health Services, both Delaware corporations,
and the rights of shareholders in Adecco, a Swiss company. The following table
highlights some of the differences between Delaware law and Swiss law:
DELAWARE LAW SWISS LAW
---------------- ----------------
Stockholder Action by Yes, unless No
Written Consent prohibited in a
corporation's
certificate of
incorporation
Appraisal Rights Yes, in some No
circumstances
Preemptive Rights No, unless Yes
provided for in
a corporation's
certificate of
incorporation
Shareholders' Suits Yes Yes, in limited
circumstances
TAX CONSEQUENCES
(SEE PAGES 88-92)
Your exchange of Olsten stock for cash and/ or Adecco ADSs and your exchange
of Olsten stock for Gentiva Health Services common stock will be considered two
separate exchanges for federal income tax purposes. You should recognize capital
gain or loss with respect to all of your Olsten stock exchanged.
DIVIDENDS
(SEE PAGES 143-144)
The board of directors of Adecco will propose to the shareholders of Adecco
on April 19, 2000 a declaration of cash dividend of CHF 8.40 ($5.64) per common
share. The record date for the dividend has not been set but typically follows
approval of the dividend at the meeting. Accordingly, Olsten stockholders
receiving Adecco ADSs in the merger will be entitled to the dividend.
Historically, Adecco has paid annual cash dividends on its common shares. The
payment of future dividends from Adecco, if any, must be proposed by its board
of directors and approved by its shareholders. Adecco's dividends will depend on
the earnings and growth prospects of Adecco after the merger and other factors
which the Adecco board of directors and shareholders may deem relevant. The
payment of dividends by Gentiva Health
9
Services will be up to the board of directors of Gentiva Health Services, which
does not intend to declare any dividends in the foreseeable future. In August
1999, Olsten's board discontinued the payment of dividends because of its
financial condition and the probability of a merger.
ADECCO ADSS
(SEE PAGES 143-144)
An Adecco ADS is an American Depositary Share issued by Morgan Guaranty
Trust Company of New York, and represents one-eighth of an Adecco common share
deposited with Morgan Guaranty. When distributions, including dividends, are
made on Adecco common shares represented by Adecco ADSs in Swiss francs, those
distributions are converted and paid to holders of Adecco ADSs in U.S. dollars.
Adecco ADSs and Adecco common shares are separate securities, with Adecco ADSs
quoted in U.S. dollars on the Nasdaq National Market, and with Adecco common
shares listed in Swiss francs on the Swiss Stock Exchange and in Euros on the
Paris Stock Exchange.
CURRENCY TRANSLATION
References in this proxy statement/ prospectus to "dollars," "$" or "USD"
are to the currency of the United States, references to Swiss francs or "CHF"
are to the currency of Switzerland and references to Euros or "[EURO]" are to
the common legal currency of the European Union. Solely for your convenience,
this proxy statement/prospectus contains translations of Swiss franc amounts
into U.S. dollars. These translations should not be taken as assurances that the
Swiss franc amounts currently represent these U.S. dollar amounts or could be
converted into U.S. dollars at the rate indicated or at any other rate at any
time.
In this proxy statement/prospectus, unless otherwise stated, Swiss francs
have been translated into U.S. dollars at a rate of $0.67 per CHF 1.00, which
was based on the noon buying rate in New York City for cable transfers in Swiss
francs as certified for customs purposes by the Federal Reserve Bank of New York
on October 3, 1999, which we refer to in this proxy statement/prospectus as the
"noon buying rate." On February , 2000, the noon buying rate was $ per
CHF 1.00. For historical information regarding rates of exchange between Swiss
francs and U.S. dollars, see "Currency Exchange Rates."
RISK FACTORS
This proxy statement/prospectus includes risk factors related to the merger,
the split-off, their effects and the operations and strategies of Adecco and
Gentiva Health Services. You should read carefully the section entitled "Risk
Factors" beginning on page 18.
RECENT DEVELOPMENTS
On January 27, 2000, Adecco announced certain unaudited consolidated results
of operations for the fiscal year ended January 2, 2000. Adecco's net service
revenue for the fiscal year ended January 2, 2000 was CHF 18,471 million
($11,637 million, based on a noon buying rate of $0.63 per CHF 1.00 on
January 2, 2000), representing an increase of 21%, or CHF 3,163 million, from
net service revenue for the fiscal year ended January 3, 1999 of
CHF 15,308 million. Adecco's net loss decreased by 11%, or CHF 21 million, from
CHF 195 million in fiscal year ended January 3, 1999 to CHF 174 million
($110 million) in the fiscal year ended January 2, 2000. Adecco's income before
amortization of goodwill increased by 29%, or CHF 119 million, from
CHF 406 million in fiscal year ended January 3, 1999 to CHF 525 million
($331 million) in the fiscal year ended January 2, 2000. Income before goodwill
amortization is not meant to portray net income or cash flow in accordance with
U.S. generally accepted accounting principles or cash available to investors.
CAUTIONARY STATEMENTS REGARDING
FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus and the documents that have been
incorporated by reference contain forward-looking statements. You can find many
of these statements by looking for words such as "believes," "expects,"
"anticipates," "estimates," or similar expressions.
10
You should note that important factors that could cause actual results to differ
materially from the forward-looking statements made in this proxy statement/
prospectus are set forth under the caption "Risk Factors" and elsewhere in this
proxy statement/prospectus. See "Cautionary Statement Regarding Forward-Looking
Statements" on page 43.
11
COMPARATIVE MARKET PRICE DATA
The following table presents closing market prices as reported on the New
York Stock Exchange Composite Tape for Olsten common stock, the Nasdaq National
Market for Adecco ADSs and the Swiss Stock Exchange for Adecco common shares:
- as of August 11, 1999, the last trading day before Olsten's public press
release reporting that it was in discussions with a third party involving
a possible significant transaction,
- as of August 17, 1999, the last trading day before the public announcement
of the execution of the merger agreement, and
- as of February , 2000, the latest practicable date prior to the printing
of this proxy statement/ prospectus.
OLSTEN EQUIVALENT ADECCO
COMMON OLSTEN COMMON COMMON ADECCO
STOCK PRICE STOCK PRICE (1) SHARE PRICE ADS PRICE
----------- ---------------- ----------- ---------
August 11, 1999........................... $9.875 $ 633.42 $558.11(2) $ 69.06
August 17, 1999........................... $ 9.50 $ 609.36 $547.80(3) $ 68.50
February , 2000......................... $ $ $ (4) $
- --------------
(1) Based upon an exchange ratio of 1 Adecco share for 64.14 Olsten shares
determined by dividing 1 share of Olsten by 0.01559, the conversion ratio
between an Adecco common share and a share of Olsten stock. Does not include
any amount for Gentiva Health Services.
(2) Based on a noon buying rate of $0.67 per CHF 1.00 on August 11, 1999.
(3) Based on a noon buying rate of $0.66 per CHF 1.00 on August 17, 1999.
(4) Based on a noon buying rate of $ per CHF 1.00 on February , 2000.
0.12472 of an Adecco ADS was worth $ based on the market price of an
Adecco ADS on February , 2000. Olsten stockholders are urged to obtain
current market quotations before making a decision with respect to the merger.
See also "Comparative Market Price and Dividend Information."
12
COMPARATIVE PER SHARE DATA
The following table sets forth the historical and pro forma consolidated per
share data of Adecco giving effect to the merger and related financings for the
year ended January 3, 1999 and the nine months ended October 3, 1999, and the
historical and equivalent pro forma per share data of Olsten for the year ended
January 3, 1999 and the nine months ended October 3, 1999. The data should be
read in conjunction with the consolidated financial statements of each of Olsten
and Adecco and each of Olsten's and Adecco's accompanying notes included or
incorporated by reference in this proxy statement/prospectus, as well as the
information set forth under "Unaudited Pro Forma Consolidated Financial
Information of Adecco SA and Olsten Corporation." The unaudited interim
historical financial data is not necessarily indicative of the full fiscal year,
and the unaudited pro forma financial data is not necessarily indicative of the
results that would have been achieved had the transaction been in effect at the
beginning of the periods presented and should not be considered indicative of
future results.
HISTORICAL PRO FORMA
------------------------------------------------ ---------------------------
FISCAL YEAR NINE MONTHS FISCAL YEAR
ENDED ENDED ENDED
JANUARY 3, 1999 OCTOBER 3, 1999 JANUARY 3, 1999
---------------------- -------------------- ---------------------
(UNAUDITED) (UNAUDITED)
ADECCO PER COMMON
SHARE DATA
Basic and diluted loss......... CHF(11.61) $(8.48)(1) CHF(7.37) $(4.94)(2) CHF(23.88) $(17.43)(1)(8)
Dividends...................... 5.50 3.74 (3) 7.00 4.62 (4) 5.22 3.55 (3)
Book value at period end....... 121.45 88.66 (1) 108.78 72.88 (2) N/A N/A
---------------------- -------------------- ---------------------
Basic and diluted weighted
average common shares........ 16,790,025 17,057,255 17,423,665
ADECCO PER ADS DATA
Basic and diluted loss......... (1.45) (1.06)(1) (0.92) (0.62)(2) (2.99) (2.18)(1)(8)
Dividends(5)................... 0.69 0.47 (3) 0.88 0.58 (4) 0.65 0.44 (3)
Book value at period end....... 15.18 11.08 (1) 13.60 9.11 (2) N/A N/A
PRO FORMA
---------------------
NINE MONTHS
ENDED
OCTOBER 3, 1999
---------------------
(UNAUDITED)
ADECCO PER COMMON
SHARE DATA
Basic and diluted loss......... CHF(19.07) $(12.78)(2)(8)
Dividends...................... 6.75 4.46 (4)
Book value at period end....... 166.46 (2) 111.53 (2)
---------------------
Basic and diluted weighted
average common shares........ 17,727,503
ADECCO PER ADS DATA
Basic and diluted loss......... (2.38) (1.60)(2)(8)
Dividends(5)................... 0.84 0.56 (4)
Book value at period end....... 20.81 13.94 (2)
HISTORICAL EQUIVALENT PRO FORMA(6)
----------------------------------- -----------------------------------
FISCAL YEAR FISCAL YEAR
ENDED NINE MONTHS ENDED ENDED NINE MONTHS ENDED
JANUARY 3, 1999 OCTOBER 3, 1999 JANUARY 3, 1999 OCTOBER 3, 1999
--------------- ----------------- --------------- -----------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
OLSTEN PER SHARE DATA
Basic and diluted (loss)
earnings.................. $(0.44) $ 0.06(7) $(0.27) $(0.20)
Dividends................... $ 0.22 $ 0.08 $ 0.06 $ 0.07
Book value at period end.... $ 9.62 $ 9.65 N/A $ 1.74
- ------------------
(1) Other than with respect to the cash dividend per common share data, based on
a noon buying rate of $0.73 per CHF1.00 on January 3, 1999.
(2) Other than with respect to the cash dividend per common share data, based on
a noon buying rate of $0.67 per CHF1.00 on October 3, 1999.
(3) Based on a noon buying rate of $0.68 per CHF1.00 on May 22, 1998, the
dividend payment date for the fiscal year ended January 3, 1999.
(4) Based on a noon buying rate of $0.66 per CHF1.00 on April 26, 1999, the
dividend payment date for the nine months ended October 3, 1999.
(5) Holders of Adecco ADSs are generally entitled to receive any dividends paid
on the common shares underlying their ADSs. Each Adecco ADS represents 1/8
of an Adecco common share. Holders of Adecco ADSs will receive dividends in
proportion to the number of Adecco common shares the ADSs represent.
(6) Based upon an exchange ratio of 1 Adecco share for 64.14 Olsten shares.
(7) Olsten staffing restructuring charges were $29 million for the nine months
ended October 3, 1999.
(8) Adecco goodwill amortization was CHF 601 million ($403 million) and CHF
508 million ($340 million) for the year ended January 3, 1999 and the nine
month period ended October 3, 1999, respectively. Pro forma consolidated
goodwill amortization was CHF 932 million ($643 million) and CHF
763 million ($511 million) for the year ended January 3, 1999 and the nine
months ended October 3, 1999, respectively.
13
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA OF OLSTEN
The following table provides summary historical consolidated financial data
of Olsten and its subsidiaries for each of the fiscal years in the five-year
period ended January 3, 1999 and for the nine-month periods ended September 27,
1998 and October 3, 1999. Olsten prepared the data as of and for each of the
fiscal years in the five-year period ended January 3, 1999 using its audited
consolidated financial statements. Olsten prepared the selected historical data
as of and for the nine months ended September 27, 1998 and October 3, 1999 using
its unaudited consolidated financial statements, and they include, in the
opinion of Olsten's management, all adjustments necessary to present fairly the
data for those periods. The unaudited interim financial data should not be
considered indicative of the full fiscal year. You should read this summary
consolidated financial data along with the historical financial statements and
accompanying notes that Olsten has incorporated by reference. You can obtain
these reports by following the instructions provided in this proxy
statement/prospectus under "Where You Can Find More Information" beginning on
page ii.
FISCAL YEARS NINE MONTHS ENDED
-------------------------------------------------------------- ------------------------------------------
1994 1995 1996(1) 1997 1998(2) SEPTEMBER 27, 1998(3) OCTOBER 3, 1999(4)
---------- ---------- ---------- ---------- ---------- --------------------- ------------------
(53 WEEKS) (UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF
OPERATIONS DATA:
Service sales,
franchise fees,
management fees and
other income........ $2,588,697 $2,813,768 $3,377,729 $4,113,014 $4,602,790 $3,346,121 $3,713,965
Net income (loss)..... 92,240 90,290 54,642 93,028 (35,539) (8,129) 4,939
BALANCE SHEET DATA:
Total assets.......... 979,714 1,138,410 1,439,240 1,750,201 2,058,807 1,916,202 2,185,449
Long-term debt........ 211,250 267,030 330,329 461,178 606,107 566,513 774,128
Shareholders'
equity.............. 515,986 586,389 769,273 841,777 782,620 818,913 785,011
SHARE INFORMATION:
Basic earnings (loss)
per share........... 1.27 1.23 .71 1.15 (.44) (.10) .06
Diluted earnings
(loss) per share.... 1.21 1.19 .71 1.15 (.44) (.10) .06
Cash dividends........ .16 .21 .28 .28 .22 .18 .08
Book value............ 7.06 7.98 9.53 10.35 9.62 10.07 9.65
- ------------------------------
(1) Net income in fiscal 1996 reflects merger and integration and other
non-recurring charges totaling approximately $80 million. These charges
include $45 million from the Quantum and Co-Counsel acquisitions,
$30 million of allowances for a change in the methodology used by Medicare
for computing reimbursements in prior years and Quantum's charge of
$5.5 million related to the settlement of shareholder litigation. See
Note 3 to the Olsten Corporation and Subsidiaries Consolidated Financial
Statements.
(2) Net loss in fiscal 1998 reflects non-recurring charges and other adjustments
of $66 million relating to the restructuring of the Health Services division
and a special charge of $56 million for the settlement of two federal
investigations. The non-recurring charges and other adjustments include a
reduction in revenues of $14 million, a charge to cost of sales of
$15 million and $37 million in selling, general and administrative expenses.
See Note 3 to the Olsten Corporation and Subsidiaries Consolidated Financial
Statements.
(3) Net loss for the nine months ended September 27, 1998 reflects non-recurring
charges and other adjustments of $66 million related to the restructuring of
Olsten's Health Services division. This provision includes a reduction in
revenues of $14 million, a charge to cost of sales of $15 million and
$37 million in selling, general and administrative expenses. See Note 3 to
the Olsten Corporation and Subsidiaries Consolidated Financial Statements.
(4) Net loss for the nine months ended October 3, 1999 reflects a special charge
of $46 million for the realignment of business units, including compensation
and severance costs of $22 million which includes an $11 million severance
payment to Olsten's former chief executive officer, asset write-offs of
$16 million and integration costs of $8 million. See Note 3 to the Olsten
Corporation and Subsidiaries Consolidated Financial Statements.
14
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA OF ADECCO SA
The following table provides summary historical consolidated financial data
of Adecco for each of the fiscal years in the five-year period ended January 3,
1999 and for the nine month periods ended September 27, 1998 and October 3,
1999. Adecco prepared the data as of and for each of the fiscal years in the
five-year period ended January 3, 1999 using its audited consolidated financial
statements and those of Ecco SA, the predecessor to Adecco for accounting
purposes, for periods prior to the merger of Ecco SA and Adia SA, which created
Adecco in 1996. Adecco prepared the summary historical data as of and for the
nine months ended September 27, 1998 and October 3, 1999 using its unaudited
consolidated financial statements, and they include, in the opinion of Adecco's
management, all adjustments necessary to present fairly the data for those
periods. The unaudited interim financial data is not necessarily indicative of
the full fiscal year. You should read the summary consolidated financial data
along with the historical financial statements and accompanying notes that
Adecco has included in this proxy statement/prospectus or incorporated by
reference. You can obtain these reports by following the instructions provided
in this proxy statement/prospectus under "Where You Can Find More Information"
beginning on page ii.
FISCAL YEAR ENDED
--------------------------------------------------------------------------
1994 1995 1996 1997 1998 1998
--------- ---------- ---------- ---------- ---------- ----------
CHF CHF CHF CHF CHF USD(1)
(53 WEEKS) (53 WEEKS)
(IN MILLIONS, EXCEPT SHARE AMOUNTS)
STATEMENT OF OPERATIONS
DATA:
Net service revenues... 3,443 4,161 6,386 11,432 15,308 11,175
Operating income
(loss)............... 158 192 58 (26) 46 34
Net income (loss)...... 98 116 (15) (206) (195) (142)
BALANCE SHEET DATA:
Total assets........... 1,641 1,890 4,878 5,731 5,607 4,093
Long-term debt......... 83 76 127 663 688 502
Shareholders' equity... 614 691 2,402 2,020 2,068 1,510
SHARE INFORMATION:
Basic and diluted
(loss) income per
share................ 10.76 11.54 (1.17) (12.52) (11.61) (8.48)
Cash dividends......... 2.46(3) 2.84(4) 7.26(5) 5.00(6) 5.50 3.74(7)
Basic and diluted
weighted average
common shares........ 9,117,099 10,020,000 12,861,165 16,459,431 16,790,025 16,790,025
OTHER DATA:
Income before goodwill
amortization(10)..... 101 118 177 301 406 296
Cash flows from (used
in):
Operating activities... 85 62 161 188 671 490
Investing activities... (7) (1) (320) (786) (194) (142)
Financing activities... (37) 90 (57) 598 (301) (220)
NINE MONTHS ENDED
(UNAUDITED)
------------------------------------------
SEPTEMBER 27, OCTOBER 3, OCTOBER 3,
1998 1999 1999
-------------- ----------- -----------
CHF CHF USD(2)
(IN MILLIONS, EXCEPT SHARE AMOUNTS)
STATEMENT OF OPERATIONS
DATA:
Net service revenues... 11,312 13,297 8,909
Operating income
(loss)............... 32 96 65
Net income (loss)...... (153) (126) (84)
BALANCE SHEET DATA:
Total assets........... 5,744 6,636 4,446
Long-term debt......... 759 460 308
Shareholders' equity... 2,102 1,863 1,248
SHARE INFORMATION:
Basic and diluted
(loss) income per
share................ (9.11) (7.37) (4.94)
Cash dividends......... 5.50(8) 7.00 4.62(9)
Basic and diluted
weighted average
common shares........ 16,790,698 17,093,863 17,093,863
OTHER DATA:
Income before goodwill
amortization(10)..... 303 382 256
Cash flows from (used
in):
Operating activities... 291 195 131
Investing activities... (132) (543) (364)
Financing activities... (150) 402 269
- ------------------------------
(1) Other than with respect to the cash dividend per common share data, based on
a noon buying rate of $0.73 per CHF1.00 on January 3, 1999.
(2) Other than with respect to the cash dividend per common share data, based on
a noon buying rate of $0.67 per CHF1.00 on October 3, 1999.
(3) The cash dividend per common share for the fiscal year ended January 1, 1995
was $1.85, based on a noon buying rate of $0.75 per CHF1.00 on July 1, 1994,
the dividend payment date.
(4) The cash dividend per common share for the fiscal year ended December 31,
1995 was $2.47, based on a noon buying rate of $0.87 per CHF1.00 on July 3,
1995, the dividend payment date.
15
(5) The cash dividend per common share for the fiscal year ended December 29,
1996 was $6.03, based on a noon buying rate of $0.83 per CHF1.00 on
February 6, 1996, the dividend payment date.
(6) The cash dividend per common share for the fiscal year ended December 28,
1997 was $3.55, based on a noon buying rate of $0.71 per CHF1.00 on May 30,
1997, the dividend payment date.
(7) Based on a noon buying rate of $0.68 per CHF1.00 on May 22, 1998, the
dividend payment date.
(8) Based on a noon buying rate of $0.68 per CHF1.00 on May 22, 1998, the
dividend payment date.
(9) Based on a noon buying rate of $0.66 per CHF1.00 on April 26, 1999, the
dividend payment date.
(10) Income before goodwill amortization is not meant to portray net income or
cash flow in accordance with U.S. generally accepted accounting principles.
Goodwill is a non-cash charge to operating income (loss); however, income
before goodwill amortization does not represent cash available to investors.
Management believes that income before goodwill amortization to be a
relevant measure of the operating performance of the company and its ability
to fund growth. This may not be comparable to similarly entitled items
reported by other companies. Adecco amortizes goodwill over its estimated
life of five years.
16
SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA OF ADECCO SA
Included in this proxy statement/prospectus is the Unaudited Pro Forma
Consolidated Financial Information of Adecco SA together with the relevant
notes, assumptions and adjustments thereto, which was prepared to illustrate the
estimated effects of the merger and the related financings for balance sheet
purposes as of October 3, 1999 and for the purposes of the consolidated
statements of operations data for the year ended January 3, 1999 and nine months
ended October 3, 1999. The Pro Forma Consolidated Financial Statements have been
prepared using the purchase method of accounting to account for the merger.
The following summary of the Unaudited Pro Forma Consolidated Financial
Information of Adecco and Olsten Corporation is derived from, and should be read
in conjunction with, the detail contained in the audited consolidated financial
statements of Adecco and the audited consolidated financial statements of Olsten
Corporation, and the accompanying notes to these statements, and the Unaudited
Pro Forma Consolidated Financial Information of Adecco SA as of October 3, 1999
and for the year ended January 3, 1999 and the nine months ended October 3, 1999
and the accompanying notes to these statements. See "Unaudited Pro Forma
Consolidated Financial Information of Adecco SA and Olsten Corporation" included
on pages 127 through 133 and "Where You Can Find More Information" on page ii.
The Pro Forma Consolidated Financial Information should not be construed as
representative of results that would actually have been achieved or results that
may be obtained in the future.
PRO FORMA
(UNAUDITED)
---------------------------------------------------------------------
FISCAL YEAR NINE MONTHS FISCAL YEAR NINE MONTHS
ENDED ENDED ENDED ENDED
JANUARY 3, 1999 OCTOBER 3, 1999 JANUARY 3, 1999 OCTOBER 3, 1999
--------------- --------------- --------------- ---------------
(In CHF millions, except (In USD millions, except
share data) share data)
STATEMENT OF OPERATIONS DATA:
Net service revenues.................... 19,787 16,963 13,653 11,365
Operating loss.......................... (93) (65) (64) (44)
Net loss................................ (416) (338)(1) (286) (226)(1)
BALANCE SHEET DATA:
Total assets............................ N/A 9,664 N/A 6,475
Long-term debt.......................... N/A 1,548 N/A 1,037
Shareholders' equity.................... N/A 2,951 N/A 1,977
PER SHARE DATA:
Basic and diluted loss per share........ (23.88) (19.07) (17.43) (12.78)
Cash dividends per common share......... 5.22 6.75 3.55 4.46
Basic and diluted weighted average
common shares......................... 17,423,665 17,727,503 17,423,665 17,727,503
- --------------------------
(1) Includes Olsten Staffing restructuring charge of $29 million (CHF
43 million) for the nine months ended October 3, 1999.
17
RISK FACTORS
THIS PROXY STATEMENT/PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT
INVOLVE A NUMBER OF RISKS AND UNCERTAINTIES. ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY INCLUDE, WITHOUT LIMITATION, THE
RISK FACTORS DISCUSSED BELOW AND ELSEWHERE IN THIS PROXY STATEMENT/PROSPECTUS.
IN ADDITION, AS A STOCKHOLDER OF GENTIVA HEALTH SERVICES, YOU WILL BE SUBJECT TO
THE RISKS OF INVESTING IN GENTIVA HEALTH SERVICES. IN ADDITION TO THE OTHER
INFORMATION CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS, INCLUDING THE GENTIVA
HEALTH SERVICES PROSPECTUS, AND THE ATTACHED ANNEXES, YOU SHOULD CONSIDER THE
FOLLOWING RISK FACTORS CAREFULLY IN DECIDING HOW TO VOTE ON THE MERGER.
RISKS RELATED TO THE TRANSACTION
IF ADECCO IS NOT ABLE TO RECOGNIZE ALL OF THE EXPECTED BENEFITS OF THE MERGER,
ADECCO COULD BE ADVERSELY AFFECTED
Adecco entered into the merger agreement with the expectation that the
merger would result in a $3.1 billion increase in annualized revenues. However,
Adecco cannot guarantee you that, after the merger, it will be able to realize
this increase in revenue. The factors that may affect Adecco's ability to fully
realize an increase in revenue from its merger with Olsten are the same factors
that would decrease Olsten's revenue in the absence of merger, including:
- an economic downturn that results in companies using fewer temporary
employees;
- increased competition in the worldwide staffing services market;
- a loss of key personnel; and
- a decreased ability to attract and retain qualified temporary personnel.
In addition, Adecco entered into the merger agreement with the expectation
that the increased revenues discussed above would yield gross margins at least
comparable to those realized by Olsten. Furthermore, Adecco entered into the
merger agreement with the expectation that, through the merger, Adecco would be
able to realize cost savings, including through cost avoidance, that it
otherwise would not have been able to realize. For example, through the
consolidation of Adecco's North American headquarters with that of Olsten's
North American headquarters, Adecco expects to realize lower administrative
costs, primarily through the reduction in the number of administrative
employees, and lower fixed operating expenses than it otherwise would incur if
Olsten and Adecco maintained separate headquarters after the merger. Adecco has
estimated annual savings resulting from this consolidation to be in the range of
$40 to $50 million, after one time costs of restructuring. In addition, by
utilizing Olsten's headquarters in Melville, New York for the consolidated North
American operations, Adecco expects to avoid the cost of upgrading its
accounting and operating systems to the level currently in place in Olsten's
headquarters. Adecco also hopes to recognize additional efficiencies by
increasing its operating leverage and achieving operating synergies. However,
the estimated savings from headquarters consolidation is preliminary and subject
to change, and the hoped for savings from cost avoidance and increased
efficiency, while potentially material, are presently speculative and may never
be realized. Failure to realize the anticipated benefits of the merger could
materially adversely affect Adecco's financial condition, results of operations
and liquidity.
IF THE MERGER AGREEMENT IS TERMINATED, OLSTEN WILL BE REQUIRED TO REPAY ADECCO
$30 MILLION OF INDEBTEDNESS AND MAY BE REQUIRED TO PAY ADECCO A $40 MILLION
TERMINATION FEE
On January 18, 2000, Adecco, Inc., a subsidiary of Adecco, agreed to loan
Olsten $30 million, in part to provide funds to Gentiva Health Services until
the closing of the merger. If the merger occurs, Olsten's indebtedness to
Adecco, Inc. will become an intercompany account. If the merger agreement is
18
terminated, the indebtedness will mature 90 days after notice of termination of
the merger agreement is given. Furthermore, under some circumstances of
termination of the merger agreement, Olsten would be required to pay Adecco a
termination fee of $40 million.
If the merger agreement is terminated:
- Olsten may not have enough cash on hand to repay this indebtedness as it
becomes due or to pay the termination fee if it becomes due and may not be
able to raise debt or equity financing before maturity of the loan or the
date the termination fee is due to repay these obligations, which would
have a material adverse effect on Olsten's financial condition, results of
operations and liquidity; and
- the existence of the Olsten indebtedness to Adecco, Inc. and, if
applicable, the obligation to pay the termination fee could have the
effect of deterring a third-party proposal for an acquisition transaction
with Olsten superior to that offered by Adecco.
OLSTEN HAS RECENTLY DETERMINED NON-COMPLIANCE WITH SOME COVENANTS IN ITS CREDIT
AGREEMENT
In late December 1999, Olsten determined that it had not included bank
overdraft balances of its French subsidiary in calculating its compliance with
the covenants under its $400 million revolving credit agreement. After including
these balances, Olsten determined that it was not in compliance with the
covenants that limit the incurrence of debt and limit the maximum ratio of debt
to its earnings before interest, taxes, depreciation and amortization (referred
to as EBITDA).
After including the overdraft balances as debt, Olsten exceeded the limit on
incurrence of debt and on incurrence of debt at the subsidiary level. Also after
including the overdraft balances as debt, Olsten exceeded the maximum permitted
ratio of debt to EBITDA from the third quarter of fiscal 1998 through the third
quarter of fiscal 1999.
Olsten's lenders waived its noncompliance with these covenants under the
credit agreement. The waiver, however, does not waive any noncompliance with the
debt to EBITDA ratio for any period after October 3, 1999. The lenders also
permitted Olsten to incur a loan of up to $30 million from Adecco, Inc., a
subsidiary of Adecco. See "The Merger--Bridge Loan."
If Olsten is not in compliance with the debt to EBITDA ratio for any period
after October 3, 1999 or another default occurs under the credit agreement, the
lenders could require Olsten immediately to pay all principal and interest
outstanding under the credit agreement. As of January 2, 2000, Olsten had
$368 million outstanding under its credit agreement. Additionally, an
acceleration under the credit agreement would trigger a right of acceleration of
some of Olsten's other debt, including the $30 million loan to Olsten by Adecco,
Inc. If any material loan were accelerated and Olsten were unable immediately to
refinance that debt, it would have a material adverse effect on Olsten's
liquidity and business.
GENTIVA HEALTH SERVICES AND ADECCO MAY NOT BE ABLE TO PAY THEIR INDEMNIFICATION
OBLIGATIONS TO EACH OTHER
Under the separation agreement, Gentiva Health Services has agreed to
indemnify Adecco for all liabilities related to the health services business.
Conversely, Olsten, as a wholly-owned subsidiary of Adecco following the merger,
will indemnify Gentiva Health Services for all of Olsten's liabilities relating
to Olsten's businesses other than those related to the health services business.
If a request for indemnification is not honored, the party making the request
would be required to make all payments and then seek reimbursement. No assurance
can be given that either of these entities will be in a position to pay whatever
amount it is required to pay to indemnify the other party if it ever becomes
obligated to do so. In such case, that party may not indemnify the other party
and the party to be indemnified may be responsible for all amounts. If either
party cannot pay the amount it is required to
19
pay to indemnify the other party, the other party can pursue claims against the
indemnifying party as an unsecured general creditor of the indemnifying party.
Olsten, as the former parent of Gentiva Health Services, and its
subsidiaries have been involved in litigation arising out of the health services
business, in particular, those described under "--Risks Related to Gentiva
Health Services--Gentiva Health Services is involved in various litigations." In
addition, the health services business has been subject to extensive federal and
state governmental investigations regarding, among other things, those matters
described under "--Risks Related to Gentiva Health Services--Gentiva Health
Services has been subject to government investigations and has entered into
agreements with the government."
In addition, under the tax sharing agreement among Olsten, Adecco and
Gentiva Health Services, Gentiva Health Services will indemnify Olsten (1) for
any incremental income taxes imposed on Olsten as a result of the split-off,
unless these taxes result from specified actions taken by Olsten and (2) if
Olsten is denied refunds attributable to the carry-back of net operating losses
of Olsten and its subsidiaries.
Under the terms of the separation agreement and the tax sharing agreement,
Gentiva Health Services is required to indemnify Olsten and Adecco for these
liabilities and any others arising out of Olsten's health services business, but
there can be no assurance that it will be able to do so.
THE TRANSACTION IS SUBJECT TO LIABILITIES AS A RESULT OF LAWS PROTECTING
CREDITORS OF OLSTEN AND GENTIVA HEALTH SERVICES
Under U.S. federal and state fraudulent conveyance laws, if a court in a
lawsuit by an unpaid creditor or a representative of creditors of Olsten or
Gentiva Health Services were to determine that, after giving effect to the
merger, Olsten or Gentiva Health Services:
- was or would be rendered insolvent;
- had unreasonably small capital with which to carry on its business and all
businesses in which it intended to engage; or
- intended to incur, or believed it would incur, debts beyond its ability to
repay such debts as they would mature,
then the court could, for the benefit of creditors, set aside the transfers or
borrowings that occurred as part of the merger, including by reallocating them
between Olsten and Gentiva Health Services with resulting effects on the
relative value of the stock of Adecco and Gentiva Health Services.
Generally an entity would be considered insolvent if the present fair
saleable value of its assets is less than:
- the amount of its liabilities including contingent liabilities, or
- the amount that will be required to pay its probable liabilities on its
existing debts as they become absolute and mature.
It is not clear what standard a court would apply in determining insolvency
or that a court would not determine that Olsten or any of its subsidiaries was
"insolvent" at the time of or after giving effect to the merger. If Olsten or
Gentiva Health Services became a debtor in a bankruptcy case, the bankruptcy
court would apply the standards of U.S. federal bankruptcy law to determine
whether a transfer that occurred within a year before the commencement of the
bankruptcy case would qualify as a fraudulent transfer. For transfers that
occurred more than one year before the bankruptcy case, the bankruptcy court
would apply applicable state law standards, which may vary among states. If
Olsten or Gentiva Health Services did not become a debtor in a bankruptcy case,
creditors who sought to recover or avoid transfers by characterizing them as
fraudulent transfers would look to the state law standards.
20
It is possible that the standards for determining whether a fraudulent transfer
occurred may vary between state and federal law, on the one hand, and between
various state laws, on the other.
In addition, if either Olsten or Gentiva Health Services were to fail to pay
its creditors, it is possible that the creditors would seek to collect from the
other party on various theories of collective liability. For example, creditors
may seek to "pierce the corporate veil" by trying to collect Olsten's
obligations from Adecco, which will be Olsten's sole shareholder upon completion
of the merger.
YOU MAY NOT RECEIVE THE FORM OF MERGER CONSIDERATION THAT YOU ELECT
Your ability to receive in the merger either 0.12472 of an Adecco ADS or
$8.75 in cash for each share of Olsten stock you own is subject to the
requirement that the consideration to be paid by Adecco will be Adecco ADSs for
half the Olsten shares and cash for the other half. Therefore, if holders of
more than 50% of the outstanding Olsten stock elect to receive cash, those
holders will receive a combination of cash and Adecco ADSs, so that Adecco will
pay in total the same amount of cash consideration it would have paid if holders
of exactly 50% of the outstanding Olsten stock elected to receive cash.
Likewise, if holders of more than 50% of the outstanding Olsten stock elect to
receive Adecco ADSs, those holders will receive a combination of cash and Adecco
ADSs for each share of Olsten stock they own. If you choose not to make an
election, you will receive your portion of the merger consideration not
allocated to Olsten stockholders who do make an election. The total dollar
amount of the cash consideration to be paid by Adecco and the total number of
Adecco ADSs to be issued in the merger will depend on the total number of shares
of Olsten stock outstanding on the date of the merger and, therefore, cannot be
determined until after the merger. However, based on the number of shares of
Olsten stock outstanding on January 18, 2000, Adecco would have paid a total of
about $355.8 million in cash and 5.1 million ADS if the merger had occurred on
that date. The following sets forth examples of situations where some Olsten
stockholders would not get the consideration they elected.
CONSIDERATION PAID
PERCENTAGE OF PERCENTAGE OF CONSIDERATION PAID PER OLSTEN SHARE
PERCENTAGE OF OLSTEN SHARES OLSTEN SHARES PER OLSTEN SHARE TO HOLDERS CONSIDERATION PAID
OLSTEN SHARES ELECTING NOT TO HOLDERS ELECTING PER OLSTEN SHARE
ELECTING CASH ADECCO ADSS ELECTING ELECTING CASH ADECCO ADSS TO NON-ELECTORS
- --------------------- --------------- ------------- --------------------- --------------------- ---------------------
100% 0% 0% 1) 0.25 OF A SHARE OF N/A N/A
GENTIVA HEALTH
SERVICES COMMON
STOCK;
2) $4.375; AND
3) 0.06236 OF AN
ADECCO ADS.
0% 90% 10% N/A 1) 0.25 OF A SHARE OF 1) 0.25 of a share of
GENTIVA HEALTH Gentiva Health
SERVICES COMMON Services common
STOCK; stock; and
2) $3.89; AND 2) $8.75.
3) 0.06929 OF AN
ADECCO ADS.
10% 70% 20% 1) 0.25 of a share of 1) 0.25 OF A SHARE OF 1) 0.25 of a share of
Gentiva Health GENTIVA HEALTH Gentiva Health
Services common SERVICES COMMON Services common
stock; and STOCK; stock; and
2) $8.75. 2) $2.50; AND 2) $8.75.
3) 0.08909 OF AN
ADECCO ADS.
21
Depending on the trading price of Adecco ADSs or Adecco common shares, one
form of the merger consideration may be more valuable than another. On August
17, 1999, the date of the merger agreement, 0.12472 of an Adecco ADS was worth
$8.54, and on February , 2000, 0.12472 of an Adecco ADS was worth $ , in
each case, based on the closing price on that date on the Nasdaq National
Market.
If (1) appraisal rights are available in connection with the merger,
(2) you do not vote in favor of the merger and (3) you follow all of the
procedures for demanding your appraisal rights described on pages 46 through 49
and in Annex E, you may receive a cash payment for the "fair value" of your
shares of common stock instead of the amount to be received by the other
stockholders pursuant to the merger agreement. If appraisal rights are available
and you properly follow these procedures, the fair value of your shares will be
determined by the Delaware Court of Chancery and may be more than, the same as
or less than the value of what you would have received in the merger if you had
not exercised your appraisal rights. Failure to take any of the steps required
by law will result in the loss of your appraisal rights, if available at all.
Appraisal rights will be available unless holders of 50% or more of Olsten stock
elect cash. Olsten stockholders who dissent from the merger and obtain the
appraisal value will be paid in cash, which will reduce the cash portion of the
merger consideration available for non-dissenting stockholders.
OLSTEN COMMON STOCKHOLDERS WILL NOT HAVE THE ABILITY TO DISAPPROVE THE
TRANSACTION
Stuart Olsten, chairman of the board of Olsten, and other members of the
Olsten family, collectively owning shares of class B common stock and common
stock representing 63% of the voting power of Olsten's stock as of January 18,
2000, have agreed to vote for the merger. Assuming these stockholders vote their
shares as they have agreed, the vote necessary for approving the merger by the
stockholders of Olsten is assured.
ADECCO'S SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT ITS FINANCIAL CONDITION
AND PREVENT IT FROM FULFILLING ITS FINANCIAL OBLIGATIONS
Adecco will require about CHF 531 million ($356 million) to fund the cash
portion of the merger consideration, about CHF 616 million ($413 million) to pay
certain Olsten debt and approximately CHF 325 million ($218 million) to satisfy
contractual obligations and transaction costs associated with the merger, for a
total of CHF 1,472 million ($987 million). In addition, Adecco will require CHF
746 million ($500 million) to refinance outstanding Adecco indebtedness maturing
in February 2000, and additional financing for operations.
In November 1999, Meridian B.V., a wholly-owned subsidiary of Adecco,
completed an offering of [EURO]360 million ($387 million based on a noon buying
rate of $1.07 per [EURO]1.00 on October 3, 1999, and CHF 576 million) in
principal amount of its 1.50% guaranteed convertible notes due 2004, the entire
net proceeds of which are available to Adecco. The convertible notes are
guaranteed on a senior unsecured basis by Adecco and are convertible into about
540,000 Adecco common shares. Adecco entered into a credit agreement in January
2000 providing for a revolving facility and a term loan facility, with total
borrowings available under those facilities of up to CHF 1.5 billion
($1 billion) to fund the remainder of its cash requirements (after completion of
a common stock offering in December 1999 for total net proceeds of
CHF 515 million ($345 million)) for the merger, to refinance its debts and to
finance its operations.
Therefore, after the merger, Adecco will have a significant amount of
indebtedness. As of October 3, 1999, on a pro forma basis assuming Adecco had
completed the merger and the related financing as of that date, Adecco would
have had about CHF 2.8 billion ($1.9 billion) of total principal amount of
indebtedness outstanding. Adecco's indebtedness relative to its market
capitalization is approximately 20%. Adecco's pro forma cash flow from
operations through October 3, 1999 was
22
CHF 151 million ($101 million). Additional interest expense net of tax is
estimated at CHF 26 million ($17 million), for the same period. Adecco's ratio
of earnings to fixed charges was approximately 1:1 for the nine months ended
October 3, 1999. For the year ended January 3, 1999, fixed charges exceeded
earnings by approximately CHF 20 million ($13 million). On a pro forma basis,
fixed charges exceeded earnings by CHF 154 million ($102 million) for the nine
months ended October 3, 1999 and CHF 164 million ($108 million) for the year
ended January 3, 1999. In computing the ratio of earnings to fixed charges:
(a) earnings have been based on income from continuing operations before income
taxes and fixed charges (exclusive of interest capitalized) and (b) fixed
charges consist of interest and amortization of debt discount and expense
(including amounts capitalized) and the estimated interest portion of rents.
Adecco's substantial indebtedness could have important consequences to
shareholders of Adecco. For example, it could:
- increase Adecco's vulnerability to general adverse economic and industry
conditions;
- limit Adecco's ability to fund future working capital, capital
expenditures and other general corporate requirements;
- limit Adecco's flexibility in planning for, or reacting to, changes in the
staffing services industry;
- place Adecco at a competitive disadvantage compared to its competitors
that have less debt; and
- limit, along with the financial and other restrictive covenants in its
indebtedness, Adecco's ability to borrow additional funds. Additionally,
failing to comply with those covenants could result in an event of default
which, if not cured or waived, could have a material adverse effect on
Adecco.
THE VALUE OF ANY STOCK THAT OLSTEN'S STOCKHOLDERS WILL RECEIVE WILL VARY AS A
RESULT OF STOCK PRICE FLUCTUATIONS
The value of the securities that Olsten stockholders receive as part of the
merger consideration will vary as a result of fluctuations in the market value
of Adecco ADSs and in the value of Gentiva Health Services' common stock
(implied in the market value of Olsten common stock before the merger). On
February , 2000, 0.12472 of an Adecco ADS was worth $ , based on the
closing price of an Adecco ADS on the Nasdaq National Market of $ . If you
receive Adecco ADSs instead of cash, the difference in the consideration you
receive per share of Olsten stock you own and what you would have received had
you received cash is the difference in the market value of 0.12472 of an Adecco
ADS and $8.75.
Olsten and Adecco have agreed that Adecco will pay to Olsten's stockholders,
in total, cash for half of the outstanding Olsten stock and Adecco ADSs for the
other half. The total amount of consideration to be paid by Adecco in exchange
for Olsten stock is about $355.8 million and about 5.1 million ADSs based on the
number of shares of Olsten stock outstanding as of January 18, 2000.
Until the closing of the merger, you will continue to be subject to the risk
of variance in the market price of Adecco ADSs and common shares. The market
value of Adecco ADSs may be adversely affected by changes in Adecco's business,
operations, results and prospects, general economic and industry conditions,
fluctuations in exchange rates between the U.S. dollar and the Swiss franc.
ADECCO MAY NOT PAY DIVIDENDS, AND GENTIVA HEALTH SERVICES DOES NOT INTEND TO PAY
DIVIDENDS IN THE FORESEEABLE FUTURE
Olsten discontinued the payment of dividends in August 1999 because of its
financial condition and the probability of a merger.
23
Although Adecco currently pays annual cash dividends and although the board
of directors of Adecco will propose in April 2000 to the Adecco shareholders a
dividend of CHF 8.40 per share, Adecco may discontinue this practice at any
time. The future payment of dividends by Adecco will depend on its financial
condition as determined by its board of directors, and on decisions by its
shareholders and ADS holders, who must approve any payment of dividends. Swiss
law requires that at least 5% of Adecco's annual net profits, as reported in the
annual financial statements of Adecco prepared on a stand-alone basis and
otherwise in accordance with Swiss law, be retained by Adecco as general
reserves for as long as these reserves amount to less than 20% of Adecco's
equity capital. Dividends may only be paid out of the remaining net profits and
out of unrestricted retained earnings and reserves. However, there can be no
assurance that Adecco will have any unrestricted net profits, retained earnings
or reserves with which to pay any dividends. For a discussion on risks that may
affect Adecco's results of operations, see "--Risks Related to Adecco."
The future payments of dividends by Gentiva Health Services will be
determined by the board of Gentiva Health Services, which does not intend to pay
dividends in the forseeable future. In addition, instruments governing debt to
be incurred by Gentiva Health Services are expected to restrict dividend
payments and other distributions to the stockholders of Gentiva Health Services.
YOU MAY HAVE TO PAY TAXES EVEN IF YOU DO NOT RECEIVE CASH IN THE MERGER
Any gain or loss recognized by Olsten stockholders with respect to the
merger will, and, with respect to the split-off, should, generally be taxable as
capital gain or loss. For example, if you receive only Adecco ADSs, shares of
Gentiva Health Services common stock and no cash, and if the total market value
of that stock you receive is higher than the total tax basis of the shares of
Olsten stock you surrendered in the merger, you will nevertheless have to pay
taxes on the difference. The more stock you receive instead of cash in the
merger, the less cash you will have available to pay taxes.
RESTRICTIONS BY REGULATORY AGENCIES OR A COURT COULD IMPEDE OUR ABILITY TO
COMPLETE THE MERGER
Olsten and Adecco have received clearance to proceed with the merger from
the Commission of the European Communities and the Canadian Competition Bureau.
In addition, Olsten and Adecco have received notice of early termination of the
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act.
Notwithstanding this early termination of the waiting period, at any time before
or after the completion of the merger, antitrust authorities could take such
action under the antitrust laws as they deem necessary or desirable in the
public interest, including seeking to enjoin consummation of the merger or
seeking the divestiture of substantial assets of Adecco and/or Olsten. There can
be no assurance that antitrust authorities and/or private parties will not
challenge the merger in court on antitrust grounds, or if such challenge is
made, what the result will be.
THE LAWS OF SWITZERLAND REQUIRE LESS CORPORATE DISCLOSURE THAN THOSE OF THE
UNITED STATES, WHICH MEANS THAT PUBLICLY-AVAILABLE INFORMATION ABOUT ADECCO IS
LESS EXTENSIVE AND AVAILABLE LATER THAN PUBLICLY-AVAILABLE INFORMATION ABOUT
OLSTEN
There is less publicly-available information about Adecco, as a foreign
issuer of securities publicly traded in the United States, than is regularly
published by or about domestic issuers of publicly-traded securities. Therefore,
Adecco shareholders receive less information about the performance of Adecco
than Olsten stockholders receive about Olsten.
Although Adecco is subject to the disclosure requirements mandated by the
Swiss Stock Exchange, Swiss law generally imposes limited disclosure
requirements. Under Swiss law, Adecco is required to furnish year-end financials
to its shareholders within six months after the close of each fiscal year, but
does not have other continuing disclosure obligations. As a foreign private
issuer under the Securities Exchange Act of 1934, Adecco is not required to file
an annual report with the Securities and
24
Exchange Commission on Form 20-F until six months after the close of each fiscal
year. Therefore, year-end information about Adecco is not currently required to
be available until three months after the corresponding information about Olsten
is required to be available. In addition, as a foreign private issuer, Adecco,
unlike Olsten prior to the merger, is not required to file quarterly reports
with the Securities and Exchange Commission and is exempt from the requirements
to furnish an annual proxy or information statement under the Securities
Exchange Act of 1934. Therefore, information you may require to make an informed
investment decision with respect to Adecco after the merger will be less
extensive and may be available later than the information made available to you
regarding Olsten prior to the merger.
UNDER SWISS LAW, THE SHAREHOLDERS OF ADECCO HAVE FEWER AND LESS WELL-DEFINED
SHAREHOLDERS' RIGHTS THAN THEY WOULD HAVE IF ADECCO WERE A DELAWARE CORPORATION
Adecco's corporate affairs are governed by the Adecco charter and the laws
of Switzerland while Olsten's corporate affairs are governed by the Olsten
charter and the laws of Delaware. The Swiss Code of Obligations is generally
less specific in terms of governance of corporate operations than is the General
Corporation Law of the State of Delaware. Accordingly, under Swiss law, the
shareholders of Adecco may have fewer or less well-defined rights than they
might otherwise have as stockholders of Olsten and Gentiva Health Services,
which are both corporations governed by Delaware law. For example, a stockholder
of a Delaware corporation has an appraisal right, which is the right, in the
event of some mergers or consolidations, to surrender his or her stock in
exchange for the "fair value" of his or her stock as determined by a court of
law. A stockholder of a Delaware corporation may also institute lawsuits on
behalf of the corporation. In contrast, a shareholder of a Swiss corporation
lacks appraisal rights and the right to institute lawsuits on behalf of a
corporation, and as a result may not be able to protect his or her interest in
the shares as well as a stockholder of a Delaware corporation could. For a
description of what your rights will be as an Adecco shareholder, see
"Description of Adecco Common Shares" and "Comparative Rights of Stockholders of
Adecco and Olsten."
GENTIVA HEALTH SERVICES WILL FACE CHALLENGES AS A STAND-ALONE COMPANY THAT IT
DID NOT EXPERIENCE AS A SUBSIDIARY OF OLSTEN
As an independent, publicly owned company, Gentiva Health Services will face
new issues and challenges that it did not experience when it was a part of
Olsten. If Gentiva Health Services is unable to resolve these issues or overcome
these challenges, its results of operations and financial position may be
adversely affected. Examples of potential issues Gentiva Health Services may
face include:
- challenges in developing and promoting new name recognition and inability
to rely on the Olsten name, long term financial strength and goodwill;
- inability to rely on the experience and business relationships of some
personnel who will not be continuing employment with Gentiva Health
Services;
- greater difficulty in obtaining financing on terms satisfactory to Gentiva
Health Services, if needed; and
- difficulty in obtaining and maintaining insurance on terms that are
acceptable to Gentiva Health Services.
Gentiva Health Services' results of operations and prospects, as well as
stock price, may be affected by factors that are different from those that have
affected Olsten in the past. After the split-off, Gentiva Health Services will
be a smaller and less diversified company than Olsten was prior to the
split-off. Gentiva Health Services' results of operations will be more affected
by competitive and market factors specific to the home health care industry. In
addition, Gentiva Health Services will not have the benefit of the diversified
source of revenues which Olsten had.
25
GENTIVA HEALTH SERVICES HAS TRADITIONALLY RELIED ON OLSTEN FOR FINANCIAL
ASSISTANCE AND MAY HAVE DIFFICULTY WITH CASH MANAGEMENT WITHOUT THIS ASSISTANCE
Gentiva Health Services has historically relied on the earnings, assets and
cash flow of Olsten for liquidity and capital requirements and administrative
services. In the past, when Gentiva Health Services' liquidity needs exceeded
its cash flow, Olsten provided it with necessary funds. Gentiva Health Services'
inability to rely on Olsten for financial assistance may adversely affect its
financial condition.
GENTIVA HEALTH SERVICES HAS NOT FULLY ESTABLISHED THE CORPORATE INFRASTRUCTURE
THAT IS REQUIRED FOR A STAND-ALONE COMPANY
After the split-off Gentiva Health Services may or may not be able to
establish the departments and services necessary to conduct its business as an
independent, publicly owned company in an efficient and timely manner or on
favorable terms. Olsten has agreed to provide Gentiva Health Services tax,
legal, procurement and other services on a cost basis for up to one year after
the split-off. Gentiva Health Services will, however, need to establish its
company as a stand-alone entity and will not be entitled to rely on Olsten other
than for these limited transitional services. In establishing these departments
and services, Gentiva Health Services may face issues and challenges, including:
- increased costs of hiring and retaining employees in departments
previously shared by all the businesses of Olsten, including the legal,
risk management, tax, treasury, human resources and public relations
departments; and
- generally increased overhead and administrative costs as a result of
establishing a stand-alone company.
If Gentiva Health Services is unable to establish the required departments
and services in a timely or cost effective manner, its operations could be
adversely affected.
GENTIVA HEALTH SERVICES' HISTORICAL FINANCIAL INFORMATION MAY NOT BE
REPRESENTATIVE OF ITS RESULTS AS A SEPARATE COMPANY
The historical financial information Gentiva Health Services has included in
its prospectus may not reflect what its results of operations, financial
position and cash flows would have been had it been a separate, stand-alone
company during the periods presented. This information may not reflect what
Gentiva Health Services' results of operations, financial position and cash
flows will be in the future. This is not only related to the various risks
associated with the fact that Gentiva Health Services has not been a stand-alone
company, but also because:
- various adjustments and allocations were made to the historical financial
statements in the Gentiva Health Services' prospectus because Olsten did
not account for it as a single stand-alone business for any period
presented;
- the historical information does not reflect many significant changes that
will occur in Gentiva Health Services' financial condition, capital
structure and operations as a result of Gentiva Health Services'
separation from Olsten; and
- the historical information does not reflect the indebtedness under Gentiva
Health Services' new credit facility and the costs associated with
borrowing under that facility.
Gentiva Health Services cannot assure you that the adjustments and
allocations made in preparing its historical financial statements appropriately
reflect its operations during the periods presented as if it had operated as a
stand-alone company, nor can Gentiva Health Services predict what the actual
effect of its separation from Olsten will be.
26
THE CHANGE OF SOME PERSONNEL AT GENTIVA HEALTH SERVICES MAY HAVE AN ADVERSE
EFFECT ON ITS SUCCESS
After the split-off, it is expected that some of the personnel of Olsten
will resign from Olsten and become Gentiva Health Services' initial employees,
while others will not continue with Gentiva Health Services. In particular,
Robert A. Fusco, the past president of Olsten's health services business,
tendered his resignation as president in late 1999. Until the split-off, he will
provide services, but will not continue with Gentiva Health Services after the
split-off. In addition, some Olsten personnel who have provided services to
Gentiva Health Services as Olsten employees in the treasury, legal, human
resources, and risk management department in the past will not become a part of
Gentiva Health Services after the split-off and their services will not be
available. Gentiva Health Services cannot assure you that the transition of
personnel from Olsten's other businesses to Gentiva Health Services, the
employment of personnel in some departments, the loss of the former president or
the loss of other personnel will not disrupt, at least temporarily, the
operations of Gentiva Health Services' business. Any disruption in Gentiva
Health Services' business could have a material adverse effect on Gentiva Health
Services' results of operations. Gentiva Health Services cannot predict with
certainty the financial impact any potential disruption might have on its
business.
THERE IS NO EXISTING TRADING MARKET FOR GENTIVA HEALTH SERVICES' COMMON STOCK
There is no existing trading market for Gentiva Health Services' common
stock and there can be no assurance that an active trading market will be
established. Gentiva Health Services has applied for approval for quotation of
its common stock on the Nasdaq National Market and expects to receive approval
for quotation on the Nasdaq National Market at the time of the split-off.
Gentiva Health Services' common stock may experience volatility until trading
values become established. As a result, it could be difficult to make purchases
or sales of Gentiva Health Services' common stock in the market at any
particular time. Gentiva Health Services does not know what price its common
stock will trade at after the split-off.
VARIOUS FACTORS MAY DEPRESS THE TRADING VALUE OF GENTIVA HEALTH SERVICES' COMMON
STOCK
Immediately after the split-off, Gentiva Health Services will have the same
stockholders as Olsten had before the split-off and you will own the same
percent of Gentiva Health Services' common stock as you did in Olsten. Some
stockholders who receive Gentiva Health Services' common stock in the split-off
may decide that they do not want to maintain an investment in a company almost
exclusively involved in home health care services. If these stockholders decide
to sell all or some of their shares, or the market perceives that those sales
could occur, the trading value of your shares may decline. In addition, because
Gentiva Health Services will be a smaller and less diversified company than
Olsten, Gentiva Health Services' stock may not be followed as closely by market
analysts or the investment community as Olsten stock had been in the past. If
there is only a limited following by market analysts or the investment
community, the amount of market activity in Gentiva Health Services' common
stock may be reduced, making it more difficult for you to sell your shares.
GENTIVA HEALTH SERVICES WILL ONLY BE PERMITTED TO USE OLSTEN'S INTELLECTUAL
PROPERTY FOR A ONE-YEAR PERIOD
Gentiva Health Services has a non-exclusive, royalty-free license for
several Olsten logos and names for one year. The Olsten logo and name have been
important to Gentiva Health Services' marketing activities in the past. Gentiva
Health Services recently changed its name and will need to devote substantial
resources to building recognition of its new name prior to the expiration of its
license with Olsten. Gentiva Health Services estimates that the development of
name recognition, including public relations efforts, could cost up to $5.0
million. Many of Gentiva Health Services' patients, payors and others Gentiva
Health Services does business with are familiar with it only as an Olsten
entity. Gentiva Health Services may lose some of these business relationships as
a result of not
27
being associated with the Olsten name and company. Although Gentiva Health
Services cannot quantify the effect that a name change will have on its ability
to retain and attract patients and others with whom it does business, the loss
of a significant number of patients could have a material adverse effect on
Gentiva Health Services' business.
GENTIVA HEALTH SERVICES IS REQUIRED TO PROVIDE NOTIFICATIONS TO, AND SEEK
APPROVAL OF, REGULATORY AUTHORITIES IN ORDER TO COMPLETE THE SPLIT-OFF
Gentiva Health Services is required to obtain regulatory approvals or make
notifications to some regulatory authorities in order to complete the split-off.
Gentiva Health Services cannot assure you that it will secure all of these
regulatory approvals on a timely basis, if at all. All of the requisite
applications or notifications with each of the applicable regulatory authorities
have been filed. With the exception of the states of New York and California,
all requisite regulatory approvals have been granted. Gentiva Health Services
cannot assure you that it will obtain the New York and California regulatory
approvals prior to the split-off. If Gentiva Health Services is unable to secure
these approvals on a timely basis, it could be subject to sanctions under
existing state laws in these states. These sanctions could take the form of
fines, or potentially, enforcement actions to suspend Gentiva Health Services'
ability to do business in these states.
PROVISIONS IN GENTIVA HEALTH SERVICES' ORGANIZATIONAL DOCUMENTS, DELAWARE LAW
AND GENTIVA HEALTH SERVICES' RIGHTS AGREEMENT COULD DELAY OR PREVENT A CHANGE IN
CONTROL OF GENTIVA HEALTH SERVICES, WHICH COULD ADVERSELY AFFECT THE PRICE OF
ITS COMMON STOCK
Provisions in Gentiva Health Services' organizational documents, Delaware
law and Gentiva Health Services' rights agreement could delay or prevent an
unsolicited change in control of Gentiva Health Services, which could adversely
affect the price of its common stock. These provisions may also have the effect
of making it more difficult for third parties to replace Gentiva Health
Services' current management without the consent of its board of directors.
These provisions in Gentiva Health Services' certificate of incorporation and
bylaws which could delay or prevent an unsolicited change in control of Gentiva
Health Services include:
- the classification of Gentiva Health Services' board of directors into
three classes, each class serving "staggered" terms of office of three
years after the initial terms;
- limitations on the removal of directors so that they may only be removed
for cause;
- the board of directors' ability to issue shares of preferred stock and
determine the terms of the preferred stock without stockholder approval;
and
- prohibition on the right of stockholders to call meetings or act by
written consent and limitation on the right of stockholders to present
proposals or make nominations at stockholder meetings.
Delaware law also imposes restrictions on mergers and other business
combinations between Gentiva Health Services and any holder of 15% or more of
Gentiva Health Services' outstanding common stock. In addition, Gentiva Health
Services has a rights agreement that has the effect of deterring takeovers of
Gentiva Health Services without the consent of its board of directors.
Generally, once a party acquires 10% or more of Gentiva Health Services' common
stock, the rights agreement may cause that party's ownership interest in Gentiva
Health Services to be diluted, unless its board of directors consents to the
acquisition.
GENTIVA HEALTH SERVICES MAY HAVE DIFFICULTY RELOCATING ITS HEADQUARTERS AND
ENTERING INTO NEW LEASES FOR REAL PROPERTY ON TERMS THAT ARE SATISFACTORY OR IN
A TIMELY FASHION
Gentiva Health Services' operations are currently based out of its
headquarters and about 400 other locations. The separation agreement requires
Gentiva Health Services to relocate its headquarters
28
within six months after the split-off. In addition, Gentiva Health Services
currently has leases for eleven locations it shares with the other businesses of
Olsten. Those leases will need to be modified, assigned or terminated in order
to prevent operations of both Olsten's businesses and Gentiva Health Services'
business in the same location. Gentiva Health Services cannot assure you that it
will obtain new leases in a timely manner or that the terms of the new leases or
subleases will be satisfactory to it. Any difficulty Gentiva Health Services may
experience in replacing these eleven leases or relocating its headquarters may
affect the operations of its business if it does not have sufficient office
space in which to operate. The result of these difficulties may include a
disruption in Gentiva Health Services' business, including:
- an inability to continue to provide the level of services it has in the
past at those locations and, in turn, generate the historical revenue from
those locations;
- a delay in collection of accounts receivable;
- challenges in ensuring regulatory compliance;
- difficulties in retaining personnel; and
- an inability to manage day to day operations.
Any of these difficulties could have a material adverse effect on Gentiva Health
Services' business until it relocates.
RISKS RELATED TO ADECCO
ANY SIGNIFICANT ECONOMIC DOWNTURN COULD RESULT IN COMPANIES USING FEWER
TEMPORARY EMPLOYEES, WHICH COULD MATERIALLY ADVERSELY AFFECT ADECCO
Demand for personnel services is sensitive to changes in the level of
economic activity. For example, when economic activity begins to increase,
temporary employees are often added before full-time employees are hired. As
economic activity begins to slow down, companies tend to reduce their use of
temporary employees before undertaking layoffs of their regular employees,
resulting in decreased demand for temporary personnel. Adecco may experience
less demand for its services and more competitive pricing pressure even during
periods of early economic downturn. Any significant economic downturn,
particularly in France and North America where Adecco collectively derived 71%
of its 1998 revenues, could have a material adverse effect on Adecco's financial
condition, results of operations and liquidity.
THE WORLDWIDE STAFFING SERVICES MARKET IS HIGHLY COMPETITIVE WITH LIMITED
BARRIERS TO ENTRY, POTENTIALLY LIMITING ADECCO'S ABILITY TO MAINTAIN OR INCREASE
ITS MARKET SHARE OR PROFITABILITY
The worldwide staffing services market is highly competitive with limited
barriers to entry, and in recent years has been undergoing significant
consolidation. Adecco competes in markets throughout North America, Europe,
Australia, Asia and Latin America with full-service and specialized temporary
service agencies. While the majority of Adecco's competitors are significantly
smaller than Adecco, several competitors, including Manpower, Randstadt, Kelly
Services and Vedior BIS, have very substantial marketing and financial
resources. Adecco expects that the level of competition will remain high in the
future, which could limit Adecco's ability to maintain or increase its market
share or profitability.
IF ADECCO LOSES ITS KEY PERSONNEL, ITS BUSINESS MAY SUFFER
Adecco's operations are dependent on the continued efforts of its executive
officers and senior management, particularly John P. Bowmer, Felix A. Weber,
Miguel Alfageme, Manfred K. Atzert, Stephen G. Harrison, Barbara J. LaTour,
Philippe Marcel, Bernard Morel, Peter Pfister, Debbie Pond-
29
Heide, Ray Roe and Nigel A. Rees. In addition, Adecco is dependent on the
performance and productivity of its local managers and field personnel. Adecco's
ability to attract and retain business is significantly affected by local
relationships and the quality of service rendered. The loss of those key
executive officers and senior management who have acquired significant
experience in operating a staffing service company on an international level may
cause a significant disruption to Adecco's business. Moreover, the loss of
Adecco's key local managers and field personnel may jeopardize existing customer
relationships with businesses that continue to use Adecco's staffing services
based upon past relationships with these local managers and field personnel.
Either of these types of losses could adversely affect Adecco's operations,
including Adecco's ability to establish and maintain customer relationships.
ADECCO'S SUCCESS DEPENDS UPON ITS ABILITY TO ATTRACT AND RETAIN QUALIFIED
TEMPORARY PERSONNEL
Adecco depends upon its ability to attract qualified temporary personnel who
possess the skills and experience necessary to meet the staffing requirements of
its clients. Adecco must continually evaluate and upgrade its base of available
qualified personnel to keep pace with changing client needs and emerging
technologies. Competition for individuals with proven professional skills,
particularly technologically-skilled employees, is intense, and demand for such
individuals is expected to remain very strong for the foreseeable future. There
can be no assurance that qualified personnel will continue to be available to
Adecco in sufficient numbers and on terms of employment acceptable to Adecco.
Adecco's success will depend on its ability to recruit qualified temporary
personnel and retain them.
ADECCO MAY BE EXPOSED TO EMPLOYMENT-RELATED CLAIMS AND COSTS THAT COULD
MATERIALLY ADVERSELY AFFECT ITS BUSINESS
Adecco is in the business of employing people and placing them in the work
place of other businesses. Attendant risks of these activities include possible
claims by customers of employee misconduct or negligence, claims by employees of
discrimination or harassment (including claims relating to actions of Adecco's
customers), claims related to the inadvertent employment of illegal aliens or
unlicensed personnel, payment of workers' compensation claims and other similar
claims. Adecco has policies and guidelines in place to help reduce its exposure
to these risks and has purchased insurance policies against certain risks in
amounts that it believes to be adequate. However, there can be no assurances
that Adecco will not experience these problems in the future or that Adecco may
not incur fines or other losses or negative publicity with respect to these
problems that could have a material adverse effect on Adecco's business.
THE COST OF UNEMPLOYMENT INSURANCE PREMIUMS AND WORKERS' COMPENSATION COSTS FOR
ADECCO'S TEMPORARY EMPLOYEES MAY RISE AND REDUCE ADECCO'S PROFITS
Businesses use temporary staffing in part to shift certain employment costs
and risks to personnel services companies. For example, Adecco is responsible
for and pays unemployment insurance premiums and workers' compensation for its
temporary employees. These costs have generally risen as a result of increased
claims and governmental regulation, as has the level of wages generally. There
can be no assurance that Adecco will be able to increase the fees charged to its
clients in the future to keep pace with increased costs. Price competition in
the personnel services industry is intense, and has led to lower margins. There
can be no assurance that Adecco will maintain its margins, and if it does not,
its profitability could be adversely affected.
30
CURRENCY FLUCTUATIONS MAY NEGATIVELY AFFECT THE U.S. DOLLAR VALUE OF ADECCO ADSS
AND DIVIDEND PAYMENTS TO ADECCO ADS HOLDERS AND MAY ADVERSELY AFFECT ADECCO'S
OPERATING RESULTS WHEN TRANSLATING FOREIGN CURRENCY INTO SWISS FRANCS
Adecco common shares are listed and traded on the Swiss Stock Exchange and
the Paris Stock Exchange. The prices for Adecco common shares on the Swiss Stock
Exchange are expressed in Swiss francs, and the prices for Adecco common shares
on the Paris Stock Exchange are expressed in Euros, but dividends on Adecco
common shares, if any, are only paid in Swiss francs. Fluctuations in the
exchange rate between the Swiss franc or Euro and the U.S. dollar will affect
the U.S. dollar equivalent of the Swiss franc price of Adecco common shares on
the Swiss Stock Exchange and the Euro price on the Paris Stock Exchange. These
fluctuations are also likely to affect the market prices of Adecco ADSs and may
negatively affect the U.S. dollar value of any dividend payments holders of
Adecco ADSs may receive in the future.
In addition, Adecco's operations are conducted in over 50 countries and
Adecco's local operations are reported in the applicable foreign currencies and
then translated into Swiss francs at the applicable foreign currency exchange
rates for inclusion in Adecco's consolidated financial statements. Exchange
rates for currencies of these countries may fluctuate in relation to the Swiss
franc and these fluctuations may have an adverse effect on Adecco's operating
results when translating foreign currency into Swiss francs.
ADECCO'S ACQUISITION STRATEGY MAY HAVE AN ADVERSE EFFECT ON ADECCO'S BUSINESS
Adecco has in recent periods acquired the following personnel services
businesses:
- TAD in 1997 for a purchase price of CHF 570 million ($382 million);
- Delphi Group plc in 1999 for a purchase price of CHF 395 million
($265 million); and
- Career Staff Ltd. in 1999 for a purchase price of CHF 128 million
($86 million).
All other acquisitions since 1997 have been immaterial. In addition to the
proposed acquisition of Olsten, Adecco may make material acquisitions in the
future. Acquisitions involve significant risks, including:
- difficulties in the assimilation of the operations, services and corporate
culture of acquired companies;
- over-valuation by Adecco of the acquired companies;
- insufficient indemnification from the selling parties for legal
liabilities incurred by the acquired companies prior to the acquisitions;
and
- diversion of management's attention from other business concerns.
In addition, further acquisitions would likely result in the incurrence of debt
or dilution, if stock is issued, and contingent liabilities and an increase in
interest expense and amortization expenses related to goodwill and other
intangible assets, which could have a material adverse effect on Adecco's
financial condition, results of operations and liquidity. For all these reasons,
any future acquisitions or failure to effectively integrate acquired companies
could adversely affect Adecco's business.
KLAUS J. JACOBS AND PHILIPPE FORIEL-DESTEZET TOGETHER OWN AND CONTROL ABOUT
43.7% OF ADECCO'S COMMON SHARES, AND THEREFORE HAVE THE ABILITY TO MAKE
DECISIONS THAT MAY ADVERSELY AFFECT THE MARKET PRICE OF ADECCO COMMON SHARES AND
ADSS
As of November 8, 1999, Klaus J. Jacobs, vice chairman and a director of
Adecco, owned, directly or indirectly, about 22.3%, and Philippe
Foriel-Destezet, chairman and a director of Adecco, owned,
31
directly or indirectly, about 21.4%, of the 17,181,920 outstanding Adecco common
shares. Assuming that the merger and Adecco's offering of 600,000 common shares
had been completed on November 8, 1999, the number of Adecco common shares that
would have been outstanding would have been about 18,416,000 shares, and
Messrs. Jacobs and Foriel-Destezet would have collectively owned about 40.8% of
those shares.
The ownership of a substantial percentage of the outstanding Adecco common
shares by Messrs. Jacobs and Foriel-Destezet provides them with the power to
make decisions for Adecco that may be detrimental to your interest as an
individual shareholder. For example, they may vote to delay, defer or prevent a
change in control of Adecco, which may discourage bids for Adecco common shares
or otherwise adversely affect the market price of Adecco common shares.
GOVERNMENT REGULATIONS MAY RESULT IN PROHIBITION OR RESTRICTION OF CERTAIN TYPES
OF EMPLOYMENT SERVICES OR THE IMPOSITION OF ADDITIONAL LICENSING OR TAX
REQUIREMENTS THAT MAY REDUCE ADECCO'S FUTURE EARNINGS
In many jurisdictions in which Adecco operates, like Germany and Japan, the
temporary employment industry is heavily regulated. For example, governmental
regulations in Germany restrict the length of contracts of temporary employees
and the industries in which temporary employees may be utilized. There can be no
assurance that the countries in which Adecco operates will not:
- create additional regulations that prohibit or restrict types of
employment services Adecco currently provides;
- require Adecco to obtain additional licensing to provide staffing
services; or
- increase taxes payable by the providers of staffing services.
Although Adecco is not aware of any pending regulation of the temporary
employment industry that would have a material adverse effect on Adecco's
business, any future regulations that make it more difficult or expensive for
Adecco to continue to provide its staffing services will have an adverse effect
on Adecco's financial condition, results of operations and liquidity.
SHAREHOLDERS MAY HAVE A LIMITED ABILITY TO PARTICIPATE IN ADECCO RIGHTS
OFFERINGS
Swiss law generally requires a corporation to offer its shareholders the
right to purchase a sufficient number of shares to maintain their existing
ownership percentage whenever a Swiss corporation issues new shares, a concept
known as "preemptive rights." If by the terms of any rights offering or for any
other reason it is impracticable to make the rights or net proceeds available to
any holder of Adecco ADSs, Morgan Guaranty Trust Company of New York, as the
depositary of the Adecco common shares represented by the ADSs and as the issuer
of the ADSs, may allow the rights to lapse pursuant to the deposit agreement
among Adecco, Morgan Guaranty Trust Company of New York and, by virtue of
ownership of the ADSs, the holder of Adecco ADSs. To learn more about this
deposit agreement and the actions that Morgan Guaranty Trust Company may take
with respect to the Adecco ADSs, please see "Description of Adecco American
Depositary Shares". In addition, United States holders of Adecco ADSs may not be
able to exercise preemptive rights through Morgan Guaranty Trust Company of New
York unless a registration statement under the Securities Act is effective with
respect to these rights or an exemption from the registration requirement
thereunder is available. Adecco intends to evaluate at the time of any rights
offering the costs and potential liabilities associated with any of these
registration statements, any benefits to it of enabling the holders of the
Adecco ADSs to exercise these rights and any other factors Adecco considers
appropriate at the time and then will make a decision as to whether to file such
registration statement. Therefore, no assurance can be given that any of these
registration statements would be filed. Similar restrictions apply to U.S.
holders of Adecco common shares. To the extent holders of Adecco ADSs are unable
to exercise the
32
rights because a registration statement has not been filed and no exemption from
the registration requirement under the Securities Act is available, Morgan
Guaranty Trust Company of New York may attempt to sell the holders' preemptive
rights and distribute the net proceeds thereof, if any, to the holders of Adecco
ADSs. In any of these cases, the holders' equity interest in Adecco would be
diluted proportionately. Morgan Guaranty Trust Company of New York, after
consultation with Adecco, will have discretion as to the procedure for making
preemptive rights available to holders of Adecco ADSs, or if the rights have
value, which they frequently do not, in disposing of these rights and making the
net proceeds available to these holders.
ADECCO WILL ASSUME OLSTEN'S LIABILITIES OTHER THAN THOSE RELATED TO THE HEALTH
SERVICES BUSINESS, INCLUDING RECENT FRANCHISEE LITIGATION
Under the terms of the separation agreement, Olsten is required to indemnify
Gentiva Health Services for liabilities of Olsten other than liabilities arising
out of Olsten's health services business. In particular, Adecco will assume
liabilities under recent claims brought or threatened against Olsten by some of
its franchisees, which claims are described below.
In the second half of 1999 and early this year, Olsten staffing franchisees
located in or near Chicago, Baton Rouge, Wichita, San Antonio and Cincinnati
filed lawsuits against Olsten alleging various claims, including breach of
contract, violation of consumer protection statutes and economic duress, in
connection with their respective Olsten staffing franchises. The plaintiffs in
these lawsuits seek rescission of their Olsten franchise/license agreements,
compensatory damages (totaling, for those plaintiffs who have specified damages,
not less than $8.1 million in the aggregate), punitive damages, attorneys' fees
and costs. Some of these lawsuits have been stayed to allow the parties to
proceed to arbitration.
In late 1999, another Olsten staffing franchisee, Robert Riedinger, who is
the cousin of Mr. Olsten and a trustee of some trusts for the benefit of
Mr. Olsten and Cheryl Olsten, notified Olsten and Adecco that he is considering
filing against them several claims, including breach of contract, unfair
competition, unfair business practices, securities fraud and common law fraud,
arising out of the sale and/or operation of Olsten staffing franchises located
in Georgia, North Carolina and Missouri. Mr. Riedinger has notified Olsten and
Adecco that he believes the aggregate damages to which he would be entitled if
he prevailed upon his claims totals approximately $29.3 million.
Although Olsten and Adecco are presently exploring with the Olsten
franchisees the possibility of reaching a negotiated resolution of the above
claims, should such efforts prove unsuccessful, Olsten intends to vigorously
defend the franchisees' claims. Adecco has advised Olsten that, as of the date
of this proxy statement/prospectus, it has conditional agreements to acquire two
of the franchises after the merger, and is in discussions with others. The
agreements provide for a release of the franchisees' claims described above.
There is no assurance that the agreements will be completed or that the
negotiations will be successful.
ADECCO CANNOT ASSURE YOU THAT A YEAR 2000-RELATED PROBLEM WITH ITS COMPUTER
SYSTEMS OR THOSE OF ITS CUSTOMERS AND SUPPLIERS WILL NOT ADVERSELY IMPACT ADECCO
AND ITS BUSINESS
Adecco's computer systems and applications could fail or create erroneous
results on or after January 1, 2000 if they recognize "00" as the year 1900
rather than the year 2000. Although Adecco has reviewed the Year 2000 compliance
of its embedded systems and its information technology systems and has solicited
confirmation of Year 2000 compliance from its customers and suppliers, Adecco
cannot guarantee that its normal business activities or operations will not be
interrupted by a failure in its own computer systems and applications, or those
of its customers and suppliers. Should there be any interruption, Adecco's
financial condition, results of operations and liquidity could be materially and
adversely affected.
33
RISKS RELATED TO GENTIVA HEALTH SERVICES
GENTIVA HEALTH SERVICES MAY HAVE DIFFICULTY OBTAINING REQUIRED FINANCING ON
SATISFACTORY TERMS
Before the split-off, Gentiva Health Services will need to obtain a
committed credit facility with a line of credit of at least $100 million to
provide for its working capital needs and for general corporate purposes. At
this time, Gentiva Health Services has a commitment letter from a bank to
provide a credit facility subject to customary conditions. See "Gentiva Health
Services Prospectus--The Split-Off--Certain indebtedness of our
company--Commitment to enter into a senior credit facility." In addition, by
October 1, 2000, Gentiva Health Services will need to refinance about
$78.6 million of outstanding 4 3/4% convertible subordinated debentures due
October 1, 2000 of its subsidiary, Quantum Health Resources, Inc. The debentures
are described under the heading "Gentiva Health Services Prospectus--The
Split-Off--Certain indebtedness of our company." After the split-off, Gentiva
Health Services will no longer benefit from any financing arrangements with, or
cash advances from, Olsten. Gentiva Health Services may have difficulty
obtaining financing on terms that are acceptable to it, if at all. If it fails
to obtain the financing it needs, it would have a material adverse effect on
Gentiva Health Services' business and financial condition.
GENTIVA HEALTH SERVICES WILL NEED TO DEVOTE CASH FLOWS FROM OPERATIONS TO MEET
ITS OBLIGATIONS
On the date following the split-off, Gentiva Health Services estimates its
indebtedness will include approximately $78.6 million of its subsidiary's
outstanding 4 3/4% convertible subordinated debentures due October 1, 2000,
$20 million of 10% convertible trust preferred securities of a subsidiary trust
which holds its 10% convertible subordinated debentures, and borrowings under
its credit facility. As a result of Gentiva Health Services' obligations,
substantial amounts of its cash flow will be dedicated to servicing its debt and
other obligations and those amounts will not be available for use in its working
capital or operations.
Gentiva Health Services cannot assure you that it will generate sufficient
cash flow to meet its obligations. If cash flows from operations or availability
under its credit facility fall below expectations, it may be forced to delay
planned capital expenditures, reduce operating expenses, or seek additional
alternatives designed to enhance liquidity.
GENTIVA HEALTH SERVICES HAS BEEN SUBJECT TO GOVERNMENT INVESTIGATIONS AND HAS
ENTERED INTO AGREEMENTS WITH THE GOVERNMENT
Olsten's health services business has been subject to extensive federal and
state governmental investigations regarding, among other things:
- the preparation of Medicare costs reports, which Gentiva Health Services
refers to as the cost reports investigation;
- the relationship between Columbia/HCA Healthcare Corporation and the
health services business in connection with the purchase by Columbia/HCA
of some home health agencies that were owned by the health services
business and subsequently managed under contract by a unit of the health
services business, which Gentiva Health Services refers to as the
Columbia/HCA investigation; and
- some of the health care practices of Quantum, including alleged improper
billing and fraud against various federally funded medical assistance
programs, which largely occurred during the period prior to Olsten's
acquisition of Quantum in June 1996, which Gentiva Health Services refers
to as the Quantum investigation.
On July 19, 1999, Olsten entered into several written civil and criminal
agreements with the U.S. Department of Justice and the Office of Inspector
General of the U.S. Department of Health and
34
Human Services finalizing the settlement of the civil and criminal aspects of
the cost reports investigation and the Columbia/HCA investigation. Under the
settlement:
- Olsten paid on August 11, 1999 the sum of $61 million to the Department of
Justice, including approximately $10.1 million in criminal fines and
penalties;
- in connection with the Columbia/HCA investigation, a subsidiary of Gentiva
Health Services, Kimberly Home Health Care, Inc., pled guilty in the
United States District Courts for the Northern District of Georgia, the
Southern District of Florida and the Middle District of Florida to a
criminal violation of the federal mail fraud, conspiracy and kickback
statutes;
- Kimberly Home Health Care, Inc. is permanently excluded from participation
in Medicare, Medicaid and all other federal health care programs as
defined in 42 U.S.C. Section1320a-7b(f); and
- Olsten signed a corporate integrity agreement with the Office of Inspector
General of the U.S. Department of Health and Human Services.
In October 1998, Olsten entered into a final settlement agreement with
several government agencies investigating the past practices of Quantum. The
agreement was entered into with the U.S. Department of Justice, the Office of
the Inspector General of the U.S. Department of Health and Human Services, the
U.S. Secretary of Defense (for the CHAMPUS/Tricare program), and the Attorneys
General for the States of New York and Oklahoma. Under the settlement, Olsten
reimbursed the government about $4.5 million for particular disputed claims
under the Medicaid and CHAMPUS programs and entered into a corporate integrity
agreement with several government agencies.
In connection with the split-off, Gentiva Health Services has agreed to
assume, to the extent permitted by law and the terms of the liabilities, and
indemnify Olsten for, all liabilities of its health services business, including
the ongoing governmental investigations and any future governmental
investigations relating to its health services business. Gentiva Health Services
also agreed to comply with the provisions of the settlement agreements and
corporate integrity agreements entered into with the government, which will
require significant financial resources over a five-year period.
In early December 1999, Gentiva Health Services received a document subpoena
from the Department of Health and Human Services, Office of Inspector General,
Office of Investigations. After preliminary discussions with the Office of
Inspector General, Gentiva Health Services believes the subpoena relates to an
investigation of possible overpayments to it by the Medicare program. In early
February 2000, Gentiva Health Services received a document subpoena from the
Department of Health and Human Services, Office of Inspector General, Office of
Investigations. Gentiva Health Services believes the subpoena relates to its
agencies' cost reporting procedures concerning contracted nursing and home
health aide costs. Gentiva Health Services intends to provide the Office of
Inspector General with the requested documents and cooperate fully with its
investigations. At this time, Gentiva Health Services is unable to assess the
probable outcome or potential liability, if any, arising from these subpoenas.
Gentiva Health Services has recently commenced discussions with the North
Carolina Attorney General's Office concerning questions that it has raised as to
the eligibility of a certain class of Gentiva Health Services' patients to
receive Medicaid-reimbursed home health services and thus, Gentiva Health
Services' entitlement to Medicaid reimbursement in connection with those
services. At this preliminary stage, Gentiva Health Services is unable to assess
the probable outcome of or potential liability arising from this matter.
Although substantially all of these pending governmental investigations have
been settled, Gentiva Health Services cannot assure you:
- that new investigations will not be conducted;
35
- that additional civil or criminal charges related to these or other
unrelated investigations will not be pursued; or
- that other pending government investigations or any of the terms of the
existing settlement agreements and corporate integrity agreements will not
have a material adverse effect on Gentiva Health Services' business.
For more details on the governmental investigations, see "Gentiva Health
Services' Prospectus--Business--Government investigations" and for more details
on our agreements with the government, see "Gentiva Health Services'
Prospectus--Business--Corporate integrity agreements with the government."
GENTIVA HEALTH SERVICES IS SUBJECT TO STRINGENT GOVERNMENTAL REGULATION WHICH
MAY LIMIT ITS OPERATIONS, RESULT IN SIGNIFICANT FINES FOR VIOLATIONS AND REQUIRE
IT TO DEVOTE SIGNIFICANT RESOURCES TO ENSURE COMPLIANCE
Gentiva Health Services' business is subject to extensive federal and state
regulations that govern, among other things, Medicare, Medicaid, CHAMPUS and
other government-funded reimbursement programs, reporting requirements,
certification and licensing standards for certain home health agencies and, in
some cases, certificate-of-need and pharmacy-licensing requirements. These
regulations may affect Gentiva Health Services' participation in Medicare,
Medicaid, CHAMPUS and other federal health care programs. Gentiva Health
Services is also subject to a variety of federal and state regulations that
prohibit fraud and abuse in the delivery of health care services, including,
prohibitions against:
- the offering or making of direct or indirect payments for the referral of
patients;
- physicians making referrals under Medicare for clinical services to a home
health agency with which the physician or an immediate family member has
some types of financial relationship; and
- the filing of false claims.
Gentiva Health Services is subject to periodic audits, examinations and
investigations conducted by or at the direction of governmental investigatory
and oversight agencies. Violation of federal and state health care regulations
can result in a health care provider being excluded from participation in the
Medicare, Medicaid, CHAMPUS and/or any other federal health care programs, and
can also subject the provider to civil and/or criminal penalties. For the nine
months ended October 3, 1999, these health care programs represented, together,
about 37% of Gentiva Health Services' revenues. As a result, Gentiva Health
Services' exclusion from any of these health care programs would have a material
adverse effect on its business.
THE AGREEMENTS GENTIVA HEALTH SERVICES HAS WITH THE GOVERNMENT LIMIT ITS
OPERATIONS
The agreements Gentiva Health Services signed with the government limit its
operations and require it to devote significant resources to ensure compliance.
In connection with the government's cost reports investigation and Columbia/HCA
investigation, Olsten entered into a corporate integrity agreement in July 1999
with the Office of Inspector General of the Department of Health and Human
Services, which governs some of Gentiva Health Services' actions until August
18, 2004. In connection with some past practices of Quantum, Olsten entered into
a corporate integrity agreement in October 1998 with the U.S. Department of
Justice, the Office of Inspector General of the U.S. Department of Health and
Human Services, the U.S. Secretary of Defense (for the CHAMPUS/Tricare Program)
and the Attorneys General for the States of New York and Oklahoma, which governs
some of Gentiva Health Services' actions until December 31, 2001. Under each of
the corporate integrity agreements, Gentiva Health Services is required, among
other things, to maintain a Corporate Compliance Officer
36
to develop and implement compliance programs, to retain an independent review
organization to perform annual reviews, and to maintain its compliance program
and reporting systems, as well as provide additional training to its employees.
The corporate integrity agreement in connection with the Quantum investigation
applies to Gentiva Health Services' specialty pharmaceutical services business
and focuses on the training and billing of blood factor products for
hemophiliacs. The corporate integrity agreement in connection with the cost
reports investigation and the Columbia/HCA investigation applies to Gentiva
Health Services' businesses that bill the federal government health programs
directly for services, such as its home care nursing business, and focuses on
issues and training related to cost report preparation, contracting, medical
necessity, and billing of claims.
Gentiva Health Services' compliance program will be implemented for all
newly established or acquired businesses units if their type of business is
covered by the corporate integrity agreements. Reports under each integrity
agreement will be filed annually with the Department of Health and Human
Services, Office of Inspector General. After each corporate integrity agreement
expires, Gentiva Health Services will file a final annual report to the
government. If Gentiva Health Services fails to comply with the terms of either
of its corporate integrity agreements, it will be subject to penalties ranging
from $1,500 to $2,500 for each day of the breach.
HEALTH CARE REFORM MAY RESULT IN REDUCTION IN THE DEMAND FOR GENTIVA HEALTH
SERVICES' SERVICES, LOWER GOVERNMENT REIMBURSEMENTS FOR ITS SERVICES AND GREATER
DIFFICULTY IN OPERATING ITS BUSINESS
There are numerous initiatives on the federal and state levels for
comprehensive reforms affecting the payment for and availability of health care
services. It is not clear at this time what proposals, if any, will be adopted
or, if adopted, what effect the proposals may have on Gentiva Health Services'
future business. Gentiva Health Services may be adversely affected by aspects of
some of these health care proposals, including:
- cutbacks in Medicare and Medicaid programs;
- containment of health care costs on an interim basis by means that could
include a short-term freeze on rates paid to health care providers;
- changes in reimbursement under Medicare and Medicaid programs through the
implementation of prospective payment systems;
- permitting greater flexibility to the states in the administration of
Medicaid; and
- developments in federal and state health information requirements,
including the standardization of electronic transmission of some
administrative and financial information.
In October 1997, as part of the Balanced Budget Act, the government enacted
the Interim Payment System for reimbursement of home care services provided
under Medicare. Under this system, provider reimbursements were reduced, and may
be subject to further reductions. Specifically, Gentiva Health Services'
Medicare revenue, excluding acquisitions, was reduced by $107 million, or 43%,
in fiscal 1998 as compared to fiscal 1997. For the first nine months of 1999,
Gentiva Health Services' Medicare revenue, excluding acquisitions, was further
reduced by $38 million, or 33%, as compared to the first nine months of fiscal
1998. These reductions have had a negative impact on Gentiva Health Services'
operations and liquidity.
On October 28, 1999, as required by the Balanced Budget Act, the government
issued proposed regulations for implementing a prospective payment system for
home health agencies, to become effective on October 1, 2000. Under the proposed
rules, a home health agency would receive a pre-set amount determined by various
factors to cover the cost of services provided to a Medicare patient during a
defined 60-day period. These proposed rules may or may not become the final
rules for the prospective payment system. Regardless of whether these rules
become final, a prospective payment
37
system will be implemented for home care services. After the prospective payment
system has been in place for 12 months, the government expects to achieve an
overall cost savings to the Medicare reimbursement system with respect to home
care. While there are industry lobbying efforts to mitigate or change these
requirements, Gentiva Health Services is unable to predict whether these efforts
will be successful.
Gentiva Health Services cannot assure you that currently proposed or future
health care legislation or other changes in the administration or interpretation
of governmental health care programs will not have a negative effect on it.
Concern about the potential effects of the proposed reform measures has
contributed to the volatility of the prices of securities of health care
companies and companies in related industries and may similarly affect the price
of Gentiva Health Services' common stock in the future.
GENTIVA HEALTH SERVICES IS INVOLVED IN VARIOUS LITIGATIONS
Olsten and its subsidiaries have been involved in various litigations
arising out of the health services business. In particular:
- a class action by some Olsten stockholders against Olsten and some of its
directors and officers asserting claims for violations of the Securities
Act and the Securities Exchange Act, including claims that the directors
and officers misrepresented information to stockholders related to the
government investigations in the health services business;
- a derivative lawsuit by some Olsten stockholders against some directors
and officers of Olsten claiming that the directors and officers breached
their fiduciary duties to stockholders in connection with the class action
described above and the governmental investigations described above; and
- a complaint by the Indiana Attorney General's Office filed against Olsten
alleging that Medicaid overpaid Gentiva Health Services, it did not
properly disclose information to their office and that its billing was
improper.
Because the above claims each seek damages and reimbursement for costs and
expenses without specific amounts, Gentiva Health Services is unable to assess
the probable outcome or potential liability arising from the lawsuits.
In connection with the split-off, Gentiva Health Services has agreed to
assume, to the extent permitted by law, and indemnify Olsten for, these lawsuits
together with any other liabilities arising out of the health services business
before or after the split-off. Gentiva Health Services is unable to assess the
materiality or costs associated with these lawsuits at this time. Gentiva Health
Services cannot assure you that these lawsuits, or any future lawsuits relating
to the health services business will not have a material adverse effect on the
health services business.
REDUCTION IN REIMBURSEMENT BY GOVERNMENT PAYORS COULD RESULT IN A REDUCTION IN
GENTIVA HEALTH SERVICES' MARGINS AND REVENUES AND ADVERSELY AFFECT ITS BUSINESS
The profitability of Gentiva Health Services' business depends on payment
and reimbursement from governmental and non-governmental third party payors. For
the nine months ended October 3, 1999, Gentiva Health Services derived
approximately 17% of its net patient revenue from Medicare, and 20% of its net
patient revenue from Medicaid, state reimbursed programs and other state/county
funding programs. Gentiva Health Services expects to continue to derive a
significant portion of its revenue from federal and state reimbursement
programs. Gentiva Health Services cannot assure you that payments under state or
federal governmental programs will remain at levels comparable to present levels
or will be sufficient to cover the costs allocable to patients eligible for
reimbursement pursuant to these programs. This risk is greater with respect to
individual state-administered Medicaid
38
programs which sometimes provide lower reimbursement rates than the Medicare
program. In addition, Gentiva Health Services cannot assure you that the
services that it provides and the facilities that it operates will meet or
continue to meet the requirements for participation in these programs.
In addition, the government has instituted cost containment measures
designed to limit payments made to health services providers, and Gentiva Health
Services cannot assure you that future measures will not adversely affect both
the timing and amount of reimbursement it receives.
Periodic and random audits by governmental investigatory and oversight
agencies may result in a delay in receipt, or an adjustment to the amounts of
reimbursement due or received under Medicare, Medicaid, CHAMPUS and other
federal health care programs. In September 1999, Gentiva Health Services
received a Notice of Amount of Program Reimbursement for its 1997 Medicare cost
reports from its Medicare fiscal intermediary notifying Gentiva Health Services
that it disagrees with Gentiva Health Services' methodology of allocating a
portion of its overhead. The Health Care Financing Administration has indicated
that it agrees with the fiscal intermediary. The notice indicates a possible
disallowance of about $7.0 million of costs in 1997 which Gentiva Health
Services would be required to pay to Medicare if the fiscal intermediary is
correct. Since Gentiva Health Services used a similar methodology for allocating
overhead costs in 1998 and 1999, a disallowance of $2.0 million could result in
each of these years. Gentiva Health Services believes its cost reports are
accurate and consistent with past practice accepted by its Health Care Financing
Administration fiscal intermediary and it will appeal the notice to the Provider
Reimbursement Review Board. Gentiva Health Services is unable to predict the
outcome of the appeal.
Some states' Medicaid agencies have instituted review processes for claims
submitted for patients dually eligible under both the Medicare and the Medicaid
programs. These reviews have focused on whether Medicaid paid for services that
should have, instead, been covered by Medicare. Gentiva Health Services cannot
assure you that it will not have to repay state medicaid programs as a result of
these state initiatives.
GENTIVA HEALTH SERVICES' ACCOUNTS RECEIVABLE ARE SUBJECT TO COLLECTIBILITY RISKS
There may be risks that Gentiva Health Services' accounts receivable will be
settled for less than the recorded balances. Most payors have introduced and
continue to introduce cost containment measures designed to limit payments to
providers of health services. Most claims for services under government programs
are subject to audit and final settlement which, because of cost containment
initiatives and the associated uncertainties, may be reimbursed for less than
Gentiva Health Services' expected reimbursement amounts. Managed care providers
and traditional indemnity insurers are imposing increasing pressures on health
care providers to reduce costs and share in the financial risks of providing
care, and are increasing the medical review of claims. The impact of these steps
has reduced profit margins, extended the payment period and made it more
difficult to obtain some authorizations and approvals, which could affect the
ultimate collectibility of the recorded accounts receivable balances. During the
past year we have made internal changes to consolidate billing and collection
processing centers, convert to new software and implement new operating models.
While these changes are designed to improve future operations, they may also
create collection risks for the current accounts receivable balances. Management
has assessed the risks associated with collection of accounts receivable
balances from third-party payors and adjusted the recorded balances accordingly.
In connection with the above, Gentiva Health Services has recorded a provision
for doubtful accounts of $24.3 million for the nine months ended October 3, 1999
on a basis consistent with prior periods.
39
GENTIVA HEALTH SERVICES IS SUBJECT TO PRICING PRESSURES AND OTHER RISKS INVOLVED
WITH COMMERCIAL PAYORS
Commercial payors, such as managed care organizations and traditional
indemnity insurers increasingly are requesting fee structures and other
arrangements providing for health care providers to assume all or a portion of
the financial risk of providing care. The lowering of reimbursement rates,
increasing medical review of bills for services and negotiating for reduced
contract rates could have a material adverse effect on Gentiva Health Services'
results of operations and liquidity. For the nine months ended October 3, 1999,
63% of Gentiva Health Services' revenues was derived from commercial payors,
including 44% of Gentiva Health Services' total revenue that were derived from
managed care organizations and traditional indemnity insurers under fee for
services arrangements and 6% of Gentiva Health Services's revenues that was
derived under capitated arrangements. Gentiva Health Services cannot assure you
that pricing pressures by commercial payors will not continue or that its
business, financial condition and results of operations will not be adversely
affected by these trends.
Also, continued growth in managed care and capitated plans have pressured
health care providers to find ways of becoming more cost competitive. Managed
care organizations have grown substantially in terms of the percentage of the
population they cover and in terms of the portion of the health care economy
they control. Managed care organizations have continued to consolidate to
enhance their ability to influence the delivery of health care services and to
exert pressure to control health care costs. A rapid increase in the percentage
of revenue derived from managed care payors or under capitated arrangements
without a corresponding decrease in Gentiva Health Services' operating costs
could have an adverse impact on its profit margins.
THERE IS A DELAY BETWEEN GENTIVA HEALTH SERVICES' PERFORMANCE OF SERVICES AND
ITS REIMBURSEMENT
The health care industry is characterized by delays that typically range
from three to six months between when services are provided and when the
reimbursement or payment for these services is received. This makes working
capital management, including prompt and diligent billing and collection, an
important factor in Gentiva Health Services' results of operations and
liquidity. Gentiva Health Services cannot assure you that trends in the industry
will not further extend the collection period and impact its working capital.
GENTIVA HEALTH SERVICES OPERATES IN A HIGHLY COMPETITIVE INDUSTRY
The segments of the health care industry in which Gentiva Health Services
operates is highly competitive and fragmented, and there are relatively few
barriers to entry in our health care market segments. There are approximately
15,000 home care agencies operating in the United States. These include a few
national companies, hundreds of regional companies and thousands of
locally-based independent home health care organizations. Gentiva Health
Services' primary national competitors are Coram Healthcare Corp. and Caremark
Therapeutic Services, and its primary regionally-based competitors are
hospital-based home health agencies and visiting nurse associations.
Gentiva Health Services competes with other home health care providers on
the basis of availability of personnel, quality and expertise of services and
the value and price of services. Gentiva Health Services could encounter
increased competition in the future from existing competitors or new entrants
that may limit its ability to maintain or increase its market share.
Gentiva Health Services may have existing competitors, as well as a number
of potential new competitors, who have greater name recognition, and
significantly greater financial, technical and marketing resources than it does.
This may permit Gentiva Health Services' competitors to devote greater resources
than it can to the development and promotion of their services. These
competitors may also engage in more extensive research and development,
undertake more far-reaching marketing
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campaigns and adopt more aggressive pricing policies and make more attractive
offers to existing and potential employees and patients.
Gentiva Health Services also expects our competitors to develop strategic
relationships with providers, referral sources and payors, which could result in
increased competition. The introduction of new and enhanced services,
acquisitions and industry consolidation and the development of strategic
relationships by Gentiva Health Services' competitors could cause a decline in
sales or loss of market acceptance of its services or price competition, or make
its services less attractive. In addition, Gentiva Health Services competes with
a number of tax-exempt nonprofit organizations that can finance acquisitions and
capital expenditures on a tax-exempt basis or receive charitable contributions
unavailable to it.
Gentiva Health Services cannot assure you that it will be able to compete
successfully against current or future competitors or that competitive pressures
will not have a material adverse effect on its business, financial condition and
results of operations.
Gentiva Health Services expects that industry forces will have an impact on
it and its competitors. In recent years, the health care industry has undergone
significant changes driven by various efforts to reduce costs, including:
- national health care reform;
- trends toward managed care;
- limits in Medicare coverage and reimbursement levels;
- consolidation of health care services companies; and
- collective purchasing arrangements by office-based health care
practitioners.
The changes in Gentiva Health Services' industry have caused greater competition
among it and similar businesses. As a result, in recent years, over 2,000 home
health care agencies have gone out of business. Gentiva Health Services'
inability to predict accurately or react competitively to changes in the health
care industry could adversely affect its operating results.
YEAR 2000 COMPLICATIONS MAY ARISE
The Year 2000 issue concerns the inability of information systems to
properly recognize and process date-sensitive information beyond January 1,
2000. Systems critical to Gentiva Health Services' business that were identified
as non-Year 2000 compliant have been replaced as part of a project that is also
being implemented to increase efficiencies. The new infrastructure, which is
Year 2000 compliant, was completely implemented in field offices before
January 1, 2000. At this time, Gentiva Health Services has not encountered any
Year 2000 failures. However, due to the general uncertainty relating to Year
2000 issues, Gentiva Health Services is unable to determine whether the
consequences of Year 2000 failures will have a material impact on its results of
operations, liquidity or financial condition. Gentiva Health Services does not
expect any Year 2000 issues to have a material adverse effect. However, the
failure of third parties to remedy Year 2000 problems could have a material
adverse effect on Gentiva Health Services' business, financial condition and
results of operations.
GENTIVA HEALTH SERVICES IS DEPENDENT ON RELATIONSHIPS WITH CERTAIN THIRD PARTIES
The profitability of Gentiva Health Services' business depends in part on
its ability to establish and maintain close working relationships with managed
care organizations, private and governmental third party payors, hospitals,
physicians, physician groups, home health agencies, long-term care facilities
and other institutional health providers, insurance companies and large
self-insured employers, as well as pharmaceutical, biotechnology, and other
product suppliers. In particular, Gentiva Health Services is
41
dependent on its relationships with certain managed care organizations and other
commercial payors. In fiscal 1998, Cigna Healthcare accounted for about 9% of
Gentiva Health Services' revenues. For the nine months ended October 3, 1999,
Cigna Healthcare accounted for about 11% of Gentiva Health Services' revenues.
Gentiva Health Services' three-year contract with Cigna Healthcare had an
expiration date of December 31, 1998. The contract was amended to continue until
terminated by either party with 60 days advance notice. Gentiva Health Services
cannot assure you that it will be successful in improving and maintaining its
relationships or that additional relationships will be successfully developed
and maintained in existing or future markets. The loss of any existing
relationships or the failure to continue to develop such relationships in the
future could have a material adverse effect on Gentiva Health Services'
business, financial condition and results of operations.
GENTIVA HEALTH SERVICES IS DEPENDENT ON THE RECRUITMENT AND RETENTION OF TRAINED
PERSONNEL
The continued operation of Gentiva Health Services' business, as well as its
future growth and success, depends upon its ability to recruit and retain a
staff of professional personnel, including registered nurses. There is currently
a shortage of these licensed professionals in some geographic areas of the
United States, including the northeast and western regions, and, in particular,
for specific services, such as pediatric care. Because it operates in these
regions and provide these specific services, Gentiva Health Services has been
affected by this shortage and has experienced higher labor costs as a result. If
this shortage of professionals continues, and Gentiva Health Services is unable
to manage the higher labor costs or the shortage worsens in the future, it could
have a material adverse effect on Gentiva Health Services' business, financial
condition and results of operations.
GENTIVA HEALTH SERVICES IS SUBJECT TO POTENTIAL PROFESSIONAL LIABILITY EXPOSURE
The services performed by Gentiva Health Services involves an inherent risk
of professional liability. While Gentiva Health Services maintains insurance
consistent with industry practice, it cannot assure you that the insurance it
currently maintains will satisfy claims made against it or that it will be able
to obtain insurance in the future at commercially reasonable rates, in adequate
amounts or on satisfactory terms. Gentiva Health Services cannot predict the
effect that any claims, regardless of their ultimate outcome, might have on its
business or reputation or on its ability to attract and retain patients and
employees.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus contains forward-looking statements about
the financial condition, results of operations and business of each of Adecco
and Olsten. All statements about Adecco and Olsten, other than statements of
historical fact, included in this proxy statement/prospectus, including without
limitation the statements under "Management's Discussion and Analysis of
Financial Condition and Results of Operations of Adecco," "Business of Olsten"
and "Business of Adecco," are, or may be deemed to be, forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. You can find many of these
statements by looking for words such as "believes," "expects," "anticipates,"
"estimates" or similar expressions used or incorporated in this proxy
statement/prospectus.
Important factors that could cause actual results to differ materially from
the forward-looking statements about Adecco or Olsten in this proxy
statement/prospectus are set forth under the caption "Risk Factors" and
elsewhere in this proxy statement/prospectus and also include factors which are
outside of their control, such as interest rates, foreign currency exchange
rates, instability in domestic and foreign financial markets, changes in
government regulations and year 2000 issues. In addition, future results are
subject to uncertainties related to the ability to implement business
strategies, including realizing cost savings from the merger and other
acquisitions. All forward-looking statements about Adecco or Olsten are
expressly qualified in their entirety by those cautionary statements.
These statements speak only as of the date of this proxy
statement/prospectus or, in the case of documents incorporated by reference, the
date of the documents. Actual results and outcomes may differ from what Adecco
and Olsten forecast in the forward-looking statements.
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INFORMATION CONCERNING THE OLSTEN SPECIAL MEETING
TIME, PLACE, DATE
A special meeting of Olsten's stockholders will be held on March , 2000,
at a.m., eastern time, at Olsten Corporation, 175 Broad Hollow Road, Melville,
New York. This proxy statement/ prospectus is being furnished to the holders of
the outstanding Olsten common stock and class B common stock as of January 18,
2000, the record date, in connection with the solicitation of proxies by the
board of directors of Olsten for use at the special meeting and at any
adjournments and postponements of the special meeting.
PURPOSE OF THE SPECIAL MEETING
At the special meeting, holders of Olsten common stock and class B common
stock as of January 18, 2000, the record date, will consider and vote as a
single class upon a proposal to approve the merger and Gentiva Health Services'
executive officers bonus plan, 1999 stock incentive plan, stock & deferred
compensation plan for non-employee directors and employee stock purchase plan,
and to transact other business as may properly come before the meeting.
Additional information concerning the special meeting, the merger and Gentiva
Health Services executive compensation and employee benefit plans is set forth
below. A vote for the merger has the effect of approving the split-off of
Gentiva Health Services, since the Gentiva Health Services common stock
distributed to Olsten stockholders is part of the merger consideration. No
separate vote on the split-off is required or being requested.
RECOMMENDATIONS OF OLSTEN'S BOARD OF DIRECTORS
OLSTEN'S BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED THAT THE MERGER,
INCLUDING THE SPLIT-OFF, AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER, ARE
FAIR TO AND IN THE BEST INTERESTS OF THE OLSTEN STOCKHOLDERS. OLSTEN'S BOARD OF
DIRECTORS RECOMMENDS THAT OLSTEN STOCKHOLDERS VOTE FOR THE MERGER. OLSTEN'S
BOARD OF DIRECTORS HAS ALSO REVIEWED THE TERMS OF THE PROPOSED GENTIVA HEALTH
SERVICES' EXECUTIVE OFFICERS BONUS PLAN, 1999 STOCK INCENTIVE PLAN, STOCK &
DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS AND EMPLOYEE STOCK
PURCHASE PLAN, HAS UNANIMOUSLY APPROVED THESE PROPOSALS AND HAS RECOMMENDED THAT
OLSTEN STOCKHOLDERS VOTE FOR THESE PROPOSALS.
RECORD DATE; OUTSTANDING OLSTEN STOCK ENTITLED TO VOTE
Olsten's board of directors has fixed the close of business on January 18,
2000 as the record date for the special meeting. Only holders of record of
Olsten common stock and class B common stock on the record date are entitled to
notice of and to vote at the special meeting. Holders of Olsten common stock are
entitled to one vote for each share held on the record date and holders of
class B common stock are entitled to ten votes for each share held on the record
date on matters properly presented at the special meeting. Holders of Olsten
common stock and class B common stock will vote together as a single class.
Shares held by Olsten as treasury shares or of any of our subsidiaries do not
have voting rights. A list of the stockholders entitled to vote at the special
meeting will be available for examination by holders of Olsten stock during
ordinary business hours, for any purpose related to the special meeting, during
the 10-day period preceding the meeting, at Olsten Corporation, 175 Broad Hollow
Road, Melville, New York 11747, telephone: (516) 844-7800. The list of the
stockholders entitled to vote at the special meeting will also be available at
the meeting.
At the close of business on the record date, there were 68,255,617 shares of
issued and outstanding Olsten common stock and 13,062,494 shares of issued and
outstanding class B common stock held of record by 1,458 common stockholders and
585 class B common stockholders. Accordingly, a total of 198,880,557 votes may
be cast at the special meeting by holders of Olsten common stock and class B
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common stock. Also, as of this date, common stock represented 34% and class B
common stock 66% of the voting power of Olsten's stock.
VOTE REQUIRED; OLSTEN STOCKHOLDERS REPRESENTING A MAJORITY OF THE VOTING POWER
OF THE OLSTEN STOCK HAVE AGREED TO VOTE FOR THE MERGER
Under Delaware law and Olsten's certificate of incorporation, the merger
must be approved by the vote of the holders of a majority of the voting power of
the Olsten common stock and class B common stock outstanding on the record date,
voting together as a single class. The other proposals to be considered at the
special meeting must be approved by the vote of the majority of the voting power
of Olsten stock present and entitled to vote at the special meeting. The
approval of the merger is not conditioned on the approval of any of the other
proposals. The approval of the other proposals is, however, conditioned on the
approval of the merger. You may vote for any of the proposals and vote against
any other proposals. The holders of a majority of the voting power of Olsten's
stock present in person or represented by proxy will constitute a quorum for the
transaction of business at the special meeting. Class B common stockholders,
including Stuart Olsten, other members of the Olsten family and some trusts
controlled by and created for the benefit of members of the Olsten family,
collectively representing 63% of the outstanding voting power of Olsten stock as
of January 18, 2000, have agreed to vote their shares for the merger. These
stockholders have sufficient voting power to create a quorum at the special
meeting, and assuming that these stockholders vote their shares at the special
meeting as they have agreed, the necessary votes for approval of the merger by
the stockholders of Olsten will be assured. See "The Principal Stockholders
Agreement."
ACTION TO BE TAKEN UNDER THE PROXY
All proxies in the enclosed form that are executed according to the
instructions on the proxy and returned to Olsten's transfer agent, ChaseMellon
Shareholder Services, L.L.C., on or before the date of the special meeting, and
not revoked, will be voted at the special meeting in accordance with any
instructions on the proxy or, if no instructions are provided, will be voted for
each of the proposals. Failure to return an executed proxy card or to vote in
person at the special meeting or voting to abstain will constitute, in effect, a
vote against each of the proposals.
Management of Olsten does not know of any other matters which may come
before the special meeting. If any other matters are properly presented at the
special meeting for action, it is intended that the persons named in the
enclosed form of proxy and acting under the proxy will vote in accordance with
their best judgment on these matters. These matters could include an adjournment
or postponement of the special meeting from time to time in accordance with
applicable law. If the board makes this determination, additional proxies may be
solicited during the adjournment period.
REVOCATION OF PROXIES
Any stockholder who has given a proxy pursuant to this solicitation may
revoke it by attending the special meeting and giving oral notice of his or her
intention to vote in person, without compliance with any other formalities. In
addition, any proxy given pursuant to this solicitation may be revoked prior to
the special meeting by delivering to the secretary of Olsten an instrument
revoking it or a duly executed proxy bearing a later date.
PROXY SOLICITATION
Olsten will pay for the expense of mailing this proxy statement/prospectus
and the solicitation of proxies. The fee payable by Olsten to D.F. King is
estimated to be $7,500. Adecco and Olsten will each pay for their own expenses
of preparing and printing this proxy statement/prospectus. In addition to the
use of the mail, proxies may be solicited by officers, directors and employees
of Olsten, without
45
additional remuneration, by personal interviews, written communication,
telephone or facsimile transmission. Olsten also will request brokerage firms,
nominees, custodians and fiduciaries to forward proxy materials to the
beneficial owners of Olsten stock, and will pay customary charges for forwarding
the material.
THE MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING ARE IMPORTANT.
THEREFORE, YOU ARE URGED TO READ AND CONSIDER CAREFULLY THE INFORMATION IN THIS
PROXY STATEMENT/PROSPECTUS AND THE RELATED ANNEXES. YOU ARE ALSO URGED TO
COMPLETE, DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY USING THE ENCLOSED
POSTAGE-PAID ENVELOPE.
APPRAISAL RIGHTS
Appraisal rights will be available to Olsten stockholders in connection with
the merger if holders of less than 50% of Olsten stock elect to receive cash.
The availability of such appraisal rights will not, however, be determinable
until following the special meeting. Accordingly, an Olsten stockholder wishing
to exercise appraisal rights under Section 262 of the General Corporation Law of
the State of Delaware as to shares of common stock and class B common stock
should follow the procedure required by that section. Set forth below is a
summary description of Section 262 and attached as Annex E is Section 262 in its
entirety. All references in this summary to a "stockholder" are to the record
holder of the shares of Olsten common stock and/or class B common stock on the
record date. A person having a beneficial interest in shares that are held in
"street name" or otherwise held of record in the name of another person, such as
a broker or nominee, is responsible for ensuring that a demand for appraisal is
made by the record holder and must act promptly to cause the record holder to
properly follow the steps summarized below in a timely manner to exercise
whatever appraisal rights the beneficial owner may have.
This summary and Section 262 should be reviewed carefully by any holder who
wishes to exercise statutory appraisal rights or who wishes to preserve the
right to do so. Failure to comply strictly with the procedures set forth in this
document and in Section 262 will result in the loss of appraisal rights.
Under Section 262, in order for appraisal rights to be available in
connection with this merger, Olsten stockholders must be required to receive
cash as a portion or all of the merger consideration. If holders of a majority
of Olsten stock elect to receive cash, those who elect ADSs and those who do not
elect will receive Adecco ADSs, shares of Gentiva Health Services common stock,
and no cash, and therefore appraisal rights would not be available. Appraisal
rights will, however, be available in every situation other than where holders
of 50% or more of Olsten stock elect cash. As the determination of what form of
consideration Olsten's stockholders have elected cannot be made until after the
election deadline, which is one day before the special meeting, whether Olsten's
stockholders have appraisal rights will not be known until after the election
deadline. Consequently, in order to exercise properly any right to appraisal
which may be available, you must follow the procedures set forth below.
Section 262 provides a procedure by which persons who were holders of Olsten
common stock or class B common stock on the effective date of the merger who
have neither voted in favor of the merger nor consented to the merger in
writing, if appraisal rights are available in connection with the merger, may
seek an appraisal of their shares in lieu of accepting the consideration to be
received in the merger. In an appraisal proceeding, the Delaware Court of
Chancery would determine the "fair value" of the common stock and the class B
common stock, exclusive of any element of value arising from the accomplishment
or expectation of the merger. Stockholders of Olsten should recognize that
appraisal under Section 262 may result in a determination of value higher or
lower than or equivalent to the consideration provided for in the merger.
Following an appraisal proceeding, the Delaware Court of Chancery would direct
Olsten, pursuant to Section 262 and as the surviving corporation, to make
payment of the determined fair value of the common stock and the class B common
stock,
46
together with a fair rate of interest, if any, to the former stockholders of
Olsten entitled to the merger consideration who properly demanded appraisal.
In accordance with Section 262, before the vote at the special meeting upon
the proposal to approve the merger, any stockholder may deliver to Olsten a
demand in writing for the appraisal of the fair value of the stockholder's
shares. The demand must reasonably inform Olsten of the identity of the
stockholder and that the stockholder intends to demand the appraisal of the
stockholder's shares, if appraisal rights are available in connection with the
merger. In order to be entitled to appraisal rights with respect to any shares,
if appraisal rights are available in connection with the merger, a stockholder
must:
- be the record holder of the shares on the record date and the date of the
making of a demand pursuant to Section 262;
- continuously hold the shares through the effective time of the merger;
- properly demand an appraisal as described in Section 262; and
- not vote in favor of the proposal to approve the merger.
A stockholder who elects to exercise appraisal rights must mail or deliver a
written demand to:
Olsten Corporation
175 Broad Hollow Road
Melville, NY 11747
Attention: Corporate Secretary
A proxy or vote against the merger or a failure to vote for the merger shall
not by itself constitute sufficient notice of a stockholder's election to
exercise appraisal rights. A stockholder seeking to exercise appraisal rights
must use a separate written demand as provided in Section 262 and as summarized
in this section. An Olsten stockholder who makes a demand for appraisal will be
deemed to have elected to receive cash consideration despite any other election
of the form of merger consideration the stockholder may have made, regardless of
whether the stockholder later withdraws the demand for appraisal.
Any stockholder, other than a record owner who is acting as a nominee holder
for different beneficial owners, seeking to exercise appraisal rights for a
portion, but not all, of the stockholder's shares should consult with legal
counsel before taking action. Olsten believes that Delaware law has not clearly
addressed the ability of a stockholder to exercise appraisal rights with respect
to a portion, but not all, of a stockholder's shares. Should a stockholder,
other than a record owner who is acting as a nominee holder for different
beneficial owners, seek to exercise appraisal rights with respect to a portion,
but not all, of the stockholder's shares, Olsten presently intends to assert
that by doing so the stockholder has waived appraisal rights. Stockholders
should be aware that a Delaware court may find that the stockholder has so
waived the stockholder's appraisal rights.
A written demand for appraisal must be executed by or for the stockholder of
record as the stockholder's name appears on the certificate or certificates
representing his or her shares. If the shares are owned of record in a fiduciary
capacity, such as by a trustee, guardian or custodian, the demand must be
executed by the fiduciary. If the shares are owned of record by more than one
person, as in a joint tenancy or tenancy in common, the demand must be executed
by all joint owners. An authorized agent, including an agent for two or more
joint owners, may execute the demand for appraisal for a stockholder of record;
however, the agent must identify the record owner and expressly disclose the
fact that, in exercising the demand, he or she is acting as agent for the record
owner. A record owner, such as a broker, who holds shares as a nominee for
others may exercise appraisal rights with respect to the shares held for all or
less than all beneficial owners of shares as to which the person is the record
owner. In this case, the written demand must set forth the number of shares
covered by the demand.
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Where the number of shares is not expressly stated, the demand will be presumed
to cover all shares outstanding in the name of the record owner. Beneficial
owners who are not record owners and who intend to exercise appraisal rights
should instruct the record owner to comply strictly with the statutory
requirements with respect to the exercise of appraisal rights.
From and after the effective date of the merger, if appraisal rights are
available in connection with the merger, no stockholder who has duly demanded
appraisal in compliance with Section 262 will be entitled to vote for any
purpose the shares subject to the demand or to receive payment of dividends or
other distributions on the shares, except for dividends or distributions payable
to stockholders of record at a date before the effective date of the merger.
At any time within 60 days after the effective date of the merger, any
stockholder shall have the right to withdraw the stockholder's demand for
appraisal in writing and to accept the terms offered in the merger agreement;
after this period, a stockholder may withdraw the stockholder's demand for
appraisal only with the written consent of Olsten, as the surviving corporation.
Within 120 days after the effective date of the merger, either Olsten, as
the surviving corporation, or any stockholder who has complied with the required
conditions of Section 262, if appraisal rights are available in connection with
the merger, and who otherwise is entitled to appraisal may file a petition in
the Delaware Court of Chancery demanding a determination of the fair value of
the shares of the dissenting stockholders. Within 120 days after the effective
date of the merger, any stockholder who has complied with the requirements of
Section 262, upon written request, will be entitled to receive from Olsten, if
appraisal rights are available in connection with the merger, a statement
setting forth the total number of shares of common stock and class B common
stock not voted in favor of the merger and with respect to which demands for
appraisal have been received and the total number of holders of these shares.
The written statement must be mailed to the stockholder within 10 days after the
stockholder's written request for this statement is received by Olsten or 10
days after the date of the special meeting, whichever is later. If a petition
for appraisal is timely filed, if appraisal rights are available in connection
with the merger, and copy thereof is delivered to Olsten, Olsten will then be
obligated to provide within 20 days to the Register in Chancery a duly verified
list containing the names and addresses of all former stockholders of Olsten who
have demanded an appraisal of their common stock and/or their class B common
stock. If a petition for an appraisal is timely filed, if appraisal rights are
available in connection with the merger, and, after notice to these
stockholders, after a hearing on the petition, the Court of Chancery will
determine the stockholders who have complied with Section 262 and which
stockholders have become entitled to appraisal rights and will appraise the
shares formerly owned by these stockholders, determining 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 be
paid upon the amount determined to be the fair value. In determining the fair
value, the Court of Chancery is to take into account all relevant factors. The
Delaware Court of Chancery may require the stockholders who have demanded
appraisal for their shares of Olsten stock to submit their stock certificates to
the Register in Chancery for notation thereon of the percentage of appraisal
proceedings.
The cost of the appraisal proceeding may be determined by the Court of
Chancery and taxed against the parties as the Court of Chancery deems equitable
in the circumstances. Upon application of a dissenting stockholder, the Court of
Chancery may order that all or a portion of the expenses incurred by any
dissenting stockholder in connection with the appraisal proceeding, including,
without limitation, reasonable attorneys' fees and the fees and expenses of
experts, be charged in proportion against the value of all shares entitled to
appraisal.
If no petition for appraisal is filed with the Court of Chancery within
120 days after the effective time of the merger, if appraisal rights are
available in connection with the merger, stockholders' rights to appraisal shall
cease, and all stockholders who had previously demanded appraisal shall
thereafter be
48
entitled to receive the merger consideration received by stockholders not
electing upon valid surrender of the certificates that formerly represented
their shares. Because Olsten has no obligation to file a petition, if appraisal
rights are available in connection with the merger, and has no present intention
to do so, any stockholder who desires a petition to be filed is advised to file
it on a timely basis.
ELECTION, EXCHANGE AND PAYMENT PROCEDURES
Olsten has enclosed a form of election/letter of transmittal with this
proxy statement/prospectus. In addition, Olsten has agreed to use its reasonable
best efforts to mail the form of election/letter of transmittal to all persons
or entities who become Olsten stockholders of record during the period between
the record date for Olsten's special stockholders meeting and 9:00 a.m., New
York time, on the date 5 business days before the special meeting. Moreover,
Olsten has agreed to use its reasonable best efforts to make the form of
election/letter of transmittal available to all persons or entities who become
Olsten stockholders between 5 business days and the end of the second business
day before the special meeting.
You must use the form of election/letter of transmittal that is mailed to
you if you would like to indicate to us whether, in consideration for your
shares of Olsten stock, you:
- prefer to receive the cash consideration;
- prefer to receive Adecco ADSs; or
- have no preference as to form of the merger consideration you are to
receive.
Adecco will also allow you to elect to receive one Adecco common share for
every eight Adecco ADSs you would otherwise be entitled to receive.
In addition, you must complete and sign the form of election/letter of
transmittal and mail it, together with your Olsten share certificates, so that
it is received by Morgan Guaranty Trust Company of New York, the exchange agent,
no later than 4:00 p.m., New York time, March , 2000, in order for your form
of election/letter of transmittal to be considered properly submitted and for
you to be able to elect the form of consideration you want to receive. If you do
not timely submit your form of election/letter of transmittal, or if you do not
include your Olsten share certificates or do not otherwise follow the
instructions on the form, you will have been deemed to have indicated to us that
you have no preference in the form of consideration you are to receive. Other
than Olsten shares held by an Olsten stockholder who has made a demand for
appraisal rights, the first complete election of form of merger consideration
received by the exchange agent will be the irrevocable election of form of
merger consideration, and will not be subject to withdrawal, amendment or
revocation. All valid elections of either form of consideration received by the
election deadline will be treated equally (that is, not first come, first
served). If you are a representative of more than one stockholder, you may
submit more than one form of election/letter of transmittal, but only if you
certify to us in writing that each form of election/letter of transmittal that
you submit covers all the shares of Olsten stock held by you for the
corresponding beneficial owner and you surrender certificates for all those
shares registered in your name. If your share certificates are not received by
March , 2000, Morgan Guaranty Trust Company of New York, the exchange agent,
will send you instructions separately after the merger has been completed on how
to do so. This, however, will delay your receipt of your merger consideration.
Even if you do not wish to make an election, you may submit your Olsten share
certificates with the form of election/letter of transmittal without completing
the form of election portion and delivering it to the exchange agent.
Once you surrender your share certificates, together with a duly executed
letter of transmittal, subject to completion of the merger, the exchange agent
will deliver to you your Adecco ADSs and/or cash and shares of Gentiva Health
Services common stock and any cash in lieu of fractional shares of Gentiva
Health Services stock, Adecco ADS, or common shares (see "The Merger--The Merger
49
Agreement" for a discussion on the treatment of fractional shares) and your
Olsten share certificates will be canceled. If you are not the registered holder
of the certificate that you are surrendering but you wish to have shares of
Adecco ADSs and shares of Gentiva Health Services common stock be issued in your
name, the certificates that you surrender must be properly endorsed by the
registered holder to you or otherwise be in proper form for transfer. In
addition, the registered holder may be required to pay any transfer or other
taxes required by reason of the exchange by you instead of the registered holder
of the certificate, or the registered holder may be required to establish that
the required tax has been paid or is not applicable.
No dividends or other distributions that are declared and payable after the
date of the merger on Adecco common shares or Gentiva Health Services shares
will be paid to you until you surrender your share certificates. Upon surrender,
the exchange agent will pay to you the dividends or other distributions,
excluding interest, that became payable after the date of the merger on the
Adecco ADSs or common shares or Gentiva Health Services shares that were
deposited with it for your account. After six months following the closing of
the merger, Adecco may elect to act in place of the exchange agent.
After the merger, there will be no transfers on the stock transfer books of
Olsten of the shares of Olsten common stock or class B common stock that were
outstanding immediately prior to the merger. If, after the merger, certificates
are presented to Adecco, Olsten or Gentiva Health Services, those certificates
will be canceled and exchanged for the appropriate consideration.
None of Olsten, Adecco or Gentiva Health Services will pay any interest to
you and no interest will accrue on the merger consideration payable to you. None
of Olsten, Adecco or Gentiva Health Services will pay any interest on dividends
and distributions. In addition, neither Olsten nor Adecco will pay you any
interest on any cash payable in place of fractional shares of Adecco or Gentiva
Health Services. From the effective time of the merger, all of Olsten's stock
will automatically be canceled and will cease to exist and you will not have any
right with respect to Olsten stock other than your right to receive cash, Adecco
ADSs or common shares, Gentiva Health Services common stock, dividends and/or
distributions as described above.
The exchange agent will deduct from the consideration paid to you any
amounts that the exchange agent is required to withhold under any provision of
federal, state, local or foreign tax law.
Prior to the merger, an Olsten stockholder whose stock certificates have
been lost, destroyed or stolen should promptly contact ChaseMellon Shareholder
Services, L.L.C., the transfer agent for Olsten, for instructions to replace
those stock certificates. After the merger and with regard to any certificates
representing shares of Olsten common stock or class B common stock have been
lost, destroyed or stolen, the exchange agent will deliver cash and/or Adecco
ADSs or common shares and Gentiva Health Services common stock when it receives
an affidavit by the owner of the certificates. However, Adecco or Gentiva Health
Services may require you to deliver a reasonable indemnity bond against any
claim that may be made against Adecco, Gentiva Health Services, the transfer
agent or the exchange agent with respect to a certificate alleged to have been
lost, destroyed or stolen.
Olsten or the exchange agent, if Olsten determines that the exchange agent
shall be so empowered, shall determine whether forms of election/letter of
transmittal have been properly completed, signed and submitted or revoked and
whether to disregard immaterial defects in a form of election/letter of
transmittal. This determination shall be conclusive and binding and neither
Olsten nor the exchange agent shall be obligated to notify you of any defect in
any form of election you have submitted to the exchange agent.
50
THE TRANSACTION
BACKGROUND OF THE TRANSACTION
In pursuing strategies for enhancing stockholder value, Olsten regularly
considers opportunities for acquisitions, dispositions and other strategic
alliances and alternatives. In January 1999, the consideration by Olsten of
strategic alternatives for its staffing and health services businesses
intensified in light of the financial and operational effects on Olsten of
government investigations, Olsten's high debt level, its need for capital and
constraints on its ability to continue to grow in order to compete effectively.
On February 10, 1999, Olsten held a regular meeting of the board and
discussed a letter from Adecco expressing preliminary interest in acquiring
Olsten and an inquiry from another possible buyer. All board members,
representatives of Debevoise & Plimpton, counsel to the outside members of the
board, and management were in attendance. The board authorized management to
retain Salomon Smith Barney to assist it in evaluating ways of enhancing
shareholder value, including pursuing these inquiries. In April 1999, Olsten
also engaged Warburg Dillon Read to assist it in this process in part because
some representatives of Salomon Smith Barney with whom Olsten had worked in the
past had moved to Warburg Dillon Read. Both firms acted throughout as financial
advisors to Olsten.
On March 18, 1999, Olsten's executive committee, consisting of Messrs.
Victor F. Ganzi, John M. May, Stuart Olsten and Josh S. Weston, met to discuss
alternative means of realizing the value of Olsten's businesses. The
alternatives discussed included those considered earlier and consisted of
Olsten's continuing as an independent entity, spinning off its health services
business to Olsten's stockholders, merging Olsten with another company or
disposing of its health services business in order to facilitate the
consummation of a transaction involving its remaining operations. All members of
the executive committee and representatives of Warburg Dillon Read and
management were in attendance.
Members of Olsten management (Messrs. Edward A. Blechschmidt, Anthony J.
Puglisi and William P. Costantini) also regularly discussed with Warburg Dillon
Read the status of a possible transaction.
During late March through May 1999, as instructed by Olsten's board of
directors, Warburg Dillon Read contacted a number of parties, including major
strategic competitors in the staffing services industry or health services
industry and financial buyers, regarding their potential interest in Olsten or
its health services business. In April 1999, confidential memoranda containing
information about Olsten and Olsten's health services business were prepared and
distributed to seven interested parties, including Adecco, upon signing a
confidentiality agreement. Two of the parties, including Adecco, expressed
interest only in the staffing businesses and five expressed interest only in the
health services business. In April 1999, Adecco commenced due diligence and
Olsten retained Cahill Gordon & Reindel to advise it on legal matters.
On May 4, 1999, the Olsten board reviewed the status of the process
undertaken by Olsten and the status of negotiations with potential buyers.
In May and June 1999, two bidders, including Adecco, submitted preliminary
non-binding indications of interest for an acquisition of Olsten without the
health services business and three bidders submitted preliminary non-binding
indications of interest for an acquisition of the health services business
alone. Olsten, in consultation with Warburg Dillon Read, evaluated the
indications of interest and concluded that it would continue discussions with,
and release additional information regarding Olsten to, these potential buyers.
In May and early June 1999, Olsten, Adecco and their respective financial
advisors held various conference calls and meetings to discuss a possible merger
without Olsten's health services business.
During May and June 1999, Olsten provided the five potential buyers,
including Adecco, with access to a data room containing, among other items,
materials pertaining to Olsten's corporate governance, employees and material
contracts, management reports and financial and operating data. Olsten's
management also made itself available for question and answer sessions. While
the potential
51
buyers performed due diligence on Olsten, Warburg Dillon Read, as instructed by
Olsten, continued to contact potential strategic and financial buyers.
On June 14, 1999, the executive committee of Olsten met and resolved that
the executive committee, together with Mr. Blechschmidt, be constituted as a
special committee of the board of directors. The members of the special
committee were Messrs. Blechschmidt, Ganzi, May, Olsten and Weston. All members
of the executive committee (other than Mr. Ganzi), Messrs. Levine and Troubh,
directors of Olsten, and representatives of Warburg Dillon Read, Salomon Smith
Barney and management were in attendance. The special committee's authority was
limited to entertaining, reviewing, and making recommendations to the board with
respect to indications of interest and offers received by Olsten for the
purchase of the health services business and/or Olsten. The special committee
engaged Debevoise & Plimpton to advise it on legal matters.
On June 14, 1999, the special committee met with Warburg Dillon Read and
Salomon Smith Barney and directed the representatives of Warburg Dillon Read to
discuss valuation issues with the investment bankers for Adecco and other
interested parties. All members of the special committee (other than
Mr. Ganzi), Messrs. Levine and Troubh, directors of Olsten, and Olsten's
financial advisors were in attendance. In addition, the Warburg Dillon Read
representatives were directed to schedule meetings with the five entities which
had expressed an interest in a transaction with Olsten.
In early July 1999, Adecco and another potential buyer submitted non-binding
proposals for the acquisition of Olsten, without the health services business.
None of the potential buyers who had earlier submitted non-binding indications
of interest for an acquisition of the health services business submitted a
non-binding proposal. Adecco's proposal was to acquire Olsten for $6.91 per
share, payable 75% in stock and 25% in cash with assumed net debt of
$374 million, while the second proposal was to acquire Olsten for $8.00 per
share in cash, with assumed net debt of $720 million. Both proposals
contemplated some additional amount being paid to Olsten class B common
stockholders. While neither proposal was satisfactory in terms of value to be
received by Olsten stockholders, the board concluded, in consultation with
Olsten's financial advisors, that each merited further discussion.
At a meeting on July 9, 1999, the special committee of Olsten reviewed with
Warburg Dillon Read and Salomon Smith Barney the process by which bids were
solicited and the non-binding proposals received from the two potential buyers.
In addition, the special committee discussed the alternatives of separating out
the health services business by sale, spin-off or split-off in the event a
transaction with either potential buyer proceeded. All members of the special
committee and representatives of Warburg Dillon Read, Salomon Smith Barney,
Debevoise & Plimpton, Cahill Gordon & Reindel and management were in attendance.
On July 14, 1999, the special committee met with Olsten's management and
with Debevoise & Plimpton, counsel to the special committee, Cahill Gordon &
Reindel, counsel to Olsten, and Warburg Dillon Read. At this meeting, the
special committee reviewed the chronology of events and valuation matters.
On July 21, 1999 Adecco and the other potential buyer submitted revised
proposals to acquire Olsten without the health care services business. Both
proposals were improved over the prior proposals. Adecco's economic proposal was
to acquire Olsten for $8.63 per share, paid 75% in stock and 25% in cash, with
assumed net debt of $750 million. The second proposal was to acquire Olsten for
$8.15 per share in cash, with assumed debt of $750 million. Both proposals
contemplated some additional amount being paid to Olsten class B common
stockholders.
On July 22, 1999, the board met to consider the possible sale of Olsten. All
members of the board, representatives of Warburg Dillon Read, Salomon Smith
Barney, Debevoise & Plimpton, Cahill Gordon & Reindel and Cravath Swaine &
Moore, counsel to the Olsten family, and Mr. Steven E. Grabowski, a non-board
representative of the Olsten family and brother-in-law of Stuart Olsten, were in
attendance. It was the strong sense of the entire board, after full discussion
at that meeting, that Olsten common stockholders and class B common stockholders
should be paid the same consideration
52
for their shares of stock in Olsten even though each share of class B common
stock is entitled to ten votes and each share of common stock is entitled to one
vote and the holders of class B common stock control the majority of the
combined votes of all stockholders and elect the majority of the Olsten board.
The Olsten board decided at that meeting to establish an independent committee
composed solely of non-management directors elected to the board by the holders
of Olsten common stock. The independent committee was given limited authority to
consider any proposal for the acquisition of all or any portion of Olsten
pursuant to which some or all of the class B common stockholders would receive,
directly or indirectly, different consideration for their shares of stock in
Olsten than the common stockholders. The Olsten board of directors appointed
Messrs. May and Weston to comprise the independent committee. The independent
committee was to report its conclusions to the full Olsten board with respect to
these matters. The independent committee retained Debevoise & Plimpton as its
counsel, whereupon that firm resigned as counsel to the special committee. On
the recommendation of Debevoise & Plimpton, the independent committee solicited
and received the advice of Delaware counsel that the prior relationship of
Debevoise & Plimpton with the Olsten board would not disqualify it as counsel to
the independent committee. Debevoise & Plimpton had in the past advised the
outside directors of the Olsten board first with respect to pending government
investigations and then later in connection with the negotiation of a separation
agreement between Olsten and Mr. Frank N. Liguori, Olsten's former chairman and
chief executive officer, and the employment agreement between Olsten and
Mr. Blechschmidt. Thereafter, the special committee played no further role in
the negotiations, because the independent committee now represented the
interests of the Olsten common stockholders with respect to any special
compensation paid to the class B common stockholders, and the Olsten board
represented the interests of the company as a whole.
At the July 22, 1999 meeting, the board reviewed with Olsten's management
and financial advisors the status of negotiations, due diligence, financial
aspects of the two proposed transactions and remaining open issues. The Olsten
board also reviewed the following strategic alternatives: (1) Olsten continuing
as an independent entity; (2) a sale of Olsten as a whole; (3) a
spin-off/split-off or sale of its health services business, separately or in
connection with a sale of Olsten; and (4) the disposition of assets. In
addition, Cahill Gordon & Reindel reviewed various legal issues with the Olsten
board. After discussion, the Olsten board determined to pursue a split-off of
Olsten's health services business and instructed management and Warburg Dillon
Read to continue negotiations with Adecco and the other bidder, to further
increase the consideration proposed by the two potential buyers and to inform
both that the board would not approve a transaction structured with different
consideration being paid for the different classes of Olsten stock.
In late July 1999, Adecco submitted a revised proposal reflecting an
increased valuation of the transaction to $8.75 per Olsten share, with Adecco
paying for 50% of the Olsten stock in cash and the other 50% in ADSs. The second
potential buyer did not increase its proposal. As a result, Olsten decided to
pursue discussions with Adecco. As part of the discussions Adecco and Olsten
agreed that, in conjunction with any merger, Olsten would split off its health
services business to its stockholders in order to enable Olsten to meet Adecco's
requirement that the health services business not be included in the businesses
to be acquired by Adecco in the merger.
Commencing July 27, 1999, Olsten, Adecco and their respective
representatives had numerous conference calls to negotiate the terms of a merger
agreement and related agreements. Adecco requested, as a condition to continued
negotiations, that Olsten deal exclusively with it for a limited time to
determine if an agreement could be reached. On August 4, 1999, Olsten agreed to
negotiate exclusively with Adecco until August 20, 1999.
From August 1 to August 9, 1999, Adecco and its legal and financial advisors
conducted due diligence on Olsten at Olsten's offices in Melville, New York and
elsewhere. At those meetings, representatives from Adecco, together with its
advisors, discussed various matters relating to the business of Olsten with
Olsten's management. On August 9, 1999, Olsten held a similar due diligence
meeting with members of Adecco's management at Adecco's U.S. offices in Redwood
City, California.
53
On August 11, 1999, Olsten and Adecco and their respective legal and
financial advisors met in New York to continue to negotiate the merger agreement
and the related agreements. Negotiations continued through August 17, 1999.
Also on August 11, 1999, Olsten issued a press release stating that it was
in discussions regarding a possible significant transaction, but did not
identify Adecco as a party to those discussions. The press release was issued in
response to an inquiry from the New York Stock Exchange about the increased
trading activity of Olsten common stock.
On August 12, 1999, the board of Olsten held a special meeting with Olsten's
senior management and legal and financial advisors to consider the merger
agreement, the terms of Adecco's proposal of July 21, the results of due
diligence and open issues. All board members and representatives of Warburg
Dillon Read, Salomon Smith Barney, Debevoise & Plimpton, Cahill Gordon & Reindel
and management were in attendance.
On August 13, 1999, Olsten's representatives, Mr. Blechschmidt, president
and chief executive officer of Olsten, and Mr. Olsten, chairman of Olsten, met
with Klaus Jacobs, vice chairman and director of Adecco, Philippe
Foriel-Destezet, chairman and director of Adecco, John Bowmer, chief executive
officer of Adecco, and Felix Weber, chief financial officer of Adecco, to
discuss the proposed transaction.
Between July 22, 1999 and August 14, 1999, the independent committee
convened numerous times by conference call with representatives of Debevoise &
Plimpton to discuss the effect on Olsten's common stockholders of certain
proposed terms of the transaction. In particular, the independent committee
considered the possible payment by Adecco of a premium to the class B common
stockholders, the terms of a consulting and non-competition agreement between
Adecco and Mr. Olsten, and the possibility that the capital structure of Gentiva
Health Services mirror the current two class capital structure of the company,
which included high-vote stock and low-vote stock. The independent committee had
numerous discussions with representatives of the class B common stockholders
with respect to these matters.
On August 14, 1999, the Olsten board held a special meeting to discuss the
merger with Adecco and the split-off. All members of the board and
representatives of Warburg Dillon Read, Salomon Smith Barney, Debevoise &
Plimpton and Cahill Gordon & Reindel, management and Mr. Grabowski, a non-board
representative of the Olsten family and brother-in-law of Stuart Olsten, were in
attendance. At that meeting, Olsten's management reviewed the status of
negotiations, including the resolution of previously open issues, the principal
terms of the proposed transactions, the strategic reasons for the merger,
including the split-off, and the material factors for and against the
transaction. Olsten's legal advisor reviewed the principal terms of the merger
agreement, the separation agreement and related legal issues. Olsten's financial
advisors provided an overview of Adecco's business and reviewed with the board
the financial analyses performed in their evaluation of the consideration to be
received by holders of Olsten stock in the transaction. Based on the assumption
that the terms of the definitive merger and separation agreements would remain
substantially the same as those set forth in the drafts of the agreements
provided to the financial advisors, Warburg Dillon Read and Salomon Smith Barney
each rendered its oral opinion, subsequently confirmed by delivery of written
opinions, to the effect that, as of the date of its opinion and based on and
subject to the matters described in its opinion, the consideration to be
received in the merger, including the split-off, was fair, from a financial
point of view, to the holders of Olsten stock.
At the August 14 meeting, the independent committee then reported that it
had reviewed the proposed consulting and non-competition payments to be made to
Mr. Olsten pursuant to a proposed agreement with Adecco and concluded that these
payments did not provide preferential consideration for him in his capacity as a
class B common stockholder. The committee also reported that since, among other
things, Gentiva Health Services would have one class of common stock, it was
satisfied that the consideration to be received by Olsten common stockholders
and class B common stockholders in the merger and split-off was the same. After
the principal terms and conditions of the proposed
54
transactions negotiated as of that date were presented to the Olsten board by
management and its legal and financial advisors, the Olsten board authorized
management to negotiate and complete definitive agreements for the proposed
transactions. The Olsten board unanimously approved the merger and all related
transactions.
On August 17, 1999, Olsten and Adecco entered into the merger agreement,
separation agreement and the ancillary agreements.
On August 18, 1999, Olsten and Adecco issued separate press releases
announcing the transactions.
On September 10, 1999, the Olsten compensation committee, comprised of
Messrs. May, Troubh and Weston, reviewed the separation, consulting and
non-competition agreements entered into in connection with the merger by
Mr. Olsten, and by the following four Olsten executives: Messrs. Blechschmidt,
Puglisi and Costantini and Ms. Maureen K. McGurl. All members of the
compensation committee, Mr. Ganzi, a director of Olsten, and representatives of
Warburg Dillon Read, Debevoise & Plimpton and Cahill Gordon & Reindel were in
attendance. Following its review, the compensation committee approved the
agreements.
Subsequently, Mr. Olsten and the four executives each agreed with the
request of the Olsten board to revise his or her agreement, which was made in
light of the level of payments to be received from Adecco by the individuals, in
order to reduce some of their benefits, and the Olsten board approved the
revised agreements. The amounts to be paid by Adecco to Olsten executives
pursuant to the revised agreements were reduced by the following total amounts:
Mr. Blechschmidt ($1.9 million), Mr. Puglisi ($1.9 million), Mr. Costantini
($1.4 million) and Ms. McGurl ($1.1 million). Each agreement (other than
Mr. Olsten's) originally provided for payments from Adecco to the individuals
for waiving rights under Olsten's supplemental executive retirement plan and
Olsten's change in control agreement. As the agreements have been revised, these
individuals did not waive their rights under the supplemental executive
retirement plan. See "--Interests of Directors and Officers in the Merger Have
Created Conflicts of Interests--Treatment of Supplemental Executive Retirement
Plan." The agreements also provided for payments from Adecco not to compete with
Adecco or to solicit its employees and (except for Ms. McGurl's) to consult with
Adecco.
The agreements also obligated Adecco to compensate Mr. Olsten and the four
executives on an after tax basis for any excise taxes imposed upon them by
reason of the receipt of amounts payable under their agreements or otherwise.
Gentiva Health Services was required to take over Adecco's obligations regarding
excise taxes following the merger. The revised agreements of Mr. Puglisi,
Mr. Costantini and Ms. McGurl eliminated the obligation to compensate for excise
tax exposure and eliminated the waiver of rights by the four executives under
Olsten's supplemental executive retirement plan and the related payments to be
received by the executives for their waiver; the revised agreement of
Mr. Olsten limited the obligation of Gentiva Health Services to compensate him
on an after-tax basis for excise taxes to no more than $1 million of excise
taxes; and the revised agreement of Mr. Blechschmidt retained the obligation
regarding excise tax exposure since this provision was in his Olsten employment
agreement.
The compensation committee had asked Debevoise & Plimpton to advise it with
respect to the issues described above, and during late August and September
Debevoise & Plimpton participated in various meetings and discussions regarding
the resolution of those issues.
The independent committee also reviewed Mr. Olsten's agreement and concluded
that the benefits did not provide preferential consideration for him as a
class B common stockholder. The independent committee reviewed the salary and
bonus payments Mr. Olsten received in the past several years and noted the
prominence of the Olsten name in the staffing business. The independent
committee further compared the structure of Mr. Olsten's agreement with similar
agreements between Adecco and members of Olsten management who are not class B
common stockholders and concluded that the payments to be made to Mr. Olsten
were not disproportionate given the time Mr. Olsten has spent
55
with the company, his senior level of responsibility and the importance of the
family name. Olsten management and Warburg Dillon Read had also advised the
independent committee that they had been informed by Adecco that securing a
consulting and non-competition agreement between Adecco and Mr. Olsten had
always been particularly important to Adecco and was a part of the negotiations
between the two companies and their principals.
On December 21, 1999, the Olsten board held a special telephonic board
meeting to approve the terms of a reorganization of Olsten's subsidiaries as
contemplated by the merger agreement. The board also approved in principle a
loan to Olsten from a subsidiary of Adecco. All board members other than
Mrs. Olsten and Mr. Ganzi attended the meeting, along with Mr. Grabowski and
representatives of Warburg Dillon Read, Salomon Smith Barney and Cahill Gordon &
Reindel. As a result of the reorganization, Gentiva Health Services will be the
parent of Olsten Health Services Holding Corp. The loan from Adecco, Inc., a
subsidiary of Adecco, will be used in part to provide funds to Gentiva Health
Services as contemplated by the separation agreement. This loan is more fully
described in "The Merger--Bridge Loan."
In late December 1999, Olsten determined that it had not included bank
overdraft balances of its French subsidiary in calculating its total
indebtedness for purposes of the separation agreement. As a result, the amount
of cash to be contributed to Gentiva Health Services under the separation
agreement would be substantially less than previously contemplated. Olsten
determined that additional funds would be required to ensure Gentiva Health
Services' liquidity. In early January 2000, Olsten requested Adecco to amend the
separation agreement to permit Olsten to contribute additional funds to Gentiva
Health Services or to loan funds to Gentiva Health Services on a subordinated
basis. Adecco declined. At a special telephonic Olsten board meeting held on
January 14, 2000, Olsten's board approved proceeding with a private placement of
not less than $20 million of convertible trust preferred stock to be issued by a
trust to be formed by Gentiva Health Services. All board members other than
Messrs. Ganzi, Troubh and Weston were in attendance, along with Mr. Grabowski
and representatives of Warburg Dillon Read, Salomon Smith Barney and Cahill
Gordon & Reindel. Members of the Olsten family, Messrs. Blechschmidt, Ganzi,
Levine, Troubh and Weston and some officers and management of Olsten and Gentiva
Health Services have agreed to purchase these securities. The directors who have
committed to purchase these securities did not participate in the vote on the
private placement.
REASONS OF OLSTEN FOR THE MERGER; RECOMMENDATION OF OLSTEN'S BOARD
Olsten's board of directors believes that the merger is fair to you and is
in your best interest. At its August 14, 1999 meeting, Olsten's board
unanimously approved the merger.
The Olsten board viewed all of the factors described below, other than the
negative matters identified on page 57 and those identified under "Risk
Factors," as favorable to its approval and recommendation of the transaction.
Although the Olsten board recognized the matters considered on page 57 and the
matters described under "Risk Factors" in this proxy statement/prospectus as
negative factors in its evaluation of the transaction, the Olsten board
concluded that the potential benefits of the transaction substantially
outweighed the risks.
Olsten's board weighed both the material factors in favor of and against the
merger and the merger agreement and determined that the material factors in
favor of the merger outweighed the material factors against the merger.
Consequently, it was Olsten's board's judgment that the merger is in the best
interests of Olsten's stockholders.
Set forth below are the material factors weighing in favor of the merger
that Olsten's board considered in reaching its decision to approve the merger
and to recommend that you vote for the merger:
- the prospects of Olsten and Adecco indicate that the combined businesses
will have a stronger presence in their markets than Olsten standing alone;
56
- the ability of stockholders to achieve a premium from the cash and ADSs
from Adecco over the $7.24 per share average market price at which
Olsten's common stock had traded during the twelve month period leading up
to August 10, 1999, the day before Olsten issued a press release stating
that it was in discussions regarding a significant transaction (by
August 14, 1999, the date Olsten's board approved the transaction, the
market price of Olsten's common stock was $9.69 per share);
- the receipt of Adecco ADSs which will allow Olsten stockholders to
continue to participate in the staffing services and information
technology services businesses, whose performance could be enhanced as a
result of its combination with Adecco's businesses, attributable in part
to the greater size and financial strength of the combined company;
- the ability to elect the form of consideration per share which enables
those stockholders who wish to receive more cash to so elect and those
stockholders who prefer to receive more Adecco ADSs to so elect;
- the possibility that Olsten's future performance might not lead to a
market price of Olsten's common stock in excess of the consideration that
Olsten stockholders would receive as part of the proposed transaction;
- the determination that the consideration to be received by Olsten common
stockholders and class B common stockholders in the transaction was the
same;
- the potential beneficial effects on Olsten's employees and customers from
the maintenance of Olsten's headquarters as the North American
headquarters for Adecco;
- the strong historical financial position and results of operations of
Adecco;
- the experience of Adecco's management in acquiring and consolidating other
staffing companies;
- Olsten's board's belief, after consultation with its legal counsel, that
the regulatory approvals necessary to complete the merger could be
obtained;
- the history of Olsten's discussions with a number of parties, including
major strategic competitors in the staffing services industry and health
services industry and financial buyers, regarding their potential interest
in Olsten or its health services business including, without limitation,
(1) the status of negotiations with bidders that submitted preliminary
non-binding indications of interest for an acquisition of Olsten without
the health services business and bidders that submitted preliminary
non-binding indications of interest for an acquisition of the health
services business alone, (2) the efforts of Olsten in exploring other
strategic initiatives to enhance stockholder value, including a spin-off
of the health services business and Olsten continuing as an independent
company, (3) the fair and ample opportunity provided to other parties to
submit proposals to Olsten, and (4) the extensive arm's-length
negotiations between Olsten and Adecco that resulted in the per share
consideration to which Adecco has agreed;
- the proposals of Adecco and the other potential buyer to acquire Olsten
without the health care services business were each improved over their
prior proposals: Adecco's economic proposal was to acquire Olsten for
$8.75 per share, with Adecco paying for 50% of Olsten stock in cash and
the other 50% in Adecco ADSs, with assumed net debt of $750 million and
the second proposal was to acquire Olsten for $8.15 per share in cash,
with assumed debt of $750 million;
- the financial presentation of Olsten's financial advisors, Warburg Dillon
Read and Salomon Smith Barney, to Olsten's board and the opinions of each
of Warburg Dillon Read and Salomon Smith Barney as to the fairness, from a
financial point of view, of the consideration to be received by the
holders of Olsten stock in the merger, including the split-off, as more
fully described below under "--Opinions of Olsten's Financial Advisors".
Olsten does not currently intend to request updated opinions from Warburg
Dillon Read and Salomon Smith Barney. If a significant event regarding the
merger occurs, such as a material amendment to the merger agreement
modifying the consideration provided for in the merger, or a material
decrease in the
57
trading price of Adecco ADSs, the Olsten board would consult with its
management and legal and financial advisors and take into account,
consistent with its fiduciary duties, all relevant facts and circumstances
existing at that time, including general market, economic and business
conditions;
- the expected taxation of any gain recognized by Olsten stockholders as
capital gain and the expected absence of any corporate level tax cost to
Olsten;
- the fact that Gentiva Health Services will have one class of stock;
- enabling the health services business to have its own publicly-traded
equity securities to finance its own growth opportunities and to
incentivize management; and
- allowing you and others to better evaluate the performance and future
prospects of the health services business as an independent entity.
Olsten's board of directors has set forth below the material factors
weighing against the merger that it considered in reaching its decision to
approve the merger agreement and to recommend that you vote for the merger:
- Olsten's obligation to pay Adecco a termination fee of $40 million if the
merger agreement is terminated because Olsten's board accepts a superior
proposal;
- the possibility that you could achieve more value over the long term from
continued operation of Olsten as an independent company;
- the merger will be taxable to Olsten's stockholders;
- because Adecco will pay to Olsten's stockholders, in total, cash for half
of the outstanding Olsten stock and the remainder in Adecco ADSs, Olsten
stockholders may not receive the type of consideration that they elect;
- that some or all of Olsten's stockholders will receive shares in a foreign
company that is not subject to the same Securities and Exchange Commission
disclosure requirements as is a U.S. company;
- that some or all of Olsten's stockholders will receive shares in a foreign
company and, therefore, will no longer enjoy the rights with respect to
corporate action granted under Delaware law;
- that holding shares of a foreign company entails risks different from
those associated with a U.S. company; and
- that the separate approval of the holders of Olsten common stock is not
necessary to approve the transaction.
The Olsten board considered the financial viability of Gentiva Health
Services as an independent company and the split-off as an integral part of the
merger. Set forth below are the material factors considered by the Olsten board
in analyzing the separation agreement:
- the financial condition, results of operation, business and prospects of
Gentiva Health Services as an independent company;
- the current health services staffing industry and market conditions;
- the net debt of Gentiva Health Services, which will be no more than
$100 million; and
- the indemnification obligations of Gentiva Health Services.
The foregoing discussion of the information and factors considered and given
weight by the Olsten board is not exhaustive. The discussion includes all
material factors considered by the Olsten board.
When it was considering all of these factors, Olsten's board was aware of
the interests of some of Olsten's executive officers and directors in the
merger. These interests included:
- accelerated vesting of currently unvested Olsten options as a result of
the consummation of the merger as described under "The Merger
Agreement--Treatment of Stock Options" and
58
"Gentiva Health Services Prospectus--The Split-Off--Terms of the employee
benefits allocation agreement--Equity based compensation plans;"
- the indemnification provisions of the merger agreement as described under
"The Merger Agreement--Indemnification and Insurance;"
- accelerated vesting and payment of benefits under the Olsten supplemental
executive retirement plan, as described under "Interests of Directors and
Officers in the Merger Have Created Conflicts of Interest--Treatment of
Supplemental Executive Retirement Plan," below;
- cash payments by Adecco to Stuart Olsten, chairman of the board of Olsten,
and to four Olsten executive officers in consideration for consulting
services, covenants not to compete and, in the case of the executive
officers, termination of their rights under their change in control or
employment agreement (see "Interests of Directors and Officers in the
Merger Have Created Conflicts of Interest--Separation, Consulting and
Non-Competition Agreements with Adecco," below); and
- cash payments by Gentiva Health Services to Stuart Olsten for entering
into a non-competition agreement with Gentiva Health Services and to an
Olsten executive officer for consulting services to Gentiva Health
Services, as described under "Interests of Directors and Officers in the
Merger Have Created Conflicts of Interest," below).
In addition, the independent committee, established by the Olsten board
consisting solely of non-management directors elected to the board by holders of
Olsten common stock, concluded that the consulting and non-competition payments
to be made to Mr. Olsten did not provide preferential consideration for him in
his capacity as a class B common stockholder and that since, among other things,
Gentiva Health Services would have one class of common stock, it was satisfied
that the consideration to be received by Olsten common stockholders and class B
common stockholders in the merger would be the same, and the Olsten board
concurred.
Olsten structured the merger, including the separation of the health
services business from Olsten's other businesses, to achieve the strategic
benefits discussed.
Because of the variety of factors considered in connection with its
evaluation of the merger, Olsten's board did not find it practicable to, and did
not, quantify or otherwise assign relative weights to the specific factors it
considered in reaching its determination. Individual members of Olsten's board
may have assigned different weights to different factors or may have considered
additional factors not listed above.
While the Olsten board did not specifically adopt the conclusions set forth
in Warburg Dillon Read and Salomon Smith Barney's opinions based on their
financial analysis of the transaction, the Olsten board did take into account,
and placed reliance on, the analyses performed by, and the opinions rendered by,
Warburg Dillon Read and Salomon Smith Barney.
Olsten's board weighed both the material factors in favor of and against the
merger and the merger agreement and determined that the material factors in
favor of the merger outweighed the material factors against the merger.
Consequently, it was Olsten's board's judgment that the merger is in the best
interests of Olsten's stockholders.
OLSTEN'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE
MERGER.
REASONS OF ADECCO FOR THE MERGER
Adecco's board of directors believes that the merger presents Adecco with a
number of important opportunities. These include:
- making Adecco the leader, in terms of revenues, in the U.S. staffing
industry and the worldwide information technology staffing business;
- providing more comprehensive and diverse services to clients and
additional career prospects for employees;
59
- allowing Adecco to achieve cost savings through economies of scale;
- acquiring a market leadership position in the eastern regions of the U.S.
to complement Adecco's market leadership in the western regions of the
U.S.;
- potentially improving operating leverage and other synergies;
- acquiring Olsten's excellent and well-established brand names; and
- combining a highly competent and motivated joint management team and
compatible corporate cultures to promote a positive environment for
employees.
Adecco's board of directors also considered the following negative factors
in its analysis of the merger:
- the possibility of over-valuation of Olsten by Adecco in establishing the
total merger consideration;
- the potential inability of Gentiva Health Services to assume the
liabilities or to satisfy obligations incurred in connection with its
health care services operations;
- the uncertainty as to the value of, or the ability to achieve, the
synergies, if any, to be realized as a result of the merger;
- the diversion of Adecco management's attention, as a result of the merger,
from general business concerns;
- the potential inability to fully assimilate the operations and corporate
culture of Olsten with those of Adecco following the merger; and
- the significant increase in Adecco's total indebtedness outstanding as a
result of the Olsten indebtedness acquired by Adecco and additional debt
financings consummated in connection with the merger.
OPINIONS OF OLSTEN'S FINANCIAL ADVISORS
OPINION OF WARBURG DILLON READ
Olsten's board of directors retained Warburg Dillon Read to act as its
co-financial advisor in connection with the board of directors' review of
strategic alternatives. At the meeting of Olsten's board of directors held on
August 14, 1999, Warburg Dillon Read delivered its oral opinion to the effect
that, as of the date of the opinion and based on and subject to the matters
described in the opinion, including a review of the definitive agreements for
the transaction, the consideration to be received in the merger, including the
split-off, was fair, from a financial point of view, to the holders of Olsten
stock. The opinion was confirmed by delivery of a written opinion dated
August 17, 1999, the date of execution of the merger agreement.
The following summary of the Warburg Dillon Read opinion is qualified in its
entirety by reference to the full text of the opinion. The full text of the
Warburg Dillon Read opinion sets forth the assumptions made, procedures
followed, matters considered and limitations on the scope of the review
undertaken and is attached as Annex C-1 to this document. We encourage you to
carefully read the Warburg Dillon Read opinion in its entirety.
The Warburg Dillon Read opinion:
- is directed to Olsten's board of directors;
- relates to the fairness, from a financial point of view, of the
consideration to be received in the merger, including the split-off, by
holders of Olsten common stock and class B common stock;
- addresses only the financial terms of the consideration to be received in
the merger, including the split-off, by the holders of Olsten common stock
and class B common stock; and
- does not constitute a recommendation to holders of Olsten common stock and
class B common stock about how to vote at the special meeting or as to
which election these holders should make regarding the form of the
consideration to be received in the merger.
60
In arriving at its opinion, Warburg Dillon Read, among other things:
- reviewed publicly available business and historical financial information
relating to Olsten, Olsten's health services business and Adecco,
including the reported prices and trading activity for the Olsten common
stock, the Adecco common shares and the Adecco ADSs;
- reviewed internal financial information and other data concerning the
business and financial prospects of Olsten, Olsten's health services
business and Adecco, including estimates and financial forecasts prepared
by management of each company, which were provided to Warburg Dillon Read
by Olsten and Adecco;
- held discussions with members of senior management of Olsten, Olsten's
health services business and Adecco regarding the business and prospects
of Olsten, Olsten's health services business and Adecco, as well as other
matters it believed relevant to its inquiry;
- reviewed publicly available financial and stock market data with respect
to selected companies in lines of business Warburg Dillon Read believed to
be generally comparable to those of Olsten's staffing services business,
Olsten's health services business and Adecco;
- compared the financial terms of the merger, including the split-off, with
the financial terms of selected other transactions that Warburg Dillon
Read believed to be generally relevant;
- considered a number of the pro forma effects of the merger, including the
split-off, and related transactions on Adecco's financial statements;
- reviewed drafts of the merger agreement and the separation agreement; and
- considered other financial studies, analyses, investigations and
information that it considered necessary or appropriate.
In connection with its review, Warburg Dillon Read:
- did not independently verify any of the information referred to above and,
with Olsten's consent, relied on it as being complete and accurate in all
material respects;
- assumed, with Olsten's consent, that the financial forecasts, estimates
and pro forma effects referred to above were reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
management of each company as to the future performance of their
respective companies;
- assumed that, following the separation of the health services business,
Gentiva Health Services would not have any material contingent liabilities
except as reflected in Olsten's financial statements;
- assumed that Adecco, Olsten and Gentiva Health Services would comply with
all the material terms of the merger agreement and the separation
agreement;
- at Olsten's direction, did not make any independent evaluation or
appraisal of any of the assets or liabilities of Olsten, Gentiva Health
Services or Adecco, nor was Warburg Dillon Read furnished with any similar
evaluation or appraisal;
- assumed, with Olsten's consent, that the merger, including the split-off,
will comply with applicable foreign, federal and state laws, including
laws relating to the payment of dividends, bankruptcy, insolvency,
reorganization, fraudulent conveyance, fraudulent transfer or other
similar law affecting creditors' rights generally; and
- did not specifically analyze the impact on any individual holder of Olsten
common stock or class B common stock of exercising the election regarding
the form of the consideration to be received in the merger.
61
Warburg Dillon Read's opinion:
- is necessarily based upon economic, monetary, market and other conditions
as they existed as of the date of the opinion and should be evaluated
based upon these conditions;
- does not imply any conclusion as to the actual value of the Gentiva Health
Services common stock, the Adecco ADSs or Adecco common shares when issued
to the holders of Olsten common stock and class B common stock in the
merger, including the split-off, or the prices at which these securities
will trade subsequent to the merger, which may vary depending upon various
factors, including changes in interest rates, dividend rates, market
conditions, general economic conditions and other factors that generally
influence the price of securities;
- does not address or take into consideration the after-tax consequences to
any holder of Olsten common stock or class B common stock of the merger,
including the split-off, and the other transactions contemplated by the
merger agreement; and
- does not address Olsten's underlying business decision to effect the
merger, including the split-off.
In connection with its opinion, Warburg Dillon Read understood that Adecco
and Olsten would treat the split-off as an integral part of the merger for all
United States federal, state and local tax purposes, and that Adecco and Olsten
expected that:
- holders of Olsten common stock and class B common stock would be treated
as having had a portion of their shares of Olsten common stock and
class B common stock (equal in value to the value of the Gentiva Health
Services common stock exchanged in the merger) redeemed by Olsten in a
transaction governed by Section 302(a) of the Internal Revenue Code of
1986, as amended, and as having sold their remaining shares of Olsten
common stock and class B common stock in a fully taxable transaction for
consideration consisting of consideration to be received in the merger;
and
- Olsten would recognize gain, if any, with respect to the Gentiva Health
Services common stock exchanged in the merger.
Warburg Dillon Read was not asked to and did not recommend the specific
consideration payable in the merger, which was determined through negotiation
between Olsten and Adecco. At Olsten's direction, Warburg Dillon Read contacted
third parties to solicit indications of interest in a possible transaction with
Olsten, both in respect of Olsten as a whole, and in respect of Olsten's health
services business. Warburg Dillon Read held discussions with a number of these
parties before the date of its opinion. Olsten did not limit Warburg Dillon Read
regarding the procedures to be followed or factors to be considered in rendering
its opinion.
In preparing its opinion, Warburg Dillon Read performed a variety of
financial and comparative analyses. The material analyses are described below.
The summary of these analyses is not a complete description of the analyses
underlying Warburg Dillon Read's opinion. The preparation of a fairness opinion
is a complex analytical process involving various determinations as to the most
appropriate and relevant methods of financial analysis and the application of
those methods to the particular circumstances and, therefore, is not susceptible
to partial analysis or summary descriptions. In arriving at its opinion, Warburg
Dillon Read made qualitative judgments as to the significance and relevance of
each analysis and factor considered by it. Accordingly, Warburg Dillon Read
believes that its analyses must be considered as a whole and that selecting
portions of its analyses and the factors considered by it, without considering
all analyses and factors, could create an incomplete view of the processes
underlying the analyses set forth in its opinion.
In performing its analyses, Warburg Dillon Read made numerous assumptions
with respect to industry performance, general business, financial, market and
economic conditions and other matters,
62
many of which are beyond the control of Olsten, Adecco or Gentiva Health
Services. No company, transaction or business used in those analyses as a
comparison is identical to Olsten or Adecco or their businesses or Olsten's
health services business or the merger, nor is an evaluation of the results
entirely mathematical. Rather, the analyses involve complex considerations and
judgments concerning financial and operating characteristics and other factors
that could affect the acquisition, public trading or other values of the
companies, business segments or transactions being analyzed.
The estimates contained in the analyses performed by Warburg Dillon Read and
the ranges of valuations resulting from any particular analysis are not
necessarily indicative of actual values or predictive of future results or
values, which may be significantly more or less favorable than suggested by
these analyses. In addition, analyses relating to the value of businesses or
securities do not purport to be appraisals or to reflect the prices at which a
business might actually be sold or the prices at which any securities may trade
at the present time or at any time in the future.
In the past, Warburg Dillon Read and its predecessors have provided
investment banking services to Olsten and received customary compensation for
the rendering of these services. In the ordinary course of its business, Warburg
Dillon Read, its successors and affiliates may trade or have traded securities
of Olsten or Adecco for their own account and, accordingly, may at any time hold
a long or short position in such securities. Warburg Dillon Read and its
affiliates, including UBS AG, may have other business relationships with Olsten
and its affiliates and Adecco and its affiliates.
OPINION OF SALOMON SMITH BARNEY
Olsten retained Salomon Smith Barney to act as co-financial advisor in
connection with the proposed transaction. In connection with this engagement,
Olsten requested that Salomon Smith Barney evaluate the fairness, from a
financial point of view, of the consideration to be received in the transaction,
to the holders of Olsten stock. On August 14, 1999, at a meeting of Olsten's
board of directors held to evaluate the proposed transaction, Salomon Smith
Barney delivered to Olsten's board of directors an oral opinion to the effect
that, as of the date of the opinion and based on and subject to the matters
described in the opinion, including a review of the definitive agreements for
the transaction, the consideration to be received in the merger, including the
split-off, was fair, from a financial point of view, to the holders of Olsten
stock. This opinion was confirmed by delivery of a written opinion dated
August 17, 1999, the date of execution of the merger agreement.
In arriving at its opinion, Salomon Smith Barney:
- reviewed the merger agreement and related documents;
- held discussions with senior officers, directors and other representatives
and advisors of Olsten and senior officers and other representatives and
advisors of Adecco concerning the operations and prospects of Olsten's
health services, staffing services and information services businesses and
Adecco;
- examined publicly available business and financial information relating to
Olsten's health services, staffing services and information services
businesses and Adecco, as well as financial forecasts and other
information and data for Olsten's health services, staffing services and
information services businesses and Adecco, which the managements of
Olsten and Adecco provided to or otherwise discussed with Salomon Smith
Barney, including information relating to strategic implications and
operational benefits anticipated to result from the merger;
- reviewed the financial terms of the transaction as described in the merger
agreement in relation to, among other things, current and historical
market prices and trading volumes of Olsten common stock, Adecco common
shares and Adecco ADSs, the financial condition and historical and
projected earnings and other operating data of Olsten's health services,
staffing services and information services businesses and Adecco, and the
capitalization of Olsten and Adecco;
63
- considered, to the extent publicly available, the financial terms of other
transactions recently effected which it considered relevant in evaluating
the merger;
- analyzed financial, stock market and other publicly available information
relating to the businesses of other companies whose operations it
considered relevant in evaluating Olsten's health services, staffing
services and information services businesses and Adecco;
- evaluated the potential pro forma financial impact of the merger on
Adecco; and
- conducted other analyses and examinations and considered other financial,
economic and market criteria as it deemed appropriate in arriving at its
opinion.
In rendering its opinion, Salomon Smith Barney assumed and relied on,
without independent verification, the accuracy and completeness of all financial
and other information and data that it reviewed or considered. With respect to
these financial forecasts and other information and data, the managements of
Olsten and Adecco advised Salomon Smith Barney that they were reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the managements of Olsten and Adecco as to the future financial
performance of Olsten's health services, staffing services and information
services businesses and Adecco and the strategic implications and operational
benefits anticipated to result from the merger.
Salomon Smith Barney did not express any opinion as to what the value of the
Adecco common shares, Adecco ADSs or Gentiva Health Services common stock
actually will be when issued to Olsten stockholders in the transaction or the
price at which the Adecco common shares, Adecco ADSs or Gentiva Health Services
common stock will trade after the transaction. In addition, Salomon Smith Barney
did not make, and was not provided with, an independent evaluation or appraisal
of the assets or liabilities, contingent or otherwise, of Olsten's health
services, staffing services and information services businesses or Adecco, and
Salomon Smith Barney did not make any physical inspection of the properties or
assets of those businesses or Adecco.
In connection with its opinion, Salomon Smith Barney was not requested to,
and did not, solicit third party indications of interest in the possible
acquisition of all or a part Olsten, although Olsten advised Salomon Smith
Barney that third party indications of interest were solicited by other
representatives of Olsten. Salomon Smith Barney was not requested to consider,
and its opinion does not address, the relative merits of the transaction as
compared to any alternative business strategies that might exist for Olsten or
the effect of any other transaction in which Olsten might engage. Salomon Smith
Barney noted that its opinion was necessarily based on information available,
and financial, stock market and other conditions and circumstances existing and
disclosed, to Salomon Smith Barney as of the date of its opinion. Although
Salomon Smith Barney evaluated the consideration to be received in the merger,
including the split-off, from a financial point of view, Salomon Smith Barney
was not asked to and did not recommend the specific consideration to be paid or
distributed in the transaction, which was determined through negotiation between
Olsten and Adecco. No other instructions or limitations were imposed by Olsten
on Salomon Smith Barney with respect to the investigations made or procedures
followed by Salomon Smith Barney in rendering its opinion.
The full text of Salomon Smith Barney's written opinion dated August 17,
1999, which describes the assumptions made, matters considered and limitations
on the review undertaken, is attached as Annex C-2 and incorporated into this
document by reference. We encourage you to read this opinion carefully in its
entirety. Salomon Smith Barney's opinion is directed to Olsten's board of
directors and relates only to the fairness, from a financial point of view, of
the consideration to be received in the merger, including the split-off, does
not address any other aspect of the merger, the split-off, or related
transactions and does not constitute a recommendation to any stockholders as to
how to vote in the merger, the form of consideration to be elected by any
stockholders in the merger or any other matter
64
relating to the proposed transaction. The summary of Salomon Smith Barney's
opinion included in this document is qualified in its entirety by reference to
the full text of the opinion.
In preparing its opinion, Salomon Smith Barney performed a variety of
financial and comparative analyses. The material analyses are described below.
The summary of these analyses is not a complete description of the analyses
underlying Salomon Smith Barney's opinion. The preparation of a fairness opinion
is a complex analytical process involving various determinations as to the most
appropriate and relevant methods of financial analysis and the application of
those methods to the particular circumstances and, therefore, a fairness opinion
is not readily susceptible to summary description. Accordingly, Salomon Smith
Barney believes that its analyses must be considered as a whole and that
selecting portions of its analyses and factors or focusing on information
presented in tabular format, without considering all analyses and factors or the
narrative description of the analyses, could create a misleading or incomplete
view of the processes underlying its analyses and opinion.
In its analyses, Salomon Smith Barney considered industry performance,
general business, economic, market and financial conditions and other matters,
many of which are beyond the control of Olsten and Adecco. No company,
transaction or business used in those analyses as a comparison is identical to
Olsten or its businesses or the proposed transaction, and an evaluation of those
analyses is not entirely mathematical. Rather, the analyses involve complex
considerations and judgments concerning financial and operating characteristics
and other factors that could affect the transaction, public trading or other
values of the companies, business segments or transactions being analyzed.
The estimates contained in Salomon Smith Barney's analyses and the valuation
ranges resulting from any particular analysis are not necessarily indicative of
actual values or predictive of future results or values, which may be
significantly more or less favorable than those suggested by the analyses. In
addition, analyses relating to the value of businesses or securities do not
necessarily purport to be appraisals or to reflect the prices at which
businesses or securities actually may be sold. Accordingly, Salomon Smith
Barney's analyses and estimates are inherently subject to substantial
uncertainty.
Salomon Smith Barney's opinion and analyses were only one of many factors
considered by Olsten's board of directors in its evaluation of the transaction
and should not be viewed as determinative of the views of Olsten's board of
directors or management with respect to the proposed transaction or the
consideration to be paid or distributed in the transaction.
Salomon Smith Barney is familiar with Olsten, having provided investment
banking services to Olsten in the past unrelated to the proposed transaction,
for which services Salomon Smith Barney has received compensation. In addition,
Salomon Smith Barney and its affiliates, including Citigroup Inc. and its
affiliates, may maintain relationships with Olsten, Adecco and their respective
affiliates. In the ordinary course of business, Salomon Smith Barney and its
affiliates may actively trade or hold the securities of Olsten and Adecco for
their own account or for the account of customers and, accordingly, may at any
time hold a long or short position in those securities.
JOINT FINANCIAL ANALYSES OF OLSTEN'S FINANCIAL ADVISORS
The following is a summary of each of the material financial analyses
jointly prepared and presented by Warburg Dillon Read and Salomon Smith Barney
in connection with the rendering of their respective opinions. The financial
analyses summarized below include information presented in tabular format. In
order to fully understand the financial analyses of the financial advisors, the
tables must be read together with the text of each summary. The tables alone do
not constitute a complete description of the financial analyses. Considering the
data set forth below without considering the full narrative description of the
financial analyses, including the methodologies and assumptions underlying the
analyses, could create a misleading or incomplete view of the financial analyses
of the financial advisors.
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OLSTEN ANALYSES
SELECTED COMPANIES ANALYSIS. Warburg Dillon Read and Salomon Smith Barney
reviewed and compared selected financial information and public market multiples
of Olsten and the following 14 other selected companies in the staffing services
industry:
- Adecco
- CDI Corporation
- Interim Services Inc.
- Kelly Services, Inc.
- Labor Ready, Inc.
- Manpower Inc.
- Randstadt Holding N.V.
- RemedyTemp, Inc.
- Robert Half International Inc.
- Select Appointments plc
- SOS Staffing Services, Inc.
- StaffMark, Inc.
- Vedior NV
- Westaff, Inc.
Warburg Dillon Read and Salomon Smith Barney chose the selected companies
because they were publicly-traded companies that, for purposes of the analysis,
the financial advisors considered reasonably similar to Olsten in that these
companies operate in the staffing services industry. The selected companies may
significantly differ from Olsten based on, among other things, the size of the
companies, the geographic coverage of the companies' operations, and the
particular specialties within the staffing services industry that the companies
focus on.
Warburg Dillon Read and Salomon Smith Barney reviewed, among other things,
enterprise values, calculated as the market value of fully diluted equity
securities plus indebtedness and minority interests less cash, as of August 13,
1999, as a multiple of actual trailing 12 months and estimated calendar 1999 and
2000 earnings before interest, taxes, depreciation and amortization, commonly
referred to as EBITDA. Warburg Dillon Read and Salomon Smith Barney then
compared the implied multiples derived for the selected companies with the
multiples implied in the merger for Olsten, excluding Olsten's health services
business, based on the estimated transaction value of the merger. For purposes
of determining the estimated transaction value of the merger, Warburg Dillon
Read and Salomon Smith Barney assumed merger consideration of $8.75 per share of
Olsten stock, about $750 million in Olsten indebtedness and about $28 million in
minority interests to be assumed by Adecco, and net operating losses with a net
present value of about $55 million to be acquired by Adecco. Actual trailing
12 months data for Olsten, excluding Olsten's health services business, were
based on historical financial information prior to Olsten's filing of its
amended 10-K and 10-Qs on October 1, 1999. Estimated financial data for Olsten,
as a whole, Adecco and the selected companies were based on publicly available
research analysts' estimates. Estimated financial data for Olsten, excluding
Olsten's health services business, were based on internal estimates of the
management of Olsten. This analysis indicated the following implied multiples
for the selected companies, as compared to the multiples implied in the merger
for Olsten, excluding Olsten's health services business, based on the estimated
transaction value of the merger:
IMPLIED RANGE OF MULTIPLES
OF SELECTED COMPANIES IMPLIED MULTIPLES OF OLSTEN, EXCLUDING
----------------------------------------- OLSTEN'S HEALTH SERVICES BUSINESS,
ENTERPRISE VALUE LOW MEAN MEDIAN HIGH BASED ON TRANSACTION VALUE OF MERGER
- ---------------- -------- -------- -------- -------- --------------------------------------
Actual trailing 12 months EBITDA... 4.6x 9.1x 7.3x 20.0x 9.0x
Estimated calendar 1999 EBITDA..... 3.6x 7.7x 7.0x 17.1x 8.2x
Estimated calendar 2000 EBITDA..... 3.2x 6.6x 5.7x 14.4x 7.2x
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SELECTED TRANSACTIONS ANALYSIS. Warburg Dillon Read and Salomon Smith
Barney reviewed and compared publicly available information relating to the
following seven selected transactions in the staffing services industry
consummated since 1996:
ACQUIROR TARGET
- -------- ------
- - Interim Services, Inc. Norell Corporation
- - StaffMark, Inc. Robert Walters plc
- - Randstadt Holdings N.V. Strategix Solutions, Inc.
- - The Corporate Services Group plc. Metamor Worldwide, Inc. (Corestaff Services)
- - Adecco TAD Resources International
- - Interim Services, Inc. Michael Page Group plc
- - Adia SA Ecco SA
Warburg Dillon Read and Salomon Smith Barney chose the selected transactions
because they were business combination transactions that, for purposes of the
analysis, the financial advisors considered reasonably similar to the merger in
that these transactions involved one or more publicly-traded companies in the
staffing services industry. The selected transactions may significantly differ
from the merger based on, among other things, the size of the transactions, the
form of consideration paid in the transactions, the structure of the
transactions, and the date the transactions were consummated.
Warburg Dillon Read and Salomon Smith Barney reviewed, among other things,
enterprise values as a multiple of actual trailing 12 months EBITDA and actual
trailing 12 months earnings before interest and taxes, commonly referred to as
EBIT. Warburg Dillon Read and Salomon Smith Barney then compared the implied
multiples derived for the selected transactions with the multiples implied in
the merger for Olsten, excluding Olsten's health services business, based on the
estimated transaction value of the merger. All multiples for the selected
transactions were based on publicly available information at the time of the
announcement of the particular selected transaction. Actual trailing 12 months
data for Olsten, excluding Olsten's health services business, were based on
historical financial information prior to Olsten's filing of its amended 10-K
and 10-Qs on October 1, 1999. Warburg Dillon Read and Salomon Smith Barney noted
that there had been significant general deterioration in the performance of
staffing services companies over the past 12 months. Therefore, Warburg Dillon
Read and Salomon Smith Barney believed that the most relevant transaction was
Interim Services, Inc.'s acquisition of Norell Corporation, which was announced
on March 25, 1999 and consummated on July 2, 1999. This analysis indicated the
following implied multiples for the Interim Services/Norell transaction as
compared to the multiples implied in the merger for Olsten, excluding Olsten's
health services business, based on the estimated transaction value of the
merger:
IMPLIED MULTIPLES OF OLSTEN, EXCLUDING
IMPLIED MULTIPLES OF INTERIM OLSTEN'S HEALTH SERVICES BUSINESS,
ENTERPRISE VALUE SERVICES/NORELL TRANSACTION BASED ON TRANSACTION VALUE OF MERGER
- ---------------- ---------------------------- --------------------------------------
Actual trailing 12 months EBITDA....... 6.7x 9.0x
Actual trailing 12 months EBIT......... 8.4x 11.9x
DISCOUNTED CASH FLOW ANALYSIS. Warburg Dillon Read and Salomon Smith Barney
performed a discounted cash flow analysis, using internal estimates of the
management of Olsten, with respect to Olsten's businesses and operations other
than Olsten's health services business in order to derive an implied enterprise
value reference range for those businesses and operations as if such businesses
and operations were to continue on a stand-alone basis. This analysis was based
on:
- the present value of the estimated unlevered, after-tax free cash flows
that those businesses could generate over the five-year period 1999
through 2003; and
- the future 2004 exit value of those businesses and operations based on a
range of multiples applied to estimated future 2004 EBITDA.
For purposes of this analysis, Warburg Dillon Read and Salomon Smith Barney
used discount rates of 11.0% to 12.0%, which were based on Olsten's estimated
weighted average cost of capital, including debt, and terminal 2004 EBITDA
multiples of 5.5x to 6.5x, which were derived by reference to the implied public
market trading multiples of enterprise value to estimated calendar year 1999
EBITDA for Olsten and 14 other selected companies in the staffing services
industry. This analysis indicated an
67
implied enterprise reference range for Olsten's businesses and operations other
than Olsten's health services business of about $1,021 million to
$1,251 million, as compared to the estimated transaction value of the merger of
about $1,438 million.
ADECCO ANALYSES
SELECTED COMPANIES ANALYSIS. Warburg Dillon Read and Salomon Smith Barney
reviewed and compared selected financial information and public market multiples
of Adecco and the following 14 other selected companies in the staffing services
industry:
- CDI Corporation
- Interim Services Inc.
- Kelly Services, Inc.
- Labor Ready, Inc.
- Manpower Inc.
- Olsten
- Randstadt Holding N.V.
- RemedyTemp, Inc.
- Robert Half International Inc.
- Select Appointments plc
- SOS Staffing Services, Inc.
- StaffMark, Inc.
- Vedior NV
- Westaff, Inc.
Warburg Dillon Read and Salomon Smith Barney chose the selected companies
because they were publicly-traded companies that, for purposes of the analysis,
the financial advisors considered reasonably similar to Adecco in that these
companies operate in the staffing services industry. The selected companies may
significantly differ from Adecco based on, among other things, the size of the
companies, the geographic coverage of the companies' operations, and the
particular specialties within the staffing services industry that the companies
focus on.
Warburg Dillon Read and Salomon Smith Barney reviewed enterprise values, as
of August 13, 1999, as a multiple of actual trailing 12 months and estimated
calendar 1999 and 2000 EBITDA, and equity values, calculated as per share
closing stock prices on August 13, 1999, as a multiple of estimated 1999 and
2000 earnings per share, commonly referred to as EPS. Warburg Dillon Read and
Salomon Smith Barney then compared the implied multiples derived for the
selected companies with the multiples implied for Adecco based on the closing
stock prices of Adecco common shares on August 13, 1999. Estimated financial
data for Adecco and the selected companies were based on publicly available
research analysts' estimates. This analysis indicated the following implied
multiples for the selected companies, as compared to the implied multiples for
Adecco:
IMPLIED RANGE OF MULTIPLES
OF SELECTED COMPANIES IMPLIED MULTIPLES OF ADECCO
-------------------------- BASED ON AUGUST 13, 1999
ENTERPRISE VALUE LOW MEAN MEDIAN HIGH CLOSING STOCK PRICE
- ---------------- -------- -------- -------- -------- ---------------------------
Actual trailing 12 months EBITDA.......... 4.6x 9.1x 7.3x 20.0x 20.0x
Estimated calendar 1999 EBITDA............ 3.6x 7.7x 7.0x 17.1x 17.1x
Estimated calendar 2000 EBITDA............ 3.2x 6.6x 5.7x 14.4x 14.4x
EQUITY VALUE
- ------------------------------------------
Estimated calendar 1999 EPS............... 6.3x 15.4x 14.1x 28.2x 28.2x
Estimated calendar 2000 EPS............... 5.5x 12.8x 12.4x 22.9x 22.9x
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Warburg Dillon Read and Salomon Smith Barney also compared the ratio of
equity value per share over estimated 2000 EPS over the estimated five-year EPS
growth rates for Adecco and the selected companies, which indicated a ratio of
about 100% for Adecco and low, mean, median and high ratios of about 32%, 71%,
76% and 114%, respectively, for the selected companies.
DISCOUNTED CASH FLOW ANALYSIS. Warburg Dillon Read and Salomon Smith Barney
performed a discounted cash flow analysis, using internal estimates of the
management of Adecco, in order to derive an implied enterprise reference range
for Adecco on a stand-alone basis, without giving effect to the merger. This
analysis was based on:
- the present value of the estimated unlevered, after-tax free cash flows
that Adecco could generate over the five-year period 1999 through 2003;
and
- the future 2004 exit value of Adecco based on a range of multiples applied
to its estimated future 2004 EBITDA.
For purposes of this analysis, Warburg Dillon Read and Salomon Smith Barney
used discount rates of 7.5% to 8.5%, which were based on Adecco's estimated
weighted average cost of capital, including debt and terminal 2004 EBITDA
multiples of 11.5x to 12.5x, which were derived by reference to the implied
public market trading multiples of enterprise value to estimated calendar year
1999 EBITDA for Adecco and two other selected European-based staffing services
companies, Ranstadt Holdings N.V. and Vedior NV. This analysis implied a per
share equity reference range for Adecco of about 826 Swiss francs to 930 Swiss
francs, as compared to the closing price of Adecco common shares on August 13,
1999 of 860 Swiss francs.
PRO FORMA MERGER ANALYSIS
Warburg Dillon Read and Salomon Smith Barney analyzed the potential pro
forma financial effects of the merger on Adecco's estimated EPS for 1999 and
2000, based on internal estimates of the managements of Olsten and Adecco. This
analysis indicated that the merger could have an accretive effect on Adecco's
EPS before amortization of goodwill in 1999 and 2000. The actual results
achieved by the combined company may vary from projected results and the
variations may be material.
OTHER FACTORS
In rendering their opinions, Warburg Dillon Read and Salomon Smith Barney
considered other factors for informational purposes, including:
- a business, financial and shareholder profile of Adecco;
- selected published analysts' reports on Adecco, including calendar years
1999 and 2000 EPS estimates of those analysts;
- the recent trading history of Adecco ADSs and Adecco common shares
relative to the Swiss Market Index and S&P 500 Index, including a
comparison of the closing prices and trading volumes for Adecco ADSs and
Adecco common shares;
- implied trading multiples for selected health services businesses; and
- historical and projected financial information for Olsten's health
services business prepared by the management of Olsten.
FEE ARRANGEMENT
Olsten has agreed to pay Warburg Dillon Read and Salomon Smith Barney for
their financial advisory services upon completion of the transaction a total fee
equal to a percentage of the consideration distributed and payable in the
merger, including Gentiva common stock issued by Gentiva and liabilities assumed
by Adecco and Gentiva. The total fee payable to Warburg Dillon Read and Salomon
Smith Barney in connection with the transaction is estimated to be about
$10.6 million. Olsten also has agreed to reimburse Warburg Dillon Read and
Salomon Smith Barney for their reasonable travel and other out-of-pocket
expenses, including the reasonable fees and expenses of legal
69
counsel. Olsten also has agreed to indemnify Warburg Dillon Read, Salomon Smith
Barney and related parties against liabilities, including liabilities under the
federal securities laws, arising out of their engagement.
Olsten selected Warburg Dillon Read and Salomon Smith Barney based on their
experience, expertise and reputation. Warburg Dillon Read and Salomon Smith
Barney are internationally recognized investment banking firms that regularly
engage in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes.
INTERESTS OF DIRECTORS AND OFFICERS IN THE MERGER HAVE CREATED CONFLICTS OF
INTEREST
Some members of Olsten's management and Olsten's board of directors may be
deemed to have interests in the merger in addition to their general interests as
Olsten stockholders. Olsten's board was aware of these potential conflicts of
interest and considered them, among other factors, in approving the merger.
These interests included:
- accelerated vesting of currently unvested Olsten options as a result of
the consummation of the merger as described under "The Merger
Agreement--Treatment of Stock Options" and in "Gentiva Health Services
Prospectus--The Split-Off--Terms of the employee benefits allocation
agreement--Equity Based Compensation Plans;"
- the indemnification provisions of the merger agreement as described under
"The Merger Agreement--Indemnification and Insurance;"
- accelerated vesting and payment of benefits under the Olsten supplemental
executive retirement plan, as described under "--Treatment of Supplemental
Executive Retirement Plan," below;
- cash payments to Stuart Olsten, chairman of the board of Olsten, and to
four executive officers, Messrs. Blechschmidt, Puglisi and Costantini, and
Ms. McGurl, in consideration for consulting services, covenants not to
compete and, in the case of the executive officers, termination of their
rights under their change in control or employment agreement (see
"--Separation, Consulting and Non-Competition Agreements," below); and
- some of Olsten's and Gentiva Health Services' directors, officers and
management and members of the Olsten family have committed to purchase
about $20 million face amount of convertible trust preferred securities to
be issued by a trust, the common beneficial interest of which will be
wholly-owned by Gentiva Health Services, in a private placement exempt
from the registration requirements of the Securities Act. See "--Gentiva
Health Services Convertible Trust Preferred Securities Commitments" below.
Mr. Olsten will be appointed as a director of Adecco when the merger is
complete. Following the merger, all of the directors of Olsten, other than
Mrs. Miriam Olsten, and some officers of Olsten will be directors and officers
of Gentiva Health Services. One executive officer, Ms. McGurl, will be retained
as a consultant of Gentiva Health Services for six months for $200,000, $100,000
of which is payable by Gentiva Health Services when the merger is completed and
the remaining $100,000 of which is payable by Gentiva Health Services three
months after completion of the merger. In addition, Mr. Olsten agreed with
Gentiva Health Services not to compete with that company for a period of four
years for a lump sum of $250,000, payable by Gentiva Health Services when the
merger is completed. Mr. Blechschmidt will become chairman of the board,
president and chief executive officer of Gentiva Health Services.
As of January 18, 2000, 15 executive officers and directors of Olsten,
collectively, beneficially owned a total of 325,520 shares of Olsten common
stock, representing 0.5% of the outstanding Olsten common stock and 0.2% of the
total voting power of Olsten stock, and 10,311,913 shares of Olsten class B
common stock, representing 79% of the outstanding class B common stock and 52%
of total voting power of Olsten stock, in each case, excluding shares subject to
outstanding stock options. All of
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these shares will be treated in the merger in the same manner as shares of
Olsten common stock and Olsten class B common stock held by other stockholders
of Olsten.
As of January 18, 2000, the executive officers of Olsten, collectively, also
held options to purchase a total of 1,522,350 shares of Olsten common stock and
3,004 shares of class B common stock pursuant to Olsten's stock option plans,
559,153 of which options to purchase Olsten common stock and all of which
options to purchase class B common stock were exercisable on or prior to that
date. In addition, as of January 18, 2000, the non-employee directors of Olsten,
collectively, held options to purchase a total of 132,000 shares of Olsten
common stock and a total of 64,559 shares of class B common stock, and an
employee director of Olsten who is not an executive officer held options to
purchase a total of 404,800 shares of common stock. Upon the consummation of the
merger, all of the options held by the executive officers and directors will
immediately become exercisable in full. The treatment of these options is
described under "The Merger Agreement--Treatment of Stock Options" and in
"Gentiva Health Services Prospectus--The Split-Off--Manner of Effecting the
Split-Off; Treatment of Olsten Stock Options."
SEPARATION, CONSULTING AND NON-COMPETITION AGREEMENTS WITH ADECCO
Messrs. Olsten, Blechschmidt, Puglisi, executive vice president and chief
financial officer, and Costantini, executive vice president and general counsel,
and Maureen K. McGurl, senior vice president, human resources, of Olsten, have
entered into separation, consulting and non-competition agreements which will
become effective only upon the completion of the merger. Each agreement provides
that at the effective time of the merger, the executive's employment will
terminate and, other than Ms. McGurl's, the executive will become a consultant
to Adecco. Each agreement, other than Ms. McGurl's, has a consulting term of
four years, or, in the case of Mr. Olsten, five years. The executives are also
obligated to maintain the confidentiality of information about Olsten.
Under these agreements Messrs. Olsten, Blechschmidt, Puglisi and Costantini
and Ms. McGurl will receive the payments from Adecco as set forth in the table
below in consideration for (1) termination of their current change in control
agreements or, in the case of Mr. Blechschmidt, his employment agreement,
(2) agreements not to compete with Adecco and not to solicit its employees
during the term of their agreements and (3) other than Ms. McGurl's, consulting
services to Adecco over the term of their agreements. Also set forth on this
table is the payment under change of control agreements to be made (1) by
Gentiva Health Services to Robert A. Fusco, the past president of Olsten's
health services business prior to the merger, who tendered his resignation in
late 1999 effective upon the split-off and (2) by Adecco to all other executive
officers of Olsten as a group. This table also sets forth for each of these
individuals the amount of cash they will receive for their Olsten stock held as
of January 18, 2000 in connection with the merger, assuming that they receive
$8.75 in cash per share from Adecco for each of their shares of Olsten stock.
CHANGE IN
CONTROL AND NON COM- TOTAL OLSTEN
EMPLOYMENT AGREEMENTS PETITION CONSULTING PAYMENT STOCK
--------------------- ----------- ---------- ----------- -----------
Olsten................. -- $ 9,000,000 $1,000,000 $10,000,000 $42,775,687
Blechschmidt........... $1,350,000 2,550,000 800,000 4,700,000 980,000
Puglisi................ 791,900 2,500,000 200,000 3,491,900 107,188
Costantini............. 686,600 2,100,000 400,000 3,186,600 118,825
McGurl................. 577,400 400,000 -- 977,400 --
Fusco.................. 2,300,000 -- -- 2,300,000 456,094
All other executive
officers as a
group................ 3,356,675 -- -- 3,356,675 194,171
---------- ----------- ---------- ----------- -----------
Total.................. $9,062,575 $16,550,000 $2,400,000 $28,012,575 $44,631,965
========== =========== ========== =========== ===========
The executives and their dependents will also receive medical coverage for
up to three years (five years in the case of Mr. Olsten), and will be reimbursed
for reasonable business expenses (including, in the case of Mr. Olsten, up to
$1,000 a month for automobile lease payments until the earlier of the
71
end of the agreement term or the lease). Messrs. Olsten and Blechschmidt will be
compensated, on an after tax basis, for excise taxes (no more than $1 million of
excise taxes in the case of Mr. Olsten) imposed by reason of the receipt of
amounts payable under the separation, consulting and non-competition agreements
or otherwise, which obligation Gentiva Health Services will assume under the
separation agreement. No amounts are payable under the agreements unless the
merger is completed, at which time Olsten, which at that time will be a
wholly-owned subsidiary of Adecco, will be obligated to make the payments as are
required by the agreements.
TREATMENT OF SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Before the merger, Olsten will amend its supplemental executive retirement
plan to provide that employees of Gentiva Health Services and Mr. Blechshmidt
will cease accruing benefits under the supplemental executive retirement plan as
of a specified transfer date. As of the transfer date, the accrued benefits of
employees of Gentiva Health Services and Mr. Blechschmidt will be vested in
full. As of the transfer date, Gentiva Health Services will establish a
nonqualified supplemental executive retirement plan substantially similar to the
Olsten plan and will assume all liabilities and obligations under the Olsten
plan with respect to the employees of Gentiva Health Services, Mr. Blechshmidt
and all former employees of Olsten as of October 7, 1999. The Olsten
supplemental executive retirement plan will be terminated after the transfer
date but before the merger, and the accrued benefits of each participant will be
vested in full at that time and distributed in the form of a lump-sum payment as
soon as administratively practicable thereafter. As of September 1, 1999, the
accrued benefits were as follows: Mr. Olsten, $1,579,320, Mr. Blechschmidt,
$3,700,000; Mr. Puglisi, $350,231; Mr. Costantini, $342,720; Ms. McGurl,
$71,026; Mr. Fusco, $1,150,326; and all other executive officers as a group,
$1,101,191.
SPECIAL DIRECTORS' FEES
On November 11, 1999, the Olsten board approved special compensation for the
directors for their efforts and time dedicated to the merger and waived any fees
otherwise due for committee and board meetings from August 15 through
November 8, 1999. Outside directors who are members of the executive committee,
the independent committee and the compensation committee each received a flat
fee of $15,000 for each committee membership, with a cap of $35,000 in the case
of membership on all three committees. In addition, Mr. Ganzi received a special
ex officio fee of $20,000, and outside directors who are not members of any of
these committees received a fee of $5,000. The total special compensation paid
under these arrangements was $130,000.
GENTIVA HEALTH SERVICES CONVERTIBLE TRUST PREFERRED SECURITIES COMMITMENTS
In January 2000, some directors, officers and management of Olsten and
Gentiva Health Services and members of the Olsten family entered into commitment
letters with Gentiva Health Services requiring them to purchase at the closing
of the merger about $20 million of 10% convertible trust preferred securities to
be issued by a trust, the common beneficial interest of which will be wholly-
owned by Gentiva Health Services. The commitments were in the following
aggregate amounts: Stuart, Miriam and Cheryl Olsten, $15 million together; Mr.
Blechschmidt, $2 million; Messrs. Ganzi, Troubh and Weston, $1 million each;
Messrs. Levine and Fusco, $250,000 each; and other officers and management of
Olsten and Gentiva Health Services, a total of $500,000. The commitments
terminate if the merger is not completed by May 31, 2000 or if Olsten or Adecco
terminates the merger agreement. The convertible trust preferred securities will
be offered in a private placement exempt from the registration requirements of
the Securities Act. To fund the trust, Gentiva Health Services will issue about
$20 million of convertible subordinated debentures to the trust on the same
terms as the 10% convertible trust preferred securities. For a more complete
description of the convertible trust preferred securities, see "The Merger --
Gentiva Health Services Convertible Trust Preferred Securities Issuance."
72
DELISTING AND DEREGISTRATION OF OLSTEN COMMON STOCK
If the merger is completed, Olsten common stock will be delisted from the
New York Stock Exchange and will be deregistered under the Securities Exchange
Act of 1934.
ACCOUNTING TREATMENT
The merger will be accounted for using the purchase method of accounting
under U.S. GAAP with Adecco as the acquiror.
SOURCES OF FUNDS
Adecco will require financing of about CHF 531 million ($356 million) to
fund the cash portion of the merger consideration, about CHF 616 million
($413 million) to pay certain Olsten debt and approximately CHF 325 million
($218 million) to satisfy contractual obligations and transaction costs
associated with the merger, for a total of CHF 1,472 million ($987 million). In
addition, Adecco will require CHF 746 million ($500 million) to refinance
outstanding Adecco indebtedness maturing in February 2000, and additional
financing for operations.
Meridian B.V., a wholly-owned subsidiary of Adecco, completed in November
1999 an offering of [EURO]360 million (CHF 576 million, $387 million) in total
principal amount of its 1.50% guaranteed convertible notes due 2004, the entire
net proceeds of which are available to Adecco. The convertible notes are
guaranteed on a senior unsecured basis by Adecco and are convertible in total,
into about 540,000 Adecco common shares. Adecco also completed in December 1999
an offering of 600,000 of its common shares for a total net proceeds of
CHF 515 million ($345 million). Neither of the offerings was made in or to
residents of the United States. Adecco entered into a credit agreement in
January 2000 providing for a revolving credit facility and a term loan facility,
with total borrowings available under those facilities of up to CHF 1.5 billion
($1 billion) to fund the remainder of its cash requirements for the merger, to
refinance its debts and to finance its operations. See "Risk Factors--Adecco's
ability to complete the merger depends on its ability to raise additional
financing."
REGULATORY MATTERS
As required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
Olsten and Adecco filed a Notification and Report Form for review with the
Federal Trade Commission and the Department of Justice on August 26, 1999. Under
the Hart-Scott-Rodino Act, Olsten and Adecco could not complete the merger until
they satisfy the waiting period requirements. On September 9, 1999, Olsten and
Adecco received notification of early termination of the waiting period under
the Hart-Scott-Rodino Act. No additional filings or waiting period is applicable
with respect to the merger pursuant to the Hart-Scott-Rodino Act and the rules
promulgated under the Hart-Scott-Rodino Act. Notwithstanding the early
termination of the Hart-Scott-Rodino waiting period, at any time before or after
the completion of the merger, the U.S. antitrust authorities could take such
action under the antitrust laws as they deem necessary or desirable in the
public interest, including seeking to enjoin consummation of the merger or
seeking the divestiture of substantial assets of Adecco and/or Olsten. Olsten
and Adecco do not believe that such action is likely. However, there can be no
assurance that U.S. antitrust authorities and/or private parties will not
challenge the merger on antitrust grounds, or if such challenge is made, what
the result will be.
On October 29, 1999, the Commission of the European Communities notified
Olsten and Adecco that it would not oppose the merger. In addition, on
November 15, 1999, the Canadian Competition Bureau issued an advance ruling
certificate indicating that there are not sufficient grounds to challenge the
merger under the Competition Act. Olsten and Adecco will also make post-closing
filings with the regulatory authorities in Brazil and Argentina.
73
The obligations of Olsten and Adecco to consummate the merger are subject to
the condition that there be no temporary restraining order, preliminary or
permanent injunction or other order by any court or governmental or regulatory
authority of competent jurisdiction prohibiting consummation of the merger. Each
party has agreed to use all reasonable best efforts to have any such injunction
or order lifted.
Gentiva Health Services is required to obtain regulatory approvals or make
notifications to some regulatory authorities in order to complete the split-off.
Gentiva Health Services cannot assure you that it will secure all of these
regulatory approvals on a timely basis, if at all. All of the requisite
applications or notifications with each of the applicable regulatory authorities
have been filed. With the exception of the states of New York and California,
all requisite regulatory approvals have been granted. If Gentiva Health Services
is unable to secure these approvals on a timely basis, it could be subject to
sanctions under existing state laws in these states. These sanctions could take
the form of fines, or potentially, enforcement actions to suspend Gentiva Health
Services' ability to do business in these states.
74
THE MERGER
THE MERGER AGREEMENT
THE FOLLOWING SUMMARY OF THE TERMS OF THE MERGER AGREEMENT IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT, A COPY OF WHICH IS ATTACHED
AS ANNEX B TO, AND IS INCORPORATED BY REFERENCE IN, THIS PROXY
STATEMENT/PROSPECTUS. YOU ARE URGED TO READ THE MERGER AGREEMENT IN ITS ENTIRETY
FOR A MORE COMPLETE DESCRIPTION OF THE TERMS AND CONDITIONS OF THE MERGER.
The merger agreement provides that, following the approval of the merger by
the stockholders of Olsten and the satisfaction or waiver of the other
conditions to the merger, Staffing Acquisition Corporation, a wholly-owned
subsidiary of Adecco, will merge with and into Olsten, with Olsten as the
surviving corporation in the merger. As a result of the merger, Olsten will
become a wholly-owned subsidiary of Adecco.
Other than with respect to the shares of Olsten stock held by (1) Adecco,
(2) Olsten, (3) any of Adecco's or Olsten's subsidiaries or (4) any stockholder
who properly dissents from the merger, each share of Olsten stock outstanding at
the time of the merger will be converted into the right to receive:
1) either:
- $8.75 in cash, without interest;
- 0.12472 of an Adecco ADS, representing 0.01559 of an Adecco common
share; or
- a combination of both; and
2) 0.25 of a share of common stock of Gentiva Health Services.
For each share of Olsten stock that you hold, you may elect to receive
either cash or Adecco ADSs. Adecco will allow holders of Olsten stock to elect
to receive one Adecco common share for every eight Adecco ADSs the holders would
otherwise be entitled to receive. Despite your election, you may receive a
combination of both Adecco ADSs and cash. A number of outstanding shares of
Olsten stock equal to 50% of the total number of shares of Olsten stock
outstanding immediately prior to the effective time of the merger will be
exchanged for cash, and the balance for Adecco ADSs. If you choose not to make
an election, you will receive the consideration not elected by the Olsten
stockholders who do make an election. In addition, if you make a demand for
appraisal, you will be deemed to have made a cash election, despite your
election of the form of merger consideration and regardless of whether you
withdraw your demand for appraisal.
If, after having surrendered all of the shares of Olsten stock that you own,
you would receive any fraction of an Adecco ADS or common share, you will
receive, instead of fractional shares, cash payment representing your
proportionate interest in the proceeds from the sale by the exchange agent, in
one or more transactions, of the number of Adecco ADSs or Adecco common shares
represented by those Adecco ADSs over the total number of whole Adecco ADSs and
Adecco common shares to be distributed to the Olsten stockholders in the merger.
The exchange agent will sell those excess Adecco ADSs as your agent and in
amounts and manner the exchange agent, at its sole discretion, determines
appropriate. Until the aggregate proceeds from the sale of those excess Adecco
ADSs are distributed to Olsten stockholders who would otherwise receive a
fraction of an Adecco ADS or Adecco common share, the exchange agent will hold
those proceeds in a trust.
In addition, if you would receive any fractional share of Gentiva Health
Services common stock, you will receive instead of fractional shares, cash in an
amount equal to the product of such fraction and the market price of a whole
share of Gentiva Health Services common stock as reported on the Nasdaq National
Market on the first trading day following the merger.
Adecco will be entitled to deduct and withhold from the merger consideration
otherwise payable to you amounts required to be deducted and withheld under
federal, state, local or foreign tax law. To the extent that any amount is so
withheld and paid over to the appropriate taxing authority, the withheld
75
amount will be treated as having been paid to you in respect of shares of Olsten
common stock or class B common stock, as applicable, for which the withholding
was made.
Shares of Olsten stock held by Adecco, Olsten or any of their respective
subsidiaries will be canceled without consideration.
EFFECTIVE TIME
The merger will become effective at the time the certificate of merger is
filed with the Secretary of State of the State of Delaware in accordance with
the General Corporation Law of the State of Delaware or at a later time
specified in the certificate of merger. Unless each of Adecco, Staffing
Acquisition Corporation and Olsten agree otherwise, the filing of the
certificate of merger will be made no later than the business day following the
time all of the conditions precedent to the merger, including the approval of
the merger by the stockholders of Olsten, are either satisfied or waived. See
"--Conditions to Completion of the Merger."
TREATMENT OF STOCK OPTIONS
Pursuant to the merger, outstanding options to purchase Olsten common stock
will become, to the extent provided in its stock option plans, fully vested and
exercisable before or at the same time as the effective date of the merger. Upon
the completion of the merger, Olsten stock options held by employees of Gentiva
Health Services will be converted to options to purchase shares of Gentiva
Health Services pursuant to an applicable stock option plan and the terms set
forth by the board of directors of Gentiva Health Services. At the effective
time of the merger, Olsten stock options held by any other former or current
employees of Olsten or non-employee directors of Olsten following consummation
of the merger will be converted to options to purchase Adecco common shares.
Each of those Olsten stock options will be adjusted so that:
- the total difference after the adjustment between the fair market value of
the Adecco common shares subject to the stock option over the total
exercise price of the stock option remains the same as the total
difference before the adjustment between the fair market value of the
shares of Olsten common stock subject to the stock option over the total
exercise price of the stock option;
- the total exercise price of the stock option remains the same before and
after the adjustment; and
- the ratio of the fair market value per share subject to the option to the
exercise price per share is the same before and after the adjustment.
The fair market value will be determined based on the arithmetic average of
the closing quoted price, with respect to the shares of Olsten common stock, on
the New York Stock Exchange and, with respect to the Adecco common shares, on
the Swiss Stock Exchange, in each case, on the five consecutive trading days
immediately preceding the date of the merger.
CONDUCT OF BUSINESS BEFORE THE MERGER
Except as specifically contemplated by the merger agreement or the
separation agreement or as expressly agreed to in writing by Adecco, during the
period from the date of the merger agreement to the date the merger is
consummated, Olsten has agreed to:
- conduct its consolidated operations according to its ordinary and usual
course of business consistent with past practice;
- maintain its consolidated business organization;
- keep available the services of its officers and employees; and
- maintain satisfactory relationships with suppliers, vendors, contractors,
customers and others having significant business relationships with Olsten
or any of its subsidiaries.
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In addition, Olsten has agreed not to take any action that would adversely
affect its ability to consummate the merger, or any other transaction
contemplated by the merger agreement or the separation agreement. Furthermore,
except as specified in the merger agreement or the separation agreement or as
expressly agreed to in writing by Adecco, Olsten has agreed that, before the
merger, neither it nor any of its subsidiaries will or will agree to:
- amend its organizational documents;
- issue additional shares or encumber any existing shares of its common
stock other than pursuant to the terms of outstanding options, warrants
and other convertible securities or rights specifically disclosed in the
merger agreement;
- split, combine or reclassify any shares of its capital stock;
- declare, set aside or pay any dividend or other distribution on in its
capital stock;
- except pursuant to an agreement that was effective before the date of the
merger agreement, purchase, prepay, redeem or otherwise acquire any shares
of its own common stock or any of its other equity securities or any of
its indebtedness or debt securities;
- except in the ordinary course of business or pursuant to an agreement that
was effective before the date of the merger agreement, increase the
compensation or benefits of any of its directors, officers or other
employees, pay or grant employee benefits or enter into or amend any
agreement with any of its past or existing directors, officers or
employees;
- except as may be required by law, adopt or become obligated under any new
pension plan, stock option plan or any other employee benefits plan that
was not in existence at the time the merger agreement was executed;
- consolidate or merge with any other entity;
- other than as contemplated by the separation agreement, sell or transfer
any of its capital stock or more than 5% of its assets to any entity;
- other than in the ordinary course of business consistent with past
practices, directly or indirectly acquire, or make investments in, any
business organization or division or asset;
- maintain its books and records in a manner not in the ordinary course of
business consistent with past practice;
- except as may be appropriate to conform to changes in law or U.S. GAAP,
institute any significant change in accounting methods, principles or
practices;
- make any material change in tax election or accounting methods or settle
or otherwise dispose of any material tax matter;
- except in the ordinary course of business consistent with past practice or
as may be appropriate to conform to changes in law or U.S. GAAP, revalue
any of its assets;
- enter into any material agreement or arrangement with any affiliate, other
than a wholly-owned subsidiary, on terms less favorable than those that
could reasonably be expected to have been obtained with an unaffiliated
third party on an arm's-length basis;
- authorize, recommend or propose any plan of liquidation or dissolution;
- other than with respect to capital expenditures, enter into a supply or
vendor agreement requiring annual payments in excess of $1.5 million and
not terminable by Olsten upon 60 days or less notice;
- enter into or amend any contract with or relating to any of its
franchisees or licensed area representatives;
- authorize or commit to make capital expenditures in excess of
$20.0 million per calendar quarter;
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- permit any material insurance policy naming it as a beneficiary to be
cancelled, terminated or materially altered, unless such policy is
replaced with a comparable policy for comparable cost;
- other than as required by law or in the ordinary course of business
consistent with past practice, pay, discharge or satisfy any claims,
liabilities or obligations;
- create or incur indebtedness for borrowed money other than indebtedness
incurred under existing working capital facilities to fund working capital
but in no event in excess of $50.0 million in total borrowings at any one
time;
- except for indebtedness incurred in the ordinary course of business
consistent with past practice, assume, guarantee, endorse or otherwise
become liable or responsible for the obligations of any other individual,
firm or corporation;
- except in the ordinary course of business consistent with past practice,
make any loans or advances, enter into any new commitment that would be
material to Olsten and its subsidiaries, taken as a whole, or amend any
material contract;
- incur any liabilities, except for liabilities that, individually or
collectively, would not have a material adverse effect on Olsten and its
subsidiaries on an individual or consolidated basis;
- other than as specified in the separation agreement, engage in or enter
into any new intercompany transaction between its health services business
and its other businesses;
- except in the ordinary course of business, sell or encumber any real or
personal property; or
- make any changes in its lines of business that would materially increase
its potential liability.
Adecco has agreed to forgo any action that would adversely affect its
ability to consummate the merger or any other transaction contemplated by the
merger agreement. In addition, except as specified in the merger agreement,
Adecco has agreed that, prior to the merger, neither it nor any of its
subsidiaries will or will agree to:
- amend its organizational documents;
- split, combine or reclassify any of its common shares;
- declare, set aside or pay any dividend or other distribution on in its
capital stock;
- authorize, recommend, propose any plan of liquidation or dissolution of
Adecco or Staffing Acquisition Corporation;
- maintain its books and records in a manner not in the ordinary course of
business consistent with past practice;
- except as may be appropriate to conform to changes in law or U.S. GAAP,
institute any significant change in accounting methods, principles or
practices;
- except in the ordinary course of business consistent with past practice or
as may be appropriate to conform to changes in law or U.S. GAAP, revalue
any of its assets; or
- with respect to Adecco, consolidate or merge with any other entity or sell
all or substantially all of its capital stock or assets.
NO SOLICITATION
Olsten has agreed that it will not, nor will it permit any of its
subsidiaries, directors, officers, employees, representatives or agents to
(1) solicit, initiate, facilitate or encourage any proposal of an acquisition
transaction or (2) negotiate, explore or otherwise communicate or provide any
information to any person with respect to a proposal for an acquisition
transaction. An "acquisition transaction" is defined in the merger agreement to
mean any tender offer, exchange offer, merger, consolidation, sale of assets,
sales of capital stock or other business combination or the acquisition of 15%
or more of the assets or, as calculated by the number of votes acquired, 15% or
more of capital stock of Olsten and its subsidiaries taken as a whole.
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However, in response to an unsolicited, bona fide written offer with
respect to a proposal for an acquisition transaction, Olsten may furnish
non-public information to, and participate in discussions or negotiations
with, any third party regarding such proposal if and only if its board of
directors, after having been advised by its financial advisors and its legal
counsel, determines in good faith:
- that the proposal likely would result in a transaction which is more
favorable to its shareholders from a financial point of view than the
merger;
- that the third party making the proposal is financially capable of
consummating the proposed transaction; and
- that failure to negotiate with, and provide non-public information to,
this third party would be a breach of the directors' fiduciary duties to
their shareholders under applicable law.
If any third party makes a proposal for an acquisition transaction to Olsten
or informs Olsten that it is considering making such a proposal, Olsten has
agreed to notify Adecco, as soon as practicable, of the identity of the person
making such a proposal, the terms of the proposal and the determination of the
board of directors of Olsten with respect to such proposal.
The merger agreement defines a "superior proposal" as a bona fide, written,
unsolicited offer made by a financially responsible third party with respect to
an acquisition transaction involving the acquisition of all of Olsten's equity
interest or all or substantially all of Olsten's and its subsidiaries' assets.
Even if Olsten receives a superior proposal, Olsten has agreed not to enter into
any agreements with respect to such proposal for at least three days after
Adecco has received notice of such proposal. Furthermore, pursuant to the merger
agreement, Adecco has the right to match any superior proposal.
Olsten has also agreed to terminate all negotiations and discussions with
third parties with respect to any proposal for an acquisition transaction if
such negotiations or discussions were being conducted prior to or at the time
the merger agreement was executed.
INDEMNIFICATION AND INSURANCE
Adecco has agreed to maintain, or cause to be maintained, for at least six
years, Olsten's current director and officer liability insurance policies with
coverage at least as favorable as Olsten's present ones. However, if Adecco is
unable to obtain any such policies for 300% of the current annual premiums paid
by Olsten, Adecco will only be required to purchase the maximum coverage
available at that cost. Adecco will fulfill and honor all rights to
indemnification currently provided to directors, officers or employees of Olsten
and Olsten's subsidiaries by Olsten and Olsten's subsidiaries for a period of
six years after the merger.
BRIDGE LOAN
Adecco has caused Adecco, Inc., one of Adecco's subsidiaries, to make a
$30 million loan to Olsten. The proceeds were used in part to provide funds to
Gentiva Health Services until the closing of the merger. The loan bears interest
at the prime rate, which was 8.50% per annum at January 18, 2000, the date on
which the loan was disbursed. The loan matures at the time of the merger, or, if
the merger agreement is terminated, 90 days after notice of termination of the
merger agreement. The loan contains customary events of default.
GENTIVA HEALTH SERVICES CONVERTIBLE TRUST PREFERRED SECURITIES ISSUANCE
Some of Olsten's and Gentiva Health Services' directors, officers and
management and members of the Olsten family have agreed to purchase at the
closing of the merger about $20 million face amount of 10% convertible trust
preferred securities to be issued by a trust, the common beneficial interest of
which is wholly-owned by Gentiva Health Services. The convertible trust
preferred securities are mandatorily redeemable five years from issuance and the
trust may redeem the securities at any time after issuance at a declining
premium over face amount. Upon a change of control, the holders
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may require the trust to purchase these securities at 100% of face amount.
Dividends are payable quarterly in cash at the rate of 10% per annum, but the
trust may defer dividend payments for up to a total of twenty quarters, in which
case dividends accrue on face amount. The convertible trust preferred securities
are convertible into Gentiva Health Services common stock at a premium of 17.5%
over the average closing stock price of Gentiva Health Services common stock
during the 10 trading days following the first announcement of results of
operations after the closing of the merger.
Simultaneously with the issuance by the trust of the convertible trust
preferred securities, Gentiva Health Services will issue to the trust a 10%
convertible subordinated debenture with a face amount of about $20 million. The
convertible subordinated debenture has the same terms as the convertible trust
preferred securities, including, but not limited to maturity, interest,
conversion price and redemption price.
COVENANTS
In addition to the covenants described above under the sections "--Conduct
of Business Prior to the Merger," "--No Solicitation" and "--Indemnification and
Insurance," the merger agreement contains the following covenants:
- subject to the terms of the confidentiality agreement between Adecco and
Olsten, Olsten and Adecco agree to provide the other party and the other
party's authorized representatives reasonable access to their respective
facilities and properties and information regarding their respective
businesses;
- Adecco agrees to keep its registration statement on Form F-4, of which
this joint proxy statement/prospectus is a part, effective at least as
long as necessary to consummate the merger;
- Olsten agrees to keep Gentiva Health Services' registration statement on
Form S-4 effective at least as long as necessary to consummate the
separation of the health services business;
- Adecco and Olsten agree to obtain all blue sky permits and approvals
necessary to consummate the merger;
- Adecco agrees to receive Olsten's approval before amending its Form F-4,
of which this proxy statement/prospectus is a part;
- Olsten agrees to obtain Adecco's approval before amending this proxy
statement/prospectus;
- Olsten agrees to obtain Adecco's approval before allowing Gentiva Health
Services to amend its Form S-4;
- Adecco and Olsten agree to make and to keep effective all filings with,
and obtain all approvals from, government agencies, if such filings and
approvals are necessary to consummate the merger;
- Adecco and Olsten agree to receive the other party's approval before
issuing any press release or other public announcements regarding the
transactions contemplated in the merger agreement or the separation
agreement;
- Adecco and Olsten agree to give notice of an allegation from a third party
that a consent from the third party will be required to consummate the
merger;
- Adecco and Olsten each agree to give notice of its receipt of written
notice of any governmental complaints, investigations or hearings or any
litigation, in each case, that in its good faith judgment is or, with the
passage of time, would be likely to impair its ability to consummate the
merger or to have a material adverse effect on its business;
- Adecco and Olsten each agree to give notice of any change or event that in
its good faith judgment is or, with the passage of time, would be likely
to impair its ability to consummate the merger or to have a material
adverse effect on its business;
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- Adecco and Olsten each agree to give notice of any event that would or,
with the passage of time, will make any of its representations or
warranties made in the merger agreement untrue;
- Adecco and Olsten each agree to bear its own expenses incurred in
connection with the merger;
- Olsten agrees (a) to notify Adecco of any person or entity who becomes an
"affiliate," as defined in Rule 145 of the Securities Act, of Olsten if
the person or entity is not disclosed in the merger agreement and (b) to
cause the affiliate to execute a letter of acknowledgment of transfer
restrictions on the securities that will be issued in the merger to the
person or entity;
- Adecco agrees to cause its ADSs to be issued in the merger to be listed on
the New York Stock Exchange or quoted on the Nasdaq National Market;
- Olsten agrees to cause the shares of common stock of Gentiva Health
Services to be issued in the merger to be listed on a national securities
exchange or quoted on the Nasdaq National Market;
- Olsten agrees to use its reasonable best efforts to obtain its and each of
its affiliates' release as parties or obligors under the governmental
settlement agreements;
- Adecco agrees to appoint Stuart Olsten as a director of Adecco
concurrently with the merger;
- Adecco agrees that it will, and will cause Olsten, after the merger, to
treat the split-off for all federal, state and local taxes purposes as an
integral part of the merger and report the split-off as a redemption, for
tax purposes, of a number of shares of Olsten common stock equal in value
to the value of the Gentiva Health Services common stock distributed in
the split-off;
- Olsten and Adecco agree to confer and work together in good faith, as soon
as practicable after the date of the merger agreement, to agree upon
mutually acceptable employee benefit and compensation arrangements so as
to provide benefits and compensation to persons who will be Olsten
employees following the consummation of the merger generally equivalent in
total to those provided to similarly situated employees of Adecco;
- Olsten agrees not to make or file any election with any federal, state or
local agency or authority which, for purposes of any income or franchise
tax, would impair Olsten from carrying back existing net operating losses
to prior taxable years; and
- Olsten agrees to file all necessary tax returns in a manner reasonably
consistent with past practices and to provide a draft of each of such tax
returns to Adecco.
TERMINATION RIGHTS; TERMINATION FEE
The merger agreement may be terminated at any time prior to the date of the
merger:
1) by mutual written consent of the board of directors of Adecco and
Olsten;
2) by either Adecco or Olsten if:
- any court or other governmental entity has issued an order, decree or
ruling which cannot be appealed and which prohibits the consummation
of the merger.
- (x) the merger is not consummated by May 31, 2000 or, if the merger
has not been consummated by May 31, 2000 because of a failure to
obtain the requisite government consents and either Adecco or Olsten
chooses to extend the expiration date, by either the earlier of the
date on which the consents are obtained or June 30, 2000 if all the
requisite consents are not obtained and (y) the party terminating the
merger agreement did not prevent the merger from being consummated by
failing to fulfill all of its obligations under the merger agreement;
or
If the merger agreement is terminated by Olsten or Adecco for any of
these reasons and
- at the time of the termination, Olsten has received and has not
rejected an outstanding proposal for an acquisition transaction
by a third party, and
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- Olsten, within one year of the termination, completes or enters
into a definitive agreement to complete the acquisition
transaction on terms more favorable than those proposed in the
merger agreement,
Olsten must pay a termination fee of $40 million to Adecco.
3) by either Adecco or Olsten if:
- Olsten has failed to obtain the approval from its shareholders
necessary to consummate the merger; or
- the non-terminating party has materially breached the merger agreement
or the separation agreement and this breach has not been cured within
ten business days from the date of receipt of written notice of the
breach or by the closing date, if earlier.
However, if it is Adecco that chooses to terminate the merger
agreement due to Olsten's failure to obtain the proper approvals or due
to Olsten's material breach that has not been properly cured, and Olsten,
within one year of the termination, completes or enters into a definitive
agreement to complete an acquisition transaction with a third party on
terms more favorable than those proposed in the merger agreement, Olsten
must pay Adecco a $40 million termination fee.
4) by Adecco if:
- the board of directors of Olsten has withdrawn or adversely modified
its recommendation to its shareholders to approve the merger; or
- the board of directors of Olsten has approved or publicly recommended
or, entered into any agreement or letter of intent with respect to,
any acquisition transaction with a third party; or
- a tender offer or an exchange offer for the shares of common stock of
Olsten has been commenced by a third party, and Olsten has not sent
to its shareholders, within 10 business days after such tender offer
or exchange offer is made, a statement disclosing that the board of
directors recommends the rejection of such tender offer or exchange
offer.
If the merger agreement is terminated by Olsten or Adecco at a time
when Adecco would have been permitted to terminate the merger agreement
as described above, Olsten must pay a termination fee of $40 million to
Adecco.
5) by Olsten if Olsten:
- is permitted, pursuant to the covenant described under the section
"--No Solicitation," to negotiate and provide non-public information
in response to a superior proposal from a third party; and
- has paid Adecco a termination fee of $40 million.
In the event the merger agreement is terminated, no provision of the merger
agreement will survive, except for the provisions relating to confidentiality,
termination, expenses and miscellaneous provisions of general application.
AMENDMENT; WAIVER
Adecco, Staffing Acquisition Corporation and Olsten may amend the merger
agreement by written agreement before completion of the merger but, after the
merger agreement is approved by the stockholders of Olsten, no amendment to the
merger agreement may be made which alters the consideration to be paid to the
stockholders of Olsten in the merger.
Any provision of the merger agreement may be waived before the consummation
of the merger, but only if the waiver is in writing and signed by the party
against whom the waiver is to be effective.
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CONDITIONS TO COMPLETION OF THE MERGER
CONDITIONS TO EACH PARTY'S OBLIGATIONS TO COMPLETE THE MERGER
Each of Adecco, Olsten and Staffing Acquisition Corporation's obligations to
consummate the merger will be subject to the following conditions:
- the registration statement on Form F-4 of Adecco, of which this joint
proxy statement/prospectus is a part, shall be effective and no stop order
suspending the effectiveness of the registration statement shall have been
issued;
- the registration statement on Form S-4 of Gentiva Health Services shall
have remained effective and no stop order suspending the effectiveness of
the registration statement shall have been issued;
- the merger agreement and the merger shall have been approved by a majority
vote of the stockholders of Olsten voting together as a class;
- the issuance of additional Adecco ADSs and common shares, if any, in the
merger shall have been approved by a majority vote of the shareholders of
Adecco;
- no writ, order, decree or injunction shall have been entered against
Olsten, Adecco or Gentiva Health Services by a court of competent
jurisdiction or governmental entity which would restrict the consummation
of the merger;
- all necessary consents and approvals of and notification and disclosure to
any governmental entity under the Hart-Scott-Rodino Antitrust Improvements
Act or similar foreign laws shall have been obtained and the waiting
period for all notification required in connection with the merger under
the Hart-Scott-Rodino Act and similar foreign laws shall have expired;
- the Adecco ADSs to be issued in the merger shall have been approved for
listing on the New York Stock Exchange or for quotation on Nasdaq;
- filing of notification of issuance with, and obtaining clearance from, the
Swiss Stock Exchange with respect to the additional Adecco common shares,
if any, to be issued in the merger; and
- the shares of common stock of Gentiva Health Services to be issued in
connection with the merger shall have been approved for listing on a
national securities exchange or for quotation on Nasdaq.
ADDITIONAL CONDITIONS TO ADECCO'S OBLIGATIONS TO COMPLETE THE MERGER
Each of Adecco and Staffing Acquisition Corporation's obligations to
consummate the merger will be subject to the following additional conditions,
which may be waived by Adecco:
- the representations and warranties made by Olsten in the merger agreement
shall be true and correct in all material respects at the time the merger
is completed, except that those representations and warranties that
address matters only as of a particular date shall remain true and correct
in all material respects as of that date;
- Olsten shall have performed all of its obligations and agreements under
the merger agreement unless its failure to so comply would not have a
material adverse effect, individually or together, on Olsten's ability to
consummate the merger and on Olsten's consolidated businesses;
- no event which would have a material adverse effect on Olsten and its
subsidiaries shall have occurred since the date of the merger agreement
(this ceased to be a condition on January 31, 2000);
- Olsten and Gentiva Health Services shall each have complied in all
material respects with all of its obligations under the separation
agreement and shall have taken all action required to be taken under the
separation agreement before the completion of the merger; and
- the representations and warranties of Gentiva Health Services contained in
the separation agreement shall be true and correct in all material
respects as of the date of the completion of
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the merger as though made on that date, except that those representations
and warranties that address matters only as of a particular date shall
remain true and correct in all material respects as of such particular
date.
ADDITIONAL CONDITIONS TO OLSTEN'S OBLIGATIONS TO COMPLETE THE MERGER
The obligations of Olsten to consummate the merger will be subject to the
following additional conditions, which may be waived by Olsten:
- the representations and warranties made by Adecco and Staffing Acquisition
Corporation in the merger agreement shall be true and correct in all
material respects at the time the merger is completed, except that those
representations and warranties that address matters only as of a
particular date shall remain true and correct in all material respects as
of such particular date;
- each of Adecco and Staffing Acquisition Corporation shall have each
performed its obligations and agreements under the merger agreement unless
its failure to so comply would not have a material adverse effect,
individually or collectively, on its ability to consummate the merger and
the split-off and on its businesses on a consolidated basis; and
- no event which would have a material adverse effect on Adecco and its
subsidiaries shall have occurred since the date of the merger agreement
(this ceased to be a condition on January 31, 2000).
REPRESENTATIONS AND WARRANTIES
The merger agreement contains a number of general representations and
warranties made by Adecco, Staffing Acquisition Corporation and Olsten that are
customary for mergers of this size or mergers of companies in the staffing
service industry. You should refer to the merger agreement attached as Annex B
for a complete list of the representations and warranties made by Adecco,
Staffing Acquisition Corporation and Olsten.
THE SPLIT-OFF
Gentiva Health Services, which operates the health services business of
Olsten, will become an independent, publicly-owned company after the split-off.
Prior to the split-off, Gentiva Health Services and its subsidiaries owned most
of the assets and were obligated for most of the liabilities of the health
services business of Olsten. The remaining assets to be transferred to Gentiva
Health Services before the split-off consist of some intellectual property. The
remaining liabilities to be assigned to and assumed by Gentiva Health Services
at the time of the split-off are contingent liabilities related to government
investigations and litigation, some obligations under Olsten's supplemental
executive retirement plan and some excise tax obligations, each described more
fully under the heading "Gentiva Health Services Prospectus--The Split-Off."
Gentiva Health Services and Olsten have agreed to indemnify each other after
the split-off with respect to various losses, damages, claims and liabilities
arising out of each of their businesses. Gentiva Health Services has also agreed
to indemnify Olsten for other liabilities more fully described under the heading
"Gentiva Health Services Prospectus--The Split-Off--Terms of the separation
agreement--Indemnification."
For one year after the split-off, Olsten has agreed to provide Gentiva
Health Services with some transitional services. The terms of the ongoing
relationship between Gentiva Health Services and Olsten are more fully described
under the heading "Gentiva Health Services Prospectus--The Split-Off."
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THE PRINCIPAL STOCKHOLDERS AGREEMENT
THE FOLLOWING SUMMARY OF THE TERMS OF THE PRINCIPAL STOCKHOLDERS AGREEMENT
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE PRINCIPAL STOCKHOLDERS
AGREEMENT, A COPY OF WHICH IS ATTACHED AS ANNEX D, AND IS INCORPORATED BY
REFERENCE IN, THIS PROXY STATEMENT/PROSPECTUS. YOU ARE URGED TO READ THE
PRINCIPAL STOCKHOLDERS AGREEMENT IN ITS ENTIRETY FOR A MORE COMPLETE DESCRIPTION
OF THE TERMS AND CONDITIONS OF THAT AGREEMENT.
OVERVIEW
In connection with the merger agreement,
- Miriam Olsten, director of Olsten and mother of Stuart Olsten and Cheryl
Olsten,
- Stuart Olsten, chairman of the board of Olsten,
- Cheryl Olsten, sister of Stuart Olsten,
- 1985 Cheryl Ashburn Trust, of which Cheryl Olsten is a beneficiary,
- 1995 Succeeding GRAT, of which Stuart Olsten and Cheryl Olsten are
beneficiaries,
- Trust FBO Stuart Olsten, and
- Trust FBO Cheryl Olsten,
each a record holder of shares of Olsten class B common stock and common stock,
entered into a principal stockholders agreement with Adecco on August 17, 1999.
Under the principal stockholders agreement, each of those stockholders agreed,
among other things:
- to vote in favor of the merger;
- to vote against any proposal from a third party regarding an acquisition
transaction;
- to refrain from amending, converting, selling, encumbering, assigning,
pledging or transferring their ownership of, or rights under, his or her
shares of Olsten class B common stock and common stock; and
- to refrain from soliciting proposals from third parties regarding a
business combination,
in each case, so long as the merger agreement is in effect. An "acquisition
transaction," by cross-reference to the merger agreement, is defined in the
principal stockholders agreement to mean any tender offer, exchange offer,
merger, consolidation, sale of assets, sale of capital stock, share exchange or
other business combination or the acquisition of 15% or more of the assets or,
as calculated by the number of votes acquired, 15% or more of capital stock of
Olsten and its subsidiaries taken as a whole.
The stockholders that entered into the principal stockholders agreement held
collectively, as of January 18, 2000, about 63% of the voting power of the
outstanding stock of Olsten.
The agreement does not contain any agreement as to the form of consideration
that these stockholders will receive or elect to receive in the merger.
VOTING AGREEMENT
In addition to agreeing to vote in favor of adoption of the merger
agreement, each of the principal stockholders has also agreed to vote against
the following matters at any Olsten stockholders meeting or in response to any
proposed written consent of the Olsten stockholders, in which the following
matters are submitted to the Olsten stockholders for their vote:
- a proposal from a third party for an acquisition transaction;
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- any action or agreement that would result in a breach under the merger
agreement, the separation agreement or the principal stockholders
agreement;
- unless otherwise agreed to in advance by Adecco, any extraordinary
corporate transaction, such as a merger, consolidation or other business
combination involving Olsten or any of its subsidiaries;
- unless otherwise agreed to in advance by Adecco, any sale, lease or
transfer of a material amount of assets, including stock, of Olsten or any
of its subsidiaries;
- unless otherwise agreed to in advance by Adecco, any restructuring,
recapitalization, special dividend, dissolution or liquidation of Olsten
or any of its subsidiaries;
- unless otherwise agreed to in advance by Adecco, any change in a majority
of persons who constitute the board of directors of Olsten or the board of
directors of any of Olsten's subsidiaries;
- unless otherwise agreed to in advance by Adecco, any change in the
capitalization of Olsten or any of its subsidiaries, including any
proposal to sell a substantial equity interest in Olsten or any of its
subsidiaries;
- any amendment to the charter documents of Olsten or any of its
subsidiaries; or
- any other action that is intended, or is reasonably expected to,
materially adversely affect Olsten's or Adecco's ability to consummate the
merger.
LOCK-UP AGREEMENT
The principal stockholders have agreed that they will not, and will not
consent to or enter into a contract to, offer for sale, sell, transfer, tender
or pledge, encumber, assign or otherwise dispose of any of their shares of
class B common stock or common stock, if any, other than a pledge or encumbrance
created as a result of a loan or an advance to the principal stockholder if:
- the loan or the advance is made by an institutional lender;
- the lender agrees to become a party to, and perform all obligations under,
the principal stockholders agreement; and
- the pledge, the encumbrance or any subsequent foreclosure does not result
in the conversion of the applicable shares of class B common stock or
common stock into shares of common stock.
In addition, the principal stockholders have agreed not to grant any proxies
or powers of attorney, deposit their shares into a voting trust or enter into a
voting agreement with respect to each stockholder's shares of class B common
stock and common stock, if any, other than a voting agreement executed by a
principal stockholder in connection with the type of loan described in the
previous paragraph.
NO SOLICITATION
Each of the principal stockholders has agreed that it will not, nor will it
permit any of its employees, representatives or agents to:
- solicit, initiate, facilitate or encourage any proposal of an acquisition
transaction, or
- negotiate, explore or otherwise communicate or provide any information to
any person with respect to a proposal for an acquisition transaction,
unless the principal stockholder, acting as a director of Olsten, is permitted
to do so under the merger agreement. See "The Merger Agreement--No
Solicitation."
86
In addition, each of the principal stockholders has agreed that it will use
its best efforts as an Olsten stockholder to cause Olsten not to:
- solicit, initiate, facilitate or encourage any proposal of an acquisition
transaction, or
- take other action to facilitate any inquiries or the making of any
proposal which constitutes or may reasonably be expected to lead to an
acquisition transaction.
COVENANTS
In addition to the covenants described above under the sections "--Voting
Agreement," "--Lock-Up Agreement" and "--No Solicitation," the principal
stockholders have agreed:
- not to take any action that would make any representation or warranty of
any principal stockholder made in the principal stockholders agreement
untrue or would result in a breach by the stockholders of their
obligations under the principal stockholders agreement and Olsten under
the merger agreement and the separation agreement; and
- not to permit or take any action to cause any share of class B common
stock held by the principal stockholders to be converted into shares of
common stock of Olsten.
TERMINATION
The principal stockholders agreement shall terminate at the earlier of
(a) the date the merger is consummated or (b) the date the merger agreement is
terminated.
REPRESENTATIONS AND WARRANTIES
The principal stockholders agreement contains a number of customary and
general representations and warranties made by each of the principal
stockholders regarding, among other things, ownership of their shares and
authority to enter into the principal stockholders agreement.
87
CURRENCY EXCHANGE RATES
Fluctuations in the exchange rate among the Swiss franc, the Euro and the
U.S. dollar will affect the U.S. dollar equivalent of the (1) Swiss franc price
of the Adecco common shares on the Swiss Stock Exchange, and (2) the Euro price
of the Adecco common shares on the Paris Stock Exchange. These fluctuations will
also affect the U.S. dollar conversion by the depositary of the ADSs of any cash
dividends paid in Swiss francs on the Adecco common shares represented by the
ADSs.
At October 3, 1999, Adecco's operations were carried out in over 50
countries around the world. As a result, Adecco's net income in Swiss franc
terms can be significantly affected by movements in exchange rates, and in
particular the movement of the Swiss franc against the French franc or the U.S.
dollar.
The following table sets forth, for the periods indicated, information
concerning the exchange rates between Swiss francs and U.S. dollars based on the
Federal Reserve Bank of New York noon buying rate:
FOR THE
FISCAL YEARS ENDED NINE MONTHS ENDED
---------------------------------------------------- --------------------------
SEPTEMBER 27, OCTOBER 3,
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- ------------- ----------
(USD PER CHF 1.00)
High............................ 0.67 0.76 0.74 0.65 0.65 0.65 0.63
Low............................. 0.81 0.90 0.87 0.72 0.76 0.72 0.74
Average (1)..................... 0.73 0.84 0.81 0.70 0.69 0.68 0.67
Period End...................... 0.76 0.87 0.75 0.70 0.73 0.72 0.67
- ------------------------
(1) The average of the noon buying rates on the last day of each month
during the period. The average for each period differs from the exchange
rates used in the preparation of Adecco's financial statements. Adecco
translates revenues, expenses, gains, and losses on a monthly basis using
the weighted average exchange rate for the period. The averages of the
exchange rates used by Adecco are as follows:
FISCAL YEAR ENDED NINE MONTHS ENDED
- ------------------------------------------------------------------------------- --------------------------
JANUARY 1, DECEMBER 31, DECEMBER 29, DECEMBER 28, JANUARY 3, SEPTEMBER 27, OCTOBER 3,
1995 1995 1996 1997 1999 1998 1999
- --------------------- ------------ ------------ ------------ ---------- ------------- ----------
0.75 0.87 0.81 0.69 0.69 0.68 0.67
MATERIAL TAX CONSEQUENCES
UNITED STATES
The following discussion summarizes the material U.S. federal income tax
consequences of the merger and the split-off to, and the ownership and
disposition of Adecco ADSs by, U.S. holders (as defined below) of Olsten stock.
This discussion addresses only those stockholders who hold their Olsten stock
and will hold their Adecco ADSs as capital assets. This discussion does not
address all of the U.S. federal income tax consequences that may be relevant to
particular stockholders in light of their individual circumstances or to
stockholders who are subject to special rules under U.S. federal income tax law,
including, without limitation:
- financial institutions;
- tax-exempt organizations;
88
- insurance companies;
- dealers or traders in securities or foreign currencies;
- passthrough entities and investors in passthrough entities;
- non-U.S. holders;
- persons who hold their shares as a hedge against currency risk or as part
of a constructive sale, straddle or conversion transaction; or
- holders who acquired their shares upon the exercise of employee stock
options or otherwise as compensation.
The discussion is based upon the Internal Revenue Code of 1986, as amended,
Treasury Regulations, administrative rulings and court decisions, all as in
effect as of the date of this proxy statement/prospectus and all of which are
subject to change, possibly with retroactive effect. This discussion addresses
only federal income tax consequences and does not address any other federal tax
consequences or any state, local or foreign tax consequences.
HOLDERS OF OLSTEN STOCK ARE STRONGLY URGED TO CONSULT THEIR TAX ADVISORS AS
TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER, THE SPLIT-OFF AND THE OWNERSHIP
AND DISPOSITION OF ADECCO ADSS TO THEM, INCLUDING THE APPLICABILITY AND EFFECTS
OF FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS ON THEIR
PARTICULAR CIRCUMSTANCES.
For purposes of this discussion, the term "U.S. holder" means a beneficial
owner of Olsten stock that is a U.S. citizen or resident (as determined for
federal income tax purposes), a corporation created or organized in or under the
laws of the United States or any political subdivision thereof, an estate the
income of which is includible in gross income for United States income tax
purposes regardless of its source, or a trust, if a U.S. court is able to
exercise primary supervision over the administration of the trust and one or
more United States fiduciaries have the authority to control all substantial
decisions of the trust, or if the trust has elected to be taxed as a "United
States person."
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
OF THE MERGER AND THE SPLIT-OFF
CONSEQUENCES TO OLSTEN STOCKHOLDERS WHO PARTICIPATE IN THE MERGER AND THE
SPLIT-OFF
If you participate in the merger and the split-off, your exchange of shares
of Olsten stock for cash and/or Adecco ADSs, and your exchange of Olsten stock
for Gentiva Health Services common stock, will be considered two separate
exchanges for federal income tax purposes.
You generally will recognize gain or loss with respect to each block of
Olsten stock exchanged for cash and for Adecco ADSs equal to the difference
between the fair market value of the cash and Adecco ADSs received for the block
(including any cash received in lieu of fractional Adecco ADSs or Adecco common
shares) and your adjusted tax basis in the block. A "block" of Olsten stock is a
group of shares with the same tax basis and holding period. Any recognized gain
or loss will be capital gain or loss and will be long term capital gain or loss
if you have held the block of Olsten stock at issue for more than one year at
the time of the merger.
While not entirely free from doubt, you should recognize gain or loss with
respect to each block of Olsten stock exchanged for Gentiva Health Services
common stock equal to the difference between the fair market value of the
Gentiva Health Services stock received for the block (plus any cash received in
lieu of fractional shares) and your adjusted tax basis in the block. Any
recognized gain or loss should
89
be capital gain or loss and should be long term capital gain or loss if you have
held the block of Olsten stock at issue for more than one year at the time of
the merger.
CONSEQUENCES TO DISSENTING OLSTEN STOCKHOLDERS
If you dissent, you will be treated as having sold your Olsten stock for
cash and will recognize gain or loss with respect to each block of Olsten stock
equal to the difference between the cash received for the block and your
adjusted tax basis in the block. Any recognized gain or loss generally will be
capital gain or loss and will be long term capital gain or loss if you have held
the block of Olsten stock at issue for more than one year at the time of the
merger.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, reporting requirements will apply to the consideration received
by you in the merger and the split-off, unless you are an exempt recipient, and
31% backup withholding may apply to this consideration if you fail to provide an
accurate taxpayer identification number or are otherwise subject to backup
withholding. The amount of any backup withholding from a payment to you will be
allowed as a credit against your federal income tax liability.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF
OWNERSHIP AND DISPOSITION OF ADECCO ADSS
In general, for federal income tax purposes, U.S. holders of Adecco ADSs
will be treated as the owners of the underlying Adecco common shares that are
represented by the ADSs, and deposits and withdrawals of Adecco common shares by
U.S. holders in exchange for Adecco ADSs will not be subject to federal income
tax.
TAXATION OF DIVIDENDS
Subject to the following discussion of special rules applicable to a
"passive foreign investment company," or "PFIC," U.S. holders generally will
treat the gross amount of any dividends paid by Adecco, without reduction for
Swiss withholding taxes, as ordinary income for United States federal income tax
purposes. In certain circumstances, however, U.S. holders may be eligible to
receive a foreign tax credit for the Swiss withholding taxes and, in the case of
a corporate U.S. holder owning 10% or more of the voting shares of Adecco, for a
portion of the Swiss taxes paid by Adecco itself. Dividends paid by Adecco on
Adecco common shares, if any, will not qualify for the dividends received
deduction otherwise available to corporate U.S. holders.
The amount of any dividend paid in Swiss francs will equal the United States
dollar value of the Swiss francs received calculated by reference to the
exchange rate in effect on the date the dividend is received by the U.S. holder,
regardless of whether the Swiss francs are converted into United States dollars
on the date of receipt. If the Swiss francs received as a dividend are not
converted into United States dollars on the date of receipt, a U.S. holder will
have a basis in the Swiss francs equal to their United States dollar value on
the date of receipt. Any gain or loss realized on a subsequent conversion or
other disposition of the Swiss francs will be treated as ordinary income or
loss.
It is possible that at some future time Adecco will be at least 50% owned by
United States persons. Dividends paid by a foreign corporation that is at least
50% owned by United States persons may be treated as United States source income
(rather than foreign source income) for foreign tax credit purposes to the
extent the foreign corporation has more than an insignificant amount of United
States source income. The effect of this rule may be to treat a portion of any
dividends paid by Adecco
90
as United States source income. Although not free from doubt, the Code may
permit a U.S. holder entitled to benefits under the Switzerland-U.S. Income Tax
Treaty to elect to treat any Adecco dividends as foreign source income for
foreign tax credit limitation purposes if the dividend income is separated from
other income items for purposes of calculating the U.S. holder's foreign tax
credit. U.S. holders should consult their tax advisors about the availability
of, desirability of making, and the method of making such an election.
SALE, EXCHANGE OR OTHER DISPOSITION
Subject to the following discussion of special rules applicable to "PFICs,"
U.S. holders will recognize capital gain or loss on the sale, exchange or other
disposition of Adecco ADSs or common shares. Any such gain or loss will be
capital gain or loss and will be long term capital gain or loss if the Adecco
common shares were held for more than one year.
PASSIVE FOREIGN INVESTMENT COMPANY CONSIDERATIONS
A "PFIC" is any foreign corporation if, after the application of certain
"look-through" rules, (i) at least 75% of its gross income in a taxable year is
"passive income" or (ii) at least 50% of the average value of its assets is
attributable to assets that produce passive income or are held for the
production of passive income. The determination as to PFIC status is made
annually. If a U.S. holder is treated as owning PFIC stock, the U.S. holder will
be subject to special rules generally intended to eliminate the benefit of the
deferral of U.S. federal income tax that results from investing in a foreign
corporation that does not distribute all its earnings currently. These rules may
adversely affect the tax treatment to a U.S. holder of dividends paid by Adecco
and of sales, exchanges and other dispositions of Adecco common shares, and may
result in other adverse federal income tax consequences.
Adecco believes that it is not currently a PFIC and does not expect to
become a PFIC in the future. However, there can be no assurance that the
Internal Revenue Service will not successfully challenge Adecco's position or
that Adecco will not become a PFIC at some future time as a result of changes in
its assets, income or business operations.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, reporting requirements will apply to dividends paid in respect
of Adecco common shares and proceeds of the disposition of Adecco common shares
paid within the United States (and in certain cases, outside the United States)
to U.S. holders other than certain exempt recipients (such as corporations), and
31% backup withholding may apply to such amounts if the U.S. holder fails to
provide an accurate taxpayer identification number or is otherwise subject to
backup withholding. The amount of any backup withholding from a payment to a
U.S. holder will be allowed as a credit against the U.S. holder's federal income
tax liability.
SWISS TAX CONSEQUENCES OF THE OWNERSHIP OF ADECCO SHARES
GAINS ON SALE
Under present Swiss law, a holder of Adecco common shares who:
- is a non-resident of Switzerland;
- during the taxable year has not engaged in a trade or business through a
permanent establishment within Switzerland; and
91
- is not subject to taxation by Switzerland for any other reason,
will be exempted from any Swiss federal, cantonal or municipal income or other
tax on gains realized during the year on the sale of Adecco common shares.
STAMP, ISSUE AND OTHER TAXES
Switzerland generally does not impose stamp, registration or similar taxes
on the sale by a holder of Adecco common shares or ADSs unless the sale or
transfer occurs through or with a Swiss "securities dealer," as defined in the
Swiss Stamp Duty Law.
WITHHOLDING TAX
Under present Swiss law, any dividends paid on the Adecco common shares will
be subject to a Swiss withholding tax, or Anticipatory Tax, at the rate of 35%,
and Adecco will be required to withhold tax at that rate from any dividend
payments made to a holder of Adecco common shares. A Swiss resident holder and
beneficial owner of Adecco common shares may qualify for a full refund of the
Swiss Anticipatory Tax withheld from such dividends. A holder and beneficial
owner of Adecco common shares who is a non-resident of Switzerland, but a
resident of a country that maintains a double taxation treaty with Switzerland,
may qualify for a full or a partial refund of the Swiss Anticipatory Tax
withheld from such dividends by virtue of the provisions of the applicable
treaty between Switzerland and the country of residence of the holder and
beneficial owner of the Adecco common shares. The current income tax treaty
between Switzerland and the United States and the regulations under that treaty
provide for a mechanism whereby a United States resident, other than a Swiss
citizen who is not also a U.S. citizen, and United States corporations, other
than U.S. corporations having a "permanent establishment," as defined in the
treaty, in Switzerland, generally can obtain a refund of the Swiss Anticipatory
Tax withheld from dividends in respect of Adecco common shares, to the extent
that 15% of the gross dividend is withheld as final tax (I.E. 20% of the gross
dividend may generally be refunded). In specific cases, U.S. companies not
having a "permanent establishment" in Switzerland owning over 10% of Adecco
common shares may receive a refund of Swiss Anticipatory Tax withheld from
dividends to the extent it exceeds 5% of the gross dividend (I.E. 30% of the
gross dividend may be refunded). To get the benefit of a refund, holders must
beneficially own Adecco common shares at the time such dividend becomes due. You
should also note that the income tax treaty between Switzerland and the United
States was revised effective as of February 1, 1998 to amend the definition of
persons benefiting under that treaty with respect to dividend payments.
WITHHOLDING TAX REFUND PROCEDURE APPLICABLE TO U.S. HOLDERS
The claim for refund of the Swiss Anticipatory Tax is required to be sent to
the Federal Tax Administration of Switzerland (FTA), Eigerstrasse 65, 3003
Berne, on Swiss Tax Form 82I with respect to natural persons, Form 82C with
respect to corporations and Form 82E with respect to all other recipients, each
in triplicate, with all copies duly completed and signed before a notary public
in the United States. Swiss Tax Form 82 I/C/E may be obtained from any Swiss
Consulate General in the United States. Swiss Tax Form 82 I/C/E is required to
be filed no later than December 31 of the third year following the calendar year
in which the income tax becomes due. Tax Form 82 I/C/E must be accompanied with
suitable evidence of the deduction of Swiss Anticipatory Tax withheld at the
source to the debit of the beneficial owner. If the situation requires, the FTA
may ask for more detailed information. If the claimant, at the time of the
claim, is outside the United States, the declaration may be made before a United
States consular officer.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF ADECCO
OVERVIEW
Adecco SA is the largest personnel services organization in the world in
terms of revenues, with over 3,000 offices in over 50 countries. Adecco's
personnel services include providing temporary personnel, placing permanent
employees, outsourcing, training and testing temporary and permanent employees
and providing outplacement counseling services. Adecco provides these services
by contract to businesses located throughout North America, Europe, Asia and
Latin America. Adecco seeks to be a leader wherever it competes. In 1998, in
terms of revenues, Adecco was first in France, Canada, Australia, Switzerland,
and Spain, second in the United Kingdom, and third in the United States and
Germany.
Adecco compares itself to its competitors based upon reported revenues, as
management believes this is the best indicator of market share and growth. In
accordance with SFAS No 131 "Disclosure about Segment of an Enterprise and
Related Information," Adecco defines its operating segments by geography.
Adecco's reportable operating segments are France, North America, Northern
Europe and all other regions. Adecco's total net service revenues in these four
geographic operating segments are set forth below.
NET SERVICE REVENUE BY OPERATING SEGMENT
NINE MONTHS ENDED SEPTEMBER 27, 1998 AND OCTOBER 3, 1999
SEPTEMBER 28, OCTOBER 3, SEPTEMBER 28, OCTOBER 3,
1998 1999 1998 1999
------------- ---------- ------------- ----------
(CHF IN MILLIONS) (USD IN MILLIONS)
France.......................... 4,628 5,060 3,101 3,390
North America................... 3,419 3,608 2,291 2,417
Northern Europe................. 2,187 2,691 1,465 1,803
All Other Regions............... 1,078 1,938 722 1,299
------ ------ ------ ------
Total Net Service Revenues...... 11,312 13,297 7,579 8,909
====== ====== ====== ======
During the nine months ended October 3, 1999, Adecco generated 38.1% of its
revenues from its operations in France, 27.1% from North America (primarily the
United States), 20.2% from Northern Europe and 14.6% from All Other Regions. For
the nine months ended September 27, 1998, the comparable percentages were 40.9%,
30.3%, 19.3% and 9.5%. The increase, as a percentage of total sales, in 1999 in
Northern Europe and All Other Regions is principally the result of acquisitions
in these operating segments.
In April 1999, Adecco acquired Delphi Group plc for approximately CHF
395 million ($265 million). Delphi is an information technology service and
staffing business with operations in the United Kingdom, the United States, and
Europe. The acquisition was financed with the proceeds of a L175 million
($105 million based on a noon buying rate of $.60 per L1.00 on October 3, 1999,
and CHF 157 million) acquisition credit facility and was accounted for as a
purchase. The results of Delphi's operations have been included in the
consolidated financial statements beginning in April 1999.
In May 1999, Adecco acquired Career Staff Ltd. for CHF 128 million
($86 million). Career Staff is a personnel services business with over 50
offices in Japan. The acquisition was financed from an existing credit facility
and other internal resources and was accounted for as a purchase. The results of
Career Staff's operations have been included in the consolidated financial
statements beginning May 1999.
93
The staffing services industry is characterized by continuing consolidation,
driven, in part, by the requirements of multinational customers for specialty
staffing services in rapidly changing technical fields. Generally, results of
operations of Adecco have been, and are expected to continue to be, favorably
impacted by management's successful integration of the operations of acquired
companies and by the increased operating leverage provided by the acquisitions.
However, because acquisitions have been financed primarily through the
incurrence of additional indebtedness, they result in increased interest
expense, and amortization of goodwill, which adversely affects results of
operations.
RESULTS OF OPERATIONS
The unaudited consolidated statements of operations for the nine months
ended September 27, 1998 and October 3, 1999 have been prepared by Adecco
pursuant to the rules and regulations of the Securities and Exchange Commission
and, in the opinion of management, include all adjustments necessary for a fair
presentation of the results of operation. Results for interim periods are not
necessarily indicative of results for a full year.
The following tables sets forth unaudited consolidated statements of
operations data and such data as a percentage of net sales for the nine months
ended September 27, 1998 and October 3, 1999:
NINE MONTHS ENDED
---------------------------------------------------------------
SEPTEMBER 27, 1998 OCTOBER 3, 1999
------------------------------ ------------------------------
(amounts in millions)
(unaudited)
CHF USD CHF USD
-------- -------- -------- --------
Net service revenues.............. 11,312 7,579 100.0% 13,297 8,909 100.0%
Direct costs of services.......... (9,354) (6,267) (82.7%) (10,903) (7,305) (82.0%)
------ ------ ------ ------- ------ ------
1,958 1,312 17.3% 2,394 1,604 18.0%
Selling, general and
administrative expenses......... (1,470) (985) (13.0%) (1,790) (1,199) (13.5%)
Amortization of goodwill.......... (456) (306) (4.0%) (508) (340) (3.8%)
------ ------ ------ ------- ------ ------
32 21 0.3% 96 65 0.7%
Interest and other income, net.... 15 10 0.1% 16 11 0.1%
Interest expense.................. (69) (46) (0.6%) (89) (60) (0.7%)
------ ------ ------ ------- ------ ------
Income (loss) before income taxes
and minority interests.......... (22) (15) (0.2%) 23 16 0.1%
Provision for income taxes........ (130) (87) (1.1%) (149) (100) (1.1%)
Income applicable to minority
interests....................... (1) (1) -- -- -- --
------ ------ ------ ------- ------ ------
Net Loss.......................... (153) (103) (1.3%) (126) (84) (1.0%)
====== ====== ====== ======= ====== ======
Adecco's net service revenue consists primarily of fees paid by customers
based on the number of hours worked by temporary staff at a negotiated rate per
hour. Other sources of revenue include fees paid by customers for the permanent
placement of Adecco's personnel and fees paid by customers for providing
outplacement services. Net service revenues were CHF 13,297 million
($8,909 million) in the nine months ended October 3, 1999, representing an
increase of 17.5% or CHF 1,985 million ($1,330 million) from net service
revenues of CHF 11,312 million ($7,579 million) in the nine months ended
September 27, 1998. The revenue growth in 1999 is due to increased service hours
provided to customers; billing rates were relatively comparable for both
periods. Of the total revenue growth, approximately 10.1% is due to the growth
of existing operations, while about 6.4% in 1999 is due to the acquisitions of
Delphi and Career Staff. During the nine months ended October 3, 1999, Adecco
94
added over 350 newly opened or acquired branches. The weakening of the Swiss
franc against most currencies during the period had a positive impact on revenue
of approximately 1.0%. Most countries in which Adecco operates posted strong
revenue gains, as measured in local currency and including the effects of the
acquisitions. Revenues increased in France (10.5%); in North America revenues
increased in the United States (5.2%) and Canada (3.3%); in Northern Europe
revenues increased in Belgium (28.0%), Switzerland (38.1%), Germany (20.9%), and
the United Kingdom (37.4%); and in the All Other Regions revenues increased in
Spain (25.1%), Australia (8.3%), and Japan (239.3%). As measured in Swiss francs
including the effect of the acquisitions, revenues in France grew by 9.3%; North
America grew by 5.5%; Northern Europe grew by 23.0%; and All Other Regions grew
by 79.8%.
Direct cost of services provided, which consists principally of payroll and
payroll related benefits, increased 16.6% or CHF 1,549 million ($1,038 million)
to CHF 10,903 million ($7,305 million) in the nine months ended October 3, 1999,
from CHF 9,354 million ($6,267 million) in the nine months ended September 27,
1998. Gross margin in 1999 increased slightly by 0.7% from 17.3% to 18.0%, as a
percentage of sales, as a result of growing contribution of higher margin
speciality services (including the 1999 integration of Delphi) and an increase
in the gross margin percentage in France. Conversely, gross margins were
negatively impacted by Adecco's expansion of its market in high volume customer
contracts, which experienced industry-wide erosion due to competitive bidding.
The negative impact on gross margins was moderated by lower operating expenses
associated with servicing large volume accounts.
Selling, general and administrative expenses, which consists principally of
personnel costs, office administration, rent and marketing, increased 21.8% or
CHF 320 million ($214 million) in the nine months ended October 3, 1999 to CHF
1,790 million ($1,199 million) from CHF 1,470 million ($985 million) in the nine
months ended September 27, 1998. Personnel costs increased by 20.0% due to an
increase in personnel resulting from acquisitions and revenue growth. Office
administration increased by 19.8%, primarily due to growth in operations and
acquisitions. Rent increased by 22.9%, primarily as a result of new branch
openings and acquired branches. Marketing increased by 37.0%, primarily as a
result of additional marketing costs of acquired businesses and a result of
costs to support growth.
Goodwill amortization increased in the nine months ended October 3, 1999 by
CHF 52 million ($34 million) to CHF 508 million ($340 million) compared to CHF
456 million ($306 million) in the nine months ended September 27, 1998. The
increase was primarily due to goodwill resulting from the acquisitions of Delphi
and Career Staff for which the amortization periods began in April 1999 and
May 1999. Adecco amortizes goodwill on a straight-line basis over a five-year
period. As of October 3, 1999, the remaining amount of unamortized goodwill was
CHF 1,833 million ($1,228 million).
Interest expense increased by CHF 20 million ($14 million) in the nine
months ended October 3, 1999 compared to the nine months ended September 27,
1998. This increase in interest expense primarily related to financing costs in
connection with acquisitions.
The provision for income taxes increased by CHF 19 million ($13 million) to
CHF 149 million ($100 million) for the nine months ended October 3, 1999 from
CHF 130 million ($87 million) for the nine months ended September 27, 1998.
Adecco's income tax provision differs from the expected tax provision of CHF
9 million ($6 million) for 1999 and expected tax benefit of CHF 9 million
($6 million) in 1998, calculated by totaling the products of pre-tax income
(loss) in each country multiplied by that country's statutory income tax rate,
principally as a result of non-deductible goodwill amortization in certain
jurisdictions of CHF 139 million ($93 million) in 1999 and CHF 146 million
($98 million) in 1998.
RECENT DEVELOPMENTS
On January 27, 2000, Adecco announced certain unaudited consolidated results
of operations for the fiscal year ended January 2, 2000.
95
Adecco's net service revenue for the fiscal year ended January 2, 2000 was
CHF 18,471 million ($11,637 million, based on a noon buying rate of $.63 per CHF
1.00 on January 2, 2000), representing an increase of 21%, or CHF 3,163 million,
from net service revenue for the fiscal year ended January 3, 1999 of CHF
15,308. An increase in service hours from new and existing branches was the
primary driver of the revenue increase, with important contributions from the
operations of Delphi Group plc acquired in April 1999 and Career Staff Co. Ltd.
of Japan acquired in May 1999. The weakening of the Swiss franc against most
currencies during the period had a positive impact on revenues of approximately
2%.
Adecco's operating income for the fiscal year ended January 2, 2000 was CHF
829 million ($522 million), representing an increase of 28%, or CHF 182 million,
from the operating income for the fiscal year ended January 3, 1999 of CHF 647
million. Continuing increases in higher margin specialty services (including the
operations of Delphi) and improved margins in France contributed importantly to
the results, augmented by the effects of efforts to control costs and increase
productivity, and offset to some extent by costs of expansion.
Amortization of goodwill for the year ended January 2, 2000 was CHF 699
million ($440 million), representing an increase of 16%, or CHF 98 million, from
goodwill for the fiscal year ended January 3, 1999 of CHF 601 million. The
increase was primarily attributable to goodwill resulting from the acquisitions
of Delphi and Career Staff.
Adecco's net loss decreased by 11%, or CHF 21 million, from CHF 195 million
in the fiscal year ended January 3, 1999 to CHF 174 million ($110 million) in
the fiscal year ended January 2, 2000, as a result of the above factors, and the
effects of increased interest and taxes.
LIQUIDITY AND CAPITAL RESOURCES
At October 3, 1999, Adecco had cash and cash equivalents of CHF 383 million
($257 million) and short-term and long-term debt totaling CHF 1,695 million
($1,136 million) compared to CHF 540 million ($362 million) and CHF 991 million
($664 million) at January 3, 1999. Increases in long and short-term debt
resulted from borrowings to finance operations and acquisitions and from
assumption of CHF 158 million ($106 million) of indebtedness of acquired
companies.
Net cash flow from operations in the nine months ended October 3, 1999 was
CHF 195 million ($131 million). Net cash expended in investing activities for
the nine months ended October 3, 1999 was CHF 543 million ($364 million),
primarily for the purchase of Delphi and Career Staff and additions of fixed
assets. Net cash provided by financing activities for the nine months ended
October 3, 1999 was CHF 402 million ($269 million), primarily resulting from
debt incurred under a short-term credit facility for acquisitions.
On August 17, 1999, Adecco agreed to acquire Olsten's generalist and
information technology staffing business for a combination of cash and common
stock. Olsten's health services business will be split off to the Olsten
shareholders as a separate entity. In connection with the acquisition, Adecco
expects to issue common shares and increase its consolidated debt. See
"Unaudited Pro Forma Consolidated Financial Statements of Adecco SA."
At the annual meeting on April 20, 1999, Adecco shareholders voted to
authorize the issuance of up to 600,000 Adecco common shares for sale for cash
no later than April 20, 2000, and an additional 1,400,000 shares to finance
mergers and acquisitions. At a special meeting on September 10, 1999, Adecco
shareholders voted to authorize an additional 700,000 shares to be issued in the
combination with Olsten, but limited the aggregate number of shares to be issued
under the April and September authorizations to 2,000,000.
To finance the Olsten acquisition, Adecco will require approximately CHF
1,472 million ($987 million), including about CHF 531 million ($356 million) to
fund the cash portion of the merger consideration, about CHF 325 million
($218 million) to satisfy certain contractual obligations and pay
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transaction costs associated with the merger, and about CHF 616 million
($413 million) to pay certain Olsten debt. In addition, Adecco will require CHF
746 million ($500 million) to refinance Adecco debt maturing in February 2000,
and to provide additional financing for operations. Meridian B.V., a wholly-
owned subsidiary of Adecco, concluded in November 1999 an offering of about
[EURO]360 million (CHF 576 million, $387 million) in principal amount of its
1.50% guaranteed convertible notes due 2004, the entire net proceeds of which
are available to Adecco. The convertible notes are guaranteed on a senior,
unsecured basis by Adecco and are convertible, in total, into about 540,000
Adecco common shares. The convertible notes do not require principal payment
prior to maturity. However, the holders of the convertible notes may require
Meridian or Adecco to redeem the convertible notes two years after the issue
date at par value if there is a change of control of Adecco beyond a threshold
set forth in the indenture governing those convertible notes. In addition,
Meridian and Adecco are required to secure the convertible notes to the extent
that any debt securities of Adecco, Meridian or any subsidiaries of Adecco
listed, quoted or traded on any stock exchange, over-the-counter or other
securities market are secured. Adecco completed in December 1999 an offering of
600,000 common shares for a total net proceeds of CHF 515 million
($345 million). In addition, Adecco entered into a credit agreement in January
2000 providing for a revolving credit facility and a term loan facility. The
revolving credit facility provides for borrowings of up to CHF 700 million
($469 million), with outstanding indebtedness accruing interest at a rate of
LIBOR or EURIBOR, as the case may be, and maturing 3.5 years from the date of
the credit agreement, and the term loan provides for borrowings of up to
CHF 800 million ($536 million), with outstanding indebtedness accruing interest
at a rate of LIBOR or EURIBOR, as the case may be, and maturing 364 days from
the date of the credit agreement. LIBOR is the London interbank offered rate and
EURIBOR is the Euro interbank offered rate, in each case, as announced from time
to time by the lending institution making available the credit facilities. The
credit agreement contains customary covenants and conditions. Adecco intends to
fund the remainder of its cash requirements for the merger, to refinance its
debts and to finance its operations, in part, from borrowings under the credit
agreement.
In the ordinary course, Adecco's principal funding requirements are
associated with financing working capital and capital expenditures. Working
capital requirements are primarily in the form of accounts receivable and are
offset by accounts payable and accrued expenses, all of which increase as
revenues increase. The level of working capital financing is primarily dependent
upon accounts receivable turnover, which varies by location, and capital
expenditures are primarily related to new office openings and expenditures for
information systems. Cash disbursement activity is predominantly associated with
scheduled payroll payments for its temporary personnel, and Adecco has limited
flexibility to adjust its disbursement schedule. Conversely, collection of
related accounts receivable from customers may be considerably delayed,
resulting in steeply rising working capital requirements during periods of
growth. As of October 3, 1999, the accounts receivable had been outstanding for
an average of 63 days. Short-term cash requirements are funded primarily through
local collections of receivables and bank lines of credit maintained within the
respective countries. Management believes that these lines of credit, typically
uncommitted, are adequate to meet short-term liquidity requirements.
FOREIGN EXCHANGE
Management evaluates its foreign currency exposures and hedges certain
assets and liabilities denominated in foreign currencies by purchasing various
foreign exchange contracts (forwards and swaps). Adecco does not engage in any
speculative foreign currency trading activity. Foreign exchange gains and losses
resulting from this foreign currency risk management are included in Adecco's
Consolidated Statements of Operations.
Adecco is domiciled in Switzerland and prepares its consolidated financial
statements in Swiss francs. Because substantially all of Adecco's operations are
conducted outside of Switzerland, fluctuations in the value of foreign
currencies against the Swiss franc may have a significant impact on
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Adecco's reported results. Revenues and expenses denominated in foreign
currencies are translated into Swiss francs using weighted average rates for the
year. Consequently, as the value of the Swiss franc changes relative to other
currencies in Adecco's major markets, the resulting translated revenues,
expenses and operating profits are affected. Fluctuations in currency exchange
rates may also impact shareholders' equity. Assets and liabilities denominated
in foreign currencies are translated into Swiss francs using year-end rates of
exchange. The resulting translation adjustments are recorded in shareholders'
equity as accumulated other comprehensive income.
Each of Adecco's local operations primarily derives revenues, incurs
expenses and is financed within the currency of its domiciled location.
Consequently, these subsidiaries do not incur currency risks in connection with
the conduct of their normal business operations. Foreign currency exposure to
the group is created as a result of financing within the group which is often in
the form of intercompany loans. With few exceptions, the intercompany loans
provided by Adecco are denominated in the functional currency of its local
subsidiaries, thereby eliminating currency exposure at the local operating
level. The foreign currency exposure related to this activity is actively
managed by Adecco. Related to this intercompany loan activity, as of October 3,
1999, Adecco had foreign exchange contracts outstanding with an aggregate
notional amount of CHF 645 million ($432 million) detailed as follows: foreign
exchange contracts to receive CHF and pay various local currencies with an
aggregate notional amount of CHF 613 million ($411 million) and an aggregate
fair value of CHF 623 million ($417 million); foreign exchange contracts to pay
CHF and receive US dollars with an aggregate notional amount of CHF 32 million
($21 million) and an aggregate fair value of CHF 31 million ($21 million). CHF
574 million ($385 million) would be the net amount required to close the
positions at October 3, 1999. These contracts primarily hedge intercompany
lending activity with the respective gains and losses being included in interest
expense.
The tables below summarize the foreign currency forward contracts as of
October 3, 1999. The tables present the notional amounts, at contract exchange
rates, purchased or sold and the weighted average contractual foreign currency
exchange rates. All forward contracts mature in less than six months and settle
in exchange for Swiss francs.
FORWARD EXCHANGE CONTRACTS
TO RECEIVE CHF AND PAY VARIOUS CURRENCIES
(CHF equivalents in millions)
NOTIONAL AVERAGE
CURRENCY AMOUNT CONTRACT RATE
- -------- -------- -------------
Australian Dollar...................................... 36 1.0070
Canadian Dollar........................................ 21 1.0400
British Pound Sterling................................. 115 2.4407
Japanese Yen........................................... 123 1.3945
New Zealand Dollar..................................... 2 0.7900
Norwegian Krona........................................ 4 19.4185
Euro................................................... 85 1.6010
Swedish Krona.......................................... 3 18.5000
U.S. Dollar............................................ 224 1.5431
FORWARD EXCHANGE CONTRACTS
TO RECEIVE USD AND PAY CHF
(CHF equivalents in millions)
NOTIONAL AVERAGE
CURRENCY AMOUNT CONTRACT RATE
- -------- -------- -------------
U.S. Dollar............................................ 32 1.0070
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INTEREST RATE RISK
Adecco manages its exposure to changes in interest rates through the use of
fixed and variable rate debt in a number of currencies and by utilizing interest
rate swaps to hedge certain underlying debt obligations. Adecco's variable rate
debt is based on LIBOR interest rates. Adecco believes it does not have a
material exposure to interest rate risk.
The information below summarizes Adecco's market risks associated with debt
obligations and interest rate swaps as of October 3, 1999. For debt obligations,
the table below presents principal cash flows and related interest rates by
fiscal year of maturity. For interest rate swaps, the table presents the
notional amounts and related interest rates by fiscal year of maturity.
EXPECTED FISCAL YEAR OF MATURITY
(CHF equivalents in millions)
THERE- FAIR
1999 2000 2001 2002 2003 AFTER TOTAL VALUE
-------- -------- -------- -------- -------- -------- -------- --------
DEBT
Fixed Rate............... -- 5 6 19 20 382 432 408
Average Interest Rate.... -- 5.70% 5.70% 6.58% 6.54% 4.54% 4.76%
Variable Rate............ 522 741 -- -- -- 1,263 1,269
Average Interest Rate.... 5.09% 5.64% -- -- -- -- 5.42%
INTEREST RATE SWAPS
Variable to Fixed........ -- -- -- -- -- 134 134 119
Average Pay Rate......... -- -- -- -- -- 7.07% 7.07%
Average Receive Rate..... -- -- -- -- -- 5.42% 5.42%
EURO
On January 1, 1999, eleven of the fifteen member countries of the European
Union established fixed conversion rates between the existing sovereign
currencies and the Euro, adopting the Euro as the common legal currency. The
Euro trades on currency exchanges and is available for non-cash transactions.
The existing sovereign currencies are scheduled to remain legal tender in the
member countries as denominations of the Euro during the transition period
between January 1, 1999 and January 1, 2002. During that transition period,
public and private parties may pay for goods and services using either the Euro
or the participating country's existing sovereign currency.
Adecco is continuing to evaluate the impact of the Euro on business
operations in all member countries of the European Union during the transition
period. Because Adecco's labor costs and prices are generally determined on a
local basis, the current impact of the Euro is related to meeting customer
invoicing requirements and making information systems modifications. These
modifications relate to converting currency values and operating in a dual
currency environment during the transition period. Modifications of information
technology and other systems will occur during and after the transition period
when non-member countries of the European Union convert to the Euro and will be
coordinated with other systems upgrades and enhancements. The costs of these
modifications are not expected to be material to the results of operations and
will be expensed as incurred.
Adecco is currently assessing the future competitive implications of
increased price transparency on its business and that of its customers resulting
from the adoption of the Euro. Historically the market for personnel services
has been very competitive due to low barriers to entry, with competition limited
to firms with offices in close proximity to a customer's particular market.
National and multinational customers' assessment of the impact of the Euro on
cross border pricing may lead to changes in workforce requirements to remain
competitive. Relocation or consolidation of economic activity may in turn cause
dislocation of employment. Adecco believes its wide network of offices will
accommodate
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some of this dislocation and shifting labor patterns in Europe. To remain
competitive, Adecco is currently evaluating opportunities to consolidate
operations, to pursue economies of scale and to reduce administrative costs by
treating Europe as a single market.
The Euro will reduce the costs of currency exchange and eliminate currency
exchange risk between the participating countries, but will not have a major
impact on Adecco since its subsidiaries' business is within each country and
there is limited cross border trading. Treasury and lending activities may be
simplified by use of the Euro and Adecco is evaluating a number of cash pooling
and other financing opportunities resulting from the introduction of the Euro.
Adecco has historically used derivatives to hedge currency exposures in the
member countries of the European Union. Adecco believes the advent of the Euro
will not have a significant impact on hedging activities and may, in fact,
create additional funding opportunities.
INFLATION
Inflation and changing prices have not had a material impact on Adecco's net
sales, revenues or income from continuing operations for the last three fiscal
years.
YEAR 2000 READINESS
The Year 2000 problem consists of computer applications using only the last
two digits to refer to a year rather than all four digits. As a result, these
applications could fail or create erroneous results on or after January 1, 2000
if they recognize "00" as the year 1900 rather than the year 2000. As of
February 4, 2000, Adecco is not aware of any material failure in its efforts to
be Year 2000 compliant. However, Adecco may detect Year 2000 non-compliance in
certain systems, such as its billing systems, at a later date.
Adecco estimates that the total cost of its Year 2000 compliance efforts
will be CHF 18 million ($12 million). Of this amount, 90% was expensed as of
November 28, 1999. Adecco plans on expensing the remainder of this cost by the
end of February 2000. The total costs of its Year 2000 compliance efforts have
not had, nor are they expected to have, a material effect on Adecco's financial
position, results of operations or cash flows.
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BUSINESS OF OLSTEN
Olsten operates through subsidiaries in the United States and 13 other
countries and engages in and derives substantially all of its revenues from
three industry segments: staffing services, information technology services and
health services. After completion of the transactions contemplated by the merger
agreement, the health services business will be split off and operate
independently of the staffing services and information technology services
businesses. Olsten was incorporated in Delaware in 1967 as the successor to a
business founded in 1950. The staffing services and information technology
services businesses are sometimes referred to herein as Olsten staffing. For a
more complete discussion of the health services business, please see "Gentiva
Health Services Prospectus--Business."
OLSTEN STAFFING AND INFORMATION TECHNOLOGY
Olsten's staffing services in the United States and Canada, and other
staffing operations in Europe and Latin America, provide supplemental staffing
to business, industry and government. In addition, Olsten staffing's specialty
staffing division provides a full spectrum of accounting and financial
professionals and support-level candidates to a wide array of clients and
further provides attorneys, paralegals and legal support staff to law firms,
corporate law departments and government.
Olsten staffing's information technology services business, with operations
in North America and Europe, provides services for the design, development and
maintenance of information systems.
Olsten staffing's owned, licensed and franchised staffing and information
technology services operation currently conducts business through approximately
1100 offices in 50 states, the District of Columbia, Puerto Rico, Canada,
Denmark, Finland, France, Germany, Norway, Spain, Sweden, the United Kingdom,
Argentina, Brazil, Chile and Mexico.
The staffing services and information technology services businesses
revenues accounted for about 61% and 9%, respectively, of Olsten's revenues for
the nine months ended October 3, 1999, and 62% and 9%, respectively, of Olsten's
1998 revenues, approximately 58% and 7%, respectively, of Olsten's 1997 revenues
and about 54% and 5%, respectively, of Olsten's 1996 revenues.
Olsten provides assignment employees in a full spectrum of skills, from
entry-level workers to seasoned professionals and managers. Service areas
include: supplemental staffing, evaluation and training for office technology;
general office and administrative services, accounting and other financial
services; legal, scientific, engineering and technical services, including
production technical training; call centers; production/distribution/assembly
services; training and pre-employment services; retail services; marketing
support and teleservices; manufacturing, construction and industrial services;
and managed services for corporations. The provision of staffing services is not
generally subject to extensive federal and state regulation.
Olsten provides information technology consultants on either a project
management or consulting basis to assist clients in the design, development and
maintenance of computer systems, including focused solutions, comprising both
horizontal practices and vertical industry offerings, including particular
strength in the financial services and telecommunications industries.
GENTIVA HEALTH SERVICES
Gentiva Health Services is currently a wholly-owned subsidiary of Olsten.
Gentiva Health Services operates the health services business of Olsten in the
United States and Canada, referred to as the health services business. After the
split-off, Gentiva Health Services will be an independent, publicly-owned
company.
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Gentiva Health Services is the leading provider of home health care services
in the United States based on revenues. Since 1971, Gentiva Health Services has
built a reputation for high quality health care for its patients. Gentiva Health
Services is committed to offering a broad spectrum of services in the home
health care industry. Gentiva Health Services currently maintains over 400
locations in the United States and Canada and serves about 450,000
patient/client accounts annually with about 70,000 caregivers and administrative
staff.
Gentiva Health Services offers high quality services through three business
lines which are (1) specialty pharmaceutical services; (2) home care nursing
services; and (3) staffing services. Through its three business lines Gentiva
Health Services offers a broad range of services, including:
- treatments for patients with chronic diseases;
- intravenous and oral administration of drugs, nutrients and other
solutions;
- skilled nursing care;
- pediatric/maternal care programs;
- rehabilitation and other therapies;
- disease management programs;
- home health aide care and assistance with personal care; and
- institutional, occupational and alternate site staffing.
Through its network of 38 pharmacies located throughout the United States,
including two national distribution centers, Gentiva Health Services offers the
leading and most comprehensive infusion therapy solutions in the industry. In
addition, through its four intake and claims processing centers, Gentiva Health
Services provides network services, including care management and coordination
of managed care customers who desire a single source for centralized intake and
billing, claims adjudication, quality assurance and data reporting and analysis.
In fiscal 1998, about 62% of Gentiva Health Services' revenues was
attributable to commercial pay sources, 23% of its revenues was attributable to
Medicaid reimbursement, state reimbursed programs and other state/county funding
programs and 15 percent of its revenues was attributable to Medicare
reimbursement. For the nine months ended October 3, 1999, about 63% of Gentiva
Health Services' revenues was attributable to commercial pay sources, 20% of its
revenues was attributable to Medicaid reimbursement, state reimbursed programs
and other state/county funding programs and 17% of its revenues was attributable
to Medicare reimbursement.
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BUSINESS OF ADECCO
GENERAL
Adecco is the largest personnel services organization in the world in terms
of revenues with over 3,000 offices in over 50 countries. Adecco is primarily
engaged in providing temporary personnel, placing permanent employees,
outsourcing, training and testing temporary and permanent employees, and
providing outplacement counseling services.
Adecco's personnel services are offered under the Adecco brand and under
several specialty brands. Adecco's primary brands include:
ADECCO (General Staffing Services). Under the Adecco brand, Adecco offers
temporary and full-time employment opportunities from offices in over 50
countries. In France, Adecco offers similar services under the Adia brand.
ACCOUNTANTS ON CALL (Accounting and Finance Personnel). Accountants on Call
specializes in the temporary and permanent placement of a wide range of
specialized finance personnel from controllers and CPA's, accounting clerks
and bookkeepers to financial analysts and finance managers. Accountants on
Call operates in the United States, Canada, the United Kingdom and as
"Accountants" in Spain.
ADECCO/TAD TECHNICAL (Technical Personnel). Adecco/TAD Technical is a
full-service provider of technical professionals, engineers, project
managers and support staff to businesses with technical staffing needs in
the United States. Adecco/TAD Technical's personnel include software and
hardware engineers, technical, electrical and mechanical technicians, MIS
professionals, help desk staff, CAD designers/drafters, publication
professionals and research and development technicians.
AJILON (Information Technology Personnel and Services). Ajilon provides
information technology staffing services ranging from providing temporary or
permanent employees to hiring a complete team to assess systems compliance
and implement needed conversions. Ajilon services are also branded as ICON
(Australia and South East Asia), PFI (Singapore), Skillbase (Spain), and
Computer People in the United Kingdom and several other European countries.
JONATHAN WREN (Banking and Finance). Jonathan Wren provides specialized
temporary help, executive search services and on-site workforce management
for the banking and finance industries in the United Kingdom and continental
Europe.
LEE HECHT HARRISON (Outplacement and Career Transition). Lee Hecht Harrison
offers outplacement services, career transition services, career development
seminars, executive coaching and flexible workforce management in the United
States and in several European and Asian countries.
ROEVIN (Engineering and Technical Services). Roevin provides temporary and
fulltime employment in the technical and engineering fields. Roevin is based
in the United Kingdom and serves major clients throughout Europe.
TAD TELECOM (Telecommunications Personnel and Services). TAD Telecom
provides engineering, management and installation personnel and services to
the communication industry (including the voice, data and video sectors) in
the United States.
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STRATEGY AND COMPETITIVE STRENGTHS
Adecco seeks to be a leader everywhere it competes. Adecco believes that, in
1998, in terms of revenues, it ranked among personnel services companies:
- first in France, Canada, Australia, Switzerland and Spain;
- second in the United Kingdom;
- third in the United States and Germany; and
- seventh in Japan.
Adecco seeks to achieve revenue leadership and improve operating margins
through a combination of acquisitions, organic growth, and superior service and
technology:
- ACQUISITIONS. Adecco is the product of the 1996 merger of Adia S.A. and
Ecco S.A. In addition to a number of smaller acquisitions in each year
since that merger, Adecco acquired TAD in 1997 and Delphi plc and Career
Staff Ltd. in 1999, and has entered into a definitive agreement to acquire
the staffing and information technology businesses of Olsten.
- ORGANIC GROWTH. Adecco has, from internal growth, increased the number of
its offices and its revenues in each fiscal year since 1996, and continues
to expand in new and existing markets.
- SERVICE AND TECHNOLOGY. Adecco aspires to provide superior performance to
its customers through the provision of motivated and talented personnel
and advanced technical resources that increase productivity and enable it
to deliver its product efficiently.
- SPECIALTY SERVICES. Specialty services, such as information technology
and accounting services, are generally more profitable than non-specialty
services, and demand for such services has been strong. Adecco has
enhanced its capabilities in these areas through the acquisition of TAD,
Delphi, and other companies and will further augment its resources through
the acquisition of Olsten.
Adecco believes that its competitive strengths include:
- a consistently high level of quality at competitive prices;
- a broad scope of services;
- a diverse pool of applicants;
- the largest network of branches for customers and candidates; and
- a diversified global culture, as evidenced by its top management that
includes six different nationalities among its top eleven executives.
OPERATIONS
NORTH AMERICA
As of December 31, 1998, Adecco operated from over 800 offices in numerous
states, Canadian provinces and the District of Columbia. In addition, services
are provided through "on-site offices" located at customer sites, which
arrangements allow Adecco to more cost efficiently expand its volume of
business. In 1998, Adecco derived about 30% of its revenues from operations in
North America.
FRANCE
As of December 31, 1998, in France, Adecco operated over 1,000 offices. In
1998, temporary workers comprised about 2% of the total French workforce, making
France the second largest
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marketplace worldwide for temporary personnel services. In 1998, Adecco derived
about 41% of its revenues from France.
OTHER EUROPE
As of December 31, 1998, Adecco operated over 1,100 offices throughout the
rest of Europe. Approximately 24% of Adecco's 1998 revenues came from European
countries other than France. The five largest countries by revenues for 1998
were as follows:
- THE UNITED KINGDOM. At December 31, 1998, in the United Kingdom, Adecco
operated over 230 offices.
- SWITZERLAND. At December 31, 1998, in Switzerland, Adecco operated over
70 offices.
- SPAIN. At December 31, 1998, in Spain Adecco operated over 200 offices.
Adecco entered the Spanish market in 1994, following deregulation, and has
enjoyed strong growth since operations began.
- GERMANY. At December 31, 1998, in Germany, Adecco operated over 100
offices. Certain German legal restrictions governing job categories and
the length of contracts in the temporary employment industry limit demand
for temporary services in Germany.
- NETHERLANDS. At December 31, 1998, in the Netherlands, Adecco operated
over 220 offices. The Netherlands has the highest penetration of temporary
personnel in the world.
AUSTRALIA AND JAPAN
Adecco's two principal marketplaces outside of North America and Europe are
in Australia and Japan, which together accounted for about 5% of revenues in
1998. As of December 31, 1998, in Australia, Adecco operated over 50 offices.
In Japan, Adecco operates principally in the Tokyo area, servicing customers
at over 15 offices as of December 31, 1998. Despite little growth in the
Japanese economy and strict regulations on the use of temporary personnel,
demand for temporary personnel increased in 1998. Adecco anticipates that demand
for its temporary personnel will remain strong in Japan, especially given the
expected further easing of legal restrictions on temporary staffing.
RECRUITING, QUALITY CONTROL AND MARKETING
Personnel services firms act as intermediaries in matching available workers
to employer assignments on a temporary or permanent basis. Personnel services
firms compete with one another not only in recruiting and retaining available
workers, but also in attracting a customer base that needs to hire these
workers.
Adecco recruits employment candidates through a wide variety of means,
including personal referrals, advertisements, the internet, and its "Job Shop"
computerized kiosks located in busy public venues, as well as through an
attractive compensation package which includes vacation and holiday pay,
incentive plans and recognition programs.
Adecco's first step toward providing its customers with quality service is
employing a highly motivated permanent staff, properly training such staff on
the methods of recruiting and matching candidates to assignments, and
effectively using proprietary and other systems that have been developed to
support this process. Adecco trains its staff to fill assignments promptly,
effectively match an individual worker to a specific assignment, monitor the
performance of the worker in that assignment, and to offer its customers other
options to help manage their use of personnel services.
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Adecco provides its customers with advanced testing of potential employees
to assess their skills and to ensure that they match the skill profile requested
by the customer. For example, Adecco measures a number of computer-related
skills by allowing the candidate to operate in the actual software program
environment. Adecco's internally developed Xpert system is a state-of-the-art
evaluation and testing tool, and its MAX Adia Office Automation & Design-TM-
system integrates the results of Adecco's skills testing with personal
attributes and work history and automatically matches available candidates with
customer requirements. MAX also allows Adecco to track the performance of
temporary personnel and provide quality reports to customers, thereby
documenting the level of performance.
As of December 31, 1998, Adecco was certified under the international
quality standard ISO 9002 in the following countries: Austria, Australia,
Belgium, Canada, the Czech Republic, France, Germany, Hungary, Japan,
Luxembourg, Mexico, the Netherlands, Norway, Portugal, Spain, Switzerland, the
United Kingdom, and the United States. Adecco is currently in the process of
seeking certification for its remaining offices in other countries under this
standard. In addition, Ajilon, Adecco's information technology subsidiary, is
ISO 9001 certified. Adecco believes it was among the first in the industry to
become certified for its consistent level of quality and believes that this
gives it a marketing advantage over many of its competitors.
Adecco differentiates itself from its competitors by providing a broader
scope of services to its customers. Adecco uses various methods to market its
personnel services to customers depending on the customers' perceived need for
workers, the skill levels required and the local labor supply. Marketing tools
include branch specialization to better match supply and demand in specific
market niches, investments in brand awareness through media advertising, and
intense sales activity with a highly trained and monitored sales force.
COMPETITION
With more than 15,000 firms competing, the personnel services industry
throughout the world is highly competitive and has low barriers to entry. In
addition to Adecco, large publicly-owned companies specializing in personnel
services include Manpower Inc. (US), Kelly Services, Inc. (US), Randstadt (the
Netherlands), Vedior/BIS (the Netherlands) and Interim Services (US). Although
some countries have a higher concentration level of personnel services
companies, with three to four companies accounting for more than 60% of the
business, Adecco believes no single company has greater than an 8% share of the
worldwide industry. Moreover, only Adecco and Manpower have significant shares
in all of the major personnel services countries in the world.
Competition generally varies from country to country because many customers
contract for their personnel services locally. In most major countries,
competitors generally include large publicly traded companies and numerous
regional and local competitors, some of which may operate only in a single
country. Competition may also be provided by governmental entities, such as the
state employment offices in many European countries.
In France, changes in French law in December 1997 reduced the amount of
certain employment tax abatements. The effect of this change was to increase the
cost of temporary employees. Adecco implemented price increases to offset this
cost increase, but due to the intensely competitive environment, the increases
were initially insufficient to forestall margin erosion.
Many customers use more than one personnel services company, and it is
common for a major customer to use several personnel services companies at the
same time. However, in recent years, there has been a significant increase in
the number of large customers consolidating their temporary personnel hiring
with a single supplier or with a small number of firms. Adecco's customer base
is large and diverse, with no customer accounting for a significant portion of
revenues.
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REGULATION
Personnel services firms are generally subject to one or more of the
following types of government regulation:
- regulation of the employer/employee relationship between a firm and its
temporary personnel;
- registration, licensing, record keeping and reporting requirements; and
- substantive limitations on its operations.
In most countries, including the United States, the United Kingdom and
France, personnel services firms are considered the legal employers of their
temporary personnel. Therefore, the firm is governed by laws regulating the
employer/employee relationship, such as tax withholding or reporting, social
security or retirement, anti-discrimination and workers' compensation. In other
countries, personnel services firms, while not the direct legal employers of
temporary personnel, are still responsible for collecting taxes and social
security deductions and transmitting such amounts to the taxing authorities.
In many countries, particularly in continental Europe, entry into the
personnel services market is restricted by the requirement to register with or
obtain licenses from a government agency. In addition, a wide variety of
administrative requirements may be imposed, such as record keeping, written
contracts and reporting.
The personnel services industry is closely regulated in all of the major
markets in which Adecco operates except the United States, the United Kingdom
and Canada. In addition to licensing or registration requirements, many
countries impose substantive restrictions on temporary employment services. Such
restrictions include:
- regulations affecting the type of work permitted; for example, Germany
prohibits the use of temporary workers in construction work, and Japan
limits temporary work to certain defined categories of workers, which
exclude, among other categories, industrial work,
- restricting the maximum length of a temporary assignment; for example,
varying from 3 to 24 months,
- imposing requirements as to wage levels; for example, in France and
Austria, wages paid to temporary workers must be the same as those paid to
permanent workers, or
- restricting the circumstances under which the temporary personnel may be
employed: for example, in Germany, they must be fully employed without
time limit.
In some countries special taxes, fees or costs are imposed in connection
with the use of temporary personnel. For example, in France, to compensate for
the precarious nature of their employment, temporary personnel are entitled to a
10% allowance which is inapplicable if a new assignment is offered to them
within three days. In some countries, the placement by private companies of
permanent workers for a fee is prohibited.
TRADEMARKS
Adecco maintains a number of trademarks, trade names, service marks and
other intangible rights. The principal marks are the Adecco service mark and
logo and the specialty brand service marks and logos, including Accountants on
Call, Ajilon, Lee Hecht Harrison, Jonathan Wren, and TAD. Adecco has filed
applications to register and/or registration has been obtained for these
trademarks and service marks in the major markets and in the countries where
Adecco operates as appropriate. Adecco is not currently aware of any infringing
uses that would be likely to significantly harm these rights.
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EMPLOYEES
Adecco had approximately 16,500 permanent full-time employees as of
December 31, 1998. During 1998, Adecco had on average over 375,000 temporary
workers employed at worldwide client locations on any given day. Adecco believes
that relations with its employees are good.
CORPORATE HISTORY
Adecco resulted from the August 1996 merger of Adia S.A. and Ecco S.A.,
pursuant to which each Ecco stockholder received Adia common shares or cash for
each share of Ecco common stock they held. In connection with the merger, Adia
changed its name to Adecco.
The Ecco merger was accounted for using the purchase method of accounting.
For accounting purposes only, and in accordance with generally accepted
accounting principles in the United States, Ecco was deemed the acquiror of Adia
as its former shareholders received a majority of the shares of Adecco. As a
result, the historical financial statements of Adecco for the periods prior to
the Ecco merger are those of Ecco and the operations of Adia have been included
in the consolidated financial statements of Adecco beginning in August 1996.
Henri Lavanchy founded Adia in 1957 in Lausanne, Switzerland, to provide
temporary personnel to businesses in that country. Beginning in the 1960's and
continuing through 1996, Adia expanded throughout Europe, the United States,
Mexico, Japan, and Southeast Asia, and into the People's Republic of China.
In 1964, Philippe Foriel-Destezet, Adecco's current Chairman, founded Ecco
in Lyon, France. By the early 1970's, Ecco had become the third largest supplier
of temporary personnel in France.
Adecco is a SOCIETE ANONYME organized under the laws of Switzerland, with
its corporate headquarters at 1275 Cheserex, Switzerland. Its telephone number
is 41 21 321 66 66.
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DESCRIPTION OF ADECCO COMMON SHARES
THE FOLLOWING IS A SUMMARY OF THE MATERIAL TERMS RELATING TO THE EQUITY
CAPITAL OF ADECCO, INCLUDING BRIEF SUMMARIES OF CERTAIN PROVISIONS OF ADECCO'S
STATUTS, WHICH IS ITS CHARTER, AND THE SWISS CODE OF OBLIGATIONS. THIS
DESCRIPTION IS ONLY A SUMMARY OF THE MATERIAL TERMS OF, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO, THE COPY OF ADECCO'S CHARTER WHICH HAS BEEN FILED WITH
THE REGISTRATION STATEMENT OF WHICH THIS PROXY STATEMENT/PROSPECTUS IS A PART.
YOU ARE ENCOURAGED TO READ THE ENGLISH TRANSLATION OF ADECCO'S CHARTER IN ITS
ENTIRETY.
OBJECT
Adecco's charter provides that Adecco's principal corporate purpose is to
acquire and manage organizations that supply employees or that provide
supervision, inspection or consulting services.
GENERAL
As of November 8, 1999, Adecco's equity capitalization consisted of the
following:
- 17,181,920 common shares, par value CHF 10.00 per share, of which 109,316
were represented by 874,528 Adecco ADSs; and
- 24,500 Class A participation certificates, par value CHF 2.00 per
participation certificate.
As of November 8, 1999, 51,323 common shares and 11,235 Class A
participation certificates were held in treasury. Under several existing stock
option plans, as of November 8, 1999, 460,607 common shares would be issuable
upon exercise of all outstanding options.
Except as noted below, Adecco's charter confers on the holders of Adecco
common shares equal rights, including equal voting rights, and equal
obligations.
On April 20, 1999, Adecco shareholders voted to approve a change in form of
Adecco shares from bearer form to registered form. Upon request of a holder of
outstanding bearer shares, or upon issue or transfer of registered shares, the
shares are registered in the share register with the right to vote, provided
that the holders declare to have acquired the registered shares in their own
name and for their own account. However, the board of directors of Adecco may
register nominees who hold shares for beneficial owners and, therefore, are not
able to make the declaration.
No person or entity, including those who hold beneficial ownership through a
nominee, is permitted to be registered with the right to vote more than 5% of
the registered share capital, except those persons or entities who held such
shares prior to April 20, 1999. Registered shares held by a nominee that exceeds
the 5% limit, however, may be registered in the share register if the nominee
discloses shareholder information of the beneficial owners for whose account the
nominee holds 0.5% or more of the registered share capital.
Corporate bodies and partnerships or other groups of persons or joint owners
who are interrelated to one another through capital ownership, voting rights,
uniform management or otherwise linked or who act in concert to circumvent the
regulations concerning the limitation of participation or the nominees, are
treated as one single person or nominee for the purposes of determining whether
the 5% limit has been exceeded.
The 5% limitation for registration in the share register also applies to
shares acquired or subscribed by the exercise of subscription, option or
conversion rights.
The participation certificates confer no voting rights, and the holders of
participation certificates do not have the right to attend general meetings of
the shareholders. However, when dividends or liquidation proceeds are declared,
holders of participation certificates are entitled to receive per
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participation certificate one-fifth of the dividend payments to be made on each
common share. See "--Allocation of Annual Net Profits" for a summary of Adecco's
dividend policies.
GENERAL MEETINGS OF SHAREHOLDERS
Under Swiss corporate law, an ordinary general meeting of the shareholders
must be held within six months after the end of each fiscal year. Extraordinary
general meetings of the shareholders may be called by the board of directors or,
if necessary, by Adecco's statutory auditors. In addition, an extraordinary
general meeting of the shareholders may be called by a resolution of the
shareholders adopted during any prior general meeting of the shareholders or, at
any time, by holders of common shares representing at least ten percent of the
share capital. Holders of Adecco common shares with a nominal value of at least
CHF 1.0 million have the right to request that a specific proposal be discussed
and voted upon at the next general meeting. Notice of a general meeting may be
provided to the shareholders by publishing notice of such meeting in the Swiss
Commercial Gazette and other newspapers at least 20 days before the meeting.
There is no quorum requirement for general meetings.
Holders of at least a majority of Adecco common shares represented in a
general meeting must vote in favor of a resolution in order for such resolution
to be adopted. In addition, in order to adopt a resolution regarding:
- changes to Adecco's corporate purpose;
- the creation or rescission of provisions in the Adecco charter requiring a
qualified quorum or majority for resolutions at the general meeting;
- the creation of shares with privileged voting rights;
- restrictions on the transferability of registered shares;
- an authorized or conditional increase in Adecco's equity capital;
- an increase in Adecco's equity capital by recourse to equity, against
contribution in kind, or for the acquisition of assets and the granting of
special benefits;
- restriction or elimination of subscription rights;
- relocation of Adecco's domicile; or
- dissolution of Adecco without liquidation,
holders of at least two-thirds of Adecco common shares represented at such
general meeting must vote in favor of such resolution.
In addition to the powers described above, the general meeting has the power
to vote on amendments to Adecco's charter (including to convert registered
shares to bearer shares), to elect the directors, the statutory auditors and any
special auditor for capital increases, to approve the annual report, including
the statutory financial statements and the annual group accounts, and to set the
annual dividend. In addition, the general meeting has competence in connection
with the special inspection and the liquidation of Adecco.
Each Adecco common share represents one vote. In addition, a shareholder may
only be represented by (1) the shareholder's legal representative, (2) another
shareholder with the right to vote, (3) a corporate body of Adecco,
(4) independent proxy or (5) a depositary. At general meetings, votes are taken
on a show of hands unless a ballot is ordered by the chairman of the meeting or
requested by holders of Adecco common shares representing at least 5% of
Adecco's share capital.
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TRANSFER OF ADECCO SHARES
Adecco shares are evidenced either by share certificates in registered form
or by registration in the share register. Adecco may renounce the printing and
delivery of certificates. However, any shareholder may demand the issuance of a
certificate. Adecco shares are transferred by delivery combined with an
endorsement or a written assignment. Shares not represented by a certificate may
only be transferred by way of written assignment. To be valid, Adecco must be
notified of the assignment. The right to vote and the other rights associated
with an Adecco share may only be exercised by a shareholder who is registered in
the share register. Adecco's charter provides that no person or entity shall be
registered in the share register with the right to vote for more than 5% of the
share capital of Adecco except persons or entities who held such shares prior to
April 20, 1999.
ALLOCATION OF ANNUAL NET PROFITS
Swiss law requires that Adecco retain at least 5% of its annual net profits
as general reserves as long as such reserves amount to less than twenty percent
of Adecco's nominal equity capital. Any remaining net profits may be distributed
as dividends, pursuant to a shareholders resolution, in equal proportion between
the holders of common shares and participation certificates, with holders of
participating certificates receiving one-fifth of the dividend payment per
certificate that holders of common shares receive per share.
Pursuant to Swiss law, Adecco is permitted to make only one dividend
payment, if any, per fiscal year. Interim dividends may only be paid with
shareholder approval. See "Comparative Rights of Shareholders of Adecco and
Olsten."
PREEMPTIVE RIGHTS
Under Swiss corporate law, each holder of common shares and participation
certificates has preemptive rights to subscribe for any new issuance of common
shares and participation certificates in proportion to the respective nominal
amount of common shares and participation certificates held by that holder. Any
new issuance of participation certificates or common shares, whether for a cash
or non-cash consideration, must be approved by the shareholders. However, the
shareholders' preemptive rights may be suspended for important reasons if the
suspension is approved by at least two-thirds of the votes of the common shares
represented at a general meeting.
BORROWING POWERS
Neither Swiss law nor Adecco's charter limits Adecco's ability to borrow and
raise funds as to amount or otherwise.
CONFLICTS OF INTERESTS
Swiss corporate law does not have a general provision on conflict of
interests. However, the Swiss Code of Obligations contains a provision which
requires directors to safeguard the interests of the corporation, and to adhere
to a duty of loyalty and a duty of care. Breach of this provision may result in
the personal liability of the directors through the corporation. In addition,
Swiss law contains a provision under which payments made to a shareholder not at
arm's length must be repaid to the corporation.
REPURCHASE OF ADECCO SHARES
Swiss law limits the amount of its common shares that Adecco may hold or
repurchase. Adecco may only repurchase its common shares if it has free reserves
to cover the purchase price and if the nominal value of the common shares to be
repurchased does not exceed 10% of Adecco's equity
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capital. In addition, Adecco common shares repurchased by Adecco may not be
voted in a general meeting. Furthermore a reserve must be created on the balance
sheet in the amount of the purchase price of the acquired shares. Moreover, free
reserves corresponding to the purchase price of the acquired shares must be
reclassified as a blocked reserve, which prevents the distribution of the
corresponding amount to shareholders.
DURATION; LIQUIDATION
Although Adecco's charter does not limit the term of Adecco's corporate
existence, Adecco may be dissolved at any time by a resolution of a general
meeting adopted by at least two-thirds of all of the outstanding Adecco common
shares. Under Swiss law, Adecco may also be dissolved by a court order based
upon the request of holders of Adecco common shares representing at least 10% of
Adecco's share capital if such request is based on important grounds, such as
matters relating to misuse of a shareholder's majority position. In addition,
the court may grant alternative relief such as a mandatory redemption by Adecco
or by its majority shareholder at fair market value of all the Adecco common
shares held by minority shareholders.
RETURN OF CAPITAL UPON LIQUIDATION
Swiss law requires that any proceeds from Adecco's liquidation, after all
obligations to its creditors have been satisfied, be used first to repay the
nominal equity capital of Adecco. Thereafter, any remaining proceeds are to be
distributed to holders of Adecco common shares and participation certificates in
proportion to the nominal value of those Adecco common shares and participation
certificates.
NOTIFICATION REQUIREMENT
Any investor who directly, indirectly or together with another person,
acquires, holds or disposes of Adecco shares, for his own account, and thereby
attains, falls below or exceeds the thresholds of 5, 10, 20, 33 1/3, 50 or
66 2/3% of the voting rights, whether or not such rights may be exercised, must
notify Adecco and the Disclosure Office of the Swiss Stock Exchange. Such
notification must be made no later than four trading days after the obligation
to disclose arises. Adecco is also under an obligation to publish the disclosure
no later than two trading days after receipt.
MANDATORY BID RULES
Pursuant to the applicable provisions of the Swiss Stock Exchange Act, if a
person acquires shares of Adecco, whether directly or indirectly or together
with another person, which exceed the threshold of 33 1/3% of the voting rights
of Adecco, irrespective of whether the voting rights are exercisable or not,
that person must make a bid to acquire all of the listed shares of Adecco. There
is no obligation to make a bid under the foregoing rules if the voting rights in
question are acquired as a result of a gift, succession or partition of an
estate, a transfer based upon matrimonial property law or execution proceedings.
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DESCRIPTION OF ADECCO
AMERICAN DEPOSITARY SHARES
THE FOLLOWING IS A SUMMARY OF THE MATERIAL PROVISIONS OF THE DEPOSIT
AGREEMENT PURSUANT TO WHICH ADECCO AMERICAN DEPOSITARY SHARES EVIDENCED BY
AMERICAN DEPOSITARY RECEIPTS WILL BE ISSUED IN THE MERGER. THE DEPOSIT AGREEMENT
IS AMONG ADECCO, MORGAN GUARANTY TRUST COMPANY, AS DEPOSITARY, AND THE
REGISTERED HOLDERS FROM TIME TO TIME OF AMERICAN DEPOSITARY RECEIPTS, OR ADRS,
EVIDENCING ADSS. THE DEPOSIT AGREEMENT IS FILED AS AN EXHIBIT TO THE
REGISTRATION STATEMENT OF WHICH THIS PROXY STATEMENT/PROSPECTUS IS A PART AND WE
ENCOURAGE YOU TO READ IT IN ITS ENTIRETY. THE FOLLOWING SUMMARY IS SUBJECT TO
AND QUALIFIED BY THE PROVISIONS OF THE DEPOSIT AGREEMENT. COPIES OF THE DEPOSIT
AGREEMENT ARE AVAILABLE FOR INSPECTION AT THE DEPOSITARY'S ADDRESS SET FORTH
BELOW.
GENERAL
Morgan Guaranty Trust Company of New York as depositary will issue Adecco
ADSs evidenced by ADRs to holders of Olsten common stock and Class B common
stock who are entitled to receive them upon completion of the merger. Each ADS
represents at the date hereof the right to receive one-eighth of one Adecco
common share. Adecco will deposit common shares underlying the ADSs with the
custodian, which currently is the Zurich, Switzerland office of Bank Leu, Ltd.
The Corporate Trust Office of Morgan Guaranty Trust Company of New York is
located at 60 Wall Street, 36th Floor, New York, New York 10260.
COMMON SHARE DIVIDENDS AND OTHER DISTRIBUTIONS
HOW WILL YOU RECEIVE DIVIDENDS AND OTHER DISTRIBUTIONS ON ADECCO COMMON SHARES
UNDERLYING YOUR ADSS?
If you are an Adecco ADS holder on the record date for a distribution,
Morgan Guaranty will pay to you the cash dividends or other distributions the
custodian receives on Adecco common shares or other deposited securities, after
deducting its fees and expenses. You will receive these distributions in
proportion to the number of Adecco common shares your ADSs represent.
- CASH. Morgan Guaranty will distribute, if permissible and practicable,
U.S. dollars available resulting from a cash dividend or other cash
distribution or the net proceeds from the sale of any other distribution.
Before making a distribution, Morgan Guaranty will convert, if reasonable,
any foreign currency to U.S. dollars, and will make appropriate
adjustments to the distribution to account for taxes withheld and expenses
incurred. If Morgan Guaranty determines that any foreign currency cannot
reasonably be converted into U.S. dollars and transferred to the United
States, the deposit agreement provides that Morgan Guaranty may distribute
the foreign currency or choose to hold the foreign currency for your
benefit, uninvested and without liability for interest. IF EXCHANGE RATES
FLUCTUATE DURING A TIME WHEN THE DEPOSITARY CANNOT CONVERT A FOREIGN
CURRENCY, YOU MAY LOSE SOME OR ALL OF THE VALUE OF THE DISTRIBUTION.
- COMMON SHARES. Morgan Guaranty will distribute additional Adecco ADSs
evidenced by ADRs representing any common shares Adecco distributes as a
dividend or free distribution. It may sell Adecco common shares which
would result in a fractional ADS, and distribute the net proceeds to the
holders entitled to those common shares.
- RIGHTS TO RECEIVE ADDITIONAL SHARES. If Adecco offers holders of
securities any rights, including rights to subscribe for additional Adecco
common shares, Morgan Guaranty will take actions necessary to make these
rights available to holders of Adecco ADSs if Adecco provides satisfactory
evidence that this granting or issuance of rights is lawful. If the
granting or issuance of rights is not proven lawful, Morgan Guaranty will
sell the rights, if practicable, and distribute
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U.S. dollars resulting from the sale to holders. Morgan Guaranty may allow
rights that are not distributed or sold to lapse.
- OTHER DISTRIBUTIONS. Morgan Guaranty will distribute to holders any other
distributions on deposited securities by any means that Morgan Guaranty
believes are legal, fair and practical. If it cannot make the distribution
in that way, Morgan Guaranty may decide to sell what Adecco
distributed--for example by public or private sale--and distribute the net
proceeds to holders.
To the extent that Morgan Guaranty determines in its discretion that any
distribution is impermissible or impracticable with respect to any ADS holder,
Morgan Guaranty may:
- make such distribution as it so determines is practicable, including the
distribution of foreign currency, securities or property or appropriate
documents evidencing the right to receive foreign currency, securities or
property, or
- retain the distribution as deposited securities for an ADS holder,
uninvested and without liability for interest.
MORGAN GUARANTY IS NOT RESPONSIBLE IF IT DECIDES THAT IT IS UNLAWFUL OR
IMPRACTICAL TO MAKE A DISTRIBUTION AVAILABLE TO ANY ADS HOLDERS.
We cannot guarantee that Morgan Guaranty will be able to convert any foreign
currency into U.S. dollars, or will be able to sell any shares, property or
other right distributed by Adecco quickly or at any specific rate or price, or
at all.
SETTING A RECORD DATE
After consulting with Adecco, Morgan Guaranty may fix a record date in order
to determine the holders of ADSs that are entitled to:
(1) receive any distribution as described above,
(2) receive notice of any meeting, or
(3) act on any other matters.
DEPOSIT, WITHDRAWAL AND CANCELLATION
HOW DOES THE DEPOSITARY ISSUE ADSS?
Morgan Guaranty will issue the ADSs evidenced by ADRs that you are entitled
to receive in the merger in book-entry form, unless you specifically request to
receive your ADRs in certificated form, against deposit with the custodian of
the underlying Adecco common shares. Morgan Guaranty will issue additional ADSs
if you deposit common shares, along with any appropriate instruments of transfer
or endorsement, with the custodian. The custodian will hold all deposited common
shares for the account of the depositary. ADS holders thus have no direct
ownership interest in the shares and only have such rights as are contained in
the deposit agreement. The custodian will also hold any additional securities,
property and cash received on or in substitution for the deposited common
shares. Upon payment of its fees and of any taxes or charges, such as stock
transfer taxes or fees, Morgan Guaranty will register the appropriate number of
ADSs in the names you request and will deliver the ADSs at its Corporate Trust
office to the persons you request. The fees and expenses of Morgan Guaranty will
not be payable by Olsten stockholders in connection with their receipt of Adecco
ADSs pursuant to the merger agreement; however, if any Adecco ADSs are to be
issued to a person other than the person in whose name the surrendered
certificate is registered, then the person requesting the exchange shall pay any
transfer or other taxes required by reason of the exchange.
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At the request, risk and expense of the person making the deposit, Morgan
Guaranty may accept deposits to be forwarded to the custodian and may deliver
ADSs at a place other than its office.
HOW DO ADS HOLDERS CANCEL AN ADS AND OBTAIN COMMON SHARES?
You may at any time surrender your ADSs and request to withdraw the
underlying deposited securities. Once you surrender your ADSs and pay all fees,
governmental charges and taxes, you are entitled to receive the amount of
deposited securities represented by your surrendered ADSs at the office of the
custodian. At your risk and expense, you may have Morgan Guaranty forward to you
the share certificates and any other documents of title. You may not surrender
ADSs which together represent less than a whole Adecco common share.
You have the right to cancel your ADSs and withdraw the underlying shares at
any time except:
- due to temporary delays caused by Morgan Guaranty or Adecco closing its
transfer books, the deposit of Adecco common shares in connection with
voting at a shareholders, meeting, or the payment of dividends;
- when you owe money to pay fees, taxes and similar charges; or
- when it is necessary to prohibit withdrawals in order to comply with any
laws or governmental regulations that apply to ADSs or to the withdrawal
of Adecco common shares or other deposited securities.
VOTING RIGHTS
If you are an ADS holder on a record date fixed by Morgan Guaranty, Morgan
Guaranty will enable you to attend, speak and vote at a meeting by appointing
you its proxy for the Adecco common shares underlying your ADSs. If you do not
wish to attend a meeting, you may appoint Morgan Guaranty or another person as
your substitute proxy to attend, speak and vote on your behalf.
If you hold ADSs through a brokerage account or otherwise in "street name,"
you will not be entitled to attend or speak at a meeting without authorization
from the broker.
As soon as practicable after receiving a written request in writing by
Adecco, Morgan Guaranty will mail to you a notice and other materials providing
you with information about a meeting, including its time, place, and the matters
to be voted on. This notice will also tell you how you may instruct Morgan
Guaranty to exercise your right to vote your shares or deposited securities
underlying your ADSs as you direct it if you choose to appoint Morgan Guaranty
as your substitute proxy. For instructions to be valid, Morgan Guaranty must
receive them on or before the date specified in the instructions. Morgan
Guaranty will, if practical and permitted under applicable law, the deposited
securities and the Adecco charter, vote the underlying Adecco common shares or
other deposited securities as you instruct. Morgan Guaranty will only vote as
you instruct. All voting rights with respect to the underlying common shares
will be subject to Swiss law.
Morgan Guaranty and its agents are not responsible for any failure to carry
out voting instructions or for the manner of carrying out voting instructions.
REPORTS AND OTHER COMMUNICATIONS
Morgan Guaranty will allow you to inspect any reports and communications
received from Adecco at its office that are:
(1) received by Morgan Guaranty as the holder of the deposited securities
and
(2) made generally available by Adecco to holders of deposited securities.
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Morgan Guaranty will send you copies of these reports directly when provided by
Adecco under the deposit agreement. All of these reports and communications will
be in English.
FEES AND EXPENSES
FOR: ADS HOLDERS MUST PAY:
- --------------------------------------------- ---------------------------------------------
- - Each issuance of an ADS, including as a $5.00 per each 100 ADSs (or portion thereof)
result of a distribution of shares or
rights or other property; however, an
Olsten stockholder will not be charged this
fee for the issuance to him or her of ADSs
as part of the merger consideration.
- - Each surrender of an ADS for withdrawal of $5.00 per each 100 ADSs (or portion thereof)
deposited securities
Morgan Guaranty may sell sufficient securities and property received as
distributions from Adecco prior to deposit in order to pay for these charges.
Adecco will pay all other charges and expenses of Morgan Guaranty except:
- stock transfer or other taxes and governmental charges, which are payable
by holders of Adecco ADSs or persons depositing Adecco common shares;
- cable, telex and facsimile transmission expenses, which are payable by
holders of Adecco ADSs or persons depositing Adecco common shares;
- transfer and registration fees for the registration or transfer of
deposited securities, which are payable by the person depositing the
Adecco common shares or the ADS holder withdrawing the underlying Adecco
common shares; and
- expenses of Morgan Guaranty in connection with the conversion of foreign
currency into U.S. dollars, which are paid out of the foreign currency.
The fees described above may be amended from time to time.
PAYMENT OF TAXES
Morgan Guaranty may deduct the amount of any taxes owed from any payments to
you. It may also restrict the registration or registration of transfer of your
ADSs or restrict the withdrawal of your underlying deposited securities until
you pay any taxes owed on your ADSs or underlying securities. It may also sell
deposited securities to pay any taxes owed. You will remain liable if the
proceeds of the sale are not enough to pay the taxes. If Morgan Guaranty sells
deposited securities, it will, if appropriate, reduce the number of ADSs held by
you to reflect the sale and pay to you any proceeds, or send to you any
property, remaining after it has paid the taxes.
RECLASSIFICATION, RECAPITALIZATION AND MERGERS
If Adecco:
- changes the par value of any Adecco common shares,
- reclassifies, splits, cancels or consolidates any of the deposited
securities,
- distributes securities or property on any of the deposited securities that
are not distributed to you, or
- recapitalizes, reorganizes, merges, sells its assets, or takes any similar
action,
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then:
(1) the cash, shares or other securities received by Morgan Guaranty will become
new deposited securities under the deposit agreement, and each ADS will
automatically represent its equal share of the new deposited securities; and
(2) Morgan Guaranty may amend the form of ADS or distribute additional or
amended ADSs with or without asking you to surrender your outstanding ADSs
or cash, securities or property.
DISCLOSURE OF INTERESTS
As a holder of Adecco ADSs, you will be deemed to have agreed to:
- comply with all disclosure requirements and ownership limitations to the
extent that they are imposed by provisions of, or regulations governing,
the Adecco ADSs or the underlying Adecco common shares; and
- cooperate with Morgan Guaranty in Morgan Guaranty's compliance with any
Adecco instruction in respect of disclosure requirements and ownership
limitations.
Failure to comply with these provisions may result in a loss of voting
rights connected with that holder's Adecco common shares.
AMENDMENT AND TERMINATION
HOW MAY THE AGREEMENT BE AMENDED?
Adecco and Morgan Guaranty may agree to amend the deposit agreement and the
ADSs without your consent. If the amendment adds or increases fees or charges,
except for:
- stock transfer or other taxes,
- other governmental charges,
- transfer or registration fees, or
- transmission or delivery costs or like expenses,
or otherwise prejudices any substantial existing right of ADS holders, it will
only become effective thirty days after Morgan Guaranty notifies you of the
amendment. At the time an amendment becomes effective, you are considered, by
continuing to hold your ADSs, to agree to the amendment and to be bound by the
agreement as amended. No amendment may impair the right of ADS holders to
surrender their ADSs and receive the underlying Adecco common shares unless
required to comply with applicable law. Any amendment made in order to comply
with any new laws or regulations will become effective prior to the provision of
notice to ADS holders as required.
HOW MAY THE AGREEMENT BE TERMINATED?
Morgan Guaranty will terminate the deposit agreement and the ADSs if Adecco
asks it to do so in writing, in which case it must notify you by mail at least
30 days before termination. If any ADSs remain outstanding after termination,
Morgan Guaranty will stop registering the transfer of ADSs, will stop
distributing dividends to ADS holders, and will not give any further notices or
do anything else under the deposit agreement other than:
(1) receive and hold, or sell, distributions on the deposited securities,
and
(2) deliver deposited securities being withdrawn.
As soon as practicable after six months after termination of the deposit
agreement, Morgan Guaranty will sell any remaining deposited securities. After
that, Morgan Guaranty will hold, as long as it is lawful, the money it received
on the sale, as well as any cash it is holding under the agreement, for
117
the PRO RATA benefit of the ADS holders that have not surrendered their ADSs. It
will not invest the money and has no liability for interest. Morgan Guaranty's
only obligations will be to account for the money and cash. After termination,
Adecco's only obligations will be with respect to Morgan Guaranty and its
agents.
LIMITATIONS ON OBLIGATIONS AND LIABILITY TO ADS HOLDERS
The deposit agreement expressly limits the obligations of Adecco and Morgan
Guaranty. It also limits the liability of Adecco and Morgan Guaranty. Adecco and
Morgan Guaranty:
- are not liable if either of them is prevented, delayed or subjected to
criminal or civil penalties under the law, any provision of the depositary
agreement or circumstances beyond their control from performing their
obligations under the agreement;
- are not liable if either of them exercises, or fails to exercise,
discretion permitted under the deposit agreement or the ADSs;
- are only obligated to take the actions specifically set forth in the ADSs
and the deposit agreement without gross negligence or bad faith;
- have no obligation to become involved in a lawsuit or proceeding related
to any deposited securities or the ADSs (in the case of Adecco, only if
Adecco believes that the lawsuit or proceeding will involve expense or
liability and that satisfactory indemnity is unavailable); and
- may rely upon any advice of or information from any legal counsel,
accountants, any person depositing Adecco common shares, any ADS holder or
any other person whom they believe is competent to give them that advice
or information.
In the deposit agreement, Adecco and Morgan Guaranty agree to indemnify each
other under specified circumstances.
Morgan Guaranty, its agents and Adecco may rely and shall be protected in
acting upon any written notice, request, direction or other document believed by
them to be genuine and to have been signed or presented by the proper party or
parties. Morgan Guaranty will not be responsible for failing to carry out
instructions to vote the ADSs or for the manner in which the ADSs are voted or
the effect of the vote. Morgan Guaranty and its agents may own and deal in any
class of securities of Adecco and its affiliates and in Adecco ADSs.
DISCLOSURE OF INTEREST IN ADSS
Adecco may, from time to time, request that holders and beneficial owners of
ADSs provide information as to:
- the capacity in which you and other holders and beneficial owners own or
owned ADSs;
- the identity of any other persons then or previously interested in such
ADSs; and
- the nature of the interest and various other matters.
You agree to provide any information requested by Adecco or Morgan Guaranty
pursuant to the deposit agreement. Morgan Guaranty has agreed to use reasonable
efforts to comply with written instructions received from Adecco requesting that
it forward any such requests to you and other holders and beneficial owners and
to forward to Adecco any responses to such requests to the extent permitted by
law.
118
REQUIREMENTS FOR DEPOSITARY ACTIONS
Before Morgan Guaranty will issue, register or register the transfer of an
ADS, effect a split-up or combination of ADSs, make a distribution on an ADS, or
permit withdrawal of any deposited securities, Adecco, Morgan Guaranty or the
custodian may require:
- payment of taxes, including stock transfer taxes or other governmental
charges, and transfer or registration fees charged by third parties for
the transfer of any shares or other deposited securities;
- production of satisfactory proof of the identity of the person presenting
Adecco common shares for deposit or ADSs upon withdrawal, and of the
genuineness of any signature or other information they deem necessary; and
- compliance with regulations Morgan Guaranty may establish consistent with
the deposit agreement, including presentation of transfer documents.
Morgan Guaranty may refuse to deliver, transfer, or register transfers of
ADSs generally when the transfer books of Morgan Guaranty are closed or at any
time if Morgan Guaranty or Adecco thinks it advisable to do so.
PRE-RELEASE OF ADSS
Morgan Guaranty may issue ADSs evidenced by ADRs before deposit of the
underlying Adecco common shares. This is called a pre-release of ADSs. Morgan
Guaranty may pre-release ADSs only under the following conditions:
(1) the pre-release must be fully collateralized with cash or U.S.
government securities held by Morgan Guaranty held for the benefit of ADS
holders;
(2) each recipient of pre-released ADSs agrees in writing with Morgan
Guaranty that he or she:
(a) owns the Adecco common shares,
(b) assigns all beneficial rights, title and interest in the Adecco
common shares to Morgan Guaranty,
(c) holds the common shares of Adecco for the account of Morgan Guaranty,
and
(d) will deliver the Adecco common shares to the custodian as soon as
possible, or immediately if demanded; and
(3) all pre-released ADSs evidence not more than 30% of all ADSs (excluding
those evidenced by pre-released ADSs) unless Morgan Guaranty changes or
disregards this limit as it deems appropriate.
Morgan Guaranty may keep for itself any earnings on collateral for
pre-released ADSs and its charges for their issuance.
119
COMPARATIVE RIGHTS OF STOCKHOLDERS OF ADECCO AND OLSTEN
As a result of the merger, some stockholders of Olsten will receive Adecco
ADSs or Adecco common shares. The following is a summary of certain material
differences between the rights of the stockholders of Olsten, a Delaware
corporation, and the rights of shareholders of Adecco SA, a societe anonyme
organized under the laws of Switzerland, arising from the differences between
the corporate laws of the State of Delaware and of Switzerland, as well as from
the governing instruments of the two corporations. This summary is not, and does
not purport to be, complete and does not purport to identify all differences
that may, under any given fact situations, be material to stockholders of
Olsten. This summary is qualified in entirety by reference to the General
Corporation Law of the State of Delaware and the Swiss Code of Obligations and
the respective governing instruments of Olsten and Adecco.
VOTING RIGHTS
Under Delaware law, each stockholder of a Under Swiss law, each Adecco common share
corporation is entitled to one vote per confers an entitlement to one vote,
share of capital stock, unless the provided, however, that no person or entity
certificates of incorporation provides is permitted to be registered in the share
otherwise. Under Olsten's certificate of register with the right to vote for more
incorporation, each share of common stock is than 5% of the share capital of Adecco
entitled to one vote per share and each unless that person or entity holds the
share of class B common stock to ten votes shares for beneficial owners, or unless the
per share. person owned the shares prior to April 20,
Holders of record of Olsten common stock and 1999, as did Jacobs AG and Akila SA.
class B common stock may act in person or Holders of Adecco common shares can be
may authorize another person or persons to represented only by (1) the shareholder's
act for them by proxy. A voting trustee with legal representative, (2) another
whom Olsten common stock and class B common shareholder with the right to vote, (3) a
stock has been deposited may also vote the corporate body of Adecco, (4) independent
shares. Persons holding stock in a fiduciary proxy or (5) a depositary.
capacity may vote the shares they hold, and
a person whose stock is pledged is entitled
to vote, unless, in the transfer by the
pledgor on the books of Olsten, this person
has expressly empowered the pledgee to vote
instead, in which case, only the pledgee or
the pledgee's proxy may vote the stock.
Class B common stockholders are generally In a general meeting of holders of Adecco
entitled to elect 75 percent of the members common shares, resolutions generally require
of the board of directors while common the approval of a majority of the Adecco
stockholders are entitled to elect 25%; each common shares represented at such meeting. A
class of directors is elected by a plurality resolution adopted at a general meeting
vote of the class; and in all matters other passed with a supermajority of at least
than the election of directors, the two-thirds of the Adecco common shares
affirmative vote of the majority of shares represented at such general meeting is
present in person or represented by proxy at required for:
a meeting of stockholders and entitled to (a) changes to the corporate purpose of
vote on the subject matter presented at such Adecco;
meeting is necessary for the stockholders to (b) creation or rescission of provisions
act. Also, subject to Olsten's certificate in the Adecco charter requiring a
of incorporation, the holders of a majority qualified quorum or majority for
of the voting power must be present, in resolutions at general meetings;
person or by proxy, at the meeting in order (c) creation of shares with privileged
for a vote of stockholders to be taken. The voting rights;
certificate of incorporation of Olsten may
require a larger vote than that set forth
above.
120
(d) restrictions on the transferability
of registered shares, if any;
(e) an authorized or conditional
increase in Adecco's equity capital;
(f) an increase in Adecco's equity
capital by recourse to equity,
against contribution in kind, or for
the acquisition of assets and the
granting of special benefits;
(g) restriction or elimination of
subscription rights;
(h) relocation of Adecco's domicile; OR
(i) dissolution of Adecco without
liquidation.
A special quorum at a special meeting is
also required to approve the voluntary
liquidation of Adecco.
Each Adecco ADS will confer upon its holder
the entitlement to direct the vote of
one-eighth of one Adecco common share held
by Morgan Guaranty in the manner described
in this proxy statement/prospectus. As a
holder of the Adecco common shares
underlying the ADSs, Morgan Guaranty will,
as provided by the deposit agreement, vote
such Adecco common shares as directed by the
holders of the Adecco ADSs.
ACTIONS BY WRITTEN CONSENT
Under Delaware law, unless otherwise Swiss law does not allow any actions by
provided in a corporation's certificate of written consent which would replace a
incorporation, any action required to be general meeting.
taken by the General Corporation Law of the
State of Delaware, or any action which may
be taken at any annual or special meeting of
stockholders of a Delaware corporation may
be taken without a meeting, without prior
notice and without a vote, if the holders of
outstanding stock, having not less than the
minimum number of votes that would be
necessary to authorize or take such action
at a meeting at which all shares entitled to
vote thereon were present and voted, consent
in writing setting forth the action so taken
and deliver the consents to the corporation.
Olsten's certificate of incorporation does
not prohibit any such actions by
stockholders by written consent.
NUMBER OF DIRECTORS
Delaware law provides that the board of Adecco's charter provides that the board of
directors must consist of at least one directors must consist of a minimum of five
director, with the corporation having the and a maximum of nine directors. In
option of specifying a fixed or a variable addition, although Swiss law generally
number of directors within a fixed range as provides that at least a majority of the
provided in the corporation's certificate of directors must be citizens of Switzerland
incorporation or bylaws. Olsten's bylaws who are also domiciled in Switzerland,
provide that its board of directors shall Adecco has obtained an exemption from this
consist of no more than twelve directors and requirement.
no less than three directors, as may
121
from time to time be fixed by the board of
directors.
SOURCES AND PAYMENTS OF DIVIDENDS
Delaware law permits the payment of Swiss law requires that at least 5% of the
dividends on capital stock, subject to the annual net profits of Adecco must be
prior rights of holders of preferred stock, retained by Adecco as general reserves for
without stockholder consent, out of a so long as these reserves amount to less
corporation's surplus (i.e., the excess of than twenty percent of Adecco's equity
net assets, the amount by which total assets capital. Any net profits remaining are at
exceed total liabilities, over capital) or the disposal of the general meeting of
out of net profits for the current and shareholders to be distributed as dividends,
preceding fiscal years if there is no provided that any distribution is made
surplus, unless net assets are less than the ratably between the Adecco common shares and
capital represented by the outstanding stock the Adecco participation certificates, with
having a preference upon a distribution of each Adecco participation certificate
assets. conferring one-fifth of the rights of one
Adecco common share. Payment of a dividend,
however, is subject to shareholder approval.
RIGHTS OF PURCHASE AND REDEMPTION
Under Delaware law, a corporation may Under Swiss law the purchase of Adecco
purchase or redeem shares of any class of common shares by Adecco is limited to 10% of
its capital stock unless its capital is Adecco's total equity capital and may only
impaired or would become impaired as a be made if an unrestricted capital surplus
result of such purchase or redemption. in the amount of the purchase price is
available. In exceptional cases, a larger
number of shares may be purchased by Adecco,
such as when Adecco's shareholders approve a
reduction of the share capital and certain
prerequisites of Swiss law concerning the
protection of creditors are met.
RIGHTS OF APPRAISAL
Under Delaware law, stockholders who follow There are no appraisal rights under Swiss
prescribed statutory procedures are law.
entitled, in the event of certain enumerated
mergers or consolidations, to surrender
their shares to the corporation in exchange
for the judicially-determined "fair value"
of such shares. A stockholder, 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,
however, is not entitled to such appraisal
rights if (1) the corporation's shares of
stock are listed on a national securities
exchange, designated as a "National Market
System Security" or (2) held of record by
more than 2,000 stockholders, unless the
agreement of merger or consolidation
converts such shares of stock into anything
other than (a), in either case, shares of
stock of the surviving corporation or
depositary receipts in respect thereof, or
(b) shares of stock of any other corporation
or depositary receipts in respect thereof
that at the effective date of the merger or
consolidation are listed on a national
securities exchange, designated as a
National Market System Security;
122
or held of record by more than 2,000 holders
or (c) cash in lieu of fractional shares of
such stock or fractional depositary receipts
or (d) any combination of such shares,
depositary receipts and cash in lieu of such
fractional shares or fractional depositary
receipts in the merger or consolidation.
PREEMPTIVE RIGHTS
Pursuant to Delaware law, unless the Under Swiss law, holders of common shares
certificate of incorporation expressly and participation certificates have
provides otherwise, stockholders of a preemptive rights to subscribe for issuance
Delaware corporation do not have preemptive of new shares and participation certificates
rights. Olsten's certificate of of the corporation in proportion to the
incorporation does not provide shareholders nominal amount of shares and participation
of Olsten with any preemptive rights. certificates held. Any issuance of shares or
participation certificates, whether for a
cash or non-cash consideration, is subject
to the prior approval of shareholders at a
general meeting. A resolution adopted at a
general meeting by a supermajority of
shareholders may suspend such preemptive
rights for certain important reasons only.
The preemptive rights of Adecco shareholders
will be preserved for holders of Adecco
ADSs. However, refer to the risk factor
"Shareholders may have a limited ability to
participate in Adecco rights offerings" on
page 33 for limitations on the preemptive
rights for holders of Adecco ADSs.
RIGHT OF INSPECTION
Delaware law allows any stockholder to Swiss law allows any shareholder to seek
inspect the stock ledger, the shareholder information from the board of directors
list and the corporation's other books and during the general meeting of shareholders
records for a purpose reasonably related to provided no preponderant interests of the
such person's interest as a stockholder. If corporation, including business secrets, are
the corporation, or an officer or agent of at stake and the information requested is
the corporation, refuses to permit an required for the exercise of shareholders'
inspection or does not reply to the demand rights. Shareholders may only obtain access
within 5 business days after the demand has to the books and records of the corporation
been made, the stockholder may apply to the if authorized by the board of directors or
Delaware Court of Chancery for an order to the general meeting of shareholders. Should
compel the inspection. the corporation refuse to provide the
information requested, shareholders may seek
a court order to gain access to such
information. In addition, if the
shareholders' inspection and information
rights prove to be insufficient, each
shareholder may petition the general meeting
to appoint a SPECIAL COMMISSIONER which
shall examine certain specific transactions
or any other facts in a so-called SPECIAL
INSPECTION. If the general meeting approves
such request, the corporation or any
shareholder may ask the court of competent
jurisdiction at the corporation's domicile
to appoint a special commissioner within 30
days. Should the general meeting deny such
request, one or more shareholders who hold
123
at least 10% of the equity capital, or
shares with an aggregate nominal value of at
least CHF 2 million, may petition a court of
competent jurisdiction to order the
appointment of a special commissioner. Such
request must be granted and a special
commissioner appointed if such court finds
PRIMA FACIE evidence that the board of
directors breached the law or did not act in
accordance with the corporation's charter
documents. The costs of the investigation
are generally allocated to the corporation
and only in exceptional cases to the
petitioner(s).
DIRECTORS' CONFLICTS OF INTEREST
Pursuant to Delaware law, no contract or Swiss corporate law does not have a general
transaction between a corporation and one or provision on conflicts of interest. However,
more of its directors or officers or between the Swiss Code of Obligations contains a
a corporation and any other entity in which provision which requires directors to
one or more of its directors or officers are safeguard the interests of the corporation,
directors or officers or have a financial and to adhere to a duty of loyalty and a
interest is void or voidable solely because duty of care. Breach of this provision
of such interest or because such director or entails personal liability of the directors
officer is present at or participates in the through the corporation. In addition, Swiss
meeting of the board of directors that law contains a provision under which
authorizes the transaction or because his or payments made to a shareholder not at arm's
her vote is counted for such purposes, as length must be repaid to the corporation.
long as one of the following three
conditions is satisfied:
- the material facts as to the interest
are disclosed or are known to the
board of directors and a majority of
the disinterested directors, in good
faith, approve the transaction (this
constituting not only approval, but
also a quorum); or
- the material facts as to the interest
are disclosed or are known to the
stockholders entitled to vote thereon,
and the contract or transaction is
approved in good faith by vote of the
stockholders; or
- the contract or transaction is fair to
the corporation as of the time it is
authorized, approved or ratified by
the board of directors, a committee
thereof or the stockholders.
LIABILITY OF DIRECTORS, ETC.
Delaware law permits a Delaware corporation Swiss law contains mandatory provisions for
to include in its certificate of personal liability of directors and
incorporation a provision limiting or statutory auditors for damages incurred by
eliminating the personal liability of a the corporation (or in specific cases by
director to the corporation or its shareholders and creditors) caused by
stockholders for monetary damages for intentional or negligent breach of the
certain breaches of his or her fiduciary duties of the directors or statutory
duty as a director. However, a Delaware auditors. A Swiss corporation's charter
corporation may not eliminate or limit documents may not restrict such liability.
director monetary liability for: During a general meeting, however,
- breaches of the director's duty of shareholders can grant discharge to the
loyalty directors. Such discharge
124
to the corporation or its bars liability claims for the period for
stockholders; which discharge has been granted. Swiss
- acts or omissions not in good faith or courts have held, however, that a general
involving intentional misconduct or a meeting may not validly discharge directors
knowing violation of law; without being fully informed of potential
- unlawful dividends, stock purchases or breaches of the directors' fiduciary duties.
redemptions; or
- transactions from which the director
received an improper personal benefit.
Such limitation of liability provision also
may not limit a director's liability for
violation of, or otherwise relieve the
corporation or its directors from the
necessity of complying with, federal or
state securities laws, or affect the
availability of non-monetary remedies such
as injunctive relief or rescission. Olsten's
certificate of incorporation contains a
provision which limits the liability of its
directors to the full extent permitted by
the General Corporation Law of the State of
Delaware.
SHAREHOLDERS' SUITS
Under Delaware law, a stockholder of record As a general principle, the board of
may institute a lawsuit on behalf of the directors of a Swiss corporation has the
corporation if the corporation has failed to power of attorney of the corporation to
enforce a right which may properly be institute law suits on behalf of the
asserted by it. An individual stockholder corporation. Such authority may also be
also may commence a class action suit on granted to specific attorneys-in-fact. A
behalf of himself and other similarly shareholder may not by virtue of his
situated stockholders where the requirements interest as shareholder institute a
for maintaining a class action under derivative action on behalf of the
Delaware law have been met. corporation. However, such shareholders may
invoke the personal liability of the
directors if an action by the directors
damages the corporation.
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SECURITY OWNERSHIP OF ADECCO
The following table sets forth information, as of November 8, 1999,
regarding the beneficial ownership of Adecco common shares with respect to each
beneficial owner of more than 10.0% of outstanding common shares and all
directors and executive officers of Adecco as a group:
COMMON SHARES
BENEFICIALLY OWNED
----------------------
NAME OF BENEFICIAL OWNER SHARES PERCENTAGE
- ------------------------ --------- ----------
Klaus J. Jacobs........................................ 3,825,948(1) 22.27%
Jacobs AG.............................................. 3,825,948(1) 22.27%
Philippe Foriel-Destezet............................... 3,680,702(2) 21.42%
Akila SA............................................... 3,680,702(2) 21.42%
All officers and directors as a group (18 members)..... 7,657,168(3) 49.57%
- ------------------------
(1) Includes 2,928,321 shares owned by Jacobs AG, and 897,627 additional shares
held in the name of Jacobs AG for the benefit of members of Mr. Jacobs'
family, which Jacobs AG may vote and dispose of. Does not include shares
owned by Akila SA, which may be deemed to be beneficially owned by
Mr. Jacobs and Jacobs AG by virtue of the Shareholders' Agreement dated
April 20, 1999 between Jacobs AG and Akila SA.
(2) Includes 3,680,702 shares owned by Akila SA. Does not include shares owned
by Jacobs AG, which may be deemed to be beneficially owned by
Mr. Foriel-Destezet and Akila SA by virtue of the Shareholders' Agreement
dated April 20, 1999 between Jacobs AG and Akila SA.
(3) Includes 136,911 shares purchasable within 60 days upon exercise of options
held by seven officers and directors. Also includes 3,830,948 shares owned
by Jacobs AG and 3,680,702 shares owned by Akila SA, of which Klaus J.
Jacobs, vice chairman and director of Adecco, and Philippe Foriel-Destezet,
chairman and director of Adecco, may be deemed to be beneficial owners,
respectively. Excluding the shares held by Jacobs AG and Akila SA, all
officers and directors as a group beneficially owned 146,518 shares, or less
than 1.0% of all common shares outstanding.
As of November 8, 1999, there were no beneficial owners of more than 10.0%
of the outstanding Adecco ADS. In addition, as of November 8, 1999, no officers
or directors held any Adecco ADSs.
126
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION OF ADECCO SA
AND OLSTEN CORPORATION
The following unaudited Pro Forma Consolidated Financial Information of
Adecco and Olsten Corporation was prepared to illustrate the estimated effects
of the split-off of Gentiva Health Services, Inc. from Olsten Corporation, the
merger of Adecco and Olsten and the related financings for balance sheet
purposes as of October 3, 1999 and for the purpose of the statements of
operations for the year ended January 3, 1999 and the nine months ended
October 3, 1999.
Based upon the terms of the merger agreement, and the resulting attributes
of the merger, the Pro Forma Consolidated Financial Statements have been
prepared in accordance with U.S. GAAP.
The balance sheet and statements of operations of Olsten Corporation have
been summarized and reclassified on a basis consistent with the presentation
adopted for purposes of the Pro Forma Consolidated Financial Statements.
As more fully described in Note 2 to the Pro Forma Consolidated Financial
Statements, the Pro Forma Consolidated Balance Sheet gives effect to the
transactions set out in the merger agreement, including the split-off of Olsten
Health Services and the related financings, as though they had occurred on
October 3, 1999. The split-off of the historical Olsten Health Services
financial statements from Olsten for all periods is represented in a separate
column. The Pro Forma Consolidated Statements of Operations for the year ended
January 3, 1999 and the nine months ended October 3 give effect to these
transactions as if they had occurred at December 29, 1997. The Pro Forma
Consolidated Financial Statements are not necessarily indicative of the results
that actually would have been achieved if the transactions reflected therein had
been completed on the dates indicated or the results which may be obtained in
the future.
The allocation of the aggregate purchase price reflected in the unaudited
Pro Forma Consolidated Financial Statements is preliminary. The final allocation
will be based upon Adecco management's evaluation of the fair values of the
assets acquired and liabilities assumed following the effective date and may
differ materially from the preliminary allocation included herein.
127
PRO FORMA OF OLSTEN CORPORATION FINANCIAL STATEMENTS
The following table illustrates the effect of the distribution of Gentiva
Health Services and foreign currency translation of Olsten Staffing Consolidated
financial statements. Olsten Staffing's Consolidated Balance Sheet as of
October 3, 1999 was translated from U.S. dollars to Swiss francs using the
October 3, 1999 exchange rate of $0.67 per CHF 1.00. Olsten Staffing Statements
of Operations for the nine months ended October 3, 1999 and for the fiscal year
ended 1998 were translated from U.S. dollars to Swiss francs using the weighted
average exchange rates of $0.67 and $0.69 per CHF 1.00. The split-off of the
historical Gentiva Health Services financial statements is reflected as an
adjustment to the Olsten Corporation financial statements to derive the
financial statements for Olsten's Staffing, which will become a part of Adecco
upon completion of the merger.
UNAUDITED CONSOLIDATED BALANCE SHEET AT OCTOBER 3, 1999
OLSTEN GENTIVA OLSTEN OLSTEN
CORPORATION HEALTH SERVICES(1) STAFFING STAFFING
----------- ------------------ -------- --------------
($ millions) (CHF millions)
Current Assets
Cash and cash equivalents................. 14 -- 14 21
Trade accounts receivable, net............ 1,180 538 642 958
Other current assets...................... 144 175 (31) (46)
----- ----- ----- -----
Total current assets.................... 1,338 713 625 933
Property, equipment and leasehold
improvements.............................. 240 58 182 272
Goodwill, net............................... 599 249 350 522
Other assets................................ 9 2 7 10
----- ----- ----- -----
2,186 1,022 1,164 1,737
===== ===== ===== =====
Current Liabilities
Accounts payable and accrued expenses..... 530 217 313 467
----- ----- ----- -----
Total current liabilities............... 530 217 313 467
Long-term debt.............................. 774 78 696 1,039
Other liabilities........................... 96 38 58 87
----- ----- ----- -----
Total liabilities....................... 1,400 333 1,067 1,593
Shareholders' Equity
Common stock.............................. 8 -- 8 12
Additional paid-in capital................ 448 709 (261) (390)
Retained earnings......................... 336 (18) 354 528
Accumulated other comprehensive income.... (6) (2) (4) (6)
----- ----- ----- -----
Total liabilities and shareholders'
equity................................ 2,186 1,022 1,164 1,737
===== ===== ===== =====
- ------------------------
(1) To give effect to the split-off of Gentiva Health Services. Each holder of
Olsten Corporation will receive 0.25 of a share of Gentiva Health Services
common stock for each share of Olsten Corporation stock.
128
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED
OCTOBER 3, 1999
OLSTEN GENTIVA OLSTEN OLSTEN
CORPORATION HEALTH SERVICES(1) STAFFING STAFFING
----------- ------------------ ---------- ------------------
(CHF millions
($ millions except share data) except share data)
Net service revenue................. 3,714 1,118 2,596 3,875
Direct costs of services............ (2,807) (740) (2,067) (3,085)
Selling, general, and administrative
expenses.......................... (833) (373) (460) (687)
Amortization of goodwill............ (19) (8) (11) (16)
Interest expense, net............... (31) (13) (18) (27)
---------- ---------- ---------- ----------
Income (loss) before income taxes
and minority interest............. 24 (16) 40 60
Benefit (provision) for income
taxes............................. (11) 3 (14) (21)
Income applicable to minority
interest.......................... (8) -- (8) (12)
---------- ---------- ---------- ----------
Net income (loss)................... 5 (13) 18 27
========== ========== ========== ==========
Earnings per share
Basic............................. 0.06 (0.16) 0.22 0.33
Diluted........................... 0.06 (0.16) 0.22 0.33
Weighted average number of shares
Basic............................. 81,288,000 81,288,000 81,288,000 81,288,000
Diluted........................... 81,419,000 81,288,000 81,419,000 81,419,000
- ------------------------
(1) To give effect to the split-off of Gentiva Health Services. Each holder of
Olsten Corporation will receive 0.25 of a share of Gentiva Health Services
common stock for each share of Olsten Corporation stock.
129
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED JANUARY 3, 1999
OLSTEN GENTIVA OLSTEN OLSTEN
CORPORATION HEALTH SERVICES(1) STAFFING STAFFING
----------- ------------------ ---------- ------------------
(CHF millions
($ millions except share data) except share data)
Net service revenue................. 4,603 1,330 3,273 4,743
Direct costs of services............ (3,501) (909) (2,592) (3,757)
Selling, general, and administrative
expenses.......................... (1,083) (543) (540) (783)
Amortization of goodwill............ (23) (10) (13) (19)
Interest expense.................... (31) (17) (14) (20)
---------- ---------- ---------- ----------
Income (loss) before income taxes
and minority interest............. (35) (149) 114 164
Benefit (provision) for income
taxes............................. 8 47 (39) (57)
Income applicable to minority
interest.......................... (9) -- (9) (13)
---------- ---------- ---------- ----------
Net income (loss)................... (36) (102) 66 94
========== ========== ========== ==========
Earnings per share
Basic............................. (.44) (1.25) .81 1.16
Diluted........................... (.44) (1.25) .81 1.16
Weighted average number of shares
Basic............................. 81,300,000 81,300,000 81,300,000 81,300,000
Diluted........................... 81,300,000 81,300,000 81,402,000 81,402,000
- ------------------------
(1) To give effect to the split-off of Gentiva Health Services. Each holder of
Olsten Corporation will receive 0.25 of a share of Gentiva Health Services
common stock for each share of Olsten Corporation stock.
130
ADECCO SA
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
OCTOBER 3, 1999
ADECCO ADECCO
OLSTEN PRO FORMA PRO FORMA PRO FORMA
NOTES ADECCO STAFFING ADJUSTMENTS CONSOLIDATED CONSOLIDATED
-------- -------- -------- ----------- ------------ -------------
(CHF MILLIONS EXCEPT SHARE DATA) ($ MILLIONS)
ASSETS
Cash and cash equivalents.................. 2.5 383 21 (531) 395 265
2.6 515
2.6 576
2.17 (569)
Trade accounts receivable, net............. 3,427 958 4,385 2,938
Other current assets....................... 2.8 453 (46) 67 516 346
2.16 42
----- ----- ----- ----- -----
Total current assets....................... 4,263 933 100 5,296 3,549
Property, equipment and leasehold
improvements, net........................ 2.1 367 272 (4) 635 425
Goodwill, net.............................. 2.3 1,833 522 (522) 3,536 2,369
2.5 1,703
Other assets............................... 2.2 173 10 14 197 132
----- ----- ----- ----- -----
Total assets............................... 6,636 1,737 1,291 9,664 6,475
===== ===== ===== ===== =====
LIABILITIES
Current liabilities
Accounts payable and accrued expenses.... 2.1 2,923 467 256 3,667 2,457
2.5 21
Short-term debt and current maturities of
long-term debt......................... 1,235 1,235 828
----- ----- ----- ----- -----
Total current liabilities.................. 4,158 467 277 4,902 3,285
Long term debt............................. 2.7 460 1,039 42 1,548 1,037
2.6 576
2.17 (569)
Other liabilities.......................... 2.16 155 87 42 263 176
2.1 -- (21)
----- ----- ----- ----- -----
Total liabilities.......................... 4,773 1,593 347 6,713 4,498
----- ----- ----- ----- -----
SHAREHOLDERS' EQUITY
Common shares.............................. 2.4 172 12 (12) 194 130
2.5 16
2.6 6
Additional paid-in capital................. 2.4 1,896 (390) 390 2,961 1,984
2.5 531
2.7 (42)
2.8 67
2.6 509
Retained earnings.......................... 2.1 (225) 528 (239) (224) (150)
2.2 14
2.3 (522)
2.4 220
Accumulated other comprehensive income..... 2.4 20 (6) 6 20 13
----- ----- ----- ----- -----
Total shareholders' equity................. 1,863 144 944 2,951 1,977
----- ----- ----- ----- -----
6,636 1,737 1,291 9,664 6,475
===== ===== ===== ===== =====
131
ADECCO SA
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED OCTOBER 3, 1999
ADECCO ADECCO ADECCO
OLSTEN PRO FORMA PRO FORMA PRO FORMA
NOTES ADECCO STAFFING ADJUSTMENTS CONSOLIDATED CONSOLIDATED
-------- ---------- ---------- ----------- ------------ -------------
(CHF millions except share data) ($ millions)
-------------
Net service revenues............... 2.12 13,297 3,875 (209) 16,963 11,365
Direct costs of services........... 2.12 (10,903) (3,085) 209 (13,779) (9,232)
Selling, general and administrative
expenses......................... 2.9 (1,790) (687)* (9) (2,486) (1,666)
Amortization of goodwill........... 2.10 (508) (16) (239) (763) (511)
Interest and other income, net..... 16 -- -- 16 11
Interest expense................... 2.15 (89) (27) (19) (115) (77)
2.11 (6)
2.18 26
---------- ---------- ---- ---------- -------
Income (loss) before income taxes
and minority interest............ 23 60 (247) (164) (110)
Provision for income taxes......... 2.14 (149) (21) 4 (169) (113)
2.15 4
2.18 (7)
(Income) loss applicable to
minority interest................ 2.13 -- (12) 7 (5) (3)
---------- ---------- ---- ---------- -------
Net income (loss).................. (126) 27 (239) (338) (226)
========== ========== ==== ========== =======
Net income (loss) per share
Basic............................ (7.37) 0.33 (19.07)
Diluted.......................... (7.37) 0.33 (19.07)
Weighted average number of shares
Basic............................ 17,093,863 81,288,000 17,727,503
Diluted.......................... 17,093,863 81,419,000 17,727,503
- ------------------------
* Includes restructuring charges for the Olsten Staffing business of
$29 million (CHF 43 million).
132
ADECCO SA
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 3, 1999
ADECCO ADECCO
OLSTEN PRO FORMA PRO FORMA PRO FORMA
NOTES ADECCO STAFFING ADJUSTMENTS CONSOLIDATED CONSOLIDATED
------------- ---------- ---------- ----------- ------------ ------------
(CHF millions except share data) ($ millions)
Net service revenues........ 2.12 15,308 4,743 (264) 19,787 13,653
Direct costs of services.... 2.12 (12,664) (3,757) 264 (16,157) (11,148)
Selling, general and
administrative expenses... 2.9 (1,997) (783) (11) (2,791) (1,926)
Amortization of goodwill.... 2.10 (601) (19) (312) (932) (643)
Interest and other income,
net....................... 26 -- -- 26 18
Interest expense............ 2.15 (91) (20) (25) (111) (76)
2.11 (9)
2.18 34
---------- ---------- ---- ---------- ----------
Income (loss) before income
taxes and minority
interest.................. (19) 164 (323) (178) (122)
Provision for income
taxes..................... 2.14 (174) (57) 5 (229) (158)
2.15 -- -- 7 --
2.18 (10)
Income applicable to
minority interest......... 2.13 (2) (13) 6 (9) (6)
---------- ---------- ---- ---------- ----------
Net income (loss)........... (195) 94 (315) (416) (286)
========== ========== ==== ========== ==========
Earnings per share
Basic..................... (11.61) 1.16 (23.88)
Diluted................... (11.61) 1.16 (23.88)
Weighted average number of
shares
Basic..................... 16,790,025 81,300,000 17,423,665
Diluted................... 16,790,025 81,402,000 17,423,665
133
ADECCO SA
NOTES TO THE PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(CHF tabular amounts in millions except share data)
1. BASIS OF PRESENTATION
The Pro Forma Consolidated Financial Statements have been prepared using the
purchase method of accounting for the merger. The total purchase price will be
allocated to the assets acquired and liabilities assumed, based on their
respective fair values. The allocation of the aggregate purchase price reflected
in the Pro Forma Consolidated Financial Statements is preliminary and is based
upon Adecco management's preliminary evaluation of the fair values of the assets
to be acquired and liabilities to be assumed. The final allocation of the
purchase price upon closing may differ materially from the preliminary
allocation included herein.
The accompanying Pro Forma Consolidated Statement of Operations for the year
ended January 3, 1999 have been prepared by management of Adecco based on the
audited consolidated statement of operations of Adecco for the year ended
January 3, 1999 and the consolidated statement of operations of Olsten Staffing
for the year ended January 3, 1999, adjusted to reflect classifications
consistent with the presentation adopted by Adecco.
The accompanying Pro Forma Consolidated Balance Sheet and Statement of
Operations as of and for the nine months ended October 3, 1999 have been
prepared by management of Adecco based on the interim unaudited consolidated
balance sheet and statement of operations of Adecco as of and for the nine
months ended October 3, 1999 and the interim unaudited consolidated balance
sheet and statement of operations of Olsten Staffing as of and for the nine
months ended October 3, 1999, adjusted to reflect classifications consistent
with the presentation adopted by Adecco. The interim unaudited consolidated
balance sheet and statement of operations of Adecco as of and for the nine
months ended October 3, 1999 are included on pages F-2 and F-3 in this
proxy/prospectus.
The accounting policies used in the preparation of the Pro Forma
Consolidated Financial Statements are those disclosed in the Adecco Annual
Report on Form 20-F. The consolidated financial statements of Adecco and Olsten
Staffing have been prepared in accordance with U.S. GAAP. The Olsten Staffing
Balance Sheet as of October 3, 1999 was translated from U.S. dollars to Swiss
Francs using the October 3, 1999 exchange rate of $0.67 per CHF 1.00. The Olsten
Staffing Statement of Operations for the nine months ended October 3, 1999 and
for the year ended January 3, 1999, were translated from U.S. dollars to Swiss
francs using the weighted average exchange rates for the periods of $0.67 and
$0.69 per CHF 1.00.
The Pro Forma Consolidated Financial Statements also are not necessarily
indicative of the results that actually would have been achieved if the
transactions reflected therein had been completed on the dates indicated or the
results which may be obtained in the future. In preparing these Pro Forma
Consolidated Financial Statements, no adjustments have been made to reflect
transactions which have occurred since the dates indicated or to reflect the
operating benefits and general and administrative cost savings expected to
result from combining the operations of Adecco and Olsten Staffing.
In the opinion of management of Adecco, these Pro Forma Consolidated
Financial Statements include all adjustments necessary for a fair presentation
of the pro forma financial statements.
The Pro Forma Consolidated Financial Statements should be read in
conjunction with the description of the merger and split-off in this proxy
statement/prospectus, the audited consolidated financial statements of Adecco as
of and for the year ended January 3, 1999 and notes thereto, incorporated by
reference in this proxy statement/prospectus, and the audited consolidated
financial
134
1. BASIS OF PRESENTATION (CONTINUED)
statements of Olsten Corporation as of and for the year ended January 3, 1999,
and notes thereto, also incorporated by reference in this proxy
statement/prospectus.
2. PRO FORMA ASSUMPTIONS AND ADJUSTMENTS
The Pro Forma Consolidated Financial Statements incorporate the following
assumptions:
- Completion of the transactions contemplated by the merger agreement, more
fully described elsewhere herein, resulting in the combination of the
businesses of Adecco and Olsten, including the split-off of Gentiva Health
Services, as described elsewhere in this proxy statement/ prospectus.
- Absence of any material transactions by, or changes in operations of,
Adecco and Olsten Staffing subsequent to October 3, 1999.
These Pro Forma Consolidated Financial Statements give effect to the
following assumptions and adjustments (as if the merger of Adecco and Olsten and
split-off of Gentiva Health Services and the related financings had occurred on
October 3, 1999 in respect of the Pro Forma Consolidated Balance Sheet and on
December 29, 1997 in respect of the Pro Forma Consolidated Statements of
Operations):
TRANSACTIONS GIVING EFFECT TO THE MERGER AND AGREEMENTS RELATED THERETO
2.1 To record increase (decrease) in fair value of Olsten Staffing's assets
and liabilities and record obligations under contractual terms of the merger as
follows:
Capitalized software........................................ (10)
Property, equipment and leasehold improvements.............. 6
Obligation to acquire minority interest and contingent
payment based on earnings of subsidiary................... (209)
Eliminate minority interest payable......................... 21
Olsten executive compensation............................... (47)
2.2 To record the tax effect of adjustments described in 2.1
2.3 To eliminate the historical goodwill of Olsten Staffing.
2.4 To eliminate on consolidation the shareholders' equity of Olsten
Staffing after giving effect to the adjustments described in 2.1-2.3 above.
135
2. PRO FORMA ASSUMPTIONS AND ADJUSTMENTS (CONTINUED)
2.5 To compute goodwill and record the transactions resulting from the
merger.
Fair value of Adecco shares to be issued.................... 531
Cash payment by Adecco...................................... 531
Fair value of options assumed............................... 16
Estimated transaction costs................................. 21
-----
Total purchase price.................................... 1,099
=====
Shareholders' equity acquired, before adjustments........... 144
Deduct adjustments, including historical goodwill (Note
2.1--2.3)................................................. (748)
-----
Adjusted fair value of net tangible assets (liabilities)
acquired.............................................. (604)
Add fair value of intangible assets acquired:
Goodwill.................................................... 1,703
-----
Total fair value of identifiable assets acquired............ 1,099
=====
The above assumes a pro rata issuance of about 633,834 common shares by
Adecco and $8.75 per share of cash in exchange for all the issued and
outstanding shares of Olsten Corporation and the issuance of options on about
80,000 Adecco common shares in exchange for Olsten Corporation common stock
options for option holders who are not employees of Gentiva Health Services. All
of Olsten Corporation's outstanding options vest immediately upon closing of the
merger. The value of common shares issued by Adecco to effect the merger is
based upon the average of the closing prices for Adecco common stock for the
three days before the merger was announced and the three days after the merger
was announced.
Estimated transaction costs include
Legal fees.................................................. 4
Accounting and Tax fees..................................... 4
Investment bank fees........................................ 13
--
Total transaction costs..................................... 21
==
2.6 To record the net proceeds of CHF 515 million ($345 million) from the
Adecco equity offering completed in connection with financing the acquisition of
Olsten Staffing and to record the additional Adecco convertible notes issuance
of CHF 576 million ($387 million) completed in connection with financing the
acquisition of Olsten Staffing.
2.7 To record additional borrowings of Olsten in accordance with the
separation agreement, the proceeds of which will be contributed as paid in
capital to Gentiva Health Services.
2.8 In accordance with the tax sharing agreement, any net operating losses
generated up to the split-off will be carried back and utilized by Olsten. As a
result, the deferred tax asset is recorded by Olsten Staffing and the amount of
Olsten Staffing's contribution to paid in capital of Gentiva Health Services is
reduced.
2.9 To record the change in depreciation and amortization expense resulting
from the fair value adjustments described in 2.1. Capitalized software will be
amortized over its estimated useful life of 5 years.
2.10 To record amortization of acquired goodwill as a result of the
purchase price allocation described in 2.5 above. Goodwill will be amortized
over its estimated useful life of 5 years.
136
2. PRO FORMA ASSUMPTIONS AND ADJUSTMENTS (CONTINUED)
2.11 To record additional interest expense resulting from the issuance of
CHF 576 million of debt at 1.50%.
2.12 To net the subcontracting revenue and cost of revenue to conform to
the presentation adopted by Adecco.
2.13 To eliminate income applicable to minority interest resulting from
Olsten's Staffing obligation to acquire minority interest.
2.14 To record the tax effect of interest expense. Other fair value
adjustments and associated change in depreciation and amortization are not
likely to have an associated tax provision or benefit.
2.15 Gentiva Health Services paid Olsten Corporation CHF 25 million per
year (CHF 17 million for nine months ended October 3, 1999) for interest expense
on intercompany debt. Since all intercompany debt has been contributed to
Gentiva Health Services as paid in capital, this interest expense has been added
back to arrive at the appropriate interest expense for purposes of these pro
forma statements of operations. This amount is tax deductible and has been tax
effected in these pro formas.
2.16 Olsten Corporation recorded a net non-current deferred tax liability
in its consolidated financial statements. Gentiva Health Services recorded a
gross current deferred tax asset and a gross non-current deferred tax liability
in its consolidated financial statements. The result of these classifications is
that the Olsten Staffing pro forma balance sheet reflected a net credit balance
in other current assets relating to deferred taxes. The net credit balance has
been reclassified to other liabilities.
2.17 To record the pay down of Olsten debt of CHF 569 million.
($381 million) due upon change in control.
2.18 To eliminate interest expense resulting from the repayment of Olsten
debt.
Note A: Adecco restructuring costs of CHF 19 million related to expected
branch and headquarters closures, and CHF 30 million related to severance have
not been included in this pro forma. These costs are expected to be incurred
within one year of the effective date of the merger.
Note B: The amortization adjustments reflected in the Pro Forma Consolidated
Statements of Operations are preliminary and may change materially based upon
the final allocation of the purchase price and the final determination of the
estimated useful life of each intangible asset acquired. The actual amortization
of intangibles will commence subsequent to the effective date of the merger.
Note C: For one year after the split-off, Olsten Staffing agreed to provide
or make available to Gentiva Health Services on a cost basis as agreed to by the
parties, some transition services as may be requested by Gentiva Health
Services. Those services may include tax preparation and filing, legal services,
information technology support and administrative services, procurement services
and other services.
3. INCOME (LOSS) PER SHARE
Under U.S. GAAP, basic income per share is calculated as net income (loss)
divided by the daily weighted average number of common shares outstanding during
the period. Diluted income (loss) per share is calculated using the treasury
stock method. The contemplated transaction anticipates that Gentiva Health
Services employees will receive Gentiva Health Services options and all other
stockholders holding Olsten options will receive equivalent value Adecco options
calculated in accordance with EITF 90-9. Adecco and pro forma results of
operations showed losses for all periods
137
3. INCOME (LOSS) PER SHARE (CONTINUED)
presented. Any dilution from the assumed conversion of stock options or the
conversion of other common stock equivalents would be antidilutive. Therefore
the conversion of any stock options in computing earnings per share for Adecco
and pro forma for all periods presented has not been considered. Income (loss)
per share in U.S. dollars is disclosed for the convenience of the reader. The
calculation of income (loss) per share under U.S. GAAP is as follows:
OLSTEN
ADECCO STAFFING PRO FORMA
NINE MONTHS ENDED OCTOBER 3, 1999 ----------- ----------- -----------
Net income (loss) per share
Basic............................................. CHF (7.37) CHF 0.33 CHF (19.07)
Diluted........................................... CHF (7.37) CHF 0.33 CHF (19.07)
Basic............................................. $ (4.94) $ 0.22 $ (12.78)
Diluted........................................... $ (4.94) $ 0.22 $ (12.78)
Weighted average number of shares
Basic............................................. 17,093,863 81,288,000 17,727,503
Diluted........................................... 17,093,863 81,419,000 17,727,503
OLSTEN
ADECCO STAFFING PRO FORMA
YEAR ENDED JANUARY 3, 1999 ----------- ----------- -----------
Net income (loss) per share
Basic............................................. CHF (11.61) CHF 1.16 CHF (23.88)
Diluted........................................... CHF (11.61) CHF 1.16 CHF (23.88)
Basic............................................. $ (8.01) $ 0.81 $ (16.48)
Diluted........................................... $ (8.01) $ 0.81 $ (16.48)
Weighted average number of shares
Basic............................................. 16,790,025 81,300,000 17,423,665
Diluted........................................... 16,790,025 81,402,000 17,423,665
138
4. PRO FORMA OF OLSTEN CORPORATION FINANCIAL STATEMENTS
The following table illustrates the effect of the split-off of Gentiva
Health Services and foreign currency translation of Olsten Staffing Services'
Consolidated financial statements. Olsten Staffing Services' Statements of
Operations for the nine months ended September 27, 1998 and for the fiscal years
ended 1996 and 1997 were translated from U.S. dollars to Swiss francs using the
weighted average exchange rates of $0.68, $0.81 and $0.69 per CHF 1.00. The
split-off of the historical Gentiva Health Services financial statements is
reflected as an adjustment to the Olsten Corporation financial statements to
derive the financial statements for Olsten's Staffing Services, which will
become part of Adecco upon completion of the merger.
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED
SEPTEMBER 27, 1998
GENTIVA
OLSTEN HEALTH OLSTEN OLSTEN
CORPORATION SERVICES(1) STAFFING STAFFING
----------- ----------- ---------- ------------------
(CHF MILLIONS
($ MILLIONS EXCEPT SHARE DATA) EXCEPT SHARE DATA)
Net service revenue....................... 3,346 968 2,378 3,497
Direct costs of services.................. (2,553) (671) (1,882) (2,768)
Selling, general, and administrative
expenses................................ (774) (373) (401) (590)
Amortization of goodwill..................
Interest expense, net..................... (22) (13) (9) (13)
---------- ---------- ---------- ----------
Income (loss) before income taxes and
minority interest....................... (3) (89) 86 126
Benefit (provision) for income taxes...... 1 30 (29) (43)
Income applicable to minority interest.... (6) (6) (9)
---------- ---------- ---------- ----------
Net income (loss)......................... (8) (59) 51 74
========== ========== ========== ==========
Earnings per share
Basic................................... (0.10) (0.73) 0.63 0.91
Diluted................................. (0.10) (0.73) 0.62 0.90
Weighted average number of shares
Basic................................... 81,307,000 81,307,000 81,307,000 81,307,000
Diluted................................. 81,307,000 81,307,000 81,555,000 81,555,000
- ------------------------
(1) To give effect to the split-off of Gentiva Health Services. Each holder of
Olsten Corporation will receive 0.25 of a share of Gentiva Health Services
common stock for each share of Olsten Corporation stock.
139
4. PRO FORMA OF OLSTEN CORPORATION FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 28, 1997
GENTIVA
OLSTEN HEALTH OLSTEN OLSTEN
CORPORATION SERVICES(1) STAFFING STAFFING
----------- ----------- ---------- ------------------
($ MILLIONS EXCEPT SHARE DATA) (CHF MILLIONS
EXCEPT SHARE DATA)
Net service revenue....................... 4,113 1,434 2,679 3,883
Direct costs of services.................. (3,016) (913) (2,103) (3,048)
Selling, general, and administrative
expenses................................ (892) (451) (441) (639)
Amortization of goodwill.................. (23) (10) (13) (19)
Interest expense, net..................... (21) (17) (4) (6)
---------- ---------- ---------- ----------
Income before income taxes and minority
interest................................ 161 43 118 171
Provision for income taxes................ (63) (16) (47) (68)
Income applicable to minority interest.... (5) -- (5) (7)
---------- ---------- ---------- ----------
Net income................................ 93 27 66 96
========== ========== ========== ==========
Earnings per share
Basic................................... 1.15 0.33 0.81 1.18
Diluted................................. 1.15 0.32 0.81 1.18
Weighted average number of shares
Basic................................... 81,237,000 81,237,000 81,237,000 81,237,000
Diluted................................. 83,115,000 83,115,000 81,465,000 81,465,000
- ------------------------
(1) To give effect to the split-off of Gentiva Health Services. Each holder of
Olsten Corporation will receive 0.25 of a share of Gentiva Health Services
common stock for each share of Olsten Corporation stock.
140
4. PRO FORMA OF OLSTEN CORPORATION FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 29, 1996
GENTIVA
OLSTEN HEALTH OLSTEN OLSTEN
CORPORATION SERVICES(1) STAFFING STAFFING
----------- ----------- ---------- -------------
($ MILLIONS EXCEPT SHARE DATA) (CHF MILLIONS
EXCEPT SHARE
DATA)
Net service revenue......................... 3,378 1,374 2,004 2,474
Direct costs of services.................... (2,422) (862) (1,560) (1,926)
Selling, general, and administrative
expenses.................................. (745) (411) (334) (412)
Amortization of goodwill.................... (23) (10) (13) (14)
Merger, integration and other non-recurring
charges................................... (80) (75) (5) (6)
Interest (expense) income, net.............. (12) (13) 1 --
---------- ---------- ---------- ----------
Income before income taxes and minority
interest.................................. 96 3 93 116
Provision for income taxes.................. (39) (7) (32) (40)
(Income) loss applicable to minority
interest.................................. (2) 1 (3) (4)
---------- ---------- ---------- ----------
Net income.................................. 55 (3) 58 72
========== ========== ========== ==========
Earnings (loss) per share...................
Basic..................................... 0.71 (0.04) 0.75 0.93
Diluted................................... 0.71 (0.04) 0.72 0.90
Weighted average number of shares...........
Basic..................................... 77,362,000 77,362,000 77,362,000 77,362,000
Diluted................................... 82,025,000 77,362,000 80,375,000 80,375,000
- ------------------------
(1) To give effect to the split-off of Gentiva Health Services. Each holder of
Olsten Corporation will receive 0.25 of a share of Gentiva Health Services
common stock for each share of Olsten Corporation stock.
141
COMPARATIVE MARKET PRICE AND DIVIDEND INFORMATION
OLSTEN STOCK
Olsten has outstanding two classes of common equity securities: (1) Olsten
common stock and (2) class B common stock. Olsten common stock is listed on the
New York Stock Exchange under the symbol "OLS." There is no established public
trading market for the class B common stock, which is subject to significant
restrictions on its sale. Olsten class B common stock, which has ten votes per
share, is convertible at any time on a share for share basis into Olsten common
stock, which has one vote per share.
On August 11, 1999, the last trading day before Olsten's public press
release reporting that it is in discussions with a third party involving a
significant transaction, and on August 17, 1999, the last trading date prior to
the public announcement by Adecco and Olsten of the execution of the merger
agreement, the last reported sale prices on the NYSE Composite Tape for Olsten
common stock were $9.875 and $9.50, respectively.
PRICE RANGE OF OLSTEN COMMON STOCK
The following table sets forth, for the fiscal quarters indicated, the range
of high and low sale prices of Olsten common stock as reported on the NYSE
Composite Tape. Olsten has a 52 or 53-week fiscal year ending the Sunday closest
to December 31.
HIGH LOW
-------- --------
Calendar Year 1997
First Quarter............................................. $19.25 $14.38
Second Quarter............................................ $21.13 $15.75
Third Quarter............................................. $23.00 $16.69
Fourth Quarter............................................ $20.00 $13.69
Calendar Year 1998
First Quarter............................................. $17.63 $14.31
Second Quarter............................................ $16.06 $11.06
Third Quarter............................................. $11.75 $ 5.63
Fourth Quarter............................................ $ 9.56 $ 4.50
Calendar Year 1999
First Quarter............................................. $ 8.50 $ 5.19
Second Quarter............................................ $ 9.44 $ 5.94
Third Quarter............................................. $10.94 $ 6.44
Fourth Quarter............................................ $11.50 $10.06
Calendar Year 2000
First Quarter through February , 2000................... $ $
On February , 2000, the most recent practicable date prior to the printing
of this proxy statement/prospectus, the last sale price for Olsten common stock
as reported by the NYSE Composite Tape was $ .
STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR OLSTEN COMMON
STOCK.
142
OLSTEN DIVIDENDS
In 1997 and 1998 Olsten paid quarterly dividends on its common stock and
class B common stock. In August 1999, Olsten authorized the discontinuance of
its dividend.
FISCAL YEAR
-------------------
DIVIDENDS PER SHARE 1998 1997
- ------------------- -------- --------
Olsten common stock......................................... $.22 $.28
Olsten class B common stock................................. .22 .28
ADECCO COMMON SHARES AND ADSS
Adecco common shares are listed and principally traded on the Swiss Stock
Exchange. In addition, Adecco common shares are listed on the Paris Stock
Exchange. The prices for the Adecco common shares as quoted in the official list
of the Swiss Stock Exchange are expressed in Swiss francs and the Paris Stock
Exchange are expressed in Euros. Adecco ADSs are currently traded on the Nasdaq
National Market under the symbol "ADECY." However, Adecco ADSs have been
approved for listing on the New York Stock Exchange. Upon listing on the New
York Stock Exchange, Adecco ADSs will cease to be quoted on the Nasdaq National
Market. Each ADS represents one-eighth of one Adecco common share deposited with
Morgan Guaranty, pursuant to a deposit agreement among Adecco, the depositary,
and the holders from time to time of ADRs evidencing ADSs.
PRICE RANGE OF ADECCO COMMON SHARES AND ADSS
The following table sets forth, for the fiscal quarters indicated,
- the reported high and low sales prices quoted in Swiss francs for the
Adecco common shares on the Swiss Stock Exchange, rounded to the nearest
Swiss franc,
- the reported high and low sales prices quoted, prior to January 4, 1999,
in French francs and, thereafter, in Euros for the Adecco common shares on
the Paris Stock Exchange, rounded to the nearest French franc or Euro, as
applicable, and
- the high and low sales prices for Adecco ADSs in U.S. dollars on the
Nasdaq National Market.
Fluctuations in the exchange rate between the Swiss franc, the French franc or
the Euro and the U.S. dollar affect the U.S. dollar equivalent of the Swiss
franc and the French franc or Euro price of the
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Adecco common shares on the Swiss and Paris Stock Exchanges and, as a result,
affect the market price of Adecco ADSs.
PRICE PER PRICE PER COMMON
COMMON PRICE PER ADS IN SHARE IN FRENCH
SHARE IN CHF USD FRANCS
------------------- ------------------- -------------------
HIGH LOW HIGH LOW HIGH LOW
-------- -------- -------- -------- -------- --------
1997
First Quarter........................ 482 345 40.19 32.50 1,884 1,300
Second Quarter....................... 588 438 51.00 38.25 2,400 1,704
Third Quarter........................ 620 507 51.75 43.38 2,500 2,070
Fourth Quarter....................... 590 349 50.50 30.63 2,398 1,472
1998
First Quarter........................ 585 405 47.87 34.25 2,380 1,681
Second Quarter....................... 710 534 58.25 45.00 2,841 2,170
Third Quarter........................ 802 500 66.37 52.75 3,200 2,020
Fourth Quarter....................... 610 345 59.25 33.37 2,579 1,450
1999
First Quarter........................ 800 599 68.88 54.00 (1) (1)
Second Quarter....................... 870 710 70.25 59.75 (1) (1)
Third Quarter........................ 877 791 71.50 65.00 (1) (1)
Fourth Quarter....................... 1,253 842 98.50 71.50 (1) (1)
2000
First Quarter through February ,
2000...............................
(1) Beginning January 4, 1999, market prices of Adecco common shares were quoted
in Euros on the Paris Stock Exchange. The high and the low of the market
prices of Adecco common shares on the Paris Stock Exchange were [EURO]495.00
and 374.87 in the first quarter of 1999, [EURO]537.99 and 444.54 in the
second quarter of 1999, [EURO]543.94 and 501.56 in the third quarter of
1999, and [EURO]779.50 and 535.00 in the fourth quarter of 1999.
On February , 2000, the most recent practicable date prior to the printing
of this proxy statement/prospectus, the last sale price of Adecco common shares
as reported by the Swiss Stock Exchange was CHF , and the last price reported
by the Paris Stock Exchange was [EURO] . In addition, on February ,
2000, the last sale price of Adecco ADSs as quoted on Nasdaq was $ .
STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATION FOR EACH OF ADECCO
COMMON SHARES AND ADSS.
ADECCO DIVIDENDS
In 1997 and 1998, Adecco paid annual dividends on its common shares as
follows:
FISCAL YEAR
-------------------
CASH DIVIDEND PER COMMON SHARE 1997 1998
- ------------------------------ -------- --------
(CHF)
Adecco common share......................................... 5.00 5.50
In addition, the board of directors of Adecco will propose to the Adecco
shareholders on April 19, 2000 a cash dividend of CHF 8.40 per share. The record
date for the dividend has not been set, but typically follows approval of the
dividend at the meeting. Accordingly, Olsten stockholders who receive Adecco
ADSs in the merger will be entitled to receive the dividend.
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ADECCO HOLDERS OF RECORD
On November 8, 1999, there were about 5,552 holders of record of Adecco
common shares and about 124 holders of record of Adecco ADSs (including
brokerage firms holding Adecco common shares or ADSs in "street name" and other
nominees).
OTHER PROPOSALS
GENTIVA HEALTH SERVICES EXECUTIVE OFFICERS BONUS PLAN
GENERAL
Gentiva Health Services' board of directors has adopted, and Olsten, as the
sole stockholder of Gentiva Health Services before the merger, has approved the
executive officers bonus plan of Gentiva Health Services pursuant to which
executive officers of Gentiva Health Services may be entitled to receive annual
bonus compensation contingent upon the attainment of certain performance goals.
In order to qualify under the performance-based compensation exception under
Section 162(m) of the Internal Revenue Code of 1986, as amended, or Code, and
thereby avoid potential nondeductibility of bonus compensation paid to certain
executive officers, the material terms of the executive officers bonus plan
(including the class of eligible participants, the performance criteria
contemplated by the plan and the maximum amount payable under the plan) must be
approved by stockholders periodically. Accordingly, the executive officers bonus
plan is being submitted for approval by the stockholders of Olsten, who will
become stockholders of Gentiva Health Services following the merger.
A copy of the executive officers bonus plan is attached as Annex F to this
proxy statement/ prospectus. The material features of the executive officers
bonus plan are described below, but this description is only a summary and is
qualified in its entirety by reference to the actual text of the executive
officers bonus plan.
PURPOSE
The purpose of the executive officers bonus plan is to provide executives of
Gentiva Health Services with an opportunity to earn annual bonus compensation as
an incentive and reward for their leadership, ability and exceptional services.
ADMINISTRATION
The executive officers bonus plan will be administered by a committee of the
board of directors of Gentiva Health Services consisting of not less than two
persons who, to the extent required to satisfy the exception for performance
based compensation under Section 162(m) of the Code, will be "outside directors"
within the meaning of such section.
Subject to the express provisions of the executive officers bonus plan, the
committee of outside directors has the authority to (i) establish performance
goals for the granting of annual bonuses for each fiscal year of Gentiva Health
Services, (ii) determine the executives to whom annual bonus awards are to be
made for each fiscal year, (iii) determine whether the performance goals for any
fiscal year have been achieved, (iv) authorize payment of annual bonuses under
the executive officers bonus plan, (v) adopt, alter and repeal such
administrative rules, guidelines and practices governing the executive officers
bonus plan as it deems advisable, and (vi) interpret the terms and provisions of
the executive officers bonus plan.
DETERMINATION OF AWARDS
The amount of any annual bonus granted to an executive for any fiscal year
of Gentiva Health Services will be an amount not greater than the lesser of 200%
of such executive's annual base salary
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or $2.5 million, which amount will be determined based on the achievement of one
or more performance goals established by the committee of outside directors with
respect to such executive. Performance goals may vary from executive to
executive and shall be based upon such one or more of the following performance
criteria as the committee of outside directors may deem appropriate:
appreciation in stock value, total stockholder return, earnings per share,
operating income, net income, pro forma net income, return on equity, return on
designated assets, return on capital, economic value added, earnings, revenues,
expenses, operating profit margin, operating cash flow, gross profit margin, net
profit margin, employee turnover, employee headcount, labor costs, customer
service and accounts receivable. The performance goals may be determined by
reference to the performance of Gentiva Health Services, or of a subsidiary or
affiliate, or of a division or unit of any of the foregoing. Not later than the
day immediately preceding the first day of the fiscal year (or a later date as
may be permitted pursuant to Section 162(m) of the Code), the committee of
outside directors will establish (i) the executives who will be eligible for an
annual bonus for such fiscal year, (ii) the performance goals for such fiscal
year, and (iii) the corresponding annual bonus amounts payable under the
executive officers bonus plan upon achievement of the performance goals.
PAYMENT OF AWARD
An annual bonus (if any) to any executive for a fiscal year of Gentiva
Health Services will be paid in a single lump sum in cash as soon as practicable
after the end of the fiscal year, provided, however, that the committee of
outside directors shall have first certified in writing, (i) that a performance
goal with respect to the executive for such fiscal year was satisfied and the
level of the goal attained, and (ii) the amount of each executive's annual
bonus. If an executive dies after the end of a fiscal year but before receiving
payment of any annual bonus, the amount will be paid to a designated beneficiary
or, if no beneficiary has been designated, to the executive's estate.
Notwithstanding the foregoing, the committee of outside directors may determine
by separate employment agreement with any executive or otherwise, that all or a
portion of an executive's annual bonus for a fiscal year will be payable to such
executive upon his death, disability, or termination of employment with Gentiva
Health Services, or upon a change of control of Gentiva Health Services, during
the fiscal year of Gentiva Health Services.
NON-TRANSFERABILITY
No annual bonuses or rights under the executive officers bonus plan may be
transferred or assigned other than by will or by the laws of descent and
distribution.
AMENDMENTS AND TERMINATION
The entire board of directors may terminate the executive officers bonus
plan and may amend it from time to time; provided, however, that no termination
or amendment of the executive officers bonus plan will adversely affect the
rights of an executive or a beneficiary to a previously certified annual bonus.
Amendments to the executive officers bonus plan may be made without stockholder
approval except as required to satisfy Section 162(m) of the Code.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain Federal income tax aspects with
respect to the executive officers bonus plan based upon the laws in effect on
the date hereof.
Upon payment of an annual bonus to an executive for any fiscal year pursuant
to the executive officers bonus plan, such executive will recognize ordinary
income in the amount of such annual bonus on the date the compensation is paid.
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Gentiva Health Services will generally be entitled to a deduction in the
amount taxable as ordinary income to an executive, subject to the limitation
imposed by Section 162(m) of the Code. Gentiva Health Services intends that
compensation paid to an executive pursuant to the executive officers bonus plan
will generally qualify as "performance-based compensation" under Section 162(m)
of the Code and, consequently, should generally not be subject to the
$1 million deduction limit thereunder.
The foregoing is based upon Federal tax laws and regulations as presently in
effect and does not purport to be a complete description of the Federal income
tax aspects of the executive officers bonus plan. Also, the specified state and
local tax consequences to an executive and Gentiva Health Services may vary,
depending upon the laws of the various states and localities and the individual
circumstances of the executive.
NEW PLAN BENEFITS
The amount of benefits payable in the future under the executive officers
bonus plan is not currently determinable and, as of the date of this proxy
statement/prospectus, Gentiva Health Services has paid no bonuses under this
plan.
REQUIRED VOTE
In voting on approval of the executive officers bonus plan, the shares of
common stock and class B common stock shall vote together as one class with each
share of common stock entitled to one vote and each share of class B common
stock entitled to ten votes. Approval of the executive officers bonus plan
requires the affirmative vote by the holders of a majority of the votes
represented by the shares of common stock and class B common stock, voting as a
single class, present in person or by proxy at the special meeting of Olsten
stockholders. Unless marked to the contrary, proxies received will be voted for
the approval of the executive officers bonus plan.
OLSTEN'S BOARD OF DIRECTORS RECOMMENDS THAT OLSTEN'S STOCKHOLDERS VOTE FOR THE
GENTIVA HEALTH SERVICES EXECUTIVE OFFICERS BONUS PLAN.
GENTIVA HEALTH SERVICES 1999 STOCK INCENTIVE PLAN
GENERAL
Gentiva Health Services' board of directors has adopted, and Olsten, as the
sole stockholder of Gentiva Health Services prior to the merger, has approved,
the 1999 stock incentive plan of Gentiva Health Services. The stock incentive
plan is being proposed in order to enhance Gentiva Health Services' ability to
attract and retain highly qualified officers, employees, consultants and
directors, and to better enable these persons to participate in the long-term
success and growth of Gentiva Health Services.
A copy of the stock incentive plan is attached as Annex H to this proxy
statement/prospectus. The material features of the stock incentive plan are
described below, but this description is only a summary and is qualified in its
entirety by reference to the actual text of the stock incentive plan.
TYPES OF AWARDS
Awards under the stock incentive plan may be in the form of (i) "incentive
stock options" within the meaning of Section 422 of the Code or any successor
provision thereto, and (ii) options that do not qualify as incentive stock
options, or "non-qualified stock options."
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ADMINISTRATION
The stock incentive plan will be administered by a committee of the board of
directors of Gentiva Health Services consisting of not less than two persons
who, to the extent required to satisfy the exception for performance based
compensation under Section 162(m) of the Code, will be "outside directors"
within the meaning of such section.
Subject to the express provisions of the stock incentive plan, the committee
of directors has the power to select the eligible employees, consultants and
directors to whom stock options are to be granted under the stock incentive
plan, and to determine the terms and conditions of each stock option granted
thereunder. Such committee's authority shall include, but is not limited to, the
authority to determine the number of shares of common stock of Gentiva Health
Services to be covered by each award. However, the maximum number of shares of
common stock for which grants may be made to any employee, consultant or
director in any calendar year is 300,000. The committee also has authority to
adopt and revise rules, guidelines and practices governing the stock incentive
plan, to interpret the terms and provisions of the stock incentive plan and any
award granted thereunder, and to otherwise supervise the administration of the
stock incentive plan. The Chief Executive Officer of the Company may award
options to purchase up to 10,000 shares of common stock to employees who are not
officers or directors.
STOCK SUBJECT TO STOCK INCENTIVE PLAN
A total of 5,000,000 shares of common stock of Gentiva Health Services are
reserved for issuance upon exercise of stock options granted under the stock
incentive plan. To the extent that a stock option terminates without having been
exercised, the shares subject to the award will again be available for
distribution in connection with future awards under the stock incentive plan.
In the event of any merger, reorganization, consolidation, sale of
substantially all assets, recapitalization, common stock dividend, common stock
split, spin-off, split-up, split-off, distribution of assets or other change in
corporate structure affecting the common stock, a substitution or adjustment, as
may be determined to be appropriate by the committee of outside directors in its
sole discretion, will be made in the total number of shares reserved for
issuance under the stock incentive plan, the number of shares available for any
individual awards, the number and kind of shares, other securities or other
consideration subject to outstanding awards and the exercise price to be paid by
optionees with respect to outstanding awards; provided, however, that no
adjustment may increase the total value of any outstanding award.
ELIGIBILITY
Officers and other employees of Gentiva Health Services or a "related
company" (which is defined in the stock incentive plan as any corporation,
partnership, joint venture or other entity in which Gentiva Health Services
owns, directly or indirectly, at least a 20% beneficial ownership interest) and
consultants and directors are eligible to be granted awards under the stock
incentive plan; provided, however, that, to the extent required under
Section 422 of the Code, incentive stock options may be granted only to officers
and other employees of Gentiva Health Services or any subsidiary corporation in
which Gentiva Health Services owns, directly or indirectly, stock having 50% or
more of the total combined voting power of all classes of stock. The persons who
will be granted awards under the stock incentive plan will be selected from time
to time by the committee of outside directors, in its sole discretion, from
among those eligible.
TERMS OF STOCK OPTIONS
OPTION PRICE. The option price per share of common stock purchasable under
a stock option is determined by the committee of outside directors; provided,
however, that the option price of non-qualified stock options cannot be less
than 85%, and the option price of incentive stock options
148
cannot be less than 100%, of the fair market value of the common stock on the
date of award of each stock option.
OPTION TERM. The term of each stock option will be ten years from the date
of grant, unless a shorter term is provided for by the committee of outside
directors at the time of grant, and subject to earlier termination as provided
below.
EXERCISABILITY. Except as otherwise provided by the committee of outside
directors at the time of grant or as provided as described below under "Change
of Control", stock options vest and are first exercisable in annual installments
of 25% of the shares originally subject thereto, commencing on the first
anniversary of the date of grant of the stock option, and an additional 25% of
the shares each year thereafter. The committee of outside directors may
accelerate an exercise date of any stock option or otherwise waive the
installment exercise provisions at any time (including at time of grant) in
whole or in part. Stock options granted to non-employee directors will vest and
become exercisable one year following the date of grant. Except in the case of
death, disability, retirement or removal of a director, a stock option is
exercisable for only 90 days (one year in the case of non-employee directors)
following the optionee's termination of service with Gentiva Health Services or
a related company.
METHOD OF EXERCISE. Stock options may be exercised in whole or in part at
any time during the option term by giving written notice of exercise to Gentiva
Health Services specifying the number of shares to be purchased, accompanied by
payment of the option price. Payment of the option price may be made in cash or
cash equivalents or, if permitted by the committee of outside directors (either
in the option agreement or at the time of exercise), by delivery of shares of
common stock of Gentiva Health Services already owned by the optionee or
withholding of shares subject to awards under the stock incentive plan (in each
case, the shares having a fair market value on the date of exercise equal to the
total option price), or in any other manner permitted by law and as determined
by the committee of outside directors, or any combination of the foregoing.
NO STOCKHOLDER RIGHTS. An optionee will have neither rights to dividends
nor other rights of a stockholder with respect to shares subject to a stock
option until the optionee has given written notice of exercise and has paid for
the shares.
NON-TRANSFERABILITY. Unless otherwise provided by the committee of outside
directors, no stock option is transferable by the optionee other than by will or
by the laws of descent and distribution and during the optionee's lifetime, all
stock options are exercisable only by the optionee.
CHANGE OF CONTROL
In the event of a change of control (as defined in the plan), unless
otherwise determined by the committee of outside directors at the time of grant
or by amendment (with the holder's consent) of the grant, all outstanding stock
options awarded under the stock incentive plan will become fully exercisable and
vested.
AMENDMENTS AND TERMINATION
The stock incentive plan will terminate on November 11, 2009, and no stock
option shall be awarded under the stock incentive plan on or after that date.
The full board of directors may discontinue the stock incentive plan at any time
and may amend it from time to time. No amendment or discontinuation of the stock
incentive plan may adversely affect any award previously granted without the
optionee's written consent. Amendments may be made without stockholder approval
except as required to satisfy Section 162(m) of the Code or, with respect to
incentive stock options, Section 422 of the Code.
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NEW PLAN BENEFITS
The amount of benefits payable in the future under the stock incentive plan
is not currently determinable and, as of the date of this proxy
statement/prospectus, no stock options have been granted under this plan.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE STOCK INCENTIVE PLAN
The following is a summary of some Federal income tax aspects of awards made
under the stock incentive plan, based upon the laws in effect on the date
hereof.
INCENTIVE STOCK OPTIONS. Generally, no taxable income is recognized by the
optionee upon the grant of an incentive stock option or upon the exercise of an
incentive stock option either during the period of the optionee's employment
with Gentiva Health Services or one of its subsidiaries (as defined in Section
424(f) of the Code) or within the period ending three months (12 months, in the
event of permanent and total disability or death of the optionee) after
termination of employment. However, the exercise of an incentive stock option
may result in an alternative minimum tax liability to an optionee since the
excess of the fair market value of the optioned stock at the date of exercise
over the exercise price must be included in alternative minimum taxable income.
If the optionee holds shares acquired upon the exercise of an incentive
stock option for at least two years from the date of grant of the option and for
at least one year from the date of exercise, any gain on a subsequent sale of
such shares will be considered as long-term capital gain to an optionee. In
general, long-term capital gain is subject to lower maximum federal income tax
rates than ordinary income. The gain recognized upon the sale of the shares is
equal to the excess of the selling price of the shares over the exercise price.
However, if the optionee sells the shares prior to the later of two years
from the date of grant of the option and one year from the date of exercise,
generally (a) the optionee will recognize ordinary income in an amount equal to
the lesser of (1) the fair market value of the shares on the date of exercise,
less the exercise price or (2) the amount realized on the date of sale, less the
exercise price, and (b) if the selling price of the shares exceeds the fair
market value on the date of exercise, the excess will be taxable to the optionee
as short-term or long-term capital gain.
No deduction will be allowed to Gentiva Health Services with respect to
incentive stock options for federal income tax purposes, unless the optionee
sells the shares as provided in the previous paragraph, in which case, Gentiva
Health Services will generally be entitled to deduct the amount of ordinary
income recognized by the optionee.
NON-QUALIFIED STOCK OPTIONS. In general, with respect to non-qualified
stock options granted to optionees of Gentiva Health Services or a related
company: (a) no income is recognized by the optionee at the time the option is
granted; (b) upon exercise of the option, the optionee recognizes ordinary
income in an amount equal to the difference between the exercise price and the
fair market value of the shares on the date of exercise; and (c) at disposition
any appreciation after the date of exercise is treated as long-term or
short-term capital gain, depending on the length of time the shares are held by
the optionee.
Generally, Gentiva Health Services will, subject to possible limitations
imposed by Section 162(m) of the Code (see discussion below), be entitled to a
tax deduction equal to the amount of ordinary income recognized by the optionee
at the date of exercise.
$1 MILLION LIMITATION ON DEDUCTIBLE COMPENSATION. Section 162(m) of the
Code generally limits Gentiva Health Services' deduction with respect to
compensation paid to each of its "covered employees" (generally defined as the
chief executive officer and four highest compensated officers of the corporation
other than the chief executive officer) to $1 million per year. This deduction
limit,
150
however, does not apply to certain "performance-based compensation," including
stock options which, among other things, are granted at an exercise price which
is not less than fair market value. Gentiva Health Services intends that stock
options granted under the stock incentive plan, at not less than fair market
value of the common stock subject to the option at the time of grant, will
qualify as "performance-based compensation."
The foregoing is based upon federal tax laws and regulations as presently in
effect and does not purport to be a complete description of the federal income
tax aspects of the stock incentive plan. Also, the specific state and local tax
consequences to each optionee under the stock incentive plan may vary, depending
upon the laws of the various states and localities and the individual
circumstances of each optionee.
REQUIRED VOTE
In voting on approval of the stock incentive plan, the shares of common
stock and class B common stock shall vote together as one class with each share
of common stock entitled to one vote and each share of class B common stock
entitled to ten votes. Approval of the plan requires the affirmative vote by the
holders of a majority of the votes represented by the shares of common stock and
class B common stock, voting as a single class, present in person or by proxy at
the special meeting of Olsten stockholders. Unless marked to the contrary,
proxies will be voted for approval of the amendments.
OLSTEN'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT OLSTEN'S
STOCKHOLDERS VOTE FOR THE GENTIVA HEALTH SERVICES 1999 STOCK INCENTIVE PLAN.
GENTIVA HEALTH SERVICES STOCK & DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE
DIRECTORS
GENERAL
Gentiva Health Services' board of directors has adopted, and Olsten, as the
sole stockholder of Gentiva Health Services before the merger, has approved,
Gentiva Health Services' stock & deferred compensation plan for non-employee
directors which provides for payment of annual retainer fees for non-employee
directors in the form of shares of common stock of Gentiva Health Services and
also allows deferral of these payments into share units. This plan is being
proposed in order to enhance Gentiva Health Services' ability to attract and
retain highly qualified non-employee directors.
A copy of the plan is attached as Annex H to this proxy statement. The
material features of the stock & deferred compensation plan are described below,
but this description is only a summary and is qualified in its entirety by
reference to the actual text of the stock and deferred compensation plan.
EFFECTIVE DATE AND SHARES RESERVED
The stock & deferred compensation plan is effective on the date of Gentiva
Health Services' first annual general stockholders meeting following the
split-off.
The total number of shares of common stock of Gentiva Health Services
reserved for issuance under the stock & deferred compensation plan is 150,000.
In the event of any change in capitalization affecting the common stock of
Gentiva Health Services, such as a stock dividend, stock split or
recapitalization, there shall automatically be substituted (a) for each share
unit a new unit and (b) for the number of shares reserved for issuance under the
stock & deferred compensation plan a number of shares or other consideration, in
the case of (a) and (b) above, representing the number and kind of shares, other
securities or other consideration into which outstanding shares shall be changed
or for which the shares shall be exchanged.
151
ANNUAL RETAINER PAID-IN SHARES
Each non-employee director's annual retainer fee shall be paid in shares of
common stock in an amount (rounded to the nearest 100 shares) determined by
dividing $25,000 by the average closing price of shares of common stock on the
Nasdaq for the ten trading days immediately before Gentiva Health Services'
annual stockholders meeting at which directors are elected or reelected.
Proportionate awards are made for anyone who becomes a non-employee director
other than on the date of the annual stockholders meeting. Payments under the
stock & deferred compensation plan will be based on fiscal years of about twelve
months beginning on the date of Gentiva Health Services' annual stockholders
meeting for a year and ending on the day immediately preceding Gentiva Health
Services' annual general stockholders meeting for the following year. The
initial plan year will begin on the date of Gentiva Health Services' first
annual stockholders meeting following the split-off. The shares are payable
30 days following the annual stockholders meeting or 30 days following the date
the person becomes a director. Shares distributed are fully vested.
DEFERRAL OF SHARES
Non-employee directors can make an irrevocable election in the preceding
calendar year to defer the retainer fee shares. Amounts deferred are credited in
the form of share units to a share unit account. If any dividends are payable on
shares of Gentiva Health Services common stock during the deferral period,
non-employee directors shall have dividend equivalents of equal amount paid to
them in cash. Share units in the account are fully vested at all times.
A non-employee director's "plan benefit," which consists of shares of common
stock equal to the number of share units in the non-employee director's account,
shall be distributed either in a lump sum at the time of termination of the
non-employee director's service or in up to three annual installments beginning
at termination of service, as elected by the non-employee director at least one
year in advance of termination.
Upon death of a non-employee director, the plan benefit shall be distributed
to beneficiaries specified by the non-employee director or otherwise to the
non-employee director's surviving spouse or living children or estate.
NON-TRANSFERABILITY
Except in the case of death, payment of plan benefits may not be
transferred.
AMENDMENT AND TERMINATION
The board may amend, alter, suspend, discontinue or terminate the plan
(including, without limitation, amending the dollar amount set forth in "Annual
Retainer Paid in Shares" above) without the consent of stockholders, provided
that no amendment or termination may materially and adversely affect the rights
of any non-employee director without his or her consent.
UNFUNDED
The unit awards account of the stock & deferred compensation plan is
unfunded, and non-employee directors stand as general creditors.
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NEW PLAN BENEFITS
NAMES AND POSITION SHARES OR SHARE UNITS(A)
- ------------------ ------------------------
Non-employee director group................................. (a)
- ------------------------
(a) Each non-executive director will receive on an annual basis either shares or
share units (each unit representing one share) having a total value of
$25,000.
SOME FEDERAL INCOME TAX CONSEQUENCES
In general, the fair market value of shares of common stock received by
non-employee directors will be taxable as ordinary income to them when received,
and Gentiva Health Services will be entitled to a corresponding deduction.
The foregoing is based upon federal tax laws and regulations as presently in
effect and does not purport to be a complete description of the federal income
tax aspects of the stock & deferred compensation plan. Also, the specific state
and local tax consequences to each non-employee director under the stock &
deferred compensation plan may vary, depending upon the laws of the various
states and localities and their individual circumstances.
REQUIRED VOTE
In voting on approval of the stock & deferred compensation plan, the shares
of common stock and class B common stock shall vote together as one class with
each share of common stock entitled to one vote and each share of class B common
stock entitled to ten votes. Approval of the stock & deferred compensation plan
requires the affirmative vote by the holders of a majority of the votes
represented by the shares of common stock and class B common stock, voting as a
single class, present in person or by proxy at the special meeting of Olsten
stockholders. Unless marked to the contrary, proxies received will be voted for
approval of the stock deferred compensation plan.
OLSTEN'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT OLSTEN'S STOCKHOLDERS
VOTE FOR THE GENTIVA HEALTH SERVICES STOCK & DEFERRED COMPENSATION PLAN.
GENTIVA HEALTH SERVICES EMPLOYEE STOCK PURCHASE PLAN
GENERAL
Gentiva Health Services' board of directors has adopted, and Olsten, as the
sole stockholder of Gentiva Health Services before the merger, has approved, the
employee stock purchase plan of Gentiva Health Services pursuant to which
employees of Gentiva Health Services and its subsidiaries may be entitled to
purchase Gentiva Health Services stock. The employee stock purchase plan is
intended to enhance Gentiva Health Services' ability to attract and retain
employees and to better enable such persons to participate in the long-term
success and growth of Gentiva Health Services.
A copy of the employee stock purchase plan is attached as Annex I to this
proxy statement/ prospectus. The material features of the employee stock
purchase plan are described below, but this description is only a summary and is
qualified in its entirety by reference to the actual text of the employee stock
purchase plan.
ADMINISTRATION
The employee stock purchase plan will be administered by a committee of the
board of directors of Gentiva Health Services.
153
Subject to the express provisions of the employee stock purchase plan, the
committee of independent directors has the power to determine the terms and
conditions of each offering of stock to employees thereunder. The committee also
has authority to adopt and revise rules, guidelines and practices governing the
employee stock purchase plan, to interpret the terms and provisions of the
employee stock purchase plan and any offering made thereunder, and to otherwise
supervise the administration of the employee stock purchase plan.
STOCK SUBJECT TO EMPLOYEE STOCK PURCHASE PLAN
A total of 1,200,000 shares of common stock of Gentiva Health Services are
reserved for issuance under the employee stock purchase plan, subject to
equitable adjustment by the committee in the event of stock dividends,
recapitalizations and other similar corporate events.
ELIGIBILITY
All employees of Gentiva Health Services or any of its subsidiaries who have
been employed for at least 8 months (or another period determined by the
committee not in excess of two years) will be eligible to purchase stock under
this plan, except that employees whose customary employment is twenty hours or
less per week will be excluded.
OPERATION OF THE PLAN
The plan is designed to qualify as an "employee stock purchase plan" under
Section 423 of the Code. The plan will allow participating employees to purchase
Gentiva Health Services common stock through payroll withholding. The plan
provides for consecutive six month offering periods (or the other periods of not
more than 27 months as determined by the committee) under which participating
employees can elect to have amounts withheld from their total compensation
during the offering period and applied to purchase Gentiva Health Services
common stock at the end of the period. Unless otherwise determined by the
committee before an offering period, the purchase price will be the lesser of
85% of the fair market value of the Gentiva Health Services common stock at the
beginning or end of the offering period. Unless otherwise determined by the
committee, the maximum number of shares that may be purchased by an employee in
any offering is 5,000 shares. In addition, applicable Code limitations specify,
in general, that a participant's right to purchase stock under the plan cannot
accrue at a rate in excess of $25,000 (based on the value at the beginning of
the applicable offering periods) per calendar year.
AMENDMENTS AND TERMINATION
The employee stock purchase plan will terminate when all shares authorized
to be issued under it have been exhausted. The full board of directors may
discontinue the employee stock purchase plan at any time and may amend it from
time to time. Amendments may be made without stockholder approval except as
required to satisfy Section 423 of the Code.
NEW PLAN BENEFITS
The amount of benefits payable in the future under the employee stock
purchase plan is not currently determinable and, as of the date of this proxy
statement/prospectus, no stock has been granted under this plan.
SOME FEDERAL INCOME TAX CONSEQUENCES OF THE EMPLOYEE STOCK PURCHASE PLAN
The following is a summary of some of the federal income tax consequences to
participants in the plan and to Gentiva Health Services, based upon current
provisions of the Code and the regulations
154
and rulings thereunder, and does not address the consequences under state or
local or any other applicable tax laws.
A participating employee in the plan will not recognize income at the time a
purchase right is granted at the beginning of an offering period or when the
employee purchases shares at the end of the offering period. However, the
employee will be taxed on amounts withheld from salary under the plan as if
actually received, and Gentiva Health Services will generally be entitled to a
corresponding income tax deduction.
If a participating employee disposes of shares purchased pursuant to the
plan after one year from the end of the applicable offering period and two years
from the beginning of the applicable offering period, the employee must include
in gross income as compensation (as ordinary income and not as capital gain) for
the taxable year of disposition an amount equal to the lesser of (a) the excess
of the fair market value of the shares at the beginning of the applicable
offering period over the purchase price computed on the first day of the
offering period or (b) the excess of the fair market value of the shares at the
time of disposition over their purchase price. Thus, if the one and two year
holding periods described above are met, the participating employee's ordinary
compensation income will be limited to the discount available on the first day
of the applicable offering period. If the amount recognized upon such a
disposition by way of sale or exchange of the shares exceeds the purchase price
plus the amount, if any, included in income as ordinary compensation income, the
excess will be long-term capital gain. If the one and two year holding periods
described above are met, Gentiva Health Services will not be entitled to any
income tax deduction.
If the participating employee disposes of shares within one year from the
end of the applicable offering period or two years from the beginning of the
offering period, the employee will recognize ordinary income at the time of
disposition which will equal the excess, if any, of the fair market value of the
shares on the date the participating employee purchases the shares (I.E., the
end of the applicable offering period) over the amount paid for the shares.
Gentiva Health Services will generally be entitled to a corresponding income tax
deduction. The excess, if any, of the amount recognized on disposition of the
shares over their fair market value on the date of purchase (I.E., the end of
the applicable offering period) will be short-term capital gain, unless the
participating employee's holding period for the shares (which will begin at the
time of purchase at the end of the offering period) is more than one year. If
the participating employee disposes of the shares for less than the purchase
price for the shares, the difference between the amount recognized and such
purchase price will be a long- or short-term capital loss, depending upon the
holding period for the shares.
REQUIRED VOTE
In voting on approval of the employee stock purchase plan, the shares of
common stock and class B common stock shall vote together as one class with each
share of common stock entitled to one vote and each share of class B common
stock entitled to ten votes. Approval of the plan requires the affirmative vote
by the holders of a majority of the votes represented by the shares of common
stock and class B common stock, voting as a single class, present in person or
by proxy at the special meeting of Olsten stockholders. Unless marked to the
contrary, proxies received will be voted for approval of the amendments.
OLSTEN'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT OLSTEN'S STOCKHOLDERS
VOTE FOR THE GENTIVA HEALTH SERVICES EMPLOYEE STOCK PURCHASE PLAN.
155
ENFORCEABILITY OF CIVIL LIABILITIES UNDER THE UNITED STATES FEDERAL SECURITIES
LAW
Adecco is a SOCIETE ANONYME organized under the laws of Switzerland. Certain
directors, officers and controlling persons of Adecco and certain of the experts
named in this proxy statement/prospectus reside outside of the United States. A
substantial portion of Adecco's assets are located outside of the United States.
As a result, it may be difficult or impossible for investors:
- to effect service of process within the United States upon the persons
named above, or
- to enforce against them in U.S. courts or courts outside of the United
States judgments of U.S. courts predicated upon the civil liability
provisions of the U.S. federal securities laws.
There is doubt as to the enforceability, in original actions in Swiss courts
or in actions for enforcement of judgments of U.S. courts, of civil liabilities
predicated solely upon the U.S. federal securities laws. In the merger
agreement, Adecco has agreed to submit itself and its property to the
jurisdiction of Delaware state courts and U.S. courts sitting in the State of
Delaware in any legal action relating to the merger agreement and the
transactions contemplated by the merger agreement.
OTHER MATTERS
We do not expect that any matters other than those described in this proxy
statement/prospectus will be brought before the meeting. If any other matters
are presented, however, we intend to vote your proxy in accordance with our
discretion.
LEGAL MATTERS
The validity of the Adecco common shares to be issued in the merger is being
passed upon for Adecco by Bar & Karrer, Zurich, Switzerland.
EXPERTS
The Adecco financial statements and schedules incorporated by reference in
this prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen SA, independent public accountants, as indicated in their
reports with respect thereto, and are included in reliance upon the authority of
said firm as experts in giving said reports.
The financial statements incorporated in this proxy statement/prospectus by
reference to the Olsten annual report on Form 10-K/A for the year ended
January 3, 1999 have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
156
INDEX TO ADECCO SA FINANCIAL STATEMENTS
Consolidated Balance Sheets as of October 3, 1999
(Unaudited) and January 3, 1999........................... F-2
Unaudited Consolidated Statements of Operations for the nine
months ended October 3, 1999
and September 27, 1998.................................... F-3
Unaudited Consolidated Statements of Cash Flows for the nine
months ended October 3, 1999
and September 27,1998..................................... F-4
Notes to Unaudited Consolidated Financial Statements for the
nine months ended October 3, 1999 and September 27,
1998...................................................... F-5
F-1
ADECCO SA
CONSOLIDATED BALANCE SHEETS
(In CHF millions except for share data)
JANUARY 3, 1999 OCTOBER 3, 1999
--------------- ---------------
(UNAUDITED)
ASSETS:
Current assets:
Cash and cash equivalents............................... 540 383
Trade accounts receivable, net.......................... 2,611 3,427
Other current assets........................................ 342 453
----- -----
Total current assets.................................. 3,493 4,263
Property, equipment and leasehold improvements............ 248 367
Goodwill, net............................................. 1,730 1,833
Other assets.............................................. 136 173
----- -----
5,607 6,636
===== =====
LIABILITIES:
Current liabilities:
Short-term debt and current maturities of long-term
debt.................................................. 303 1,235
Accounts payable and accrued expenses................... 2,399 2,923
----- -----
Total current liabilities............................. 2,702 4,158
Long term debt............................................ 688 460
Other liabilities......................................... 144 148
----- -----
Total liabilities..................................... 3,534 4,766
Minority interests........................................ 5 7
----- -----
SHAREHOLDERS' EQUITY:
Participation certificates, CHF 2 par value--
Authorized and issued: 94,185 and 24,500
Outstanding: 59,705 and 13,265
Common stock, CHF 10 par value--
Authorized: 17,766,182 and 19,783,019 shares
Issued: 17,084,347 and 17,177,857 shares
Outstanding: 17,026,909 and 17,126,534 shares........... 171 172
Additional paid-in capital................................ 1,904 1,921
Retained earnings (deficit)............................... 20 (225)
Accumulated other comprehensive income.................... 3 20
----- -----
2,098 1,888
Less treasury stock:
Common stock............................................ (26) (24)
Participation certificates.............................. (4) (1)
----- -----
2,068 1,863
----- -----
5,607 6,636
===== =====
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-2
ADECCO SA
CONSOLIDATED STATEMENTS OF OPERATIONS
(In CHF millions, except share and per share data)
(Unaudited)
FOR THE NINE MONTHS ENDED
---------------------------
SEPTEMBER 27, OCTOBER 3,
1998 1999
------------- -----------
Net service revenues........................................ 11,312 13,297
Direct costs of services.................................... (9,354) (10,903)
---------- ----------
1,958 2,394
Selling, general and administrative expenses................ (1,470) (1,790)
Amortization of goodwill.................................... (456) (508)
---------- ----------
32 96
Interest and other income, net.............................. 15 16
Interest expense............................................ (69) (89)
---------- ----------
Income (loss) before income taxes and minority interest..... (22) 23
Provision for income taxes.................................. (130) (149)
Income applicable to minority interest...................... (1) --
---------- ----------
Net loss.................................................... (153) (126)
========== ==========
Basic and diluted net loss per share........................ (9.11) (7.37)
Basic and diluted weighted average common shares............ 16,790,698 17,093,863
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-3
ADECCO, S.A.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In CHF millions)
(Unaudited)
FOR THE NINE MONTHS ENDED
---------------------------------------
SEPTEMBER 27, 1998 OCTOBER 3, 1999
------------------ ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. (153) (126)
Adjustments to reconcile loss from operations to net cash
provided by operating activities:
Depreciation and amortization........................... 515 580
Other................................................... 19 24
Changes in operating assets and liabilities, net of
acquisitions and sales of subsidiaries:
Trade accounts receivable............................... (441) (503)
Accounts payable and accrued expenses................... 329 263
Other current assets.................................... 85 (76)
Other noncurrent assets and liabilities................. (63) 33
---- ----
Cash flows from operating activities.................. 291 195
---- ----
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, equipment and leasehold
improvements............................................ (90) (117)
Cash purchase price for Delphi, net of cash acquired of
CHF 99.................................................. -- (296)
Cash purchase price for Career Staff, net of cash acquired
of CHF 75............................................... -- (37)
Other acquisitions and investing activity................. (42) (93)
---- ----
Cash flows from investing activities.................. (132) (543)
---- ----
CASH FLOW FROM FINANCING ACTIVITIES
Net increase (decrease) in short-term debt................ (440) 551
Net increase in long-term debt............................ 71 (19)
Dividends paid to shareholders............................ (91) (120)
Issuance of common stock, net............................. 302 --
Common stock options exercised............................ 4 21
Other Financing Activities................................ 4 (31)
---- ----
Cash flows from financing activities.................. (150) 402
---- ----
EFFECT OF EXCHANGE RATES CHANGES ON CASH.................... (1) (211)
---- ----
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 8 (157)
Cash and cash equivalents:
Beginning of period....................................... 439 540
---- ----
End of period............................................. 447 383
==== ====
Cash paid for interest...................................... 36 21
==== ====
Cash paid for taxes......................................... 44 126
==== ====
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
F-4
ADECCO SA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. ACCOUNTING POLICIES
The unaudited consolidated financial statements have been prepared by Adecco
SA ("Adecco") pursuant to the rules and regulations of the Securities and
Exchange Commission and, in the opinion of management, include all adjustments
necessary for a fair presentation of results of operations, financial position
and cash flows for each period presented. Such adjustments are of a normal
recurring nature. Results for interim periods are not necessarily indicative of
results for a full year. The year-end balance sheet data was derived from
audited financial statements, but does not include all disclosures required by
generally accepted accounting principles.
2. COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) consists of net losses and foreign currency
translation adjustments as follows:
FOR THE NINE MONTHS ENDED
------------------------------
SEPTEMBER 30, OCTOBER 3,
1998 1999
------------- ----------
(In CHF millions)
Net loss.......................................... (153) (126)
Foreign currency translation adjustments.......... (27) 17
---- ----
Total comprehensive loss.......................... (180) (109)
==== ====
3. NET LOSS PER SHARE
Adecco computes basic and diluted net loss per share using the weighted
average number of common stock and dilutive potential common stock. Potential
common stock includes stock options.
LOSS SHARES LOSS
(NUMERATOR) (DENOMINATOR) PER SHARE
--------------- ---------------- ---------------
(In CHF millions, except share and per share data)
FOR THE NINE MONTHS ENDED
- ----------------------------------
September 30, 1998................ (153) 16,790,698 (9.11)
October 3, 1999................... (126) 17,093,863 (7.37)
A weighted average of 460,607 and 340,192 options at CHF 439 and CHF 320 per
share were outstanding during the nine months ended October 3, 1999 and
September 27, 1998. These options were not included in the computation of
diluted earnings per share as they were antidilutive.
4. ACQUISITIONS
In April 1999 Adecco acquired Delphi Group plc ("Delphi") for approximately
CHF 395 million. Delphi is an information technology service and staffing
business with operations in the United Kingdom, the United States, and Europe.
The acquisition was financed from bank borrowings and was accounted for as a
purchase. The excess of the purchase price over the fair value of the net assets
acquired was CHF 308 million and was recorded as goodwill. Goodwill is amortized
on a straight-line basis over a five-year period. The results of the operations
of Delphi have been included in the financial statements beginning April 1999.
F-5
4. ACQUISITIONS (CONTINUED)
The following unaudited pro forma information shows consolidated operating
results as if the acquisition of Delphi had occurred at the beginning of 1999
for the nine months ended October 3, 1999 and at the beginning of 1998 for the
year ended January 3, 1999.
JANUARY 3, OCTOBER 3,
1999 1999
----------- -----------
(In CHF millions, except
per share data)
Revenues............................................... 16,047 13,507
Net loss............................................... (221) (129)
Basic and diluted net loss per share................... (13.16) (7.55)
In May 1999, Adecco acquired Career Staff Co. Ltd. ("Career Staff"), a
personnel services business in Japan, for approximately CHF 128 million. The
acquisition was financed using existing credit facilities and internal resources
and is accounted for as a purchase. The excess of the purchase price over the
fair value of the net assets acquired was CHF 102 million and was recorded as
goodwill. Goodwill is amortized on a straight-line basis over a five-year
period. The results of operations of Career Staff have been included in the
financial statements beginning May 1999.
The following unaudited pro forma information shows consolidated operating
results as if the acquisition of Career Staff had occurred at the beginning of
1999 for the nine months ended October 3, 1999 and at the beginning of 1998 for
the year ended January 3, 1999.
JANUARY 3, 1999 OCTOBER 3, 1999
--------------- ---------------
(IN CHF MILLIONS,
EXCEPT PER SHARE DATA)
Revenues.................................................... 15,909 13,511
Net loss.................................................... (195) (129)
Basic and diluted net loss per share........................ (11.61) (7.55)
In August of 1999, Adecco agreed to acquire Olsten Corporation for a
combination of cash and stock and assume up to $750 million (CHF 1,119 million)
of net debt. Gentiva Health Services will be split off to Olsten stockholders as
a separate publicly traded entity. In the transaction, holders of common stock
of Olsten will receive shares of the new health services company, which will
continue to conduct the health care business of Olsten; American Depositary
Shares ("ADSs"), which each represent 1/8 of a share of Adecco common stock; and
cash. Stockholders may elect to receive 0.12472 Adecco ADSs for half of their
Olsten shares, and $8.75 per share cash for the remainder, subject to proration.
The Agreement is subject to a number of conditions, including stockholder and
regulatory approvals, and is expected to close in the first quarter. There can
be no assurance that the transaction will be consummated.
5. LONG-TERM DEBT
In February 1997, Adecco entered into a three year CHF 500 million unsecured
multicurrency revolving credit facility due in February 2000. Amounts drawn bear
interest at LIBOR plus .175% plus an annual commitment fee on the undrawn
portion of the facility of 0.085%. Adecco draws amount for terms of one to three
months. Adecco funded the acquisition of Career Staff primarily with borrowings
under this credit facility.
In February 1999, Adecco entered into a L175 million unsecured credit
facility, which bears an interest rate of LIBOR plus 0.3% and is due
February 2000. At June 30, 1999 the company had borrowed CHF 395 million at an
interest rate of 5.7%. The proceeds of this facility were used in
F-6
5. LONG-TERM DEBT (CONTINUED)
connection with the Delphi acquisition. The outstanding long-term debt of Delphi
consisted of a $50 million senior loan note bearing an interest rate of 7.1% due
in 2007. At October 30, 1999 the outstanding balance of the senior loan note
amounted to CHF 76 million.
6. SHAREHOLDERS' EQUITY
At their annual meeting on April 20, 1999, the Adecco shareholders voted to,
among other things, authorize up to 600,000 additional Adecco shares to be
issued no later than April 20, 2000 for cash as may be advisable to strengthen
Adecco's financial condition, and authorize up to 1,400,000 additional Adecco
common shares to finance possible mergers and acquisition and to convert all
Adecco shares from bearer shares to registered shares. At a special meeting of
shareholders on September 10, 1999, the Adecco shareholders voted to authorize
up to 700,000 additional Adecco common shares to be used in connection with the
proposed merger of Olsten, and to limit the total number of shares to be issued
under the April and September distributions to 1,400,000 shares.
On April 20, 1999, Adecco's Board of Directors declared a cash dividend of
CHF 7.00 per share which was paid on April 26, 1999 to the shareholders of
record on April 26, 1999.
7. SEGMENT REPORTING
Adecco has adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS No. 131 establishes standards for
reporting information about operating segments in annual statements. It also
establishes standards for related disclosures about products and services and
geographic areas. Operating segments are defined as components of an enterprise
about which separate financial information is available that is evaluated
regularly by the chief operating decision-maker in deciding how to allocate
resources and measure performance. Adecco's chief operating decision-maker is
the chief executive officer. The operating segments of Adecco are defined by
geography. Adecco's reportable operating segments are France, North America,
Northern Europe and All Other Regions. Adecco evaluates performance based on
country contribution which is defined as the amount of segment profit or loss
before intercompany charges, interest income and expense charges, goodwill
amortization and income taxes. The accounting policies of the operating segments
are the same as those described in the summary of significant accounting
policies on the financial statement of Adecco on Form 20-F/A, incorporated by
reference in this document. Adecco delivers
F-7
7. SEGMENT REPORTING (CONTINUED)
general staffing services and specialty services within its segments. Specialty
services include accounting and finance, information technology, engineering and
technical, and outplacement and career transition.
NORTH NORTHERN ALL OTHER
FRANCE AMERICA(1) EUROPE(2) REGIONS(3) TOTAL
-------- ---------- --------- ---------- --------
(In CHF millions)
AS OF AND FOR THE NINE MONTHS ENDED
SEPTEMBER 27, 1998
Sales...................................... 4,628 3,419 2,187 1,078 11,312
Depreciation and amortization.............. 18 116 32 349 515
Country contribution....................... 181 169 97 41 488
Fixed asset additions
Segment assets............................. 1,935 1,075 732 2,002 5,744
Long lived assets(4)....................... 70 71 81 151 373
OCTOBER 3, 1999
Sales...................................... 5,060 3,608 2,691 1,938 13,297
Depreciation and amortization.............. 20 124 68 368 580
Country contribution....................... 220 220 135 29 604
Fixed asset additions
Segment assets............................. 1,994 1,190 1,290 2,162 6,636
Long lived assets(4)....................... 92 120 74 224 510
- ------------------------
(1) Consists primarily of operations in the United States
(2) Consists primarily of operations in the United Kingdom, Netherlands, Germany
and Switzerland
(3) Consists of operations in Southern Europe, Pacific Rim, South America and
Corporate
(4) Long-lived assets include all non-current assets except deferred taxes of
CHF 30 and CHF 54, and goodwill of CHF 1,833, CHF 1,862 at October 3, 1999
and September 27, 1998
SEPTEMBER 27, OCTOBER 3,
SALES BY SERVICE 1998 1999
- ---------------- ------------- ----------
(In CHF millions)
General Staffing................................... 9,995 11,172
Specialty.......................................... 1,317 2,125
------ ------
11,312 13,297
====== ======
8. RESTRUCTURING RESERVE
The activity in the restructuring reserve for the period ended October 3,
1999 was as follows:
(In CHF millions)
Balance at January 3, 1999.................................. 22
Additions................................................... 27
Deductions.................................................. (27)
---
Balance at October 3, 1999.................................. 22
===
In connection with the 1997 acquisition of TAD, Adecco committed to a
restructuring plan which resulted in a pre-tax charge of CHF 6 million in 1997
related to employee reductions and branch closure costs. In addition,
restructuring costs of CHF 44 million of the acquiree were accrued in connection
with the purchase accounting for the TAD acquisition. The total restructuring
costs of
F-8
8. RESTRUCTURING RESERVE (CONTINUED)
CHF 50 million included CHF 23 million for employee reductions, CHF 18 million
for remaining lease commitments on abandoned facilities and CHF 9 million for
branch closure and other costs. At January 3, 1999, the remaining restructuring
reserve was CHF 22 million, including CHF 5 million for employee reductions, CHF
13 million for remaining lease commitments on abandoned facilities and CHF
4 million for branch closure and other costs, and was included in accounts
payable and accrued expenses. At October 3, 1999, the remaining restructuring
reserve related to TAD amounted to CHF 2 million.
In connection with the acquisitions in 1999, primarily the Delphi and Career
Staff acquisitions, Adecco committed to a restructuring plan which resulted in a
pre-tax charge of CHF 3 million in 1999 related to employee reductions and
branch closure costs. In addition, restructuring costs of
CHF 24 million of the acquirees were accrued in connection with the purchase
accounting for the acquisitions. The total restructuring costs of
CHF 27 million included CHF 8 million for employee reductions, CHF 9 million for
remaining lease commitments on abandoned facilities and
CHF 10 million for branch closure costs. At October 3, 1999, the remaining
restructuring reserve related to 1999 acquisitions was CHF 20 million, including
CHF 6 million for employee reductions,
CHF 8 million for remaining lease commitments on abandoned facilities and CHF
6 million for branch closure costs, and was included in accounts payable and
accrued expenses.
9. SUBSEQUENT EVENTS
In November 1999, Meridian B.V., a wholly-owned subsidiary of Adecco,
completed an offering of [EURO]360 million (approximately CHF 576 million) in
total principal amount of its 1.50% guaranteed convertible notes due 2004, the
entire net proceeds of which are available to Adecco. The convertible notes are
guaranteed on a senior, unsecured basis by Adecco and are convertible, in the
aggregate, into approximately 540,000 Adecco common shares. Adecco also
completed an offering in December 1999 of 600,000 of its common shares for total
net proceeds of approximately CHF 515 million ($345 million).
F-9
THIS GENTIVA HEALTH SERVICES, INC. PROSPECTUS SHOULD BE ATTACHED TO THE
PROXY STATEMENT/ PROSPECTUS AND IS A PART OF THE PROXY STATEMENT/PROSPECTUS.
GENTIVA HEALTH SERVICES, INC. PROSPECTUS
THE OFFER OR SALE OF OUR COMMON STOCK IN THOSE STATES WHERE THE OFFER IS
REQUIRED BY STATE SECURITIES LAWS TO BE MADE BY A LICENSED BROKER OR DEALER ARE
DEEMED TO BE MADE TO OLSTEN'S STOCKHOLDERS RESIDING IN THOSE STATES BY WARBURG
DILLON READ LLC, A REGISTERED BROKER OR DEALER LICENSED UNDER THE LAWS OF THOSE
STATES, AS AN ACCOMMODATION TO, AND ON BEHALF OF, OLSTEN AND GENTIVA HEALTH
SERVICES. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THIS
PROSPECTUS AND RELATED MATERIALS MAY BE DIRECTED TO D.F. KING & CO., INC. BY
MAIL AT 77 WATER STREET, NEW YORK, NEW YORK 10005, OR BY TELEPHONE, TOLL FREE AT
(800) 431-9629.
X-i
GENTIVA HEALTH SERVICES PROSPECTUS
The information in this Gentiva Health Services prospectus, which is a part
of the proxy statement/ prospectus, relates to Gentiva Health Services and the
shares of Gentiva Health Services common stock to be issued to holders of Olsten
stock in connection with the split-off.
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION REGARDING GENTIVA HEALTH
SERVICES AND THE ISSUANCE OF GENTIVA HEALTH SERVICES COMMON STOCK TO THE HOLDERS
OF OLSTEN STOCK, WHICH WE REFER TO AS THE SPLIT-OFF. YOU SHOULD READ THIS ENTIRE
PROSPECTUS, INCLUDING OUR FINANCIAL STATEMENTS AND THE NOTES TO OUR FINANCIAL
STATEMENTS, FOR MORE DETAILED INFORMATION RELATING TO THE SPLIT-OFF AND GENTIVA
HEALTH SERVICES. UNLESS OTHERWISE INDICATED, REFERENCES IN THIS PROSPECTUS TO
"GENTIVA HEALTH SERVICES", "US" "WE" AND "OUR" REFER TO GENTIVA HEALTH SERVICES,
INC. AND ITS SUBSIDIARIES AND ASSUME THE COMPLETION OF (1) THE SEPARATION OF THE
HEALTH SERVICES BUSINESS OF OLSTEN FROM THE OTHER BUSINESSES OF OLSTEN AND
(2) THE MERGER, INCLUDING THE SPLIT-OFF. UNLESS OTHERWISE INDICATED, REFERENCES
TO "OLSTEN" REFER TO OLSTEN CORPORATION AND ITS SUBSIDIARIES PRIOR TO THE
MERGER.
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS ABOUT THE FINANCIAL
CONDITION, RESULTS OF OPERATIONS AND BUSINESS OF OUR COMPANY. YOU CAN FIND MANY
OF THESE STATEMENTS BY LOOKING FOR WORDS SUCH AS "BELIEVES", "EXPECTS",
"ANTICIPATES", "ESTIMATES" OR SIMILAR EXPRESSIONS USED IN THIS PROSPECTUS.
IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE
FORWARD-LOOKING STATEMENTS IN THIS PROSPECTUS ARE SET FORTH UNDER THE CAPTION
"RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS AND INCLUDE FACTORS WHICH ARE
OUTSIDE OF OUR CONTROL, SUCH AS CHANGES IN GOVERNMENT REGULATIONS AND INDUSTRY
TRENDS. IN ADDITION, OUR FUTURE RESULTS ARE SUBJECT TO UNCERTAINTIES RELATING TO
OUR ABILITY TO FUNCTION EFFECTIVELY AS AN INDEPENDENT, PUBLICLY OWNED COMPANY.
ALL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO US OR PERSONS ACTING ON OUR
BEHALF ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THOSE CAUTIONARY STATEMENTS.
GENTIVA HEALTH SERVICES
We are currently a wholly-owned subsidiary of Olsten. We operate the health
services business of Olsten in the United States and Canada, which we refer to
as the health services business. After the split-off, we will be an independent,
publicly owned company.
We are the leading provider of home health care services in the United
States based on revenues. Since 1971, we have built a reputation for high
quality health care for our patients. We are committed to offering a broad
spectrum of services in the home health care industry. We currently maintain
over 400 locations in the United States and Canada and serve over 420,000
patient/client accounts annually with over 65,000 caregivers and administrative
staff.
We offer high quality services through three business lines which are
(1) specialty pharmaceutical services; (2) home care nursing services; and
(3) staffing services. Through our three business lines we offer a broad range
of services, including:
- treatments for patients with chronic diseases;
- intravenous and oral administration of drugs, nutrients and other
solutions;
- skilled nursing care;
- pediatric/maternal care programs;
- rehabilitation and other therapies;
X-1
- disease management programs;
- home health aide care and assistance with personal care; and
- institutional, occupational and alternate site staffing.
Through our network of 38 pharmacies located throughout the United States,
including two national distribution centers, we offer the leading and most
comprehensive infusion therapy solutions in the industry. In addition, through
our four intake and claims processing centers, we provide network services,
including care management and coordination of managed care customers who desire
a single source for centralized intake and billing, claims adjudication, quality
assurance and data reporting and analysis.
In fiscal 1998, approximately 62 percent of our revenues was attributable to
commercial pay sources, 23 percent of our revenues was attributable to Medicaid
reimbursement, state reimbursed programs and other state/county funding programs
and 15 percent of our revenues was attributable to Medicare reimbursement. For
the nine months ended October 3, 1999, approximately 63 percent of our revenues
was attributable to commercial pay sources, 20 percent of our revenues was
attributable to Medicaid reimbursement, state reimbursed programs and other
state/county funding programs and 17 percent of our revenues was attributable to
Medicare reimbursement.
Our principal executive office is located at 175 Broad Hollow Road,
Melville, New York 11747-8905, and the telephone number at that address is
(516) 844-7800.
THE TRANSACTION
Olsten and Adecco have entered into a merger agreement which provides that
Olsten will merge with Adecco. After the merger, Olsten will be a wholly-owned
subsidiary of Adecco. As a condition to, and as part of, the merger, Olsten will
separate its health services business from its other businesses and deliver all
of our common stock to its stockholders in exchange for a portion of each of
their shares of Olsten stock. The split-off will not be completed unless the
merger is completed. The separation agreement, together with the related
agreements referred to in the separation agreement, govern the terms of the
separation of the health service business from the other businesses of Olsten
and the relationship among us, Olsten and Adecco before and after the split-off.
Subject to the merger agreement, at the time of the merger each share of
Olsten stock held by an Olsten stockholder will be exchanged for:
(1) .25 shares of our common stock, par value $.10 per share, and
(2) the Adecco stock and/or cash, which constitutes the remainder of the
merger consideration.
X-2
SUMMARY OF THE SPLIT-OFF
Purpose of transaction....................... The split-off is an integral part of the
merger of Olsten and Adecco and it will only
occur if the merger is completed. The
transaction will result in the separation of
Olsten's health services business from its
other businesses at the time of the split-
off. Adecco will not acquire the health
services business.
Parent corporation prior to the split-off.... Olsten Corporation.
Split-off corporation........................ Gentiva Health Services, Inc., which operates
the health services business of Olsten and
will become an independent, publicly owned
company after the split-off. Prior to the
split-off, we owned most of the assets and
were obligated for most of the liabilities of
the health services business. The remaining
assets to be transferred to us before the
split-off consist of some intellectual
property. The remaining liabilities to be
assigned to and assumed by us are contingent
liabilities related to government
investigations and litigation, some
obligations under Olsten's supplemental
executive retirement plan and some excise tax
obligations, each described more fully under
the heading "The Split-Off".
Split-off ratio.............................. .25 shares of our common stock for each share
of Olsten stock owned of record on the date
of the split-off.
Fractional shares of our common stock........ Instead of receiving any fraction of a share
of our common stock, you will receive cash in
an amount equal to the fraction of a share of
our common stock you would have received in
the split-off multiplied by the last reported
sale price of our common stock as reported on
the Nasdaq National Market on the first full
trading day after the split-off.
Securities to be issued to Olsten
stockholders............................... We will issue a total of 20,329,527 shares of
our common stock, based on the number of
issued and outstanding shares of Olsten stock
as of January 18, 2000 multiplied by .25.
X-3
Appraisal rights............................. Holders of Olsten stock who properly exercise
their appraisal rights under Delaware law
will not receive our common stock or the
other merger consideration. Instead, the
Delaware Court of Chancery will determine the
fair value of their shares of Olsten stock,
and we and Adecco will each pay our portion
of that amount in cash to those holders.
Listing of our common stock.................. We have applied for our common stock to be
approved for quotation on the Nasdaq National
Market at the time of the split-off.
Tax consequences............................. The material tax consequences of the merger,
including the split-off, are described under
the heading "Material Tax Consequences".
Indemnification obligations after the
split-off.................................. We and Olsten have agreed to indemnify each
other after the split-off with respect to
various losses, damages, claims and
liabilities arising out of each of our
businesses. We have also agreed to indemnify
Olsten for other liabilities more fully
described under the heading "The Split-Off--
Terms of the separation agreement--
Indemnification".
Relationship with Olsten after the
split-off.................................. For one year after the split-off, Olsten has
agreed to provide us with some transitional
services. The terms of the ongoing
relationship between us and Olsten are more
fully described under the heading "The
Split-Off".
Risk factors................................. You should carefully read the section
entitled "Risk Factors" beginning on
page X-7 for a discussion of risks related to
the split-off and our business.
THE INFORMATION ABOVE IS A SUMMARY OF SOME OF THE TERMS OF THE SPLIT-OFF.
THE SPLIT-OFF AND THE SEPARATION AGREEMENT ARE MORE FULLY DESCRIBED IN THIS
PROSPECTUS UNDER THE HEADING "THE SPLIT-OFF".
X-4
SUMMARY FINANCIAL DATA OF GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
The following table provides summary consolidated financial data of Gentiva
Health Services as of and for each of the fiscal years in the three-year period
ended January 3, 1999 and as of and for the nine-month periods ended
September 27, 1998 and October 3, 1999. The data as of and for each of the
fiscal years in the three-year period ended January 3, 1999 have been derived
from Gentiva Health Services' audited financial statements, which are included
elsewhere in this prospectus. The consolidated financial data as of and for the
nine months ended September 27, 1998 and October 3, 1999 have been derived from
Gentiva Health Services' unaudited consolidated financial statements, and they
include, in the opinion of Gentiva Health Services' management, all adjustments,
consisting of normal recurring adjustments, necessary for a fair statement of
the results for those periods. The historical consolidated financial information
presents Gentiva Health Services' results of operations and financial position
as if Gentiva Health Services was a separate entity for all periods presented.
The historical financial information may not be indicative of our future
performance and may not necessarily reflect what the financial position and
results of operations of Gentiva Health Services would have been if Gentiva
Health Services was a separate stand-alone entity during the periods covered.
Also set forth below is summary unaudited pro forma consolidated financial data
of Gentiva Health Services for the year ended January 3, 1999 and as of and for
the nine months ended October 3, 1999. The pro forma consolidated financial data
presents the results of operations of Gentiva Health Services assuming the
split-off of Gentiva Health Services occurred as of the date of the balance
sheet, for the balance sheet data, and as of the first day of fiscal 1998 for
purposes of the statement of operations data and reflect adjustments to the
historical financial data giving effect to estimated costs and expenses, the
transfer of cash and the issuance of Gentiva Health Services shares of common
stock associated with the split-off. This summary should be read with the
historical and pro forma consolidated financial statements of Gentiva Health
Services and notes to those financial statements, which are included elsewhere
in this prospectus.
Fiscal Year Ended For the Nine Months Ended
---------------------------------------- ------------------------------
September 27, October 3,
1996 1997 1998 1998 1999
---------- ---------- ----------- ------------- -----------
(53 weeks)
(In thousands, except share data)
STATEMENT OF
OPERATIONS DATA:
Service sales,
management fees and
other income........ $1,374,353 $1,433,854 $ 1,330,303 $ 968,285 $ 1,118,045
Gross profit.......... 511,940 520,586 421,407 297,020 377,994
Net income (loss)..... (2,877) 26,847 (101,465) (58,471) (12,852)
Net income (loss) per
share............... (28,770) 268,470 (1,014,650) (584,710) (128,520)
Average shares
outstanding......... 100 100 100 100 100
OTHER DATA:
Earnings (loss) before
interest, taxes,
depreciation and
amortization(1)..... $ 42,906 (2) $ 89,825 $ (99,720)(3) $ (52,408)(4) $ 23,165 (5)
Cash flows provided by
(used in) operating
activities.......... (7,680) 20,200 (63,875) (50,833) (115,353)
Cash flows used in
investing
activities.......... (49,792) (17,913) (68,568) (24,415) (17,280)
Cash flows provided by
(used in) financing
activities.......... 27,980 (38,143) 133,242 75,248 131,834
Pro Forma
-----------------------------
Fiscal Year Nine Months
Ended Ended
January 3, October 3,
1999 1999
----------- ------------
(In thousands, except share data)
STATEMENT OF
OPERATIONS DATA:
Service sales,
management fees and
other income........ $ 1,329,603 $1,119,545
Gross profit.......... 420,707 379,494
Net income (loss)..... (99,965) (15,552)
Net income (loss) per
share............... (4.92) (0.77)
Average shares
outstanding......... 20,326,414 20,326,414
OTHER DATA:
Earnings (loss) before
interest, taxes,
depreciation and
amortization(1)..... $ (105,620)(3) $ 20,765 (5)
Cash flows provided by
(used in) operating
activities..........
Cash flows used in
investing
activities..........
Cash flows provided by
(used in) financing
activities..........
X-5
Pro Forma
------------
Fiscal Year Ended For the Nine Months Ended Nine Months
---------------------------------------- ------------------------------ Ended
September 27, October 3, October 3,
1996 1997 1998 1998 1999 1999
---------- ---------- ----------- ------------- ----------- ------------
(53 weeks)
(In thousands, except share data)
BALANCE SHEET DATA (AT END OF
PERIOD):
Working capital.................. $ 334,512 $ 346,135 $ 367,915 $ 365,264 $ 496,651 $ 490,851
Total assets..................... 785,341 783,478 945,738 821,849 1,022,257 1,038,657
Long-term debt................... 86,250 86,250 86,250 86,250 78,562 78,562
Shareholders' equity............. 541,737 530,270 561,859 547,526 688,611 665,111
- ------------------------------
(1) Earnings (loss) before interest, income taxes, depreciation and amortization
("EBITDA") is not intended to represent cash flow in accordance with
generally accepted accounting principles and does not represent the measure
of cash available for distribution. EBITDA is presented supplementally
because we believe it allows for a more complete analysis of results of
operations. EBITDA is commonly used to analyze companies on the basis of
operating performance, leverage and liquidity. EBITDA is not intended as an
alternative to earnings from continuing operations or net income and should
not be considered as an indicator of overall financial performance. EBITDA
is not a measurement under generally accepted accounting principles and may
not be comparable with other similarly titled measures of other companies
that do not compute EBITDA in the same manner.
(2) EBITDA in fiscal 1996 reflects merger, integration and other non-recurring
charges totaling approximately $75 million. These charges resulted from the
Quantum acquisition of $39 million; $30 million of allowances for a change
in the methodology used by Medicare for computing reimbursements in prior
years and Quantum's charge of $5.5 million related to the settlement of
shareholder litigation. See Note 4 to the Gentiva Health Services'
Consolidated Financial Statements.
(3) EBITDA in fiscal 1998 reflects non-recurring charges and other adjustments
totaling approximately $122 million. These charges represented $66 million
related to the restructuring of Gentiva Health Services' businesses and a
special charge of $56 million for the settlement of two federal
investigations. These provisions include a reduction in revenues of
$14 million, a charge to cost of sales of $15 million and $93 million in
selling, general and administrative expenses. See Note 4 to the Gentiva
Health Services' Consolidated Financial Statements.
(4) EBITDA for the nine months ended September 27, 1998 reflects non-recurring
charges and other adjustments of approximately $66 million related to the
restructuring of Gentiva Health Services' businesses. This provision
includes a reduction in revenues of $14 million, a charge to cost of sales
of $15 million and $37 million in selling, general and administrative
expenses. See Note 4 to the Gentiva Health Services' Consolidated Financial
Statements.
(5) EBITDA for the nine months ended October 3, 1999 reflects a special charge
of $17 million for the realignment of business units as part of a new
restructuring plan. These charges are included in selling, general and
administrative expenses. See Note 4 to the Gentiva Health Services'
Consolidated Financial Statements.
X-6
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, YOU SHOULD
CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS WITH RESPECT TO THE SPLIT-OFF AND
OUR BUSINESS.
RISKS RELATED TO THE SPLIT-OFF
OUR BUSINESS WILL FACE CHALLENGES AS A STAND-ALONE COMPANY THAT WE DID NOT
EXPERIENCE AS A SUBSIDIARY OF OLSTEN
As an independent, publicly owned company, we will face new issues and
challenges that we did not experience when we were part of Olsten. If we are
unable to resolve these issues or overcome these challenges, our results of
operations and financial position may be adversely affected. Examples of
potential issues include:
- challenges in developing and promoting new name recognition and inability
to rely on the Olsten name, long term financial strength and goodwill;
- inability to rely on the experience and business relationships of some
personnel who will not be continuing employment with our company;
- greater difficulty in obtaining financing on terms satisfactory to us, if
needed; and
- difficulty in obtaining and maintaining insurance on terms that are
acceptable to us.
Our results of operations and prospects, as well as stock price, may be
affected by factors that are different from those that have affected Olsten in
the past. After the split-off, we will be a smaller and less diversified company
than Olsten was prior to the split-off. Our results of operations will be more
affected by competitive and market factors specific to the home health care
industry. In addition, we will not have the benefit of the diversified source of
revenues which Olsten had.
WE HAVE TRADITIONALLY RELIED ON OLSTEN FOR FINANCIAL ASSISTANCE AND MAY HAVE
DIFFICULTY WITH CASH MANAGEMENT WITHOUT THIS ASSISTANCE
We have historically relied on the earnings, assets and cash flow of Olsten
for liquidity and capital requirements and administrative services. In the past,
when our liquidity needs exceeded our cash flow, Olsten provided us with
necessary funds. Our inability to rely on Olsten for financial assistance may
adversely affect our financial condition.
WE HAVE NOT FULLY ESTABLISHED THE CORPORATE INFRASTRUCTURE THAT IS REQUIRED FOR
A STAND-ALONE COMPANY
After the split-off we may or may not be able to establish the departments
and services necessary to conduct our business as an independent, publicly owned
company in an efficient and timely manner or on favorable terms. Olsten has
agreed to provide to us tax, legal, procurement and other services on a cost
basis for up to one year after the split-off. We will, however, need to
establish our company as a stand-alone entity and will not be entitled to rely
on Olsten other than for these limited transitional services. In establishing
these departments and services we may face issues and challenges, including:
- increased costs of hiring and retaining employees in departments
previously shared by all the businesses of Olsten, including the legal,
risk management, tax, treasury, human resources and public relations
departments; and
- generally increased overhead and administrative costs as a result of
establishing a stand-alone company.
If we are unable to establish the required departments and services in a
timely or cost effective manner, it could adversely affect our operations.
X-7
OUR HISTORICAL FINANCIAL INFORMATION MAY NOT BE REPRESENTATIVE OF OUR RESULTS AS
A SEPARATE COMPANY
The historical financial information we have included in this prospectus may
not reflect what our results of operations, financial position and cash flows
would have been had we been a separate, stand-alone company during the periods
presented. This information may not reflect what our results of operations,
financial position and cash flows will be in the future. This is not only
related to the various risks associated with the fact that we have not been a
stand-alone company, but also because:
- various adjustments and allocations were made to the historical financial
statements in this prospectus because Olsten did not account for us as a
single stand-alone business for any period presented;
- the historical information does not reflect many significant changes that
will occur in our financial condition, capital structure and operations as
a result of our separation from Olsten; and
- the historical information does not reflect the indebtedness under our new
credit facility and the costs associated with borrowing under that
facility.
We cannot assure you that the adjustments and allocations we made in
preparing our historical financial statements appropriately reflect our
operations during the periods presented as if we had operated as a stand-alone
company, nor can we predict what the actual effect of our separation from Olsten
will be.
THE CHANGE OF SOME PERSONNEL IN OUR COMPANY MAY HAVE AN ADVERSE EFFECT ON OUR
SUCCESS
After the split-off, it is expected that some of the personnel of Olsten
will resign from Olsten and become our initial employees, while others will not
continue with us. In particular, Robert A. Fusco, the past president of Olsten's
health services business, tendered his resignation as president in late 1999.
Until the split-off he will provide services to us, but will not continue with
us after the split-off. In addition, some Olsten personnel who have provided
services to us as Olsten employees in the treasury, legal, human resources, and
risk management departments in the past will not become a part of our company
after the split-off and their services will not be available to us, except on a
limited transitional basis. We cannot assure you that the transition of
personnel from Olsten's other businesses to our company, the employment of
personnel in some departments, the loss of our president or the loss of other
personnel will not disrupt, at least temporarily, the operations of our
business. Any disruption in our business could have a material adverse effect on
our results of operations. We cannot predict with certainty the financial impact
any potential disruption might have on our business.
THERE IS NO EXISTING TRADING MARKET FOR OUR COMMON STOCK
There is no existing trading market for our common stock and there can be no
assurance that an active trading market will be established. We have applied for
approval for quotation of our common stock on the Nasdaq National Market and
expect to receive approval for quotation on the Nasdaq National Market at the
time of the split-off. Our common stock may experience volatility until trading
values become established. As a result, it could be difficult to make purchases
or sales of our common stock in the market at any particular time. We do not
know what price our common stock will trade at after the split-off.
VARIOUS FACTORS MAY DEPRESS THE TRADING VALUE OF OUR COMMON STOCK
Immediately after the split-off, we will have the same stockholders as
Olsten had before the split-off and you will own the same percent of our common
stock as you did in Olsten. Some stockholders who receive our common stock in
the split-off may decide that they do not want to maintain an investment in a
company almost exclusively involved in home health care services. If these
stockholders decide to sell all or some of their shares, or the market perceives
that those sales could occur, the trading value of your shares may decline. In
addition, because we will be a smaller and less
X-8
diversified company than Olsten, our stock may not be followed as closely by
market analysts or the investment community as Olsten stock had been in the
past. If there is only a limited following by market analysts or the investment
community, the amount of market activity in our common stock may be reduced,
making it more difficult for you to sell your shares.
WE WILL ONLY BE PERMITTED TO USE OLSTEN'S INTELLECTUAL PROPERTY FOR A ONE-YEAR
PERIOD
We have a non-exclusive, royalty-free license for several Olsten logos and
names for one year. The Olsten logo and name have been important to our
marketing activities in the past. We recently changed the name of our company
and will need to devote substantial resources to building recognition of our new
name prior to the expiration of our license with Olsten. We estimate that the
development of name recognition, including public relations efforts, could cost
up to $5.0 million. Many of our patients, payors and others we do business with
are familiar with us only as an Olsten entity. We may lose some of these
business relationships as a result of not being associated with the Olsten name
and company. Although we cannot quantify the effect that a name change will have
on our ability to retain and attract patients and others with whom we do
business, the loss of a significant number of patients could have a material
adverse affect on our business.
WE ARE OBLIGATED TO INDEMNIFY OLSTEN AND OTHERS FOR LIABILITIES WHICH COULD
REQUIRE US TO PAY OLSTEN AMOUNTS THAT WE MAY NOT HAVE
The separation agreement and related agreements provide that we will
indemnify Olsten and other related persons after the split-off for liabilities
related to our business, statements in this prospectus and the proxy
statement/prospectus about our business and breaches of our obligations under
the separation agreement. We are also required to indemnify Olsten for other
matters, including the government investigations and litigations described
below.
In addition, under our tax sharing agreement with Olsten and Adecco, we will
indemnify Olsten (1) for any incremental income taxes imposed on Olsten as a
result of the split-off, unless these taxes result from specified actions taken
by Olsten and (2) if Olsten is denied refunds attributable to the carry-back of
net operating losses of ours and our subsidiaries.
We are unable to predict the amount, if any, that may be required for us to
satisfy our indemnification obligations under the separation agreement and
related agreements. However, the amount could be substantial. We cannot assure
you that we will have sufficient funds available to satisfy our potential
indemnification obligations or that we will be able to obtain the funds on terms
satisfactory to us, if at all. If we are unable to obtain the necessary funds,
we may be forced to consider other alternatives, including sales of assets, to
raise necessary funds.
WE ARE REQUIRED TO PROVIDE NOTIFICATIONS TO, AND SEEK APPROVAL OF, REGULATORY
AUTHORITIES IN ORDER TO COMPLETE THE SPLIT-OFF
We are required to obtain regulatory approvals or make notifications to some
regulatory authorities in order to complete the split-off. We cannot assure you
that we will secure all of these regulatory approvals on a timely basis, if at
all. All of the requisite applications or notifications with each of the
applicable regulatory authorities have been filed. With the exception of the
states of New York and California, all requisite regulatory approvals have been
granted. We cannot assure you that we will obtain the New York and California
regulatory approvals prior to the split-off. If we are unable to secure these
approvals on a timely basis, we could be subject to sanctions under existing
state laws in these states. These sanctions could take the form of fines, or
potentially, enforcement actions to suspend our ability to do business in these
states.
X-9
WE MAY BE SUBJECT TO LIABILITIES RESULTING FROM LAWS THAT PROTECT OUR AND
OLSTEN'S CREDITORS
Under United States federal and state fraudulent transfer laws, a court in a
lawsuit by an unpaid creditor or a representative of creditors of ours or Olsten
could determine that, after giving effect to the merger, including the
split-off, we or Olsten:
- were or would be rendered insolvent;
- had unreasonably small capital to carry on our business and all businesses
in which we or are Olsten intended to engage; or
- intended to incur, or believed we or Olsten would incur, debts beyond our
or Olsten's abilities to repay as they would mature.
If that determination is made, the court could invalidate, in whole or in part,
the merger, including the split-off, as a fraudulent transfer and order Olsten's
stockholders to return the value of the merger consideration, including any of
our common stock, and any dividends paid or require us to pay various
liabilities of Olsten for the benefit of creditors or require Olsten to pay
various liabilities of ours for the benefit of creditors.
Generally, an entity is considered insolvent if the present fair saleable
value of its assets is less than (1) the amount of its liabilities (including
contingent liabilities), or (2) the amount that will be required to pay its
probable liabilities on its existing debts as they become due.
We do not know what standard a court would apply in determining insolvency
or whether a court would determine that we or Olsten were "insolvent" at the
time of or after giving effect to the merger. If we or Olsten became a debtor in
a bankruptcy case, the bankruptcy court would apply the standards of United
States federal bankruptcy law to determine whether a transfer that occurred
within a year before the commencement of the bankruptcy case would qualify as a
fraudulent transfer. For transfers that occurred more than one year prior to the
bankruptcy case, the bankruptcy court would apply applicable state law
standards, which may vary among states. If we or Olsten did not become a debtor
in a bankruptcy case, creditors who sought to recover or avoid transfers as
fraudulent transfers would look to the state law standards. It is possible that
the standards for determining whether a fraudulent transfer occurred may vary
between state and federal law, on the one hand, and between various state laws,
on the other.
PROVISIONS IN OUR ORGANIZATIONAL DOCUMENTS, DELAWARE LAW AND OUR RIGHTS
AGREEMENT COULD DELAY OR PREVENT A CHANGE IN CONTROL OF OUR COMPANY, WHICH COULD
ADVERSELY AFFECT THE PRICE OF OUR COMMON STOCK
Provisions in our organizational documents, Delaware law and our rights
agreement could delay or prevent an unsolicited change in control of our
company, which could adversely affect the price of our common stock. These
provisions may also have the effect of making it more difficult for third
parties to replace our current management without the consent of our board of
directors. These provisions in our certificate of incorporation and bylaws which
could delay or prevent an unsolicited change in control of our company include:
- the classification of our board of directors into three classes, each
class serving "staggered" terms of office of three years after the initial
terms;
- limitations on the removal of directors so that they may only be removed
for cause;
- the board of directors' ability to issue shares of preferred stock and
determine the terms of the preferred stock without stockholder approval;
and
- prohibition on the right of stockholders to call meetings or act by
written consent and limitation on the right of stockholders to present
proposals or make nominations at stockholder meetings.
Delaware law also imposes restrictions on mergers and other business
combinations between us and any holder of 15 percent or more of our outstanding
common stock. In addition, we have a rights
X-10
agreement that has the effect of deterring takeovers of our company without the
consent of our board of directors. Generally, once a party acquires 10 percent
or more of our common stock, the rights agreement may cause that party's
ownership interest in our company to be diluted, unless our board of directors
consents to the acquisition.
WE MAY HAVE DIFFICULTY RELOCATING OUR HEADQUARTERS AND ENTERING INTO NEW LEASES
FOR REAL PROPERTY ON TERMS THAT ARE SATISFACTORY OR IN A TIMELY FASHION
Our operations are currently based out of our headquarters and about 400
other locations. The separation agreement requires us to relocate our
headquarters within six months after the split-off. In addition, we currently
have leases for eleven locations that we share with the other businesses of
Olsten. Those leases will need to be modified, assigned or terminated in order
to prevent operations of both Olsten's businesses and our business in the same
location. We cannot assure you that we will obtain new leases in a timely manner
or that the terms of the new leases or subleases will be satisfactory to us. Any
difficulty we may experience in replacing these eleven leases or relocating our
headquarters may affect the operations of our business if we do not have
sufficient office space in which to operate. The result of these difficulties
may include a disruption in our business, including:
- an inability to continue to provide the level of services we have in the
past at those locations and, in turn, generate the historical revenue from
those locations;
- a delay in collection of accounts receivable;
- challenges in ensuring regulatory compliance;
- difficulties in retaining personnel; and
- an inability to manage day to day operations.
Any of these difficulties could have a material adverse effect on our business
until we relocate.
RISKS RELATED TO OUR BUSINESS
WE MAY HAVE DIFFICULTY OBTAINING REQUIRED FINANCING ON SATISFACTORY TERMS
We are required under the separation agreement to obtain a committed credit
facility with a line of credit of at least $100 million to provide for our
working capital needs and for general corporate purposes. At this time, we have
a commitment letter from a bank to underwrite a credit facility subject to
customary conditions. See "The Split-Off--Certain indebtedness of our
company--Commitment to enter into a senior credit facility". In addition, by
October 1, 2000, we will need to refinance $78.6 million of outstanding 4 3/4%
convertible subordinated debentures due October 1, 2000 of our subsidiary,
Quantum Health Resources, Inc. The debentures are described in this prospectus
under the heading "The Split-Off--Certain indebtedness of our company". After
the split-off, we will no longer benefit from any financing arrangements with,
or cash advances from, Olsten. We may have difficulty obtaining financing on
terms that are acceptable to us, if at all. If we fail to obtain the financing
we need, it would have a material adverse effect on our business and financial
condition.
WE WILL NEED TO DEVOTE CASH FLOW FROM OUR OPERATIONS TO MEET OUR DEBT AND OTHER
OBLIGATIONS
On the date following the split-off, we estimate our indebtedness will
include $78.6 million of our subsidiary's outstanding 4 3/4% convertible
subordinated debentures due October 1, 2000, about $20 million of 10%
convertible trust preferred securities of a trust of which we own all of the
common equity which holds our 10% convertible subordinated debentures, and
borrowings under our credit facility. As a result of these obligations,
substantial amounts of our cash flow will be dedicated to servicing our debt and
other obligations and those amounts will not be available for use in our working
capital or operations.
We cannot assure you that we will generate sufficient cash flow to meet our
obligations. If cash flows from operations or availability under our credit
facility fall below expectations, we may be forced
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to delay planned capital expenditures, reduce operating expenses, or seek
additional alternatives designed to enhance liquidity.
WE HAVE BEEN SUBJECT TO GOVERNMENT INVESTIGATIONS AND HAVE ENTERED INTO
AGREEMENTS WITH THE GOVERNMENT
The health services business has been subject to extensive federal and state
governmental investigations regarding, among other things:
- the preparation of Medicare costs reports, which we refer to as the cost
reports investigation;
- the relationship between Columbia/HCA Healthcare Corporation and the
health services business in connection with the purchase by Columbia/HCA
of some home health agencies that were owned by the health services
business and subsequently managed under contract by a unit of the health
services business, which we refer to as the Columbia/HCA investigation;
and
- some of the health care practices of Quantum, including alleged improper
billing and fraud against various federally funded medical assistance
programs, which largely occurred during the period prior to Olsten's
acquisition of Quantum in June 1996, which we refer to as the Quantum
investigation.
On July 19, 1999, Olsten entered into several written civil and criminal
agreements with the U.S. Department of Justice and the Office of Inspector
General of the U.S. Department of Health and Human Services finalizing the
settlement of the civil and criminal aspects of the cost reports investigation
and the Columbia/HCA investigation. Under the settlement:
- Olsten paid on August 11, 1999 the sum of $61 million to the Department of
Justice, including approximately $10.1 million in criminal fines and
penalties;
- in connection with the Columbia/HCA investigation, a subsidiary of ours,
Kimberly Home Health Care, Inc., pled guilty in the United States District
Courts for the Northern District of Georgia, the Southern District of
Florida and the Middle District of Florida to a criminal violation of the
federal mail fraud, conspiracy and kickback statutes;
- Kimberly Home Health Care, Inc. is permanently excluded from participation
in Medicare, Medicaid and all other federal health care programs as
defined in 42 U.S.C. Section1320a-7b(f); and
- Olsten signed a corporate integrity agreement with the Office of Inspector
General of the U.S. Department of Health and Human Services.
In October 1998, Olsten entered into a final settlement agreement with
several government agencies investigating the past practices of Quantum. The
agreement was entered into with the U.S. Department of Justice, the Office of
the Inspector General of the U.S. Department of Health and Human Services, the
U.S. Secretary of Defense (for the CHAMPUS/Tricare program), and the Attorneys
General for the States of New York and Oklahoma. Under the settlement, Olsten
reimbursed the government about $4.5 million for particular disputed claims
under the Medicaid and CHAMPUS programs and entered into a corporate integrity
agreement with several government agencies.
In connection with the split-off, we have agreed to assume, to the extent
permitted by law and the terms of the liabilities, and indemnify Olsten for, all
liabilities of our health services business, including the ongoing governmental
investigations and any future governmental investigations relating to our health
services business. We also agreed to comply with the provisions of the
settlement agreements and corporate integrity agreements entered into with the
government, which will require significant financial resources over a five-year
period.
In early December 1999, we received a document subpoena from the Department
of Health and Human Services, Office of Inspector General, Office of
Investigations. After preliminary discussions with the Office of Inspector
General, we believe the subpoena relates to an investigation of possible
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overpayments to us by the Medicare program. In early February 2000, we received
a document subpoena from the Department of Health and Human Services, Office of
Inspector General, Office of Investigations. We believe the subpoena relates to
our agencies' cost reporting procedures concerning contracted nursing and home
health aide costs. We intend to provide the Office of Inspector General with the
requested documents and cooperate fully with its investigations. At this time,
we are unable to assess the probable outcome or potential liability, if any,
arising from these subpoenas.
We have recently commenced discussions with the North Carolina Attorney
General's Office concerning questions that it has raised as to the eligibility
of a certain class of our patients to receive Medicaid-reimbursed home health
services and, thus, our entitlement to Medicaid reimbursement in connection with
those services. At this preliminary stage, we are unable to assess the probable
outcome of or potential liability arising from this matter.
Although substantially all of these pending governmental investigations have
been settled, we cannot assure you:
- that new investigations will not be conducted;
- that additional civil or criminal charges related to these or other
unrelated investigations will not be pursued; or
- that other pending government investigations or any of the terms of the
existing settlement agreements and corporate integrity agreements will not
have a material adverse effect on our business.
For more details on the governmental investigations, see
"Business--Government investigations" and for more details on our agreements
with the government, see "Business--Corporate integrity agreements with the
government".
WE ARE SUBJECT TO STRINGENT GOVERNMENTAL REGULATION WHICH MAY LIMIT OUR
OPERATIONS, RESULT IN SIGNIFICANT FINES FOR VIOLATIONS AND REQUIRE US TO DEVOTE
SIGNIFICANT RESOURCES TO ENSURE COMPLIANCE
Our business is subject to extensive federal and state regulations that
govern, among other things, Medicare, Medicaid, CHAMPUS and other
government-funded reimbursement programs, reporting requirements, certification
and licensing standards for certain home health agencies and, in some cases,
certificate-of-need and pharmacy-licensing requirements. These regulations may
affect our participation in Medicare, Medicaid, CHAMPUS and other federal health
care programs. We are also subject to a variety of federal and state regulations
that prohibit fraud and abuse in the delivery of health care services,
including, prohibitions against:
- the offering or making of direct or indirect payments for the referral of
patients;
- physicians making referrals under Medicare for clinical services to a home
health agency with which the physician or an immediate family member has
some types of financial relationship; and
- the filing of false claims.
We are subject to periodic audits, examinations and investigations conducted by
or at the direction of governmental investigatory and oversight agencies.
Violation of federal and state health care regulations can result in a health
care provider being excluded from participation in the Medicare, Medicaid,
CHAMPUS and/or any other federal health care programs, and can also subject the
provider to civil and/or criminal penalties. For the nine months ended October
3, 1999, these health care programs represented, together, about 37 percent of
our revenues. As a result, our exclusion from any one of these health care
programs would have a material adverse effect on our business.
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THE AGREEMENTS WE HAVE WITH THE GOVERNMENT LIMIT OUR OPERATIONS
The agreements we signed with the government limit our operations and
require us to devote significant resources to ensure compliance. In connection
with the government's cost reports investigation and Columbia/HCA investigation,
Olsten entered into a corporate integrity agreement in July 1999 with the Office
of Inspector General of the Department of Health and Human Services, which
governs some of our actions until August 18, 2004. In connection with some past
practices of Quantum, Olsten entered into a corporate integrity agreement in
October 1998 with the U.S. Department of Justice, the Office of Inspector
General of the U.S. Department of Health and Human Services, the U.S. Secretary
of Defense (for the CHAMPUS/Tricare Program) and the Attorneys General for the
States of New York and Oklahoma, which governs some of our actions until
December 31, 2001. Under each of the corporate integrity agreements, we are
required, among other things, to maintain a Corporate Compliance Officer to
develop and implement compliance programs, to retain an independent review
organization to perform annual reviews, and to maintain our compliance program
and reporting systems, as well as provide additional training to our employees.
The corporate integrity agreement in connection with the Quantum investigation
applies to our specialty pharmaceutical services business and focuses on the
training and billing of blood factor products for hemophiliacs. The corporate
integrity agreement in connection with the cost reports investigation and the
Columbia/HCA investigation applies to our businesses that bill the federal
government health programs directly for services, such as our home care nursing
business, and focuses on issues and training related to cost report preparation,
contracting, medical necessity, and billing of claims.
Our compliance program will be implemented for all newly established or
acquired businesses units if their type of business is covered by the corporate
integrity agreements, Reports under each integrity agreement will be filed
annually with the Department of Health and Human Services, Office of Inspector
General. After each corporate integrity agreement expires, we will file a final
annual report to the government. If we fail to comply with the terms of either
of our corporate integrity agreements, we will be subject to penalties ranging
from $1,500 to $2,500 for each day of the breach.
HEALTH CARE REFORM MAY RESULT IN REDUCTION IN THE DEMAND FOR OUR SERVICES, LOWER
GOVERNMENT REIMBURSEMENTS FOR OUR SERVICES AND GREATER DIFFICULTY IN OPERATING
OUR BUSINESS
There are numerous initiatives on the federal and state levels for
comprehensive reforms affecting the payment for and availability of health care
services. It is not clear at this time what proposals, if any, will be adopted
or, if adopted, what effect the proposals may have on our future business. We
may be adversely affected by aspects of some of these health care proposals,
including:
- cutbacks in Medicare and Medicaid programs;
- containment of health care costs on an interim basis by means that could
include a short-term freeze on rates paid to health care providers;
- changes in reimbursement under Medicare and Medicaid programs through the
implementation of prospective payment systems;
- permitting greater flexibility to the states in the administration of
Medicaid; and
- developments in federal and state health information requirements,
including the standardization of electronic transmission of some
administrative and financial information.
In October 1997, as part of the Balanced Budget Act, the government enacted
the Interim Payment System for reimbursement of home care services provided
under Medicare. Under this system, provider reimbursements were reduced, and may
be subject to further reductions. Specifically, our Medicare revenue, excluding
acquisitions, was reduced by $107 million, or 43 percent, in fiscal 1998 as
compared to fiscal 1997. For the first nine months of 1999, our Medicare
revenue, excluding acquisitions, was further reduced by $38 million, or 33
percent, as compared to the first nine months of fiscal 1998. These reductions
have had a negative impact on our operations and liquidity.
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On October 28, 1999, as required by the Balanced Budget Act, the government
issued proposed regulations for implementing a prospective payment system for
home health agencies, to become effective on October 1, 2000. Under the proposed
rules, a home health agency would receive a pre-set amount determined by various
factors to cover the cost of services provided to a Medicare patient during a
defined 60-day period. These proposed rules may or may not become the final
rules for the prospective payment system. Regardless of whether these rules
become final, a prospective payment system will be implemented for home care
services. After the prospective payment system has been in place for 12 months,
the government expects to achieve an overall cost savings to the Medicare
reimbursement system with respect to home care. While there are industry
lobbying efforts to mitigate or change these requirements, we are unable to
predict whether these efforts will be successful.
We cannot assure you that currently proposed or future health care
legislation or other changes in the administration or interpretation of
governmental health care programs will not have a negative effect on us. Concern
about the potential effects of the proposed reform measures has contributed to
the volatility of the prices of securities of health care companies and
companies in related industries and may similarly affect the price of our common
stock in the future.
WE ARE INVOLVED IN VARIOUS LITIGATIONS
Olsten and its subsidiaries have been involved in various litigations
arising out of the health services business. In particular:
- a class action by some Olsten stockholders against Olsten and some of its
directors and officers asserting claims for violations of the Securities
Act and the Securities Exchange Act, including claims that the directors
and officers misrepresented information to stockholders related to the
government investigations in the health services business;
- a derivative lawsuit by some Olsten stockholders against some directors
and officers of Olsten claiming that the directors and officers breached
their fiduciary duties to stockholders in connection with the class action
described above and the governmental investigations described above; and
- a complaint by the Indiana Attorney General's Office filed against Olsten
alleging that Medicaid overpaid us, we did not properly disclose
information to their office and that our billing was improper.
Because the above claims each seek damages and reimbursement for costs and
expenses without specific amounts, we are unable to assess the probable outcome
or potential liability arising from the lawsuits.
In connection with the split-off, we have agreed to assume, to the extent
permitted by law, and indemnify Olsten for, these lawsuits together with any
other liabilities arising out of the health services business before or after
the split-off. We are unable to assess the materiality or costs associated with
these lawsuits at this time. We cannot assure you that these lawsuits, or any
future lawsuits relating to the health services business will not have a
material adverse effect on the health services business.
REDUCTION IN REIMBURSEMENT BY GOVERNMENT PAYORS COULD RESULT IN A REDUCTION IN
OUR MARGINS AND REVENUES AND ADVERSELY AFFECT OUR BUSINESS
The profitability of our business depends on payment and reimbursement from
governmental and non-governmental third party payors. For the nine months ended
October 3, 1999, we derived approximately 17 percent of our net patient revenue
from Medicare, and 20 percent of our net patient revenue from Medicaid, state
reimbursed programs and other state/county funding programs. We expect to
continue to derive a significant portion of our revenue from federal and state
reimbursement programs. We cannot assure you that payments under state or
federal governmental programs will remain at levels comparable to present levels
or will be sufficient to cover the costs allocable to patients eligible for
reimbursement pursuant to these programs. This risk is greater with respect to
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individual state-administered Medicaid programs which sometimes provide lower
reimbursement rates than the Medicare program. In addition, we cannot assure you
that the services that we provide and the facilities that we operate will meet
or continue to meet the requirements for participation in these programs.
In addition, the government has instituted cost containment measures
designed to limit payments made to health services providers, and we cannot
assure you that future measures will not adversely affect both the timing and
amount of reimbursement we receive.
Periodic and random audits by governmental investigatory and oversight
agencies may result in a delay in receipt, or an adjustment to the amounts of
reimbursement due or received under Medicare, Medicaid, CHAMPUS and other
federal health care programs. In September 1999, we received a Notice of Amount
of Program Reimbursement for our 1997 Medicare cost reports from our Medicare
fiscal intermediary notifying us that it disagrees with our methodology of
allocating a portion of our overhead. The Health Care Financing Administration
has indicated that it agrees with the fiscal intermediary. The notice indicates
a possible disallowance of about $7.0 million of costs in 1997 which we would be
required to pay to Medicare if the fiscal intermediary is correct. Since we used
a similar methodology for allocating overhead costs in 1998 and 1999, a
disallowance of $2.0 million could result in each of these years. We believe our
cost reports are accurate and consistent with past practice accepted by our
Health Care Financing Administration fiscal intermediary and we will appeal the
notice to the Provider Reimbursement Review Board. We are unable to predict the
outcome of the appeal.
Some states' Medicaid agencies have instituted review processes for claims
submitted for patients dually eligible under both the Medicare and the Medicaid
programs. These reviews have focused on whether Medicaid paid for services that
should have, instead, been covered by Medicare. We cannot assure you that we
will not have to repay state medicaid programs as a result of these state
initiatives.
OUR ACCOUNTS RECEIVABLE ARE SUBJECT TO COLLECTIBILITY RISKS
There may be risks that our accounts receivable will be settled for less
than the recorded balances. Most payors have introduced and continue to
introduce cost containment measures designed to limit payments to providers of
health services. Most claims for services under government programs are subject
to audit and final settlement which, because of cost containment initiatives and
the associated uncertainties, may be reimbursed for less than our expected
reimbursement amounts. Managed care providers and traditional indemnity insurers
are imposing increasing pressures on health care providers to reduce costs and
share in the financial risks of providing care, and are increasing the medical
review of claims. The impact of these steps has reduced profit margins, extended
the payment period and made it more difficult to obtain some authorizations and
approvals, which could affect the ultimate collectibility of the recorded
accounts receivable balances. During the past year we have made internal changes
to consolidate billing and collection processing centers, convert to new
software and implement new operating models. While these changes are designed to
improve future operations, they may also create collection risks for the current
accounts receivable balances. Management has assessed the risks associated with
collection of accounts receivable balances from third-party payors and adjusted
the recorded balances accordingly. In connection with the above, we have
recorded a provision for doubtful accounts of $24.3 million for the nine months
ended October 3, 1999 on a basis consistent with prior periods.
WE ARE SUBJECT TO PRICING PRESSURES AND OTHER RISKS INVOLVED WITH COMMERCIAL
PAYORS
Commercial payors, such as managed care organizations and traditional
indemnity insurers increasingly are requesting fee structures and other
arrangements providing for health care providers to assume all or a portion of
the financial risk of providing care. The lowering of reimbursement rates,
increasing medical review of bills for services and negotiating for reduced
contract rates could have a material adverse effect on our results of operations
and liquidity. For the nine months ended
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October 3, 1999, 63 percent of our revenue was derived from commercial payors,
including 44 percent of our total revenue that was derived from managed care
organizations and traditional indemnity insurers under fee for services
arrangements and 6 percent of our revenue that was derived under capitated
arrangements. We cannot assure you that pricing pressures by commercial payors
will not continue or that our business, financial condition and results of
operations will not be adversely affected by these trends.
Also, continued growth in managed care and capitated plans have pressured
health care providers to find ways of becoming more cost competitive. Managed
care organizations have grown substantially in terms of the percentage of the
population they cover and in terms of the portion of the health care economy
they control. Managed care organizations have continued to consolidate to
enhance their ability to influence the delivery of health care services and to
exert pressure to control health care costs. A rapid increase in the percentage
of revenue derived from managed care payors or under capitated arrangements
without a corresponding decrease in our operating costs could have an adverse
impact on our profit margins.
THERE IS A DELAY BETWEEN OUR PERFORMANCE OF SERVICES AND OUR REIMBURSEMENT
The health care industry is characterized by delays that typically range
from three to six months between when services are provided and when the
reimbursement or payment for these services is received. This makes working
capital management, including prompt and diligent billing and collection, an
important factor in our results of operations and liquidity. We cannot assure
you that trends in the industry will not further extend the collection period
and impact our working capital.
WE OPERATE IN A HIGHLY COMPETITIVE INDUSTRY
The segments of the health care industry in which we operate are highly
competitive and fragmented, and there are relatively few barriers to entry in
our health care market segments. There are approximately 15,000 home care
agencies operating in the United States. These include a few national companies,
hundreds of regional companies and thousands of locally-based independent home
health care organizations. Our primary national competitors are Coram Healthcare
Corp. and Caremark Therapeutic Services, and our primary regionally-based
competitors are hospital-based home health agencies and visiting nurse
associations.
We compete with other home health care providers on the basis of
availability of personnel, quality and expertise of services and the value and
price of services. We could encounter increased competition in the future from
existing competitors or new entrants that may limit our ability to maintain or
increase our market share.
We may have existing competitors, as well as a number of potential new
competitors, who have greater name recognition, and significantly greater
financial, technical and marketing resources than we do. This may permit our
competitors to devote greater resources than we can to the development and
promotion of their services. These competitors may also engage in more extensive
research and development, undertake more far-reaching marketing campaigns and
adopt more aggressive pricing policies and make more attractive offers to
existing and potential employees and patients.
We also expect our competitors to develop strategic relationships with
providers, referral sources and payors, which could result in increased
competition. The introduction of new and enhanced services, acquisitions and
industry consolidation and the development of strategic relationships by our
competitors could cause a decline in sales or loss of market acceptance of our
services or price competition, or make our services less attractive. In
addition, we compete with a number of tax-exempt nonprofit organizations that
can finance acquisitions and capital expenditures on a tax-exempt basis or
receive charitable contributions unavailable to us.
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We cannot assure you that we will be able to compete successfully against
current or future competitors or that competitive pressures will not have a
material adverse effect on our business, financial condition and results of
operations.
We expect that industry forces will have an impact on us and our
competitors. In recent years, the health care industry has undergone significant
changes driven by various efforts to reduce costs, including:
- national health care reform;
- trends toward managed care;
- limits in Medicare coverage and reimbursement levels;
- consolidation of health care services companies; and
- collective purchasing arrangements by office-based health care
practitioners.
The changes in our industry have caused greater competition among us and similar
businesses. As a result, in recent years, over 2,000 home health care agencies
have gone out of business. Our inability to predict accurately or react
competitively to changes in the health care industry could adversely affect our
operating results.
YEAR 2000 COMPLICATIONS MAY ARISE
The Year 2000 issue concerns the inability of information systems to
properly recognize and process date-sensitive information beyond January 1,
2000. Systems critical to our business that were identified as non-Year 2000
compliant have been replaced as part of a project that is also being implemented
to increase efficiencies. The new infrastructure, which is Year 2000 compliant,
was completely implemented in field offices before January 1, 2000. At this
time, we have not encountered any Year 2000 failures. However, due to the
general uncertainty relating to Year 2000 issues, we are unable to determine
whether the consequences of Year 2000 failures will have a material impact on
our results of operations, liquidity or financial condition. We do not expect
any Year 2000 issues to have a material adverse effect. The failure of third
parties to remedy Year 2000 problems could have a material adverse effect on our
business, financial condition and results of operations.
WE ARE DEPENDENT ON RELATIONSHIPS WITH CERTAIN THIRD PARTIES
The profitability of our business depends in part on our ability to
establish and maintain close working relationships with managed care
organizations, private and governmental third party payors, hospitals,
physicians, physician groups, home health agencies, long-term care facilities
and other institutional health providers, insurance companies and large
self-insured employers, as well as pharmaceutical, biotechnology, and other
product suppliers. In particular, we are dependent on our relationships with
certain managed care organizations and other commercial payors. In fiscal 1998,
Cigna Healthcare accounted for about 9 percent of our revenues. For the nine
months ended October 3, 1999, Cigna Healthcare accounted for about 11 percent of
our revenues. Our three-year contract with Cigna Healthcare had an expiration
date of December 31, 1998. The contract was amended to continue until terminated
by either party with 60 days advance notice. We cannot assure you that we will
be successful in improving and maintaining our relationships or that additional
relationships will be successfully developed and maintained in existing or
future markets. The loss of any existing relationships or the failure to
continue to develop such relationships in the future could have a material
adverse effect on our business, financial condition and results of operations.
WE ARE DEPENDENT ON THE RECRUITMENT AND RETENTION OF TRAINED PERSONNEL
The continued operation of our business, as well as our future growth and
success, depends upon our ability to recruit and retain a staff of professional
personnel, including registered nurses. There is currently a shortage of these
licensed professionals in some geographic areas of the United States,
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including the northeast and western regions, and, in particular, for specific
services, such as pediatric care. Because we operate in these regions and
provide these specific services, we have been affected by this shortage and have
experienced higher labor costs as a result. If this shortage of professionals
continues and we are unable to manage the higher labor costs or the shortage
worsens, it could have a material adverse effect on our business, financial
condition and results of operations.
WE ARE SUBJECT TO POTENTIAL PROFESSIONAL LIABILITY EXPOSURE
The services performed by us involve an inherent risk of professional
liability. While we maintain insurance consistent with industry practice, we
cannot assure you that the insurance we currently maintain will satisfy claims
made against us or that we will be able to obtain insurance in the future at
commercially reasonable rates, in adequate amounts or on satisfactory terms. We
cannot predict the effect that any claims, regardless of their ultimate outcome,
might have on our business or reputation or on our ability to attract and retain
patients and employees.
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THE SPLIT-OFF
THIS SECTION OF THIS PROSPECTUS DESCRIBES THE PROPOSED SPLIT-OFF AND THE
SEPARATION OF THE HEALTH SERVICES BUSINESS FROM OLSTEN AND ITS OTHER BUSINESSES.
THE DESCRIPTION BELOW IS A SUMMARY. WE URGE YOU TO READ THE SEPARATION
AGREEMENT, THE TAX SHARING AGREEMENT AND THE EMPLOYEE BENEFITS ALLOCATION
AGREEMENT, EACH OF WHICH IS CONTAINED AS AN EXHIBIT TO THE REGISTRATION
STATEMENT OF WHICH THIS PROSPECTUS IS A PART.
SEPARATION OF THE HEALTH SERVICES BUSINESS FROM OLSTEN AND ITS OTHER BUSINESSES
The separation agreement provides that Olsten will transfer to us all of the
assets exclusively used in the health services business. Because Olsten
generally operates the health services business as a business separate from its
other businesses, we already own most of the assets of the health services
business and are directly obligated for most of the liabilities of the health
services business. Before the split-off, Olsten will transfer to us the
remaining health services business assets and we will assume the remaining
liabilities. The remaining assets to be transferred to us include some
intellectual property.
The separation agreement provides that Olsten will assign to us, and we will
assume, specified liabilities, to the extent we are not already solely liable
for them. Those liabilities are all the liabilities arising out of the
operations of the health services business, whether arising before or after the
split-off, including:
- the liabilities described under the headings "Business--Governmental
investigations" and "Business--Legal proceedings";
- the liabilities and obligations under the supplemental executive
retirement plan with respect to our employees and some former employees of
Olsten; and
- the liabilities of Olsten with respect to any excise tax obligations under
Mr. Edward A. Blechschmidt's and Mr. Stuart Olsten's agreements described
under the heading "--Other agreements with former and present directors
and officers of ours and Olsten".
Before the split-off, Olsten will take actions as our sole stockholder to
establish us as an independent company. As a result, when the split-off is
complete, the health services business will be separated from the staffing
services and the information technology services businesses of Olsten and we
will be an independent, publicly owned company.
TERMS OF THE SEPARATION AGREEMENT
The separation agreement contains provisions for the operation of our
company before the split-off. The separation agreement also dictates various
continuing relations between Olsten, Adecco and us, including the provisions
described below.
INSURANCE
Olsten agreed to pay for, until the split-off, all insurance that was in
force when the separation agreement was signed. After the split-off, Olsten and
Adecco will be responsible for providing insurance coverage for the businesses
retained by Olsten and we will be responsible for providing insurance coverage
for the health services business. Olsten agreed to assist us before the
split-off in obtaining the insurance we need as an independent company.
Before the split-off, Olsten agreed to transfer to us all insurance policies
that are exclusively for the benefit of the health services business and Olsten
will retain all other insurance policies. With respect to the policies that
cover both the health services business and the businesses retained by Olsten,
which we refer to as the shared policies, we will be entitled to the benefits of
those policies for all liabilities arising out of actions and conduct before the
split-off. With respect to the shared policies, after the split-off, Olsten will
be responsible for all claims administration and financial administration
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of all of those policies. We have agreed to pay the share of premiums and
administrative expense for the shared policies that relate to the portion of
that insurance that covers our business.
After the split-off, we are required to promptly notify Olsten of all claims
covered by a shared policy that are asserted after the split-off and that relate
to events that happened before the split-off. Olsten will be responsible for
notifying the appropriate insurance carrier. Olsten will have final authority to
compromise and settle any claim under any shared policy so long as it obtains a
release on our behalf. If the settlement includes a remedy other than monetary
damages within coverage limits, Olsten will be required to obtain our consent.
Olsten will be responsible for allocating all insurance proceeds received by it
under shared policies. In instances where we and Olsten have a common claim, the
insurance proceeds will be allocated proportionally between Olsten, on the one
hand, and us, on the other hand, except in the event the proceeds relate to a
claim against both Olsten and us relating to the health services business prior
to the split-off. In those instances, Olsten will be paid in full before any
proceeds are distributed to us.
INTELLECTUAL PROPERTY
Olsten will transfer to us all rights and ownership in most of the names,
trademarks and service marks used exclusively by the health services business,
other than, names, trademarks and service marks bearing the name "Olsten". With
respect to those names, trademarks and service marks that are used by the health
services business and include the name "Olsten" as well as some other names,
trademarks and service marks which are not being transferred to us, Olsten
granted us a royalty-free license to use those names for a period of one year
after the split-off. We also have the right, pursuant to the license, to use
existing brochures, supplies and other materials bearing the Olsten names for up
to one year after the split-off.
TRANSITIONAL SERVICES
For one year after the split-off, Olsten agreed to provide or make available
to us on a cost basis as agreed to by the parties, some transition services as
may be requested by us. Those services include tax preparation and filing, legal
services, information technology support and administrative services,
procurement services and other services.
LEASES OF REAL PROPERTY
Olsten has agreed to provide office space for our headquarters at the Olsten
headquarters at 175 Broad Hollow Road, Melville, New York 11747-8905 without
charge for six months after the split-off. We have agreed to use our best
efforts to relocate our headquarters promptly, but in no event later than six
months after the split-off. In addition, before the split-off, all leases for
real property used exclusively by the health services business will be
transferred to us and any leases for real property shared by the health services
business and the businesses retained by Olsten will be modified, transferred or
terminated as agreed by us and Olsten.
COVENANTS
We and Olsten have also agreed that, between the date of the separation
agreement and the merger, the health services business and the staffing services
and information technology services businesses of Olsten will be operated in the
ordinary course of business consistent with past practice to the fullest extent
possible. In addition, with respect to our company, prior to October 31, 1999
and Olsten and its retained businesses prior to the merger, neither Olsten nor
our company has or will, without the prior written consent of Adecco:
- make or fail to make any capital expenditure other than pursuant to an
approved capital expenditure plan;
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- make any change to the billing processes for services, other than as may
be related to planned system improvement;
- discount, securitize or consign accounts receivable;
- change the aging of accounts payable in effect on the date of the
separation agreement or payment practices for them; or
- except for cash transfers made in the ordinary course of business through
and reflected in the intercompany balance, transfer or encumber assets
except in the ordinary course of business in arms length transactions.
INTERCOMPANY LOAN BALANCE
The separation agreement provides that:
(1) on October 31, 1999, the intercompany loan balance which reflects cash
transfers between Olsten and the health services business be frozen;
(2) on October 31, 1999, Olsten establish a new intercompany account to record
intercompany transactions for the period from October 31, 1999 through the
date of the merger;
(3) on October 31, 1999, if the sum of (a) indebtedness for borrowed money,
(b) the deferred purchase price of property and (c) up to $10 million of
transaction fees related to the transactions contemplated by the separation
agreement and the merger agreement, less cash on hand (the sum is referred
to as net debt) of Olsten and its subsidiaries (other than us and our
subsidiaries), after giving effect to the separation agreement, is
(i) greater than $750 million, then the new intercompany account will
reflect a payable by us to Olsten equal to the excess, or (ii) less than
$750 million, then the new intercompany account will reflect a payable by
Olsten to us equal to the shortfall or (iii) equal to $750 million, then no
payment will be made in connection with the net debt calculation; and
(4) on November 1, 1999, Olsten establish a cash management system for the
health services business and related accounts and the health services
business will cease participation in Olsten's cash management system.
The above actions have been completed in compliance with the separation
agreement. Pursuant to item (3) above, on October 31, 1999, net debt of Olsten
and its subsidiaries (other than us and our subsidiaries) was $721 million. As a
result, on October 31, 1999, the new intercompany account reflected a payable of
$29 million to us by Olsten, which we refer to as the true-up amount. Olsten
will pay interest on the true-up amount at 6 percent per annum on the average
daily balance of the true-up amount from October 31, 1999 to the earlier of
(1) the date of the split-off or (2) when total advances to us from Olsten
exceed the true-up amount. After October 31, 1999, any advances to us by Olsten
will reduce the amount payable to us by Olsten and may result in a payable to
Olsten by us. If advances to us by Olsten exceed $29 million, we will need to
borrow under our credit facility to pay Olsten the amount of the excess.
Advances to us by Olsten in excess of the true-up amount will bear interest at
the rate that The Chase Manhattan Bank announces as its prime lending rate on
the average daily balance of those advances.
Between October 31, 1999 and the date of the merger:
- all cash receipts and disbursements of the health services business must
be made through the health services business cash management account;
- all transfers of cash or other assets (other than those contemplated by
the separation agreement) or transactions, including management fees and
intercompany loans between the retained
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business of Olsten, on the one hand, and the health services business, on
the other, will be reflected in the new intercompany account;
- we will pay management fees to Olsten on the same basis as prior to
October 31, 1999; and
- other than the true-up amount, Olsten may not make further advances to us
in excess of $50 million without the consent of Adecco.
In addition, we and Olsten have agreed that:
- at the time of the split-off, the intercompany balance as of October 31,
1999 will be contributed to the capital of the health services business;
and
- no later than one day after the split-off, the new intercompany account
balance will be settled by either us or Olsten, as the case may be, by
delivering to the other cash in the amount, if any, owing to the other
together with interest at the rates described above.
INDEMNIFICATION
After the split-off, we will indemnify Olsten and each of its directors and
officers for any losses related to:
(1) any liabilities we assumed under the separation agreement including all
liabilities arising out of the operation of the health services business,
whether arising before or after the split-off;
(2) any material misstatements or omissions in the proxy
statement/prospectus or this prospectus related to our business or the
split-off;
(3) any misrepresentation or breach of any warranty in the separation
agreement made by us;
(4) any breach of any agreement or covenant under the separation agreement
made by us;
(5) liabilities resulting from any Olsten stockholder exercising appraisal
rights in connection with the split-off; and
(6) any cash paid to Olsten stockholders in lieu of fractional shares of our
common stock.
After the split-off, Olsten will indemnify and hold harmless our company and
each of our directors and officers for any losses related to any liabilities of
the staffing services and information technology services businesses assumed
under the separation agreement and any breach of any agreement or covenant under
the separation agreement made by Olsten after the split-off.
SALES AND OTHER TRANSFER TAXES
All sales and other transfer taxes (excluding any income or franchise taxes)
payable in connection with the merger shall be paid 100 percent by Olsten. All
other sales and other transfer taxes payable in connection with the split-off
and other transactions contemplated by the separation agreement shall be paid
100 percent by Gentiva Health Services.
EXPENSES
All costs and expenses incurred in connection with preparing and
implementing the separation agreement and the transactions contemplated by the
separation agreement will be paid by the party incurring the expense, with some
limited exceptions. Olsten's chief financial officer has final authority in
determining which entity incurred the expense.
AMENDMENTS
The separation agreement may not be amended without the written consent of
Olsten, Adecco and our company.
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MANNER OF EFFECTING THE SPLIT-OFF
At the time of the split-off, Olsten stockholders who do not dissent from
the merger in accordance with Delaware law will receive .25 shares of our common
stock and the remaining merger consideration to be paid by Adecco in exchange
for their Olsten stock. In the event an Olsten stockholder would receive a
fraction of a share of our common stock as a result of the split-off, the Olsten
stockholder will receive, instead, cash in an amount equal to the fraction of a
share of our common stock they would receive in the split-off multiplied by the
last reported sale price of our common stock as reported on the Nasdaq National
Market on the first full trading day following the split-off.
CERTAIN INDEBTEDNESS OF OUR COMPANY
QUANTUM DEBENTURES
The following summary of some of the provisions of Quantum Health
Resources, Inc.'s 4 3/4% convertible subordinated debentures is not complete and
is subject to, and qualified by all of the provisions of the indenture referred
to below. After the split-off, the debentures will continue to be Quantum's debt
and will not be assumed by nor will Olsten be liable for the debentures.
Quantum, one of our subsidiaries, has about $78.6 million outstanding of its
4 3/4% convertible subordinated debentures. The debentures mature on October 1,
2000. The debentures were issued under an indenture dated October 8, 1993, as
amended on June 28, 1996, between Quantum and First Trust National Association,
as Trustee. Initially, Quantum issued about $86.3 million of debentures, of
which about $7.7 million of debentures were retired in January 1999. Interest on
the debentures is payable semi-annually on April 1 and October 1 of each year.
The payment of the principal of, and premium, if any, and interest on the
debentures are subordinate to the prior payment in full of all senior
indebtedness of Quantum.
The debentures are redeemable, in whole or in part, at the option of
Quantum, at a redemption price of 100.68 percent of the principal amount to be
redeemed. If a change of control of Quantum occurs without prior approval of the
board of directors, each holder of debentures will have the right, at the
holder's option, to require Quantum to repurchase all or any portion of the
holder's debentures at a purchase price equal to 100 percent of the amount of
the debentures to be repurchased. Neither the merger nor the split-off will
trigger a Quantum debenture holders' right to require us or Quantum to
repurchase their debentures.
The debentures are convertible into class B common stock of Olsten at $52.26
per share. After the split-off, the debentures will be convertible, on or prior
to September 1, 2000, into:
(1) our stock, as the consideration for the split-off part of the merger,
and
(2) the other part of the merger consideration described below
as if the holder of the debenture held the number of shares of Olsten's class B
common stock that the debentures would have been convertible into, in accordance
with the indenture, immediately prior to the merger. The merger consideration
consists of $8.75 in cash or .12472 American Depositary Shares or a combination
of the two and the split-off part of the merger consideration is .25 shares of
our common stock, in each case, for each share of class B common stock. Quantum
will pay Adecco the fair market value of any Adecco American Depositary Shares
issued in accordance with the indenture prior to Adecco issuing the shares to
the debenture holder.
The indenture contains covenants, including a restriction, subject to
limitations, on Quantum's ability to consolidate with or merge into any other
person or convey, transfer or lease its properties and
X-24
assets substantially as an entirety to any person. The debentures contain
certain customary events of default, including, but not limited to:
(1) a default in any payment of interest or principal (including due to a
required repurchase) on the debentures;
(2) failure of Quantum to perform any covenant or warranty in the indenture;
(3) a default under any indebtedness for borrowed money of Quantum or any of
its subsidiaries and such indebtedness being accelerated; and
(4) certain bankruptcy events.
COMMITMENT TO ENTER INTO A SENIOR CREDIT FACILITY
On January 18, 2000, Fleet Capital Corp. and Fleet Boston Robertson
Stephens, Inc., which we refer to in this section together as "Fleet", executed
a commitment letter to establish a $150 million revolving credit facility for us
to provide for our working capital requirements and to support future
acquisitions.
The following is a summary of the commitment letter relating to the credit
facility. The commitment on the part of Fleet to establish the credit facility
is subject to conditions described below.
Fleet has agreed to act as administrative agent, to fund this credit
facility and may arrange for other banks to fund a portion of the credit
facility. The credit facility will expire four years after the completion of the
split-off. The maximum line of credit under the proposed credit facility is $150
million, including up to $30 million which is available for letters of credit.
The lenders will permit borrowings of up to a maximum of 80 percent of eligible
accounts receivable, reduced by reserves as Fleet deems necessary in accordance
with industry practice. Not all of our accounts receivable are considered
eligible for this calculation. However, as of October 3, 1999, assuming the
credit facility was established, we would have been able to borrow the full $150
million under this credit facility.
The interest on this credit facility will be either LIBOR plus 2.50 percent
or Fleet's prime rate plus 0.25 percent, as determined by us. The commitment
letter requires us to pay fees, one of which was paid at the time of execution
of the commitment letter and another to be paid on the date of execution of the
credit facility. In addition, the credit facility will require us to pay:
- an annual unused line of credit fee based on the average unused portion of
the credit facility;
- an annual administrative agent fee;
- an annual fee for the average issued amount outstanding on the letters of
credit; and
- a fee payable to the fronting bank on the date a letter of credit is
issued.
The loans under the credit facility will be secured by all of our present
and future tangible and intangible personal property, other than equipment. In
addition, the credit facility will include covenants requiring us to maintain a
minimum tangible net worth and minimum earnings before interest, taxes,
depreciation and amortization. In addition, the credit facility will contain
covenants limiting mergers, liens, investments, guarantees, acquisitions,
dividends, debt and capital expenditures.
The commitment letter contains conditions that need to be satisfied or
waived by Fleet in order for Fleet to be required to establish and fund the
credit facility. The material conditions include:
- no material adverse change in our business, financial condition, assets or
collateral;
- no material adverse change in any government regulation or policy
affecting us or in our outstanding litigation or government
investigations;
X-25
- no material adverse change affecting loan syndication or financial,
banking or capital market conditions;
- no default in our existing debt or other material contracts and no
violations of laws;
- no payments may be made on the Quantum debentures unless conditions are
met;
- our having in place satisfactory insurance coverage;
- our ability to borrow at least $100 million under the credit facility on
the proposed date of the initial funding, after giving effect to any
borrowing on the date of initial funding, based on the eligible accounts
receivable calculation set forth above; and
- our receiving a minimum of $20 million in cash from the issuance of the
convertible subordinated debentures on terms acceptable to Fleet. See
"Convertible trust preferred securities of our subsidiary".
CONVERTIBLE TRUST PREFERRED SECURITIES OF OUR SUBSIDIARY
Some of our and Olsten's directors, officers and management and members of
the Olsten family have agreed to purchase at the closing of the split-off about
$20 million of 10% convertible trust preferred securities to be issued by a
trust, of which we own all the common equity. The convertible trust preferred
securities are mandatorily redeemable five years from issuance and the trust may
redeem the securities at any time after issuance at a declining premium over
face amount. Upon a change of control, the holders of convertible trust
preferred securities may require the trust to purchase these securities at 100
percent of their face amount. Dividends are payable quarterly in cash at the
rate of 10 percent per annum, but the trust may defer dividend payments for up
to a total of twenty quarters, in which case dividends will accrue. The
convertible trust preferred securities are convertible into our common stock at
a premium of 17.5 percent over the average closing stock price of our common
stock during the 10 trading days following the first earnings announcement after
the closing of the split-off.
Simultaneously with, and in connection with the issuance by the trust of the
convertible trust preferred securities, we will issue to the trust about $20
million of 10% convertible subordinated debentures. The convertible subordinated
debentures will have the same terms as the convertible trust preferred
securities, including but not limited to maturity, interest, conversion and
redemption price.
The trust that is issuing the convertible trust preferred securities is a
special purpose trust. The trust's operations are limited to issuing the
convertible trust preferred securities and holding our convertible subordinated
debentures. The trust will only have the ability to pay dividends to the extent
we pay interest on our convertible subordinated debentures.
LISTING OF OUR COMMON STOCK; RESTRICTIONS ON RESALE
We applied for approval for quotation of our common stock on the Nasdaq
National Market at the time of the split-off. Our common stock will be freely
tradeable under the Securities Act of 1933, as amended, except for shares
received by persons who may be deemed "affiliates" of ours within the meaning of
Rule 144 under the Securities Act or who may be deemed to have been affiliates
of ours within the meaning of Rule 145 under the Securities Act. Persons who may
be deemed to be affiliates of ours after the split-off generally include
individuals or entities that control, are controlled by, or are under common
control with our company or, before the split-off, Olsten. This group may
include the directors and executive officers of our company or, before the
split-off, Olsten and our or, before the split-off, Olsten's principal
stockholders. Persons who are affiliates of ours will be permitted to sell their
shares of our common stock only pursuant to an effective registration statement
under the Securities Act or pursuant to an exemption from the registration
requirements of the Securities Act. The registration statement of which this
prospectus forms a part will not cover resales of our common stock
X-26
by our affiliates. You are encouraged to read the information in this prospectus
described under the heading "Shares Eligible for Future Sale".
TERMS OF THE EMPLOYEE BENEFITS ALLOCATION AGREEMENT
GENERAL
In connection with the separation agreement, we entered into an employee
benefits allocation agreement with Olsten. The agreement provides for Olsten's
and our rights and obligations concerning employees, former employees and some
employee benefits and other matters related to plans, programs and practices
maintained by Olsten prior to the split-off for the benefit of employees,
officers and directors of Olsten and its affiliates. We encourage you to read
the employee benefits allocation agreement, which is attached as an exhibit to
this registration statement.
Prior to the split-off, we and Olsten will allocate the employees of Olsten
between us and Olsten. Employees who are primarily engaged in the health
services business will become our employees after the split-off and employees
who are primarily engaged in Olsten's retained businesses will not become our
employees after the split-off. All employees that are not engaged primarily in
one particular business of Olsten prior to the split-off will be allocated on
terms acceptable to Olsten and us. Subject to the terms of the employee benefits
allocation agreement, we have agreed to assume all obligations and liabilities
for wages, salaries, welfare, pension, incentive compensation and other
employee-related liabilities with respect to our employees and former employees
of our business after the split-off. The following is a summary of some of the
provisions of the employee benefits allocation agreement.
COMPENSATION BENEFIT PLANS
Effective as of the split-off, we will generally retain all benefit
obligations with respect to our employees and former employees of our business
and Olsten will have no further liability with respect to them. Our employees
will not continue to participate in Olsten's plans and instead will be eligible
to participate in our plans. We will treat each of our employee's service with
Olsten and its subsidiaries prior to the split-off as service with our company
for purposes of determining eligibility to participate, eligibility for benefits
and vesting under our compensation benefit plans.
QUALIFIED SAVINGS PLANS
We will establish one or more qualified savings plans for the benefit of our
employees. For purposes of determining eligibility and vesting under our savings
plans we will give credit to our employees for all service with Olsten and its
subsidiaries before the split-off. As soon as possible after the split-off,
Olsten will cause all assets held for the benefit of our employees and former
employees of our business under Olsten's qualified savings plans to be
transferred to our new qualified savings plans. We and our qualified savings
plans will then assume all liabilities with respect to our employees under our
savings plans and Olsten's qualified savings plans and Olsten will have no
further liability with respect to those employees' and former employees' rights
under the Olsten plans. Before the split-off, we will be responsible for making
required contributions to the Olsten savings plans for our employees.
NONQUALIFIED RETIREMENT AND SAVINGS PLANS
As soon as possible after the split-off, we will provide our employees with
benefits under our new nonqualified retirement and savings plans, and we will
assume all liabilities and obligations to our employees and former employees of
our business for benefits under Olsten's nonqualified plans. Our employees will
cease accruing benefits under Olsten's nonqualified plans. In addition, after
the split-off we will establish one or more trusts in connection with our
nonqualified plans, and assets attributable to benefits of our employees and
former employees of our business will be transferred from Olsten's corresponding
trusts to our trusts.
X-27
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Before the merger, we will establish a nonqualified supplemental executive
retirement plan substantially similar to the Olsten plan and will assume all
liabilities and obligations with respect to our employees and all former
employees of Olsten as of October 7, 1999. We will be liable for the funding of
liabilities under our plan to the extent, if any, that these liabilities are in
excess of the assets transferred to us.
WELFARE BENEFIT PLANS
Effective as of the split-off, we will establish or otherwise maintain for
our employees medical, dental and other employee welfare benefit plans with
substantially similar terms as those maintained by Olsten prior to the
split-off. All of our employees will be eligible for immediate participation in
our plans and all employment with Olsten will be credited for each employee.
Effective as of the split-off, we will assume all liabilities relating to claims
and premiums under those welfare benefit plans with respect to our employees or
former employees of our business.
EQUITY BASED COMPENSATION PLANS
The employee benefits allocation agreement provides that, as of the
split-off, all options to purchase stock of Olsten held by our employees and
former employees of our business will be assumed by us and either:
- retired, to the extent allowed, in exchange for cash, or
- converted into options to purchase our common stock in accordance with our
plans.
BONUS PLANS
We will be responsible for all annual bonus payments for our employees for
the calendar year when the split-off occurs.
TERMS OF THE TAX SHARING AGREEMENT
In connection with the separation agreement, we entered into a tax sharing
agreement with Olsten and Adecco, to allocate liability for some taxes and to
address some other tax matters. We encourage you to read the tax sharing
agreement, which is attached as an exhibit to this registration statement. The
tax sharing agreement will become effective at the time of the merger. If the
merger agreement is terminated for any reason, the tax sharing agreement will
terminate and no party will have any liability under the agreement.
The tax sharing agreement provides that Olsten will be liable for, and will
indemnify us for, all taxes not specifically allocated to us.
With respect to all income taxes attributable to taxable periods before the
split-off that were imposed on Olsten and/or one or more subsidiaries of Olsten
on a consolidated or combined basis, we will generally be liable, and will
indemnify Olsten, only for the portion of those income taxes that is
attributable to us or entities that will be subsidiaries of ours immediately
after the split-off. However, we have also agreed to indemnify Olsten:
- for any incremental income taxes imposed on Olsten as a result of the
distribution of our stock pursuant to the split-off, except to the extent
these incremental income taxes result from some actions taken by Olsten,
in which case Olsten must indemnify us;
- for any incremental income taxes imposed on Olsten as a result of a
disallowance of certain income tax deductions related to the health
services business; and
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- if some refunds to be claimed by Olsten are denied due to the disallowance
of some net operating losses of ours or entities that will be subsidiaries
of ours immediately after the split-off.
We have also agreed to bear 50 percent of any incremental income taxes
imposed on Olsten, us or our or their affiliates that result from
(i) pre-split-off transfers under the separation agreement, or (ii) the
triggering of potential deferred gains as a result of the split-off, other than
any deferred gain in our common stock for which either we or Olsten are 100
percent liable (as described in the preceding sentence) and other than certain
taxes of Olsten resulting from actions taken by Olsten for which Olsten is 100%
liable.
Olsten generally is entitled to 100 percent of any tax refunds or other tax
benefits received with respect to consolidated or combined income taxes
attributable to taxable periods before the split-off.
All taxes attributable to taxable periods before the split-off, other than
consolidated or combined income and other taxes described above, shall remain
the responsibility of the entity on whom primary legal liability for the tax is
imposed.
OTHER AGREEMENTS WITH FORMER AND PRESENT DIRECTORS AND OFFICERS OF OURS AND
OLSTEN
Mr. Stuart Olsten has agreed not to compete with us for a period of four
years from the date of the merger. In return for this agreement, we will pay him
a lump sum of $250,000, payable when the merger is complete. One executive
officer of Olsten, Ms. Maureen McGurl, will be retained as a consultant of our
company for a period of six months from the split-off for a payment of $200,000,
payable during the term of the consulting period. In addition, Mr. Robert A.
Fusco, the past president of Olsten's health services business, will not
continue with our company after the split-off. We will pay him $2.3 million upon
completion of the split-off pursuant to his change in control agreement.
Under the separation agreement, Messrs. Blechschmidt and Olsten will be
compensated by us, on an after tax basis, for excise taxes (no more than $1.0
million in excise taxes in the case of Mr. Olsten) imposed by reason of the
receipt of amounts payable under their separation, consulting and non-
competition agreements with Adecco.
Prior to the split-off we will establish a nonqualified supplemental
executive retirement plan substantially similar to the Olsten plan and will
assume all liabilities and obligations under the Olsten plan with respect to our
employees and all former employees of Olsten as of October 7, 1999. Olsten and a
former executive officer of Olsten are presently engaged in discussions
concerning his claim that Olsten miscalculated, and thus erroneously reduced by
approximately $650,000, the supplemental executive retirement plan payment owed
to this former executive under the separation agreement.
In January 2000, some of our and Olsten's directors, officers and management
and members of the Olsten family entered into commitment letters with us
requiring them to purchase at the closing of the split-off about $20 million of
10% convertible trust preferred securities to be issued by a trust of which we
own all the common equity. The commitments are in the following aggregate
amounts: Stuart, Miriam and Cheryl Olsten, $15 million together;
Mr. Blechschmidt, $2 million; Messrs. Ganzi, Troubh and Weston, $1 million each;
Messrs. Levine and Fusco, $250,000 each; Messrs. Collura, Mitchell and Nixon,
$100,000 each; Dr. Hornbake, $50,000; Messrs. Christmas, Perry and Silver and
Ms. Ma, $25,000 each; and other personnel, an aggregate of $150,000. The
commitments terminate if the split-off is not completed by May 31, 2000 or
Olsten or Adecco terminate the merger agreement. The convertible trust preferred
securities will be offered in a private placement exempt from the registration
requirements of the Securities Act. To fund the trust we will issue about $20
million of convertible subordinated debentures to the trust on the same terms as
the 10% convertible trust preferred securities. For a more detailed description
of the terms of the convertible trust preferred securities, see "--Convertible
trust preferred securities of our subsidiary".
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CAPITALIZATION
The following table sets forth our historical and pro forma capitalization
as of October 3, 1999 on an actual basis and as adjusted to give effect to the
split-off.
OCTOBER 3, 1999
----------------------------
HISTORICAL AS ADJUSTED
---------- -----------
(UNAUDITED, IN THOUSANDS)
LONG-TERM DEBT:
Senior credit facility.................................... $ -- $ -- (1)
Quantum debentures........................................ 78,562 78,562
-------- --------
Total long-term debt.................................... $ 78,562 $ 78,562
GENTIVA-OBLIGATED MANDATORILY REDEEMABLE SECURITIES OF
OUR SUBSIDIARY HOLDING SOLELY OUR DEBENTURES.............. -- 20,000 (2)
REDEEMABLE PREFERRED STOCK.................................. -- 100 (3)
-------- --------
SHAREHOLDERS' EQUITY:
Common stock.............................................. $ -- $ 2,033 (4)
Additional paid-in-capital(3)(5).......................... 709,082 691,049
Accumulated deficit....................................... (18,136) (18,136)
Accumulated other comprehensive loss...................... (2,335) (2,335)
-------- --------
Total shareholders' equity.............................. 688,611 672,611
-------- --------
Total capitalization.................................... $767,173 $771,273
======== ========
- ------------------------
(1) On January 18, 2000 we received a commitment letter for a credit facility
with a line of credit of $150 million. The commitment letter is described
under the heading "The Split-Off--Certain indebtedness of our
company--Commitment to enter into a senior credit facility". If on the date
of the split-off, the new intercompany account between us and Olsten
reflects an amount due to Olsten, we intend to borrow under the credit
facility to satisfy the obligation.
(2) To adjust for $20 million of 10% convertible trust preferred securities
issued to some directors, officers and management of Gentiva Health Services
and Olsten and members of the Olsten family by a trust of which we own all
the common equity. The trust's only asset is an equal amount of Gentiva
Health Services' $20 million of 10% convertible subordinated debentures
issued in connection with the convertible trust preferred securities. See
"The Split-Off--Certain indebtedness of our company--Convertible trust
preferred securities of our subsidiary".
(3) Prior to the split-off, we will issue 100 shares of series A cumulative
non-voting redeemable preferred stock. The series A cumulative non-voting
redeemable preferred stock is described under the heading "Description of
Gentiva Health Services Capital Stock--Capital Stock--Preferred
stock--Series A cumulative non-voting redeemable preferred stock".
(4) To adjust Gentiva Health Services common stock based upon 81,305,657 of
outstanding shares of Olsten at October 3, 1999, adjusted for the .25 shares
of common stock of Gentiva Health Services that each Olsten shareholder will
receive upon completion of the split-off.
(5) As adjusted, additional paid-in-capital reflects $29 million of cash to be
received by Gentiva Health Services in connection with the split-off offset
by a $45 million deferred tax asset resulting from net operating losses
which will be used by Olsten as indicated on the Unaudited Pro Forma
Consolidated Balance Sheet. See "The Split-Off--Terms of the separation
agreement--Intercompany loan balance".
X-30
DIVIDEND POLICY
We do not expect to pay any dividends on our common stock for the
foreseeable future. Any future payments of dividends and the amount of the
dividend will be determined by our board of directors from time to time based on
our:
- results of operations,
- financial condition,
- cash requirements,
- future prospects, and
- other factors deemed relevant by our board of directors.
X-31
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL DATA
The following provides unaudited pro forma consolidated financial data of
Gentiva Health Services for the year ended January 3, 1999 and as of and for the
nine months ended October 3, 1999. The data reflects adjustments to the
historical consolidated financial data of Gentiva Health Services to give effect
to estimated costs and expenses, transfers of cash and the issuance of Gentiva
Health Services shares of common stock associated with the split-off.
The unaudited pro forma consolidated financial statements have been prepared
assuming that the split-off of Gentiva Health Services and related transactions
occurred as of the date of the balance sheet, for purposes of the unaudited pro
forma consolidated balance sheet and as of the first day of fiscal 1998, for
purposes of the unaudited pro forma consolidated statements of income.
The unaudited pro forma consolidated financial statements do not reflect the
consolidated results of operations or financial position that would have existed
had the split-off been effected on the dates specified nor are they necessarily
indicative of future results. The unaudited pro forma consolidated financial
statements and adjustments should be read with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our historical
consolidated financial statements and the notes to the financial statements
included elsewhere in this prospectus.
X-32
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
NINE MONTHS ENDED OCTOBER 3, 1999
(In thousands, except share data)
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
----------- ----------- -----------
Service sales, management fees and other income........... $ 1,118,045 $ 1,500 (1) $ 1,119,545
Cost of services sold..................................... 740,051 -- 740,051
----------- ------- -----------
Gross profit............................................ 377,994 1,500 379,494
Selling, general and administrative expenses.............. 380,627 3,900 (2) 384,527
Interest expense, net..................................... 3,058 11,500 (3) 14,558
Interest expense on intercompany debt..................... 9,750 (9,750)(4) --
----------- ------- -----------
Loss before income taxes................................ (15,441) (4,150) (19,591)
Income tax benefit........................................ (2,589) (1,450)(5) (4,039)
----------- ------- -----------
Net loss................................................ $ (12,852) $(2,700) $ (15,552)
=========== ======= ===========
SHARE INFORMATION:
Basic loss per share...................................... $ (128,520) $ (0.77)
Average shares outstanding(6)............................. 100 20,326,414
- --------------------------
(1) To reflect the estimated increase in Medicare reimbursement resulting from
an increase in cost reimbursement of approximately $5.1 million for the
incrementally higher costs to be incurred from the creation of new corporate
functions and interest expense related to working capital borrowings
partially offset by a decrease in cost reimbursement of approximately
$3.6 million attributable to the elimination of reimbursement of overhead
costs allocated to Gentiva Health Services by Olsten.
(2) Represents management's estimate of the incremental costs associated with
becoming a stand-alone public entity. Such costs relate primarily to the
following corporate departments which must be developed: legal, risk
management, tax, treasury, human resources and public relations, as well as
other activities (including rent expense of $900,000 from the date of the
split-off relating to the relocation of our headquarters). In connection
with the split-off, Gentiva Health Services will incur about $2.3 million
relating to a change in control agreement to be paid to Olsten's health
services business past president who will not continue with Gentiva Health
Services after the split-off, payments of $250,000 to a director of Olsten
and $200,000 to an executive officer of Olsten and an estimated
$2.2 million to reimburse Mr. Blechschmidt's excise tax obligations pursuant
to the agreements described under the heading "The Split-Off--Other
agreements with former and present directors and officers of ours and
Olsten". These costs have not been included as adjustments in the unaudited
pro forma consolidated statement of income as they will not have a
continuing impact on Gentiva Health Services.
(3) Represents interest expense on (i) weighted average outstanding bank
borrowings of approximately $150 million for the nine months ended
October 3, 1999 at an interest rate of 8.25 percent per annum which
approximates the interest rate on the credit facility for which Gentiva
Health Services has received a commitment letter from a bank and
(ii) $20 million of 10% convertible trust preferred securities which a trust
of which Gentiva Health Services owns all the common equity will issue on or
prior to split-off plus amortization of credit facility issuance costs. This
level of borrowings is based upon assumed drawdowns on a line of credit
resulting from Gentiva Health Services' historical cash flow activity from
December 29, 1997 as well as Olsten's actual net debt of $721 million on
October 31, 1999, which will result in Gentiva Health Services receiving
approximately $29 million of cash in connection with the split-off. Advances
to Gentiva Health Services by Olsten will reduce this amount of cash to be
received by Gentiva Health Services and if advances exceed $29 million,
Gentiva Health Services will need to borrow under its credit facility to pay
Olsten the amount of the excess. See "The Split-Off--Terms of the separation
agreement--Intercompany loan balance". See Note 7 to the Consolidated
Financial Statements.
(4) Reflects the elimination of interest expense relating to intercompany debt,
which was contributed to the capital of Gentiva Health Services.
(5) To reflect the tax effect of the above pro forma adjustments.
(6) The number of shares used to compute pro forma basic loss per share is based
upon the average shares outstanding of Olsten adjusted for the .25 shares of
common stock of Gentiva Health Services that each Olsten shareholder will
receive upon consummation of the split-off. The average shares outstanding
excludes the options to purchase Olsten common stock of those who will
become employees of Gentiva Health Services. These options have not been
included because Gentiva Health Services cannot determine the number of
shares of Gentiva Health Services common stock into which the Olsten options
will be converted upon the split-off until the implied value of Gentiva
Health Services common stock is established on the date of the split-off.
X-33
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED JANUARY 3, 1999
(IN THOUSANDS, EXCEPT SHARE DATA)
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
----------- ----------- -----------
Service sales, management fees and other income............. $ 1,330,303 $ (700)(1) $ 1,329,603
Cost of services sold....................................... 908,896 -- 908,896
----------- -------- -----------
Gross profit.............................................. 421,407 (700) 420,707
Selling, general and administrative expenses................ 552,528 5,200 (2) 557,728
Interest expense, net....................................... 4,414 4,800 (3) 9,214
Interest expense on intercompany debt....................... 13,000 (13,000)(4) --
----------- -------- -----------
Loss before income taxes.................................. (148,535) 2,300 (146,235)
Income tax expense (benefit)................................ (47,070) 800 (5) (46,270)
----------- -------- -----------
Net loss.................................................. $ (101,465) $ 1,500 $ (99,965)
=========== ======== ===========
SHARE INFORMATION:
Basic loss per share........................................ $(1,014,650) $ (4.92)
Average shares outstanding(6)............................... 100 20,326,414
- --------------------------
(1) To reflect the estimated decrease in Medicare reimbursement resulting from a
decrease in cost reimbursement of approximately $4.8 million due to the
elimination of reimbursement of overhead costs allocated to Gentiva Health
Services by Olsten partially offset by an increase in cost reimbursement of
approximately $4.1 million for the incrementally higher costs to be incurred
from the creation of new corporate functions and interest expense related to
working capital borrowings.
(2) Represents management's estimate of the incremental costs associated with
becoming a stand-alone public entity. Such costs relate primarily to the
following corporate departments which must be developed: legal, risk
management, tax, treasury, human resources and public relations, as well as
other activities (including rent expense of $1.2 million from the date of
the split-off relating to the relocation of our headquarters). In connection
with the split-off, Gentiva Health Services will incur about $2.3 million
relating to a change in control agreement to be paid to Olsten's health
services business past president who will not continue with Gentiva Health
Services after the split-off, payments of $250,000 to a director of Olsten
and $200,000 to an executive officer of Olsten and an estimated
$2.2 million to reimburse Mr. Blechschmidt's excise tax obligations pursuant
to the agreements described under the heading "The Split-Off--Other
agreements with former and present directors and officers of ours and
Olsten". These costs have not been included as adjustments in the unaudited
pro forma consolidated statement of income as they will not have a
continuing impact on Gentiva Health Services.
(3) Represents interest expense on (i) weighted average outstanding bank
borrowings of approximately $27 million for the year ended January 3, 1999
at an interest rate of 8.25 percent per annum which approximates the
interest rate on the credit facility for which Gentiva Health Services has
received a commitment letter from a bank and (ii) $20 million of 10%
convertible trust preferred securities which a trust of which Gentiva Health
Services owns all of the common equity will issue on or prior to the
split-off plus amortization of credit facility issuance costs. Such level of
borrowings is based upon assumed drawdowns on a line of credit resulting
from Gentiva Health Services' historical cash flow activity from
December 29, 1997 as well as Olsten's actual net debt of $721 million on
October 31, 1999, which will result in Gentiva Health Services receiving
approximately $29 million of cash in connection with the split-off. Advances
to Gentiva Health Services by Olsten will reduce the amount of cash to be
received by Gentiva Health Services and may result in Gentiva Health
Services being required to borrow under its credit facility to pay Olsten
the amount of the excess. See "The Split-Off--Terms of the separation
agreement--Intercompany loan balance". See Note 7 to the Consolidated
Financial Statements.
(4) Reflects the elimination of interest expense relating to intercompany debt.
(5) To reflect the tax effect of the above pro forma adjustments.
(6) The number of shares used to compute pro forma basic loss per share is based
upon the average shares outstanding of Olsten adjusted for the .25 shares of
common stock of Gentiva Health Services that each Olsten shareholder will
receive upon consummation of the split-off. The average shares outstanding
excludes the options to purchase Olsten common stock of those who will
become employees of Gentiva Health Services. These options have not been
included because Gentiva Health Services cannot determine the number of
shares of Gentiva Health Services common stock into which the Olsten options
will be converted upon the split-off until the implied value of Gentiva
Health Services common stock is established on the date of the split-off.
X-34
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF OCTOBER 3, 1999
(In thousands)
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ----------
ASSETS
Current assets
Cash...................................................... $ -- $ 29,000 (1) $ 49,000
20,000 (2)
Receivables, less allowance for doubtful accounts......... 538,041 -- 538,041
Other current assets...................................... 175,358 (45,000)(3) 140,358
10,000 (4)
---------- ---------- ----------
Total current assets.................................... 713,399 14,000 727,399
Fixed assets, net........................................... 57,550 -- 57,550
Intangibles, principally goodwill, net...................... 249,291 -- 249,291
Other assets................................................ 2,017 2,300 (5) 4,417
100 (6)
---------- ---------- ----------
$1,022,257 $ 16,400 $1,038,657
========== ========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
Accrued expenses............................................ $ 72,526 $ 2,300 (5) $ 74,826
Other current liabilities................................... 144,222 13,000 (4) 161,722
2,200 (7)
2,300 (8)
---------- ---------- ----------
Total current liabilities............................... 216,748 19,800 236,548
Long-term debt.............................................. 78,562 -- 78,562
Other liabilities........................................... 38,336 -- 38,336
Gentiva-obligated mandatorily redeemable securities
of our subsidiary holding solely our debentures........... -- 20,000 (2) 20,000
Redeemable preferred stock.................................. -- 100 (6) 100
Shareholder's equity
Common stock.............................................. -- 2,033 (9) 2,033
Additional paid-in capital................................ 709,082 29,000 (1) 691,049
(45,000)(3)
(2,033)(9)
Accumulated deficit....................................... (18,136) (3,000)(4) (25,636)
(2,200)(7)
(2,300)(8)
Accumulated other comprehensive loss...................... (2,335) -- (2,335)
---------- ---------- ----------
Total shareholder's equity.............................. 688,611 (23,500) 665,111
---------- ---------- ----------
$1,022,257 $ 16,400 $1,038,657
========== ========== ==========
- ------------------------------
(1) To reflect $29 million of cash that Gentiva Health Services will receive
based on Olsten's actual net debt of $721 million on October 31, 1999 in
accordance with the terms of the separation agreement. See Note 7 to the
Consolidated Financial Statements. Advances to Gentiva Health Services by
Olsten will reduce the amount of cash to be received by Gentiva Health
Services and, if advances exceed $29 million, Gentiva Health Services will
need to borrow under its credit facility to pay Olsten the amount of the
excess. See "The Split-Off--Terms of the separation agreement--Intercompany
loan balance".
(2) To adjust for $20 million of 10% convertible trust preferred securities to
be issued on or about the split-off. The trust's only asset willl be an
equal amount of Gentiva Health Services' $20 million of 10% convertible
debentures of Gentiva Health Services. See "The Split-Off--Certain
indebtedness of our company--Convertible trust preferred securities of our
subsidiary".
(3) In accordance with the tax sharing agreement, any net operating losses
generated up to the split-off will be carried back and utilized by Olsten.
As a result, the deferred tax asset of $45 million is charged against
additional paid-in capital.
(4) To reflect the assets and liabilities of approximately $10 million and
$13 million, respectively, of Olsten's supplemental executive retirement
plan that Gentiva Health Services will assume with respect to its employees
and some former employees of Olsten. Gentiva Health Services expects to
terminate this plan shortly after the split-off.
(5) To accrue $2.3 million of debt issuance costs relating to the establishment
of our $150 million credit facility.
(6) To adjust for 100 shares of series A cumulative non-voting redeemable
preferred stock issued on , 2000. The series A cumulative
non-voting redeemable preferred stock is described under the heading
"Description of Gentiva Health Services Capital Stock--Capital
Stock--Preferred stock--Series A cumulative non-voting redeemable preferred
stock".
(7) To accrue $2.2 million for the estimated cost of reimbursing excise tax
obligations under Mr. Blechschmidt's agreement described under the heading
"The Split-Off--Other agreements with former and present directors and
officers of ours and Olsten".
(8) To accrue $2.3 million relating to a change in control agreement to be paid
to Olsten's health services business past president who will not continue
with Gentiva Health Services after the split-off.
(9) To adjust Gentiva Health Services common stock based upon 81,305,657
outstanding shares of Olsten at October 3, 1999, adjusted for the .25 shares
of common stock of Gentiva Health Services that each Olsten shareholder will
receive upon consummation of the split-off.
X-35
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
The following table provides selected historical consolidated financial data
of Gentiva Health Services as of and for each of the fiscal years in the
five-year period ended January 3, 1999 and as of and for the nine-month periods
ended September 27, 1998 and October 3, 1999. The data as of and for each of the
fiscal years in the three-year period ended January 3, 1999 have been derived
from Gentiva Health Services' audited consolidated financial statements,
included elsewhere in this prospectus. The consolidated financial data as of and
for each of the fiscal years in the two-year period ended December 31, 1995 and
as of and for the nine months ended September 27, 1998 and October 3, 1999 have
been derived from Gentiva Health Services' unaudited financial statements, and
they include, in the opinion of Gentiva Health Services' management, all
adjustments, consisting of normal recurring adjustments, necessary for a fair
statement of the results for those periods. The historical consolidated
financial information presents Gentiva Health Services' results of operations
and financial position as if we were a separate entity for all periods
presented. The historical financial information may not be indicative of Gentiva
Health Services' future performance and may not necessarily reflect what the
financial position and results of operations of Gentiva Health Services would
have been if Gentiva Health Services was a separate stand-alone entity during
the periods covered. You should read this data together with Gentiva Health
Services' financial statements and notes to those financial statements, which
are included elsewhere in this prospectus.
FISCAL YEAR ENDED FOR THE NINE MONTHS ENDED
------------------------------------------------------------------- -------------------------------
SEPTEMBER 27, OCTOBER 3,
1994 1995 1996 1997 1998 1998 1999
----------- ----------- ---------- ---------- ---------- -------------- -----------
(53 WEEKS)
(IN THOUSANDS, EXCEPT SHARE DATA)
STATEMENT OF
OPERATIONS DATA:
Service sales,
management fees and
other income....... $1,422,315 $1,369,382 $1,374,353 $1,433,854 $1,330,303 $ 968,285 $1,118,045
Gross profit......... 523,360 525,261 511,940 520,586 421,407 297,020 377,994
Selling, general and
administrative
expenses........... 410,308 436,674 421,222 460,254 552,528 372,506 380,627
Net income (loss).... 67,621 45,163 (2,877)(1) 26,847 (101,465)(2) (58,471)(3) (12,852)(4)
Net income (loss) per
share.............. 676,210 451,630 (28,770) 268,470 (1,014,650) (584,710) (128,520)
Average shares
outstanding........ 100 100 100 100 100 100 100
BALANCE SHEET DATA
(AT END OF PERIOD):
Working capital...... $ 226,899 $ 326,681 $ 334,512 $ 346,135 $ 367,915 $ 365,264 $ 496,651
Total assets......... 645,556 739,438 785,341 783,478 945,738 821,849 1,022,257
Long-term debt....... 86,250 86,250 86,250 86,250 86,250 86,250 78,562
Shareholder's
equity............. 384,935 516,716 541,737 530,270 561,859 547,526 688,611
- ------------------------------
(1) Net loss in fiscal 1996 reflects merger, integration and other non-recurring
pre-tax charges totaling approximately $75 million. These charges resulted
from the Quantum acquisition of $39 million; $30 million of allowances for a
change in the methodology used by Medicare for computing reimbursements in
prior years related to our home health care business; and Quantum's charge
of $5.5 million related to the settlement of shareholder litigation. See
Note 4 to the Gentiva Health Services' Consolidated Financial Statements.
(2) Net loss in fiscal 1998 reflects non-recurring pre-tax charges and other
adjustments totaling approximately $122 million. These charges resulted from
$66 million related to the restructuring of our businesses and a special
charge of $56 million for the settlement of two federal investigations.
These provisions include a reduction in revenues of $14 million, a charge to
cost
X-36
of sales of $15 million and $93 million in selling, general and
administrative expenses. See Note 4 to the Gentiva Health Services'
Consolidated Financial Statements.
(3) Net loss for the nine months ended September 27, 1998 reflects non-recurring
pre-tax charges and other adjustments of approximately $66 million related
to the restructuring of Gentiva Health Services businesses. This provision
includes a reduction in revenues of $14 million, a charge to cost of sales
of $15 million and $37 million in selling, general and administrative
expenses. See Note 4 to the Gentiva Health Services' Consolidated Financial
Statement.
(4) Net loss for the nine months ended October 3, 1999 reflects a special
pre-tax charge of $17 million for the realignment of business units as part
of a new restructuring plan. This charge is included in selling, general and
administrative expenses. See Note 4 to the Gentiva Health Services'
Consolidated Financial Statements.
X-37
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
YOU SHOULD READ THE FOLLOWING DISCUSSION AND ANALYSIS WITH THE SELECTED
HISTORICAL CONSOLIDATED FINANCIAL DATA AND CONSOLIDATED FINANCIAL STATEMENTS,
INCLUDING THE NOTES TO THE FINANCIAL STATEMENTS, APPEARING IN THIS PROSPECTUS.
THE FOLLOWING DISCUSSION AND ANALYSIS CONTAINS CERTAIN FORWARD-LOOKING
STATEMENTS WHICH ARE SUBJECT TO RISKS, UNCERTAINTIES AND CONTINGENCIES,
INCLUDING THOSE SET FORTH UNDER THE HEADING "RISK FACTORS", WHICH COULD CAUSE
OUR ACTUAL BUSINESS, RESULTS OF OPERATIONS OR FINANCIAL CONDITION TO DIFFER
MATERIALLY FROM THOSE EXPRESSED IN, OR IMPLIED BY, THOSE STATEMENTS.
GENERAL
We are and until the split-off will continue to be a wholly-owned subsidiary
of Olsten. We operate all of the health services business of Olsten in the
United States and Canada. Olsten provides some administrative services to us,
including legal, risk management, tax, treasury, human resources, public
relations and other functions. In addition, we have historically participated in
Olsten's centralized cash management system. Since October 31, 1999, we have
operated our own cash management system. At the same time as the merger of
Olsten and Adecco, Olsten will issue to its stockholders all of our outstanding
common stock in exchange for a portion of their shares of Olsten. At that time
we will become an independent, publicly owned company.
As an independent company, we expect to incur additional legal, risk
management, tax, treasury, human resources and administrative and other expenses
that we did not experience as a wholly-owned subsidiary of Olsten. The
historical consolidated financial information presents our results of operations
and financial position as if we were an independent company for all periods
presented. The historical financial information may not be indicative of our
future performance and may not necessarily reflect what our financial position
and results of operations would have been if we were a separate stand-alone
entity during the periods covered.
We provide home health care through our caregivers, including licensed
health care personnel, such as registered nurses. We offer a broad range of
services, including:
- treatments for patients with chronic diseases;
- intravenous and oral administration of drugs, nutrients and other
solutions;
- skilled nursing care;
- pediatric/maternal care programs;
- rehabilitation and other therapies;
- disease management programs;
- home health aide and personal services care; and
- institutional, occupational and alternate site staffing.
The home healthcare industry in which we operate has undergone significant
changes due to government regulation. In October 1997, as a part of the Balanced
Budget Act, the government enacted the Interim Payment System (IPS) for
reimbursement of home care services provided under Medicare. Prior to enactment
of the IPS, home care services were reimbursed based on cost subject to a
per-visit limit determined by the Health Care Financing Administration. The IPS
reimburses home care services based on costs, subject to both a per-beneficiary
limit and a per-visit limit. Further, the IPS reduced the per-visit limit to
1994 levels.
As a result of these cuts, the amount we get paid has been reduced.
Specifically, our Medicare revenue, excluding acquisitions, was reduced by
$107 million or 43 percent in fiscal 1998 as compared to fiscal 1997. For the
first nine months of 1999, our Medicare revenue, excluding acquisitions, was
further reduced by $38 million or 33 percent as compared to the first nine
months of fiscal 1998. These reductions have had a negative impact on our
operations and liquidity. In order to operate at the lowered reimbursement
rates, home health care companies reduced the services provided to patients by
X-38
providing fewer patient visits. In addition, the regulatory climate that ensued
in home health care caused a lower level of physician referrals.
RESULTS OF OPERATIONS
GENERAL
On March 30, 1999, we announced plans to take a special charge totaling
$56 million, which was recorded in the year ended January 3, 1999. The charge
was for the settlement of two federal investigations focusing on our Medicare
home office cost reports and certain transactions with Columbia/HCA. The
agreements in connection with the settlement were finalized and signed on
July 19, 1999. On August 11, 1999 Olsten paid $61 million pursuant to the
settlement, about $5 million of which was previously accrued as part of the 1996
merger and integration and other non-recurring charges. In the quarter ended
April 4, 1999, we recorded a special charge totaling $17 million for the
realignment of business units as part of a new restructuring plan, including:
- compensation and severance costs of $5 million to be paid to operational
support staff, branch administrative personnel and management;
- asset write-offs of $7 million, related primarily to fixed assets being
disposed of in offices being closed and facilities being consolidated as
well as fixed assets and goodwill attributable to our exit from certain
businesses; and
- integration costs of $5 million, primarily related to obligations under
lease agreements for offices and other facilities being closed.
As of the end of the third quarter of 1999, about 77 percent of the closures
and consolidation of facilities had been completed and about 83 percent of the
expected 525 terminations had occurred. We expect that the realignment of the
business units will achieve a reduction of expenses of about $4 million in 1999,
due to reduced employee, lease and depreciation expenses.
In 1998, we also recorded non-recurring charges and other adjustments of
$66 million, of which approximately $64 million was recorded in the second
quarter and $2 million was recorded in the third quarter both related to the
restructuring of our business. These charges, which were primarily for 60 office
closings and consolidations in the United States, were taken to help position us
to operate more efficiently under the new IPS. In addition, we also made
significant technological investments in order to improve operational
efficiencies and employee retention levels. The benefit of the restructuring
began to be realized in the second quarter of 1998.
Included in this provision was $24 million charged to selling, general and
administrative expenses, which included lease payments of $3 million, employee
severance of $4 million, fixed asset and software write-offs of $5 million to
reflect the loss incurred upon our decision to dispose of the assets in some
closed offices, and an increase in the allowance for doubtful accounts of
$12 million. All closures and consolidations of facilities and employee
terminations, related to this charge, have been completed. The allowance for
doubtful accounts was increased because our receipt of payment is highly
dependent on our ability to provide some evidence of service and authorization
documentation to a variety of third-party payors. The office closings,
consolidation of certain business service centers and the termination of
employees are all events that, in our experience, impair our ability to provide
the documentation required to collect on receivables. We also recorded other
adjustments to selling, general and administrative expenses of $13 million which
included professional fees and related costs resulting from the settlement with
several government agencies regarding certain past business practices of
Quantum, the level of effort required to respond to the significant inquiries
conducted by the government, and costs incurred to redesign the credit and
collection process of our business.
In addition, upon final announcement of the per-beneficiary limits by the
government, we recorded a reduction in revenues in the second quarter of 1998
for the nine month period ended September 27, 1998 of $14 million in
anticipation of lower Medicare reimbursements resulting from the new per-visit
and per-beneficiary limits that were imposed by Medicare under the IPS.
X-39
We recorded a charge to cost of sales of $15 million to reflect the
estimated increase in costs that have been incurred, but not yet reported, based
upon a change in the actuarial estimates utilized to determine the level of
service to patients covered under our capitated contracts.
In 1996, we recorded merger, integration and other non-recurring charges
totaling about $75 million. These charges resulted from the Quantum acquisition
of $39 million; $30 million of allowances for a change in the methodology used
by Medicare for computing reimbursements in prior years related to our home
health services business; and Quantum's charge of $5.5 million related to the
settlement of shareholder litigation. The $39 million charge, related to the
Quantum acquisition, included transaction costs of $7 million, compensation and
severance costs of $8.6 million, asset writedowns of $8.2 million, primarily
including fixed assets and an unrecoverable majority-interest investment in a
software development company held by Quantum; integration costs, for employee
relocation, obligations under lease agreements for planned vacancies and other
activities required to consolidate the operations of $15.5 million.
At October 3, 1999, about $6 million, consisting primarily of severance and
integration costs, remained unpaid and were included in accrued expenses.
REVENUES
Revenues increased 15 percent, or $150 million, during the nine months ended
October 3, 1999 compared to the prior period driven by growth in specialty
pharmaceutical services of 24 percent, or $102 million, and staffing services of
38 percent, or $21 million, and home care nursing services of 6 percent, or
$27 million. Included in home care nursing services revenues is an increase in
revenue attributable to our acquisition of Columbia/HCA Healthcare Corporation's
home health care operations in the state of Florida, which was partially offset
by declines in Medicare-related home care visits and reimbursement due to the
implementation of the IPS.
Revenues in 1998 decreased 7 percent, or $104 million, compared to 1997,
primarily as a result of a 23 percent, or $197 million, decrease in home care
nursing services revenues resulting from the reduction in Medicare related home
care visits due to the implementation of IPS, partially offset by a 14 percent,
or $74 million, increase in specialty pharmaceutical services revenues and a
32 percent, or $19 million, increase in the staffing services business.
Revenues in 1997 increased 4 percent, or $60 million, as compared to 1996,
primarily as a result of a 35 percent, or $134 million, increase in specialty
pharmaceutical services and a 27 percent, or $13 million, increase in the
staffing services business, partially offset by a 9 percent, or $87 million,
decrease in home care nursing services.
GROSS PROFIT
Gross profit margins increased in the first nine months of 1999 to
34 percent from 31 percent for the first nine months of 1998 primarily as a
result of productivity enhancements, rate increases and a change of payor mix in
the home care nursing services business, partially offset by greater growth in
the lower margin staffing services business.
Gross profit margins decreased in 1998 to 32 percent from 36 percent in 1997
primarily as a result of a change in the business mix reflecting growth in lower
margin staffing services business and revenue decline in the Medicare portion of
the home care nursing business. The negative influences on gross profit margins
were partially offset by growth in the specialty pharmaceutical services.
Gross profit margins decreased in 1997 to 36 percent from 37 percent in
1996, primarily as a result of a change in the business mix reflecting volume
growth in both the lower margin managed care business in the home care business
as well as lower margin staffing services business and revenue declines in the
Medicare business in the home care nursing business. These declines in gross
profit margins were partially offset by margin improvements in specialty
pharmaceutical services.
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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $381 million, or
34 percent of sales, for the nine months ended October 3, 1999 from
$373 million, or 38 percent of sales, for the comparable prior year period.
Excluding the effects of the non-recurring charges and other adjustments
recorded in both periods, selling, general and administrative expenses were
33 percent of sales during the nine months ended October 3, 1999, a 2 percent
decrease compared to the same period in 1998, primarily as a result of the
impact of efficiency improvement efforts in home care nursing services and
corporate administrative support departments partially offset by increased
information systems costs.
Selling, general and administrative expenses for 1998 were $553 million, or
42 percent of sales, as compared to $460 million, or 32 percent of sales, in
1997. Excluding the effects of the non-recurring charges and other adjustments,
selling, general and administrative expenses were $460 million, or 35 percent of
sales, for 1998. The increase in selling, general and administrative expenses as
a percent of sales was primarily attributable to investments in infrastructure,
including new information systems and increased expenses incurred to grow the
specialty pharmaceutical services and staffing services businesses. These
increases were partially offset by the cost reduction initiatives, including
closing and consolidating offices in the home care services business.
Selling, general and administrative expenses for 1997 were $460 million, or
32 percent of sales, as compared to $421 million, or 31 percent of sales in
1996. The increase in selling, general and administrative expenses was
attributable to legal costs incurred related to the then ongoing government
investigation, increase in expenses incurred to support growth in specialty
pharmaceutical services and investment in information systems and receivables
management. These increases were partially offset by cost reductions in the home
care nursing business related to lower patient volume.
INTEREST EXPENSE
Interest expense of $12.8 million during the first nine months of 1999 was
slightly lower than interest expense of $13.1 million for the same period in
1998 due to the retirement of $7.7 million of Quantum's 4 3/4% convertible
subordinated debentures in January 1999. Interest expense was $17.4 million in
both 1998 and 1997 for interest on the debentures outstanding and intercompany
borrowings with Olsten in both periods and net interest expense of
$12.7 million in 1996 reflects the interest on the debentures and intercompany
borrowings with Olsten offset by interest income on investments of $4 million.
INCOME TAXES
The effective income tax rates on income (loss) were for the first nine
months of 1999 and 1998, 17 percent and 34 percent, respectively. For the years
1998, 1997 and 1996, the effective income tax rates on income (loss) were
32 percent, 38 percent, and 209 percent, respectively. The rates differ from
statutory rates primarily because of non-deductible goodwill amortization and
other non-deductible items.
YEAR 2000
The Year 2000 issue concerns the inability of information systems to
properly recognize and process date-sensitive information on or after
January 1, 2000.
Our technical infrastructure, encompassing all business applications, is
Year 2000 compliant. Systems not directly related to the financial operations of
the business, primarily voice communications, have also been upgraded to help
ensure readiness.
Systems critical to our business, which were identified as non-year 2000
compliant, have been replaced to increase efficiencies and improve our ability
to provide services to customers. The new infrastructure, which is Year 2000
compliant, was completely implemented in field offices before January 1, 2000.
Other systems, which required remediation, were completed before January 1,
2000. The total cost of our remediation plan was about $2.5 million.
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With respect to the risks associated with our systems, we believe that the
most reasonably likely worst case scenario is that we may experience minor
system malfunctions and errors in early 2000. We do not expect these problems to
have a material impact on our ability to place and pay caregivers or bill
patients or payors. At this time, we have not encountered any Year 2000
failures.
As part of our Year 2000 readiness activities, in October 1999 we contacted
over 12,000 companies with which we do business. Of those contacted, we sent a
letter with a survey to over 2,200 business partners with annual revenue impact
over $5,000. The response rate has been about 30 percent to date and we continue
to review the replies. None to date have been identified as having problems with
Year 2000 readiness.
During the review process, we also instituted an additional screening for
payors or others that have a revenue impact of over $200,000 on our business.
Any payors or other entities which have not responded are being pursued for a
status statement and assurance of readiness.
The Health Care Financing Administration, which administers Medicare and
Medicaid programs, has stated that it is Year 2000 compliant and that it does
not expect any disruption in Medicare or Medicaid payments after January 1,
2000, provided claims are submitted in Year 2000 compliant format.
In addition to these contacts, during 1998 and 1999 we participated in a
healthcare industry study and work group (VitalSigns2000, sponsored by the Odin
Group) considering Year 2000 risk and contingency planning alternatives. The
products from this group include contingency planning guides. Additional
activities include on-site audits and teleconference workshops which targeted
specific companies that are involved with business relationships that represent
substantial risk due to volume or type of business.
With respect to the risks associated with the third parties, we believe that
the most reasonably likely worst case scenario is that some of our vendors and
customers will not be compliant. We believe, however, that the number of
noncompliant vendors and customers has been minimized by our program of
contacting significant entities with which we do business. Despite our
diligence, we cannot guarantee that third parties that we rely upon to conduct
day to day business will be compliant. If these companies, or any governmental
entities, fail to remediate their systems on a timely basis it could impact cash
flow from operations.
Due to the general uncertainty inherent in the Year 2000 issue resulting, in
part, from the uncertainty of the Year 2000 readiness of third-party payors,
suppliers and customers, and government agencies, we are unable to determine the
effect that Year 2000 failures will have on our results of operations, liquidity
or financial condition. We believe that by implementing new business systems and
completing our Year 2000 plan as scheduled, the likelihood of significant
interruptions of normal operations has been reduced.
We believe we have addressed our significant Year 2000 issues prior to being
affected by them. We have made available to our operating units contingency plan
guidelines and materials to assist them with Year 2000 issues. If we identify
any additional risks related to our Year 2000 readiness, we will further develop
contingency plans as deemed necessary at that time.
The failure to correct a material Year 2000 problem could result in an
interruption or a failure of certain normal business activities or operations. A
failure could materially and adversely affect our results of operations,
liquidity and financial condition.
LIQUIDITY AND CAPITAL RESOURCES
Historically, we have relied on cash flow from operations and advances and
other financial resources from Olsten to meet our operating and investing
activities. In the past, when our liquidity needs exceeded our cash flow, Olsten
provided us with the necessary funds. At or before the time of the split-off, we
will receive cash in the amount of $29 million pursuant to the separation
agreement. This amount will be reduced by any advances we receive from Olsten
prior to the split-off. If advances
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to us exceed this amount, we will be required to borrow under our credit
facility to pay Olsten the excess amount. See "The Split-Off--Terms of the
separation agreement". In addition, we will receive about $20 million of
proceeds from the issuance, by a trust of which we own all the common equity, of
10% convertible trust preferred securities on the split-off date. This trust's
only asset will be our 10% convertible subordinated debentures. See "The
Split-Off--Certain indebtedness of our company--Convertible trust preferred
securities of our subsidiary". After the split-off, we will no longer be able to
use Olsten's resources to meet our needs but will require third party financing.
We intend, and are required under the separation agreement, to enter into a
committed credit facility with a line of credit of at least $100 million for our
working capital needs and other general corporate purposes. On January 18, 2000,
we received a commitment letter from a lender to underwrite a credit facility
with a line of credit of up to $150 million on or prior to the date of the
split-off. The commitment letter is described under the heading "The
Split-Off--Certain indebtedness of our company--Commitment to enter into a
senior credit facility". In addition, prior to October 2000, we will need to
refinance our $78.6 million of 4 3/4% Quantum debentures.
Working capital at October 3, 1999 was $497 million, an increase of
35 percent versus $368 million at January 3, 1999. Net receivables increased
$86 million, or 19 percent, predominantly due to growth in the specialty
pharmaceutical services, which historically has a longer collection period than
our other businesses.
Management believes cash flows from operations, the proceeds to be received
in connection with the issuance of the 10% convertible trust preferred
securities and our new credit facility will be adequate to support our ongoing
operations and to meet our debt service and principal repayment requirements for
the foreseeable future. We intend to make investments and other expenditures to,
among other things, upgrade our computer technology and system infrastructure
and relocate our headquarters. If cash flows from operations or availability
under our new credit facility fall below expectations, we may be forced to delay
planned capital expenditures, reduce operating expenses, seek additional
financing or consider alternatives designed to enhance liquidity.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our exposure to the market risk for changes in interest rates relates to the
fair value of our fixed rate Quantum debentures. Generally, the fair market
value of fixed rate debt will increase as interest rates fall and decrease as
interest rates rise. Based on the overall interest rate exposure on our fixed
rate debentures at October 3, 1999, a 10 percent change in market interest rates
would not have a material effect on the fair value of our long-term debt.
Fluctuations in currency exchange rates may impact shareholder's equity.
Assets and liabilities of our Canadian subsidiary are translated into U.S.
dollars at the exchange rates in effect at the balance sheet date. Revenues and
expenses are translated into U.S. dollars at the weighted average exchange rate
for the period. The resulting translation adjustments are recorded in
shareholder's equity as accumulated other comprehensive income (loss).
Although currency fluctuations impact our reported results of operations,
such fluctuations generally do not affect our cash flow or result in actual
economic gains or losses. Each of our subsidiaries derives revenues and incur
expenses within a single country and do not incur currency risks in connection
with the conduct of normal business operations.
Other than intercompany transactions between the United States and our
Canadian subsidiary, we generally do not have significant transactions that are
denominated in a currency other than the functional currency applicable to each
entity. We do not engage in hedging activities and did not hold any derivative
instruments at October 3, 1999.
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BUSINESS
GENERAL
We are the leading provider of home health care services in the United
States based on revenues. Since 1971, we have built a reputation for high
quality health care for our patients with a commitment to offering a broad
spectrum of services in the home healthcare industry. We currently maintain over
400 locations in the United States and Canada and serve over 420,000
patient/client accounts annually with over 65,000 administrative staff and
caregivers.
We offer high quality services through three business lines which are
(1) specialty pharmaceutical services, (2) home care nursing services and
(3) staffing services. Through these three business lines we offer a broad range
of services including:
- treatments for patients with chronic diseases;
- intravenous and oral administration of drugs, nutrients and other
solutions;
- skilled nursing care;
- pediatric/maternal care programs;
- rehabilitation and other therapies;
- disease management programs;
- home health aide and personal services care; and
- institutional, occupational and alternate site staffing.
Through our network of 38 pharmacies located throughout the United States,
including two national distribution centers, we offer the leading and most
comprehensive infusion therapy solutions in the industry. In addition, through
our four intake and claims processing centers, we provide network services
including care management and coordination of managed care customers desiring a
single source for centralized intake and billing, claims adjudication, quality
assurance and data reporting and analysis. The following is a more complete list
of the broad range of services provided by our three business lines:
SPECIALTY PHARMACEUTICAL
SERVICES HOME CARE NURSING SERVICES STAFFING SERVICES
------------------------ -------------------------- -----------------
- - Chronicare services for - General skilled nursing - Institutional, occupational
chronic diseases: care and alternate site health
- Hemophilia and related - Pediatric care care staffing, including:
coagulation disorders - Rehabilitation services - Critical care and neonatal
- Primary pulmonary - Other therapy services - Pediatric
hypertension - Disease management programs - Psychiatric
- Immuno deficiency/ - Home health aide care - Operating room
autoimmune disorders - Personal care - Medical/surgical
- Growth disorders - Network services - Occupational health
- - Antibiotic therapies - Utilization review
- - Total parenteral and - Case management
enteral nutrition
- - Chemotherapy
- - Pain management
- - Marketing and distribution
services for
pharmaceutical,
biotechnology and medical
device firms
- - Clinical support for
clinical trials sponsored
by institutions and
pharmaceutical/
biotechnology firms
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Our business strategy is to enhance our position as the leading provider of
quality, cost-effective, comprehensive home health care services. We intend to
take advantage of our leading industry position, our breadth of service
offerings and changing industry dynamics by continuing to pursue the following
strategy:
- Offer clients a comprehensive range of services and continue to pursue
cross-selling opportunities. We are committed to offering home care
nursing services, specialty pharmaceutical services and staffing services
and, through subcontractors, other healthcare services as needed by our
patients.
- Expand our growing staffing services business. We believe there exists
significant opportunities in aiding hospitals and health care institutions
with qualified candidates.
- Expand our growing specialty pharmaceutical services business.
- Continue to develop relationships with managed care, insurance and private
pay clients for our home health care services.
- Continue to invest in our information technology in order to support all
aspects of our business, including streamlining administrative operations,
providing timely and accurate decision support data for care management,
improving outcomes analysis and helping to detect and analyze new business
opportunities.
- Strengthen our billing, collection and inventory management procedures.
We will be required to devote management attention and financial resources
to successfully implement our business strategy. We cannot assure you that the
benefits of implementing our strategy will outweigh the costs.
SPECIALTY PHARMACEUTICAL SERVICES. Our specialty pharmaceutical services
business includes:
- the distribution of drugs and other biological and pharmaceutical products
and professional support services for individuals with chronic diseases,
such as hemophilia, primary pulmonary hypertension, autoimmune
deficiencies and growth disorders;
- the administration of antibiotics, chemotherapy, nutrients and other
medications for patients with acute or episodic disease states; and
- marketing and distribution services for pharmaceutical, biotechnology and
medical service firms.
Our specialty pharmaceutical services business combines clinical expertise
and core nursing strength with a network of 38 pharmacies across the United
States, including two distribution centers located in Warrendale, Pennsylvania
and Fort Worth, Texas. We deliver, manage and administer our products in the
home setting; perform patient, family and home environmental assessments; and
evaluate equipment needs.
We provide a wide range of home infusion therapies. Home infusion therapy
involves the administration of medications intravenously (into veins),
subcutaneously (under the skin), intramuscularly (into muscle), intraecally or
epidurally (via spinal routes) or through feeding tubes into the digestive
tract. Infusion therapy often begins during hospitalization of a patient and
continues in the home environment.
Our specialty pharmaceutical services business includes therapeutic,
socioeconomic, psychosocial and professional support services for individuals
with some of the following rare, chronic diseases:
- Hemophilia, which is a hereditary bleeding disorder in which a plasma
protein, known as factor, necessary for normal blood clotting, is either
missing or dysfunctional. Hemophilia is treated by intravenously infusing
anti-hemophilic factor, consisting of factor concentrates and sterile
water, to replace deficient clotting factor. This disease is diagnosed at
birth and has no known cure, but hemophiliacs can lead relatively long and
healthy lives with proper treatment.
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- Primary pulmonary hypertension, which is a chronic pulmonary disease for
which there is no known cure. This disease is treated by the infusion of
Flolan, which is an epoprostenol sodium product, for a patient's lifetime
or until the patient receives a lung transplant.
- Immunodeficiency/autoimmune disorders, which are a classification of
chronic disorders arising when the body's immune system fails to produce
sufficient antibodies to protect against infection. These disorders
include multiple sclerosis, myasthenia gravis and lupus. These disorders
are generally incurable but the symptoms can be treated with a therapy
consisting of intravenous immune globulin prepared from human plasma
(IVIG).
- Growth disorders, which result from damage to or malformation of either
the hypothalamus or the pituitary gland. This disorder is treated by
injecting growth hormone therapy into the patient.
Some of our other significant specialty pharmaceutical services include:
- Antibiotic therapies, which are the infusion of antibiotic medications
into a patient's bloodstream. These medications are typically used to
treat a variety of serious infections and diseases.
- Total Parenteral Nutrition (TPN), which is the long-term provision of
nutrients for patients with chronic gastrointestinal conditions. These
nutrients are infused through surgically implanted central vein catheters
or through peripherally inserted central catheters. Enteral nutrition is
the infusion of nutrients through a feeding tube inserted directly into a
patient's digestive tract. This long-term therapy is prescribed for
patients who are unable to eat and drink normally.
- Chemotherapy, which is the infusion of drugs in a patient's bloodstream to
treat various forms of cancer.
- Pain management, which involves the infusion of certain drugs into the
bloodstream of patients suffering from acute or chronic pain.
We also offer our distribution network to manufacturers after government
approval is secured. Distribution programs currently include:
- the first new drug for rheumatoid arthritis in 20 years;
- a new hand-held device for monitoring blood clotting time; and
- pharmaceuticals for chemotherapy and white blood cell stimulation, the
treatment of primary pulmonary hypertension, and management of amyotrophic
lateral sclerosis (ALS or Lou Gehrig's disease), multiple sclerosis and
severe muscle wasting.
We assist drug companies in distributing new products and meeting special
distribution requirements. In addition, we provide some logistical and handling
functions, including pharmacy mail order services, clinical support,
reimbursement management and data management. We also assist pharmaceutical
companies with clinical trials of new drug therapies awaiting U.S. Food and Drug
Administration approval.
HOME CARE NURSING SERVICES. Our home care nursing services business
includes:
- professional and paraprofessional services, including skilled nursing,
rehabilitation and other therapies, home health aide and personal care
services, to individuals with acute illnesses, long-term chronic health
conditions, permanent disabilities, terminal illnesses or post procedural
needs; and
- care management and coordination for managed care organizations and
self-insured employees.
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We provide high quality home care nursing services as evidenced by our high
patient satisfaction levels in our company studies. We believe the high quality
of our nursing services has made our company the leading provider of home care
nursing services in the United States and an effective competitor in Canada. Our
home care nursing services provide insurers with an avenue to save thousands of
dollars in costs by reducing patient visits to physicians offices and patient
stays in hospitals.
Our home care nursing services include:
- General skilled nursing care that is provided by registered nurses and
licensed practical nurses who periodically assess the appropriateness of
home health care, perform clinical procedures and instruct the patient and
family regarding necessary treatments. Patients receiving this care
typically include stabilized post-operative patients in recovery at home,
patients who are acutely ill but who do not require hospitalization and
patients who are chronically or terminally ill.
- Pediatric services consisting of nursing services specializing in care for
children. These services include early NICU discharge to the home,
prenatal, maternal/infant care and phototherapy.
- Rehabilitation services consisting of programs and services that address a
wide range of neurologic and orthopedic diagnoses, including head or
traumatic brain injuries, spinal cord injuries and other complex
rehabilitation cases.
- Other therapy services that consist of physical, occupational, speech and
respiratory therapy to patients recovering from strokes, traumas or
certain surgeries, services for high risk pregnancies, post-partum care,
mental health care, AIDS therapy and various medical social services.
- Disease management programs that are administered by nurses who provide
specialty care regimens to patients in their home. These nurses instruct
patients and their families in the self-administration of some therapies
and procedures, such as wound care and infection control, emergency
procedures and the proper handling and usage of medication, medical
supplies and equipment as well as teach disease state management programs
at home to patients with asthma, diabetes and other illnesses.
- Home health aide care that involves basic patient care from taking
temperatures and blood pressure to assisting with daily living activities.
Our home health aides must pass certain competency tests and are
supervised by a registered nurse.
- Personal care services consisting of unskilled homemaker services which
are provided to the elderly or the disabled. These services may include
housekeeping, shopping and assistance with personal hygiene, dressing and
meals.
We also provide network services to managed care organizations through our
four intake and claims processing centers in the United States. These services
involve care management and coordination for managed care customers desiring a
single source for referrals, centralized intake and billing, claims adjustment,
utilization review, quality assurance and data reporting and analysis.
STAFFING SERVICES. Our staffing services business includes services to
institutional, occupational and alternate site health care organizations by
providing health care professionals to meet supplemental staffing needs.
Our staffing services business provides these organizations with the ability
to better control costs by using our health care professionals for temporary
assignments to cover peak periods and illness and vacation time of their
permanent staff. Our health care professionals include:
- registered nurses;
- licensed practical nurses;
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- physical, speech and occupational therapists;
- certified nursing assistants;
- medical assistants; and
- medical technologists.
These professionals typically work in hospitals, industrial settings, long-term
care facilities, clinics, schools, physicians' offices, laboratories, home care
agencies and insurance companies. We arrange for their assignments from over 40
locations throughout the United States.
Through our Flying Nurses-Registered Trademark- division in Dallas, Texas,
we also make special arrangements for our health care professionals to travel to
virtually any location for special assignments. This provides health care
organizations in Florida, for example, with an economical way to manage peak
demand during the winter season.
INDUSTRY
Our business is part of the $48 billion home health care industry that
consists of four primary segments: nursing and related services (72 percent),
infusion therapy (13 percent), respiratory therapy (8 percent) and medical
equipment (7 percent). The nursing and related services segment, which
represents about $35 billion annually, provides patient care to individuals with
acute illnesses, long-term chronic health conditions, permanent disabilities,
terminal illnesses or post-procedural needs. These services are provided both in
the home and to hospital and other health care organizations. Infusion therapy,
a roughly $6 billion market, provides care to patients requiring the
administration of medication either intravenously or through a device such as a
feeding tube. Respiratory therapy, about a $4 billion segment, includes the
delivery and the preparation of prescribed therapy or equipment to patients with
severe and chronic pulmonary diseases. The remaining market segment,
representing about $3 billion, is medical equipment that involves the sale of
various types of medical equipment to patients for use in their homes.
Our industry is dramatically changing, with the number of people over the
age of 65 estimated to grow by approximately 55 percent between 1999 and 2020.
People over the age of 65 consume about 75 percent of all home health care
services although they represent only 13 percent of the current U.S. population.
Because the demand for home health care is related to the number of elderly
people in the population, the home health care industry is expected to
experience a significant increase in demand as a result of the aging of the U.S.
population. Other factors that we believe will continue to contribute to the
development and growth of the home health care industry include:
- recognition by the medical community and health care insurers that home
health care can be a cost-effective alternative to lengthy, more expensive
institutional care;
- technological advances that allow more health care procedures to be
provided at home;
- increasing consumer awareness and interest in home health care; and
- recognition by the medical community of the psychological benefits of
recuperating from an illness or accident in one's own home.
AGING POPULATION. The U.S. Census Bureau predicts that while the overall
population of the United States will increase by approximately 9 percent between
1999 and 2010, the population of persons between the ages of 50 and 64, is
expected to increase by approximately 43 percent over the same period. The
elderly population (persons 65 years of age or over) is expected to grow at a
faster rate than the overall population and is estimated to increase by over
14 percent between 1999 and 2010. In addition, it is estimated that by 2015 the
population covered by Medicare will have increased by 33 percent to over
45 million people (15 percent of the total population). This aging of the
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population is due in part to increases in longevity, which is represented in the
growth of the age group over 65. The home health care industry is expected to
encounter a significant increase in demand as a result of the aging U.S.
population.
COST EFFECTIVENESS OF HOME HEALTH CARE SERVICES. National health care
expenses have increased dramatically in the last 10 years. Until recently, in
response to rapidly rising costs, governmental and private payors have adopted
cost containment measures which encouraged reduced hospital admissions and
reduced lengths of stay in hospitals. The result of this policy was an increased
number of people who received health services in their homes. Due to recent
revisions under the prospective payment system hospitals now have an incentive
to keep patients longer, however, there has been no discernible change in the
average length of hospital stays. Home care, however, remains a cost efficient
alternative. Treating patients at home is significantly cheaper than
facility-based care. The national median cost for home care per day is
approximately $100, compared to $400 per day for a skilled nursing facility and
$2,000 per day for a hospital stay.
ADVANCED TECHNOLOGY. Technological advances have enabled patients who
previously required hospitalization to be treated at home. The number of medical
conditions that can now be treated in the home has grown significantly. In
addition, technological advances such as telephonic vital sign monitoring and
medication compliance reminders have increased the number of patients who can be
treated in their homes. We believe that the use of technology will increase the
number of patients that utilize home health care because it is viewed as a
cost-effective alternative.
INCREASED ACCEPTANCE. We believe that as a result of the previously
discussed factors, home health care has gained increased acceptance from
patients, physicians and payors. Additionally, the American Medical Association
Councils on Scientific Affairs and Medical Education have recommended that
training in home health care be incorporated into the undergraduate, graduate
and continuing education of physicians which we believe will lead to the
increased use of home health care options. We believe cost conscious managed
care and other third-party payors will continue to encourage home care as a
cost-effective alternative to extended hospital stays.
MARKETING AND SALES
In general, we obtain clients through personal and corporate sales
presentations, telephone marketing calls, direct mail solicitation, referrals
from other clients and advertising in a variety of local and national media,
including the Yellow Pages, newspapers, magazines, trade publications and
television. Our marketing efforts also involve personal contact with case
managers for managed health care programs, such as those involving health
maintenance organizations (HMOs) and preferred provider organizations (PPOs),
insurance company representatives and employers with self-funded employee health
benefit programs. We do not seek reimbursement from government payors for
unallowable marketing and sales expenses.
Managed care and other non-governmental payors, which are an increasingly
significant source of referrals for home health care services, accounted for
62 percent of our net revenues in fiscal 1998. The Joint Commission on
Accreditation of Healthcare Organizations (JCAHO) accredits some of our over 400
locations. We believe JCAHO accreditation enhances our ability to obtain
contracts with certain managed care organizations. We are also targeting
referrals from managed care organizations by offering disease management
programs for the treatment of asthma, diabetes and other chronic illnesses, as
well as outcome and utilization reports. We expect managed care contracts will
generate an increasing number of referrals as the penetration of managed care
accelerates in our markets. We believe that we have the local relationships, the
knowledge of the regional markets in which we operate, and the cost-effective,
comprehensive services and products required to compete effectively for managed
care contracts and other referrals.
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We believe that our success in furnishing caregivers is based, among other
factors, on our reputation for quality and our local market expertise combined
with the resources of our extensive office network. We also empower our branch
directors with a high level of responsibility, providing strong incentives to
manage the business effectively at the local level, one of the central
ingredients in a business where relationships are vital to success.
PATIENT SERVICES
We have historically received high satisfaction ratings from our patients
and referral sources. We also provide educational information to physicians and
their staffs, hospital management, hospital discharge planners and nursing home
supervisors.
PAYORS
In fiscal 1998, Medicare accounted for 15 percent of our revenues and
Medicaid programs, state reimbursed programs and other state/county funding
programs accounted for 23 percent of our revenues. In fiscal 1998, the remaining
62 percent of our revenues was derived from commercial payors, including
insurance companies, managed care organizations, healthcare institutions and
private payors. For the nine months ended October 3, 1999, Medicare accounted
for 17 percent of our revenues and Medicaid programs, state reimbursed programs
and other state/county funding programs accounted for 20 percent of our
revenues. For the nine months ended October 3, 1999, the remaining 63 percent of
our revenues was derived from commercial payors. In fiscal 1998, Cigna
Healthcare accounted for approximately 9 percent of our revenues. For the nine
months ended October 3, 1999, Cigna Healthcare accounted for approximately
11 percent of our revenues. Our three year contract with Cigna Healthcare had an
expiration date of December 31, 1998. The contract was amended to continue until
terminated by either party with 60 days advance notice. Except for these payors,
no other payor accounts for as much as 10 percent of our revenues. The revenues
from commercial payors are primarily generated under fee for service contracts
which are traditionally one year in term and renewable automatically on an
annual basis, unless terminated by either party.
CAREGIVERS
To maximize the cost effectiveness and productivity of our caregivers, we
utilize customized systems and procedures that we have developed and refined
over the years. These processes include the recruitment and selection of
applicants who fit the patients' individual parameters for skills, experience
and other criteria. Personalized matching is achieved through initial applicant
profiles, personal interviews, skill evaluations and background and reference
checks. We generally employ caregivers on an as-needed basis to meet client
demand. Specialized recruitment and retention programs are offered to caregivers
as incentives for them to remain in our employ.
Caregivers are recruited through a variety of sources, including advertising
in local and national media, job fairs, solicitations on web sites, direct mail
and telephone solicitations, as well as referrals obtained directly from clients
and other caregivers. Our caregivers are generally paid by us on an hourly basis
for time actually worked, subject to a four-hour daily minimum on the days
worked. The wages we pay may vary in different geographic areas to reflect the
prevailing wages paid for the particular skills in the community where the
services are performed. In the northeastern and western regions of the United
States we are currently experiencing a shortage of licensed professionals. A
prolonged shortage of professionals could have a material adverse effect on our
business.
CANADIAN OPERATIONS
Through subsidiaries, we have provided home health services in Canada for
many years. In fiscal 1998, our Canadian operations represented about 3 percent
of revenues.
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TRADEMARKS
We have various trademarks registered or in the process of being registered
with the United States Patent and Trademark Office, including
CHRONICARE-Registered Trademark-. In addition, we have a royalty-free license
from Olsten which permits us to use, for a period of one year, some trademarks,
service marks and names that will not be transferred to us in the transactions,
including OLSTEN-Registered Trademark-. Before the expiration of this license,
we intend to develop our new name and further develop our health services
business trademarks.
COMPETITIVE POSITION
The segments of the health care industry in which we operate are highly
competitive and fragmented. There are approximately 15,000 home care agencies
operating in the United States, in which the three largest providers represented
less than 15 percent of the national industry in 1998. The industry is comprised
of a few national companies, hundreds of regional companies and thousands of
locally-based independent home health care organizations. These companies range
from facility-based (hospital, nursing home, rehabilitation facility, government
agency) agencies to independent companies to visiting nurse associations and
nurse registries. They can be not-for-profit organizations or for-profit
organizations. In addition, there are relatively few barriers to entry in the
segments of the health care market in which we operate. We could experience
increased competition in the future from existing competitors or new entrants
that may limit our ability to maintain or increase our market share. Our primary
national competitors are Coram Healthcare Corp. and Caremark Therapeutic
Services, and our primary regionally-based competitors are hospital-based home
health agencies and visiting nurse associations.
We compete with other home health care providers on the basis of
availability of personnel, quality and expertise of services and the value and
price of services. We believe that we have a favorable competitive position,
attributable mainly to our widespread office network and the consistently high
quality and targeted services we have provided over the years to our patients,
as well as to our screening and evaluation procedures and our training programs
for our caregivers.
We may have existing competitors, as well as a number of potential new
competitors, who have greater name recognition, and significantly greater
financial, technical and marketing resources than we do. This may allow them to
devote greater resources than we can to the development and promotion of their
services. These competitors may also engage in more extensive research and
development, undertake more far-reaching marketing campaigns and adopt more
aggressive pricing policies and make more attractive offers to existing and
potential employees and clients.
We expect that industry forces will impact us and our competitors. Our
competitors will likely strive to improve their service offerings and price
competitiveness. We also expect our competitors to develop new strategic
relationships with providers, referral sources and payors, which could result in
increased competition. The introduction of new and enhanced services,
acquisitions and industry consolidation and the development of strategic
relationships by our competitors could cause a decline in sales or loss of
market acceptance of our services or price competition, or make our services
less attractive. We cannot assure you that we will be able to compete
successfully against current or future competitors or that competitive pressures
will not have a material adverse effect on our business, financial condition and
results of operations.
EMPLOYEES
At October 3, 1999, we had over 5,200 full-time administrative staff and
approximately 750 full time caregivers. We also employ caregivers on a temporary
basis, as needed, to provide home healthcare services. In fiscal 1999, the
average number of temporary caregivers employed on a weekly basis has been
18,000. In British Columbia some of our caregivers are unionized by the British
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Columbia Government Services' Employee Union under the master collective
bargaining agreement which applies to all home health agencies in British
Columbia. In addition, we are in the process of negotiating our first collective
bargaining agreement with all unionized caregivers in the Thunder Bay, Ontario
office with the Services' Employees International Union, Local 268. In our
Windsor, Ontario location, the Canadian Union of Public Workers has alleged in a
letter to us dated September 20, 1999 that it is the bargaining agent for our
caregivers. We are reviewing its allegations. In addition, the Services'
Employees International Union, Local 880 has filed a representation petition
with the National Labor Relations Board covering three home health services
offices in Chicago, Illinois with about 700 caregivers. An election was held on
November 5, 1999 at which the employees voted against the representation. The
union filed objections to the vote against the election. These objections were
upheld by the National Labor Relations Board; we intend to appeal this decision.
If we lose the appeal, another election will be held. We believe that our
relationships with our employees are generally good.
With respect to administrative staff and caregivers, we pay the employer's
share of Social Security taxes, federal and state unemployment taxes, workers'
compensation insurance and other similar costs. Administrative staff and
caregivers are covered by general liability insurance and by a fidelity bond
maintained by us. In addition, caregivers are covered by professional medical
liability insurance. We believe that we maintain insurance coverages which are
adequate for the purposes of our business.
PROPERTIES
In connection with the split-off, Olsten has agreed to provide office space
to us without charge at 175 Broad Hollow Road, Melville, New York 11747-8905 for
our corporate headquarters for six months after the split-off. We have agreed to
use our best efforts to relocate our corporate headquarters promptly, but in no
event later than six months after the split-off. In addition, before the
split-off, all leases for real property used exclusively by the health services
business will be transferred to us and all leases for real property shared by
the health services business and the businesses retained by Olsten will be
modified, transferred or terminated as agreed by us and Olsten. The leases for
the operating offices we and our subsidiaries use and will use expire at various
dates. We believe that our facilities are adequate for our immediate needs. We
do not anticipate that we will have any problem obtaining additional or
replacement space if needed in the future.
REGULATION
Our business is subject to extensive federal and state regulations which
govern, among other things:
- Medicare, Medicaid, CHAMPUS and other government-funded reimbursement
programs;
- reporting requirements, certification and licensing standards for certain
home health agencies; and
- in some cases, certificate-of-need and pharmacy-licensing requirements.
Our compliance with these regulations may affect our participation in
Medicare, Medicaid, CHAMPUS and other federal health care programs. We are also
subject to a variety of federal and state regulations which prohibit fraud and
abuse in the delivery of health care services. These regulations include, among
other things:
- prohibitions against the offering or making of direct or indirect payments
for the referral of patients;
- rules against physicians making referrals under Medicare for clinical
services to a home health agency with which the physician has certain
types of financial relationship; and
- laws against the filing of false claims.
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As part of the extensive federal and state regulation of our home health care
business, and under our corporate integrity agreements, we are subject to
periodic audits, examinations and investigations conducted by, or at the
direction of, governmental investigatory and oversight agencies. Violation of
the applicable federal and state health care regulations can result in a health
care provider's being excluded from participation in the Medicare, Medicaid
and/or CHAMPUS programs and can subject the provider to substantial civil and/or
criminal penalties. One of our subsidiaries has been permanently excluded from
participation in Medicare, Medicaid and all other federal health care programs
pursuant to a plea agreement.
Periodic and random audits conducted by intermediaries may result in a delay
in receipt, or an adjustment to the amounts of reimbursement due or received
under Medicare, Medicaid, CHAMPUS and other federal health care programs. In
September 1999, we received a Notice of Amount of Program Reimbursement for our
1997 Medicare cost reports from our Medicare fiscal intermediary notifying us
that it disagrees with our methodology of allocating a portion of our overhead.
The Health Care Financing Administration has indicated that it agrees with the
fiscal intermediary. The notice indicates a possible disallowance of
approximately $7 million of costs in 1997. Since we used the same or a similar
methodology for allocating overhead costs in 1998 and 1999, a comparable
disallowance could result for these years. We believe our cost reports are
accurate and consistent with past practice accepted by our HCFA fiscal
intermediary and will appeal the notice to the Provider Reimbursement Review
Board. We are unable to predict the outcome of the appeal.
GOVERNMENT INVESTIGATIONS
We have been subject to several federal and state governmental
investigations. Some of those investigations are still pending, although
substantially all of them have been settled. In connection with the split-off we
have agreed to assume, to the extent permitted by law and the terms of the
liabilities, and indemnify Olsten for, all liabilities associated with any
pending or future governmental investigation of the home health services
business. We also have agreed to comply with all related settlement agreements
and corporate integrity agreements or other operational agreements with the
government. Compliance with the various agreements will require significant
financial resources over a five year period.
We continue to cooperate with the Office of Investigations section of the
Office of Inspector General of the U.S. Department of Health and Human Services
and the U.S. Department of Justice in connection with the cost reports
investigation. We also continue to cooperate with the U.S. Department of Justice
and other federal agencies investigating the relationship between Columbia/HCA
Healthcare Corporation and us in connection with the Columbia/HCA investigation.
We continue to cooperate with various state and federal agencies, including
the U.S. Department of Justice, the Office of the Attorney General of New Mexico
and the New Mexico Health Care Anti-Fraud Task Force in connection with their
investigations into certain health care practices of Quantum Health Resources.
Among the matters the federal agencies are or were inquiring into include
allegations of improper billing and fraud against various federally-funded
medical assistance programs (referred to as the Quantum New Mexico
investigation) on the part of Quantum and its post-acquisition successor, our
specialty pharmaceutical distribution services business. Most of the time period
that we believe to be at issue in the Quantum New Mexico investigation predates
Olsten's June 1996 acquisition of Quantum.
In October 1998, Olsten entered into a final settlement agreement with
several government agencies investigating certain past practices of Quantum. The
agreement was entered into with:
- the U.S. Department of Justice;
- the Office of the Inspector General of the U.S. Department of Health and
Human Services;
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- the U.S. Secretary of Defense (for the CHAMPUS/Tricare program); and
- the Attorneys General for the States of New York and Oklahoma.
The settlement required Olsten to reimburse the government about
$4.5 million for disputed claims under the Medicaid and CHAMPUS programs. The
disputed claims relate to reimbursement for the provision of anti-hemophilia
factor products to patients covered by some federal health care programs. In
addition, Olsten was required to enter into a corporate integrity agreement.
In January 1999, Olsten was advised by the United States Attorney's Office
for the District of New Mexico that, in connection with the Quantum New Mexico
investigation, it had dropped its criminal investigation into past practices of
Quantum. The criminal aspect of the Quantum New Mexico investigation had focused
on allegations of improper billing and fraud against various federally funded
medical assistance programs on the part of Quantum during the period between
January 1992 and April 1997. By letter dated February 1, 1999, the New Mexico
U.S. Attorney's Office advised Olsten that, having ended its criminal inquiry,
the Office has referred the Quantum matter to its Affirmative Civil Enforcement
Section. We continue to cooperate with the civil inquiry into the Quantum matter
and to explore with the New Mexico U.S. Attorney's Office the possibility of
reaching a negotiated monetary resolution of the matter. Any negotiated amount
could include multiplied damages, interest and civil penalties.
By letter dated June 30, 1999, the Medicare Fraud Control Unit of the New
Mexico Attorney General's Office notified Olsten that it has declined to
criminally prosecute the so-called "J-Code issue" relating to Quantum's past
practices in seeking government health care reimbursement.
On July 19, 1999, Olsten entered into written civil and criminal agreements
with the U.S. Department of Justice and the Office of Inspector General of the
U.S. Department of Health and Human Services. Those agreements finalized the
settlement of the civil and criminal aspects of the cost reports investigation
and the Columbia/HCA investigation. Pursuant to the settlement,
(a) on August 11, 1999, Olsten paid $61 million to the U.S. Department of
Justice, including approximately $10.1 million in criminal fines and
penalties;
(b) in connection with the Columbia/HCA investigation, our subsidiary,
Kimberly Home Health Care, Inc., pled guilty in the United States
District Court for the Northern District of Georgia, the Southern
District of Florida and the Middle District of Florida, to a criminal
violation of the federal mail fraud, conspiracy and kickback statutes;
(c) Kimberly has been permanently excluded from participation in Medicare,
Medicaid and all other federal health care programs as defined in 42
U.S.C. Section1320a-7b(f); and
(d) Olsten has executed a corporate integrity agreement with the Office of
Inspector General of the U.S. Department of Health and Human Services.
In early December 1999, we received a document subpoena from the Department
of Health and Human Services, Office of Inspector General, Office of
Investigations. The subpoena was delivered to us in connection with an
investigation of possible violations by us of the Medicare provisions of the
Social Security Act. After preliminary discussions with the Office of Inspector
General, we believe the subpoena relates to possible overpayments to us by the
Medicare program. In early February 2000, we received a document subpoena from
the Department of Health and Human Services, Office of Inspector General, Office
of Investigations. We believe the subpoena relates to our agencies' cost
reporting procedures concerning contracted nursing and home health aide costs.
We intend to provide the Office of Inspector General with the requested
documents and to cooperate fully with its investigations. At this time, we are
unable to assess the probable outcome or potential liability, if any, arising
from these subpoenas.
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We have recently commenced discussions with the North Carolina Attorney
General's Office concerning questions that it has raised as to the eligibility
of a certain class of our patients to receive Medicaid-reimbursed home health
services and, thus, our entitlement to Medicaid reimbursement in connection with
those services. At this preliminary stage, we are unable to assess the probable
outcome of or potential liability arising from this matter.
CORPORATE INTEGRITY AGREEMENTS WITH THE GOVERNMENT
In connection with the government's cost reports investigation and
Columbia/HCA investigation, Olsten executed a corporate integrity agreement,
with the Office of Inspector General of the Department of Health and Human
Services. That corporate integrity agreement will be in effect until August 18,
2004. In connection with the government's investigation of past practices of
Quantum, Olsten executed a corporate integrity agreement in October 1998 with
the U.S. Department of Justice, the Office of Inspector General of the U.S.
Department of Health and Human Services, the U.S. Secretary of Defense (for the
CHAMPUS/Tricare Program) and the Attorneys General for the States of New York
and Oklahoma that will be in effect until December 31, 2001. Under each of the
corporate integrity agreements, we are, for example, required:
- to maintain a corporate compliance officer to develop and implement
compliance programs;
- to retain an independent review organization to perform annual reviews;
and
- to maintain our compliance program and reporting systems, as well as
provide certain training to our employees.
The corporate integrity agreement entered into in connection with the Quantum
investigation applies to our specialty pharmaceutical services business and
focuses on the training and billing of blood factor products for hemophiliacs.
The corporate integrity agreement relating to the cost reports investigation and
the Columbia/HCA investigation applies to our businesses that bill the federal
government health programs directly for services, such as our home care nursing
business (but excluding the specialty pharmaceutical services business). That
corporate integrity agreement focuses on issues and training related to cost
report preparation, contracting, medical necessity and billing of claims. Our
compliance program will be implemented for all newly established or acquired
business units if their type of business is covered by the corporate integrity
agreements. Reports under each integrity agreement will be filed annually with
the Department of Health and Human Services, Office of Inspector General. After
each corporate integrity agreement expires, we will file a final annual report
to the government. If we fail to comply with the terms of either of our
corporate integrity agreements, we will be subject to penalties ranging from
$1,500 to $2,500 for each day of the breach.
LEGAL PROCEEDINGS
In connection with the split-off, we have agreed to assume, to the extent
permitted by law and the terms of the liabilities, and indemnify Olsten for all
liabilities, whether or not pending at the time of the split-off, of the health
services business, some of which are listed below.
On September 8, 1998, a Consolidated Amended Class Action Complaint (the
"Amended Complaint") was filed in the U.S. District Court for the Eastern
District of New York, captioned IN RE OLSTEN CORPORATION SECURITIES LITIGATION,
No. 97-5056, by some shareholders against Olsten and some of its officers and
directors (the "Class Action"). The Amended Complaint, which consolidated four
purported class action lawsuits filed in April, August and September 1997
against Olsten and some of its officers and directors, asserts claims under
Sections 10(b) (including Rule 10b-5 promulgated thereunder), 14(a) and 20(a) of
the Securities Exchange Act of 1934 and Sections 11, 12(a)(2) and 15 of the
Securities Act of 1933 related to the home health services business. On
October 19, 1998, Olsten and the individual defendants served a motion seeking
an order dismissing the Amended Complaint.
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The parties filed with the court in October 1999 supplemental submissions in
connection with defendants' pending dismissal motion. The defendants filed a
response to plaintiffs' submission on October 14, 1999, the plaintiffs responded
to it on October 21, 1999 and the defendants filed a reply on October 22, 1999.
The Amended Complaint seeks certification of the proposed class, a judgment
declaring the conduct of the defendants to be in violation of the law,
unspecified compensatory damages and unspecified costs and expenses, including
attorneys' fees and experts' fees. While we are unable at this time to assess
the probable outcome of the Class Action or the materiality of the risk of loss
in connection with the class action (given the preliminary stage of the Class
Action and the fact that the Amended Complaint does not allege damages with any
specificity), Olsten believes that it acted responsibly with respect to its
shareholders and has vigorously defended the Class Action. After the split-off
we intend to vigorously defend the Class Action.
On May 11, 1999, a Complaint captioned RUBIN, ET AL. v. MAY, ET AL.,
No. 17135-NC (the "Derivative Lawsuit") was filed in the Delaware Chancery Court
in a derivative suit against several current and former directors of Olsten. The
Complaint, which names Olsten as a nominal defendant, alleges a claim for breach
of fiduciary duties arising out of the Class Action and the government
investigations described above. The plaintiffs seek a judgment:
(1) requiring the defendants to account to Olsten for unspecified alleged
damages resulting from the defendants' alleged conduct;
(2) directing the defendants to establish and maintain effective compliance
programs; and
(3) awarding plaintiffs the costs and expenses of the lawsuit, including
reasonable attorneys' fees.
On September 10, 1999, the defendants in the Derivative Lawsuit filed a motion
to dismiss or, in the alternative, stay the lawsuit.
On January 14, 1999, Kimberly Home Health Care, Inc. initiated three
arbitration proceedings against hospitals owned by Columbia/HCA Healthcare Corp.
with which Kimberly had management services agreements to provide services to
the hospitals' home health agencies. The basis for each of the arbitrations is
that Columbia/HCA sold the home health agencies without assigning the management
services agreements and, as a result, Columbia/HCA has breached the management
services agreements. In response to the arbitrations, Columbia/HCA has asserted
that the arbitration be consolidated and stayed, in part based upon its alleged
claims against Kimberly for breach of contract and requesting indemnity and
possibly return of management fees. Columbia/HCA has not yet formally presented
these claims in the arbitrations or other legal proceedings, and has not yet
quantified the claims. The parties have agreed to suspend the proceedings until
March, 2000.
In July 1999, we received notification that the Indiana Attorney General's
Office filed a civil complaint against Olsten requesting the court to determine
if Quantum violated the Indiana law with respect to Medicaid claims. The
complaint alleges that:
(1) overpayment was made to Quantum due largely to advances paid by Medicaid
that were not properly credited by Quantum;
(2) Quantum supplied the Indiana Attorney General's Office with insufficient
documentation regarding services provided by one of our pharmacies; and
(3) deliveries exceeded the amounts of physicians' orders.
The alleged violations predate Olsten's acquisition of Quantum in June 1996. The
complaint filed by the Indiana Attorney General's Office seeks an unspecified
amount of monetary damages, double or treble damages, penalties and
investigative costs.
In addition to the above pending legal proceedings, various claims and legal
proceedings generally incidental to the normal course of business are pending or
threatened against us. While we cannot predict the outcome of these matters, our
management believes that any matters of this nature will not have a material
adverse effect on our business, financial condition and results of operations.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain available information regarding our
executive officers and directors immediately following the split-off. None of
our executive officers will continue to serve as executive officers for Olsten
or Adecco.
NAME AGE POSITION
- ---- -------- --------
Edward A. Blechschmidt.................... 47 President, Chief Executive Officer and
Chairman of the Board of Directors
Richard C. Christmas...................... 45 Senior Vice President
John J. Collura........................... 52 Executive Vice President, Chief Financial
Officer and Treasurer
E. Rodney Hornbake, M.D................... 49 Senior Vice President and Chief Medical
Officer
Patricia C. Ma............................ 38 Senior Vice President, General Counsel and
Secretary
Terry Mitchell............................ 49 Senior Vice President
Robert J. Nixon........................... 43 Executive Vice President
Vernon A. Perry, Jr....................... 48 Senior Vice President
David C. Silver........................... 57 Senior Vice President
Victor F. Ganzi........................... 52 Director
Steven E. Grabowski....................... 45 Director
Stuart R. Levine.......................... 52 Director
John M. May............................... 71 Director
Stuart Olsten............................. 47 Director
Richard J. Sharoff........................ 53 Director
Raymond S. Troubh......................... 73 Director
Josh S. Weston............................ 71 Director
EDWARD A. BLECHSCHMIDT
Mr. Blechschmidt, our president, chief executive officer and chairman of the
board of directors, has served as the chief executive officer and a director of
Olsten since February 1999. He has also been the president of Olsten since
October 1998 and served as the chief operating officer of Olsten from
October 1998 to February 1999. From August 1996 to October 1998 he was president
and chief executive officer of Siemens Nixdorf Americas, an information
technology company. From January 1996 to July 1996 he was senior vice president
and chief financial officer of Unisys Corporation, a provider of information
technology and consulting services. From January 1995 to December 1995 he was
senior vice president and president of the United States and Canada division of
Unisys Corporation. From 1990 to December 1994 he was senior vice president and
president of the Pacific Asia Americas Division of Unisys Corporation.
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RICHARD C. CHRISTMAS
Mr. Christmas, one of our senior vice presidents, joined Olsten in 1992 and
has served as regional director, area vice president and project manager-vice
president for a business and technology reengineering project for Olsten.
Mr. Christmas has served as one of our senior vice presidents since 1997. Prior
to joining Olsten, Mr. Christmas was a regional director of Manpower Inc. and
vice president of Helpmates Temporary Services.
JOHN J. COLLURA
Mr. Collura, our chief financial officer, our treasurer and one of our
executive vice presidents, has served as the chief financial officer and an
executive vice president of our business since 1998 when he joined Olsten. From
1996 to 1998, Mr. Collura directed the financial and business development
operations of Partners Healthcare, a $5 billion integrated healthcare delivery
system that manages 42 entities. From 1995 to 1996, Mr. Collura was the chief
operating officer of the Port Authority of New York and New Jersey. He also held
several senior level finance positions at the Port Authority and was assistant
chief executive officer. Mr. Collura is a member of the Institute of Management
Accountants, where he has served as president and national board member and a
member of the Healthcare Financial Management Association.
E. RODNEY HORNBAKE, M.D.
Dr. Hornbake, one of our senior vice presidents and our chief medical
officer, joined us in November 1999. Before joining us, Dr. Hornbake served as
vice president and medical director of the North Shore-Long Island Jewish Health
System. Prior to that, Dr. Hornbake was chief medical officer for Aetna
Professional Management Corporation and chief of medicine for the Park Ridge
Health System.
PATRICIA C. MA
Ms. Ma, our general counsel, one of our senior vice presidents and
secretary, joined Olsten in June 1994. Since 1998 she has served as our general
counsel and vice president. From 1994 to 1998, Ms. Ma served in various legal
positions with our business, including vice president, assistant general
counsel, assistant vice president and senior counsel. Prior to joining Olsten,
Ms. Ma served as assistant general counsel of Fresenius Medical Care (formerly
known as National Medical Care, Inc.) from 1990 to 1994.
TERRY MITCHELL
Mr. Mitchell, one of our senior vice presidents, joined us in February,
1993. Mr. Mitchell has served in numerous capacities for our company. Prior to
joining our company, Mr. Mitchell had an eighteen year tenure at Marriott
Corporation, including serving as senior vice president in the management and
facilities management divisions.
ROBERT J. NIXON
Mr. Nixon, one of our executive vice presidents, has been a member of our
senior management team since joining Olsten in 1994. From 1994 to 1999, he has
served in various capacities, including as our senior vice president. Prior to
joining Olsten, Mr. Nixon held positions with PediatriCare America, Critical
Care America and Sherwood Medical.
VERNON A. PERRY, JR.
Mr. Perry, one of our senior vice presidents, joined Olsten in 1994. From
1996 to 1999, he served as our senior vice president of network management. From
1994 to 1996, he served as vice president of business development, primarily
responsible for the health services business development. Before joining Olsten,
Mr. Perry spent twenty years in various health care management positions,
including
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senior positions at Georgetown University Community Health Plan, Sierra Health
Services and Principal Health Care.
DAVID C. SILVER
Mr. Silver, our senior vice president of human resources, joined Olsten in
1998 as a vice president of human resources for Olsten's staffing services
business. From 1989 to 1998, Mr. Silver served as president of DCS Associates,
Inc., a New Mexico based human resources consulting firm with a client base of
over 250 organizations.
VICTOR F. GANZI
Mr. Ganzi, one of our directors, has served as a director of Olsten since
1998. He has been executive vice president of The Hearst Corporation, a
diversified communications company with interests in magazine, newspaper and
business publishing and television and radio stations, since March 1997 and its
chief operating officer since March 1998. From 1992 to 1997, at various times
Mr. Ganzi served as Hearst's senior vice president, chief financial officer and
chief legal officer. From March 1995 until October 1999 he was group head of
Hearst's Books/Business Publishing Group. He is a director of Hearst-Argyle
Television, Inc.
STEVEN E. GRABOWSKI
Mr. Grabowski, one of our directors, is currently a Vice President in the
Private Client Group of PaineWebber, Inc., a member of the New York Stock
Exchange, where he has worked since 1991. Mr. Grabowski currently serves on the
board of a not-for-profit entity named VITA Education Services. Mr. Grabowski is
the brother-in-law of Mr. Olsten, a director of our company.
STUART R. LEVINE
Mr. Levine, one of our directors, has served as a director of Olsten since
1995. Since June 1996 he has served as the chairman and chief executive officer
of Stuart Levine & Associates LLC, an international training company. From
September 1992 to June 1996 he was Chief Executive Officer of Dale Carnegie &
Associates, Inc., a global provider of corporate training in leadership and
personal development. Mr. Levine currently serves as a Trustee of Long Island
Jewish Health Care, and for 15 years, until 1995, he served as a Vice Chairman
of North Shore Hospital. Mr. Levine is a member of the board of directors of
European American Bank.
JOHN M. MAY
Mr. May, one of our directors, has served as a director of Olsten since
1989. He has been an independent management consultant for more than five years.
Mr. May serves as a member of the board of directors of each of Long Island
University, Eastern Long Island Hospital and Peconic Health Corporation.
STUART OLSTEN
Mr. Olsten, one of our directors, has served as a director of Olsten since
1986. Since February 1999 he has been the chairman of the board of directors of
Olsten. He was vice chairman of Olsten from August 1994 to February 1999 and was
president of Olsten from April 1990 to February 1999. Subject to the completion
of the merger, Mr. Olsten will be appointed to the board of directors of Adecco
at the time of the merger. Mr. Olsten is the brother-in-law of Mr. Grabowski, a
director of our company.
RICHARD J. SHAROFF
Mr. Sharoff, one of our directors, has served as a director of Olsten since
1994. Since November 1996 he has been president and chief executive officer of
MagCorp., Inc., a franchisor of restaurants.
X-59
From January 1996 to November 1996 he was chairman and chief executive officer
of Superior Pasta, L.L.C., a developmental stage company in the food industry.
From July 1995 to December 1995 he was a consultant in the food industry. From
January 1992 to June 1995, he was president and chief executive officer of
Haifoods, Inc., a holding company in the food and beverage industries.
RAYMOND S. TROUBH
Mr. Troubh, one of our directors, has served as a director of Olsten since
1993. He has been a financial consultant for more than five years. He is a
director of ARIAD Pharmaceuticals, Inc., Becton Dickinson and Company, Diamond
Offshore Drilling, Inc., Foundation Health Systems, Inc., General American
Investors Company, Starwood Hotels and Resorts, Triarc Companies and WHX
Corporation.
JOSH S. WESTON
Mr. Weston, one of our directors, has served as a director of Olsten since
1995. Since May 1998 he has been honorary chairman of Automatic Data
Processing, Inc., a provider of computerized transaction processing, data
communication and information services. He was chairman of Automatic Data
Processing, Inc. from 1982 to April 1998 and was chief executive officer of
Automatic Data Processing, Inc. from 1982 to August 1996. He is a director of
Automatic Data Processing, Inc., J. Crew Inc., Russ Berri Corp. and Shared
Medical Systems, Inc. and a trustee of Atlantic Health Systems, Inc.
CLASSIFIED BOARD OF DIRECTORS
Our board of directors is divided into three classes. Victor F. Ganzi, John
M. May, Richard J. Sharoff and Josh S. Weston, will be the class 1 directors
with an initial term expiring at our first annual stockholders meeting for
election of directors. Edward A. Blechschmidt, Steven E. Grabowski and Raymond
S. Troubh, will be the class 2 directors with an initial term expiring at our
second annual stockholders meeting for election of directors. Stuart R. Levine
and Stuart Olsten, will be the class 3 directors with an initial term expiring
at the third annual stockholders meeting for the election of directors. After
their initial terms, directors will generally serve for three years.
COMMITTEES OF THE BOARD OF DIRECTORS
Our board of directors has an audit committee, a human resources and
compensation committee and an executive committee. The audit committee
recommends the appointment of auditors and oversees accounting and audit
functions and other key financial matters of our company. In addition, the audit
committee oversees compliance matters as well as the implementation of the
corporate integrity agreements described under the heading "Business--Corporate
integrity agreements with the government". Messrs. Ganzi, Grabowski, May and
Sharoff will serve as the audit committee's members. The human resources and
compensation committee will oversee compensation and benefit programs.
Messrs. Levine, Troubh and Weston will serve as members of the human resources
and compensation committee. The executive committee will act for the entire
board of directors between board meetings. Messrs. Blechschmidt, Ganzi, May,
Olsten and Weston will serve as members of the executive committee.
DIRECTOR COMPENSATION
Each non-employee member of the board of directors will receive an annual
retainer of $25,000 in shares of our common stock. In addition, any non-employee
directors who act as chair of a committee of the board will receive $2,000
annually for acting as a chairperson. Non-employee directors will also receive
$1,000 for each board or committee meeting they attend ($500 if attendance is by
telephone). All directors, regardless of whether or not they are our employees,
will receive reimbursement for out-of-pocket expenses incurred in connection
with attending meetings. Upon initial election to the
X-60
board, each non-employee director will receive stock options exercisable for up
to 5,000 shares of our common stock with future grants to be determined by our
board of directors.
EXECUTIVE COMPENSATION
Set forth below is information regarding the compensation during Olsten's
1998 fiscal year for the people who served as chief executive officer of or in a
similar capacity for Gentiva Health Services and the four other most highly
compensated officers of Gentiva Health Services (collectively referred to as the
named officers). During this period, the named officers, other than Mr.
Blechschmidt who was employed by Olsten and paid by Olsten, were our employees
and all compensation was paid by us. After the split-off, all of the named
officers who will continue with Gentiva Health Services, will be our employees
and the compensation of the named officers and all of our other officers will be
determined by our human resources and compensation committee. We anticipate that
the compensation to the named officers and all other executive officers will
initially be comparable to fiscal 1998 levels of compensation received by them.
There can, however, be no assurance that changes will not be made to the
compensation practices and policies if our human resources and compensation
committee and management deems them appropriate.
SUMMARY COMPENSATION TABLE. The summary compensation table set forth below
contains information regarding compensation of each of the named officers for
services rendered in all capacities during Olsten's 1998 fiscal year.
LONG TERM COMPENSATION
-------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------------------------- ------------------------ ----------
SECURITIES
RESTRICTED UNDERLYING
NAME AND PRINCIPAL OTHER ANNUAL STOCK OPTIONS/ LTIP
POSITION YEAR(1) SALARY($) BONUS($) COMPENSATION($)(2) AWARD(S)($) SARS(#) PAYOUTS($)
- ------------------ -------- --------- -------- ------------------ ----------- ---------- ----------
Edward A.
Blechschmidt(4)..... 1998 $ 95,192 $235,000 378 -- 200,000 --
President, Chief
Executive Officer
and Chairman of
the Board
Robert A. Fusco(5).... 1998 600,000 -- 2,490 -- 75,000 --
Former President
John J. Collura....... 1998 206,346 40,000 -- -- 25,000 --
Executive Vice
President, Chief
Financial Officer
and Treasurer
Terry Mitchell........ 1998 279,941 25,000 -- -- 8,000 --
Senior Vice
President
Robert J. Nixon....... 1998 325,000 40,000 -- -- 25,000 --
Executive Vice
President
Vernon A. Perry,
Jr.................. 1998 175,000 48,625 -- -- 10,000 --
Senior Vice
President
NAME AND PRINCIPAL ALL OTHER
POSITION COMPENSATION($)(3)
- ------------------ ------------------
Edward A.
Blechschmidt(4)..... --
President, Chief
Executive Officer
and Chairman of
the Board
Robert A. Fusco(5).... 50,040
Former President
John J. Collura....... 10,821
Executive Vice
President, Chief
Financial Officer
and Treasurer
Terry Mitchell........ 23,484
Senior Vice
President
Robert J. Nixon....... 28,890
Executive Vice
President
Vernon A. Perry,
Jr.................. 15,049
Senior Vice
President
- ------------------------------
(1) Since Gentiva Health Services was not a reporting company during the three
immediately preceding fiscal years, Olsten information with respect to the
1998 fiscal year is reflected in the table.
(2) Gross-up of taxable portion of fringe benefit.
(3) Represents profit sharing and matching contributions by Olsten for the named
officers pursuant to Olsten's Non-Qualified Retirement Plan for selected
management employees.
(4) Mr. Blechschmidt commenced employment with Olsten in October 1998 as
president and chief operating officer.
(5) Mr. Fusco resigned from his position as president of the health services
business of Olsten in late 1999. He will not be employed by Gentiva Health
Services after the split-off.
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OPTION GRANTS. The table below sets forth further information concerning
the grant of stock options to the named officers by Olsten during Olsten's 1998
fiscal year.
OLSTEN STOCK OPTION GRANTS IN FISCAL 1998
POTENTIAL REALIZABLE
VALUE AT
INDIVIDUAL GRANTS ASSUMED ANNUAL
- --------------------------------------------------------------------------------------------------------- RATES OF STOCK PRICE
NUMBER OF % OF TOTAL APPRECIATION FOR
SECURITIES OPTIONS OPTION
UNDERLYING GRANTED TO EXERCISE TERM(3)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------
NAME GRANTED(#)(1) FISCAL YEAR(2) ($/SH) DATE 5%($) 10%($)(3)
- ---- ------------- -------------- -------- ---------- -------- ----------
Edward A. Blechschmidt........................... 200,000 10.1% $ 5.9375 10/19/08 $746,807 $1,892,566
Robert A. Fusco.................................. 40,000 2.0 14.6875 1/13/08 369,472 936,324
35,000 1.8 9.1250 7/30/08 200,851 509,002
John J. Collura.................................. 25,000 1.3 9.1250 7/30/08 143,465 363,573
Terry Mitchell................................... 8,000 0.4 14.6875 1/13/08 73,894 187,265
Robert J. Nixon.................................. 25,000 1.3 9.1250 7/30/08 143,465 363,573
Vernon A. Perry, Jr.............................. 10,000 0.5 9.1250 7/30/08 57,386 145,429
- ------------------------------
(1) The options were granted at an exercise price equal to the fair market
values of Olsten's common stock on the date of the grant. The options have a
ten-year term. In the case of Mr. Blechschmidt's options, the options become
exercisable over a five-year period in increments of 20 percent per year
beginning with the first anniversary of the date of the grant. In the case
of Messrs. Fusco, Mitchell, Collura, Nixon and Perry, the options became
exercisable over a four-year period in increments of 25 percent per year
beginning with the first anniversary of the date of the grant. In fiscal
1999, Olsten granted Mr. Blechschmidt options to purchase 150,000 shares at
an exercise price of $7.25 per share with an expiration date of
February 10, 2009. In fiscal 1999, Olsten granted Messrs. Fusco, Mitchell,
Collura, Nixon and Perry options to purchase 50,000 shares, 10,000 shares,
20,000 shares, 20,000 shares and 3,000 shares, respectively, at an exercise
price of $7.50 per share with an expiration date of January 5, 2009.
(2) The percentages shown are based upon the total options granted to Olsten
employees.
(3) The dollar amounts under the indicated columns are the result of
calculations at the 5% and 10% rates set forth by the Securities and
Exchange Commission and are not intended to forecast possible future
appreciation of Olsten's or our company's stock price.
AGGREGATED OPTION EXERCISES IN OLSTEN'S 1998 FISCAL YEAR AND 1998 FISCAL
YEAR END OPTION VALUES. The table below sets forth information with respect to
the named officers concerning the exercise of stock options during Olsten's 1998
fiscal year and unexercised options held as of the end of that year.
NUMBER OF SECURITIES
UNDERLYING
SHARES UNEXERCISED OPTIONS AT
ACQUIRED 1998 FISCAL YEAR END (#)
ON VALUE ---------------------------
NAME EXERCISE(#) REALIZED EXERCISABLE UNEXERCISABLE
- ---- ------------------------ ------------------------ ----------- -------------
Edward A. Blechschmidt.............. -- -- -- 200,000
Robert A. Fusco..................... -- -- 108,125 216,875
John J. Collura..................... -- -- -- 25,000
Terry Mitchell...................... -- -- 16,687 15,313
Robert J. Nixon..................... -- -- 19,875 78,625
Vernon A. Perry, Jr................. -- -- 9,487 28,563
VALUE OF UNEXERCISED
IN-THE-MONEY
OPTIONS AT
1998 FISCAL YEAR END ($)
----------------------------------------
NAME EXERCISABLE UNEXERCISABLE
- ---- ------------------------ -------------
Edward A. Blechschmidt.............. -- $287,500
Robert A. Fusco..................... 0 0
John J. Collura..................... -- 0
Terry Mitchell...................... 0 0
Robert J. Nixon..................... 0 0
Vernon A. Perry, Jr................. 0 0
EMPLOYMENT AGREEMENT
On or prior to the date of the split-off, we will enter into an employment
agreement with Mr. Blechschmidt, our current president, chief executive officer
and chairman of the board of directors. The agreement will become effective on
the date of the split-off and will be in effect for a period of three years from
the date of the split-off. During the term of the agreement, Mr. Blechschmidt
will
X-62
receive: (1) a base salary of $600,000 per year, and (2) an annual bonus, based
on the achievement of target levels of performance, with target bonus equal to
80 percent of his base salary and the maximum bonus equal to 120 percent of his
salary. However, Mr. Blechschmidt's bonus will not be less than 50 percent of
his base salary for 2000. Mr. Blechschmidt will also receive customary benefits,
perquisites and reimbursement for expenses.
The agreement provides that Mr. Blechschmidt's employment will terminate:
- upon the death or disability of Mr. Blechschmidt,
- upon termination of his employment for cause by us,
- for termination of his employment without cause by us, or
- termination of his employment for good reason by Mr. Blechschmidt.
In the event his employment is terminated as a result of his death or
disability, he or his estate will be entitled to receive his earned salary,
vested benefits and accelerated vesting of his accrued pension benefits. He will
not be entitled to severance benefits. In the event the agreement is terminated
for cause by us, he will be entitled to receive earned salary and vested
benefits and will not be entitled to severance benefits. In the event the
agreement is terminated for good reason by Mr. Blechschmidt or without cause by
us, he will be entitled to earned salary, vested benefits, severance benefits
and accelerated vesting of his accrued pension benefits and continued medical
benefits for up to two years. Severance benefits as referred to in this section,
are equal to two times Mr. Blechschmidt's base salary, so long as
Mr. Blechschmidt does not receive any amounts under his change in control
agreement.
The agreement also restricts Mr. Blechschmidt's ability to engage in any of
our business lines in the United States and Canada for the term of the agreement
and during the nine months after termination of his employment, other than
termination without cause and termination for good reason. It also contains
confidentiality provisions and provisions for non-solicitation of our employees.
Mr. Blechschmidt will enter into a change in control agreement with us,
similar to the terms described below.
CHANGE IN CONTROL AGREEMENTS
Our executive officers will be parties to change in control agreements in
connection with their employment with us. These agreements will have a term of
three years, commencing on the date of the split-off. They will generally
provide benefits in the event: (1) the employee's employment is terminated by us
and the termination is not for cause or is by the employee for good reason (as
specified in the agreement) and (2) the termination is within three years after
a change in control of our company. In addition, these executive officers will
receive the benefit of their agreements if they were terminated by Gentiva
Health Services without cause up to a year before a change in control, if their
termination arose in connection with the change in control. These agreements are
still being finalized and agreements with particular executive officers will be
entered into prior to the split-off.
The benefits conferred under these agreements generally will include the
following:
- a cash payment equal to two times the employee's base salary and target
bonus;
- continued benefits for the lesser of two years following the termination
or until the employee obtains comparable benefits from another employer;
- immediate vesting of any stock options held by the employee (those options
would remain exercisable for one year following the termination, but not
beyond the original full term); and
- full vesting of retirement and deferred compensation benefits.
X-63
Under certain circumstances the benefits could be reduced in order to avoid
the incurrence of excise taxes by the employees.
Under the agreements, a change in control is defined to include the
following events:
- a person or group beneficially owns at least 25 percent or more of our
voting stock;
- either the directors named in this prospectus (and their approved
successors) cease to constitute a majority of our board of directors or a
majority of the persons nominated by our board of directors for election
fails to be elected;
- a merger of our company if our stockholders do not own a majority of the
stock of the surviving company or if the members of our board of directors
do not constitute a majority of the directors of the surviving company's
board;
- if our company is liquidated; or
- if all or substantially all of our assets are sold.
In addition, our change in control agreements provide that if an employee
substantially prevails in a dispute with us relating to their agreement, we will
pay that employee's attorney's fees which result from their suit. Our employees
who have these agreements are not required to seek other employment or otherwise
mitigate any damages they are caused as a result of a change in control, but
they are required to keep our confidential information private.
SEVERANCE AGREEMENTS
Our executive officers will be parties to severance agreements in connection
with their employment with us. These severance agreements generally provide
that, in the event the executive officer is terminated other than for cause or
has his/her base salary reduced in a situation that is not part of a general
salary reduction, the executive officers have the right to receive payments from
us for periods ranging from one to two years in an amount based on that
executive's base salary at the time of termination. Additionally, the severance
agreements provide that we will provide these executive officers with health
benefits based on their benefit levels at the time of termination for the same
period or until they obtain similar health benefits elsewhere.
EXECUTIVE OFFICERS BONUS PLAN
Our board of directors has adopted an executive officers bonus plan under
which our executive officers may be entitled to receive a bonus contingent upon
the achievement of performance goals. The purpose of the plan is to provide our
executives with an opportunity to earn a bonus as an incentive and reward for
their leadership, ability and exceptional service. The plan will be administered
by our human resources and compensation committee of our board of directors. The
committee will be able to:
- establish performance goals for the granting of bonuses for each year;
- determine the executives who are eligible to take part in the plan;
- determine whether the performance goals for any year have been achieved;
- authorize payment of bonuses under the plan;
- adopt, alter and repeal the administrative rules, guidelines and practices
governing the plan; and
- interpret the terms and provisions of the plan.
Initially, there are about seven executives who will be eligible to
participate in the executive officers bonus plan.
X-64
The amount of any bonus granted to any of our executives for any year can
not be more than the lesser of 200 percent of the executive's annual base salary
or $2.5 million. Performance goals may vary from executive to executive and will
be based upon some of the following performance criteria, as the committee may
deem appropriate:
- appreciation in stock value, total stockholder return, earnings per share;
- operating income, net income, pro forma net income;
- return on equity, return on designated assets, return on capital;
- economic value added, earnings, revenues, expenses;
- operating profit margin, operating cash flow, gross profit margin, net
profit margin;
- employee turnover, employee headcount, labor costs; and
- customer service and accounts receivable.
A copy of the executive officers bonus plan is attached as an exhibit to
this registration statement.
1999 STOCK INCENTIVE PLAN
Our board of directors has adopted a 1999 stock incentive plan. The plan was
adopted in order to enhance our ability to attract and retain highly qualified
officers, employees, consultants and directors, and to better enable those
persons to participate in our long-term success and growth. The plan will
provide for discretionary grants of stock options which may be either incentive
stock options or nonqualified options. The plan will be administered by our
human resources and compensation committee of our board of directors.
The committee has the power to select the eligible employees, consultants
and directors to whom stock options are to be granted under the plan and to
determine the terms and conditions of each stock option granted under the plan.
The committee will be able to determine the number of shares of our common stock
to be covered by each award. The maximum total number of shares of our common
stock for which grants may be made to any employee, consultant or director in
any calendar year, however, is 300,000. Our chief executive officer may award
options to purchase up to 10,000 shares of common stock to employees who are not
officers or directors. A total of 5,000,000 shares of our common stock are
reserved for issuance upon exercise of stock options granted under the plan.
A copy of the 1999 stock incentive plan is attached as an exhibit to this
registration statement.
STOCK & DEFERRED COMPENSATION PLAN
Our board of directors has adopted a stock & deferred compensation plan for
non-employee directors which provides for payment of annual retainer fees for
non-employee directors in the form of shares of our common stock. The plan was
adopted in order to enhance our ability to attract and retain highly qualified
non-employee directors. About eight persons are eligible to participate in this
plan.
The plan is effective on the date of our first annual stockholders meeting.
A total of 150,000 shares of our common stock are reserved for issuance under
the plan. Each of our non-employee director's annual retainer fee will be paid
in shares of our common stock in an amount (rounded to the nearest 100 shares)
determined by dividing $25,000 by the average closing price of shares of our
common stock on the Nasdaq National Market for the ten trading days immediately
prior to our annual stockholders meeting at which directors are elected or
reelected. Our non-employee directors can elect to defer the retainer fee
shares. Amounts deferred are credited in the form of share units to a share unit
account. If any dividends are payable on shares of our common stock during the
deferral
X-65
period, non-employee directors shall have dividend equivalents of an equal
amount paid to them in cash.
A copy of the stock & deferred compensation plan is attached as an exhibit
to this registration statement.
EMPLOYEE STOCK PURCHASE PLAN
Our board of directors has adopted an employee stock purchase plan under
which our employees may be entitled to purchase our common stock. The plan was
adopted in order to provide eligible employees the opportunity to purchase our
common stock, enhance our ability to attract and retain highly-qualified
personnel, and to better enable such persons to participate in our long-term
success and growth. The plan will be administered by our human resources and
compensation committee.
All of our employees and the employees of our subsidiaries who have been
employed for at least eight months (or another period determined by the
committee not in excess of two years) will be eligible to purchase stock under
this plan, except that employees whose customary employment is twenty hours or
less per week will be excluded. The committee has the power to determine the
terms and conditions of each offering of our common stock to employees under the
plan. The committee may also determine the number of shares of our common stock
to be covered by each offering. The maximum number of shares of our common stock
which may be sold to any employee in any offering, however, will generally be 10
percent of that employee's compensation during the period of the offering. A
total of 1,200,000 shares of our common stock are reserved for issuance under
the employee stock purchase plan.
A copy of the employee stock purchase plan is attached as an exhibit to this
registration statement.
X-66
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In January 2000, some of our and Olsten's directors, officers and members of
the Olsten family entered into commitment letters with us requiring them to
purchase at the date of the split-off about $20 million of 10% convertible trust
preferred securities to be issued by a trust of which we own all the common
equity. The commitments are in the following aggregate amounts: Stuart, Miriam
and Cheryl Olsten, $15 million together; Mr. Blechschmidt, $2 million;
Messrs. Ganzi, Troubh and Weston, $1 million each; Messrs. Levine and Fusco,
$250,000 each; Messrs. Collura, Mitchell and Nixon, $100,000 each; Dr. Hornbake,
$50,000; Messrs. Christmas, Perry and Silver and Ms. Ma, $25,000 each; and other
personnel, an aggregate of $150,000. The commitments terminate if the split-off
is not completed by May 31, 2000 or if Olsten or Adecco terminates the merger
agreement. The convertible trust preferred securities will be offered in a
private placement exempt from the registration requirements of the Securities
Act. To fund the trust we will issue about $20 million of convertible
subordinated debentures to the trust on the same terms as the 10% convertible
trust preferred securities. For a more detailed description of the terms of the
convertible trust preferred securities, see "The Split-Off--Certain indebtedness
of our company--Convertible trust preferred securities of our subsidiary".
Mr. Stuart Olsten has agreed not to compete with us for a period of four
years from the date of the merger. In return for this agreement, we will pay him
a lump sum of $250,000, payable when the merger is complete. One executive
officer of Olsten, Ms. Maureen McGurl, will be retained as a consultant of our
company for a period of six months from the split-off for a payment of $200,000,
payable during the term of the consulting period. In addition, Mr. Robert A.
Fusco, the past president of Olsten's health services business, will not
continue with our company after the split-off. We will pay him $2.3 million upon
completion of the split-off pursuant to his change in control agreement.
Under the separation agreement, Messrs. Blechschmidt and Olsten will be
compensated by us, on an after tax basis, for excise taxes (no more than $1.0
million in excise taxes in the case of Mr. Olsten) imposed by reason of the
receipt of amounts payable under their separation, consulting and non-
competition agreements with Adecco.
X-67
PRINCIPAL STOCKHOLDERS
The following table sets forth as of January 18, 2000, the amount of our
common stock, as adjusted to give effect to the split-off, expected to be
beneficially owned by:
- each director and director nominee of our company;
- the named officers of our company;
- all officers and directors of our company as a group; and
- all persons who beneficially own more than five percent of our common
stock.
The amounts and percentages are derived from the amount of Olsten stock
beneficially owned by the persons listed in the table, assuming all Olsten
class B common stock had been converted into Olsten common stock, as of
January 18, 2000. We will be a wholly-owned subsidiary of Olsten until the
split-off. Because all of the shares of our common stock will be issued to
stockholders of Olsten, the number of shares of our common stock shown below to
be owned beneficially by the persons listed below will depend upon the number of
shares of Olsten stock held by the person at the time of the split-off. Options
referred to below, if not already vested, will vest on the date of the
split-off.
POST-SPLIT-OFF
BENEFICIAL OWNERSHIP OF
GENTIVA HEALTH SERVICES
COMMON STOCK
------------------------------------
PERCENT
NUMBER OF OWNED
NAME OF BENEFICIAL OWNER SHARES OWNED (IF MORE THAN 1%)
- ------------------------ ------------ -----------------
Edward A. Blechschmidt(1)(2)................................ 115,500
Richard C. Christmas(2)(3).................................. 3,312
John J. Collura(2)(3)....................................... 11,250
E. Rodney Hornbake, M.D.(2)................................. --
Patricia C. Ma(2)(3)........................................ 4,100
Terry Mitchell(2)(4)........................................ 11,375
Robert J. Nixon(2)(5)....................................... 32,125
Vernon A. Perry(2)(3)....................................... 10,262
David C. Silver(2)(3)....................................... 500
Victor F. Ganzi(2).......................................... 750
Steven Grabowski(2)(6)...................................... 1,311,277 6.5%
Stuart Levine(2)............................................ 2,063
John M. May................................................. 4,125
Stuart Olsten(2)(7)......................................... 1,559,998 7.7%
Richard J. Sharoff.......................................... 2,130
Raymond S. Troubh(2)........................................ 18,649
Josh S. Weston(2)........................................... 2,487
Cheryl Olsten(2)(8)......................................... 1,310,852 6.4%
Miriam Olsten(2)(9)......................................... 1,020,578 5.0%
Robert L. Riedinger(10)..................................... 1,489,762 7.3%
P.O. Box 404
Monticello, GA
Pacific Financial Research(11).............................. 1,533,350 7.5%
9601 Wilshire Boulevard
Beverly Hills, CA
First Manhattan Co.(12)..................................... 1,245,455 6.1%
437 Madison Avenue
New York, NY
All executive officers and directors as a group (17 2,757,673 13.5%
persons)(13)..............................................
- ------------------------
(1) Mr. Blechschmidt's holding includes 23,000 shares owned directly and 5,000
shares owned by his wife, as to which shares he disclaims beneficial
ownership, and 87,500 shares, subject to adjustment
X-68
to preserve their value when granted, that may be acquired within 60 days
through the exercise of options.
(2) Excludes shares of convertible trust preferred securities that such person
has committed to purchase. The convertible trust preferred securities are
convertible into our common stock at a price of 17.5 percent over the
average closing stock price of our common stock during the 10 trading days
following the first earnings announcement after the date of the split-off.
See "The Split-Off--Certain indebtedness of our company--Convertible trust
preferred securities of our subsidiary".
(3) Represents shares, subject to adjustment to preserve their value when
granted, that may be acquired within 60 days through the exercise of
options.
(4) Includes 10,500 shares, subject to adjustment to preserve their value when
granted, that may be acquired within 60 days through the exercise of
options.
(5) Includes 29,625 shares, subject to adjustment to preserve their value when
granted, that may be acquired within 60 days through the exercise of
options.
(6) Mr. Grabowski's holdings include 425 shares owned directly and 1,310,852
shares beneficially owned by his wife, Cheryl Olsten, as to which shares he
disclaims beneficial ownership. See footnote (8).
(7) Mr. Stuart Olsten's holdings include 483,057 shares owned of record and 300
shares owned of record by his wife, as to which shares he disclaims
beneficial ownership. Mr. Olsten has shared voting and investment power as a
trustee with respect to 630,709 shares owned by a trust for his and his
sister's benefit and 390,951 shares owned by a trust for his benefit. He has
shared voting and investment power as a trustee with respect to 11,250
shares owned by a trust for the benefit of his son, 22,500 shares owned by
two trusts for the benefit of his niece and nephew and 20,901 shares owned
by a trust for the benefit of his descendants, as to which shares he
disclaims beneficial ownership. His holdings further include 330 shares held
in a custodial account for his daughter, as to which shares he disclaims
beneficial ownership.
(8) Ms. Cheryl Olsten owns of record 234,541 shares and has shared voting and
investment power as a trustee with respect to 630,709 shares owned by a
trust for her and her brother's benefit and 390,951 shares owned by a trust
for her benefit. Ms. Olsten has shared voting and investment power as a
trustee with respect to 22,500 shares owned by two trusts for the benefit of
her two children, 11,250 shares held by a trust for the benefit of her
nephew and 20,901 shares owned by a trust for the benefit of her
descendants, as to which shares she disclaims beneficial ownership.
(9) Mrs. Miriam Olsten owns 786,376 shares. She has sole voting and investment
power with respect to 234,202 shares held under a trust for the benefit of
one of her children, of which she is trustee, and as to which shares she
disclaims beneficial ownership.
(10) Mr. Riedinger holds directly 56,250 shares. He has shared voting and
investment power as a trustee with respect to 630,709 shares owned by a
trust for the benefit of Stuart Olsten and Cheryl Olsten, 390,951 shares
owned by a trust for the benefit of Stuart Olsten, 390,951 shares owned by a
trust for the benefit of Cheryl Olsten and 20,901 shares owned by a trust
for the benefit of descendants of Ms. Olsten, as to which shares
Mr. Riedinger disclaims beneficial ownership.
(11) Based on a Schedule 13G dated February 11, 1999 and filed with the
Securities and Exchange Commission, Pacific Financial Research held sole
voting power and sole dispositive power as to all of such shares.
(12) Based on a Schedule 13G dated February 11, 1999 and filed with the
Securities and Exchange Commission, First Manhattan Co. held sole voting
power and sole dispositive power as to 35,000 of such shares, shared voting
power as to 1,145,697 of such shares and shared dispositive power as to
1,210,455 of such shares.
(13) Includes 157,049 shares, subject to adjustment to preserve their value when
granted, that may be acquired by executive officers within 60 days through
the exercise of options.
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DESCRIPTION OF GENTIVA HEALTH SERVICES CAPITAL STOCK
CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
Our authorized capital stock immediately after the split-off will consist of
100,000,000 shares of common stock, $0.10 par value, and 25,000,000 shares of
preferred stock, $.01 par value of which 1,000 shares have been designated
series A cumulative non-voting redeemable preferred stock and a number of shares
equal to our outstanding common stock have been designated series A junior
participating preferred stock. Based on the number of shares of Olsten stock
outstanding at January 18, 2000, 20,329,527 shares of our common stock will be
issued to Olsten stockholders on the date of the split-off. On the date of the
split-off, those shares of our common stock will be the only shares of our
common stock issued and outstanding and 100 shares of series A cumulative
non-voting redeemable preferred stock, which we refer to in this section as the
cumulative preferred stock, will be issued and outstanding.
COMMON STOCK
The holders of our common stock are entitled to one vote for each share on
all matters on which common stockholders are entitled to vote. Except as
otherwise provided by Delaware law or in the certificate of incorporation, the
holders of our common stock have the exclusive right to vote for the election of
directors, an increase or decrease in the authorized shares of preferred stock
and on all other matters or proposals presented to our stockholders. Matters
submitted for stockholder approval generally require a majority vote of the
shares of our common stock present and voting. Subject to the preferences that
may be applicable to preferred stock outstanding at the time, holders of our
common stock are entitled to receive dividends out of assets legally available
at such times and in such amounts as the board of directors may determine from
time to time. Our common stock is not subject to preemptive rights and is not
subject to redemption or conversion. Upon liquidation, dissolution or winding-up
of our company, the assets legally available for distribution to stockholders
will be distributed ratably among the holders of our common stock after payment
of the liquidation preferences, if any, on the outstanding preferred stock and
payment of other claims of creditors. The transfer agent and registrar for our
common stock is EquiServe Limited Partnership.
PREFERRED STOCK
GENERAL
The board of directors is authorized to issue, subject to the limitations
prescribed by Delaware law, preferred stock in one of more series. The board of
directors may establish the number of shares to be included in each series and
fix the designation, powers, privileges, preferences and rights of the shares of
each series and the qualifications, limitations and restrictions thereon.
The board of directors may authorize the issuance of preferred stock with
voting or conversion rights that could adversely affect the voting power or
other rights of the holders of common stock. The issuance of preferred stock,
while providing flexibility in connection with possible acquisitions and other
corporate purposes could, among other things, have the effect of delaying,
deferring or preventing a change in control in our company. We have no current
intent to issue any more preferred stock.
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
A description of this series of preferred stock is summarized under the
section entitled "--Summary of Rights Under Gentiva Health Services' Rights
Agreement".
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SERIES A CUMULATIVE NON-VOTING REDEEMABLE PREFERRED STOCK
DIVIDENDS. Holders of the cumulative preferred stock will be entitled to
receive cumulative cash dividends at an annual rate of LIBOR on the stated
liquidation preference of $1,000 per share, payable quarterly in arrears out of
assets legally available for payment of dividends, when and as declared by our
board of directors on March 31, June 30, September 30 and December 31 of each
year, commencing June 30, 2000. Dividends will accumulate and be cumulative from
the issue date.
RANKING. The cumulative preferred stock, with respect to distributions upon
the liquidation, dissolution or other winding-up of our company and with respect
to dividend distributions, other than distributions made in the form of common
stock, ranks:
(1) senior to all classes of our common stock; and
(2) equally with any class or series or preferred stock later issued by
us which is expressly designated as on parity with the cumulative preferred
stock.
In addition, we will not be permitted to redeem or make other distributions
on common stock until all accrued but unpaid dividends on the cumulative
preferred stock are fully paid.
VOTING RIGHTS. Holders of the cumulative preferred stock are not entitled
to any voting rights except as required by law.
LIQUIDATION PREFERENCE. In the event of any voluntary or involuntary
liquidation, dissolution or other winding-up of our company, the holders of
cumulative preferred stock will be entitled to receive and to be paid out of our
assets available for distribution to our stockholders, before any payment or
distribution is made to holders of our common stock or any other class or series
of stock of our company ranking junior to the convertible preferred stock upon
liquidation, the stated liquidation preference per share of $1,000, subject to
appropriate adjustments for stock splits, stock dividends, combinations,
recapitalizations and the like, plus accumulated and unpaid dividends, if any,
with respect to each share.
OPTIONAL REDEMPTION. On or after the fifth anniversary of the issuance of
the preferred stock, any holder of cumulative preferred stock may demand that we
redeem their shares of cumulative preferred stock, in whole or in part, at a
price per share equal to $1,000 per share, subject to appropriate adjustments
for stock splits, stock dividends, combinations, recapitalizations and the like,
plus accrued and unpaid dividends, if any.
On or after the fifth anniversary of the issuance of the preferred stock, we
may redeem the cumulative preferred stock, in whole or in part, at a price per
share equal to $1,000 per share, subject to appropriate adjustments for stock
splits, stock dividends, combinations, recapitalizations and the like, plus
accrued and unpaid dividends, if any.
No cumulative preferred stock may be redeemed pursuant to the above
paragraphs except with funds legally available for the payment of the redemption
price.
ANTI-TAKEOVER PROVISIONS
CERTIFICATE OF INCORPORATION AND BYLAWS
Provisions in our certificate of incorporation and bylaws may delay or make
more difficult unsolicited acquisitions or changes of control. Those provisions
could have the effect of discouraging third parties from making proposals
involving an unsolicited acquisition or change of control of our company,
although these proposals, if made, might be considered desirable by a majority
of our stockholders. Our rights agreement, which is described below, will have
the same effect. The provisions of the rights agreement may also have the effect
of making it more difficult for third parties to cause
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the replacement of our current management without the concurrence of our board
of directors. The anti-takeover provisions in our certificate of incorporation
and by-laws include:
- the division of our board of directors into three classes, each class
serving staggered terms of office of three years;
- the availability of authorized shares of preferred stock for issuance from
time to time and the determination of rights, powers and preferences of
the preferred stock at the discretion of our board of directors without
the approval of our stockholders;
- provisions allowing the removal of directors only for "cause";
- the requirement of a meeting of stockholders to approve all action to be
taken by the stockholders;
- prohibition on stockholders' rights to call meetings;
- requirements for advance notice for raising business or making nominations
at stockholders meetings; and
- limitations on the minimum and maximum number of directors that constitute
our board of directors.
Our bylaws establish an advance notice procedure with regard to business to
be brought before an annual or special meeting of our stockholders and with
regard to the nomination, other than by or at the direction of our board of
directors, of candidates for election as directors. Although our bylaws do not
give the board of directors any power to approve or disapprove stockholder
nominations for the election of directors or proposals for action, they may have
the effect of precluding a contest for the election of directors or the
consideration of stockholder proposals if the proper procedures are not
followed. They may also discourage or deter a third party from conducting a
solicitation of proxies to elect its own slate of directors or to approve its
proposal without regard to whether consideration of such nominees or proposals
might be harmful or beneficial to our company and its stockholders.
THE DELAWARE BUSINESS COMBINATION ACT
As a corporation organized under the laws of the State of Delaware, we are
subject to Section 203 of the General Corporation Law of the State of Delaware.
Section 203 imposes a three-year moratorium on business combinations between a
Delaware corporation and an "interested stockholder", in general, a stockholder
owning 15 percent or more of a corporation's outstanding voting stock, or an
affiliate or associate thereof, unless:
- before the interested stockholder becomes an interested stockholder, the
board of directors of the corporation approved either the business
combination or the transaction resulting in the interested stockholder
becoming an interested stockholder;
- upon completion of the transaction resulting in the interested stockholder
becoming an interested stockholder, the interested stockholder owned
85 percent of the voting stock outstanding at the time the transaction
commenced, excluding from the calculation of shares outstanding those
shares beneficially owned by directors who are also officers and certain
employee benefit plans; or
- on or after the interested stockholder becomes an interested stockholder,
the business combination is approved by the board of directors and the
holders of at least 66 2/3 percent of the outstanding shares other than
those shares beneficially owned by the interested stockholder at a meeting
of stockholders.
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The Delaware Business Combination Act defines the term "business
combination" to encompass a wide variety of transactions with, or caused by, an
interested stockholder in which the interested stockholder receives or could
receive a benefit on other than a proportional basis with other stockholders.
These transactions include mergers, some asset sales, some issuances of
additional shares to the interested stockholder, transactions with us which
increase the proportionate interest of the interested stockholder or
transactions in which the interested stockholder receives some other benefits.
By a provision in its original certificate of incorporation or an amendment
thereto or to its bylaws adopted by a majority of the shares entitled to vote
thereon, a corporation may elect not to be governed by the Delaware Business
Combination Act, provided that any amendment to the certificate of incorporation
will not become effective until 12 months after its adoption. We have not made
this election in our certificate of incorporation.
MATERIAL DIFFERENCES IN THE RIGHTS OF OUR STOCKHOLDERS AND OLSTEN STOCKHOLDERS
Both we and Olsten are corporations formed under and governed by the laws of
the State of Delaware. Accordingly, any differences in the rights of our
stockholders and Olsten's are based on the provisions set forth in the
certificate of incorporation and by-laws of each company. The material
differences between the rights of the stockholders of each company are described
below.
OLSTEN CORPORATION GENTIVA HEALTH SERVICES, INC.
- --------------------------------------------- ---------------------------------------------
CAPITALIZATION
Olsten is authorized to issue 160,250,000 We are authorized to issue 125,000,000 shares
shares of capital stock, of which 110,000,000 of capital stock, of which 100,000,000 shares
shares are common stock, 50,000,000 are are designated common stock and 25,000,000
class B common stock and 250,000 are shares are designated preferred stock.
preferred stock. The rights of the two
classes of common stock differ, as described
below.
COMMON STOCK
Olsten has two classes of common stock. We are authorized to issue one class of
The holders of Olsten common stock are common stock and our common stock holders are
generally entitled to one vote per share of entitled to one vote for each share of stock
common stock they own, while the holders of they own.
Olsten class B common stock are entitled to
ten votes for each share they own. All of our common stock holders are entitled
to vote for directors as one class.
Class B common stock holders are
generally entitled to elect 75 percent of the
members of the board of directors while the
common stock holders are generally permitted
to elect only 25 percent of the members of
the board of directors.
ANNUAL STOCKHOLDERS MEETINGS
Olsten's annual meeting of stockholders The date of our annual meeting of
is held on the same predetermined day of each stockholders will be set by our board of
year. directors.
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OLSTEN CORPORATION GENTIVA HEALTH SERVICES, INC.
- --------------------------------------------- ---------------------------------------------
STOCKHOLDER NOMINATIONS AND OTHER PROPOSED STOCKHOLDER ACTION
No restrictions on actions proposed by Our stockholders are not permitted to call
Olsten's stockholders. stockholders' meetings and are restricted in
their right to make nominations for directors
or other proposals at meetings. Any
stockholder action proposed to be brought
before a meeting of our stockholders, with
some exceptions, must be submitted to our
board of directors in the manner specified in
our by-laws.
VOTE BY WRITTEN CONSENT
Olsten stockholders are permitted to take Our stockholders are not permitted to vote by
any action by written consent that could be written consent. Our by-laws require that any
voted on at a meeting. stockholder action must be properly placed
before a meeting of stockholders and voted
upon at a meeting.
BOARD OF DIRECTORS
Olsten's by-laws require that the board Our by-laws require that our board of
of directors must have at least three, but no directors have at least five, but no more
more than twelve directors. There is one than twelve directors. Our board of directors
class of directors with each director holding is divided into three classes. Each class is
office until the next succeeding annual staggered, meaning only one class of
meeting. Directors may be removed even if directors is subject to election at each
there is no cause for removal. annual meeting. After the initial terms
expire, the members of each class of the
board will generally hold office for three
years. Our directors may only be removed for
cause.
LIMITATION ON LIABILITY AND INDEMNIFICATION OF
DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS
Our certificate of incorporation limits, to the maximum extent permitted by
the General Corporation Law of the State of Delaware, or the DGCL, the liability
of directors for monetary damages for breach of their fiduciary duties as
directors. This indemnification, however, does not include some circumstances
involving wrongful acts such as a director's breach of their duty of loyalty or
acts or omissions which involve intentional misconduct or a knowing violation of
law.
Section 145 of the DGCL permits a company to indemnify officers, directors,
employees or agents against expenses, judgments, fines and amounts paid in
settlement in connection with legal proceedings if the person acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation. With respect to any criminal action or proceeding,
the indemnified person must have had no reasonable cause to believe the person's
conduct was unlawful. However, with respect to actions by, or in the right of
the corporation against, these individuals, indemnification is not permitted as
to any matter as to which this person shall have been adjudged to be liable to
the corporation unless and only to the extent that the court in which the legal
proceeding was brought determines upon application that, despite the
adjudication of liability, the person is fairly and reasonably entitled to
indemnity for such expenses as the court shall deem proper. Individuals who are
successful in the defense of any legal proceeding are entitled to
indemnification against expenses reasonably incurred in connection therewith.
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Our certificate of incorporation and by-laws provide that we will indemnify
our directors and officers, and may indemnify employees and agents to the
fullest extent permitted by Section 145 of the DGCL. In addition, our
certificate of incorporation and by-laws provide that we may advance any and all
expenses to any director, officer, employee or agent reasonably incurred by such
person in connection with any legal proceedings in connection with their
position with us.
The indemnification provided in our certificate of incorporation and by-laws
may be available for liabilities arising in the split-off. To the extent that
the limitation of liability or indemnification provisions permitted by our
certificate of incorporation apply, we have been informed that, in the opinion
of the SEC, the indemnification is against public policy as expressed in the
Securities Act and is unenforceable.
We plan to maintain standard insurance policies under which coverage is
provided for payments made by us to our directors, officers, employees and
agents in respect of the indemnification provisions in our certificate of
incorporation and bylaws.
SUMMARY OF RIGHTS UNDER GENTIVA HEALTH SERVICES' RIGHTS AGREEMENT
Stockholders of Olsten will receive one right for every share of our common
stock issued to them on the date of the split-off. The right will be evidenced
by each stock certificate of our company. After an event causing the
exercisablity as described below, each right entitles the holder to purchase
from us, one one-thousandth of a share of series A junior participating
preferred stock, which we refer to as the participating preferred stock in this
section, at a price of $75 per one one-thousandth of a share, subject to
adjustments. The right also entitles holders to acquire our common stock or
common stock of an acquirer in the events described below. The rights agreement
serves as an anti-takeover mechanism. It provides our board of directors with a
tool to deter hostile takeover tactics and encourages third parties interested
in acquiring our company to negotiate directly with our board of directors.
The terms of the rights are in a rights agreement between us and EquiServe
Limited Partnership, as rights agent. The description below is a summary of some
of the provisions of the rights agreement. You are encouraged to read the rights
agreement. A copy of the rights agreement is filed with the SEC as an exhibit to
the Registration Statement on Form S-4 dated January 18, 2000, of which this
prospectus is a part. A copy of the rights agreement is also available free of
charge from us.
EVENTS CAUSING THE EXERCISABILITY OF THE RIGHTS
The exercisability of the rights will be triggered:
- ten days after the public announcement of the acquisition by a person or
group of persons of 10 percent or more of our common stock, who we refer
to as the acquirer; or
- 10 days after the commencement (or announcement of commencement) of a
tender offer or exchange offer that would result in a person or group
becoming an acquirer.
Once the rights are exercisable, stockholders may purchase our preferred
stock at $75 per one one-thousandth of a preferred share.
Persons who acquire 10 percent of our company as a result of us buying back
our stock are excluded from the term acquirer and would not trigger the
exercisablility of the rights.
The Olsten family, including Stuart Olsten, Miriam Olsten, Cheryl Olsten and
some of their relatives and affiliates, are also excluded from the term acquirer
so long as the Olsten family does not acquire 20 percent or more of our company.
This percentage, which the Olsten family is permitted to hold without triggering
the rights agreement, will be increased to the extent the Olsten family acquires
our common stock on conversion of the trust convertible preferred securities
which they hold on the
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date of the split-off. We refer to the 20 percent ownership of our company that
the Olsten family is permitted to own without triggering the agreement as the
grandfathered percentage. In the event the Olsten family's ownership in our
company decreases as a result of sales by the family of our common stock, the 20
percent grandfathered percentage will decrease by the same percentage as the
Olstens' ownership interest in our company decreases.
The exclusion of the Olsten family from the definition of acquirer extends
to any person:
- who acquires 10 percent or more of our common stock directly from a
member or members of the Olsten family;
- who, after giving effect to the transfer from the Olsten family and any
other acquisition of our common stock, does not, individually or together
with the Olsten family, own the grandfathered percentage or more of our
shares of common stock as in effect immediately prior to the transfer
from the Olsten family; and
- who is designated an "Olsten Assignee" for purposes of the exclusion from
the term acquirers, the Olsten family will only have the ability to
designate one person as an "Olsten Assignee".
OUR BOARD OF DIRECTORS MAY REDEEM OR EXCHANGE THE RIGHTS
Our board of directors may redeem the rights at a price of $.001 per right
at any time prior to the public announcement that a person has become an
acquirer and for 10-business-days afterwards. This period may be extended by our
board of directors once for an additional 20 business days to give our directors
further time to negotiate with the acquirer.
Our board of directors may exchange the rights (other than rights owned by
the acquirer which shall have become void), at any time after the public
announcement that a person has become an acquirer, in whole or in part, at an
exchange ratio of one share of our common stock per right.
Until a right is exercised or exchanged, the holder of the right, by virtue
of being a right holder, will have no rights as a stockholder of our company,
including, for example, the right to vote or to receive dividends.
EXERCISE OF RIGHTS FOR OUR COMMON STOCK
After the rights become exercisable and after the time period when the board
of directors' right to redeem the rights has expired, each right holder will
have the right to receive, upon exercise of the rights, our common stock, or, in
some circumstances, cash, property or other securities of our company having a
value equal to two times the exercise price of $75 per share per right. Upon a
person becoming an acquirer, all rights that are, or, under some circumstances
specified in the rights agreement, were, owned by any acquirer will be void.
EXERCISE OF RIGHTS FOR SHARES OF THE ACQUIRING COMPANY
If, after the date the rights become exercisable, (1) our company is
acquired in a merger or other business combination transaction, or (2) 50
percent or more of our assets or earning power is sold, each right holder,
except the acquirer, shall afterwards have the right to receive, upon exercise,
common stock of the acquirer having a value equal to two times the exercise
price of the right.
ADJUSTMENTS TO EXERCISE PRICE
The exercise price for each right, and the number of shares of participating
preferred stock (or common stock or other securities) issuable, upon exercise of
the rights are subject to adjustment from time to time to prevent dilution.
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TERMS OF PARTICIPATING PREFERRED STOCK
The participating preferred stock will rank junior to all other series of
our preferred stock which may be issued in the future with respect to payment of
dividends and as to distributions of assets in liquidation. Each share of
preferred stock will have a quarterly dividend rate per share. The participating
preferred stock will not be redeemable. In the event of liquidation, the holders
of the participating preferred stock will be entitled to receive a liquidation
payment per share of $1.00 (plus accrued and unpaid dividends) or, if greater,
an amount equal to 1,000 times the payment to be made per share of our common
stock, subject to adjustments. Generally, each share of participating preferred
stock will vote together with our common stock and any other series of
cumulative preferred stock entitled to vote in such manner and will be entitled
to 1,000 votes, subject to adjustments. Because of the nature of the
participating preferred stock's dividend, voting, liquidation and other rights,
the value of the one one-thousandth of a share of participating preferred stock
purchasable with each right is intended to approximate the value of one share of
our common stock.
AMENDMENTS TO TERMS OF THE RIGHTS
Any of the provisions of the rights agreement may be amended by our board of
directors so long as the rights are redeemable. After the rights are no longer
redeemable, the provisions of the rights agreement may be amended by our board
of directors in order to cure any ambiguity, defect or inconsistency, or to make
changes which do not adversely affect the interests of holders of rights
(excluding the interests of any acquirer).
TERM
The rights will expire at the close of business on the tenth anniversary of
the rights agreement, unless earlier redeemed, exercised or exchanged by us as
described.
SHARES ELIGIBLE FOR FUTURE SALE
We estimate that 20,329,527 shares of our common stock will be outstanding
after the split-off, based on the number of shares of Olsten stock outstanding
on January 18, 2000. All of our shares of common stock will be freely tradable
without restriction or further registration under the Securities Act, except to
the extent such shares are held by our "affiliates" (within the meaning of
Rule 144 or Rule 145 promulgated under the Securities Act). Our affiliates will
be subject to the limitations of Rule 144 or Rule 145, as applicable,
promulgated under the Securities Act. In general, under Rule 144 as currently in
effect, persons who may be deemed our affiliates or affiliates of Olsten prior
to the split-off, as that term is defined in the Securities Act, would be
entitled to sell within any three-month period a number of shares that does not
exceed the greater of 1 percent of the then outstanding shares of our common
stock (approximately 203,295 shares immediately after the split-off) or the
average weekly trading volume during the four calendar weeks preceding a sale by
such person. Sales under Rule 144 are also subject to certain provisions
relating to the manner and notice of sale and availability of current public
information about us. In general, under Rule 145 as currently in effect, our
affiliates (which generally is defined to include affiliates of Olsten prior to
the split-off) would also be subject to the above restrictions on sales of our
common stock.
MATERIAL TAX CONSEQUENCES
The following discussion summarizes the material federal income tax
consequences of the merger and split-off to U.S. holders (as defined below) of
Olsten stock. This discussion addresses only those stockholders who hold their
Olsten stock as capital assets. This discussion does not address all of the
federal income tax consequences that may be relevant to particular stockholders
in light of their
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individual circumstances or to stockholders who are subject to special rules
under federal income tax law, including, without limitation:
- financial institutions;
- tax-exempt organizations;
- insurance companies;
- dealers or traders in securities or foreign currencies;
- passthrough entities and investors in passthrough entities;
- non-U.S. holders;
- persons who hold their shares as a hedge against currency risk or as part
of a constructive sale, straddle or conversion transaction; or
- holders who acquired their shares upon the exercise of employee stock
options or otherwise as compensation.
The discussion is based upon the Internal Revenue Code of 1986, as amended,
Treasury Regulations, administrative rulings and court decisions, all as in
effect as of the date of this prospectus and all of which are subject to change,
possibly with retroactive effect. This discussion addresses only federal income
tax consequences and does not address any other federal tax consequences or any
state, local or foreign tax consequences.
HOLDERS OF OLSTEN STOCK ARE STRONGLY URGED TO CONSULT THEIR TAX ADVISORS AS
TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER AND THE SPLIT-OFF, INCLUDING THE
APPLICABILITY AND EFFECTS OF FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER
TAX LAWS ON THEIR PARTICULAR CIRCUMSTANCES.
For purposes of this discussion, the term "U.S. holder" means a beneficial
owner of Olsten stock that is a U.S. citizen or resident (as determined for
federal income tax purposes), a corporation created or organized in or under the
laws of the United States or any political subdivision thereof, an estate the
income of which is includible in gross income for United States income tax
purposes regardless of its source, or a trust, if a U.S. court is able to
exercise primary supervision over the administration of the trust and one or
more United States fiduciaries have the authority to control all substantial
decisions of the trust, or if the trust has elected to be taxed as a "United
States person."
CONSEQUENCES TO OLSTEN STOCKHOLDERS WHO PARTICIPATE IN THE MERGER AND THE
SPLIT-OFF
If you participate in the merger and the split-off, your exchange of shares
of Olsten stock for cash and/or Adecco American Depository Shares and your
exchange of Olsten stock for our common stock will be considered two separate
exchanges for federal income tax purposes.
You generally will recognize gain or loss with respect to each block of
Olsten stock exchanged for cash and/or Adecco American Depository Shares equal
to the difference between the fair market value of cash and/or Adecco American
Depository Shares received for the block (including any cash received in lieu of
fractional merger consideration shares) and your adjusted tax basis in the
block. A "block" of Olsten stock is a group of shares with the same tax basis
and holding period. Any recognized gain or loss will be capital gain or loss and
will be long term capital gain or loss if you have held the block of Olsten
stock at issue for more than one year at the time of the merger.
While not entirely free from doubt, you should recognize gain or loss with
respect to each block of Olsten stock exchanged for our common stock equal to
the difference between the fair market value of our stock received for the block
(plus any cash received in lieu of fractional shares) and your adjusted tax
basis in the block. Any recognized gain or loss should be capital gain or loss
and should be long
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term capital gain or loss if you have held the block of Olsten stock at issue
for more than one year at the time of the merger.
CONSEQUENCES TO DISSENTING OLSTEN STOCKHOLDERS
If you dissent, you will be treated as having sold your Olsten stock for
cash and will recognize gain or loss with respect to each block of Olsten stock
equal to the difference between the cash received for the block and your
adjusted tax basis in the block. Any recognized gain or loss generally will be
capital gain or loss and will be long term capital gain or loss if you have held
the block of Olsten stock at issue for more than one year at the time of the
merger.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, reporting requirements will apply to the consideration received
by you in the merger and the split-off, unless you are an exempt recipient, and
31 percent backup withholding may apply to this consideration if you fail to
provide an accurate taxpayer identification number or are otherwise subject to
backup withholding. The amount of any backup withholding from a payment to you
will be allowed as a credit against your federal income tax liability.
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LEGAL MATTERS
Certain legal matters with respect to the validity of the Gentiva Health
Services common stock to be issued hereby will be passed upon for us by Cahill
Gordon & Reindel, New York, New York.
EXPERTS
The financial statements as of January 3, 1999 and December 28, 1997 and for
each of the three years in the period ended January 3, 1999 included in this
prospectus have been included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-4 (together
with all amendments, schedules and exhibits thereto, the "registration
statement") under the Securities Act with respect to the shares of our common
stock described in this prospectus. This prospectus, which is part of the
registration statement, does not contain all the information set forth in the
registration statement, certain portions of which are omitted as permitted by
the rules and regulations of the SEC. For further information pertaining to us
and our common stock, reference is made to the registration statement, including
the exhibits thereto and the financial statements, notes and schedules filed as
a part thereof. Statements made in this prospectus regarding the contents of any
contract or other document referred to herein or therein are not necessarily
complete, and in each instance reference is made to the copy of the contract or
other document filed as an exhibit to the registration statement or the other
document, each statement being qualified in all respects by the reference.
After the split-off, we will be subject to the informational requirements of
the Securities Exchange Act of 1934, and, in accordance with those requirements,
will file reports, proxy statements and other information with the SEC. Such
reports, proxy statements and other information, as well as the registration
statement and the exhibits and schedules thereto, may be inspected, without
charge, at the public reference facility maintained by the SEC at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
SEC's regional offices located at Seven World Trade Center, Suite 1300, New
York, NY 10048. Copies of such material may also be obtained from the Public
Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. Such materials can also be inspected at the offices of The
Nasdaq National Market at 33 Whitehall Street, 8th Floor, New York, NY
10004-4087 or on the SEC's site on the Internet at http://www.sec.gov.
We intend to furnish our stockholders with annual reports containing audited
financial statements for each fiscal year.
X-80
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE NO.
--------
Report of Independent Accountants........................... F-2
Consolidated Balance Sheets as of December 28, 1997, January
3, 1999 and October 3, 1999 (unaudited)................... F-3
Consolidated Statements of Income for the three years ended
January 3, 1999 and for the nine months ended
September 27, 1998 (unaudited) and October 3, 1999
(unaudited)............................................... F-4
Consolidated Statements of Changes in Shareholder's Equity
for the three years ended January 3, 1999 and for the nine
months ended October 3, 1999 (unaudited).................. F-5
Consolidated Statements of Cash Flows for the three years
ended January 3, 1999 and for the nine months ended
September 27, 1998 (unaudited) and October 3, 1999
(unaudited)............................................... F-6
Notes to Consolidated Financial Statements.................. F-7
Schedule II--Valuation and Qualifying Accounts.............. F-26
XF-1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholder of
Gentiva Health Services, Inc. and Subsidiaries:
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Gentiva Health Services, Inc. and Subsidiaries at January 3, 1999
and December 28, 1997, and the results of their operations and their cash flows
for each of the three years in the period ended January 3, 1999, in conformity
with generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule listed in the accompanying index presents fairly,
in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. These financial
statements and financial statement schedule are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards, which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
February 28, 1999, except as to the information presented
in Notes 4, 8 and 16, for which the date is September 29, 1999.
XF-2
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
DECEMBER 28, 1997 JANUARY 3, 1999 OCTOBER 3, 1999
----------------- --------------- ---------------
(unaudited)
ASSETS
Current assets
Cash........................................... $ -- $ 799 $ --
Receivables, less allowance for doubtful
accounts of $19,200, $25,596 and $26,470,
respectively................................. 407,056 452,318 538,041
Inventories.................................... 56,893 90,276 86,660
Prepaid expenses and other current assets...... 32,893 83,746 88,698
-------- -------- ----------
Total current assets......................... 496,842 627,139 713,399
Fixed assets, net................................ 50,459 60,877 57,550
Intangibles, principally goodwill, net of
accumulated amortization of $74,775, $85,305
and $92,982, respectively...................... 234,563 256,116 249,291
Other assets..................................... 1,614 1,606 2,017
-------- -------- ----------
$783,478 $945,738 $1,022,257
======== ======== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities
Accrued expenses............................... $ 64,715 $118,627 $ 72,526
Accounts payable............................... 40,306 93,210 96,900
Insurance costs................................ 28,835 23,278 30,597
Payroll and related taxes...................... 16,851 24,109 16,725
-------- -------- ----------
Total current liabilities.................... 150,707 259,224 216,748
Long-term debt................................... 86,250 86,250 78,562
Other liabilities................................ 16,251 38,405 38,336
Shareholder's equity
Common stock, $.10 par value; authorized 2,000
shares; issued 100 shares.................... -- -- --
Additional paid-in capital..................... 436,318 569,560 709,082
Retained earnings (accumulated deficit)........ 96,181 (5,284) (18,136)
Accumulated other comprehensive loss........... (2,229) (2,417) (2,335)
-------- -------- ----------
Total shareholder's equity................... 530,270 561,859 688,611
-------- -------- ----------
$783,478 $945,738 $1,022,257
======== ======== ==========
See notes to consolidated financial statements.
XF-3
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share amounts)
FOR THE NINE MONTHS
FOR THE FISCAL YEARS ENDED ENDED
------------------------------------- ----------------------
1996 1997 1998 1998 1999
---------- ---------- ----------- --------- ----------
(53 Weeks) (unaudited) (unaudited)
Service sales, management fees and
other income..................... $1,374,353 $1,433,854 $ 1,330,303 $ 968,285 $1,118,045
Cost of services sold.............. 862,413 913,268 908,896 671,265 740,051
---------- ---------- ----------- --------- ----------
Gross profit..................... 511,940 520,586 421,407 297,020 377,994
Selling, general and administrative
expenses......................... 421,222 460,254 552,528 372,506 380,627
Interest expense, net.............. 687 4,351 4,414 3,303 3,058
Interest expense on intercompany
debt............................. 12,000 13,000 13,000 9,750 9,750
Merger, integration and other non-
recurring charges................ 74,820 -- -- -- --
---------- ---------- ----------- --------- ----------
Income (loss) before income taxes
and minority interest.......... 3,211 42,981 (148,535) (88,539) (15,441)
Income tax expense (benefit)....... 6,716 16,298 (47,070) (30,068) (2,589)
---------- ---------- ----------- --------- ----------
Income (loss) before minority
interest....................... (3,505) 26,683 (101,465) (58,471) (12,852)
Minority interest.................. 628 164 -- -- --
---------- ---------- ----------- --------- ----------
Net income (loss)................ $ (2,877) $ 26,847 $ (101,465) $ (58,471) $ (12,852)
========== ========== =========== ========= ==========
SHARE INFORMATION:
Basic income (loss) per share...... $ (28,770) $ 268,470 $(1,014,650) $(584,710) $ (128,520)
========== ========== =========== ========= ==========
Average shares outstanding......... 100 100 100 100 100
========== ========== =========== ========= ==========
See notes to consolidated financial statements.
XF-4
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDER'S EQUITY
(In thousands, except share amounts)
RETAINED ACCUMULATED
COMMON STOCK ADDITIONAL EARNINGS OTHER
------------------- PAID-IN (ACCUMULATED COMPREHENSIVE
SHARES AMOUNT CAPITAL DEFICIT) LOSS TOTAL
-------- -------- ---------- ------------ ------------- ---------
Balance at December 31, 1995...... 100 $ -- $446,481 $ 72,211 $(1,976) $ 516,716
Comprehensive loss:
Net loss and cumulative
translation adjustment...... -- (2,877) (82) (2,959)
Net transactions with Olsten.... 27,980 27,980
--- -------- -------- --------- ------- ---------
Balance at December 29, 1996...... 100 -- 474,461 69,334 (2,058) 541,737
Comprehensive income (loss):
Net income and cumulative
translation adjustment...... -- 26,847 (171) 26,676
Net transactions with Olsten.... -- (38,143) (38,143)
--- -------- -------- --------- ------- ---------
Balance at December 28, 1997...... 100 -- 436,318 96,181 (2,229) 530,270
Comprehensive loss:
Net loss and cumulative
translation adjustment...... -- (101,465) (188) (101,653)
Net transactions with Olsten.... 133,242 133,242
--- -------- -------- --------- ------- ---------
Balance at January 3, 1999........ 100 -- 569,560 (5,284) (2,417) 561,859
Comprehensive income (loss):
Net loss and cumulative
translation adjustment
(unaudited)................. -- -- (12,852) 82 (12,770)
Net transactions with Olsten
(unaudited)................... 139,522 139,522
--- -------- -------- --------- ------- ---------
Balance at October 3, 1999
(unaudited)..................... 100 $ -- $709,082 $ (18,136) $(2,335) $ 688,611
=== ======== ======== ========= ======= =========
See notes to consolidated financial statements.
XF-5
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
FOR THE NINE MONTHS
FOR THE FISCAL YEAR ENDED ENDED
------------------------------- -------------------------
1996 1997 1998 1998 1999
-------- -------- --------- ----------- -----------
(53 Weeks) (unaudited) (unaudited)
OPERATING ACTIVITIES:
Net income (loss)....................... $ (2,877) $ 26,847 $(101,465) $(58,471) $ (12,852)
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities:
Depreciation and amortization......... 27,008 29,493 31,401 23,078 25,798
Provision for doubtful accounts....... 18,430 25,884 24,046 16,808 24,334
Loss on disposal of fixed assets...... 4,248 2,944 4,202 3,255 1,608
Deferred income taxes................. (2,227) 2,679 (17,556) (17,987) 12,861
Minority interest in results of
operations of consolidated
subsidiaries........................ 628 164 -- -- --
Changes in assets and liabilities, net
of effects from acquisitions and
dispositions:
Accounts receivable................. (61,645) (89,089) (53,454) (23,121) (110,058)
Inventories, prepaid expenses and
other current assets.............. (6,273) 4,296 (24,310) (16,145) (13,662)
Current liabilities................. 15,870 15,274 70,425 21,316 (46,056)
Other, net.......................... (842) 1,708 2,836 434 2,674
-------- -------- --------- -------- ---------
Net cash provided by (used in)
operating activities................ (7,680) 20,200 (63,875) (50,833) (115,353)
-------- -------- --------- -------- ---------
INVESTING ACTIVITIES:
Acquisitions of businesses, net of cash
acquired.............................. (25,065) (4,256) (33,989) (170) (1,655)
Purchases of fixed assets, net.......... (24,727) (23,072) (34,579) (24,245) (15,625)
Proceeds from sale of investment
securities............................ -- 9,415 -- -- --
-------- -------- --------- -------- ---------
Net cash used in investing
activities.......................... (49,792) (17,913) (68,568) (24,415) (17,280)
-------- -------- --------- -------- ---------
FINANCING ACTIVITIES:
Net transactions with Olsten............ 27,980 (38,143) 133,242 75,248 139,522
Retirement of long-term debt............ -- -- -- -- (7,688)
-------- -------- --------- -------- ---------
Net cash provided by (used in)
financing activities................ 27,980 (38,143) 133,242 75,248 131,834
-------- -------- --------- -------- ---------
Net (decrease) increase in cash......... (29,492) (35,856) 799 -- (799)
Cash at beginning of period............. 65,348 35,856 -- -- 799
-------- -------- --------- -------- ---------
Cash at end of period................... $ 35,856 $ -- $ 799 $ -- $ --
======== ======== ========= ======== =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments for interest............ $ 4,096 $ 4,096 $ 4,096 $ 4,096 $ 3,730
See notes to consolidated financial statements.
XF-6
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
NOTE 1. BACKGROUND AND BASIS OF PRESENTATION
BACKGROUND
On August 18, 1999, Olsten Corporation ("Olsten") announced its intention to
create a separate publicly traded company (the "Split-off") of Olsten's health
services business and to merge its Staffing and Information Technology
businesses (the "Retained Businesses") with those of Adecco S.A. ("Adecco")
pursuant to the Merger Agreement, (the "Merger" and, together with the
Split-off, the "Transaction"). Gentiva Health Services, Inc. (the "Company")
operates Olsten's health services business. Upon the consummation of the Merger,
Olsten will issue all of its shares of common stock in the Company to its
shareholders in exchange for the redemption by Olsten of a portion of each share
of Olsten stock and Adecco will deliver to the Olsten shareholders $8.75 in cash
or .12472 Adecco American Depository Shares (ADS - each ADS representing
one-eighth of an Adecco common share), or a combination thereof determined in
accordance with the formula described in the Merger Agreement, in exchange for
the remaining portion of each Olsten share held.
BASIS OF PRESENTATION
The accompanying consolidated financial statements reflect the results of
operations, financial position, changes in shareholder's equity and cash flows
of the Company as if it were a separate entity for all periods presented. The
consolidated financial statements have been prepared using the historical basis
in the assets and liabilities and historical results of operations related to
the Company. Additionally, the Company's selling, general and administrative
expenses include a management fee, which represents an allocation of certain
general corporate overhead expenses of $5 million in each year related to
Olsten's corporate headquarters. Management believes the allocations related to
general corporate overhead expenses are reasonable, however, the costs of these
items deemed to be charged to the Company are not necessarily indicative of the
costs that would have been incurred if the Company had been a stand-alone
entity. Subsequent to the Split-off, the Company will perform these functions
using its own resources or purchased services and will be responsible for the
costs and expenses associated with the management of a public corporation.
Management estimates that had the Company been a separate entity for each year
presented, selling, general and administrative expenses would have been
approximately $5 million greater than the amounts presented in these historical
financial statements.
Interest expense shown in the Consolidated Statements of Income reflects the
interest associated with the Convertible Subordinated Debentures discussed in
Note 6 and $12 million in 1996 and $13 million in 1997 and 1998 relating to the
intercompany balances with Olsten. Such intercompany balances have been
reflected as a contribution to capital at the end of each period presented in
these consolidated financial statements. Additionally, income taxes are
calculated on a separate company basis. The Company's financial statements
include the costs experienced by the Olsten benefit plans for employees for whom
the Company will assume responsibility. As part of the Transaction, the Company,
Olsten and Adecco have entered into a Separation Agreement, Tax Sharing
Agreement and an Employee Benefits Allocation Agreement, which address the
allocation of assets and liabilities and govern future relationships between
them.
The financial information in these financial statements is not necessarily
indicative of results that would have occurred if the Company had been a
separate stand-alone entity during the periods presented or of future results of
the Company.
XF-7
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned and majority-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated. The Company's
fiscal year ends on the Sunday nearest to December 31st, which was January 3,
1999 for 1998, December 28, 1997 for 1997 and December 29, 1996 for 1996.
UNAUDITED INTERIM FINANCIAL INFORMATION
The accompanying interim consolidated balance sheet as of October 3, 1999
and the statements of income and cash flows for the nine months ended
September 27, 1998 and October 3, 1999 together with the related disclosures and
amounts set forth in the notes are unaudited but include all adjustments,
consisting of only normal recurring adjustments, which the Company considers
necessary to present fairly, in all material respects, the consolidated
financial position as of October 3, 1999, and the consolidated results of
operations and cash flows for the nine months ended September 27, 1998 and
October 3, 1999. These results are not necessarily indicative of results for the
entire year.
REVENUE RECOGNITION
Service sales and related costs, including labor, payroll taxes, fringe
benefits and products and supplies, are recognized in the period in which the
services and products are provided. Sales are recorded based on fee-for-service
or contractual arrangements, including capitated agreements, with customers and
third party payors, estimates of expected reimbursement under arrangements with
Medicare and state reimbursed programs, and management fees generated from
services provided to hospital based home health agencies and are adjusted in
future periods as final settlements are determined. Sales from state reimbursed
programs amounted to 21 percent, 20 percent and 23 percent of total consolidated
sales in 1996, 1997 and 1998, respectively.
Medicare reimbursement is based on reasonable, allowable costs incurred in
providing services to eligible beneficiaries. These costs are reported in annual
cost reports which are filed with the Medicare fiscal intermediary and are
subject to audit. Sales representing estimated reimbursement of allowable costs
from Medicare amounted to 22 percent, 19 percent and 15 percent of total
consolidated sales in 1996, 1997 and 1998, respectively.
Under capitated agreements with managed care customers, the Company
recognizes revenue based on a predetermined contractual rate for each member of
the managed care plan. Costs are determined based on estimates of expected
service and product requirements. These estimates are developed by applying
actuarial assumptions and historical patterns of utilization to authorized
levels of service. Sales from capitated agreements with managed care payors
represented 1 percent for 1996 and 5 percent of total consolidated sales in 1997
and 1998.
Sales adjustments result from differences between estimated and actual
reimbursement amounts, an inability to obtain appropriate billing documentation
or authorizations acceptable to the payor and other reasons unrelated to credit
risk. Sales adjustments are deducted directly from gross accounts receivable.
Accounts receivable includes a receivable of $1 million as of January 3, 1999
and is offset by a payable of $3.3 million as of December 28, 1997 related to
net contractual adjustments and third party settlements. Management prepares
various analyses to evaluate its receivable valuation accounts. Such analyses
include accounts receivable aging trends, historical collection and write-off
data and other statistical information.
XF-8
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported 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.
INVENTORIES
Inventories consist primarily of biological and pharmaceutical products and
supplies held for sale or distribution to patients through prescription. The
Company records inventories at the lower of cost or market. Cost represents the
weighted average cost of purchased products and supplies.
FIXED ASSETS
Fixed assets, including external costs of Company developed software, are
stated at cost and depreciated over the estimated useful lives of the assets
using the straight-line method. Leasehold improvements are amortized over the
shorter of the life of the lease or the life of the improvement.
INTANGIBLES
Intangibles, principally goodwill, associated with acquired businesses are
being amortized on a straight-line basis over periods ranging from 10 to
40 years. When events and circumstances so indicate, all long-term assets,
including intangibles, are assessed for recoverability based upon undiscounted
operating cash flow forecasts. If an asset is impaired, it is written down to
fair value which is based on discounted future cash flows.
FOREIGN CURRENCY TRANSLATION
Financial statements of the Company's Canadian subsidiary are translated
into U.S. dollars using the exchange rate at each balance sheet date for assets
and liabilities and a weighted average exchange rate for each period for
revenues, expenses, gains and losses and cash flows. Translation adjustments are
recorded within accumulated other comprehensive income/loss. Transaction gains
and losses that arise from exchange rate fluctuations on transactions
denominated in a currency other than the functional currency are not
significant.
EARNINGS PER SHARE
Historical earnings per share data has been computed based upon 100 shares
of common stock outstanding, all of which are owned by Olsten.
INCOME TAXES
The Company has been included, where applicable, in the consolidated income
tax returns of Olsten for the respective periods. The provisions for income
taxes in the Consolidated Statements of Income have been calculated on a
separate company basis. The Company provides for taxes based on current taxable
income and the future tax consequences of temporary differences between the
financial reporting and income tax carrying values of its assets and
liabilities. Under Statement of Financial Accounting Standards
XF-9
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
("SFAS") No. 109, assets and liabilities acquired in purchase business
combinations are assigned their fair values, and deferred taxes are provided for
lower or higher tax bases.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of a financial instrument represents the amount at which the
instrument could be exchanged in a current transaction between willing parties,
other than in a forced sale or liquidation. Significant differences can arise
between the fair value and carrying amount of financial instruments that are
recognized at historical amounts.
The carrying amounts of the Company's cash, accounts receivable, accounts
payable and accrued expenses approximate fair value because of their short
maturity. The estimated fair value of the Company's long-term debt,
approximately $82 million and $83 million at December 28, 1997 and January 3,
1999, respectively, was determined based on quoted market prices for similar
investments.
NEWLY ISSUED ACCOUNTING STANDARDS
Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." This statement establishes standards for the reporting
and presentation of comprehensive income and its components in a full set of
financial statements. As shown in the Statement of Changes in Shareholder's
Equity, comprehensive income (loss) includes all changes in equity during a
period, except those resulting from investments by and distributions to the
Company's shareholder. As this standard only requires additional information in
the financial statements, it does not affect the Company's results of operations
or financial position.
Effective January 1, 1998, the Company adopted SFAS No. 131, "Disclosure
about Segments of an Enterprise and Related Information." SFAS No. 131
establishes standards for the way that publicly held companies report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports issued to shareholders. It also establishes standards
for related disclosures about products and services, geographic areas and major
customers. The adoption of SFAS No. 131 did not impact the Company's results of
operations or financial position, but did affect the disclosure of segment
information.
NOTE 3. ACQUISITIONS
In 1999, the Company acquired several home care operations for an aggregate
purchase price of $1.7 million.
In 1998, the Company acquired all of Columbia/HCA Healthcare Corporation's
home health care operations in the state of Florida and several other companies
in asset transactions approximating $35 million in cash. Assets acquired in
these transactions were $4 million, with the excess of the purchase price over
the fair value of assets acquired recorded as goodwill.
In 1997, the Company acquired several home care operations, providing
skilled nursing services for an aggregate purchase price of $4.6 million in cash
primarily related to goodwill.
In 1996, the Company acquired several home care operations and a management
company for hospital-based home health agencies for an aggregate purchase price
of $26.6 million, in cash, primarily related to goodwill.
XF-10
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
Goodwill associated with these acquisitions is being amortized on a
straight-line basis, over periods ranging from 10 to 40 years. The results of
operations of the acquired companies are included in the Company's Consolidated
Statements of Income from the dates of acquisition. Pro forma results of
operations are not presented as the pro forma impact of the purchased
acquisitions, which were accounted for by the purchase method of accounting, was
not significant to the Company's Financial Statements.
In 1996, Olsten issued 8.8 million shares of class B common stock in
exchange for all the outstanding capital stock of Quantum Health Resources,
Inc., a specialty pharmaceutical services company. The acquisition was accounted
for as a pooling of interests.
NOTE 4. MERGER, INTEGRATION AND OTHER NON-RECURRING CHARGES
In the quarter ended April 4, 1999, the Company recorded a special charge
aggregating $17 million. The charge is for the realignment of business units as
part of a new restructuring plan, including compensation and severance costs of
$5 million to be paid to operational support staff, branch administrative
personnel and management, asset write-offs of $7 million related primarily to
fixed assets being disposed of in offices being closed and facilities being
consolidated, as well as fixed assets and goodwill attributable to the Company's
exit from certain businesses previously acquired but not within the Company's
strategic objectives, and integration costs of $5 million, primarily related to
obligations under lease agreements for offices and other facilities being
closed. The Company expects that the realignment of the business units will
achieve a reduction of expenses of approximately $4 million for the last three
quarters of 1999, due to reduced employee, lease and depreciation expenses. As
of October 3, 1999, approximately 77 percent of closures and consolidations of
facilities have been completed and approximately 83 percent of the 525 expected
terminations have occurred.
On March 30, 1999, the Company announced plans to take a $56 million special
charge which was recorded in the year ended January 3, 1999. This charge was for
the settlement of two federal investigations (described in Note 8), focusing on
the Company's Medicare home office cost reports and certain transactions with
Columbia/HCA Healthcare Corporation ("Columbia/HCA") which was finalized and
signed on July 19, 1999. On August 11, 1999, Olsten paid $61 million pursuant to
the settlement, approximately $5 million of which was accrued as part of the
Company's 1996 merger, integration and other non-recurring charges.
In 1998, as a part of the Balanced Budget Act, the government enacted the
Interim Payment System ("IPS") for reimbursement of home care services provided
under Medicare effective October 1, 1997. Prior to enactment of the IPS, home
care services were reimbursed based on cost subject to a cap determined by the
Health Care Financing Administration. The IPS reimburses home care services
based on costs, subject to both a per-beneficiary limit and a per-visit limit.
Further, the IPS reduced the per-visit limit to 1994 levels. As a result of
these cuts in reimbursement, provider reimbursements have been reduced. In order
to operate at the lowered reimbursement rates, home health care companies
reduced the services provided to patients by providing fewer patient visits. In
addition, the regulatory climate that ensued in home health care caused a lower
level of physician referrals.
As a consequence of these circumstances, in 1998, the Company recorded
non-recurring charges and other adjustments of $66 million, of which
approximately $64 million and $2 million were recorded in the second and third
quarters of 1998, respectively, related to the restructuring of the Company's
businesses. These charges, which were primarily for 60 office closings and
consolidations in the United States, were taken to help position the Company to
operate more efficiently under the new IPS. In addition, the Company has also
made significant technological investments in order to improve operational
efficiencies
XF-11
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
and employee retention levels. The benefit of the restructuring began to be
realized in the second quarter of 1998.
Included in this provision was $24 million charged to selling, general and
administrative expenses, which included lease payments of $3 million, employee
severance of $4 million, fixed asset and software write-offs of $5 million to
reflect the loss incurred upon the Company's decision to dispose of the assets
in certain closed offices, and an increase in the allowance for doubtful
accounts of $12 million. All closures and consolidations of facilities and
employee terminations related to this charge have been completed. The allowance
for doubtful accounts was increased because the collection of receivables is
highly dependent on the service provider's ability to provide certain evidence
of service and authorization documentation to a variety of third-party payors.
The office closings, consolidation of certain business service centers and the
termination of employees are all events that, in the Company's past experience,
impair the ability to provide the aforementioned documentation and to collect
receivables.
The Company also recorded other adjustments to selling, general and
administrative expenses of $13 million which included professional fees and
related costs resulting from the settlement with several government agencies
regarding certain past business practices of Quantum Health Resources
("Quantum"), the level of effort required to respond to the significant
inquiries conducted by the government, and costs incurred to redesign the credit
and collection process of the home health services business.
In addition, upon final announcement of the per-beneficiary limits by the
government, the Company recorded a reduction in revenues of $14 million in the
second quarter of 1998 for the six month period ended June 28, 1998 in
anticipation of lower Medicare reimbursements resulting from the new per-visit
and per-beneficiary limits that have been imposed by Medicare under the IPS.
The Company recorded a charge to cost of sales of $15 million in the second
quarter of 1998 to reflect the estimated increase in costs that have been
incurred, but not yet reported, based upon a change in the actuarial estimates
utilized to determine the level of service to patients covered under the
Company's capitated contracts.
In 1996, the Company recorded merger, integration and other non-recurring
charges totalling approximately $75 million. These charges resulted from the
Quantum acquisition of $39 million; $30 million of allowances for a change in
the methodology used by Medicare for computing reimbursements in prior years
related to the Company's home health services business; and Quantum's charge of
$5.5 million related to the settlement of shareholder litigation. The
$39 million charge, related to the Quantum acquisition, included transaction
costs of $7 million; compensation and severance costs of $8.6 million; asset
write-downs of $8.2 million, primarily comprised of fixed assets and an
unrecoverable majority-interest investment in a software development company
held by Quantum; and integration costs, for employee relocation, obligations
under lease agreements for planned vacancies and other activities required to
consolidate the operations, of $15.5 million.
XF-12
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
The major components, as well as the activity during the years ended 1996,
1997 and 1998 and the nine months ended October 3, 1999 (unaudited), of the
charges were as follows:
ACCOUNTS COMPENSATION
RECEIVABLES AND AND SEVERANCE INTEGRATION
SETTLEMENTS OTHER ASSETS(1) COSTS COSTS OTHER TOTAL
----------- --------------- ------------- ----------- -------- --------
Charge--1996....................... $10,700 $33,000 $8,600 $15,500 $7,020 $74,820
Cash expenditures................ (5,500) -- (2,611) (5,572) (6,035) (19,718)
Non-cash write-offs.............. -- (27,268) -- -- -- (27,268)
------- ------- ------ ------- ------ -------
Balance at December 29, 1996..... 5,200 5,732 5,989 9,928 985 27,834
Cash expenditures................ -- -- (5,633) (9,021) (985) (15,639)
Non-cash write-offs.............. -- (5,670) -- -- -- (5,670)
------- ------- ------ ------- ------ -------
Balance at December 28, 1997..... 5,200 62 356 907 -- 6,525
Cash expenditures................ -- -- (356) (813) -- (1,169)
Non-cash write-offs.............. -- (62) -- -- -- (62)
------- ------- ------ ------- ------ -------
Balance at January 3, 1999....... 5,200 -- -- 94 -- 5,294
Cash expenditures................ (5,200) -- -- (94) -- (5,294)
Non-cash write-offs.............. -- -- -- -- -- --
------- ------- ------ ------- ------ -------
Balance at October 3, 1999......... -- -- -- -- -- --
------- ------- ------ ------- ------ -------
Charge--1998....................... 56,000 17,309 4,000 34,641 10,050 122,000
Cash expenditures................ -- -- (3,739) (33,839) (9,574) (47,152)
Non-cash write-offs.............. -- (17,211) -- -- -- (17,211)
------- ------- ------ ------- ------ -------
Balance at January 3, 1999....... 56,000 98 261 802 476 57,637
Cash expenditures................ (56,000) -- (261) (457) (476) (57,194)
Non-cash write-offs.............. -- (98) -- -- -- (98)
------- ------- ------ ------- ------ -------
Balance at October 3, 1999......... -- -- -- 345 -- 345
------- ------- ------ ------- ------ -------
Charge--1999....................... -- 6,490 5,020 5,190 -- 16,700
Cash expenditures................ -- -- (2,257) (2,786) -- (5,043)
Non-cash write-offs.............. -- (5,748) -- -- -- (5,748)
------- ------- ------ ------- ------ -------
Balance at October 3, 1999......... -- 742 2,763 2,404 -- 5,909
------- ------- ------ ------- ------ -------
Balance of all charges combined at
October 3, 1999.................. $ -- $ 742 $2,763 $ 2,749 $ -- $ 6,254
======= ======= ====== ======= ====== =======
- ------------------------
(1) Amounts represent contra assets.
XF-13
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
NOTE 5. FIXED ASSETS, NET
1997 1998
-------- --------
Computer equipment and software............................. $ 60,293 $ 67,025
Furniture and fixtures...................................... 43,339 38,658
Buildings and improvements.................................. 13,658 15,850
Machinery and equipment..................................... 13,226 14,597
-------- --------
130,516 136,130
Less accumulated depreciation............................... (80,057) (75,253)
-------- --------
$ 50,459 $ 60,877
======== ========
Depreciation expense was approximately $17 million in 1996, $19 million in
1997 and $21 million in 1998.
NOTE 6. LONG-TERM DEBT
In 1993, the Company's Quantum subsidiary, issued $86.3 million of 4 3/4%
Convertible Subordinated Debentures maturing on October 1, 2000. The debentures
are convertible into Class B common stock of Olsten at $52.26 per share.
Subsequent to the consummation of the Transaction, the debentures will be
exchangeable into shares of the Company and the merger consideration as if the
holder of the debenture held the number of shares of Olsten's Class B common
stock that the debentures would have been convertible into, immediately prior to
the Transaction. The merger consideration is either $8.75 in cash or .12472
Adecco Depository Shares or a combination thereof determined in accordance with
the Merger Agreement and the Split-Off consideration is .25 shares of the
Company for each share of common stock. As such, if holders present the
debentures for conversion, the Company will purchase Adecco ADS's at fair market
value. Quantum is also a guarantor with respect to Olsten's revolving credit
facility. In accordance with the terms of the Separation Agreement, Quantum's
guarantee is expected to be released upon the closing of the Transactions.
In January 1999, $7.7 million of the convertible subordinated debentures
were retired at 88.5 percent of the principal amount, resulting in a gain of
approximately $.9 million. Interest expense is net of interest income of
$4 million in 1996, $310 thousand in 1997 and $120 thousand in 1998.
NOTE 7. TRANSACTIONS WITH OLSTEN
Net transactions with Olsten, included in shareholder's equity, include the
accumulated excess of cash outlays made on the Company's behalf and management
fees charged to the Company by Olsten over cash receipts generated by the
Company. In accordance with the terms of the Separation Agreement, intercompany
balances at October 31, 1999 of approximately $622 million have been contributed
to the Company's capital in its entirety. Intercompany account loans as a result
of the true-up amount (as described below) are payable in full with interest of
6% per annum on the date of the consummation of the split-off. Any amounts
advanced to the Company by Olsten in excess of the true-up amount will bear
interest at The Chase Manhattan Bank's prime lending rate. The Separation
Agreement provides that on October 31, 1999 if the sum of (a) indebtedness for
borrowed money, (b) the deferred purchase price of property and (c) up to
$10 million of transactions fees related to the transactions contemplated by the
Separation Agreement and the Merger Agreement, less cash on hand (referred to as
net debt) of Olsten
XF-14
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
and its subsidiaries (excluding the Company and its subsidiaries) is
(i) greater than $750 million, then the new intercompany account will reflect a
payable by the Company to Olsten equal to the amount of excess, or (ii) less
than $750 million, then the new intercompany account will reflect a payable by
Olsten to the Company, in an amount equal to the shortfall or (iii) equal to
$750 million, then no payment will be made in connection with the net debt
calculation. Pursuant to the Separation Agreement, on October 31, 1999, net debt
of Olsten and its subsidiaries (excluding the Company and its subsidiaries) was
$721 million and on or prior to the date of the Split-off the Company will
receive approximately $29 million in cash (referred to as the true-up amount).
That amount will be reduced by any advances the Company receives from Olsten
prior to the split-off date and may result in a payable by the Company to
Olsten. In the event the Company is required to pay Olsten, it will need to
borrow under its credit facility.
Olsten uses a centralized cash management system. As a result, cash and cash
equivalents (other than actual cash on hand) were not allocated to the Company.
On October 31, 1999, the Company ceased participation in Olsten's cash
management system and established its own cash management system.
Included in selling, general and administrative expenses are $1.4 million,
$1.6 million, and $1.4 million, in 1996, 1997 and 1998, respectively, relating
to staffing services provided to the Company by Olsten.
NOTE 8. LEGAL MATTERS
GOVERNMENT INVESTIGATIONS
The Company has been subject to several federal and state governmental
investigations. Some of those investigations are still pending, although
substantially all of them have been settled. In connection with the Split-Off,
the Company has agreed to assume, to the extent permitted by operation of law
and the terms of the liabilities, and indemnify Olsten for all liabilities
associated with any pending or future governmental investigation of the health
services business and has also agreed to comply with and be subject to all
related settlement agreements and corporate integrity agreements or other
operational agreements with the government.
The Company has cooperated with the Office of Investigations section of the
Office of Inspector General (an agency within the U.S. Department of Health and
Human Services) and the U.S. Department of Justice in connection with the
government's investigation into the Company's preparation of Medicare cost
reports (the "cost reports investigation"). The Company has also cooperated with
the U.S. Department of Justice and other federal agencies investigating the
relationship between Columbia/HCA and the Company in connection with the
purchase by Columbia/HCA of some home health agencies which had been owned by
the health services business and subsequently managed under contract by a unit
of Gentiva Health Services (the "Columbia/HCA investigation").
The Company continues to cooperate with various state and federal agencies,
including the U.S. Department of Justice, the Office of the Attorney General of
New Mexico and the New Mexico Health Care Anti-Fraud Task Force in connection
with their investigations into certain health care practices of Quantum. Among
the matters the federal agencies are or were inquiring are allegations of
improper billing and fraud against various federally-funded medical assistance
programs on the part of Quantum and its post-acquisition successor, the Home
Care Infusion Therapy Services business of Gentiva Health Services (the "Quantum
New Mexico investigation"). Most of the time period that the Company understands
to be at issue in the Quantum New Mexico investigation predates Olsten's
June 1996 acquisition of Quantum.
XF-15
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
In early December 1999, the Company received a document subpoena from the
Department of Health and Human Services, Office of Inspector General, Office of
Investigations. After preliminary discussions with the Office of Inspector
General, the Company believes that the subpoena relates to possible overpayments
to the Company by the Medicare program. In early February 2000, we received a
document subpoena from the Department of Health and Human Resources, Office of
Inspector General, Office of Investigations. We believe the subpoena relates to
our agencies' cost reporting procedures concerning contracted nursing and home
health aide costs. The Company intends to provide the Office of Inspector
General with the requested documents and to cooperate fully with its
investigations. At this time, the Company is unable to assess the probable
outcome or potential liability, if any, arising from these subpoenas.
On July 19, 1999, Olsten entered into written civil and criminal agreements
with the U.S. Department of Justice (and, as to the civil agreement, the Office
of Inspector General of the U.S. Department of Health and Human Services)
finalizing the understanding that it announced on March 30, 1999 to settle the
civil and criminal aspects of the cost reports investigation and the
Columbia/HCA investigation. Pursuant to the settlement, (a) Olsten paid on
August 11, 1999 the sum of $61 million to the U.S. Department of Justice,
including approximately $10.1 million in criminal fines and penalties; (b) in
connection with the Columbia/HCA investigation, a subsidiary of the Company,
Kimberly Home Health Care, Inc., pled guilty in the United States District Court
for the Northern District of Georgia, the Southern District of Florida and the
Middle District of Florida, respectively, to a criminal violation of the federal
mail fraud, conspiracy and kickback statutes; (c) Kimberly Home Health
Care, Inc. has been permanently excluded from participation in Medicare,
Medicaid and all other federal health care programs as defined in 42 U.S.C.
Section 1320a-7b(f); and (d) Olsten has executed a corporate integrity agreement
with the Office of Inspector General of the U.S. Department of Health and Human
Services.
By letter dated June 30, 1999, the Medicare Fraud Control Unit of the New
Mexico Attorney General's Office notified Olsten that it has declined to
criminally prosecute the so-called "J-Code issue" relating to Quantum's past
practices in seeking government health care reimbursement.
On January 28, 1999, Olsten announced that it had been advised by the United
States Attorney's Office for the District of New Mexico ("New Mexico U.S.
Attorney's Office") that, in connection with the Quantum New Mexico
Investigation, it had dropped its criminal investigation into certain past
practices of Quantum. The criminal aspect of the Quantum New Mexico
Investigation had focused on allegations of improper billing and fraud against
various federally funded medical assistance programs on the part of Quantum
during the period between January 1992 and April 1997. By letter dated
February 1, 1999, the New Mexico U.S. Attorney's Office advised Olsten that,
having ended its criminal inquiry, the Office has referred the Quantum matter to
its Affirmative Civil Enforcement Section. We continue to cooperate with the
civil inquiry into the Quantum matter and to explore with the New Mexico U.S.
Attorney's Office the possibility of reaching a negotiated monetary resolution
of the matter. Any negotiated amount could include multiplied damages, interest
and civil penalties.
On October 28, 1998, Olsten announced that it entered into a final
settlement agreement with several government agencies investigating certain past
practices of Quantum. The agreement was entered into with the U.S. Department of
Justice, the Office of the Inspector General of the U.S. Department of Health
and Human Services, the U.S. Secretary of Defense (for the CHAMPUS/Tricare
program), and the Attorneys General for the States of New York and Oklahoma.
Pursuant to the settlement, Olsten reimbursed the government approximately
$4.5 million for certain disputed claims under the Medicaid and CHAMPUS programs
for reimbursement for the provision of anti-hemophilia factor products to
patients covered by certain federal health care programs and entered into a
corporate integrity agreement.
XF-16
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
LEGAL PROCEEDINGS
In connection with the Split-Off, the Company has agreed to assume, to the
extent permitted by operation of law and the terms of the liabilities, and
indemnify Olsten for all liabilities, whether or not pending at the time of the
Split-Off, of the health services business of Olsten and its subsidiaries,
including, but not limited, to those listed below.
In April 1997, a purported class action captioned Gail Weichman v. Olsten
Corporation, et al., No. CV 97-1946, was filed in the United States District
Court for the Eastern District of New York against Olsten, Miriam Olsten, Frank
Liguori and Anthony Puglisi. In August 1997, two additional proposed class
action lawsuits, captioned Esta S. Goldman v. Olsten Corporation, et al., No. CV
97-4501, and Elliott Waldman v. Olsten Corporation, et al., No. CV 97-5056, were
filed in the United States District Court for the Eastern District of New York
against the same defendants named in the Weichman lawsuit, plus Stuart Olsten.
In September 1997, a fourth proposed class action lawsuit, captioned Michael
Cannold v. Olsten Corporation, et al., No. CV 97-5408, was filed in the United
States District Court for the Eastern District of New York against Olsten,
Miriam Olsten, Stuart Olsten, Frank Liguori and Anthony Puglisi. (The Weichman,
Goldman, Waldman and Cannold actions are referred to collectively as the "Class
Actions"). On or about September 8, 1998, a Consolidated Amended Class Action
Complaint (the "Amended Complaint") was filed in the U.S. District Court for the
Eastern District of New York, captioned IN RE OLSTEN CORPORATION SECURITIES
LITIGATION, No. 97-5056, by above plaintiffs against Olsten, Miriam Olsten,
Stuart Olsten, Frank Liguori and Anthony Puglisi. The Amended Complaint asserts
claims under Sections 10(b) (including Rule 10b-5 promulgated thereunder), 14(a)
and 20(a) of the Securities Exchange Act of 1934 and Sections 11, 12(a)(2) and
15 of the Securities Act of 1933, alleging that, as a result of certain alleged
misstatements and omissions by certain of the defendants, Olsten's common stock
was artificially inflated during the proposed class period (which is defined in
the Amended Complaint as the period from February 5, 1996 though July 22, 1997).
On October 19, 1998, Olsten and the individual defendants served a motion
seeking an order dismissing the Amended Complaint. That motion was fully briefed
on December 23, 1998. Plaintiffs filed a submission in connection with
defendants' motion on October 12, 1999. Defendants filed a response to
plaintiffs' submission on October 14, 1999, plaintiffs responded to it on
October 21, 1999 and defendants filed a reply on October 21, 1999.
The Amended Complaint seeks certification of the proposed class, a judgment
declaring the conduct of the defendants to be in violation of the law,
unspecified compensatory damages and unspecified costs and expenses, including
attorneys' fees and experts' fees. While the Company is unable at this time to
assess the probable outcome of the Class Actions or the materiality of the risk
of loss in connection with the class action (given the preliminary stage of the
Class Actions and the fact that the Amended Complaint does not allege damages
with any specificity), Olsten believes that it acted responsibly with respect to
its shareholders and has vigorously defended the Class Action.
On or about May 11, 1999, a Complaint was filed in the Delaware Chancery
Court in a derivative lawsuit, captioned RUBIN V. MAY, No. 17135-NC, against
certain current and former directors of Olsten (the "Derivative Lawsuit"). The
Complaint, which names Olsten as a nominal defendant, alleges a claim for breach
of fiduciary duties arising out of the Class Action and the government
investigations described above. The plaintiffs seek a judgment (1) requiring the
defendants to account to Olsten for unspecified alleged damages resulting from
the defendants' alleged conduct; (2) directing the defendants to establish and
maintain effective compliance programs; and (3) awarding plaintiffs the costs
and expenses of the lawsuit, including reasonable attorneys' fees. On
September 10, the defendants in the Derivative Lawsuit filed a motion to dismiss
or, in the alternative, stay the lawsuit.
XF-17
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
On January 14, 1999, Kimberly Home Health Care, Inc. ("KHHC") initiated
three arbitration proceedings against hospitals owned by Columbia/HCA with which
one of the Company's subsidiaries had management services agreements to provide
services to the hospitals' home health agencies. The basis for each of the
arbitrations is that Columbia/HCA sold the home health agencies without
assigning the management services agreements, while the management services
agreements had periods ranging from 18 to 42 months prior to expiration and that
as a result Columbia/HCA has breached the management services agreements. In
response to the arbitrations, Columbia/HCA has asserted that the arbitration be
consolidated and stayed, in part based upon its alleged claims against KHHC for
breach of contract and requests indemnity and possibly return of management fees
paid under the disallowance provision of the management services agreements.
Columbia/HCA has not yet fully presented these claims in the arbitrations or
other legal proceedings, and has not yet quantified the claims.
In July 1999, the Company received notification that the Indiana Attorney
General's Office filed a civil complaint against Olsten requesting the court to
determine if Quantum violated Indiana law with respect to Medicaid claims. The
complaint alleges that (1) overpayment was made to Quantum due largely to
advances paid by Medicaid that were not properly credited by Quantum;
(2) Quantum supplied the Indiana Attorney General's Office with insufficient
documentation regarding services provided by one of our pharmacies; and
(3) deliveries exceeded the amounts of physicians' orders. The alleged
violations predate Olsten's acquisition of Quantum in June 1996.
NOTE 9. LEASE COMMITMENTS
The Company rents certain properties under noncancellable, long-term
operating leases, which expire at various dates. Certain of these leases require
additional payments for taxes, insurance and maintenance and, in many cases,
provide for renewal options. Rent expense under all leases was $24,545 in 1996,
$25,524 in 1997 and $26,937 in 1998.
Future minimum rental commitments for all noncancellable leases having a
remaining term in excess of one year at January 3, 1999 are as follows:
1999........................................................ $22,712
2000........................................................ 15,959
2001........................................................ 10,518
2002........................................................ 5,791
2003........................................................ 4,017
Thereafter.................................................. 5,918
NOTE 10. ACCRUED EXPENSES
Accrued expenses are comprised of the following:
1997 1998
-------- --------
Settlement............................................... $ -- $ 56,000
Costs under network services contracts................... 20,350 30,433
Income taxes payable..................................... 13,619 --
Other.................................................... 30,746 32,194
------- --------
$64,715 $118,627
======= ========
XF-18
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
NOTE 11. STOCK PLANS
Olsten maintains various stock option incentive plans under which certain
employees of the Company are eligible for the grant of stock options. These
options may be awarded in the form of incentive stock options ("ISOs") or
non-qualified stock options ("NQSOs"). The option price of an ISO cannot be less
than 100 percent, and the option price of the NQSO cannot be less than
85 percent, of the fair market value at the date of grant. Options under the
Plan(s) generally have a term of ten years and generally become cumulatively
exercisable commencing one year after grant in four or five equal annual
installments. The Company expects to establish stock option incentive plans to
be effective upon consummation of the Split-Off. Effective as of the date of the
Split-Off, all options to purchase Olsten stock held by the Company's employees
will be converted into options to purchase the Company's stock.
A summary of Olsten stock options for the three years ended January 3, 1999
for employees assigned to Gentiva Health Services is as follows:
1996 1997 1998
-------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- -------- --------- -------- --------- --------
Options outstanding, beginning of year... 1,078,762 $23.85 1,002,194 $20.87 980,376 $20.50
Granted................................ 303,076 15.67 230,000 19.63 701,500 10.00
Exercised.............................. (162,808) 15.33 (107,511) 15.25 (2,076) 7.89
Cancelled.............................. (216,836) 33.20 (144,307) 25.65 (233,733) 18.60
--------- ------ --------- ------ --------- ------
Options outstanding, end of year......... 1,002,194 $20.87 980,376 $20.50 1,446,067 $15.72
========= ====== ========= ====== ========= ======
Options exercisable, end of year......... 556,259 $22.46 518,450 $21.69 485,485 $22.07
========= ====== ========= ====== ========= ======
Weighted-average fair value of options
granted during the year................ $ 6.28 $ 8.19 $ 3.57
========= ========= =========
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1996, 1997 and 1998, respectively: risk-free
interest rates of 6.5, 6.3 and 5.3 percent; dividend yield of 2 percent for 1998
and 1 percent for 1997 and 1996; expected lives of six years for all; and
volatility of 36 percent for 1998 and 1997 and 33 percent for 1996.
XF-19
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
The following table summarizes information about Olsten's stock options
outstanding at January 3, 1999 for employees assigned to Gentiva Health
Services:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------------- ----------------------------------
NUMBER WEIGHTED AVERAGE NUMBER
RANGE OF OUTSTANDING AT REMAINING WEIGHTED AVERAGE EXERCISABLE AT WEIGHTED AVERAGE
EXERCISE PRICES JANUARY 3, 1999 CONTRACTUAL LIFE EXERCISE PRICE JANUARY 3, 1999 EXERCISE PRICE
- --------------------- --------------- ---------------- ---------------- --------------- ----------------
$ .86 to 1.08 4,785 .68 $ 1.07 4,785 $ 1.07
1.72 to 2.59 3,443 1.41 2.12 3,443 2.12
4.99 to 7.49 200,000 9.79 5.94 0 5.94
7.60 to 10.35 277,000 9.57 9.13 0 9.13
12.07 to 17.67 406,339 8.24 14.68 139,605 14.92
18.53 to 26.25 486,096 7.51 21.28 269,248 21.98
27.80 to 41.38 41,033 5.28 31.42 41,033 31.42
42.24 to 60.35 27,371 5.29 51.67 27,371 51.67
--------- ---- ------ ------- ------
$ .86 to 60.35 1,446,067 8.28 $15.72 485,485 $22.07
========= ==== ====== ======= ======
XF-20
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
In 1996, Olsten adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123 ("SFAS No. 123"), "Accounting for
Stock-Based Compensation." Accordingly, no compensation cost has been recognized
under the stock option plans. Had compensation cost for Olsten's stock option
plans been determined based on the fair value at the grant date for awards
consistent with the provisions of SFAS No. 123, the Company's net income (loss)
and net income (loss) per share would have been reduced (increased) to the pro
forma amounts indicated below:
1996 1997 1998
-------- -------- ----------
$ $ $
Net (loss) income--as reported.............................. (2,877) 26,847 (101,465)
Net (loss) income--pro forma................................ (5,026) 26,287 (102,535)
Basic (loss) income per share--as reported.................. (28,770) 268,470 (1,014,650)
Basic (loss) income per share--pro forma.................... (50,260) 262,870 (1,025,350)
The statement provides for pro forma amounts for options granted beginning
in 1995; therefore, the pro forma expense will likely increase in future years
as the new option grants become subject to the pricing model.
NOTE 12. INCOME TAXES
Comparative analysis of the provision (benefit) for income taxes follows:
1996 1997 1998
-------- -------- --------
CURRENT
Federal........................................ $7,817 $14,166 $(29,808)
State and local................................ 1,126 (547) 294
------ ------- --------
8,943 13,619 (29,514)
------ ------- --------
DEFERRED
Federal........................................ (1,860) 1,982 (17,556)
State and local................................ (367) 697 --
------ ------- --------
(2,227) 2,679 (17,556)
------ ------- --------
$6,716 $16,298 $(47,070)
====== ======= ========
In accordance with the Tax Sharing Agreement, any net operating losses
generated up to the Split-off will be carried back and utilized by Olsten.
XF-21
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
Reconciliations of the differences between income taxes computed at the
Federal statutory rate and provisions (benefits) for income taxes are as
follows:
1996 1997 1998
-------- -------- --------
Income taxes computed at Federal statutory tax rate......... $1,123 $15,043 $(51,987)
State income taxes, net of Federal benefit.................. 493 98 190
Nondeductible settlement of government investigations....... -- -- 3,500
Amortization of intangibles................................. 1,893 1,701 922
Nondeductible merger costs.................................. 2,297 -- --
Nondeductible meals & entertainment......................... 380 357 343
Earnings of non consolidated subsidiaries................... 462 -- --
Other, net.................................................. 68 (901) (38)
------ ------- --------
$6,716 $16,298 $(47,070)
====== ======= ========
Deferred tax assets and liabilities are as follows:
DECEMBER 28, 1997 JANUARY 3, 1999
----------------- ---------------
DEFERRED TAX ASSETS
Reserves and allowances...................... $21,540 $40,320
Other........................................ 419 291
------- -------
21,959 40,611
------- -------
DEFERRED TAX LIABILITIES
Capitalized software......................... (1,875) (2,281)
Intangible assets............................ (2,551) (24,933)
Depreciation................................. (371) (371)
Other........................................ (585) (753)
------- -------
(5,382) (28,338)
------- -------
Net deferred tax asset......................... $16,577 $12,273
======= =======
During the fourth quarter of 1998, Olsten reached final agreement with the
Internal Revenue Service with respect to its examination of Olsten's federal
income tax returns for the years 1989 through 1993. Accordingly, certain amounts
have been reclassified to deferred tax liabilities to reflect the conclusion of
such examination.
NOTE 13. BENEFIT PLANS FOR PERMANENT EMPLOYEES
Olsten and its subsidiaries maintain qualified and non-qualified defined
contribution retirement plans for its salaried employees which provide for a
partial match of employee savings under the plans and for discretionary
profit-sharing contributions based on employee compensation. Olsten also
maintains a non-qualified defined benefit retirement program for key employees
and officers which provides supplemental retirement benefits funded in part by
profit-sharing contributions. Certain employees of the Company are eligible to
participate in the Olsten sponsored plans. The Company expects to establish
benefit plans for permanent employees following the Split-off. Effective at the
time of the Split-off, the Company will assume all obligations with respect to
the Company's employees under Olsten's qualified and non-qualified defined
contribution retirement plans. Before the Merger, the Company will establish a
XF-22
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
nonqualified supplemental executive retirement plan substantially similar to the
Olsten plan and will assume all liabilities and obligations with respect to
their employees and some former employees of Olsten. The Company will be liable
for the funding of liabilities under the plan to the extent, if any, that these
liabilities are in excess of the assets transferred. It is expected that shortly
after the merger the nonqualified supplemental executive retirement plan will be
terminated and the assets will be distributed to the participating employees.
Company contributions under the defined contribution plans were
approximately $3.1 million in 1996, $3.5 million in 1997, and $3.4 million in
1998.
NOTE 14. BUSINESS SEGMENT INFORMATION
The Company operates in the United States and Canada, servicing patients and
customers through the following business segments: Specialty Pharmaceutical
Services, Home Care Nursing Services and Staffing Services. These segments are
briefly described below.
SPECIALTY PHARMACEUTICAL SERVICES includes (i) the distribution of drugs and
other biological and pharmaceutical products and professional support services
for individuals with chronic diseases, such as hemophilia, primary pulmonary
hypertension, autoimmune deficiencies and growth disorders, (ii) the
administration of antibiotics, chemotherapy, nutrients and other medications for
patients with acute or episodic disease states and (iii) marketing and
distribution services for pharmaceutical, biotechnology and medical service
firms.
HOME CARE NURSING SERVICES includes (i) professional and paraprofessional
services, including skilled nursing, rehabilitation and other therapies, home
health aide and personal care services, to individuals with acute illnesses,
long-term chronic health conditions, permanent disabilities, terminal illnesses
or post-procedural needs and (ii) care management and coordination for managed
care organizations and self-insured employees.
STAFFING SERVICES includes services to institutional, occupational and
alternate site health care organizations by providing health care professionals
to meet supplemental staffing needs.
The Company evaluates performance and allocates resources based on earnings
(loss) before interest, taxes, depreciation and amortization. The accounting
policies of the reportable segments are the same as those described in the
summary of significant accounting policies. Segment data includes charges for
allocating corporate costs to each of the operating segments. Information about
the Company's operations, inclusive of non-recurring charges, special charges
and other adjustments of $75 million ($40 million related to Specialty
Pharmaceutical Services and $35 million related to Home Care Nursing Services)
in 1996, $122 million ($24 million related to Specialty Pharmaceutical Services
and $98 million related to Home Care Nursing Services) in the year ended 1998 of
which $66 million ($24 million related to Specialty Pharmaceutical Services and
$42 million related to Home Care Nursing Services) was recorded in the nine
months ended September 27, 1998, and $17 million ($2 million related to
Specialty Pharmaceutical
XF-23
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
Services and $15 million related to Home Care Nursing Services) in the nine
months ended October 3, 1999, as discussed in Note 4, is as follows:
SPECIALTY HOME CARE
PHARMACEUTICAL NURSING STAFFING
SERVICES SERVICES SERVICES TOTAL
-------------- --------- -------- ----------
YEAR ENDED DECEMBER 29, 1996
- -----------------------------------------------
Service sales, management fees and other
income....................................... $383,077 $ 943,015 $48,261 $1,374,353
======== ========= ======= ==========
Earnings (loss) before interest, taxes,
depreciation and amortization................ $(24,481) $ 66,899 $ 488 $ 42,906
Depreciation and amortization.................. 8,185 18,322 501 27,008
Interest....................................... 4,566 7,786 335 12,687
-------- --------- ------- ----------
Income (loss) before income taxes and minority
interest..................................... $(37,232) $ 40,791 $ (348) $ 3,211
======== ========= ======= ==========
Segment assets................................. $287,177 $ 484,797 $13,367 $ 785,341
======== ========= ======= ==========
Expenditures for long-lived assets............. $ 11,519 $ 35,597 $ 2,676 $ 49,792
======== ========= ======= ==========
YEAR ENDED DECEMBER 28, 1997
- -----------------------------------------------
Service sales, management fees and other
income....................................... $516,712 $ 856,072 $61,070 $1,433,854
======== ========= ======= ==========
Earnings before interest, taxes, depreciation
and amortization............................. $ 46,962 $ 41,033 $ 1,830 $ 89,825
Depreciation and amortization.................. 7,735 21,038 720 29,493
Interest....................................... 7,386 9,523 442 17,351
-------- --------- ------- ----------
Income before income taxes and minority
interest..................................... $ 31,841 $ 10,472 $ 668 $ 42,981
======== ========= ======= ==========
Segment assets................................. $308,701 $ 456,397 $18,380 $ 783,478
======== ========= ======= ==========
Expenditures for long-lived assets............. $ 11,933 $ 14,602 $ 793 $ 27,328
======== ========= ======= ==========
YEAR ENDED JANUARY 3, 1999
- -----------------------------------------------
Service sales, management fees and other
income....................................... $591,138 $ 658,745 $80,420 $1,330,303
======== ========= ======= ==========
Earnings (loss) before interest, taxes,
depreciation and amortization................ $ 22,493 $(123,641) $ 1,428 $ (99,720)
Depreciation and amortization.................. 9,707 20,782 912 31,401
Interest....................................... 9,447 7,513 454 17,414
-------- --------- ------- ----------
Income (loss) before income taxes.............. $ 3,339 $(151,936) $ 62 $ (148,535)
======== ========= ======= ==========
Segment assets................................. $434,299 $ 489,860 $21,579 $ 945,738
======== ========= ======= ==========
Expenditures for long-lived assets............. $ 15,400 $ 51,705 $ 1,463 $ 68,568
======== ========= ======= ==========
XF-24
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
SPECIALTY HOME CARE
PHARMACEUTICAL NURSING STAFFING
SERVICES SERVICES SERVICES TOTAL
-------------- --------- -------- ----------
NINE MONTHS ENDED SEPTEMBER 27, 1998
(UNAUDITED)
Service sales, management fees and other
income....................................... $430,944 $ 480,771 $56,570 $ 968,285
======== ========= ======= ==========
Earnings (loss) before interest expense, taxes,
depreciation and amortization................ $ 10,541 $ (63,541) $ 592 $ (52,408)
-------- --------- ------- ----------
Depreciation and amortization.................. 6,896 15,512 670 23,078
Interest expense............................... 7,284 5,437 332 13,053
======== ========= ======= ==========
Loss before income taxes....................... $ (3,639) $ (84,490) $ (410) $ (88,539)
======== ========= ======= ==========
Segment assets................................. $386,603 $ 417,258 $17,988 $ 821,849
======== ========= ======= ==========
Expenditures for long-lived assets............. $ 10,629 $ 12,575 $ 1,211 $ 24,415
======== ========= ======= ==========
NINE MONTHS ENDED OCTOBER 3, 1999 (UNAUDITED)
Service sales, management fees and other
income....................................... $532,799 $ 507,296 $77,950 $1,118,045
======== ========= ======= ==========
Earnings (loss) before interest expense, taxes,
depreciation and amortization................ $ 41,696 $ (19,871) $ 1,340 $ 23,165
Depreciation and amortization.................. 8,447 16,488 863 25,798
Interest expense............................... 7,708 4,771 329 12,808
-------- --------- ------- ----------
Income (loss) before income taxes.............. $ 25,541 $ (41,130) $ 148 $ (15,441)
======== ========= ======= ==========
Segment assets................................. $504,286 $ 492,192 $25,779 $1,022,257
======== ========= ======= ==========
Expenditures for long-lived assets............. $ 6,617 $ 9,878 $ 785 $ 17,280
======== ========= ======= ==========
Financial information, summarized by geographic area, is as follows:
SERVICE SALES,
MANAGEMENT FEES AND LONG-LIVED
OTHER INCOME ASSETS
------------------- ----------
YEAR ENDED DECEMBER 29, 1996
United States............................................... $1,345,371 $309,538
Canada...................................................... 28,982 488
---------- --------
$1,374,353 $310,026
========== ========
YEAR ENDED DECEMBER 28, 1997
United States............................................... $1,398,998 $286,008
Canada...................................................... 34,856 628
---------- --------
$1,433,854 $286,636
========== ========
YEAR ENDED JANUARY 3, 1999
United States............................................... $1,290,072 $317,849
Canada...................................................... 40,231 750
---------- --------
$1,330,303 $318,599
========== ========
XF-25
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
NOTE 15. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
$ $ $ $
YEAR ENDED DECEMBER 28, 1997
Service sales, management fees and other income........ 359,144 365,309 353,309 356,092
Gross profit........................................... 133,597 132,954 128,195 125,840
Net income............................................. 9,248 9,411 5,782 2,406
SHARE INFORMATION:
Basic income per share................................. 92,480 94,110 57,820 24,060
YEAR ENDED JANUARY 3, 1999
Service sales, management fees and other income........ 331,967 315,202 321,118 362,016
Gross profit........................................... 113,560 77,376 106,085 124,386
Net loss............................................... (1,980) (49,417) (7,510) (42,558)
SHARE INFORMATION:
Basic loss per share................................... (19,800) (494,170) (75,100) (425,580)
The fourth quarters ended January 3, 1999 and December 28, 1997 include 14
weeks and 13 weeks, respectively.
The second, third and fourth quarters of 1998 include approximately
$64 million, $2 million and $56 million, respectively, of certain non-recurring
charges and other adjustments as indicated in Note 4.
NOTE 16. CONTINGENCY
In September 1999, the Company received a Notice of Amount of Program
Reimbursement relating to its 1997 Medicare cost reports indicating that the
Medicare fiscal intermediary disagrees with the Company's methodology of
allocating a portion of its overhead. The Health Care Financing Administration
has indicated that it agrees with the fiscal intermediary which could result in
a possible disallowance of cost. Since the Company used a similar methodology
for allocating overhead costs in 1998 and 1999, a disallowance could result for
these periods as well. The Company believes its cost reports are accurate and
consistent with past practice accepted by the fiscal intermediary, and will
appeal the notice to the Provider Reimbursement Review Board. While management
believes that adequate provisions have been made for revenue adjustments, the
Company is unable to predict the outcome of this appeal and the final
determination of revenue ultimately recognized under the Medicare program.
XF-26
SCHEDULE II--VALUATION & QUALIFYING ACCOUNTS
COL. B COL. C COL. E
---------- ---------------- ---------
BALANCE AT ADDITIONS COL. D BALANCE
BEGINNING CHARGED TO COSTS ---------- AT END OF
OF PERIOD AND EXPENSES DEDUCTIONS PERIOD
---------- ---------------- ---------- ---------
Allowance for Doubtful Accounts:
For the Year Ended January 3, 1999............... $19,200 $24,046 $(17,650) $25,596
For the Year Ended December 28, 1997............. $22,171 $25,884 $(28,855) $19,200
For the Year Ended December 29, 1996............. $28,517 $18,430 $(24,776) $22,171
XF-27
Until 90 days after the date of the split-off all dealers effecting transactions
in the registered securities, whether or not participating in this distribution,
may be required to deliver a prospectus.
No dealer, salesperson or other person is authorized to give any information or
to represent anything not contained in this prospectus. You must not rely on any
unauthorized information of representations. This prospectus is an offer to sell
only the shares offered hereby, but only under circumstances and jurisdictions
where it is lawful to do so. The information contained in this prospectus is
current only as of its date.
GENTIVA HEALTH SERVICES, INC.
ANNEX A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN
OF MERGER
BY AND AMONG
ADECCO SA,
STAFFING ACQUISITION CORPORATION
AND
OLSTEN CORPORATION
DATED AS OF AUGUST 17, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
--------
ARTICLE I
THE MERGER
Section 1.01. The Merger.................................................. 2
Section 1.02. Effective Time.............................................. 2
Section 1.03. Certificate of Incorporation and By-Laws of Surviving
Corporation................................................. 2
Section 1.04. Directors and Officers of Surviving Corporation............. 2
Section 1.05. Stockholders' Meetings...................................... 2
Section 1.06. Further Assurances.......................................... 3
ARTICLE II
CONVERSION OF SHARES
Section 2.01. Olsten Common Stock......................................... 4
Section 2.02. Election Procedures......................................... 5
Section 2.03. Merger Sub Common Stock; Adecco Owned Olsten Common Stock... 6
Section 2.04. Exchange of Shares.......................................... 6
Section 2.05. Effect on Options and Convertible Securities................ 8
Section 2.06. Fractional Shares........................................... 9
Section 2.07. Dissenting Shares........................................... 9
Section 2.08. Lost Certificates........................................... 10
Section 2.09. Withholding Rights.......................................... 10
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF ADECCO AND MERGER SUB
Section 3.01. Organization, Etc........................................... 11
Section 3.02. Authority................................................... 11
Section 3.03. Consents; No Violations, Etc................................ 11
Section 3.04. Capitalization.............................................. 12
Section 3.05. SEC and Other Filings....................................... 12
Section 3.06. Financial Statements........................................ 13
Section 3.07. Absence of Undisclosed Liabilities.......................... 13
Section 3.08. Absence of Changes or Events................................ 13
Section 3.09. Litigation.................................................. 14
Section 3.10. Compliance with Laws........................................ 14
Section 3.11. Taxes....................................................... 14
Section 3.12. Employee Benefit Plans; ERISA............................... 14
Section 3.13. Environmental Matters....................................... 15
Section 3.14. Finders or Brokers.......................................... 15
Section 3.15. Board Recommendation........................................ 15
A-i
PAGE
--------
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF OLSTEN
Section 4.01. Organization, Etc........................................... 16
Section 4.02. Authority................................................... 16
Section 4.03. Consents; No Violations, Etc................................ 16
Section 4.04. Capitalization.............................................. 17
Section 4.05. SEC Filings................................................. 17
Section 4.06. Financial Statements........................................ 18
Section 4.07. Absence of Undisclosed Liabilities.......................... 18
Section 4.08. Absence of Changes or Events................................ 18
Section 4.09. Litigation.................................................. 20
Section 4.10. Subsidiaries and Investments................................ 20
Section 4.11. Compliance with Laws........................................ 20
Section 4.12. Intellectual Property Rights................................ 21
Section 4.13. Taxes....................................................... 22
Section 4.14. Employee Benefit Plans; ERISA............................... 23
Section 4.15. Labor and Employment Matters................................ 26
Section 4.16. No Change of Control Payments............................... 26
Section 4.17. Environmental Matters....................................... 27
Section 4.18. Insurance................................................... 27
Section 4.19. Leases...................................................... 27
Section 4.20. Contracts and Commitments................................... 28
Section 4.21. Finders or Brokers.......................................... 28
Section 4.22. Opinions.................................................... 29
Section 4.23. Board Recommendation........................................ 29
Section 4.24. Voting Requirements......................................... 29
Section 4.25. State Antitakeover Statutes................................. 29
ARTICLE V
COVENANTS
Section 5.01. Conduct of Business of Olsten and Adecco.................... 30
Section 5.02. No Solicitation............................................. 33
Section 5.03. Access to Information....................................... 34
Section 5.04. Registration Statements and Proxy Statements................ 34
Section 5.05. Other Actions; Filings; Consents............................ 36
Section 5.06. Public Announcements........................................ 36
Section 5.07. Notification of Certain Matters............................. 36
Section 5.08. Expenses.................................................... 37
Section 5.09. Affiliates.................................................. 37
Section 5.10. Stock Exchange Listing...................................... 37
Section 5.11. Indemnification............................................. 37
Section 5.12. Settlement Releases......................................... 38
Section 5.13. Board Representation........................................ 38
Section 5.14. Taxation and the Split-Off.................................. 38
Section 5.15. Certain Employee Benefits................................... 38
Section 5.16. Carryback Elections......................................... 38
Section 5.17. Tax Basis and Earnings & Profits Study...................... 38
Section 5.18. Waiver of Repurchase Obligation............................. 38
A-ii
PAGE
--------
Section 5.19. Review and Filing of Tax Returns............................ 38
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS
OF OLSTEN, ADECCO AND MERGER SUB
Section 6.01. Registration Statement...................................... 39
Section 6.02. Stockholder Approval........................................ 39
Section 6.04. HSR Act and Other Antitrust Approvals....................... 39
Section 6.05. Stock Exchange Listing...................................... 39
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF ADECCO
AND MERGER SUB
Section 7.01. Representations and Warranties True......................... 40
Section 7.02. Performance................................................. 40
Section 7.03. Material Adverse Effect..................................... 40
Section 7.04. Compliance with Separation Agreement........................ 40
Section 7.05. Separation Agreement Representations and Warranties True.... 40
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF OLSTEN
Section 8.01. Representations and Warranties True......................... 40
Section 8.02. Performance................................................. 40
Section 8.03. Material Adverse Effect..................................... 41
ARTICLE IX
CLOSING
Section 9.01. Time and Place.............................................. 41
Section 9.02. Filings and Deliveries at the Closing....................... 41
ARTICLE X
TERMINATION AND ABANDONMENT
Section 10.01. Termination................................................. 41
Section 10.02. Procedure for Termination................................... 42
Section 10.03. Effect of Termination and Abandonment....................... 42
Section 10.04. Termination Fees............................................ 43
ARTICLE XI
DEFINITIONS
Section 11.01. Terms Defined in This Agreement............................. 43
ARTICLE XII
MISCELLANEOUS
Section 12.01. Amendment and Modification.................................. 46
Section 12.02. Waiver of Compliance; Consents.............................. 46
Section 12.03. Survival of Representations and Warranties;
Investigations.............................................. 46
A-iii
PAGE
--------
Section 12.04. Notices..................................................... 46
Section 12.05. Assignment; Third Party Beneficiaries....................... 47
Section 12.06. Governing Law............................................... 47
Section 12.07. Agent for Service; Waiver of Limitations.................... 48
Section 12.08. WAIVER OF JURY TRIAL AND CERTAIN DAMAGES.................... 48
Section 12.09. Counterparts................................................ 48
Section 12.10. Severability................................................ 48
Section 12.11. Interpretation.............................................. 48
Section 12.12. Entire Agreement............................................ 49
Section 12.13. Enforcement of Agreement.................................... 49
EXHIBITS
Exhibit A -- Form of Separation Agreement
Exhibit B -- Form of Olsten Voting Agreement
Exhibit C Form of Certificate of Incorporation of the Surviving
-- Corporation
Exhibit D -- Form of Affiliate Letter
A-iv
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 17, 1999 (the "Agreement"),
by and among Adecco SA, a SOCIETE ANONYME organized under the laws of
Switzerland ("Adecco"), Staffing Acquisition Corporation, a Delaware corporation
and a wholly-owned subsidiary of Adecco ("Merger Sub") and Olsten Corporation, a
Delaware corporation ("Olsten"). Merger Sub and Olsten are hereinafter sometimes
collectively referred to as the "Constituent Corporations."
RECITALS
WHEREAS, Adecco and Olsten wish to effect the combination of the staffing
services and information services businesses of Adecco and Olsten through a
merger of Olsten with Merger Sub (the "Merger") on the terms and conditions set
forth herein;
WHEREAS, prior to the Merger, Olsten will transfer, on the terms and subject
to the conditions set forth in the separation agreement, dated as of the date
hereof, among Adecco, Olsten and OHS (as hereinafter defined) in the form
attached hereto as Exhibit A (the "Separation Agreement," which term shall
include the Ancillary Agreements (as defined in the Separation Agreement)), the
Health Services Business (as defined in the Separation Agreement) of Olsten and
its Subsidiaries and the Assumed OHS Liabilities (as defined in the Separation
Agreement) to Aaronco Corp. ("OHS"), a Delaware corporation and a wholly-owned
subsidiary of Olsten and at the Effective Time (as defined in Section 1.02
hereof) the holders of shares of Olsten common stock, par value $.10 ("Olsten
Stock"), and Olsten Class B common stock, par value $.10 ("Olsten Class B
Stock," and, together with the Olsten Stock, the "Olsten Common Stock"), will
receive shares of common stock of OHS in consideration for the redemption of a
portion of their shares of Olsten Common Stock (the "Split-Off");
WHEREAS, upon the Split-Off it is intended that Olsten will own only the
Retained Businesses (as defined in the Separation Agreement) subject to the
terms and conditions of the Separation Agreement;
WHEREAS, in order to effect the Split-Off and the Merger (together, the
"Transaction"), Merger Sub will merge with and into Olsten and each issued and
outstanding share of Olsten Common Stock (other than shares of Olsten Common
Stock held by Olsten as treasury stock or owned by Adecco or Merger Sub
immediately prior to the Effective Time and other than Dissenting Shares (as
defined in Section 2.07 hereof)), will be converted into the right to receive
(i) the Merger Consideration (as defined in Section 2.01 hereof) and (ii) the
Split-Off Consideration (as defined in Section 2.01 hereof) as set forth below;
WHEREAS, the Board of Directors of Olsten has unanimously determined that
the Merger and the Split-Off are advisable on the terms and conditions contained
in this Agreement, the Separation Agreement and the other agreements
contemplated hereby and thereby, and that each of the other transactions
contemplated herein and therein are fair to, and in the best interests of Olsten
and Olsten's stockholders, and has approved and adopted this Agreement, the
Separation Agreement, the Merger, the Split-Off and each of the other
transactions contemplated herein and therein and intends to recommend the
approval and adoption of this Agreement, the Merger and the other transactions
contemplated hereby by the stockholders of Olsten;
WHEREAS, the Board of Directors of Adecco has determined that the Merger is
advisable on the terms and conditions contained in this Agreement and that each
of the other transactions contemplated herein is consistent with and in
furtherance of the long-term business strategy of Adecco and is fair to, and in
the best interests of Adecco and Adecco's stockholders, and has approved and
adopted this Agreement and the other transactions contemplated herein and
intends to recommend that the stockholders of Adecco approve (i) the issuance of
the Adecco Common Stock (as defined Section 2.01
A-1
hereof) and, if necessary, the Adecco ADSs (as defined in Section 2.01 hereof)
making up the Stock Consideration (as defined in Section 2.01 hereof) and
required for issuance pursuant to Section 2.05 of this Agreement and the waiver
of any preemptive rights with respect thereto and (ii) the increase in the size
of the Board of Directors of Adecco and the election of new directors as
contemplated by Section 5.13 hereof (such proposals collectively referred to
herein as the "Adecco Stockholder Proposals");
WHEREAS, certain holders of Olsten Class B Stock have committed to vote in
favor of approving this Agreement, the Merger, and the other transactions
contemplated hereby, all as provided in the form attached hereto as Exhibit B
(the "Voting Agreement");
WHEREAS, Adecco, Merger Sub and Olsten desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger; and
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, agreements and conditions contained
herein, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.01. THE MERGER. (a) In accordance with the provisions of this
Agreement and the General Corporation Law of the State of Delaware (the
"Delaware Act"), at the Effective Time, which shall occur as soon as practicable
after the satisfaction or waiver of the conditions set forth in Articles VI, VII
and VIII, Merger Sub shall be merged with and into Olsten, and Olsten shall be
the surviving corporation (hereinafter sometimes called the "Surviving
Corporation") and shall continue its corporate existence under the laws of the
State of Delaware. The name of the Surviving Corporation shall be "Olsten," or
such other name as may be designated by Adecco. At the Effective Time the
separate existence of Merger Sub shall cease.
(b) The Merger shall have the effects on Olsten and Merger Sub as
constituent corporations of the Merger as provided under the Delaware Act.
Section 1.02. EFFECTIVE TIME. The Merger shall become effective at the
time of filing of, or at such later time specified in, a certificate of merger,
in the form required by and executed in accordance with the Delaware Act, with
the Secretary of State of the State of Delaware in accordance with the Delaware
Act (the "Certificate of Merger"). The date and time when the Merger shall
become effective is herein referred to as the "Effective Time."
Section 1.03. CERTIFICATE OF INCORPORATION AND BY-LAWS OF SURVIVING
CORPORATION. The Certificate of Incorporation of Olsten shall be amended as of
the Effective Time to read as set forth on Exhibit C. The By-Laws of Olsten, as
in effect immediately prior to the Effective Time, shall be the By-Laws of the
Surviving Corporation until thereafter amended as provided by law.
Section 1.04. DIRECTORS AND OFFICERS OF SURVIVING CORPORATION. The initial
directors of the Surviving Corporation shall be those persons who serve as
directors of Merger Sub immediately prior to the Effective Time and the initial
officers of the Surviving Corporation shall be those persons who serve as
officers of Olsten immediately prior to the Effective Time, in each case until
their successors are elected and qualified or until their earlier death,
resignation or removal in accordance with the Surviving Corporation's
Certificate of Incorporation and By-Laws.
Section 1.05. STOCKHOLDERS' MEETINGS. (a) Olsten shall take all action
necessary in accordance with applicable law and its Certificate of Incorporation
and By-Laws to call and convene a special meeting of its stockholders (the
"Olsten Special Meeting" and, together with the Adecco Special Meeting (as
defined below), the "Special Meetings") as soon as practicable to consider, vote
upon and obtain the approval of this Agreement, the Merger and the other
transactions contemplated hereby by a majority
A-2
of the voting power represented by the outstanding shares of Olsten Stock and
Olsten Class B Stock entitled to vote thereon, voting together as a single
class. Olsten shall, through its Board of Directors, (i) recommend to its
stockholders approval of this Agreement, the Merger and the other transactions
contemplated hereby, which recommendation shall be contained in a proxy
statement of Olsten (the "Olsten Proxy Statement") and shall not withdraw,
modify or change in any manner or take action inconsistent with its
recommendation of this Agreement, the Merger or the other transactions
contemplated hereby and shall not resolve to do any of the foregoing and
publicly disclose such resolution; PROVIDED, HOWEVER, that, subject to
compliance with the provisions of Section 5.02 hereof, the Board of Directors of
Olsten may fail to make its recommendation to its stockholders or may withdraw,
modify or change in any manner or take action inconsistent with such
recommendation or resolve to do any of the foregoing and publicly disclose such
resolution if such Board of Directors reasonably believes after (x) receiving a
Superior Proposal (as hereinafter defined) which was not solicited by it after
July 26, 1999 and which did not result from a breach of Section 5.02 hereof,
(y) receiving the advice of outside legal counsel that failure to take such
action would be a breach of its fiduciary duties to its stockholders under
applicable law and (z) receiving the advice of a financial advisor of nationally
recognized reputation that the party making such proposal is financially capable
and that such Superior Proposal is more favorable from a financial point of view
to its stockholders than the Merger and the Split-Off, that the making of such
recommendation or the failure to so withdraw, modify or change in any manner or
take any action inconsistent with such recommendation or to resolve to do any of
the foregoing and publicly disclose such resolution would be a breach of its
fiduciary duties under applicable law and (ii) cause to be solicited from its
stockholders proxies regarding approval and adoption of this Agreement, the
Merger and the other transactions contemplated hereby.
(b) Adecco shall take all action necessary in accordance with applicable law
and its Certificate of Incorporation and By-Laws (or other applicable
organizational documents) to call and convene a special meeting of its
stockholders (the "Adecco Special Meeting") as soon as practicable to consider
and vote upon the approval of the Adecco Stockholder Proposals. Adecco, through
its Board of Directors, (i) shall recommend to its stockholders the approval of
the Adecco Stockholder Proposals, which recommendation shall be contained in any
materials of Adecco delivered by Adecco to its stockholders in connection with
the convening of the Adecco Special Meeting (the "Adecco Proxy Statement") and
(ii) cause to be solicited from its stockholders the approval of the Adecco
Stockholder Proposals.
Section 1.06. FURTHER ASSURANCES. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, obligation, title or interest in, to or under
any of the rights, properties or assets of either of the Constituent
Corporations acquired or to be acquired by the Surviving Corporation as a result
of, or in connection with, the Merger or otherwise to carry out this Agreement,
the officers and directors of the Surviving Corporation shall be authorized to
execute and deliver, in the name and on behalf of each of the Constituent
Corporations or otherwise, all such deeds, bills of sale, assignments and
assurances and to take and do, in the name and on behalf of each of the
Constituent Corporations or otherwise, all such other actions and things as may
be necessary or desirable to vest, perfect or confirm any and all right,
obligation, title and interest in, to and under such rights, properties or
assets in the Surviving Corporation or otherwise to carry out this Agreement.
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ARTICLE II
CONVERSION OF SHARES
Section 2.01. OLSTEN COMMON STOCK. (a) At the Effective Time, each share
of Olsten Common Stock issued and outstanding immediately prior to the Effective
Time (except for Dissenting Shares (as hereinafter defined), shares, if any,
owned by Olsten as treasury stock or owned by Adecco, Merger Sub or any of their
wholly-owned Subsidiaries or by any wholly-owned Subsidiary of Olsten) shall, by
virtue of the Split-Off and the Merger and without any action on the part of the
holder thereof, be converted into the right to receive (x) all of the shares of
validly issued, fully paid and nonassessable shares (the "Split-Off
Consideration") of common stock of OHS (the "OHS Common Stock"), except for a
nominal number of the outstanding shares of OHS Common Stock which may be
retained by Olsten, which shares shall be identified, prior to the Effective
Time, in a writing between Olsten and Adecco and (y) either (A) $8.75 per share,
without interest (the "Cash Consideration") or (B) .12472 Adecco American
Depositary Shares ("Adecco ADSs"), each Adecco ADS representing one-eighth of
one validly issued, fully paid and nonassessable share of Adecco's common
shares, par value CHF 10.00 per share (the "Adecco Common Stock"), evidenced by
American Depositary Receipts of Adecco ("Adecco ADRs") (the "Stock
Consideration") or (C) a combination of a fraction of an Adecco ADS and cash,
determined in accordance with Section 2.01(d), (e) or (f), as applicable (the
foregoing clause (A) or (B) or (C) (the "Merger Consideration"). The ADSs are to
be issued pursuant to a Deposit Agreement (the "Deposit Agreement") dated
November 1994, among Adecco, Morgan Guaranty Trust Company of New York, as
Depositary and the holders from time to time of Adecco ADRs evidencing Adecco
ADSs representing Adecco Common Stock issued thereunder. The Split-Off
Consideration and the Merger Consideration pursuant to this Section 2.01(a) are
hereinafter sometimes called the "Closing Consideration."
(b) EFFECT ON OLSTEN COMMON STOCK. At the Effective Time all outstanding
shares of Olsten Common Stock, by virtue of the Merger and without any action on
the part of the holders thereof, shall no longer be outstanding and shall be
canceled and retired and shall cease to exist, and each holder of a certificate
representing any such shares of Olsten Common Stock shall thereafter cease to
have any rights with respect to such shares of Olsten Common Stock, except the
right to receive the Closing Consideration for such shares of Olsten Common
Stock as specified in the foregoing clause (a) upon the surrender of such
certificate in accordance with Section 2.04 or dissenters' rights pursuant to
Section 2.07.
(c) ELECTION OF MERGER CONSIDERATION. Subject to the allocation and election
procedures set forth in this Section 2.01 and Section 2.02, each holder of
record (as of the Effective Time) of shares of Olsten Common Stock will be
entitled, with respect to each such share, to (i) receive the Split-Off
Consideration and (ii)(A) elect to receive cash (a "Cash Election"), (B) elect
to receive Adecco ADSs (a "Stock Election"), or (C) indicate that such record
holder has no preference as to the receipt of cash or Adecco ADSs (a
"Non-Election"). Any holder who fails to make a valid and timely election shall
be deemed to have made a Non-Election. All such elections shall be made on a
form designed for that purpose (a "Form of Election") in accordance with the
procedures specified in Section 2.02.
(d) EXCESS CASH ELECTIONS. If the aggregate number of shares of Olsten
Common Stock covered by Cash Elections (the "Cash Election Shares") exceeds the
Cash Election Number (as defined below), then all shares of Olsten Common Stock
covered by Stock Elections and all shares of Olsten Common Stock covered by
Non-Elections (the "Non-Election Shares") shall be converted into the right to
receive the Split-Off Consideration and Stock Consideration, and all shares of
Olsten Common Stock covered by Cash Elections shall be converted into the right
to receive (in addition to the Split-Off Consideration) Adecco ADSs and cash in
the following manner:
each share shall be converted into the right to receive (i) an amount in
cash, without interest, equal to the product of (x) the Cash Consideration
and (y) a fraction (the "Cash Fraction"), the
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numerator of which shall be the Cash Election Number and the denominator of
which shall be the total number of Cash Election Shares, and (ii) a number
of shares of Adecco ADSs equal to the product of (x) the Stock Consideration
and (y) a fraction equal to one minus the Cash Fraction.
The "Cash Election Number" shall be equal to (i) 50% of the number of shares
of Olsten Common Stock outstanding as of immediately prior to the Effective
Time, minus (ii) (A) the number of shares of Olsten Common Stock represented by
Dissenting Shares (as defined below), (B) the number of shares of Olsten Common
Stock for which cash in lieu of fractional shares of Adecco ADSs is payable
pursuant to Section 2.06 and (C) the number of shares of Olsten Common Stock, if
any, owned by Olsten as treasury stock or owned by Adecco, Merger Sub or any of
their wholly-owned Subsidiaries or by any wholly-owned Subsidiary of Olsten.
(e) EXCESS STOCK ELECTIONS. If the aggregate number of shares of Olsten
Common Stock covered by Stock Elections (the "Stock Election Shares") exceeds
the Stock Election Number (as defined below), then all shares of Olsten Common
Stock covered by Cash Elections and all shares of Olsten Common Stock covered by
Non-Elections shall be converted into the right to receive the Split-Off
Consideration and the Cash Consideration, and all shares of Olsten Common Stock
covered by Stock Elections shall be converted into the right to receive (in
addition to the Split-Off Consideration) Adecco ADSs and cash in the following
manner:
each share shall be converted into the right to receive (i) a number of
shares of Adecco ADSs equal to a fraction (the "Stock Fraction"), the
numerator of which shall be the Stock Election Number and the denominator of
which shall be the total number of Stock Election Shares, and (ii) an amount
in cash, without interest, equal to the product of (x) the Cash
Consideration and (y) a fraction equal to one minus the Stock Fraction.
The "Stock Election Number" shall be equal to (i) 50% of the number of
shares of Olsten Common Stock outstanding as of immediately prior to the
Effective Time minus (ii) the number of shares of Olsten Common Stock, if any,
owned by Olsten as treasury stock or owned by Adecco, Merger Sub or any of their
wholly-owned Subsidiaries or by any wholly-owned Subsidiary of Olsten.
(f) INSUFFICIENT ELECTIONS. In the event that neither Section 2.01(d) nor
Section 2.01(e) above is applicable, all shares of Olsten Common Stock covered
by Cash Elections shall be converted into the right to receive the Split-Off
Consideration and the Cash Consideration, all shares of Olsten Common Stock
covered by Stock Elections shall be converted into the right to receive the
Split-Off Consideration and the Stock Consideration, and the shares of Olsten
Common Stock covered by Non-Elections, if any, shall be converted into the right
to receive (in addition to the Split-Off Consideration) Adecco ADSs and cash in
the following manner:
each share shall be converted into the right to receive (i) an amount in
cash, without interest, equal to the product of (x) the Cash Consideration
and (y) a fraction (the "Non-Election Fraction"), the numerator of which
shall be the excess, if any, of the Cash Election Number over the total
number of Cash Election Shares and the denominator of which shall be the
Non-Election Shares and (ii) a number of shares of Adecco ADSs equal to the
product of (x) the Stock Consideration and (y) a fraction equal to one minus
the Non-Election Fraction.
Section 2.02. ELECTION PROCEDURES. (a) Elections shall be made by holders
of Olsten Common Stock by mailing to the Exchange Agent (as hereinafter defined)
a Form of Election. To be effective, a Form of Election must be properly
completed, signed and submitted to the Exchange Agent and accompanied by
Certificates (as hereinafter defined) representing the shares of Olsten Common
Stock as to which the election is being made. Holders of record of shares of
Olsten Common Stock who hold such shares as nominees, trustees or in other
representative capacities (a "Representative") may submit multiple Forms of
Elections, provided that such Representative certifies in writing that each such
Form of Election covers all the shares of Olsten Common Stock held by each
Representative for a particular
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beneficial owner. Olsten shall have the discretion, which it may delegate in
whole or in part to the Exchange Agent, to determine whether Forms of Election
have been properly completed, signed and submitted or revoked and to disregard
immaterial defects in Forms of Election. The decision of Olsten (or the Exchange
Agent) in such matters shall be conclusive and binding. Neither Olsten nor the
Exchange Agent shall be under any obligation to notify any person of any defect
in a Form of Election submitted to the Exchange Agent. The Exchange Agent shall
make all computations contemplated by Section 2.01 and this Section 2.02 and all
such computations shall be conclusive and binding on the holders of Olsten
Common Stock. Forms of Election and other appropriate and customary transmittal
materials (which shall specify that delivery shall be effected and risk of loss
and title to the Certificates theretofore representing shares of Olsten Common
Stock shall pass, only upon proper delivery of such Certificates to the Exchange
Agent) in such form as Adecco and Olsten shall mutually agree shall be mailed on
the date that the Olsten Proxy Statement is first mailed to the stockholders of
Olsten.
(b) A holder of Olsten Common Stock who does not submit a Form of Election
which is received by the Exchange Agent prior to the Election Deadline (as
defined below) shall be deemed to have made a Non-Election. If Olsten or the
Exchange Agent shall determine that any purported Cash Election or Stock
Election was not properly made with respect to any or all of the shares of
Olsten Common Stock of a holder, such purported Cash Election or Stock Election
shall be deemed to be of no force and effect and the stockholder making such
purported Cash Election or Stock Election shall, for purposes hereof, be deemed
to have made a Non-Election.
(c) Olsten shall use its reasonable best efforts to mail the Form of
Election to all persons or entities who become holders of Olsten Common Stock
during the period between the record date for the Olsten Special Meeting and
10:00 a.m., New York time, on the date five business days prior to the
anticipated Effective Time and to make the Form of Election available to all
persons or entities who become holders of Olsten Common Stock subsequent to such
day and no later than the close of business on the business day prior to the
Effective Time. A Form of Election must be received by the Exchange Agent by
4:00 p.m. on the last business day prior to the Effective Time (the "Election
Deadline") in order to be effective. All elections may be revoked in writing
until the Election Deadline.
Section 2.03. MERGER SUB COMMON STOCK; ADECCO OWNED OLSTEN COMMON
STOCK. (a) At the Effective Time, each share of common stock, par value $.001
per share, of Merger Sub ("Merger Sub Common Stock") issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into one
validly issued, fully paid and nonassessable share of common stock, par value
$.10 per share, of the Surviving Corporation ("Surviving Corporation Common
Stock").
(b) At the Effective Time all outstanding shares of Olsten Common Stock that
are owned by Olsten as treasury stock and any shares of Olsten Common Stock that
are owned by Adecco or Merger Sub or any wholly-owned Subsidiary thereof or by
any wholly-owned Subsidiary of Olsten, by virtue of the Merger and without any
action on the part of the holders thereof, shall no longer be outstanding and
shall be canceled and retired and shall cease to exist, and each holder of a
certificate representing any such shares of Olsten Common Stock shall thereafter
cease to have any rights with respect to such shares of Olsten Common Stock and
no consideration shall be delivered in exchange therefor.
Section 2.04. EXCHANGE OF SHARES. (a) Adecco and Olsten shall jointly
designate one or more persons in the United States to act as the Exchange Agent
(the "Exchange Agent") for the purposes described in Section 2.02 and for the
purpose of exchanging certificates representing shares of Olsten Common Stock
for the Closing Consideration. At least one business day prior to the Effective
Time, Adecco will deposit with the Exchange Agent the aggregate Merger
Consideration, and Olsten shall deposit or cause OHS to deposit with the
Exchange Agent the aggregate Split-Off Consideration, each to be paid in respect
of the shares of Olsten Common Stock. For purposes of determining the aggregate
Merger Consideration and the aggregate Split-Off Consideration to be so
deposited with the
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Exchange Agent, Adecco and Olsten shall assume that no holder of shares of
Olsten Common Stock will perfect his/her right to appraisal of his/her shares of
Olsten Common Stock pursuant to Section 2.07 hereof. Adecco will pay all fees
and expenses associated with the issuance of the Adecco ADSs evidenced by Adecco
ADRs to Morgan Guaranty Trust Company of New York, as depositary (the
"Depositary") and the issuance by the Depositary of the Adecco ADSs.
(b) Promptly after the Effective Time, Adecco and the Surviving Corporation
shall cause the Exchange Agent to mail to each record holder, as of the
Effective Time, of an outstanding certificate or certificates that immediately
prior to the Effective Time represented shares of Olsten Common Stock (the
"Certificates") a form letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon proper delivery of the Certificates to the Exchange Agent) and
instructions for use in effecting the surrender of the Certificates in exchange
for the Closing Consideration.
(c) Upon surrender to the Exchange Agent of a Certificate, together with
such letter of transmittal duly executed, the holder of such Certificate shall
be entitled to receive in exchange therefor the Closing Consideration that such
holder has the right to receive under this Article II, and such Certificate
shall forthwith be canceled. If any shares of Adecco ADSs are to be issued to a
person other than the person in whose name the surrendered Certificate is
registered, it shall be a condition of exchange that such surrendered
Certificate shall be properly endorsed or otherwise in proper form for transfer
and that the person requesting such exchange shall pay any transfer or other
taxes required by reason of the exchange by a person other than the registered
holder of the Certificate surrendered or such person shall establish to the
satisfaction of Adecco that such tax has been paid or is not applicable. Until
surrendered in accordance with the provisions of this Section 2.04, each
Certificate shall represent, for all purposes, the right to receive the Closing
Consideration in respect of the number of shares of Olsten Common Stock
evidenced by such Certificate. No dividends or other distributions that are
declared after the Effective Time on Adecco Common Stock or OHS Common Stock and
payable to the respective holders of record thereof after the Effective Time
will be paid to holders of Certificates until such holders surrender their
Certificates. Upon such surrender, Adecco or OHS, as the case may be, shall
deposit with the Exchange Agent and shall cause the Exchange Agent to pay to the
record holder of the shares of Adecco ADRs or Adecco Common Stock, as the case
may be, representing Stock Consideration or the recordholder of the OHS Common
Stock representing Split-Off Consideration, the dividends or other
distributions, excluding interest, that became payable after the Effective Time
and were not paid because of the delay in surrendering Certificates for
exchange.
(d) From and after the Effective Time, there shall be no transfers on the
stock transfer books of Olsten of the shares of Olsten Common Stock that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to Adecco or the Surviving Corporation, they
shall be canceled and exchanged as provided in this Article II.
(e) Neither Olsten, Adecco nor the Surviving Corporation shall be liable to
any holder of Certificates with respect to any Closing Consideration delivered
to a public official pursuant to any applicable abandoned property, escheat or
similar law.
(f) Any Closing Consideration payable to holders of Olsten Common Stock
pursuant to Section 2.01 which remains undistributed to the holders of Olsten
Common Stock for a period of six months after the Closing Date shall be
delivered to the Surviving Corporation, upon its request, and any holders of
Olsten Common Stock who have not surrendered Certificates to the Exchange Agent
for the Closing Consideration or complied with the instructions in the letter of
transmittal, as the case may be, shall thereafter look only to the Surviving
Corporation for payment of the Closing Consideration.
(g) Notwithstanding Section 2.01(a), Adecco will provide holders of Olsten
Common Stock with the option to elect to receive one share of Adecco Common
Stock for every eight shares of Adecco
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ADSs such holder would otherwise be entitled to receive pursuant to
Section 2.01(a). The Form of Election will provide, consistent with the terms of
the Deposit Agreement, for such election option and holders of Olsten Common
Stock who wish to do so must irrevocably elect to receive such Adecco Common
Stock at the time they surrender their Certificates representing shares of
Olsten Common Stock in accordance with the provisions described in this
Section 2.04, and the receipt of such Adecco Common Stock will be deemed for all
purposes of this Agreement as the receipt of the Stock Consideration and
reference to Adecco ADSs in the provisions of Article II shall, as applicable
for such purposes, be deemed references to such Adecco Common Stock.
Section 2.05. EFFECT ON OPTIONS AND CONVERTIBLE SECURITIES. (a) The
parties hereto agree that each option to purchase shares of Olsten Common Stock
(each a "Olsten Option") issued and outstanding under the Olsten 1994 Stock
Incentive Plan, the 1990 Nonqualified Stock Option Plan for Non-Employee
Directors and Consultants, the Of Counsel Enterprises, Inc. 1993 Employee Stock
Option Plan, the IMI Systems, Inc. 1988 Incentive Stock Option Plan, the
Lifetime Corporation 1989 Non-Employee Directors Stock Option Plan, and the
Quantum Health Resources, Inc. 1991 Restated Stock Option Plan (the "Olsten
Plans"), to the extent, if any, provided in the Olsten Plans as in effect on
August 1, 1999, shall be fully vested and exercisable prior to or at the
Effective Time.
(b) Effective as of the Effective Time, all outstanding Olsten Options held
by Olsten Employees (as defined in the Employee Benefits Allocation Agreement)
and Olsten non-employee directors shall be adjusted as described below to
represent options to purchase Adecco Common Stock. Each such Olsten Option shall
be adjusted such that (i) the aggregate post-transaction difference between the
fair market value of the Adecco Common Stock subject to the option over the
aggregate exercise price of the option remains the same as the aggregate
pre-transaction difference between the fair market value of the Olsten Common
Stock subject to the option over the aggregate exercise price of the option,
(ii) the aggregate exercise price of the option remains the same and (iii) the
ratio of the post-transaction fair market value per share subject to the option
to exercise price per share is the same as the pre-transaction ratio. For this
purpose, the post-transaction fair market value of Adecco Common Stock shall be
the average of the closing prices on the Swiss Stock Exchange for the five
trading days immediately preceding the Effective Time (converted into U.S.
Dollars at the Federal Reserve's Noon Buying Rate for U.S. Dollars and CHF on
each of such days as determined pursuant to instructions for Form 20-F of the
Securities Exchange Commission (the "SEC")), and the pre-transaction fair market
value of the Olsten Common Stock shall be the average of the closing prices on
the New York Stock Exchange (the "NYSE") for the five trading days immediately
preceding the Effective Time. If appropriate, the exercise price of the Olsten
Options, as adjusted, shall be converted into CHF at the Federal Reserve's Noon
Buying Rate for U.S. Dollars and CHF on the Effective Date.
(c) Effective as of the Effective Time, all Olsten Options held by OHS
Employees (as defined in the Employee Benefits Allocation Agreement) shall be
assumed by OHS and, at the election of OHS, either retired, to the extent
permitted by the Olsten Plans and applicable option agreements, in exchange for
cash, or converted into options to purchase OHS shares on terms set forth by the
OHS Board of Directors (or a committee thereof), in its discretion, subject to
the Olsten Plans and applicable option agreements.
(d) Without limiting the foregoing and except as otherwise provided in
clauses (b) and (c) above, the duration and other terms of each adjusted Olsten
Options immediately after the Effective Time (unless otherwise agreed in writing
by the optionee with respect to a particular option) shall be the same as the
corresponding Olsten Option that were in effect immediately before the Effective
Time, except that all references to Olsten in the Olsten Plans (and the
corresponding references in each option agreement documenting each such stock
option) shall be deemed to be references to Adecco or OHS, as applicable.
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(e) As soon as practicable after the Effective Time, Adecco shall deliver to
optionees appropriate notices setting forth such optionee's rights pursuant to
the adjusted Olsten Options referenced in clause (b) above.
(f) Adecco shall take all corporate action necessary to reserve for issuance
a sufficient number of shares of Adecco Common Stock for delivery upon exercise
of stock options referenced in clause (b) above. As soon as practicable after
the Effective Time, Adecco shall file registration statements on Form S-8, or
another appropriate form, as the case may be (or any successor form), with
respect to the shares of Adecco Common Stock subject to such options.
(g) Subject to Adecco's performance of its obligations in the first sentence
of clause (f) above, Olsten, prior to the Effective Time, shall take all
corporate action necessary to cause all outstanding Olsten Options to cease to
represent any claim on the equity of Olsten.
(h) Olsten agrees to cooperate with Adecco to develop and implement a
program to be effective at the Effective Time, whereby out-of-the money Olsten
Options will, with the consent of the several holders, be replaced or
restructured with appropriate employee incentives, or terminated for an
equitable amount. As to such Olsten Options which are not so replaced,
restructured or terminated, Olsten will, to the extent allowed by the Olsten
Plans, terminate such options at the Effective Time.
(i) At and after the Effective Time, the Quantum Debt shall no longer be
exchangeable for shares of Olsten Class B Stock, but instead shall thereafter be
exchangeable, upon surrender of the instrument evidencing such Quantum Debt to
OHS, into the Closing Consideration that would have been payable to the holder
of such instrument, had such instrument been surrendered in exchange for Olsten
Class B Stock immediately prior to the Effective Time as if such holder had made
a Non-Election. Adecco shall take all corporate action necessary to reserve for
issuance a sufficient number of Adecco ADSs for issuance to holders of Quantum
Debt surrendering the instruments evidencing such Quantum Debt and, upon payment
by OHS of the fair market value of such Adecco ADSs, shall provide such Adecco
ADSs to OHS in satisfaction of such exchange obligation. After the Effective
Time, the Quantum Debt shall cease to represent any claim on the equity of
Olsten.
Section 2.06. FRACTIONAL SHARES. Notwithstanding any other provision of
this Agreement, each holder of shares of Olsten Common Stock who upon surrender
of all of the Certificates of such holder would be entitled to receive
fractional shares of Adecco Common Stock, Adecco ADSs or OHS Common Stock shall
receive, in lieu of such fractional shares, cash in an amount equal to such
fraction multiplied by the Market Value of Adecco Common Stock, Adecco ADSs or
OHS Common Stock, as applicable. With respect to Adecco ADSs, "Market Value"
shall mean the arithmetic average of the last reported sale price of Adecco ADSs
as reported on the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") for the five (5) consecutive trading days ending
with the last trading day prior to the Effective Time. With respect to Adecco
Common Stock, "Market Value" shall mean the arithmetic average of the last
reported sale price of Adecco Common Stock as reported on the Swiss Stock
Exchange for the five (5) consecutive trading days ending with the last trading
day prior to the Effective Time. With respect to OHS Common Stock, "Market
Value" shall mean the last reported sale price of OHS Common Stock as reported
on a national securities exchange or NASDAQ on the first full trading day
following the Effective Time. All references in this Agreement to Adecco ADSs or
Adecco Common Stock to be issued as Stock Consideration or OHS Common Stock to
be issued as Split-Off Consideration shall be deemed to include any cash in lieu
of fractional shares of Adecco ADSs, Adecco Common Stock or OHS Common Stock, as
applicable, payable pursuant to this Section 2.06.
Section 2.07. DISSENTING SHARES. (a) Notwithstanding anything in this
Agreement to the contrary, Olsten Common Stock which is issued and outstanding
immediately prior to the Effective Time and which is held by Olsten stockholders
who have not voted such shares in favor of the Merger, who shall have delivered
a written demand for appraisal of such shares of Olsten Common Stock in the
manner
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provided in the Delaware Act and who, as of the Effective Time, shall not have
effectively withdrawn or lost such right to appraisal ("Dissenting Shares")
shall not be converted into or represent a right to receive the Closing
Consideration pursuant to Section 2.01 hereof, but the holders thereof shall be
entitled only to such rights as are granted by Section 262 of the Delaware Act.
Each holder of Dissenting Shares who becomes entitled to payment for such shares
pursuant to Section 262 of the Delaware Act shall receive payment therefor from
the Surviving Corporation in accordance with the Delaware Act; PROVIDED,
HOWEVER, that if (i) any such holder of Dissenting Shares shall have failed to
establish his/her entitlement to appraisal rights as provided in Section 262 of
the Delaware Act, (ii) any such holder of Dissenting Shares shall have
effectively withdrawn his/her demand for appraisal of such shares of Olsten
Common Stock or lost his/her right to appraisal and payment for his/her shares
of Olsten Common Stock under Section 262 of the Delaware Act or (iii) neither
any holder of Dissenting Shares nor the Surviving Corporation shall have filed a
petition demanding a determination of the value of all Dissenting Shares within
the time provided in Section 262 of the Delaware Act, such holder or holders, as
the case may be, shall forfeit the right to appraisal of such shares and each
such share shall thereupon be deemed to have been converted, as of the Effective
Time, into and represent the right to receive from the Surviving Corporation the
Closing Consideration, without interest thereon, as provided in Section 2.01
hereof. In such case, the Surviving Corporation will provide to such holder or
holders, the Split-Off Consideration with respect to such shares.
(b) NOTICE OF APPRAISAL DEMANDS. Olsten shall give Adecco and Merger Sub
(i) prompt notice of any written demands for appraisal, withdrawals of demands
for appraisal and any other instruments served pursuant to Section 262 of the
Delaware Act received by Olsten and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under
Section 262 of the Delaware Act. Olsten shall not, except with the prior written
consent of Adecco, voluntarily make any payment with respect to any demands for
appraisal or offer to settle or settle any such demands.
Section 2.08. LOST CERTIFICATES. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Exchange Agent, the posting by such person of a bond in such reasonable
amount as Adecco may direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Surviving Corporation or Olsten
will issue in exchange for such lost, stolen or destroyed Certificate the
Closing Consideration in respect thereof pursuant to this Agreement.
Section 2.09. WITHHOLDING RIGHTS. Each of Olsten and Adecco shall be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of former Olsten Common Stock such
amounts as may be required to be deducted and withheld with respect to the
making of such payment under the Internal Revenue Code of 1986, as amended (the
"Code"), or under any provision of state, local or foreign tax law. To the
extent that amounts are so withheld and paid over to the appropriate taxing
authority, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Olsten Common Stock in
respect of which such deduction and withholding was made.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF ADECCO AND MERGER SUB
Subject to the disclosure schedule delivered by Adecco to Olsten at or prior
to the execution of this Agreement (the "Adecco Disclosure Statement"), the
section numbers of which are numbered to correspond to the sections of this
Agreement to which they relate, each of Adecco and Merger Sub represents and
warrants to Olsten as follows:
Section 3.01. ORGANIZATION, ETC. Adecco is a corporation duly organized,
validly existing and in good standing under the laws of Switzerland and has all
requisite power and authority to own, lease and operate its properties and
assets and to carry on its business as it is now being conducted. Adecco is duly
qualified as a foreign corporation to do business, and is in good standing in
each jurisdiction where the character of its properties owned, leased or
operated or the nature of its activities makes such qualification necessary,
except for failures to be so qualified or in good standing that would not,
individually or in the aggregate, have a material adverse effect on the
business, results of operations, assets or condition (financial or otherwise) of
Adecco and its Subsidiaries taken as a whole, other than any change or effect
arising out of or resulting from general economic conditions or conditions
affecting the staffing services industry (an "Adecco Material Adverse Effect").
Neither Adecco nor Merger Sub is in violation of any of the provisions of its
organizational documents. Complete and correct copies of the organizational
documents, as currently in effect, of Adecco and Merger Sub have been made
available to Olsten.
Section 3.02. AUTHORITY. Each of Adecco and Merger Sub has full corporate
power and authority to execute and deliver this Agreement and, subject to
approval of the Adecco Stockholder Proposals by the holders of Adecco Common
Stock at the Adecco Special Meeting, to consummate the Merger and the other
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the Merger and the other transactions contemplated
hereby have been duly and validly authorized by the Boards of Directors of
Adecco and Merger Sub, and by Adecco as the sole shareholder of Merger Sub, and
no other corporate proceedings on the part of Adecco or Merger Sub are necessary
to authorize this Agreement or to consummate the Merger or the other
transactions contemplated hereby (other than the approval of and the adoption of
the Adecco Stockholder Proposals at the Adecco Special Meeting or any
adjournment thereof by the requisite holders of the outstanding shares of Adecco
Common Stock). This Agreement has been duly and validly executed and delivered
by each of Adecco and Merger Sub and, assuming the due authorization, execution
and delivery hereof by Olsten, constitutes a valid and binding agreement of each
of Adecco and Merger Sub, enforceable against Adecco and Merger Sub in
accordance with its terms, except to the extent that its enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws affecting the enforcement of creditors' rights generally or by
general equitable principles. Adecco has full corporate power and authority to
execute and deliver the Separation Agreement. The execution and delivery of the
Separation Agreement have been duly and validly authorized by the Board of
Directors of Adecco, and no other corporate proceedings on the part of Adecco
are necessary to authorize the Separation Agreement. The Separation Agreement
has been duly and validly executed and delivered by Adecco and, assuming the due
authorization, execution and delivery thereof by Olsten and OHS, constitutes a
valid and binding agreement of Adecco, enforceable against Adecco in accordance
with its terms, except to the extent that its enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors' rights generally or by general equitable
principles.
Section 3.03. CONSENTS; NO VIOLATIONS, ETC. (a) No filing or registration
with, or permit, authorization, consent or approval of, or notification or
disclosure to, any United States (federal, state or local) or foreign
government, or governmental, regulatory or administrative authority, agency or
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commission (a "Governmental Authority"), court or third party is required by
Adecco or Merger Sub in connection with the execution and delivery of this
Agreement and, as applicable, the Separation Agreement, or the consummation of
the Merger and the other transactions contemplated hereby, except (i) in
connection with the applicable requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act") and applicable foreign
antitrust or other similar laws, (ii) in connection with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (the "Securities Act") and the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder (the "Exchange
Act"), (iii) the filing of appropriate merger documents as required by the
Delaware Act, (iv) such consents, approvals, orders, permits, authorizations,
registrations, declarations and filings as may be required under the Blue Sky
laws of various states and (v) such consents, approvals, orders, permits,
authorizations, registrations, declarations and filings which will have been
made or obtained prior to the Effective Time and will then be in full force and
effect.
(b) Assuming that all filings, permits, authorizations, consents,
disclosures and approvals required prior to the Effective Time have been duly
made or obtained as contemplated by Section 3.03(a), the execution, delivery and
performance of this Agreement and the Separation Agreement and the consummation
of the Merger and the other transactions contemplated hereby by Adecco will not
(i) subject to approval by the holders of Adecco Common Stock at the Adecco
Special Meeting, violate any provision of the organizational documents of Adecco
or Merger Sub, (ii) violate any statute, rule, regulation, injunction, judgment,
writ, order or decree of any Governmental Authority or court applicable to
Adecco or Merger Sub or by which Adecco or Merger Sub or any of their properties
are bound or (iii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation, acceleration, redemption or repurchase)
under, any of the terms, conditions or provisions of any (x) note, bond,
mortgage, indenture or deed of trust relating to indebtedness for borrowed money
or (y) license, lease, agreement or other instrument or obligation to which
Adecco or Merger Sub is a party or by which either of them or any of their
properties or assets may be bound, excluding from the foregoing clauses
(ii) and (iii)(y) violations, breaches or defaults that, individually or in the
aggregate, would not either impair Adecco's or Merger Sub's ability to
consummate the Merger or the other transactions contemplated hereby or have an
Adecco Material Adverse Effect.
Section 3.04. CAPITALIZATION. At July 4, 1999, the authorized capital
stock of Adecco consists of 19,769,082 shares of Adecco Common Stock and 24,500
shares of Participation Certificates (Class A), nominal value 2.0 CHF per share.
As of July 4, 1999, there were 17,197,948 shares of Adecco Common Stock issued
and outstanding and 67,180 shares of Adecco Common Stock held in Adecco's
treasury. All issued and outstanding shares of capital stock of Adecco are duly
authorized and validly issued, fully paid and nonassessable. The Adecco Common
Stock to be issued in accordance with Section 2.01 hereof, when so issued, will
be duly and validly authorized and, when Adecco ADSs representing the Adecco
Common Stock to be issued hereunder are issued, the ADSs will be duly and
validly issued, fully paid and nonassessable and free of preemptive rights with
respect thereto. Upon issuance by the Depositary of ADRs evidencing ADSs against
the deposit of Adecco Common Stock in respect thereof in accordance with the
provisions of the Deposit Agreement, such ADRs will be duly and validly issued
and the persons in whose names the ADRs are registered will be entitled to the
rights specified therein and in the Deposit Agreement. Other than pursuant to
the options to acquire Adecco Common Stock, there has not been any issuance of
capital stock of Adecco since July 4, 1999. Adecco is a "foreign private
issuer," as such term is defined in Rule 3b-4(c) under the Exchange Act.
Section 3.05. SEC AND OTHER FILINGS. (a) Adecco has timely filed with the
SEC, any similar foreign regulatory authority and any stock exchange on which
Adecco Common Stock or Adecco ADRs are listed all required forms, reports,
registration statements and documents required to be filed by it with the SEC or
such other authority since January 1, 1997 (collectively, the "Adecco Reports"),
all of
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which complied as to form when filed in all material respects with the
applicable provisions of the Securities Act, the Exchange Act or the applicable
laws or regulations of any such authority, as the case may be. As of their
respective dates, the Adecco Reports (including all exhibits and schedules
thereto and documents incorporated by reference therein) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. All documents required
to be filed as exhibits to the Adecco Reports have been so filed. None of
Adecco's Subsidiaries is required to file any forms, reports or other documents
with the SEC.
(b) Adecco will deliver to Olsten, as soon as they become available, true
and complete copies of any report or statement mailed by Adecco to its
securityholders generally or filed by it with the SEC, any similar foreign
regulatory authority or any stock exchange on which Adecco Common Stock or
Adecco ADRs are listed, in each case subsequent to the date hereof and prior to
the Effective Time. As of their respective dates, such reports and statements
(excluding any information therein provided by Olsten, as to which Adecco makes
no representation) will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they are
made, not misleading and will comply in all material respects with all
applicable requirements of law. The audited consolidated financial statements
and unaudited consolidated interim financial statements of Adecco and its
Subsidiaries required to be included or incorporated by reference in such
reports and statements (if any) will be prepared in accordance with U.S. GAAP
(as defined below) and will fairly present the consolidated financial position
of Adecco and its Subsidiaries as of the dates thereof and the consolidated
results of operations and consolidated cash flows for the periods then ended
(subject, in the case of any unaudited interim financial statements, to normal
year-end adjustments and to the extent they may not include footnotes or may be
condensed or summary statements).
Section 3.06. FINANCIAL STATEMENTS. The audited consolidated financial
statements of Adecco and its Subsidiaries included or incorporated by reference
in any of the Adecco Reports have been prepared in accordance with generally
accepted accounting principles in the United States, applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) ("U.S. GAAP"), and fairly present in all material respects the
consolidated financial position of Adecco and its Subsidiaries as of the dates
thereof and the consolidated results of operations and consolidated cash flows
for the periods then ended, and such audited consolidated financial statements
are accompanied by an unqualified auditors' report thereon by Adecco's
independent public accountants. The unaudited consolidated balance sheets and
statements of operations as of July 4, 1999 of Adecco and its Subsidiaries
provided to Olsten have been prepared in accordance with U.S. GAAP. The
Consolidated Balance Sheet as at January 3, 1999 of Adecco and its Subsidiaries
contained in such financial statements is hereinafter referred to as the "Adecco
Balance Sheet."
Section 3.07. ABSENCE OF UNDISCLOSED LIABILITIES. As of the date hereof,
neither Adecco nor any of its Subsidiaries has any liabilities or obligations of
any nature, whether absolute, accrued, unmatured, contingent or otherwise, or
any unsatisfied judgments or any unusual or extraordinary commitments, except
for (i) the liabilities recorded on the Adecco Balance Sheet and/or reflected in
the notes thereto, (ii) liabilities and obligations disclosed in any Adecco
Report filed since January 3, 1999 and prior to the date of this Agreement or in
the unaudited consolidated balance sheets as of July 4, 1999 of Adecco and its
Subsidiaries provided to Olsten, (iii) liabilities and obligations incurred
since January 3, 1999 in the ordinary course of business consistent with past
practice, which are not unusual in nature or amount and which would not,
individually or in the aggregate, have an Adecco Material Adverse Effect and
(iv) liabilities or obligations that, individually or in the aggregate, would
not have an Adecco Material Adverse Effect.
Section 3.08. ABSENCE OF CHANGES OR EVENTS. From January 3, 1999 through
the date of this Agreement and except as set forth in the Adecco Reports filed
prior to the date hereof (a) there has
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been no Adecco Material Adverse Effect, (b) Adecco and its Subsidiaries have
conducted their business only in the ordinary course and (c) neither Adecco nor
any of its Subsidiaries has, directly or indirectly:
(a) purchased or otherwise acquired, or agreed to purchase or otherwise
acquire, any shares of capital stock of Adecco or any of its Subsidiaries, or
any options, warrants or other equity securities of Adecco or any of its
Subsidiaries, in each case, other than purchases or acquisitions (or agreements
with respect thereto) of minority interests or made in the ordinary course of
business consistent with past practice, or declared, set aside or paid any
dividend or otherwise made a distribution (whether in cash, stock or property or
any combination thereof) in respect of its capital stock;
(b) instituted any significant change in accounting methods, principles or
practices affecting its assets, liabilities or business, except insofar as may
be appropriate to conform to changes in law or U.S. GAAP; or
(c) agreed to do any of the things described in the preceding clauses
(a) or (b).
Section 3.09. LITIGATION. There is no (i) claim, action, suit or
proceeding pending or, to the best of Adecco's knowledge, threatened against
Adecco or any of its Subsidiaries before any court or governmental or regulatory
authority or body or arbitration tribunal or (ii) outstanding judgment, order,
writ, injunction or decree of any court, governmental agency or arbitration
tribunal in a proceeding to which Adecco, any of its Subsidiaries or any of
their respective assets was or is a party, except, in the case of clauses
(i) and (ii) above, such as would not, individually or in the aggregate, either
impair Adecco's or Merger Sub's ability to consummate the Merger or the other
transactions contemplated hereby or have an Adecco Material Adverse Effect.
Section 3.10. COMPLIANCE WITH LAWS. Neither Adecco nor any of its
Subsidiaries has violated or failed to comply with any statute, law, ordinance,
regulation, rule or order of any Governmental Authority, or any judgment, decree
or order of any court, applicable to its business or operations, except for any
such violations or failures to comply that, individually or in the aggregate,
would not either impair Adecco's or Merger Sub's ability to consummate the
Merger or the other transactions contemplated hereby or have an Adecco Material
Adverse Effect.
Section 3.11. TAXES. Adecco and each of its Subsidiaries have (i) timely
filed all Tax Returns required to be filed by them (taking into account
extensions) and all such Tax Returns were complete, correct and accurate in all
material respects, (ii) timely paid all Taxes shown to be due on such Tax
Returns, (iii) timely paid all Taxes for which a notice of assessment or
collection has been received (other than amounts being contested in good faith
by appropriate proceedings and properly accrued in accordance with U.S. GAAP),
except in the case of clause (i), (ii) or (iii) for any such filings or payments
that, individually or in the aggregate, would not have an Adecco Material
Adverse Effect. There are no liens for Taxes upon the assets of Adecco or any of
its Subsidiaries (other than liens for Taxes that are not yet due). "Tax" or
"Taxes" shall mean any U.S. federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, capital stock,
franchise, profits, withholding, social security, unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty or addition thereto, whether disputed or not,
and shall include any transferee liability in respect of Taxes and any liability
in respect of Taxes imposed by contract, tax sharing agreement, tax indemnity
agreement or any similar agreement. "Tax Return" shall mean any return,
declaration, report, claim for refund, or information return or statement
relating to Taxes, including any schedule or attachment thereto, and including
any amendment thereof.
Section 3.12. EMPLOYEE BENEFIT PLANS; ERISA. (a) To the extent required,
Adecco and each of its Subsidiaries are in compliance with the applicable
provisions of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), the Code and other applicable laws with respect to the
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employee benefit plans (within the meaning of Section 3(3) of ERISA) maintained
or contributed to by Adecco or its Subsidiaries, except where the failure to
comply would not, singly or in the aggregate, reasonably be expected to have an
Adecco Material Adverse Effect. Adecco and each of its Subsidiaries are in
compliance with applicable laws with respect to each of Adecco's material Adecco
Foreign Plans (as hereinafter defined), except where the failure to comply would
not, singly or in the aggregate, reasonably be expected to have an Adecco
Material Adverse Effect. For purposes of this Agreement, the term "Adecco
Foreign Plan" shall mean any employee benefit plan, program, policy or
arrangement maintained or contributed to, by, or entered into with, Adecco or
any of its Subsidiaries with respect to employees (or former employees) employed
outside the United States.
(b) Neither Adecco nor any of its Subsidiaries nor any of their ERISA
Affiliates (as defined below) has incurred, or reasonably expects to incur, any
liability to the Pension Benefit Guaranty Corporation (the "PBGC") or to a
trustee appointed under Section 4042(b) or (c) of ERISA other than for the
payment of premiums, all of which have been paid when due. For purposes of this
Agreement, "ERISA Affiliate" shall mean any person (as defined in Section 3(9)
of ERISA) that is a member of any group of persons described in Section 414(b),
(c) or (m) of the Code which includes the referent person or its Subsidiaries.
(c) Neither Adecco nor any of its Subsidiaries nor any of their ERISA
Affiliates has any liability (including any contingent liability under
Section 4204 of ERISA) with respect to any multiemployer plan, within the
meaning of Section 3(37) of ERISA, except for any such liability which would
not, singly or in the aggregate, reasonably be expected to have an Adecco
Material Adverse Effect.
Section 3.13. ENVIRONMENTAL MATTERS. Except as would not have an Adecco
Material Adverse Effect, Adecco and each of its subsidiaries are in compliance
with and have no liability under applicable Environmental Laws (as hereinafter
defined). As used in this Agreement, the term "Environmental Laws" means the
common law, and any law, statute, rule, regulation, ordinance, judgment,
directive, order or decree relating to pollution or protection of the
environment, including without limitation, natural resources, or to human health
or safety.
Section 3.14. FINDERS OR BROKERS. Other than Goldman, Sachs & Co., neither
Adecco nor any of its Subsidiaries has employed any investment banker, broker,
finder or intermediary in connection with the transactions contemplated hereby
who might be entitled to a fee or any commission the receipt of which is
conditioned upon consummation of the Merger or the amount of which is calculated
with reference to any part of the Closing Consideration.
Section 3.15. BOARD RECOMMENDATION. The Board of Directors of Adecco has,
by a unanimous vote at a meeting of such Board duly held on August 12, 1999,
approved and adopted the Merger and the other transactions contemplated hereby,
and determined that the Agreement, the Separation Agreement, the Merger and the
other transactions contemplated hereby, taken together, are in the best interest
of the stockholders of Adecco, and prior to the date hereof resolved to
recommend that the holders of Adecco Common Stock approve the Adecco Stockholder
Proposals.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF OLSTEN
Subject to the disclosure schedule delivered by Olsten to Adecco and Merger
Sub at or prior to the execution of this Agreement (the "Olsten Disclosure
Statement"), the section numbers of which are numbered to correspond to the
section numbers of this Agreement to which they relate, Olsten represents and
warrants to Adecco and Merger Sub as follows:
Section 4.01. ORGANIZATION, ETC. Olsten is a corporation duly organized,
validly existing and in good standing under the laws of the state of Delaware
and has all requisite power and authority to own, lease and operate its
properties and assets and to carry on its business as it is now being conducted.
Olsten is duly qualified as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of its properties owned,
leased or operated or the nature of its activities makes such qualification
necessary, except for failures to be so qualified or in good standing that would
not, individually or in the aggregate, have a material adverse effect on the
business, results of operations, assets or condition (financial or otherwise) of
(i) Olsten and its Subsidiaries taken as a whole, or (ii) Olsten and the
Retained Subsidiaries, taken as a whole, other than any change or effect arising
out of or resulting from general economic conditions or conditions affecting the
staffing services industry (a "Olsten Material Adverse Effect"). Olsten is not
in violation of any of the provisions of its organizational documents. Complete
and correct copies of the organizational documents, as currently in effect, of
Olsten have been made available to Adecco.
Section 4.02. AUTHORITY. Olsten has full corporate power and authority to
execute and deliver this Agreement and the Separation Agreement and, subject to
approval by the requisite holders of the outstanding shares of Olsten Stock and
Olsten Class B Stock, voting together as a single class, at the Olsten Special
Meeting, to consummate the Merger, the Split-Off and the other transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Separation Agreement and the consummation of the Merger, the Split-Off
and the other transactions contemplated hereby and thereby have been duly and
validly authorized by the Board of Directors of Olsten, and no other corporate
proceedings on the part of Olsten are necessary to authorize this Agreement or
the Separation Agreement or to consummate the Merger, the Split-Off and the
other transactions contemplated hereby and thereby (other than the approval of
and adoption of this Agreement, the Merger and the other transactions
contemplated hereby at the Olsten Special Meeting or any adjournment thereof by
the requisite holders of the outstanding shares of Olsten Common Stock and
Olsten Class B Stock, voting together as a single class). Each of this Agreement
and the Separation Agreement has been duly and validly executed and delivered by
Olsten and, in the case of Separation Agreement, OHS, and assuming the due
authorization, execution and delivery hereof by Adecco and Merger Sub, in the
case of the Merger Agreement, constitutes a valid and binding agreement of
Olsten and, in the case of the Separation Agreement, OHS, enforceable against
Olsten, and in the case of the Separation Agreement, OHS, in accordance with its
terms, except to the extent that its enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting the
enforcement of creditors' rights generally or by general equitable principles.
Section 4.03. CONSENTS; NO VIOLATIONS, ETC. (a) No filing or registration
with, or permit, authorization, consent or approval of, or notification or
disclosure to, any Governmental Authority, court or third party is required by
Olsten or OHS in connection with the execution and delivery of this Agreement
and the Separation Agreement or the consummation by Olsten of the Merger and the
consummation by Olsten and OHS of the Split-Off and the other transactions
contemplated hereby and thereby, except (i) in connection with the applicable
requirements of the HSR Act and applicable foreign antitrust or other similar
laws, (ii) in connection with the provisions of the Securities Act and the
Exchange Act, (iii) the filings of appropriate merger documents as required by
the Delaware Act, (iv) such consents, approvals, orders, permits,
authorizations, registrations, declarations and filings as
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may be required under the Blue Sky laws of various states and (v) such consents,
approvals, orders, permits, authorizations, registrations, declarations and
filings which will have been made or obtained prior to the Effective Time and
will then be in full force and effect.
(b) Assuming that all filings, permits, authorization, consents, disclosures
and approvals required prior to the Effective Time have been duly made or
obtained as contemplated by Section 4.03(a), the execution and delivery of this
Agreement and the Separation Agreement and the consummation by Olsten of the
Merger and Olsten and OHS of the Split-Off and the other transactions
contemplated hereby and thereby will not (i) subject to obtaining the approval
of the requisite holders of the outstanding shares of Olsten Common Stock and
Olsten Class B Stock, voting together as a single class, violate any provision
of the organizational documents of Olsten or any of its Subsidiaries,
(ii) violate any statute, rule, regulation, injunction, judgment, writ, order or
decree of any Governmental Authority or court applicable to Olsten or any of its
Subsidiaries or by which Olsten, any of its Subsidiaries or any of their
properties are bound or (iii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, cancellation, acceleration, redemption or repurchase)
under, any of the terms, conditions or provisions of any (x) note, bond,
mortgage, indenture or deed of trust relating to indebtedness for borrowed money
or Governmental Settlement Agreement (as defined in the Separation Agreement) or
(y) license, lease, agreement or other instrument or obligation to which Olsten
or any of its Subsidiaries is a party or by which any of them or any of their
properties or assets may be bound, excluding from the foregoing clauses
(ii) and (iii)(y) violations, breaches or defaults that, individually or in the
aggregate, would not either impair Olsten's or OHS', as applicable, ability to
consummate the Merger or Split-Off or the other transactions contemplated hereby
or by the Separation Agreement or have an Olsten Material Adverse Effect.
Section 4.04. CAPITALIZATION. The authorized capital stock of Olsten
consists of 110,000,000 shares of Olsten Stock, 50,000,000 shares of Olsten
Class B Stock and 250,000 shares of preferred stock, par value $.10 per share.
As of April 4, 1999, there were 68,255,667 shares of Olsten Stock outstanding,
13,068,973 shares of Olsten Class B Stock outstanding, 45,700 shares of Olsten
Stock held in Olsten's treasury and 7,475,040 shares of Olsten Common Stock
(including 5,731,342 shares of Olsten Stock and 1,743,698 shares of Olsten
Class B Stock) reserved for issuance upon the exercise of options theretofore
granted pursuant to the Olsten Plans and upon conversion of the Quantum Debt (as
defined in the Separation Agreement). All issued and outstanding shares of
capital stock of Olsten are duly authorized and validly issued, fully paid,
nonassessable and free of preemptive rights with respect thereto. Section 4.04
of the Olsten Disclosure Statement lists each Olsten Plan and each outstanding
option and stock grant as of August 12, 1999, the number of shares of Olsten
Common Stock to be received upon exercise thereof and the exercise price of each
such option (the "Olsten Common Stock Equivalents"). Except for the Olsten
Common Stock Equivalents and the Quantum Debt, there are no options, warrants,
calls, subscriptions, or other rights, agreements or commitments obligating
Olsten to issue, transfer or sell any shares of capital stock of Olsten or any
other securities convertible into or evidencing the right to subscribe for any
such shares. Other than stock, if any, issued pursuant to the Olsten Plans,
stock, if any, issued upon conversion of the Quantum Debt and stock, if any,
issued upon exercise of stock options or the vesting of stock grants pursuant to
the Olsten Common Stock Equivalents, there has not been any issuance of capital
stock of Olsten since August 12, 1999. There are no outstanding stock
appreciation rights with respect to the capital stock of Olsten. At and after
the Effective Time, none of the options or warrants exercisable for or other
securities convertible into shares of capital stock of Olsten shall, then or
thereafter, continue to be so exercisable or convertible into capital stock or
other claim on the equity of Olsten.
Section 4.05. SEC FILINGS. (a) Olsten has timely filed with the SEC and
any stock exchange on which Olsten Common Stock is listed all required forms,
reports, registration statements and documents required to be filed by it with
the SEC or such other authority since January 1, 1996
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(collectively, the "Olsten SEC Reports"), all of which complied as to form when
filed in all material respects with the applicable provisions of the Securities
Act or the Exchange Act or the applicable laws or regulations of any such
authority, as the case may be. As of their respective dates, the Olsten SEC
Reports (including all exhibits and schedules thereto and documents incorporated
by reference therein) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. Except as set forth in Section 4.05(a) of the Olsten
Disclosure Statement, all documents required to be filed as exhibits to the
Olsten SEC Reports have been so filed. None of Olsten's subsidiaries is required
to file any forms, reports or other documents with the SEC.
(b) Olsten will deliver to Adecco as soon as they become available true and
complete copies of any report or statement mailed by Olsten to its
securityholders generally or filed by it with the SEC, in each case subsequent
to the date hereof and prior to the Effective Time. As of their respective
dates, such reports and statements (excluding any information therein provided
by Adecco, as to which Olsten makes no representation) will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they are made, not misleading and will comply in
all material respects with all applicable requirements of law. The audited
consolidated financial statements and unaudited consolidated interim financial
statements of Olsten and its Subsidiaries to be included or incorporated by
reference in such reports and statements will be prepared in accordance with
U.S. GAAP and regulations of the SEC applicable to public companies and will
fairly present the consolidated financial position of Olsten and its
Subsidiaries as of the dates thereof and the consolidated results of operations
and consolidated cash flows for the periods then ended (subject, in the case of
any unaudited interim financial statements, to normal year-end adjustments and
to the extent they may not include footnotes or may be condensed or summary
statements).
Section 4.06. FINANCIAL STATEMENTS. The audited consolidated financial
statements and unaudited consolidated interim financial statements of Olsten and
its Subsidiaries included or incorporated by reference in any of the Olsten SEC
Reports have been prepared in accordance with U.S. GAAP and regulations of the
SEC applicable to public companies and fairly present in all material respects
the consolidated financial position of Olsten and its Subsidiaries as of the
dates thereof and the consolidated results of operations and consolidated cash
flows for the periods then ended (subject, in the case of any unaudited interim
financial statements, to normal year-end adjustments and to the extent they may
not include footnotes or may be condensed or summary statements), and such
audited consolidated financial statements are accompanied by an unqualified
opinion thereon by Olsten's independent accountants. The Consolidated Balance
Sheet as at January 3, 1999 of Olsten and its Subsidiaries contained in such
financial statements is hereinafter referred to as the "Olsten Balance Sheet."
Section 4.07. ABSENCE OF UNDISCLOSED LIABILITIES. As of the date hereof,
neither Olsten nor any of its Subsidiaries has any liabilities or obligations of
any nature, whether absolute, accrued, unmatured, contingent or otherwise, or
any unsatisfied judgments or any unusual or extraordinary commitments, except
for (i) the liabilities recorded on the Olsten Balance Sheet and/or reflected in
the notes thereto, (ii) liabilities and obligations disclosed in any Olsten SEC
Report filed since January 3, 1999 and prior to the date of this Agreement,
(iii) liabilities and obligations incurred since January 3, 1999 in the ordinary
course of business consistent with past practice, which are not unusual in
nature or amount and which would not, individually or in the aggregate, have an
Olsten Material Adverse Effect and (iv) liabilities or obligations that,
individually or in the aggregate, would not have an Olsten Material Adverse
Effect.
Section 4.08. ABSENCE OF CHANGES OR EVENTS. From January 3, 1999 through
the date of this Agreement and except as set forth in the Olsten SEC Reports
filed prior to the date hereof: (a) there has been no Olsten Material Adverse
Effect, (b) Olsten and its Subsidiaries have conducted their
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business only in the ordinary course and (c) neither Olsten nor any of its
Subsidiaries has, directly or indirectly:
(a) other than pursuant to any Olsten Plan, issued any capital stock or
purchased, redeemed or otherwise acquired, or agreed to purchase, redeem or
otherwise acquire, any shares of capital stock of Olsten or any of its
Subsidiaries, or issued or purchased any options, warrants or other equity
securities, debt securities or evidence of indebtedness of Olsten or any of its
Subsidiaries, or declared, set aside or paid any dividend or otherwise made a
distribution (whether in cash, stock or property or any combination thereof) in
respect of its capital stock;
(b) split, combined or reclassified any of its capital stock;
(c) (i) assumed, guaranteed, endorsed or otherwise as an accommodation
become responsible for the obligations of any other individual, firm or
corporation (other than any wholly-owned Subsidiary of Olsten), or made any
loans or advances to any other individual, firm or corporation (other than loans
among Olsten and any of its wholly-owned Subsidiaries) except in the ordinary
course of business consistent with past practice; or (ii) incurred any
liabilities, except for liabilities that, individually or in the aggregate,
would not reasonably be expected to have an Olsten Material Adverse Effect;
(d) made any payment with respect to any option, warrant or other equity
security, or any debt security or evidence of indebtedness of Olsten or any of
its Subsidiaries (other than regular, periodic payments of principal and/or
interest required pursuant to the terms of the applicable security or
instrument);
(e) instituted any significant change in accounting methods, principles or
practices affecting its assets, liabilities, reserve or expense recognition,
reserves, amortization or accruals, except insofar as may be appropriate to
conform to changes in law or U.S. GAAP;
(f) revalued any of its assets, including without limitation, writing down
the value of inventory or notes or accounts receivables;
(g) suffered any damage, destruction or loss, whether covered by insurance
or not, except for such that, individually or in the aggregate, would not have
an Olsten Material Adverse Effect;
(h) since the date of the information contained in Olsten's proxy statement
dated April 13, 1999, (i) increased in any manner the compensation or benefits
of any of its directors or, except in the ordinary course of business consistent
with past practice, officers or employees, except in each case as required under
plans or arrangements existing at April 13, 1999; (ii) paid or agreed to pay any
pension, retirement allowance or other employee benefit not required under
agreements, plans or arrangements existing at April 13, 1999; (iii) paid any
bonus, except for bonuses paid in the ordinary course of business consistent
with past practice; (iv) granted any severance or termination pay to any person,
or entered into any employment consulting and severance agreement with, any
person providing for total compensation and severance payments in excess of
$100,000; (v) entered into or made any material modification or amendment to,
any currently effective employment, severance, termination or indemnification
agreement or any agreement the benefits of which are contingent or the terms of
which are materially altered upon the occurrence of a transaction involving
Olsten of the nature contemplated hereby or by the Separation Agreement, or
(vi) become obligated under any new pension plan, welfare plan, multiemployer
plan, employee benefit plan, benefit arrangement or similar plan or arrangement
(including any bonus, incentive, deferred compensation, stock purchase, stock
option, stock appreciation right, group insurance, severance pay, retirement or
other benefit plan, contract, agreement or understanding) that was not in
existence as a plan of Olsten prior to April 13, 1999, or amended any such plan
or arrangement in existence at or prior to April 13, 1999, in each case except
as may be required by applicable law;
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(i) sold, transferred, pledged, mortgaged, or otherwise disposed of, or
leased or licensed to or from any person, or encumbered, any material properties
or assets, real, personal or mixed, except in the ordinary course of business;
or
(j) agreed to do any of the things described in the preceding clauses
(a) through (i).
Section 4.09. LITIGATION. Except as described specifically in the Olsten
SEC Reports filed prior to the date hereof, there is no (i) claim, action, suit
or proceeding pending or, to Olsten's knowledge, threatened against Olsten or
any of its Subsidiaries before any court or governmental or regulatory authority
or body or arbitration tribunal or (ii) outstanding judgment, order, writ,
injunction or decree of any court, governmental agency or arbitration tribunal
in a proceeding to which Olsten, any of its Subsidiaries or any of their
respective assets was or is a party, except, in the case of clauses (i) and
(ii) above, such as would not, individually or in the aggregate, either impair
Olsten's or OHS' (as applicable) ability to consummate the Merger, the Split-Off
or the other transactions contemplated hereby or by the Separation Agreement or
have an Olsten Material Adverse Effect.
Section 4.10. SUBSIDIARIES AND INVESTMENTS. (a) Section 4.10(a) of the
Olsten Disclosure Statement contains a complete list as of the date hereof of
each Subsidiary of Olsten and sets forth with respect to each of Olsten's
Subsidiaries its name and jurisdiction of organization and, with respect to each
Subsidiary of Olsten that is not wholly-owned, the percentage of share capital
owned by Olsten or a Subsidiary of Olsten. Each Subsidiary of Olsten is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization and, except as would not, individually or in the
aggregate, have an Olsten Material Adverse Effect, has all requisite power and
authority to own, lease and operate its properties and assets and to carry on
its business as now being conducted. Each subsidiary of Olsten is duly qualified
to do business, and is in good standing, in each jurisdiction where the
character of its properties owned, leased or operated or the nature of its
activities makes such qualification necessary, except for failures to be so
qualified or in good standing that, individually or in the aggregate, would not
have an Olsten Material Adverse Effect. All of the outstanding shares of capital
stock or share capital of each Subsidiary of Olsten are validly issued, fully
paid and nonassessable, and those owned by Olsten or by a Subsidiary of Olsten
are owned free and clear of any liens, claims or encumbrances. There are no
options, warrants, calls, subscriptions or other rights, agreements or
commitments obligating any of the Subsidiaries of Olsten to issue, transfer or
sell any shares of its capital stock or other securities convertible into or
evidencing the right to subscribe for any such shares.
(b) Section 4.10(b) of the Olsten Disclosure Statement lists, as of the date
hereof, each corporation, partnership, joint venture or other business,
association or entity (other than its Subsidiaries) in which Olsten or any of
its Subsidiaries owns, directly or, to the knowledge of Olsten, indirectly, an
equity interest other than any ownership interest of less than 5% of the
outstanding equity securities of any issuer whose securities are registered
under the Exchange Act.
(c) Section 4.10(c) of the Olsten Disclosure Statement lists all agreements
which contain liabilities or obligations whether absolute, accrued, contingent,
matured, unmatured or otherwise of Olsten and its Subsidiaries for earn-outs or
other similar payments related to acquisitions and other similar transactions
and all puts and other buy-out obligations related to minority interests.
Section 4.11. COMPLIANCE WITH LAWS. (a) Except as described specifically
in the Olsten SEC Reports filed prior to the date hereof, (i) neither Olsten nor
any of its Subsidiaries has violated or failed to comply with any statute, law,
ordinance, regulation, rule or order of any Governmental Authority, or any
judgment, decree or order of any court, applicable to it, its business or
operations or by which it, its business or operations are bound, except for any
such violations or failures to comply that, individually or in the aggregate,
would not impair Olsten's or OHS' (as applicable) ability to consummate the
Merger, the Split-Off and the other transactions contemplated hereby or by the
Separation Agreement or have an Olsten Material Adverse Effect, (ii) no
investigation or review by any
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Governmental Authority is pending or, to Olsten's knowledge, has been threatened
against Olsten or any of its Subsidiaries, nor, to Olsten's knowledge, has any
Governmental Authority indicated by written notice or, to Olsten's knowledge,
otherwise, an intention to conduct an investigation of Olsten or any of its
Subsidiaries, other than any such investigation which would not, individually or
in the aggregate, impair Olsten's or OHS' (as applicable) ability to consummate
the Merger, the Split-Off or the other transactions contemplated hereby or by
the Separation Agreement or have an Olsten Material Adverse Effect;
(iii) neither Olsten nor any of its Subsidiaries is liable, either primarily or
jointly and severally with any other party, for any fines, penalties or other
amounts payable to any Governmental Authority in an aggregate amount in excess
of $5,000,000 and (iv) there is no agreement, judgement, injunction, order or
decree binding upon Olsten or any of its Subsidiaries which has or could
reasonably be expected to have the effect of prohibiting or materially impairing
any business practice of Olsten or any of its Subsidiaries, any acquisition of
material property by Olsten or any of its Subsidiaries, the conduct of business
by Olsten as currently conducted, or the Merger or Split-Off or the other
transactions contemplated by this Agreement and the Separation Agreement. Other
than as disclosed by Olsten to Adecco, Olsten and its Subsidiaries are each in
compliance, in all material respects, with all material laws and regulations
relating to franchising and their relationship with their franchisees and
licensed area representatives.
(b) Each of Olsten and its Subsidiaries has such certificates, permits,
licenses, franchises, consents, approvals, orders, authorizations and clearances
from appropriate Governmental Authorities ("Olsten Licenses") as are necessary
to own, lease or operate its properties and assets and to conduct its business
in the manner described in the Olsten SEC Reports and as presently conducted and
all such Olsten Licenses are valid and in full force and effect, except for any
failures to have any such Olsten License or any failures of any such Olsten
License to be valid and in full force and effect that, individually or in the
aggregate, would not have an Olsten Material Adverse Effect. Each of Olsten and
its Subsidiaries is, and within the period of all applicable statues of
limitation has been, in compliance with its obligations under such Olsten
Licenses and no event has occurred that allows, or after notice or lapse of time
would allow, revocation or termination of such Olsten Licenses, except for any
such failures to be in compliance with such obligations or any such revocations
or terminations that, individually or in the aggregate, would not have an Olsten
Material Adverse Effect. Olsten has no knowledge of any facts or circumstances
that could reasonably be expected to result in an inability of Olsten or any of
its Subsidiaries to renew any Olsten License. Neither the execution and delivery
by Olsten of this Agreement or by Olsten and OHS of the Separation Agreement nor
the consummation of the Merger or the Split-Off or any of the other transactions
contemplated herein or therein will result in any revocation or termination of
any Olsten License, except for Olsten Licenses, the revocation or termination of
which would not, individually or in the aggregate, have an Olsten Material
Adverse Effect or impair, in any material respect, the operation of the Retained
Businesses after the Merger.
Section 4.12. INTELLECTUAL PROPERTY RIGHTS. To Olsten's knowledge, Olsten
and its Subsidiaries own or have the right to use all Olsten Intellectual
Property Rights (as defined below) necessary to the conduct of their respective
businesses, except for such lack or defects in ownership or possession as would
not, individually or in the aggregate, have an Olsten Material Adverse Effect.
There have been no written claims or assertions made by others that Olsten or
any of its Subsidiaries has infringed any material intellectual property rights
of others in the preceding three year period and, to Olsten's knowledge, there
has been no such infringement by Olsten or any of its Subsidiaries during this
period except for such infringements that, individually or in the aggregate,
would not have an Olsten Material Adverse Effect. Olsten has no knowledge of any
infringement of Olsten Intellectual Property Rights by others, except for such
infringements that, individually or in the aggregate, would not have an Olsten
Material Adverse Effect. All material issued patents, registered trademarks and
service marks owned by Olsten or its Subsidiaries are recorded on the public
record in the name of Olsten or its Subsidiaries,
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except to the extent that the failure to be so recorded would not materially
impair the ownership, use or protection of such patents, trademarks and service
marks.
Section 4.12 of the Olsten Disclosure Statement contains a list of all
material patents, trade names, registered copyrights, registered and
unregistered trademarks and service marks and applications for the foregoing
owned by Olsten or its Subsidiaries. Olsten and/or its Subsidiaries have clear
and unencumbered title to the Olsten Intellectual Property Rights set forth in
Section 4.12 of the Olsten Disclosure Statement and such title has not been
challenged (pending or threatened) by others except for the encumbrances listed
therein.
"Olsten Intellectual Property Rights" shall mean and include rights relating
to Olsten's or its Subsidiaries, patents, trademarks, service marks, trade
names, copyrights, and all currently pending applications for any thereof, and
any inventions, processes, trade secrets, know-how, confidentiality agreements,
consulting agreements, software systems, proprietary field systems, software
licenses or options to obtain rights or licenses.
Section 4.13. TAXES.
(a) FILING OF TAX RETURNS. Olsten and its Subsidiaries have timely filed,
taking into account extensions, with the proper taxing or other governmental
authorities all Tax Returns (as such term is defined in Section 3.11) required
to be filed through the date hereof. Such Tax Returns are complete, correct and
accurate in all respects. Olsten and its Subsidiaries have delivered to Adecco
complete and accurate copies of all consolidated federal, state and local income
or franchise Tax Returns filed by Olsten and its Subsidiaries for their taxable
year ended December 28, 1997.
(b) PAYMENT OF TAXES. Olsten and its Subsidiaries have paid or will have
paid all Taxes for all periods or portions thereof ending on or before the
Effective Time, or adequate reserves (in conformity with U.S. GAAP applied on a
consistent basis and consistent with such entity's past custom and practice)
have been established therefor, and Olsten and its Subsidiaries have no material
liability for Taxes in excess of the amounts so paid or reserves so established.
All Taxes that Olsten and each of its Subsidiaries have been required to collect
or withhold have been duly collected or withheld and, to the extent required
when due, have been or will be duly paid to the proper taxing or other
governmental authority.
(c) AUDIT HISTORY.
(i) No deficiencies for Taxes of Olsten or any of its Subsidiaries have
been claimed in writing or assessed by any taxing or other governmental
authority, which deficiencies have not been paid or finally settled.
(ii) There are no pending or, to Olsten's knowledge, threatened audits,
investigations or claims for or relating to any liability in respect of
Taxes of Olsten or its Subsidiaries.
(iii) No extension of a statute of limitations relating to Taxes is in
effect with respect to Olsten or any of its Subsidiaries.
(d) TAX ELECTIONS.
(i) Olsten and each of its Subsidiaries have not made any elections, and
are not required, to treat any of their assets as owned by another person or
as tax-exempt bond financed property or tax-exempt use property within the
meaning of Section 168 of the Code or under any comparable state or local
income Tax or other Tax provision.
(ii) Olsten and its Subsidiaries are not parties to or bound by any tax
sharing, tax indemnity or tax allocation agreement or other similar
arrangement with any other person or entity (including, without limitation,
any advance pricing agreement, closing agreement or other agreement relating
to Taxes with any taxing authority).
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(iii) Olsten and its Subsidiaries have not filed consents pursuant to
the collapsible corporation provisions of Section 341(f) of the Code (or any
corresponding provision of state or local law) or agreed to have Sections
341(f)(2) of the Code (or any corresponding provision of state or local law)
apply to any disposition of any asset owned by it.
(e) ADDITIONAL REPRESENTATIONS.
(i) There are no liens for Taxes (other than for Taxes not yet
delinquent) upon the assets of Olsten or any of its Subsidiaries.
(ii) Since 1992, Olsten and its Subsidiaries have never been members of
an affiliated group of corporations within the meaning of Section 1504 of
the Code, with the exception of the affiliated group for which Olsten is the
common parent. Neither Olsten nor any of its Subsidiaries, or any
predecessor or affiliate of any of them, has become liable (whether by
contract, as transferee or successor, by law or otherwise) for the Taxes of
any other person or entity under Treasury Regulation section 1.1502-6 or any
similar provision of state, local or foreign law, except for other members
of the affiliated group of which Olsten is the common parent.
(iii) Olsten and its Subsidiaries have not made, requested or agreed to
make, nor are they required to make, any adjustment under Section 481(a) of
the Code by reason of a change in accounting method or otherwise for any
taxable year.
(iv) Neither Olsten nor any of its Subsidiaries is a party to any
agreement, contract, arrangement or plan that has resulted or would result,
separately or in the aggregate, in the payment of any amount as to which a
deduction may be denied under Section 162(m) of the Code.
(v) Olsten and its Subsidiaries have not been "United States real
property holding corporations" within the meaning of Section 897(c)(2) of
the Code during the applicable period specified in
Section 897(c)(1)(A)(ii).
(vi) Olsten and its Subsidiaries have properly requested, received and
retained all necessary exemption certificates and other documentation
supporting any claimed exemption or waiver of Taxes on sales or other
transactions as to which Olsten and its Subsidiaries would have been
obligated to collect or withhold Taxes, except for any failure to do so
which would not be expected to have a Material Adverse Effect on Olsten and
its Subsidiaries taken as a whole.
(vii) There is no contract, agreement, plan or arrangement covering any
employee or former employee of Olsten or any of its Subsidiaries (with
respect to such employee's relationship with Olsten or the applicable
Subsidiary) that, individually or collectively, requires, or in any prior
period required, the payment by Olsten or any of its Subsidiaries of any
amount (i) that is or was not deductible under Section 162(a)(1) or 404 of
the Code or (ii) that is or was an "excess parachute payment" pursuant to
Section 280G of the Code.
Section 4.14. EMPLOYEE BENEFIT PLANS; ERISA. (a) Olsten has disclosed to
Adecco in Section 4.14(a) of the Olsten Disclosure Statement all "employee
pension benefit plans" (as defined in Section 3(2) of ERISA) maintained or
contributed to by Olsten or any of its Subsidiaries or any of their ERISA
Affiliates, or to which Olsten or any of its Subsidiaries or any of their ERISA
Affiliates contributes or is obligated to make payments thereunder or otherwise
may have any liability (collectively, the "Olsten Pension Benefit Plans").
(b) Olsten has delivered or made available to Adecco true and complete
copies of all "welfare benefit plans" (as defined in Section 3(1) of ERISA)
maintained or contributed to by Olsten or any of its Subsidiaries (the "Olsten
Welfare Plans"), all multiemployer plans (as defined in Section 3(37) of ERISA)
to which Olsten or any of its Subsidiaries or any of their ERISA Affiliates is
required to make contributions or otherwise may have any liability and all stock
bonus, stock option, restricted stock,
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stock appreciation right, stock purchase, bonus, incentive, deferred
compensation, severance and vacation plans maintained or contributed to by
Olsten or a Subsidiary of Olsten.
(c) Olsten and each of its Subsidiaries and each of the Olsten Pension
Benefit Plans and Olsten Welfare Plans are in compliance with the applicable
provisions of ERISA, the Code and other applicable laws with respect to the
Olsten Pension Benefit Plans and Olsten Welfare Plans, except where the failure
to comply would not, singly or in the aggregate with all other failures,
non-compliance, liabilities, transactions, events and other matters that are the
subject of any representation and warranty under this Section 4.14, reasonably
be expected to have an Olsten Material Adverse Effect.
(d) All contributions to, and payments from, the Olsten Pension Benefit
Plans which are required to have been made in accordance with the Olsten Pension
Benefit Plans and, when applicable, Section 302 of ERISA or Section 412 of the
Code have been timely made, except where the failure to make such contributions
or payments on a timely basis would not, singly or in the aggregate with all
other failures, non-compliance, liabilities, transactions, events and other
matters that are the subject of any representation and warranty under this
Section 4.14, reasonably be expected to have an Olsten Material Adverse Effect.
(e) The Olsten Pension Benefit Plans intended to qualify under Section 401
of the Code have been determined by the Internal Revenue Service (the "IRS") to
be so qualified and nothing has occurred with respect to the operation of such
Olsten Pension Benefit Plans which would reasonably be expected to cause the
loss of such qualification or exemption or the imposition of any material
liability, penalty or tax under ERISA or the Code.
(f) There are (i) no investigations pending, to the knowledge of Olsten, by
any governmental entity involving the Olsten Pension Benefit Plans or Olsten
Welfare Plans, (ii) no termination proceedings involving the Olsten Pension
Benefit Plans and (iii) no pending or, to Olsten's knowledge, threatened claims
(other than routine claims for benefits), suits or proceedings with respect to
any Olsten Pension Benefit Plan or Olsten Welfare Plan, against the assets of
any of the trusts under any Olsten Pension Benefit Plan or Olsten Welfare Plan
or against any fiduciary of any Olsten Pension Benefit Plan or Olsten Welfare
Plan with respect to the operation of such plan or asserting any rights or
claims to benefits under any Olsten Pension Benefit Plan or against the assets
of any trust under such plan, nor, to Olsten's knowledge, are there any facts
which would give rise to any such investigations, claims, suits or proceedings,
except for any such matter which would not, singly or in the aggregate with all
other failures, non-compliance, liabilities, transactions, events and other
matters that are the subject of any representation and warranty under this
Section 4.14, reasonably be expected to have an Olsten Material Adverse Effect.
(g) None of Olsten, any of its Subsidiaries or any employee of the
foregoing, nor any trustee, administrator, other fiduciary or any other "party
in interest" or "disqualified person" with respect to the Olsten Pension Benefit
Plans or Olsten Welfare Plans, has engaged in a "prohibited transaction" (as
such term is defined in Section 4975 of the Code or Section 406 of ERISA) which
would be reasonably likely to result in a tax, penalty, or other liability on
Olsten or any of its Subsidiaries under Section 4975 of the Code or
Section 502(i) of ERISA, except any such event which would not, singly or in the
aggregate with all other failures, non-compliance, liabilities, transactions,
events and other matters that are the subject of any representation and warranty
under this Section 4.14, reasonably be expected to have an Olsten Material
Adverse Effect.
(h) Neither the Olsten Pension Benefit Plans subject to Title IV of ERISA
nor any trust created thereunder has been terminated nor have there been any
"reportable events" (as defined in Section 4043 of ERISA and the regulations
thereunder) with respect to either thereof, nor has there been any event with
respect to any Olsten Pension Benefit Plan requiring disclosure under
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Section 4063(a) of ERISA or any event with respect to any Olsten Pension Benefit
Plan requiring disclosure under Section 4041(c)(3)(C) of ERISA.
(i) Neither Olsten nor any Subsidiary of Olsten nor any of their ERISA
Affiliates has incurred any currently outstanding liability to the PBGC or to a
trustee appointed under Section 4042(b) or (c) of ERISA other than for the
payment of premiums, all of which have been paid when due. No Olsten Pension
Benefit Plan has applied for, or received, a waiver of the minimum funding
standards imposed by Section 412 of the Code. The information supplied to the
actuary by Olsten or any of its Subsidiaries for use in preparing the most
recent actuarial report for the Olsten Pension Benefit Plans is complete and
accurate in all material respects.
(j) Neither Olsten, any of its Subsidiaries nor any of their ERISA
Affiliates has any material liability (including any contingent liability under
Section 4204 of ERISA) with respect to any multiemployer plan, within the
meaning of Section 3(37) of ERISA.
(k) With respect to each of the Olsten Pension Benefit Plans and Olsten
Welfare Plans, true, correct and complete copies of the following documents have
been delivered or made available to Adecco: (i) the current plans and related
trust documents, including amendments thereto, (ii) any current summary plan
descriptions, (iii) the most recent Forms 5500, financial statements and
actuarial reports, if applicable, and (iv) the most recent IRS determination
letter, if applicable, and (v) any filings with or correspondence to or from the
IRS, or compliance statements, with respect to self-corrections of any
disqualifying defects pursuant to Revenue Procedure 98-22.
(l) Neither Olsten, any of its Subsidiaries, any organization to which
Olsten is a successor or parent corporation, within the meaning of
Section 4069(b) of ERISA, nor any of their ERISA Affiliates has engaged in any
transaction described in Section 4069(a) of ERISA which would reasonably be
expected to result in a material liability to Olsten or its Subsidiaries.
(m) None of the Olsten Welfare Plans maintained by Olsten or any of its
Subsidiaries are retiree life or retiree health insurance plans which provide
for continuing benefits or coverage for any participant or any beneficiary of a
participant following termination of employment, except as may be required under
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA"), or except at the expense of the participant or the participant's
beneficiary. Olsten and each of its Subsidiaries which maintain a "group health
plan" within the meaning of Section 5000(b)(1) of the Code have complied with
the notice and continuation requirements of Section 4980(B) of the Code, COBRA,
Part 6 of Subtitle B of Title I of ERISA and the regulations thereunder, except
for noncompliance which would not, singly or in the aggregate with all other
failures, non-compliance, liabilities, transactions, events and other matters
that are the subject of any representation and warranty under this
Section 4.14, reasonably be expected to have an Olsten Material Adverse Effect.
(n) No liability under any Olsten Pension Benefit Plan or Olsten Welfare
Plan has been funded nor has any such obligation been satisfied with the
purchase of a contract from an insurance company as to which Olsten or any of
its Subsidiaries has received notice that such insurance company is in
rehabilitation.
(o) The execution of, and consummation of the transactions contemplated by,
this Agreement and the Separation Agreement will not, either alone or upon the
occurrence of subsequent events, result in an increase in the amount of
compensation or benefits or accelerate the vesting or timing of payment or
funding of any benefits or compensation payable to or in respect of any employee
or former employee of Olsten or any of its Subsidiaries. Olsten has disclosed to
Adecco in the Olsten Disclosure Statement any severance agreements or severance
policies of Olsten or its Subsidiaries providing benefits in the event of a
change of control of Olsten.
(p) Olsten has disclosed to Adecco in Section 4.14(p) of the Olsten
Disclosure Statement each of Olsten's material Olsten Foreign Plans (as
hereinafter defined) to the extent the benefits provided
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thereunder are not mandated by the laws of the applicable foreign jurisdiction.
Olsten and each of its Subsidiaries and each of such Olsten Foreign Plans are in
compliance with applicable laws and all required contributions have been made to
the Olsten Foreign Plans, except where the failure to comply or make
contributions would not, singly or in the aggregate with all other failures,
non-compliance, liabilities, transactions, events and other matters that are the
subject of any representation and warranty under this Section 4.14, reasonably
be expected to have an Olsten Material Adverse Effect. For purposes of this
Agreement, the term "Olsten Foreign Plan" shall mean any employee benefit plan,
program, policy or arrangement maintained or contributed to, by, or entered into
with, Olsten or any of its Subsidiaries with respect to employees (or former
employees) employed outside the United States.
Section 4.15. LABOR AND EMPLOYMENT MATTERS. (a) Each of Olsten and its
Subsidiaries is in compliance in all material respects with all applicable laws
respecting employment and employment practices, terms and conditions of
employment, safety, wages and hours, and neither Olsten nor any of its
Subsidiaries is engaged in any unfair labor practice in each case, except as
would not, individually or in the aggregate, reasonably be expected to have an
Olsten Material Adverse Effect. Olsten and each of its Subsidiaries: (i) has
withheld all amounts required by law or by agreement to be withheld from wages,
salaries and other payments to employees; (ii) to Olsten's knowledge, is not
liable for any arrears of wages or any taxes or any penalty for failure to
comply with any of the laws set forth in the preceding sentence; and (iii) is
not liable for any material payment to any trust or other fund or to any
Governmental Authority or administrative authority, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
employees (other than routine payments to be made in the normal course of
business and consistent with past practice), except in the case of each of
clauses (i), (ii) and (iii), for failures to withhold and liabilities which
would not, individually or in the aggregate, have an Olsten Material Adverse
Effect. There are no pending, or, to Olsten's knowledge, threatened or
reasonably anticipated claims or actions against under any worker's compensation
policy or long-term disability policy, except as would not, individually or in
the aggregate, have an Olsten Material Adverse Effect. There is no labor strike,
slowdown or stoppage pending (or, to the knowledge of Olsten, any labor strike,
slowdown or stoppage threatened) against or affecting Olsten or any of its
Subsidiaries, except as would not, individually or in the aggregate, have an
Olsten Material Adverse Effect. None of Olsten or its Subsidiaries is a party to
any union contract or collective bargaining agreement in North America. To
Olsten's knowledge, no union organizing activities with respect to any of its or
its Subsidiaries' employees are occurring or threatened, except as would not,
individually or in the aggregate, have an Olsten Material Adverse Effect.
(b) Neither Olsten nor any of its Subsidiaries is a party to any employment,
management services, consultation or other contract or agreement with any past
or present officer or director or, to Olsten's knowledge, any entity affiliated
with any past or present officer or director, other than the agreements executed
by employees generally, the forms of which have been provided to Adecco.
Section 4.16. NO CHANGE OF CONTROL PAYMENTS. Neither the execution and
delivery by Olsten of this Agreement or the execution and delivery by Olsten or
OHS of the Separation Agreement nor the consummation of any of the transactions
contemplated hereby or thereby gives rise to any obligation of Olsten or any of
its Subsidiaries to, or any right of any holder of any security (equity or debt)
of Olsten or any of its Subsidiaries or any holder of any other indebtedness of
Olsten or any of its Subsidiaries or any of Olsten's franchisees or licensed
area representatives to, require Olsten to purchase, offer to purchase, redeem,
otherwise prepay or repay, pay any penalty or otherwise make any payments with
respect to, any such security, indebtedness, or franchise or licensed area
representative contract or agreement, or deposit any funds to effect the same.
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Section 4.17. ENVIRONMENTAL MATTERS. Except as would not have an Olsten
Material Adverse Effect:
(a) Olsten and each of its subsidiaries are in compliance with and have no
liability under applicable Environmental Laws;
(b) there is no civil, criminal or administrative action, suit, demand,
claim, hearing, notice of violation, investigation, notice or demand letter, or
request for information pending, or to Olsten's knowledge threatened, under any
Environmental Law (as hereinafter defined) against Olsten or any of its
Subsidiaries;
(c) neither Olsten nor any of its Subsidiaries has received written notice
of actual or potential liability under any Environmental Law that has not been
resolved, or is performing or obligated to perform any investigation or other
action under any Environmental Law;
(d) to Olsten's knowledge after due inquiry, there are no past or present
events, activities, conditions or occurrences, including, without limitation,
any disposal, spill, discharge or release of any Hazardous Materials (as
hereinafter defined), that would reasonably be expected to result in any
liability under any Environmental Law on the part of Olsten or any of its
subsidiaries; and
(e) to Olsten's knowledge, there is no asbestos or underground storage tank
located at, on or under any facility or property owned, operated or leased by
Olsten or any of its Subsidiaries.
As used in this Agreement, the term "Environmental Laws" means the common
law, and any law, statute, rule, regulation, ordinance, judgment, directive,
order or decree relating to pollution or protection of the environment,
including without limitation, natural resources, or to human health or safety;
and the term "Hazardous Materials" means any pollutant, contaminant, chemical,
substance, constituent, waste or material regulated or which can give rise to
liability under any Environmental Law.
Section 4.18. INSURANCE. Olsten has insurance policies and fidelity bonds
covering its and its Subsidiaries' assets, business, equipment, properties,
operations, employees, officers and directors of the type and in amounts
customarily carried by persons conducting business similar to that of Olsten and
such Subsidiaries. All premiums due and payable under all such policies and
bonds have been paid, and Olsten is otherwise in full compliance with the terms
and conditions of all such policies and bonds, except where the failure to have
made payment or to be in full compliance would not, singularly or in the
aggregate with all such other failures, have an Olsten Material Adverse Effect.
The reserves established by Olsten in respect of all matters as to which Olsten
self-insures or carries retention and/or deductibles, including for workers'
medical coverage and workers' compensation, are adequate and appropriate in
light of Olsten's experience with respect thereto and Olsten is not aware of any
facts or circumstances existing as of the date hereof that could reasonably be
expected to cause such reserves to be inadequate or inappropriate.
Section 4.19. LEASES. Neither Olsten nor any of its Subsidiaries owns any
real property. Olsten has delivered or made available to Adecco true and
complete copies of each lease requiring the payment of rentals aggregating, or
pursuant to which the annual rentals are reasonably expected to be, at least
$250,000 per annum pursuant to which real property is held under lease by Olsten
or any of its Subsidiaries, and true and complete copies of each lease pursuant
to which Olsten or any of its Subsidiaries leases real property to others.
Section 4.19 of the Olsten Disclosure Statement sets forth a true and complete
list of all such leases. All of the leases of Olsten or its Subsidiaries listed
on Section 4.19 of the Olsten Disclosure Statement, are valid and subsisting and
in full force and effect with respect to Olsten and its Subsidiaries, as the
case may be, and, to Olsten's knowledge, with respect to any other party thereto
except any such failures to be in full force and effect as would not be
reasonably expected to have an Olsten Material Adverse Effect. Neither Olsten
nor any of its Subsidiaries nor, to Olsten's knowledge, any landlord is in
default of its obligations under any lease to
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which Olsten is bound and, to Olsten's knowledge, there are no conditions which,
given notice and the passage of time, could constitute a default under such
lease, except for any defaults which would not reasonably be expected to have an
Olsten Material Adverse Effect. Olsten or its Subsidiaries, as the case may be,
have valid leasehold interests in all properties leased thereunder free and
clear of all liens, except as would not, individually or in the aggregate, have
an Olsten Material Adverse Effect. To Olsten's knowledge, the leased real
properties are in good operating order and condition.
Section 4.20. CONTRACTS AND COMMITMENTS. (a) As of the date hereof, none
of Olsten or any of its Subsidiaries is a party to any existing contract,
obligation or commitment of any type in any of the following categories except
for contracts filed as exhibits to the Olsten SEC Reports or set forth in
Section 4.20 of the Olsten Disclosure Statement (true and complete copies of
which contracts have been delivered to or made available to Adecco):
(i) contracts that provide for annual payments to or by Olsten or any of
its Subsidiaries aggregating in excess of $6,000,000;
(ii) any contract under which Olsten or any Subsidiary has or may,
except by way of endorsement of negotiable instruments for collection in the
ordinary course of business and consistent with past practice, become
absolutely or contingently or otherwise liable for (x) the performance under
a contract of any other person, firm or corporation or (y) the whole or any
part of the indebtedness or liabilities of any other person, firm or
corporation, in all cases, individually in excess of $1,000,000 and in the
aggregate in excess of $5,000,000;
(iii) employment agreements, consulting agreements, contracts or
commitments with any employee or member of Olsten's Board of Directors,
other than those which are terminable by Olsten or any of its Subsidiaries
on not more than thirty days notice without liability or financial
obligation, and within each such category of agreements, contracts or
commitments, which are individually in excess of $150,000;
(iv) any agreements or plans, including, without limitation, any stock
option, stock appreciation right or stock purchase plans or agreements, any
of the benefits of which will be increased, or the vesting of benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which
will be calculated on the basis of any of the transactions contemplated by
this Agreement;
(v) any contract with any director, officer or more than 5% stockholder
of Olsten other than in such person's capacity as a director or officer of
Olsten or any contract with any entity in which, to Olsten's knowledge, any
director, officer or more than 5% stockholder or any family member of any
director, officer or stockholder has a material economic interest;
(vi) any contract that limits or restricts in any material respect where
Olsten or any of its Subsidiaries may conduct its or their business or the
type or line of business that Olsten or any of its Subsidiaries may engage
in; and
(vii) any material contract containing any agreement with respect to any
change of control.
(b) All of the contracts listed in Section 4.20 of the Olsten Disclosure
Statement are in full force and effect, except for those contracts the
ineffectiveness of which would not reasonably be expected to have an Olsten
Material Adverse Effect. None of Olsten or its Subsidiaries is in breach of or
default under any contract to which it is a party, except for breaches or
defaults that would not, individually or in the aggregate, either impair
Olsten's or OHS' (as applicable) ability to consummate the Merger or the
Split-Off or the other transactions contemplated hereby or by the Separation
Agreement or have an Olsten Material Adverse Effect.
Section 4.21. FINDERS OR BROKERS. Other than Warburg Dillon Read and
Salomon Smith Barney, neither Olsten nor any of its Subsidiaries has employed
any investment banker, broker, finder or
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intermediary in connection with the transactions contemplated hereby who might
be entitled to a fee or any commission the receipt of which is conditioned upon
consummation of the Merger or the amount of which is calculated with reference
to any part of the Closing Consideration.
Section 4.22. OPINIONS. The Board of Directors of Olsten has received the
opinions of Warburg Dillon Read LLC and Salomon Smith Barney Inc. to the effect
that as of the date of this Agreement the Closing Consideration is fair to the
holders of Olsten Common Stock from a financial point of view.
Section 4.23. BOARD RECOMMENDATION. The Board of Directors of Olsten has,
by a unanimous vote at a meeting of such board duly held on August 14, 1999,
approved and adopted this Agreement, the Merger, the Split-Off and the other
transactions contemplated hereby and thereby, and determined that this
Agreement, the Separation Agreement, the Merger, the Split-Off and the other
transactions contemplated hereby and thereby, taken together, are in the best
interest of the stockholders of Olsten, and prior to the date hereof resolved to
recommend that the holders of Olsten Common Stock approve and adopt this
Agreement, the Merger and the other transactions contemplated hereby.
Section 4.24. VOTING REQUIREMENTS. The approval by a majority of the
voting power represented by the outstanding shares of Olsten Stock and Olsten
Class B Stock entitled to vote thereon, and voting together as a single class,
is the only vote of the holders of any class of Olsten's capital stock necessary
to approve this Agreement, the Merger and the other transactions contemplated
hereby. No separate approval by the holders of any other class or series of
capital stock of Olsten is necessary to approve this Agreement, the Merger or
any of the other transactions contemplated hereby.
Section 4.25. STATE ANTITAKEOVER STATUTES. Olsten has granted all
approvals and taken all other steps necessary to exempt this Agreement, the
Voting Agreement, the Merger and the other transactions contemplated hereby from
the requirements and provisions of Section 203 of the Delaware Act and any other
state or other antitakeover statute or regulation to the extent applicable such
that none of the provisions of such "business combination," "moratorium,"
"control share," or other state antitakeover statute or regulation (x) prohibits
or restricts Olsten's ability to perform its obligations under this Agreement or
its ability to consummate the Merger and the other transactions contemplated
hereby, (y) would have the effect of invalidating or voiding this Agreement or
any provisions hereof, or (z) would subject Olsten or Adecco to any material
impediment or condition in connection with the exercise of any of their
respective rights under this Agreement.
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ARTICLE V
COVENANTS
Section 5.01. CONDUCT OF BUSINESS OF OLSTEN AND ADECCO. (a) Except as
specifically contemplated by this Agreement or the Separation Agreement or as
expressly agreed to in writing by Adecco, during the period from the date of
this Agreement to the Effective Time, each of Olsten and its Subsidiaries will
conduct its operations according to its ordinary and usual course of business
consistent with past practice, and will use all commercially reasonable efforts
to preserve intact its business organization, to keep available the services of
its officers and employees and to maintain satisfactory relationships with
suppliers, vendors, contractors, customers and others having significant
business relationships with it and will take no action that would adversely
affect its ability to consummate the Merger, the Split-Off or the other
transactions contemplated hereby or by the Separation Agreement. Without
limiting the generality of the foregoing, and except as otherwise expressly
provided in this Agreement or the Separation Agreement, from the date of this
Agreement to the Effective Time, neither Olsten nor any of its Subsidiaries
will, without the prior written consent of Adecco:
(i) amend its organizational documents;
(ii) authorize for issuance, issue, sell, deliver, pledge, otherwise
encumber, grant any options, warrants, calls, subscriptions or other rights
(the "Rights") for, or otherwise agree or commit to issue, sell, deliver,
pledge or otherwise encumber any shares of any class of its capital stock or
the capital stock of any of its Subsidiaries or any securities convertible
into or exchangeable or exercisable for shares of any class of its capital
stock or the capital stock of any of its Subsidiaries other than pursuant to
and in accordance with and subject to the terms of outstanding Olsten Common
Stock Equivalents;
(iii) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock, or, except pursuant to agreements in effect on the date of
execution of this Agreement which have been disclosed in the Olsten
Disclosure Statement, purchase, prepay, redeem or otherwise acquire any
shares of its own capital stock or any of its Rights or any indebtedness or
debt security;
(iv) (A) increase in any manner the compensation of any directors or,
except in the ordinary course of business consistent with past practice, its
officers or other employees; (B) pay or agree to pay any pension, retirement
allowance or other employee benefit, or enter into any contract, agreement
or understanding with any of its or its Subsidiaries' past or present
employees relating to any such pension, retirement allowance or other
employee benefit, except (as to other than directors or officers) in the
ordinary course of business consistent with past practice or except as
required under agreements, plans or arrangements existing as of the date
hereof; (C) grant any severance or termination pay to, or enter into or
amend any severance agreement with, any person, except as required under
agreements existing as of the date hereof or done in the ordinary course of
business consistent with past practice; (D) enter into or amend any
contract, agreement or understanding with any past or present officers or
directors or, except in the ordinary course of business consistent with past
practice, with past or present other employees; and (E) except as may be
required to comply with applicable law, adopt or become obligated under any
new pension plan, welfare plan, multiemployer plan, employee benefit plan,
benefit arrangement, or similar plan or arrangement that was not in
existence prior to the date hereof, including any bonus, incentive, deferred
compensation, stock purchase, stock option, stock appreciation right, group
insurance, severance pay, retirement or other benefit plan, or amend any
such plans, contracts, agreements or understandings in existence prior to
the date hereof;
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(v) consolidate, merge or amalgamate with or into any person or sell or
transfer any of its capital stock (other than in intercompany transactions
expressly contemplated by the Separation Agreement and required to effect
the Split-Off) or 5% or more of its assets (whether in one or a series of
related transactions) to another person;
(vi) acquire (including, without limitation, by merger, consolidation,
amalgamation or acquisition of stock or assets) any interest in any
corporation, partnership, other business organization or any division
thereof, or any assets, other than acquisitions of assets in the ordinary
course of business consistent with past practice;
(vii) maintain its books and records in a manner not in the ordinary
course of business consistent with past practice;
(viii) institute any significant change in accounting methods,
principles or practices affecting its assets, liabilities, reserve or
expense recognition, reserves, amortization or accruals, except insofar as
may be appropriate to conform to changes in law or U.S. GAAP;
(ix) make any material change in tax accounting methods, any new
election with respect to material taxes or any modification or revocation of
any existing election with respect to material taxes, or settle or otherwise
dispose of any material tax matter;
(x) revalue any of its respective assets, including without limitation,
writing down the value of inventory or notes or accounts receivables, in
each case, except in the ordinary course of business consistent with past
practice and except insofar as may be appropriate to conform to changes in
law or U.S. GAAP;
(xi) enter into, or permit any of its Subsidiaries to enter into, any
material agreement or arrangement with any of their respective affiliates
(other than wholly-owned Subsidiaries) on terms less favorable to Olsten or
such Subsidiary than could reasonably be expected to have been obtained with
an unaffiliated third party on an arm's length basis;
(xii) authorize, recommend, propose or announce an intention to
authorize, recommend or propose, or enter into any agreement in principle or
an agreement with any other person with respect to any plan of liquidation
or dissolution;
(xiii) except in the ordinary course of business consistent with past
practice, enter into a material contract or any amendment or modification of
any material contract or release or relinquish any material contract rights
and even in the ordinary course, enter into a supply or vendor agreement,
which agreement requires annual payments in excess of $1,500,000, which is
not terminable by Olsten upon 60 days' or less notice, other than with
respect to capital expenditures;
(xiv) enter into any contract, or amend, modify or terminate any
existing contract, in each case with or relating to any of its franchisees
or licensed area representatives;
(xv) authorize or commit to make capital expenditures in excess of
$20,000,000 per calendar quarter;
(xvi) permit any material insurance policy naming it as a beneficiary or
a loss payee to be cancelled, terminated or materially altered, unless such
policy is replaced with a comparable policy for comparable cost;
(xvii) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, contingent or otherwise), other than as required by law
or in the ordinary course of business consistent with past practice;
(xviii) (A) create or incur indebtedness for borrowed money other than
indebtedness incurred under existing working capital facilities of Olsten to
fund working capital but in no event in excess
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of $50,000,000 in the aggregate at any one time outstanding, (B) assume,
guarantee, endorse or otherwise become liable or responsible for the
obligations of any other individual, firm or corporation or make any loans
or advances, except for indebtedness incurred in the ordinary course of
business consistent with past practice, (C) enter into any commitment or
transaction material to Olsten and its Subsidiaries, taken as a whole, other
than in the ordinary course of business consistent with past practice, or
(D) incur any liabilities, except for liabilities that, individually or in
the aggregate, would not have an Olsten Material Adverse Effect;
(xix) (A) other than in the ordinary course of business consistent with
past practice (but not if restricted by the Separation Agreement), make any
intercompany loans or transfer assets through the intercompany accounts or
otherwise between the Retained Subsidiaries, on the one hand, and OHS or its
Subsidiaries (after giving effect to the Split-Off), on the other, or
(B) engage in or enter into any new intercompany or other transactions among
the Retained Subsidiaries, on the one hand, and OHS or its Subsidiaries
(after giving effect to the Split-Off), on the other;
(xx) sell, transfer, pledge, mortgage, or otherwise dispose of, or lease
or license to or from any person, or encumber, any material real or personal
properties, except in the ordinary course of business;
(xxi) make any change in their lines of business as of the date hereof
that would, based on the facts and circumstances and conduct of the
particular business, materially increase the potential liability of Olsten
or the Retained Businesses.
(xxii) take any action that is likely to (i) have a material adverse
effect on its ability to consummate the transactions contemplated by this
Agreement or the Separation Agreement or (ii) delay materially the
consummation of the transactions contemplated by this Agreement or the
Separation Agreement; or
(xxiii) agree to do any of the foregoing.
(b) Prior to the Effective Time, neither Adecco nor any of its Subsidiaries
will do or agree to do any of the following without the prior written consent of
Olsten:
(i) amend its organizational documents;
(ii) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock;
(iii) in the case of Adecco and Merger Sub, authorize, recommend,
propose or announce an intention to authorize, recommend or propose, or
enter into any agreement in principle or an agreement with any other person
with respect to any plan of liquidation or dissolution;
(iv) maintain its books and records in a manner not in the ordinary
course of business consistent with past practice;
(v) institute any significant change in accounting methods, principles
or practices affecting its assets, liabilities or business except insofar as
may be appropriate to conform to change in law or U.S. GAAP;
(vi) revalue any of its respective assets, including without limitation,
writing down the value of inventory or writing off notes or accounts
receivables, in each case, except in the ordinary course of business
consistent with past practice and except insofar as may be appropriate to
conform to change in law or U.S. GAAP;
(vii) in the case of Adecco, consolidate, merge or amalgamate into
another person or sell all or substantially all of its capital stock or
assets;
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(viii) take any action that is likely to (i) have a material adverse
effect on its ability to consummate the transactions contemplated by this
Agreement or (ii) delay materially the consummation of the transactions
contemplated by this Agreement; or
(ix) agree to do any of the foregoing.
Section 5.02. NO SOLICITATION. (a) Olsten agrees that from and after the
date hereof it will not, nor will it authorize or permit any of its Subsidiaries
or any of its or its Subsidiaries' directors, officers, employees, investment
bankers, attorneys, accountants or other agents or representatives (collectively
"Agents") to, directly or indirectly, (w) solicit, initiate, facilitate or
encourage (including by way of furnishing or disclosing nonpublic information)
any inquiries or the making of any offer or proposal by any corporation,
partnership, trust, person or other entity or group (a "Third Party") with
respect to, or that could reasonably be expected to lead to, any merger,
consolidation, share exchange, business combination, tender or exchange offer or
other similar transaction regarding Olsten or any of its Subsidiaries or
involving the acquisition of a substantial portion (15% or more) of the assets
of Olsten and any of its Subsidiaries, taken as a whole, or a significant equity
interest (15% or more by numbers or vote) in (including by way of tender offer),
or a recapitalization or restructuring of, Olsten or any of its Subsidiaries
(any of the foregoing being an "Acquisition Transaction"), (x) negotiate,
explore or otherwise communicate in any way with any Third Party with respect to
any Acquisition Transaction or enter into, approve or recommend any agreement,
arrangement or understanding requiring it to abandon, terminate or fail to
consummate the Merger or any other transaction contemplated by this Agreement,
(y) agree to do any of the foregoing or (z) take any other action inconsistent
with its obligations and commitments pursuant to this Section 5.02; PROVIDED,
HOWEVER, that Olsten may, in response to a Superior Proposal (as defined below)
which was not solicited by it after July 26, 1999 and which did not otherwise
result from a breach of this Section 5.02, subject to compliance with all of the
provisions of this Section 5.02, furnish information to, or engage in
discussions and negotiations with, such Third Party, if but only if (A) the
Board of Directors of Olsten, having received (x) the advice of outside legal
counsel that failure to take such action would be a breach of its fiduciary
duties to its stockholders under applicable law and (y) the advice of a
financial advisor of nationally recognized reputation that the party making such
proposal is financially capable and that such Superior Proposal would be more
favorable from a financial point of view to its stockholders than the Merger and
the Split-Off, reasonably determines in good faith that taking such action is
reasonably likely to lead to an Acquisition Transaction that is more favorable
to it and its stockholders than the Merger and the Split-Off and that failing to
take such action would be a breach of the directors' fiduciary duties under
applicable law, (B) prior to furnishing or disclosing any non-public information
to, or entering into discussions or negotiations with, such Third Party, it
receives from such Third Party an executed confidentiality agreement with
respect to the information to be furnished with terms no less favorable in the
aggregate to it than those contained in the Confidentiality Agreement, but which
confidentiality agreement shall not (nor shall any other agreement or
arrangement between Olsten or any of its Subsidiaries, on the one hand, and such
Third Party, on the other hand, or any of their respective Agents) provide for
any exclusive right to negotiate with Olsten or any payments by Olsten and
(C) it advises Adecco of all such non-public information delivered to such Third
Party no later than concurrently with such delivery. Nothing in this
Section 5.02 shall prohibit the Board of Directors of Olsten from complying with
Rule 14e-2 promulgated under the Exchange Act with regard to a tender or
exchange offer. As used herein, "Superior Proposal" means a bona fide, written
and unsolicited offer made by a financially responsible Third Party with respect
to an Acquisition Transaction involving the acquisition of all of Olsten's
equity interests (or all or substantially all of Olsten's and its Subsidiaries'
assets). Without limiting the foregoing, it is understood that any violation of
the restrictions set forth in this Section 5.02(a) by any officer or director of
Olsten or any of its Subsidiaries or any investment banker, attorney or other
advisor or Agent of Olsten or any of its Subsidiaries shall be deemed to be a
breach of this Section 5.02 by Olsten.
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(b) Olsten shall (i) as promptly as practicable (and in any event no later
than the close of business on the next business day) notify Adecco in writing of
receipt of any inquiries, proposals or offers with respect to an Acquisition
Transaction or any request for nonpublic information relating to it in
connection with an Acquisition Transaction or for access to its or any of its
Subsidiaries' properties, books or records by any Third Party that informs
Olsten's Board of Directors that it is considering making, or has made (or which
Olsten's Board of Directors reasonably believes may be considering making or has
made) a proposal or offer with respect to an Acquisition Transaction, (ii) in
such written notice, indicate in reasonable detail the identity of such Third
Party (including the name of such Third Party) and the terms and conditions of
such proposal or offer, (iii) immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing, and take all necessary steps to
inform such individuals or entities of the obligations undertaken in this
Section 5.02 and (iv) as promptly as practicable (and in any event no later than
the close of business on the next business day) notify Adecco in writing of any
determination by its Board of Directors to furnish information or engage in
discussions or negotiations with any Third Party. If any notice is given or
required to be given in accordance with clause (iv) of the immediately preceding
sentence, then Olsten shall thereafter continue to keep Adecco informed, on a
current basis, of the status of any such discussions or negotiations and the
terms being discussed or negotiated. Notwithstanding the foregoing, Olsten shall
not accept or enter into any agreement concerning a Superior Proposal for a
period of at least three business days after Adecco's receipt of the
notification of the terms thereof pursuant to the second preceding sentence (and
only in compliance with the terms of Article X hereof), during which period
Adecco shall be afforded the opportunity to match the terms and conditions
contained in such Superior Proposal (with equivalent value in the case of
non-cash consideration).
Section 5.03. ACCESS TO INFORMATION. (a) Subject to the terms of the
Confidentiality Agreement, dated April 15, 1999 (the "Confidentiality
Agreement"), between Olsten and Adecco, from the date hereof until the Effective
Time, Olsten will give Adecco and its authorized representatives (including
counsel, consultants, accountants, auditors and agents) reasonable access during
normal business hours to all facilities and to all books and records (and audit
workpapers of independent public accountants) of it and its Subsidiaries and
will cause its officers and those of its Subsidiaries to furnish Adecco with
such reasonable financial and operating data and other information with respect
to its business and properties as Adecco may from time to time reasonably
request, in each case, in a manner that does not unduly interfere with the
normal operations of Olsten's business.
(b) Subject to the terms of the Confidentiality Agreement from the date
hereof until the Effective Time, Adecco will give Olsten and its authorized
representatives (including counsel, consultants, accountants, auditors and
agents) reasonable access during normal business hours to such facilities and to
its officers and representatives and provide such information with respect to
its business and properties as Olsten may from time to time reasonably request
as is customarily provided by a Swiss corporation to its stockholders and which
is materially necessary in order for Olsten to determine the value of the Stock
Consideration to be issued in the Merger, in each case, in a manner that does
not unduly interfere with the normal operations of Adecco's business; PROVIDED,
HOWEVER, to the extent the exercise of fiduciary duty, in the opinion of outside
legal counsel, may require access to additional documents in order to determine
such value, Adecco will use all reasonable efforts to provide Olsten with such
documents.
Section 5.04. REGISTRATION STATEMENTS AND PROXY STATEMENTS. (a) As soon as
is reasonably practicable after the date hereof (i) Olsten, in cooperation with
Adecco, will prepare the Olsten Proxy Statement, (ii) Olsten and OHS shall
prepare a Registration Statement on Form S-4 (or any successor form) in
connection with the registration under the Securities Act of the shares of OHS
Common Stock to be issued at the Effective Time as Split-Off Consideration (the
"OHS Registration Statement"), (iii) Adecco will prepare the Adecco Proxy
Statement, (iv) Adecco will prepare a Registration
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Statement on Form F-4 (or any successor form) (the "Adecco Registration
Statement") and will cause the Depositary to prepare a Registration Statement on
Form F-6 (or any successor form) (the "Depositary Registration Statement," and
together with the OHS Registration Statement and the Adecco Registration
Statement, the "Registration Statements"), in each case in connection with the
registration under the Securities Act of the shares of Adecco Common Stock and
Adecco ADSs (evidenced by Adecco ADRs) to be issued at the Effective Time as
Stock Consideration. Olsten shall, with the cooperation of Adecco, file the
Olsten Proxy Statement with the SEC and shall cause OHS to timely file the OHS
Registration Statement with the SEC and Adecco shall, with the cooperation of
Olsten, timely file the Adecco Registration Statement with the SEC. The parties
will cooperate to cause the Olsten Proxy Statement, the OHS Registration
Statement and the Adecco Registration Statement (collectively, the "Filed
Documents") to comply as to form in all material respects with the applicable
provisions of the Securities Act and the Exchange Act. The parties will
cooperate to cause the Adecco Proxy Statement to comply with any applicable laws
or regulations, including those of any foreign or national securities exchange
on which Adecco Common Stock or Adecco ADSs are listed. Olsten and Adecco shall,
and Olsten shall cause OHS to, use their respective reasonable best efforts to
have the Olsten Proxy Statement cleared by the SEC, to have the OHS Registration
Statement and the Adecco Registration Statement declared effective by the SEC as
promptly as practicable after the filing thereof (including, without limitation,
responding to any comments received from the SEC with respect thereto) and to
keep the OHS Registration Statement and the Adecco Registration Statement
effective as long as is necessary to consummate the Split-Off and the Merger, as
applicable. Each party shall, and Olsten will cause OHS to, as promptly as
practicable, provide the other party with copies of any written comments
received from the SEC with respect to the Filed Documents and advise the other
of any oral comments with respect thereto received from the SEC. Olsten and
Adecco shall use their respective reasonable best efforts to obtain, prior to
the effective date of the OHS Registration Statement, all necessary state
securities law or Blue Sky permits or approvals required to carry out the
transactions contemplated by this Agreement and the Separation Agreement. Olsten
or OHS will pay all such expenses required for the OHS Registration Statement
and Adecco will pay all such expenses required by the Adecco Registration
Statement.
(b) Each party agrees that none of the information supplied or to be
supplied by it or its Subsidiaries for inclusion or incorporation by reference
in the Filed Documents (i) in the case of the Olsten Proxy Statement and each
amendment or supplement thereto, at the time of mailing thereof and at the time
of the stockholders meetings contemplated by Section 1.05, or (ii) in the case
of the OHS Registration Statement or the Adecco Registration Statement and each
amendment or supplement thereto, at the time it is filed or becomes effective
and thereafter until the Effective Time, will contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. If at any time prior to the Effective Time
an event with respect to Olsten or its Subsidiaries or Adecco or its
Subsidiaries shall occur that is required to be described in the Filed Documents
or the Adecco Proxy Statement such event shall be so described, and an amendment
or supplement shall be promptly filed with the SEC (in the case of the Filed
Documents) and, as required by law, disseminated to the stockholders of Olsten.
No amendment or supplement to any Filed Document will be made by either party,
and Olsten will not permit any amendment or supplement to be made by OHS,
without the approval of both Olsten and Adecco, except, in each case, to the
extent such party is advised by outside legal counsel that any such amendment or
supplement is required by law, in which case it shall be permitted to the extent
so required. Each of Olsten and Adecco will advise the other party, promptly
after it receives notice thereof, of the time when the OHS Registration
Statement or the Adecco Registration Statement has become effective or any
supplement or amendment has been filed, the issuance of any stop order, or the
suspension of the qualification of the OHS Common Stock, the Adecco Common Stock
or Adecco ADRs issuable in connection with the Transaction for offering or sale
in any jurisdiction or any request by the SEC for amendment of any of
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the Filed Documents or comments thereon and responses thereto or requests by the
SEC for additional information.
Section 5.05. OTHER ACTIONS; FILINGS; CONSENTS. Subject to the terms and
conditions provided in this Agreement and the Separation Agreement, Olsten and
Adecco shall (i) use their reasonable best efforts to take, or cause to be
taken, all other actions and do, or cause to be done, all other things
necessary, proper or appropriate under applicable laws and regulations or
required to be taken by any Governmental Authority to consummate and make
effective the transactions contemplated by this Agreement and the Separation
Agreement as promptly as practicable, (ii) use their reasonable best efforts to
make, as promptly as practicable, all necessary filings, and thereafter make any
other required submissions with respect to this Agreement, the Separation
Agreement, the Merger or the Split-Off required under (A) the Securities Act,
the Exchange Act and any other applicable foreign, federal or state securities
laws or regulations, (B) the HSR Act and any applicable foreign antitrust or
similar laws and any related governmental request thereunder and (C) any other
applicable federal, state, local or foreign statute, law, rule or regulation,
(iii) use their reasonable best efforts to obtain from any Governmental
Authorities any consents, licenses, permits, waivers, approvals, authorizations
or orders required to be obtained or made by Olsten or Adecco or any of their
respective Subsidiaries in connection with the authorization, execution and
delivery of this Agreement, the Separation Agreement and the consummation of the
transactions contemplated hereby and thereby, (iv) use their reasonable best
efforts to resolve any objections as may be asserted by any Governmental
Authority with respect to the Merger and the Split-Off and the transactions
contemplated hereby and in the Separation Agreement under any antitrust or trade
or regulatory laws or regulations of any Governmental Authority, (v) furnish the
other with copies of all correspondence, filings and communications between them
and their affiliates and their respective representatives, on the one hand, and
any Governmental Authority or member of their respective staffs, on the other
hand, with respect to this Agreement and the Separation Agreement and the
transactions contemplated hereby and thereby, (vi) furnish the other with such
necessary information and reasonable assistance as the other may reasonably
request in connection with their preparation of necessary filings, registrations
or submissions of information to any Governmental Authority and (vii) use their
reasonable best efforts to defend vigorously any litigation seeking to enjoin,
prevent or delay the consummation of the Merger or the Split-Off or the
transactions contemplated hereby or in the Separation Agreement or seeking
material changes and to lift, remove or rescind any injunction or restraining
order or other order adversely affecting the ability of the parties to
consummate the transactions contemplated hereby.
Section 5.06. PUBLIC ANNOUNCEMENTS. Before issuing any press release or
otherwise making any public statement with respect to the Merger, the Split-Off,
any Acquisition Transaction or any of the other transactions contemplated by
this Agreement or the Separation Agreement, Olsten and Adecco will consult with,
and obtain the consent of, each other as to its form and substance and shall not
issue any such press release or make any such public statement prior to
obtaining such consent, except as may be required by law or pursuant to any
order of any court or governmental agency, tribunal or regulatory authority.
Section 5.07. NOTIFICATION OF CERTAIN MATTERS. Each party shall cause one
or more of its representatives to confer on a regular and frequent basis with
representatives of the other and to report on the general status of its ongoing
operations. Each party shall give prompt notice to the other parties of (i) any
written notice or other communication from any Third Party alleging that the
consent of such Third Party is or may be required in connection with the Merger
or Split-Off or other transactions contemplated by this Agreement or the
Separation Agreement, (ii) its receipt of written notice of any governmental
complaints, investigations or hearings or any litigation, in each case, that in
its good faith judgement is (or would be with the passage of time or otherwise)
likely to impair its ability to consummate the transactions contemplated by this
Agreement or the Separation Agreement or to have an Olsten Material Adverse
Effect or an Adecco Material Adverse Effect, as the case may
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be, (iii) any change or event that in its good faith judgment is (or would be
with the passage of time or otherwise) likely to impair its ability to
consummate the transactions contemplated by this Agreement or the Separation
Agreement or to have an Olsten Material Adverse Effect or Adecco Material
Adverse Effect, as the case may be, or (iv) the occurrence or existence of any
event that would, or could with the passage of time or otherwise, make any
representation or warranty contained herein untrue.
Section 5.08. EXPENSES. Except as set forth in Section 10.04 (or, with
respect to Olsten, as may be allocated between Olsten and OHS in the Separation
Agreement), Olsten and Adecco shall bear their respective expenses incurred in
connection with this Agreement, the Separation Agreement, the Merger, the
Split-Off and the transactions contemplated by this Agreement and the Separation
Agreement, including, without limitation, the preparation, execution and
performance of this Agreement, the Separation Agreement and the transactions
contemplated hereby and thereby and all fees and expenses of investment bankers,
finders, brokers, agents, representatives, counsel and accountants.
Section 5.09. AFFILIATES. Section 5.09 of the Olsten Disclosure Statement
lists all persons who may currently be deemed to be "affiliates" of Olsten, for
purposes of Rule 145 under the Securities Act ("Affiliates"), and Olsten shall
advise Adecco in writing of any person who becomes an Affiliate after the date
hereof and prior to the Effective Time, and shall use its reasonable best
efforts to cause each such person to deliver to Adecco, at or prior to the
Effective Time, a written agreement substantially in the form of EXHIBIT D
hereto.
Section 5.10. STOCK EXCHANGE LISTING. Adecco will use its reasonable best
efforts to have the Adecco ADRs to be issued in connection with the Merger, as
Stock Consideration, authorized for quotation or listing, as the case may be, on
the NYSE or NASDAQ, subject to notice of issuance. Adecco shall use its
reasonable best efforts to have the Adecco Common Stock to be issued in
connection with the Merger, as Stock Consideration, authorized for listing on
the Swiss Stock Exchange, subject to notice of issuance. Olsten will use its
reasonable best efforts to have the OHS Common Stock to be issued in connection
with the Split-Off, as Split-Off Consideration, listed on a national securities
exchange or authorized for quotation on NASDAQ, subject to official notice of
issuance.
Section 5.11. INDEMNIFICATION. (a) From and after the Effective Time, each
of Adecco and the Surviving Corporation shall fulfill and honor all rights to
indemnification now existing in favor of any employee, director or officer of
Olsten and its Subsidiaries as provided in its charter or by-laws, in an
agreement between any such person and Olsten or one of its Subsidiaries, or
otherwise by law, which obligation shall survive the Merger and shall continue
in full force and effect for a period of not less than six years from the
Effective Time; PROVIDED that in the event any claim or claims are asserted or
made within such six-year period, all rights to indemnification in respect of
any such claim or claims shall continue until final disposition of any and all
such claims. Adecco will cause the Surviving Corporation to indemnify all
directors and officers of Olsten (the "Indemnified Parties"), to the fullest
extent that Olsten would have been permitted under Delaware law and its charter
or bylaws in effect as of the date hereof to indemnify such individuals, with
respect to all matters arising out of or pertaining to such Indemnified Party's
services as directors or officers of Olsten or any of its Subsidiaries occurring
prior to the Effective Time, including without limitation the transactions
contemplated by this Agreement, and shall also cause the Surviving Corporation
to advance expenses as incurred to the fullest extent permitted by applicable
law, provided the Indemnified Party to whom expenses are advanced provides an
undertaking to repay such advances if it is ultimately determined that such
Indemnified Party is not entitled to indemnification. Adecco and the Surviving
Corporation shall pay reasonable expenses, including attorneys' fees, that may
be incurred by any Indemnifying Party in enforcing the indemnity and other
obligations provided for in this Section 5.11.
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(b) Adecco agrees that, from and after the Effective Time, it shall cause to
be maintained in effect for not less than six years from the Effective Time the
current policies of the directors' and officers' liability insurance maintained
by Olsten; PROVIDED that Adecco may substitute therefor policies of at least the
same coverage containing terms and conditions which are no less advantageous,
PROVIDED that such substitution shall not result in any gaps or lapses in
coverage with respect to matters occurring prior to the Effective Time; and
PROVIDED, FURTHER, that Adecco shall not be required to pay an annual premium in
excess of 300% of the last annual premium paid by Olsten prior to the date
hereof and if Adecco is unable to obtain the insurance required by this
Section 5.11 it shall obtain as much comparable insurance as possible for an
annual premium equal to such maximum amount.
Section 5.12. SETTLEMENT RELEASES. Olsten shall use its reasonable best
efforts to obtain the release of it and each of its affiliates after the Merger
as a party, guarantor or other obligor under and with respect to the
Governmental Settlement Agreements.
Section 5.13. BOARD REPRESENTATION. At or prior to the Effective Time,
Stuart Olsten shall be appointed or elected to the Board of Directors of Adecco.
Section 5.14. TAXATION AND THE SPLIT-OFF. Adecco shall, and shall cause
the Surviving Corporation to, treat the Split-Off for all federal, state and
local taxes purposes as an integral part of the Merger and thus report the
Split-Off as a redemption, for purposes of Section 302(a) of the Code, of a
number of shares of Olsten Common Stock equal in value to the value of the OHS
Common Stock distributed in the Split-Off.
Section 5.15. CERTAIN EMPLOYEE BENEFITS. As soon as practicable after the
execution of this Agreement, Olsten and Adecco shall confer and work together in
good faith to agree upon mutually acceptable employee benefit and compensation
arrangements (and terminate Olsten Pension Benefit Plans and/or Olsten Welfare
Plans immediately prior to the Effective Time if appropriate) so as to provide
benefits and compensation to Olsten employees who will be employees of the
Retained Businesses generally equivalent in the aggregate to those provided to
similarly situated employees of Adecco.
Section 5.16. CARRYBACK ELECTIONS. Prior to the effective time neither
Olsten nor any member of the affiliated group of which Olsten is the common
parent shall make or file any election with any federal, state or local agency
or authority which, for purposes of any income or franchise Tax, prevents or in
any other way impairs Olsten from carrying back existing net operating losses to
prior taxable years.
Section 5.17. TAX BASIS AND EARNINGS & PROFITS STUDY. Immediately
following the execution of this Agreement, Olsten and all of its Subsidiaries
will cooperate fully with Olsten's independent public accountants and its
designated representatives in preparing a study of the basis and earnings and
profits for federal income tax purposes of Olsten and OHS, which study will be
promptly furnished to Adecco and its designated representatives together with
all background and other materials as shall be reasonably requested in order to
permit them to review and analyze such study. Each of the parties hereto shall,
and Olsten shall cause OHS to, attempt in good faith to resolve any issues
raised by Adecco or its designated representatives with respect to such study.
Section 5.18. WAIVER OF REPURCHASE OBLIGATION. Olsten shall use its
reasonable best efforts to cause the Board of Directors of Quantum Health
Resources to approve the transactions contemplated hereby so as to cause such
transactions not to be a Risk Event (as defined in the indenture, as
supplemented, governing the Quantum Debt).
Section 5.19. REVIEW AND FILING OF TAX RETURNS. With respect to all
consolidated or combined federal, state, or local income or franchise Tax
Returns filed on or after the date hereof and prior to the Effective Time,
Adecco shall have the right to receive a draft of each such Tax Return for
review reasonably in advance of the due date for filing such Tax Return. Olsten
shall be obligated to consider
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in good faith any reasonable suggestions made by Adecco with respect to such Tax
Returns. Olsten shall prepare and file all such Tax Returns in a manner
reasonably consistent with past practices.
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS
OF OLSTEN, ADECCO AND MERGER SUB
The respective obligations of each party to effect the Merger and of Olsten
to effect the Split-Off shall be subject to the fulfillment at or prior to the
Closing (as defined in Section 9.01) of each of the following conditions:
Section 6.01. REGISTRATION STATEMENT. The Adecco Registration Statement
and the OHS Registration Statement shall have become effective in accordance
with the provisions of the Securities Act and, with respect to the Adecco
Registration Statement, any other applicable foreign laws. No stop order
suspending the effectiveness of the Adecco Registration Statement or the OHS
Registration Statement shall have been issued by the SEC and, with respect to
the Adecco Registration Statement, any other applicable governmental authority,
and remain in effect.
Section 6.02. STOCKHOLDER APPROVAL. (a) This Agreement, the Merger and the
other transactions contemplated in this Agreement shall have been approved and
adopted by the affirmative vote of the holders of a majority of the voting power
represented by the outstanding shares of Olsten Stock and Olsten Class B Stock,
voting together as a single class.
(b) The Adecco Stockholder Proposals shall have been approved and adopted by
the affirmative vote of the requisite shares of Adecco Common Stock.
Section 6.03. CERTAIN ORDERS. No writ, order, decree or injunction of a
court of competent jurisdiction or governmental entity shall have been entered
against Olsten, Adecco or OHS which prohibits or restricts the consummation of
the Merger or the Split-Off or would otherwise restrict the Surviving
Corporation's exercise of any material rights with respect to the ownership or
operation of the Retained Businesses (as defined in the Separation Agreement).
Section 6.04. HSR ACT AND OTHER ANTITRUST APPROVALS. All necessary
consents and approvals of, and notifications and disclosures to, and filings and
registrations with, any United States or any other governmental authority under
the HSR Act and any applicable foreign antitrust or other similar laws required
for the consummation of the Merger shall have been obtained and any waiting
period applicable to the consummation of the Merger under the HSR Act and any
other applicable antitrust clearances shall have expired or been terminated.
Section 6.05. STOCK EXCHANGE LISTING. The Adecco ADRs and the Adecco
Common Stock issuable in the Merger as Stock Consideration shall have been
authorized for quotation, as appropriate, on NYSE or NASDAQ and the Swiss Stock
Exchange, respectively, subject to official notice of issuance. The OHS Common
Stock issuable in the Split-Off as Split-Off Consideration shall have been
authorized for listing on a national securities exchange or authorized for
quotation on NASDAQ, subject to official notice of issuance.
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ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF ADECCO
AND MERGER SUB
The obligation of Adecco and Merger Sub to effect the Merger shall be
subject to the fulfillment at or prior to the Closing of the following
additional conditions, any one or more of which may be waived by Adecco:
Section 7.01. REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of Olsten contained herein that are qualified with reference to an
Olsten Material Adverse Effect or materiality shall be true and correct and the
representations and warranties of Olsten contained herein that are not so
qualified shall be true and correct in all material respects, in each case, as
of the Effective Time as though made as of such date, except that those
representations and warranties that address matters only as of a particular date
shall remain true and correct as of such date.
Section 7.02. PERFORMANCE. Olsten shall have performed and complied in all
material respects with all agreements, obligations and conditions required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date, except for those failures to so perform or comply that individually or in
the aggregate would not either impair Olsten's ability to consummate the Merger
and the Split-Off and the other transactions contemplated by this Agreement and
the Separation Agreement or have an Olsten Material Adverse Effect.
Section 7.03. MATERIAL ADVERSE EFFECT. No Olsten Material Adverse Effect
shall have occurred since the date of this Agreement and be continuing.
Section 7.04. COMPLIANCE WITH SEPARATION AGREEMENT. Olsten and OHS shall
have complied in all material respects with all of their respective obligations
under the Separation Agreement (except for Sections 5.12 and 5.13 of the
Separation Agreement which shall have been complied with in all respects) and
shall have taken all action required to be taken thereunder prior to the
Effective Time.
Section 7.05. SEPARATION AGREEMENT REPRESENTATIONS AND WARRANTIES
TRUE. The representations and warranties of OHS contained in the Separation
Agreement that are qualified with reference to materiality shall be true and
correct, and the representations and warranties of OHS contained therein that
are not so qualified shall be true and correct in all material respects, as of
the Effective Time as though made as of said date, except that those
representations and warranties that address matters only as of a particular date
shall remain true and correct as of such date.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF OLSTEN
The obligations of Olsten under this Agreement and the Separation Agreement
to effect the Merger and the Split-Off shall be subject to the fulfillment on or
before the Closing Date of each of the following additional conditions, any one
or more of which may be waived by Olsten:
Section 8.01. REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of Adecco and Merger Sub contained herein that are qualified with
reference to an Adecco Material Adverse Effect or materiality shall be true and
correct and the representations and warranties of Adecco and Merger Sub
contained herein that are not so qualified shall be true and correct in all
material respects, in each case, as of the Effective Time as though made as of
such date, except that those representations and warranties that address matters
only as of a particular date shall remain true and correct as of such date.
Section 8.02. PERFORMANCE. Adecco and Merger Sub shall have performed and
complied in all material respects with all agreements, obligations and
conditions required by this Agreement to be
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performed or complied with by them on or prior to the Closing Date, except for
those failures to so perform or comply that, individually or in the aggregate,
would not either impair the ability of Adecco or Merger Sub to consummate the
Merger and the other transactions contemplated hereby or have an Adecco Material
Adverse Effect.
Section 8.03. MATERIAL ADVERSE EFFECT. No Adecco Material Adverse Effect
shall have occurred since the date of this Agreement and be continuing.
ARTICLE IX
CLOSING
Section 9.01. TIME AND PLACE. Subject to the provisions of Articles VI,
VII, VIII and X, the closing of the Merger and the Split-Off (the "Closing")
shall take place at the offices of Cahill Gordon & Reindel, as soon as
practicable but in no event later than 9:30 A.M., local time, on the first
business day after the date on which each of the conditions set forth in
Articles VI, VII and VIII have been satisfied or waived by the party or parties
entitled to the benefit of such conditions; or at such other place, at such
other time, or on such other date as Olsten and Adecco may mutually agree. The
date on which the Closing actually occurs is herein referred to as the "Closing
Date."
Section 9.02. FILINGS AND DELIVERIES AT THE CLOSING. (a) Subject to the
provisions of Articles VI, VII, VIII and X, Olsten, Adecco and Merger Sub shall
cause to be executed at the Closing the Certificate of Merger and shall cause
the Certificate of Merger to be filed and recorded in accordance with the
applicable provisions of the Delaware Act and shall take any and all other
lawful actions and do any and all other lawful things necessary to cause the
Merger and the Split-Off to become effective.
(b) Prior to the Closing, each of Olsten, Adecco and Merger Sub shall
furnish such certificates of its officers to evidence compliance with the
conditions set forth in this Agreement and other matters as may be reasonably
requested by the other party hereto.
ARTICLE X
TERMINATION AND ABANDONMENT
Section 10.01. TERMINATION. This Agreement may be terminated and the
Merger may be abandoned any time prior to the Effective Time, whether before or
after approval by the stockholders of Olsten or Adecco:
(a) by mutual written consent of the Boards of Directors of Olsten and
Adecco;
(b) by either Olsten or Adecco if, without fault of such terminating party,
the Merger shall not have been consummated on or before March 31, 2000, which
date may be extended by mutual consent of the parties hereto; PROVIDED, HOWEVER,
that the right to terminate this Agreement pursuant to this Section 10.01(b)
shall not be available to any party whose failure to perform or observe in any
material respect any of its obligations under this Agreement in any manner shall
have been the cause of, or resulted in, the failure of the Merger to occur on or
before such date; and PROVIDED, FURTHER, that if, on March 31, 2000, the Merger
could be consummated but for the failure to obtain consents, waivers, approvals,
authorizations or orders of a Governmental Entity as contemplated by
Section 6.04, either Olsten or Adecco may, upon notice to the other, extend the
period for consummation of the Merger to the earlier of the date on which such
approvals are obtained or June 30, 2000, but only so long as the party
requesting such extension shall be using its reasonable best efforts to obtain
receipt of such consents, waivers, approvals, authorizations or orders;
(c) by either Olsten or Adecco if any court of competent jurisdiction or
other Governmental Authority shall have issued an order (other than a temporary
restraining order), decree or ruling or
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taken any other action restraining, enjoining or otherwise prohibiting the
Merger or the Split-Off, and such order, decree, ruling or other action shall
have become final and nonappealable;
(d) by Olsten, if the stockholders of Adecco shall have failed to approve
the Adecco Stockholder Proposals at a meeting duly convened therefor;
(e) by Adecco, if the holders of Olsten Common Stock, voting as a single
class, shall have failed to approve and adopt this Agreement, the Merger and the
other transactions contemplated hereby at a meeting duly convened therefor;
(f) by Olsten, if Adecco or Merger Sub has materially breached any
representation, warranty, covenant or agreement contained herein and has not
cured such breach within ten (10) business days of receipt of written notice
from Olsten or by the Closing Date, if earlier;
(g) by Adecco, if Olsten has materially breached any representation,
warranty, covenant or agreement contained herein or in the Separation Agreement
and has not cured such breach within ten (10) business days of receipt of
written notice from Adecco or by the Closing Date, if earlier;
(h) by Adecco, if the Board of Directors of Olsten shall have
(1) withdrawn, changed or modified in any manner its recommendation that its
stockholders vote in favor of this Agreement, the Merger or the other
transactions contemplated hereby; (2) Olsten shall have failed to include in the
Olsten Proxy Statement the recommendation of the Board of Directors of Olsten in
favor of the approval of this Agreement, the Merger and the other transactions
contemplated hereby; (3) the Board of Directors of Olsten or any committee
thereof shall have approved or publicly recommended any Acquisition Transaction;
(4) Olsten shall have entered into any letter of intent or similar document or
any agreement, contract or commitment accepting or expressing an intention to
accept any Acquisition Transaction; or (5) a tender or exchange offer relating
to securities of Olsten shall have been commenced by a Person unaffiliated with
Adecco, and Olsten shall not have sent to its stockholders pursuant to
Rule 14e-2 promulgated under the Securities Act, within 10 business days after
such tender or exchange offer is first published sent or given, a statement
disclosing that Olsten recommends rejection of such tender or exchange offer.
(i) by Olsten, prior to the approval by its stockholders of the Merger, if
(1) Olsten shall have received a Superior Proposal which was not solicited by it
after July 26, 1999 and which did not result from a breach of Section 5.02
hereof, (2) the Board of Directors of Olsten shall have received (x) the advice
of outside legal counsel that failure to take the actions permitted by the
proviso to the first sentence of Section 5.02(a) would be a breach of the
fiduciary duties of the Board of Directors of Olsten to its stockholders under
applicable law and (y) the advice of a financial advisor of nationally
recognized reputation that the party making such proposal is financially capable
and that such Superior Proposal would be more favorable from a financial point
of view to its stockholders than the Merger and the Split-Off, and, thereafter,
reasonably determines in good faith that such Superior Proposal would be more
favorable to its stockholders than the Merger and that failing to take such
actions would be a breach of the directors' fiduciary duties under applicable
law and (3) Olsten shall have given Adecco three business days' written notice
prior to such termination and otherwise complied with the provisions of
Section 5.02 and Adecco shall not have matched such Superior Proposal; provided
that such termination shall not be effective until the fee specified in
Section 10.04 has been paid.
Section 10.02. PROCEDURE FOR TERMINATION. In the event of termination and
abandonment of the Merger by any party pursuant to this Article X, written
notice thereof shall immediately be given to the other party.
Section 10.03. EFFECT OF TERMINATION AND ABANDONMENT. In the event of
termination of this Agreement and abandonment of the Merger pursuant to
Section 10.01, this Agreement and the Separation Agreement shall become void and
have no effect, without liability on the part of any party (or any of its
directors, officers or stockholders), except under this Section 10.03, Sections
5.06, 5.08
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and 10.04, Article XII and the Confidentiality Agreement. Nothing herein shall
relieve any party from liability for any breach of this Agreement occurring
before such termination or shall prejudice the ability of a non-breaching party
from seeking damages from any other party for any breach of this Agreement,
including, without limitation, reasonable attorneys' fees and the right to
pursue any remedy at law or in equity.
Section 10.04. TERMINATION FEES. In order for Olsten to induce Adecco to
enter into this Agreement and to reimburse Adecco for its costs and expenses
related to entering into this Agreement and seeking to consummate the Merger, if
(a) Olsten terminates this Agreement pursuant to 10.01(i); (b) Olsten terminates
this Agreement pursuant to Section 10.01 hereof and at such time Adecco would
have been permitted to terminate this Agreement under Section 10.01(h) hereof;
(c) Adecco terminates this Agreement pursuant to Section 10.01(h) hereof;
(d) Adecco or Olsten terminates this Agreement pursuant to Section 10.01(b) or
(c) and (x) at the time of such termination a definitive proposal for an
Acquisition Transaction has been provided to Olsten by a Third Party and such
proposal has not been rejected by the Board of Directors of Olsten and
(y) within one year of such termination Olsten shall have consummated, or have
entered into a definitive agreement with respect to, an Acquisition Transaction
(on terms more favorable than the terms of this Agreement (without taking into
account the payment of the fee provided for in this Section 10.04)); or
(e) Adecco terminates this Agreement pursuant to Section 10.01(e) or (g) and
within one year of such termination Olsten shall have consummated, or have
entered into a definitive agreement with respect to, an Acquisition Transaction
on terms more favorable than the terms of this Agreement (without taking into
account the payment of the fee provided for in this Section 10.04), then Olsten
shall pay to Adecco, concurrently (i) in the case of clauses (a), (b) and
(c) with such termination and (ii) in the case of clauses (d) and (e), with the
earlier of such consummation or entering into of a definitive agreement, a fee,
in cash, of $40,000,000 (the "Termination Fee").
ARTICLE XI
DEFINITIONS
Section 11.01. TERMS DEFINED IN THIS AGREEMENT. The following capitalized
terms used herein shall have the meanings ascribed in the indicated sections.
Acquisition Transaction................................ 5.02
Adecco................................................. First Paragraph
Adecco ADRs............................................ 2.01
Adecco ADSs............................................ 2.01
Adecco Balance Sheet................................... 3.06
Adecco Common Stock.................................... 2.01
Adecco Disclosure Statement............................ 3.00
Adecco Foreign Plan.................................... 3.12
Adecco Material Adverse Effect......................... 3.01
Adecco Proxy Statement................................. 1.05
Adecco Registration Statement.......................... 5.04
Adecco Reports......................................... 3.05
Adecco Special Meeting................................. 1.05
Adecco Stockholder Proposals........................... Recitals
Affiliates............................................. 5.09
Agent.................................................. 5.02
Agreement.............................................. First Paragraph
Ancillary Agreements................................... Recitals
Assumed OHS Liabilities................................ Recitals
Cash Consideration..................................... 2.01
Cash Election.......................................... 2.01
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Cash Election Number................................... 2.01
Cash Election Shares................................... 2.01
Cash Fraction.......................................... 2.01
Certificate of Merger.................................. 1.02
Certificates........................................... 2.04
CHF.................................................... 12.11
Closing................................................ 9.01
Closing Date........................................... 9.01
Closing Consideration.................................. 2.01
COBRA.................................................. 4.14
Code................................................... 2.09
Confidentiality Agreement.............................. 5.03
Constituent Corporations............................... First Paragraph
Delaware Act........................................... 1.01
Delaware Courts........................................ 12.06
Depositary............................................. 2.04
Depositary Registration Statement...................... 5.04
Deposit Agreement...................................... 2.01
Dissenting Shares...................................... 2.07
$ or Dollars........................................... 12.11
Effective Time......................................... 1.02
Election Deadline...................................... 2.02
Environmental Laws..................................... 3.13, 4.17
ERISA.................................................. 3.12
ERISA Affiliate........................................ 3.12
Exchange Act........................................... 3.03
Exchange Agent......................................... 2.04
Filed Documents........................................ 5.04
Form of Election....................................... 2.01
Governmental Settlement Agreement...................... 4.03
Governmental Authority................................. 3.03
Hazardous Material..................................... 4.17
Health Services Assets................................. Recitals
Health Services Business............................... Recitals
Health Services Liabilities............................ Recitals
HSR Act................................................ 3.03
Indemnified Parties.................................... 5.11
IRS.................................................... 4.14
Market Value........................................... 2.06
Merger................................................. Recitals
Merger Consideration................................... 2.01
Merger Sub............................................. First Paragraph
Merger Sub Common Stock................................ 2.03
NASDAQ................................................. 2.06
Non-Election........................................... 2.01
Non-Election Shares.................................... 2.01
Non-Election Fraction.................................. 2.01
NYSE................................................... 2.05
OHS.................................................... Recitals
OHS Common Stock....................................... 2.01
OHS Registration Statement............................. 5.04
Olsten................................................. First Paragraph
Olsten Balance Sheet................................... 4.06
Olsten Class B Stock................................... Recitals
Olsten Common Stock.................................... Recitals
Olsten Common Stock Equivalents........................ 4.04
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Olsten Disclosure Statement............................ 4.00
Olsten Foreign Plan.................................... 4.14
Olsten Intellectual Property Rights.................... 4.12
Olsten Licenses........................................ 4.11
Olsten Material Adverse Effect......................... 4.01
Olsten Option.......................................... 2.05
Olsten Pension Benefit Plans........................... 4.14
Olsten Plans........................................... 2.05
Olsten Proxy Statement................................. 1.05
Olsten SEC Reports..................................... 4.05
Olsten Special Meeting................................. 1.05
Olsten Staffing Business............................... 6.03
Olsten Stock........................................... Recitals
Olsten Welfare Plans................................... 4.14
PBGC................................................... 3.12
Person................................................. 12.11
Quantum Debt........................................... 4.04
Registration Statements................................ 5.04
Representative......................................... 2.02
Retained Businesses.................................... Recitals
Rights................................................. 5.01
SEC.................................................... 2.05
Securities Act......................................... 3.03
Separation Agreement................................... Recitals
Special Meetings....................................... 1.05
Split-Off.............................................. Recitals
Split-Off Consideration................................ 2.01
Stock Consideration.................................... 2.01
Stock Election......................................... 2.01
Stock Election Shares.................................. 2.01
Stock Election Number.................................. 2.01
Stock Fraction......................................... 2.01
Stock Option Agreement................................. Recitals
Subsidiary............................................. 12.11
Superior Proposal...................................... 5.02
Surviving Corporation.................................. 1.01
Surviving Corporation Common Stock..................... 2.03
Tax.................................................... 3.11
Tax Return............................................. 3.11
Termination Fee........................................ 10.04
Third Party............................................ 5.02
Transaction............................................ Recitals
Transferred Assets..................................... 5.12
U.S. GAAP.............................................. 3.06
Voting Agreement....................................... Recitals
A-45
ARTICLE XII
MISCELLANEOUS
Section 12.01. AMENDMENT AND MODIFICATION. Subject to applicable law, this
Agreement may be amended, modified or supplemented only by written agreement of
Olsten, Adecco and Merger Sub at any time prior to the Effective Time with
respect to any of the terms contained herein; PROVIDED, HOWEVER, that after this
Agreement is adopted by the stockholders of Olsten, no such amendment or
modification shall change the amount or form of the Closing Consideration.
Section 12.02. WAIVER OF COMPLIANCE; CONSENTS. At any time prior to the
Effective Time, any party hereto may (a) extend the time for the performance of
any obligation or other act of any other party hereto, (b) waive any inaccuracy
in the representations and warranties made to such party contained herein or in
any document delivered pursuant hereto or (c) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall
only be valid if set forth in an instrument in writing signed on behalf of such
party. Any waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure. Whenever this
Agreement requires or permits consent by or on behalf of any party hereto, such
consent shall be given in writing in a manner consistent with the requirements
for a waiver of compliance as set forth in this Section 12.02.
Section 12.03. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INVESTIGATIONS. (a) The respective representations and warranties of Olsten,
Adecco and Merger Sub contained herein or in any certificates or other documents
delivered prior to or at the Closing shall not be deemed waived or otherwise
affected by any investigation made by any party hereto. The representations,
warranties and agreements in this Agreement or in any instrument delivered
pursuant hereto by any person shall terminate at the Effective Time, except that
the agreements set forth in Articles I, II and XII and Sections 5.11 and 5.14 of
this Agreement shall survive the Merger.
Section 12.04. NOTICES. All notices and other communications hereunder
shall be in writing and shall be delivered personally, by next-day courier or
mailed by registered or certified mail (return receipt requested), first class
postage prepaid, or sent by facsimile, telegram or telex, to the parties at the
addresses specified below (or at such other address for a party as shall be
specified by like notice; PROVIDED that notices of a change of address shall be
effective only upon receipt thereof). Any such notice shall be effective upon
receipt, if personally delivered or telecommunicated, one day after delivery to
a courier for next-day delivery, or three days after mailing, if deposited in
the U.S. mail, first class postage prepaid.
(a) if to Adecco or Merger Sub, to:
Adecco SA
1275 Cheserex
Switzerland
Attention: Felix A. Weber
Telephone: 011 41 21 321 6666
Telecopy: 011 41 21 321 6688
A-46
with a copy to:
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
Attention: Thomas W. Dobson, Esq.
Telephone: (213) 485-1234
Telecopy: (213) 891-8763
and:
Baer & Karrer
Rechtsanwaelte
Seefeldstrasse 19
8024 Zurich
Switzerland
Attention: PD Dr. Rolf Watter
Telephone: 011 41 1 261 51 50
Telecopy: 011 41 1 251 30 25
(b) if to Olsten, to:
Olsten Corporation
175 Broad Hollow Road
Melville, New York 11747
Attention: Edward A. Blechschmidt
Telephone: (516) 844-7800
Telecopy: (516) 844-7266
with a copy to:
Cahill Gordon & Reindel
Eighty Pine Street
New York, NY 10005
Attention: Kenneth W. Orce, Esq.
Telephone: (212) 701-3000
Telecopy: (212) 269-5420
Section 12.05. ASSIGNMENT; THIRD PARTY BENEFICIARIES. This Agreement and
all of the provisions hereof shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns, but
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties hereto without the prior written consent
of the other parties; PROVIDED, HOWEVER, that Adecco shall have the authority,
in its sole discretion, to assign and transfer the rights, benefits, duties and
obligations of Merger Sub under this Agreement to another newly formed direct or
indirect Subsidiary of Adecco. This Agreement is not intended to confer any
rights or remedies hereunder upon any other person except for officers,
directors, or employees of Olsten pursuant to Section 5.11.
Section 12.06. GOVERNING LAW. This Agreement shall be governed by the laws
of the State of Delaware (regardless of the laws that might otherwise govern
under applicable Delaware principles of conflicts of law) as to all matters,
including but not limited to matters of validity, construction, effect,
performance and remedies. Each of the parties hereto irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the courts
of the State of Delaware and of the United States of
A-47
America located in the State of Delaware (the "Delaware Courts") for any
litigation arising out of or relating to this Agreement and the transactions
contemplated hereby (and agrees not to commence any litigation relating thereto
except in such courts), waives any objection to the laying of venue of any such
litigation in the Delaware Courts and agrees not to plead or claim in any
Delaware Court that such litigation brought therein has been brought in an
inconvenient forum. Each of the parties hereto hereby agrees to service of
process in any litigation arising out of or relating to this Agreement and the
transactions contemplated hereby by certified mail, return receipt requested,
postage prepaid to it at its address for notice specified in Section 12.04.
Section 12.07. AGENT FOR SERVICE; WAIVER OF LIMITATIONS. By the execution
and delivery of this Agreement, Adecco (i) acknowledges that it will, by
separate written instrument, designate and appoint RL&F Service Corp., One
Rodney Square, Wilmington, Delaware 19801 (and any successor entity) as its
authorized agent upon which process may be served in any suit or proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby and acknowledges that RL&F Service Corp. will accept such designation and
(ii) agrees that service of process upon RL&F Service Corp. and written notice
of said service to Adecco in accordance with Section 12.04 shall be deemed in
every respect effective service of process upon Adecco in any such suit or
proceeding. To the extent that Adecco has or hereafter may acquire any immunity
from jurisdiction of any court or from any legal process (whether through
service of notice, attachment prior to judgment, attachment in aid of execution,
execution or otherwise) with respect to itself or its property, it hereby
irrevocably waives such immunity in respect of its obligations under this
Agreement and the transactions contemplated hereby to the extent permitted by
law.
Section 12.08. WAIVER OF JURY TRIAL AND CERTAIN DAMAGES. EACH PARTY TO
THIS AGREEMENT WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
(A) ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, SUIT OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND (B) ANY RIGHT IT MAY
HAVE TO RECEIVE DAMAGES FROM ANY OTHER PARTY BASED ON ANY THEORY OF LIABILITY
FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL (INCLUDING LOST PROFITS) OR PUNITIVE
DAMAGES; PROVIDED, HOWEVER, THAT CLAUSE (B) OF THIS SECTION 12.08 DOES NOT APPLY
TO SECTION 10.04 AND SHALL IN NO WAY LIMIT ANY RIGHTS OF ADECCO THEREUNDER OR
WITH RESPECT THERETO.
Section 12.09. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 12.10. SEVERABILITY. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in any
respect against a party hereto, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby and such invalidity, illegality or unenforceability shall only
apply as to such party in the specific jurisdiction where such judgment shall be
made.
Section 12.11. INTERPRETATION. The article and section headings contained
in this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement. As used in this Agreement, (i) the term
"Person" shall mean and include an individual, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof; (ii) the term "Subsidiary" of any specified
corporation shall mean any corporation of which at least a majority of the
outstanding securities having ordinary voting power to elect a majority of the
board of directors is directly or indirectly owned or controlled by such
specified corporation, any person of which such corporation is a general
partner, or any other person of which at least a majority of the equity
interests therein is, directly or indirectly, owned or controlled by such
specified corporation; (iii) "$" or dollars
A-48
shall mean the lawful currency of the United States of America and (iv) "CHF"
shall mean the lawful currency of Switzerland. In this Agreement, unless the
context otherwise requires, words describing the singular number shall include
the plural and vice versa, and words denoting any gender shall include both
genders. In this Agreement, the phrase "to the knowledge of" and similar phrases
relating to knowledge of Olsten or Adecco shall mean the actual knowledge of its
executive officers.
Section 12.12. ENTIRE AGREEMENT. This Agreement and the Separation
Agreement, including the exhibits hereto and thereto and the documents and
instruments referred to herein and therein, embody the entire agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and supersedes all prior agreements and understandings among the parties
with respect thereto. There are no representations, promises, warranties,
covenants or undertakings by any party, other than those expressly set forth or
referred to herein and therein.
Section 12.13. ENFORCEMENT OF AGREEMENT. The parties hereto agree that
irreparable damage would occur to a party in the event any provision of this
Agreement was not performed by the other party in accordance with the terms
hereof and that the parties shall be entitled to specific performance of the
terms hereof, in addition to any other remedy at law or equity.
A-49
IN WITNESS WHEREOF, Adecco SA, Staffing Acquisition Corporation and Olsten
Corporation have caused this Agreement to be signed by their respective duly
authorized officers as of the date first above written.
Adecco SA,
a societe anonyme organized
under the laws of Switzerland
By: /s/ John P. Bowner
------------------------------
Name: John P. Bowmer
Title: Chief Executive Officer
By: /s/ Felix Weber
------------------------------
Name: Felix A. Weber
Title: Chief Financial Officer
Staffing Acquisition Corporation,
a Delaware corporation
By: /s/ John P. Bowmer
------------------------------
Name: John P. Bowmer
Title: President
By: /s/ Felix Weber
------------------------------
Name: Felix A. Weber
Title: Vice-President
Olsten Corporation,
a Delaware corporation
By: /s/ Edward A. Blechschmidt
------------------------------
Name: Edward A. Blechschmidt
Title: President and Chief
Executive Officer
ANNEX B
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SEPARATION AGREEMENT
DATED AS OF
AUGUST 17, 1999,
AMONG
OLSTEN CORPORATION,
AARONCO CORP.
AND
ADECCO SA
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
--------
ARTICLE I
DEFINITIONS
Section 1.01. Definitions................................................. 1
ARTICLE II
TRANSFER OF ASSETS; ASSUMPTION OF LIABILITIES
Section 2.01. Transfer of Assets.......................................... 5
Section 2.02. Consideration for Transferred Assets........................ 6
Section 2.03. Assignment and Assumption of Liabilities.................... 6
Section 2.04. Delayed Assets and Liabilities.............................. 6
Section 2.05. Representations or Warranties; Disclaimers.................. 7
Section 2.06. Final Determination of Assets and Liabilities............... 8
Section 2.07. Closing; Conveyancing and Stock Assumption Instruments...... 9
Section 2.08. Cash Allocation............................................. 9
Section 2.09. True-Up Net Debt; Intercompany Balance...................... 10
ARTICLE III
THE SPLIT-OFF
Section 3.01. Cooperation Prior to the Split-Off.......................... 10
Section 3.02. Conduct of Health Services Business Pending Split-Off....... 11
Section 3.03. Consummation of the Split-Off............................... 11
ARTICLE IV
INDEMNIFICATION
Section 4.01. OHS Indemnification of Olsten............................... 11
Section 4.02. Olsten Indemnification of OHS............................... 11
Section 4.03. Notice and Payment of Claims................................ 11
Section 4.04. Notice and Defense of Third-Party Claims.................... 12
Section 4.05. Insurance Proceeds.......................................... 13
Section 4.06. Contribution................................................ 13
Section 4.07. Subrogation................................................. 13
Section 4.08. Third-Party Beneficiaries................................... 14
Section 4.09. Remedies Cumulative......................................... 14
Section 4.10. Survival of Indemnities..................................... 14
Section 4.11. After-Tax Indemnification Payments.......................... 14
B-i
PAGE
--------
ARTICLE V
CERTAIN ADDITIONAL MATTERS
Section 5.01. Ancillary Agreements........................................ 14
Section 5.02. OHS Officers and Board of Directors......................... 14
Section 5.03. OHS Certificate of Incorporation and By-laws................ 14
Section 5.04. Credit Agreement............................................ 14
Section 5.05. Sales and Transfer Taxes.................................... 14
Section 5.06. Use of Names................................................ 15
Section 5.07. Mail........................................................ 15
Section 5.08. Transition Services......................................... 16
Section 5.09. Leases of Real Property..................................... 16
Section 5.10. Plea Agreements............................................. 17
Section 5.11. Insurance Policies and Claims Administration................ 17
Section 5.12. Financial Covenants......................................... 19
Section 5.13. Tax Refund Escrow Account................................... 20
Section 5.14. Worker's Compensation Letters of Credit..................... 21
ARTICLE VI
RECORDS AND INFORMATION; ACCESS
Section 6.01. Corporate Records........................................... 21
Section 6.02. Access to Information....................................... 21
Section 6.03. Access to Employees......................................... 21
Section 6.04. Reimbursement............................................... 21
Section 6.05. Confidentiality............................................. 21
ARTICLE VII
MISCELLANEOUS
Section 7.01. Termination................................................. 22
Section 7.02. Amendment................................................... 22
Section 7.03. Waiver of Compliance; Consents.............................. 22
Section 7.04. Expenses.................................................... 22
Section 7.05. Notices..................................................... 22
Section 7.06. Counterparts................................................ 23
Section 7.07. Governing Law............................................... 23
Section 7.08. Entire Agreement............................................ 23
Section 7.09. Assignment; No Third Party Beneficiaries.................... 24
Section 7.10. Ancillary Agreements........................................ 24
Section 7.11. Tax Sharing Agreement....................................... 24
Section 7.12. Further Assurances and Consents............................. 24
Section 7.13. Exhibits and Schedules...................................... 24
Section 7.14. Legal Enforceability........................................ 24
Section 7.15. Dispute Resolution.......................................... 24
Section 7.16. Titles and Headings......................................... 25
Section 7.17. Survival of Representations and Agreements.................. 26
B-ii
Exhibit A -- Form of Employee Benefits Allocation Agreement
Exhibit B -- Form of Tax Sharing Agreement
Schedule 1 -- Health Subsidiaries
Schedule 2 -- Governmental Settlement Agreements
Schedule 3 -- OHS Names
Schedule 4 -- Olsten Names
Schedule 5 -- Balance Sheets
Schedule 6 -- Consents
Schedule 7 -- Shared Leased Property
Schedule 8 -- Licensed Olsten Names
Schedule 9 -- Board Composition
Schedule 10 -- Transition Team
B-iii
SEPARATION AGREEMENT
SEPARATION AGREEMENT ("Agreement") dated as of August 17, 1999 by and among
Olsten Corporation, a Delaware corporation ("Olsten"), Aaronco Corp., a newly
formed Delaware corporation and a wholly-owned subsidiary of Olsten ("OHS"), and
Adecco SA, a societe anonyme organized under the laws of Switzerland ("Adecco").
RECITALS
WHEREAS, Olsten currently conducts the Staffing Services Business, the
Information Technology Services Business and the Health Services Business (each
as defined below) and conducts certain related operations.
WHEREAS, the Staffing Services Business and the Information Technology
Services Business are conducted through Olsten and certain of its subsidiaries
(together with any other subsidiary of Olsten formed after the date hereof for
purposes of conducting the Staffing Services Business and the Information
Technology Services Business) other than the Health Subsidiaries (as defined
below) (the "Retained Subsidiaries") and the Health Services Business is
conducted through Olsten and the subsidiaries listed on Schedule 1 hereto,
together with any other subsidiary of Olsten formed after the date hereof for
purposes of conducting the Health Services Business (the "Health Subsidiaries").
WHEREAS, Olsten, Adecco and Staffing Acquisition Corporation, a Delaware
corporation and a wholly-owned subsidiary of Adecco ("Merger Sub"), have entered
into an Agreement and Plan of Merger, dated as of August 17, 1999 (the "Merger
Agreement"), pursuant to which, at the Effective Time (as defined below), Merger
Sub will merge with and into Olsten, with Olsten being the surviving corporation
(the "Merger").
WHEREAS, prior to the Effective Time, and subject to the terms and
conditions set forth in this Agreement, Olsten will transfer to OHS assets
related to the Health Services Business, and OHS will assume the liabilities
related thereto, as provided in this Agreement and the Ancillary Agreements (as
defined below).
WHEREAS, the Board of Directors of Olsten has determined that it is in the
best interest of Olsten and the stockholders of Olsten to split-off (the
"Split-Off") to the holders of Olsten Common Stock (as defined below) all of the
outstanding shares of OHS Common Stock (as defined below) in consideration for
the redemption of a portion of their shares of Olsten Common Stock.
WHEREAS, the parties have determined that it is necessary and desirable to
set forth the principal corporate transactions required to effect the Split-Off
and to set forth other agreements that will govern certain other matters
following the Split-Off.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
agreements, provisions and covenants contained in this Agreement, the parties
hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. DEFINITIONS. As used herein, the following terms have the
following meaning:
"AAA Rules" has the meaning specified in Section 7.15.
"Action" means any claim, suit, arbitration, inquiry, proceeding or
investigation by or before any court, governmental or regulatory or
administrative agency or commission or any other tribunal.
"Adecco" has the meaning specified in the introduction to this Agreement.
"Adecco Registration Statement" means the registration statement on
Form F-4 filed by Adecco with the Commission to effect the registration by
Adecco of the Stock Consideration, as such registration statement may be amended
from time to time.
"Affiliate" of any specified person means any other person that, directly or
indirectly, controls, is controlled by or is under direct or indirect common
control with such specified person.
"Agreement" has the meaning specified in the introduction to this Agreement.
"Ancillary Agreements" means the Employee Benefits Allocation Agreement and
the Tax Sharing Agreement.
"Assets" means all properties, rights, contracts, leases and claims of every
kind and description, wherever located, whether tangible or intangible, and
whether real, personal or mixed.
"Assumed OHS Liabilities" has the meaning specified in Section 2.03.
"Balance Sheet" has the meaning specified in Section 2.01.
"Closing" has the meaning specified in Section 2.07.
"Closing Date" has the meaning specified in Section 2.07.
"Closing Intercompany Balance" means the balance outstanding in the New
Intercompany Account on the Closing Date.
"Commission" means the Securities and Exchange Commission.
"Consulting Agreements" means the Separation, Consulting and Non-Competition
Agreements dated as of August 17, 1999 by and among Adecco, Olsten and each of
Edward A. Blechschmidt, Stuart Olsten, William P. Costantini and Anthony Puglisi
and the Separation, Consulting and Non-Competition Agreement dated as of
August 17, 1999 by and between Olsten and Maureen McGurl.
"Covered Claims" means those Liabilities that, individually or in the
aggregate, are covered within the terms and conditions of any of the Policies,
whether or not subject to deductibles, co-insurance, uncollectability or
retrospectively rated premium adjustments.
"Delayed Asset" has the meaning specified in Section 2.04.
"Delayed Liabilities" has the meaning specified in Section 2.04.
"Demand" has the meaning specified in Section 7.15.
"Disputes" has the meaning specified in Section 7.15.
"Dissenting Shares" has the meaning specified in the Merger Agreement.
"Effective Time" has the meaning specified in the Merger Agreement.
B-2
"Employee Benefits Allocation Agreement" means the agreement to be entered
into between Olsten and OHS, before the Effective Time, providing for certain
matters relating to the allocation of employee benefits, the treatment of
employee stock options and other employee matters, in substantially the form set
forth as Exhibit A.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Agent" has the meaning specified in the Merger Agreement.
"Existing Credit Agreement" means the Credit Agreement, dated August 9,
1996, as amended from time to time to the date hereof, among Olsten, each of the
Banks named therein and The Chase Manhattan Bank, as agent for the Banks.
"Governmental Authority" means any United States (federal, state or local)
or foreign government, or governmental, regulatory or administrative authority,
agency or commission.
"Governmental Settlement Agreements" means all compromise, settlement or
plea agreements listed on Schedule 2 and all compromise, settlement or plea
agreements between Olsten or any of its subsidiaries and any Governmental
Authority relating to the conduct of the Health Services Business.
"Governmental Settlement Agreement Liabilities" means all Liabilities of
Olsten and its subsidiaries pursuant to or in connection with the Governmental
Settlement Agreements.
"Health Services Business" means the health care business of Olsten and the
Health Subsidiaries conducted in the United States and Canada whereby Olsten and
the Health Subsidiaries provide, directly or under arrangement with third
parties, through licensed and unlicensed health care personnel, services,
including: (i) skilled nursing; education; home health aide and personal
services; pediatric and perinatal care; physical, occupational, neurological and
speech therapies; administration of drugs and disease management programs;
institutional, occupational and alternate site staffing; and marketing,
distribution and staffing solutions for pharmaceutical, biotechnology and
medical device firms; (ii) acute and chronic infusion therapy; and
(iii) network services, including care management and coordination services,
such as centralized intake and billing, claims adjudication, quality assurance
and data reporting and analysis, for managed care customers and self-insured
employers.
"Health Services Business Policies" means all Policies which are owned or
maintained by or on behalf of Olsten and/or any of its subsidiaries or their
respective predecessors pursuant to which the Health Subsidiaries and/or their
officers, directors or agents are eligible for coverage and Olsten and the
Retained Subsidiaries and their officers, directors and agents are not eligible
for coverage.
"Health Subsidiaries" has the meaning specified in the second recital of
this Agreement.
"Indemnifiable Losses" has the meaning specified in Section 4.01.
"Indemnified Party" has the meaning specified in Section 4.03.
"Indemnifying Party" has the meaning specified in Section 4.03.
"Information Technology Services Business" means the business whereby Olsten
and its subsidiaries provide information technology consultants on either a
project management or consulting basis to assist clients in the design,
development and maintenance of computer systems.
"Insurance Charges" has the meaning specified in Section 5.11(e)(ii).
"Insurance Proceeds" means those monies (i) received by an insured from an
insurance carrier or (ii) by an insurance carrier on behalf of an insured.
"Intercompany Loan Balance" means (i) at July 4, 1999, the intercompany loan
balance reflected on the Balance Sheet and (ii) at the Closing Date, an amount
computed on a basis and using practices consistent with the Intercompany Loan
Balance at July 4, 1999.
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"Liabilities" means any and all claims, debts, liabilities, license fees,
franchise fees, losses, penalties, deficiencies, litigation proceedings, levies,
duties, assessments, attorneys' fees, charges, allegations, demands, damages,
judgments and obligations, absolute or contingent, matured or not matured,
liquidated or unliquidated, accrued or not accrued, known or unknown, whenever
arising, and whether or not the same would properly be reflected on a balance
sheet, including all costs and expenses relating thereto including, without
limitation, under any law, rule, regulation, action, order or consent decree of
any Governmental Authority or any award of any arbitrator of any kind, and those
arising under any contract, commitment or undertaking.
"Licensed Olsten Names" has the meaning specified in Section 5.06(a).
"Merger" has the meaning specified in the third recital to this Agreement.
"Merger Agreement" has the meaning specified in the third recital to this
Agreement.
"Merger Sub" has the meaning specified in the third recital to this
Agreement.
"NASDAQ" means the National Association of Securities Dealers Automated
Quotation System.
"Net Debt" as of the True-Up Date means as of such date the sum of
(i) indebtedness for borrowed money, (ii) the deferred purchase price of
property and (iii) up to a maximum of $10 million of transaction fees related to
the transactions contemplated by the Merger Agreement and this Agreement LESS
cash on hand; PROVIDED, HOWEVER, that cash on hand shall not include any cash
amount in the Tax Refund Escrow Account.
"Net Operating Loss Refund Claim" means a claim for a tax refund of the
Olsten affiliated group filed on federal form 1139, Corporate Application for
Tentative Refund or federal form 1120X, Amended Corporation Income Tax Return or
an equivalent state or local tax form with respect to a net operating loss of
the Olsten affiliated group.
"New Intercompany Account" has the meaning specified in Section 2.09.
"OHS" has the meaning specified in the introduction to this Agreement.
"OHS Common Stock" means the shares of common stock, par value $.01 per
share, of OHS or any other shares or classes of capital stock of OHS that may be
created hereafter.
"OHS Employee" has the meaning set forth in the Employee Benefits Allocation
Agreement.
"OHS Indemnitees" has the meaning specified in Section 4.02.
"OHS Liabilities" means all of (i) the Liabilities of OHS under this
Agreement and the Employee Benefits Allocation Agreement that may arise
hereunder or thereunder, (ii) the Assumed OHS Liabilities, (iii) the Liabilities
of OHS, the Health Services Business and the Health Subsidiaries arising after
the Closing Date and (iv) the Liabilities of Olsten under Section 7 of the
Consulting Agreements.
"OHS Names" means the names listed on Schedule 3.
"OHS Proprietary Name Rights" has the meaning specified in Section 5.06.
"OHS Registration Statement" means the registration statement on Form S-4
filed by OHS with the Commission to effect the registration of the OHS Common
Stock to be issued as the Split-Off Consideration pursuant to the Securities
Act, as such registration statement may be amended from time to time.
"Olsten" has the meaning specified in the introduction to this Agreement.
"Olsten Common Stock" means, collectively, the outstanding shares of common
stock, par value $.10 per share, and the Class B common stock, par value $.10
per share, of Olsten.
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"Olsten Indemnitees" has the meaning specified in Section 4.01.
"Olsten Liabilities" means all of the Liabilities of Olsten under this
Agreement and that may arise under this Agreement, and the Liabilities of
Olsten, whether arising before, on or after the Closing Date, but not including
(i) the Assumed OHS Liabilities and (ii) the Liabilities of OHS, the Health
Services Business and the Health Subsidiaries arising after the Closing Date.
"Olsten Names" means the names listed on Schedule 4.
"Olsten Proprietary Name Rights" has the meaning specified in Section 5.06.
"Olsten Proxy Statement" means the proxy statement in the form sent to each
holder of Olsten Common Stock in connection with the Merger and the Split-Off.
"Panel" has the meaning specified in Section 7.15.
"Party" has the meaning specified in Section 7.15.
"Person" has the meaning specified in Section 7.16.
"Policies" or "Policy" means insurance policies and insurance contracts of
any kind as in effect as of the date hereof, including, without limitation,
primary, excess and umbrella, comprehensive general liability, automobile,
workers' compensation, employee dishonesty, property and crime insurance
policies and self-insurance and captive insurance company arrangements, together
with the rights, benefits and privileges thereunder.
"Quantum Debt" means the 4 3/4% Convertible Subordinated Debentures due 2000
of Quantum Health Resources, Inc.
"Representatives" has the meaning specified in Section 7.15.
"Retained Assets" means all Assets of Olsten and its subsidiaries (including
the Tax Refund Escrow Account), other than the Transferred OHS Assets.
"Retained Businesses" means any business conducted by Olsten now or in the
future other than the Health Services Business.
"Retained Businesses Policies" means all Policies which are owned or
maintained by or on behalf of Olsten and/or any of its subsidiaries or their
respective predecessors where Olsten and/or the Retained Subsidiaries and/or
their officers, directors or agents are eligible for coverage and the Health
Subsidiaries and their officers, directors and agents are not eligible for
coverage.
"Retained Subsidiaries" has the meaning specified in the second recital of
this Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"Shared Policies" means Policies where both the Retained Businesses and the
Health Services Business are eligible for coverage and/or Policies where the
employees, directors or agents of both the Retained Businesses and the Health
Services Business are eligible for coverage.
"Shareholder Liabilities" means all of the liabilities, including, without
limitation, the contingent liabilities, arising from the lawsuits captioned IN
RE OLSTEN CORPORATION SECURITIES LITIGATION, No. 97 CV 5056 (DRH) (United States
District Court for the Eastern District of New York), and RUBIN V. MAY, C.A.
No. 17135NC (Delaware Chancery Court, County of New Castle).
"Split-Off" has the meaning specified in the sixth recital of this
Agreement.
"Split-Off Consideration" has the meaning specified in the Merger Agreement.
"Staffing Services Business" means the business of Olsten and its
subsidiaries whereby it provides assignment employees in a variety of service
areas (other than the Health Services Business), including:
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supplemental staffing; evaluation and training for office technology; general
office and administrative services; accounting and other financial services;
legal, scientific, engineering and technical services, including production
technical training; call centers; production/distribution/assembly services;
training and pre-employment services; retail services; marketing support and
teleservices; manufacturing, construction and industrial services; and managed
services for corporations.
"Stock Consideration" has the meaning specified in the Merger Agreement.
"subsidiary" has the meaning specified in Section 7.16.
"Tax" shall have the meaning given to such term in the Tax Sharing
Agreement.
"Tax Refund Escrow Account" has the meaning specified in Section 5.13.
"Tax Sharing Agreement" means the agreement to be entered into between
Olsten, Adecco and OHS prior to the Effective Time providing for certain tax
related matters, in substantially the form set forth as EXHIBIT B.
"Third-Party Claim" has the meaning specified in Section 4.04.
"Transition Services" has the meaning specified in Section 5.08.
"Transition Services Invoice" has the meaning specified in Section 5.08.
"Transition Services Period" has the meaning specified in Section 5.08.
"Transaction Taxes" has the meaning specified in Section 5.05.
"Transferred OHS Assets" has the meaning specified in Section 2.01(a).
"Transferred Olsten Assets" has the meaning specified in Section 2.01(b).
"True-Up Date" means the close of business on October 31, 1999.
"True-Up Intercompany Balance" means the intercompany loan balance on the
True-Up Date, computed on a basis and using practices consistent with the
Intercompany Loan Balance reflected on the Balance Sheet.
"US GAAP" means generally accepted accounting principles in the United
States, applied on a consistent basis.
ARTICLE II
TRANSFER OF ASSETS; ASSUMPTION OF LIABILITIES
Section 2.01. TRANSFER OF ASSETS. (a) Prior to the Effective Time, Olsten
shall take or shall cause to be taken all actions necessary to cause the
transfer, assignment, delivery and conveyance to OHS of all of Olsten's and its
subsidiaries' rights, title and interest in all of the Assets and related
goodwill, wherever located, relating exclusively to the operation of the Health
Services Business, including, without limitation, the assets listed below
(collectively, the "Transferred OHS Assets"):
(i) all assets shown or reflected on the balance sheet of the Health
Services Business as at July 4, 1999 attached on Schedule 5 (the "Balance
Sheet"), other than such assets as have been disposed of since July 4, 1999
in the ordinary course of business consistent with past practice;
(ii) Assets relating exclusively to the operation of the Health Services
Business that are acquired by any of the Health Subsidiaries in the ordinary
course of their business consistent with past practices after July 4, 1999
and prior to the Effective Time;
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(iii) the shares of capital stock of the Health Subsidiaries owned,
directly or indirectly, by Olsten and any equity interest owned, directly or
indirectly, by any of the Health Subsidiaries as set forth on Schedule 1;
(iv) all contracts, contract rights, agreements, arrangements or
commitments of any kind and all licenses and permits of the Health
Subsidiaries that relate exclusively to the Health Services Business,
including without limitation, the Governmental Settlement Agreements;
(v) all real property leases or other interests in real property or
rights to use thereof, and all buildings, structures, appurtenances and
improvements erected upon, attached to or located thereon of the Health
Subsidiaries that relate exclusively to the Health Services Business;
(vi) the OHS Names and OHS Proprietary Name Rights and other intangible
properties and rights that relate exclusively to the Health Services
Businesses;
(vii) all books, records and files of, or relating exclusively to, the
Health Services Business; and
(viii) the Health Services Business Policies.
(b) Prior to the Effective Time, OHS shall take or shall cause to be taken
all actions necessary to cause the transfer, assignment, delivery and conveyance
to Olsten or the appropriate Retained Subsidiary of all rights, title and
interest of OHS and any Health Subsidiary in the Retained Businesses (the
"Transferred Olsten Assets").
(c) Notwithstanding anything contained in Section 2.01(a) to the contrary,
Olsten and the Retained Subsidiaries shall retain and shall not transfer,
assign, deliver or convey to OHS or any Health Subsidiary any Retained Assets.
Section 2.02. CONSIDERATION FOR TRANSFERRED ASSETS. In full consideration
for the Transferred OHS Assets, (i) OHS shall issue to Olsten a sufficient
number of shares of OHS Common Stock that, together with the shares of OHS
Common Stock held by Olsten prior to such date, shall be sufficient to enable
Olsten and OHS to perform their obligations under the Merger Agreement and
(ii) OHS shall assume the Assumed OHS Liabilities. In full consideration for the
Transferred Olsten Assets, Olsten shall pay, perform and discharge the Olsten
Liabilities.
Section 2.03. ASSIGNMENT AND ASSUMPTION OF LIABILITIES. (a) Prior to the
Effective Time, simultaneously with the transfer of Assets pursuant to
Section 2.01, Olsten shall assign to OHS and OHS shall assume and agree to pay,
perform and discharge when due all of the Liabilities of the Health Subsidiaries
and of the Health Services Business including, without limitation, all
Liabilities of Olsten and its subsidiaries arising out of, relating to,
associated with or resulting from the operation of the Health Services Business
or the ownership, use or possession of the Transferred OHS Assets or other
activities in connection therewith, whether arising before, on or after the
Closing Date, including without limitation, the Shareholder Liabilities, the
Governmental Settlement Agreement Liabilities, the Liabilities reflected on the
Balance Sheet and the Quantum Debt (the "Assumed OHS Liabilities").
(b) Notwithstanding the foregoing, the Assumed OHS Liabilities shall not
include (i) any debt of Olsten for money borrowed (including but not limited to
any such debt evidenced by a note, debenture or other instrument), and
(ii) except as provided in clause (iv) of the definition of "OHS Liabilities,"
any claims, losses, damages, demands, costs, expenses or liabilities for any Tax
(which shall be governed by the Tax Sharing Agreement and Sections 4.11 and
5.05).
Section 2.04. DELAYED ASSETS AND LIABILITIES. Nothing herein shall be
deemed to require the transfer of any Assets ("Delayed Assets") or the
assumption of any Liabilities ("Delayed Liabilities") that by their terms or by
operation of law cannot be transferred or assumed; PROVIDED, HOWEVER, that
Olsten and OHS and their respective subsidiaries and Affiliates shall cooperate
in seeking to obtain any
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necessary consents or approvals as promptly as possible for the transfer of all
Delayed Assets and assignment and assumption of all Delayed Liabilities as
contemplated by this Article II and in obtaining the release of Olsten and the
Retained Subsidiaries from the Assumed OHS Liabilities and any guaranty or
similar obligation of any Assumed OHS Liability and OHS and the Health
Subsidiaries from the Olsten Liabilities or any guaranty or similar obligation
of any Olsten Liability. In the event that any such transfer of Assets or
Liabilities has not been consummated on or prior to the Closing Date, the party
retaining such Delayed Asset or Delayed Liability shall thereafter hold such
Delayed Asset in trust for the use and benefit of the party entitled thereto (at
the expense of the party entitled thereto) and retain such Delayed Liability for
the account of the party by whom such Delayed Liability is to be assumed
pursuant hereto, and take such other actions as may be reasonably required in
order to place the parties, insofar as reasonably possible, in the same position
as would have existed had such Delayed Asset been transferred or such Delayed
Liability been assumed as contemplated hereby including, without limitation,
enjoyment of rights to indemnification as if such Delayed Liability had been
assumed. As and when any such Delayed Asset or Delayed Liability becomes
transferable, such transfer and assumption shall be effected forthwith. In the
event Olsten or the Retained Subsidiaries are not released from any Assumed OHS
Liabilities or Delayed Liabilities, including the Governmental Settlement
Agreement Liabilities, or OHS or the Health Subsidiaries are not released from
any Olsten Liabilities, in each case, prior to the Effective Time, each such
party shall be entitled to indemnification for all such Liabilities pursuant to
Section 4.01.
Section 2.05. REPRESENTATIONS OR WARRANTIES; DISCLAIMERS. (a) It is
understood and agreed (i) that neither Olsten nor any of the Retained
Subsidiaries is representing or warranting in any way as to the value or freedom
from encumbrance of, or any other matter concerning, any Transferred OHS Assets,
and (ii) that the Transferred OHS Assets are being transferred "as is, where is"
and with all faults (provided that the absence of such warranties shall not
negate the allocation of liabilities under this Agreement and shall have no
effect on any manufacturers, sellers or other third party warranties that are
intended to be transferred with such assets). Similarly, it is understood and
agreed that neither Adecco, Olsten nor any of the Retained Subsidiaries is, in
this Agreement or in any other agreement or document contemplated by this
Agreement, representing or warranting to OHS or any OHS Indemnitee in any way
that the obtaining of the consents and approvals, the execution and delivery of
any amendatory agreements and the making of the filings and applications
contemplated by this Agreement shall satisfy the provisions of any or all
applicable agreements or the requirements of all applicable laws or judgments.
(b) OHS represents and warrants that:
(i) OHS is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite
corporate power and authority to own, lease and operate its properties and
to carry on its business as now being conducted;
(ii) OHS has full corporate power and authority to execute this
Agreement and the Ancillary Agreements to which it will be a party and to
consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement and the Ancillary Agreements and the
consummation of the transactions contemplated hereby and thereby have been
duly authorized by all necessary action on the part of OHS and, to the
extent required, by the stockholder of OHS. This Agreement has been duly
executed and delivered by OHS and, assuming due authorization, execution and
delivery hereof by Olsten, constitutes a valid and binding agreement of OHS,
enforceable against OHS in accordance with its terms, except to the extent
that its enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement of
creditors' rights generally or by general equitable principles. Each of the
Ancillary Agreements will be duly executed and delivered by OHS on or prior
to the Effective Time and, assuming due authorization, execution and
delivery thereof by each other party thereto, will constitute a valid and
binding agreement of OHS, enforceable against OHS in accordance with
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its terms, except to the extent that its enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors' rights generally or by general
equitable principles;
(iii) The execution and delivery by OHS of this Agreement and the
Ancillary Agreements and the consummation of the transactions contemplated
hereby or thereby will not contravene, violate, result in a breach of or
constitute a default under (x) any provision of applicable law or of the
articles of incorporation or by-laws of OHS or any Health Subsidiary or
(y) any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to OHS or any Health Subsidiary or any of their properties or
assets, except for such contravention, violations, breaches or defaults
that, individually or in the aggregate, would not materially impair OHS's
ability to consummate the transactions contemplated hereby or (z) the
Governmental Settlement Agreements;
(iv) No filing or registration with, or permit, authorization, consent
or approval of, or notification or disclosure to, any Governmental Authority
is required by OHS in connection with the execution and delivery of this
Agreement, the Ancillary Agreements or the consummation of the transactions
contemplated hereby or thereby, except (w) in connection with the provisions
of the Securities Act and the Exchange Act, (x) such consents, approvals,
orders, permits, authorizations, registrations, declarations and filings as
may be required under the Blue Sky laws of various states, (y) consents,
authorizations, approvals or notifications listed on Schedule 6 and
(z) such consents, approvals, orders, permits, authorizations,
registrations, declarations and filings, the failure of which to obtain
would not, individually or in the aggregate, materially impair OHS's ability
or Olsten's ability to consummate the transactions contemplated hereby;
(v) The OHS Common Stock to be issued pursuant to Section 2.02 has been
duly authorized and, when so issued, will be fully paid, validly issued and
nonassessable and will not have been issued in violation of any preemptive
rights;
(vi) At the Effective Time, neither OHS nor any of the Health
Subsidiaries will be a party to any material agreement, arrangement or
understanding with Olsten or any of the Retained Subsidiaries other than
this Agreement, the Ancillary Agreements and any other agreement entered
into in connection with the Split-Off as contemplated by this Agreement; and
(vii) Each of the Balance Sheet and the balance sheets attached as
Schedule 5 for the years ended January 4, 1999 and December 28, 1997 fairly
present in all material respects the combined financial position of the
Health Services Business as of their respective dates, in accordance with US
GAAP (subject in the case of interim financial statements, to normal
year-end adjustments).
(c) In addition to the actions specifically provided for elsewhere in this
Agreement and except as otherwise expressly set forth in this Agreement, each of
the parties hereto shall act in good faith and use its respective reasonable
best efforts to take, or cause to be taken, all actions, and, to execute and
deliver, or cause to be executed and delivered, such additional documents and
instruments, and to do, or cause to be done, all things, reasonably necessary,
proper or advisable under applicable laws and agreements to consummate and make
effective the transactions contemplated by this Agreement.
(d) Notwithstanding anything contained herein to the contrary, neither
Olsten nor OHS shall, without the prior written consent of Adecco, take any
action or inaction in effecting the transactions contemplated hereby if such
action or inaction would (i) materially increase the Liabilities of Olsten or
the Retained Subsidiaries, (ii) materially impair Olsten's ability to conduct
the Retained Businesses, or (iii) materially decrease the value of the Retained
Assets.
Section 2.06. FINAL DETERMINATION OF ASSETS AND LIABILITIES. (a) In case
of any dispute arising before the Split-Off, as to the identity or existence of
Assets relating to the operation of the Health Services Business and the
Retained Businesses or the existence of such a relationship or the
transferability thereof, or the allocation of insurance premium refunds, the
good faith determination of
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the Board of Directors of Olsten, together with the consent of Adecco, which
consent shall not be unreasonably withheld, if such dispute shall concern Assets
or Liabilities that are material to Olsten and the Retained Subsidiaries, taken
as a whole, if made before the Split-Off, shall be final, conclusive and
binding.
(b) In case of any dispute arising before the Split-Off as to the identity
or existence of Liabilities, to be assumed by OHS or as to which OHS is to
indemnify Olsten and its subsidiaries, or the identification or other allocation
of Liabilities in respect of insurance premium obligations, the good faith
determination of the Board of Directors of Olsten, together, in the case of a
dispute which concerns Assets or Liabilities that are material to Olsten and the
Retained Subsidiaries, taken as a whole, with the consent of Adecco, which
consent shall not be unreasonably withheld, if made before the Split-Off, shall
be final, conclusive and binding.
Section 2.07. CLOSING; CONVEYANCING AND STOCK ASSUMPTION INSTRUMENTS. (a)
The sale, transfer, assignment and delivery of Assets referred to in
Section 2.01 and the assumption of Liabilities referred to in Section 2.03 (the
"Closing") shall take place at any time and place as may be designated by the
parties hereto, but in no event later than the Effective Time (the "Closing
Date").
(b) At the Closing the parties shall execute or cause to be executed by the
appropriate entities conveyancing and assumption instruments, including using
their reasonable best efforts to obtain from third-parties appropriate releases
and novations, in such forms as the parties shall reasonably agree, including
deeds as may be appropriate, the assignment of trademarks and franchise rights,
and the assignment and assumption of existing lease agreements. Any transfer of
capital stock (including the issuance of OHS Common Stock described in
Section 2.02) shall be effected by means of delivery of stock certificates and
executed stock powers and notation on the stock record books of the corporation
or other legal entities involved and, to the extent required by applicable law,
by notation on public registries.
Section 2.08. CASH ALLOCATION.
(a) CASH ALLOCATION ON THE CLOSING DATE. The allocation between Olsten and
OHS of all domestic and international cash bank balances, short-term investments
and outstanding checks and drafts of Olsten and its subsidiaries recorded on the
books of Olsten and its subsidiaries shall be in accordance with the following:
(i) all cash received in, and deposits of cash, checks, drafts or
short-term investments made to, depositary accounts as of the close of
business on the Closing Date shall be remitted to Olsten, other than cash
contained in accounts allocated to OHS pursuant to Section 2.03; and
(ii) all petty cash of the Health Services Business shall be allocated
to OHS on the Closing Date; and
(iii) all Liabilities for payment of outstanding checks or drafts drawn
on or prior to the Closing Date on accounts allocated to OHS pursuant to
Section 2.03 shall be paid by OHS.
(b) CASH MANAGEMENT AFTER THE CLOSING DATE. The petty cash, depositary and
disbursement accounts of the Health Services Business shall be transferred to
OHS on the Closing Date after the allocations are made pursuant to
Section 2.08(a)(i) and (ii). OHS shall establish and maintain a separate cash
management system and accounting records with respect to the Health Services
Business effective as of 12:01 a.m. New York time on the day following the
Effective Time.
(c) For purposes of this Section 2.08, any disagreement or dispute arising
between Olsten and OHS on or prior to the Closing Date shall be resolved by the
Board of Directors of Olsten, together, in the case of a dispute which concerns
Assets or Liabilities that are material to Olsten and the Retained Subsidiaries,
taken as a whole, with the consent of Adecco, which resolution shall be binding
and final upon each of the parties hereto and not subject to further review.
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Section 2.09. TRUE-UP NET DEBT; INTERCOMPANY BALANCE.
(a) On the True-Up Date, the True-Up Intercompany Balance shall be frozen
and thereafter shall not be increased or decreased.
(b) On the True-Up Date, Olsten shall open a new intercompany account (the
"New Intercompany Account") to record intercompany transactions for the period
between the True-Up Date and the Closing Date. All entries to the New
Intercompany Account shall be made in the ordinary course of business and on a
basis consistent with the intercompany loan balance reflected on the Balance
Sheet.
(c) On the True-Up Date, if the Net Debt of Olsten and the Retained
Subsidiaries is (i) greater than $750 million, then the New Intercompany Account
shall reflect a payable by OHS to Olsten equal to the amount of such excess, or
(ii) less than $750 million, then Olsten shall pay to OHS cash on such date, in
an amount equal to such shortfall or (iii) equal to $750 million, then the New
Intercompany Account shall open with a zero balance.
(d) At the Effective Time, (i) the Closing Intercompany Balance shall be
settled by OHS or Olsten, as the case may be, delivering to the other a cash
payment in an amount equal to the amount owing by such party to the other, if
any, together with simple interest at 6% per annum from the True-Up Date to the
Effective Time on the average daily balance, and (ii) the True-Up Intercompany
Balance shall be contributed to the capital of OHS at the Effective Time.
(e) On the day following the True-Up Date, OHS shall establish a cash
management system for the Health Services Business and related accounts and the
Health Services Business shall cease participation in Olsten's cash management
system. Between the True-Up Date until the Effective Time, (i) all cash receipts
and disbursements of OHS and the Health Services Business shall be made through
the Health Services Business cash management system, and (ii) all transfers of
cash or other assets (other than to accomplish the transfer of assets pursuant
to Section 2.01), or transactions, including management fees and intercompany
loans, between the Retained Businesses, on the one hand and the Health Services
Business, on the other, shall be reflected in the New Intercompany Account, and
(iii) management fees shall be paid by OHS to Olsten on the same basis as prior
to the True-Up Date and shall be prorated to the Effective Time.
ARTICLE III
THE SPLIT-OFF
Section 3.01. COOPERATION PRIOR TO THE SPLIT-OFF. As promptly as
practicable after the date hereof, (a) Olsten and OHS shall prepare, and Olsten
shall mail to the holders of Olsten Common Stock, the Olsten Proxy Statement,
which sets forth disclosure concerning OHS, the Split-Off, the Merger and other
matters. Olsten and OHS shall also prepare, and OHS shall file with the
Commission, the OHS Registration Statement, which will include or incorporate by
reference the Olsten Proxy Statement. Olsten and OHS shall use their reasonable
best efforts to cause the OHS Registration Statement to become effective under
the Securities Act.
(b) Olsten and OHS shall cooperate in preparing, filing with the Commission
and causing to become effective any registration statements or amendments
thereto that are appropriate to reflect the establishment of or amendments to
any employee benefit and other plans contemplated by the Employee Benefits
Allocation Agreement.
(c) Olsten and OHS shall take all such action as may be necessary or
appropriate under the securities or Blue Sky laws of the states or other
political subdivisions of the United States in connection with the transactions
contemplated by this Agreement.
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(d) OHS will prepare and file a preliminary listing application and will
pursue the approval of the application to permit listing or quotation of the OHS
Common Stock on a national securities exchange or NASDAQ, as determined by
Olsten.
Section 3.02. CONDUCT OF HEALTH SERVICES BUSINESS PENDING SPLIT-OFF. Prior
to the Split-Off:
(a) The Health Services Business, including, but not limited to, the
administration of accounts payable and accounts receivable, will be
conducted in the ordinary course of business consistent with past practice
and in compliance in all material respects with applicable laws, rules and
regulations of any Governmental Authority.
(b) OHS shall have no operations or conduct any business except in
preparation for the consummation of the transactions contemplated by this
Agreement.
Section 3.03. CONSUMMATION OF THE SPLIT-OFF. The Split-Off shall be
consummated at the Effective Time in accordance with the terms of the Merger
Agreement. Olsten agrees to provide all certificates for shares of OHS Common
Stock that the Exchange Agent shall require in order to effect the Split-Off.
ARTICLE IV
INDEMNIFICATION
Section 4.01. OHS INDEMNIFICATION OF OLSTEN. Except as otherwise expressly
provided in any of the Ancillary Agreements, from and after the Closing Date,
OHS shall indemnify, defend and hold harmless Olsten and its subsidiaries, and
each of their respective directors, officers, employees, agents and Affiliates
and each of the heirs, executors, successors and assigns of any of the foregoing
(the "Olsten Indemnitees") from and against any and all damage, loss, liability,
deficiency and expense (including, without limitation, reasonable expenses of
investigation and reasonable attorneys' fees and expenses in connection with any
or all such investigations or any and all Actions or threatened Actions)
(collectively, "Indemnifiable Losses") incurred or suffered by any of the Olsten
Indemnitees and arising out of or related to (i) the OHS Liabilities or the
failure of OHS or any of the Health Subsidiaries to pay, perform or otherwise
discharge any of the OHS Liabilities; (ii) with respect to information in the
Olsten Proxy Statement, the OHS Registration Statement or the Adecco
Registration Statement related to the Health Services Business, OHS or any of
the Health Subsidiaries or the Split-Off, any untrue statement or alleged untrue
statement of a material fact or any omission or alleged omission to state
therein or necessary to make the statements therein in light of the
circumstances under which they were made, not misleading; (iii) any
misrepresentation or breach of any warranty in this Agreement made by OHS;
(iv) any breach of any agreement or covenant under this Agreement made by OHS;
(v) liabilities resulting from any holder of Olsten Common Stock exercising
appraisal rights under the Delaware General Corporation Law with respect to the
value of the Split-Off Consideration; and (vi) any cash paid to stockholders of
Olsten in lieu of fractional shares of OHS.
Section 4.02. OLSTEN INDEMNIFICATION OF OHS. Except as otherwise expressly
provided in any of the Ancillary Agreements, from and after the Closing Date,
Olsten shall indemnify, defend and hold harmless OHS and the Health
Subsidiaries, and each of their respective directors, officers, employees,
agents and Affiliates and each of the heirs, executors, successors and assigns
of any of the foregoing (the "OHS Indemnitees") from and against any and all
Indemnifiable Losses incurred or suffered by any of the OHS Indemnitees and
arising out of or related to (i) the Olsten Liabilities or the failure of Olsten
or any of its subsidiaries to pay, perform or otherwise discharge any of the
Olsten Liabilities or (ii) any breach of any agreement or covenant under this
Agreement made by Olsten after the Closing Date.
Section 4.03. NOTICE AND PAYMENT OF CLAIMS. If any Olsten Indemnitee or
OHS Indemnitee (the "Indemnified Party") determines that it is or may be
entitled to indemnification by OHS or Olsten, as
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the case may be (the "Indemnifying Party"), under this Article IV (other than in
connection with any Action subject to Section 4.04), the Indemnified Party shall
deliver to the Indemnifying Party a written notice specifying, to the extent
reasonably practicable, the basis for its claim for indemnification and the
amount for which the Indemnified Party reasonably believes it is entitled to be
Indemnified. After the Indemnifying Party shall have been notified of the amount
for which the Indemnified Party seeks indemnification, the Indemnifying Party
shall, within 15 days after receipt of such notice, either (i) pay the
Indemnified Party such amount in cash or other immediately available funds (or
reach agreement with the Indemnified Party as to a mutually agreeable
alternative payment schedule) or (ii) object to the claim for indemnification or
the amount thereof by giving the Indemnified Party written notice setting forth
the grounds therefor. Any objection shall be resolved in accordance with
Section 7.15. If the Indemnifying Party does not give such notice, the
Indemnifying Party shall be deemed to have acknowledged its liability for such
claim and the Indemnified Party may exercise any and all of its rights under
applicable law to collect such amount.
Section 4.04. NOTICE AND DEFENSE OF THIRD-PARTY CLAIMS. (a) Promptly
following the earlier of (a) receipt of written notice of the commencement by a
third party of any Action against or otherwise involving any Indemnified Party,
or (b) receipt of written information from a third party alleging the existence
of a claim against an Indemnified Party, in either case, with respect to which
indemnification may be sought pursuant to this Agreement (a "Third-Party
Claim"), the Indemnified Party shall give the Indemnifying Party prompt written
notice thereof. The failure of the Indemnified Party to give notice as provided
in this Section 4.04 shall not relieve the Indemnifying Party of its obligations
under this agreement, except to the extent that the Indemnifying Party is
prejudiced by such failure to give notice. Such notice shall describe the
Third-Party Claim in reasonable detail and shall indicate the amount of the
Indemnifiable Loss that has been or will be sustained by the Indemnified Party.
(b) Within 30 days after receipt of such notice, the Indemnifying Party may,
by giving written notice thereof to the Indemnified Party, (i) acknowledge
liability for and at its option elect to assume the defense of such Third-Party
Claim at its sole cost and expense, or (ii) object to the claim of
indemnification for such Third-Party Claim setting forth the grounds therefor.
Any objection shall be resolved in accordance with Section 7.15. If the
Indemnifying Party does not within such 30-day period give the Indemnified Party
such notice, the Indemnifying Party shall be deemed to have acknowledged its
liability for such Third-Party Claim.
(c) Any defense of a Third-Party Claim as to which the Indemnifying Party
has elected to assume the defense shall be conducted by attorneys employed by
the Indemnifying Party and reasonably satisfactory to Olsten in the case of
Olsten Indemnitees and OHS in the case of OHS Indemnitees. The Indemnified Party
shall have the right to participate in such proceedings and to be represented by
attorneys of its own choosing at the Indemnified Party's sole cost and expense;
PROVIDED that if the defendants or parties against which relief is sought in any
such claim include both the Indemnifying Party and one or more Indemnified
Parties and, in the reasonable judgment of Olsten in the case of Olsten
Indemnitees and OHS in the case of OHS Indemnitees, a conflict of interest
between such Indemnified Parties and such Indemnifying Party exists in respect
of such claim, such Indemnified Parties shall have the right to employ one firm
of counsel selected by Olsten or OHS, as the case may be, and in that event the
reasonable fees and expenses of such separate counsel (but not more than one
separate counsel reasonably satisfactory to the Indemnifying Party) shall be
paid by such Indemnifying Party.
(d) If the Indemnifying Party assumes the defense of a Third-Party Claim,
the Indemnifying Party may settle or compromise the claim without the prior
written consent of the Indemnified Party; PROVIDED that without the prior
written consent of Olsten in the case of Olsten Indemnitees and OHS in the case
of OHS Indemnitees, the Indemnifying Party may not agree to any such settlement
unless as a condition to such settlement the Indemnified Party receives a
written release from any and all liability relating to such Third-Party Claim
and such settlement or compromise does not include any remedy or
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relief to be applied to or against the Indemnified Party, other than monetary
damages for which the Indemnifying Party shall be responsible hereunder.
(e) If the Indemnifying Party does not assume the defense of a Third-Party
Claim for which it has acknowledged liability for indemnification under this
Article IV, Olsten in the case of Olsten Indemnitees and OHS in the case of OHS
Indemnitees may pursue the defense of such Third-Party Claim and choose one firm
of counsel in connection therewith. The Indemnifying Party is required to
reimburse Olsten or OHS, as the case may be, on a current basis for its
reasonable expenses of investigation, reasonable attorney's fees and reasonable
out-of-pocket expenses incurred by Olsten in the case of Olsten Indemnitees and
OHS in the case of OHS Indemnitees in defending against such Third-Party Claim
and the Indemnifying Party shall be bound by the result obtained with respect
thereto; PROVIDED that the Indemnifying Party shall not be liable for any
settlement effected without the consent of Olsten in the case of Olsten
Indemnitees and OHS in the case of OHS Indemnitees, which consent shall not be
unreasonably withheld.
(f) The Indemnifying Party shall pay to the Indemnified Party in cash the
amount for which the Indemnified Party is entitled to be indemnified (if any)
within 15 days after the final resolution of such Third-Party Claim (whether by
the final nonappealable judgment of a court of competent jurisdiction or
otherwise) or, in the case of any Third-Party Claim as to which the Indemnifying
Party has not acknowledged liability, within 15 days after such Indemnifying
Party's objection has been resolved pursuant to Section 7.15.
Section 4.05. INSURANCE PROCEEDS. The amount that any Indemnifying Party
is or may be required to pay to any Indemnified Party pursuant to this
Article IV shall be reduced (including, without limitation, retroactively) by
any insurance proceeds or other amounts actually recovered by or on behalf of
such Indemnified Parties in reduction of the related Indemnifiable Loss. If an
Indemnified Party shall have received the payment required by this Agreement
from an Indemnifying Party in respect of an Indemnifiable Loss and shall
subsequently actually receive insurance proceeds, or other amounts in respect of
such Indemnifiable Loss as specified above, then such Indemnified Party shall
pay to such Indemnifying Party a sum equal to the amount of such insurance
proceeds or other amounts actually received after deducting therefrom all of the
Indemnified Party's costs and expenses associated with the recovery of any such
amount.
Section 4.06. CONTRIBUTION. If the indemnification provided for in this
Article IV is unavailable to an Indemnified Party in respect of any
Indemnifiable Loss arising out of or related to information about OHS, the
Health Subsidiaries or the Health Services Business contained in or omitted from
the OHS Registration Statement, the Adecco Registration Statement or the Olsten
Proxy Statement, then OHS, in lieu of indemnifying the Olsten Indemnitees, shall
contribute to the amount paid or payable by the Olsten Indemnitees as a result
of such Indemnifiable Loss in such proportion as is appropriate to reflect the
relative fault of OHS, on the one hand, and Olsten, on the other hand, in
connection with the statements or omissions that resulted in such Indemnifiable
Loss. The relative fault of the OHS Indemnitees on the one hand and of the
Olsten Indemnitees on the other hand shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information concerning OHS on the one hand or Olsten on the other hand.
Section 4.07. SUBROGATION. In the event of payment by an Indemnifying
Party to any Indemnified Party in connection with any Third-Party Claim, such
Indemnifying Party shall be subrogated to and shall stand in the place of such
Indemnified Party as to any events or circumstances in respect of which such
Indemnified Party may have any right or claim relating to such Third-Party
Claim. Such Indemnified Party shall cooperate with such Indemnifying Party in a
reasonable manner, and at the cost and expense of such Indemnifying Party, in
prosecuting any subrogated right or claim.
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Section 4.08. THIRD-PARTY BENEFICIARIES. This Article IV shall inure to
the benefit of, and be enforceable by, Olsten, OHS and Adecco and their
respective successors and permitted assigns. The indemnification provided for by
this Article IV shall not inure to the benefit of any other third party or
parties and shall not relieve any insurer who would otherwise be obligated to
pay any claim of the responsibility with respect thereto or, solely by virtue of
the indemnification provisions hereof, provide any subrogation rights with
respect thereto and each Party agrees to waive such rights against the other to
the fullest extent permitted.
Section 4.09. REMEDIES CUMULATIVE. The remedies provided in this
Article IV shall be cumulative and shall not preclude assertion by any
Indemnified Party of any other rights or the seeking of any and all other
remedies against any Indemnifying Party.
Section 4.10. SURVIVAL OF INDEMNITIES. The obligations of each of Olsten
and OHS under this Article IV shall survive the sale or other transfer by it of
any Assets or businesses or the assignment by it of any Liabilities, with
respect to any Indemnifiable Loss of the other related to such Assets,
businesses or Liabilities.
Section 4.11. AFTER-TAX INDEMNIFICATION PAYMENTS. Except as otherwise
expressly provided herein or in an Ancillary Agreement, any indemnification
payment made by any Indemnifying Party under this Article IV shall be computed
by taking into account the value of any and all applicable deductions, losses,
credits, offsets or other items for Federal, state or other tax purposes
attributable to the payment of the indemnified liability by the Indemnified
Party and any Tax incurred by the Indemnified Party attributable to receipt of
the indemnification payment.
ARTICLE V
CERTAIN ADDITIONAL MATTERS
Section 5.01. ANCILLARY AGREEMENTS. Prior to the Effective Time, Olsten
and OHS shall execute and deliver the Ancillary Agreements.
Section 5.02. OHS OFFICERS AND BOARD OF DIRECTORS. Prior to the Effective
Time, Olsten shall take, and shall cause OHS to take, all actions necessary to
appoint as officers and directors of OHS those persons named in the OHS
Registration Statement to constitute the officers and directors of OHS on the
Closing Date. The Board of Directors of OHS shall be determined as set forth on
Schedule 9.
Section 5.03. OHS CERTIFICATE OF INCORPORATION AND BY-LAWS. Prior to the
Effective Time, Olsten shall take all action necessary to cause the certificate
of incorporation and by-laws of OHS to be amended and restated substantially in
the form attached as an exhibit to the OHS Registration Statement at the time it
is declared effective.
Section 5.04. CREDIT AGREEMENT. Prior to the Effective Time, Olsten shall
take all necessary action to amend or replace its Existing Credit Agreement so
as to release Quantum Health Resources, Inc. from any liability or obligation
with respect thereto from and after the Closing Date.
Section 5.05. SALES AND TRANSFER TAXES. Olsten and OHS agree to cooperate
to determine the amount of sales or other transfer Taxes (including, without
limitation, all real estate, patent, copyright and trademark transfer Taxes and
recording fees) payable in connection with the transactions contemplated by this
Agreement, but excluding any income or franchise Taxes or other Taxes imposed on
or measured by income (the "Transaction Taxes"); provided, that Olsten shall be
responsible for any Transaction Taxes payable in connection with the Merger.
Olsten agrees to file promptly and timely the returns for such Transaction Taxes
with the appropriate taxing authorities and remit payment of the Transaction
Taxes and OHS will join in the execution of any such tax returns or other
documentation. Payment of all Transaction Taxes, other than Transaction Taxes
paid in connection with the Merger,
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shall be the responsibility of OHS and shall be reimbursed to Olsten by OHS
promptly upon request by Olsten.
Section 5.06. USE OF NAMES. (a) Following the Effective Time, OHS and the
Health Subsidiaries shall have the sole and exclusive ownership of and right to
use, as between Olsten and each of the Retained Subsidiaries, on the one hand,
and OHS and the Health Subsidiaries, on the other hand, the OHS Names, and each
of the trade marks, trade names, service marks and other proprietary rights
exclusively related to such OHS Names and any trade marks, trade names, service
marks or other proprietary rights mutually agreed among the parties prior to the
Effective Time (the "OHS Proprietary Name Rights"). Following the Effective
Time, Olsten and each of the Retained Subsidiaries shall have the sole and
exclusive ownership of and right to use, as between OHS and the Health
Subsidiaries, on the one hand, and Olsten and each of the Retained Subsidiaries,
on the other hand, the Olsten Names, and trade marks, trade names, service marks
and other proprietary rights related to such Olsten Names other than the OHS
Proprietary Name Rights and any trade marks, trade names, service marks or other
proprietary rights mutually agreed among the parties prior to the Effective Time
(the "Olsten Proprietary Name Rights"). Notwithstanding the foregoing, with
respect to the Olsten Names and Olsten Proprietary Name Rights which are listed
on Schedule 8 (the "Licensed Olsten Names"), Olsten hereby grants to OHS and
each of the Health Subsidiaries, a royalty-free license in order for OHS and the
Health Subsidiaries to continue to use the Licensed Olsten Names and have the
full privileges of a licensee with respect to the Licensed Olsten Names for a
period of one year following the Effective Time.
(b) Following the Effective Time, (x) OHS shall, and shall cause its
subsidiaries and other Affiliates to, take all action reasonably necessary to
cease using, and change as soon as commercially practicable (including by
amending any charter documents), any corporate or other names which are the same
as or confusingly similar to any of the Olsten Names or any of the Olsten
Proprietary Name Rights, and (y) Olsten shall, and shall cause its subsidiaries
and other Affiliates to, take all action reasonably necessary to cease using,
and change as soon as commercially practicable (including by amending any
charter documents), any corporate or other names which are the same as or
confusingly similar to any of the OHS Names or any of the OHS Proprietary Name
Rights.
(c) The license granted pursuant to Section 5.06(a) shall include the right
to use existing brochures, stationery, labeling, supplies, advertising
materials, office materials and any similar materials bearing any Licensed
Olsten Names until the earlier of (i) the termination of the license, and
(ii) the date such existing materials are exhausted and Olsten and the Retained
Subsidiaries shall have the right to use existing brochures, stationery,
labeling, supplies, advertising materials, office materials and any similar
materials bearing any OHS Names until the earlier of (i) one year after the
Effective Time and (ii) the date such existing materials are exhausted; PROVIDED
that each such Party shall use their reasonable best efforts to (a) replace such
materials with materials that do not use the other's names as promptly as
practicable and (b) to the extent commercially practicable, indicate by sticker
affixed to such materials that the name being used is being used under temporary
limited license from the other party who is the owner or licensor of such name.
Section 5.07. MAIL. After the Closing Date, each of Olsten and OHS may
receive mail, telegrams, packages and other communications properly belonging to
the other. Accordingly, at all times after the Effective Time, each of Olsten
and OHS authorizes the other to receive and open all mail, telegrams, packages
and other communications received by it and not unambiguously intended for the
other party or any of the other party's officers or directors specifically in
their capacities as such, and to retain the same to the extent that they relate
to the business of the receiving party or, to the extent that they do not relate
to the business of the receiving party and do relate to the business of the
other party, or to the extent that they relate to both businesses, the receiving
party shall promptly contact the other party by telephone for delivery
instructions and such mail, telegrams, packages or other communications (or, in
case the same relate to both businesses, copies thereof) shall promptly be
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forwarded to the other party in accordance with its delivery instructions. The
foregoing provisions of this Section 5.07 shall constitute full authorization to
the postal authorities, all telegraph and courier companies and all other
persons to make deliveries to Olsten or OHS, as the case may be, addressed to
either of them or to any of their officers or directors specifically in their
capacities as such. The provisions of this Section 5.07 are not intended to and
shall not be deemed to constitute an authorization by either Olsten or OHS to
permit the other to accept service of process on its behalf, and neither party
is or shall be deemed to be the agent of the other for service of process
purposes or for any other purpose.
Section 5.08. TRANSITION SERVICES. Following the Effective Time and ending
on the one year anniversary of the Effective Time (such period, the "Transition
Services Period"), Olsten shall use its commercially reasonable efforts to
provide, or make available, to OHS and the Health Subsidiaries, at such times
and in such amounts as may be reasonably requested by OHS, the following
services (the "Transition Services") and OHS will pay for such Transition
Services on a cost basis as agreed to by the parties:
(i) tax preparation and filing services;
(ii) legal services, to be provided by Olsten's general counsel and
other internal counsel to the extent consistent with applicable standards of
professional responsibility;
(iii) information and technology support services and administrative and
office services;
(iv) procurement services; and
(v) such other additional services as may be reasonably requested by
OHS; provided that the scope of any services, as well as the time and the
manner in which such services are to be provided, shall be mutually
agreeable between the parties.
Following the end of the calendar month in which any Transition Services are
performed, Olsten shall provide to OHS an invoice (the "Transition Services
Invoice") setting forth in summary detail the Transition Services which were
provided during such calendar month and the appropriate cost thereof. OHS shall
pay Olsten, in a reasonably prompt manner (but in no event later than 30 days)
following the delivery by Olsten of a Transition Services Invoice, the amounts
due with respect to the Transition Services reflected on such Transition
Services Invoice.
Notwithstanding anything herein to the contrary, all Transition Services
shall be performed with reasonable care, but no Party hereto shall have any
liability whatsoever to any other Party or any third party for any loss,
liability, damage, cost or deficiency suffered by any such person arising out of
or resulting from providing any Transition Services hereunder.
Section 5.09. LEASES OF REAL PROPERTY. (a) Olsten and OHS shall jointly
and promptly review all instances in which (i) OHS or the Health Subsidiaries
maintain facilities in, or otherwise occupy, real property leased by Olsten or
the Retained Subsidiaries and (ii) Olsten or the Retained Subsidiaries maintain
facilities in or otherwise occupy, real property leased by a Health Subsidiary,
each as set forth on Schedule 7, and shall use commercially reasonable efforts
in each case to either (x) negotiate and enter into a written lease or sublease
incorporating terms and conditions which are fair to both parties, (y) assign
such lease to OHS or Olsten, as the case may be, and OHS or Olsten, as the case
may be, shall accept responsibility for such lease, or (z) terminate the
arrangement on mutually agreeable terms; PROVIDED, HOWEVER, that the foregoing
shall not apply in any instance (A) involving facilities maintained, or real
property occupied by the Health Subsidiaries that are to be transferred to OHS
in accordance with Section 2.01 or (B) covered by a written lease agreement
between the parties in effect on the date hereof.
(b) OHS agrees that it will use its reasonable best efforts to promptly (but
in no event later than six months) after the Effective Time, relocate the
headquarters for the Health Services Business from
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175 Broad Hollow Road, Melville, New York 11747 (the "Main Headquarters"). Until
the time when the headquarters of the Health Service Business is relocated OHS
shall be entitled to occupy and use without charge office space at the Main
Headquarters, as shall be reasonably designated by Olsten as necessary to enable
OHS and the Health Subsidiaries to continue to conduct its current operations.
Section 5.10. PLEA AGREEMENTS. OHS agrees to be bound by the terms of the
Plea Agreements dated July 19, 1999 between Kimberly Home Health Care, Inc. and
the United States of America, including those terms governing the retention and
production of information, records and testimony.
Section 5.11. INSURANCE POLICIES AND CLAIMS ADMINISTRATION. (a) POLICIES
AND RIGHTS INCLUDED WITHIN THE TRANSFERRED OHS ASSETS. The Transferred OHS
Assets shall include: (i) any Health Services Business Policies and (ii) any and
all rights of the Health Subsidiaries under any Shared Policies covering
(x) Liabilities arising out of or relating to the conduct of the Health Services
Business prior to the Effective Time and (y) Liabilities arising out of or
relating to the conduct of the Retained Businesses prior to the Effective Time
to the extent any claim is made against OHS or any of the Health Subsidiaries
for such Liabilities, specifically including (in the case of (i) and
(ii) above) rights of indemnity and the right to be defended by or at the
expense of the insurer, with respect to all claims, suits, actions, proceedings,
injuries, losses, liabilities, damages and expenses and excluding rights covered
by Section 5.11(b).
(b) POLICIES AND RIGHTS INCLUDED WITHIN THE RETAINED ASSETS. The Retained
Assets shall include: (i) any Retained Businesses Policies and (ii) any and all
rights of Olsten and its subsidiaries under any Shared Policies covering
(x) Liabilities arising out of or relating to the conduct of the Retained
Businesses prior to the Effective Time and (y) Liabilities arising out of or
relating to the conduct of the Health Services Business prior to the Effective
Time to the extent any claim is made against Olsten or any of the Retained
Subsidiaries for such Liabilities, specifically including (in the case of
(i) and (ii) above) rights of indemnity and the right to be defended by or at
the expense of the insurer, with respect to all claims, suits, actions,
proceedings, injuries, losses, liabilities, damages and expenses.
(c) OLSTEN TO MAINTAIN INSURANCE COVERAGE PRIOR TO EFFECTIVE TIME. (i)
Olsten shall use its reasonable best efforts to maintain in full force and
effect, at all times up to and including the Effective Time, the Policies and
current coverages and limits of such Policies.
(ii) To the extent not already provided for by the terms of a Shared Policy,
Olsten shall use its commercially reasonable efforts to cause OHS and the Health
Subsidiaries, as appropriate, to be named as additional insureds under each such
Policy in respect of Covered Claims arising out of or relating to periods prior
to the Effective Time; PROVIDED, HOWEVER, that nothing contained herein shall be
construed to require Olsten or any of the Retained Subsidiaries to pay any
additional premium or other charges in respect to, or waive or otherwise limit
any of its rights, benefits or privileges under, any Shared Policy to effect the
naming of OHS and the Health Subsidiaries as such additional insureds.
(d) OHS RESPONSIBLE FOR ESTABLISHING INSURANCE COVERAGE ON AND AFTER
EFFECTIVE TIME. Commencing on and as of the Effective Time, OHS and each of the
Health Subsidiaries shall be responsible for establishing and maintaining its
own separate insurance programs for activities and claims relating to any period
on or after the Effective Time involving OHS or any of the Health Subsidiaries.
Notwithstanding any other agreement or understanding to the contrary, except as
set forth in Section 5.11(e)(i) and (ii) with respect to claims administration
and financial administration of the Shared Policies, as of and after the
Effective Time, neither Olsten nor any of the Retained Subsidiaries shall have
any responsibility for or obligation to OHS or the Health Subsidiaries relating
to insurance matters for any period, whether prior to, at or after the Effective
Time. Notwithstanding the foregoing, from the date hereof to the Effective Time,
Olsten shall use its commercially reasonable efforts to transfer to OHS and the
Health Subsidiaries the Health Services Business Policies and to obtain
insurance (or binders therefor) providing coverage to OHS and the Health
Subsidiaries similar to the coverage provided to the Health Services Business by
the Shared Policies prior to the Split-Off.
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(e) ADMINISTRATION AND PROCEDURE. (i) OHS and its subsidiaries appoint
Olsten or a Retained Subsidiary, as appropriate, to administer, in good faith,
all claims and finances relating to the Shared Policies, including the
prosecution of any actions for declaratory relief, "bad faith" or other extra-
contractual damages. From and after the Effective Time, Olsten or a Retained
Subsidiary, as appropriate, shall be responsible for the claims administration
and financial administration of all Shared Policies relating to the assets,
ownership or operation prior to the Effective Time of the Health Services
Business; PROVIDED, HOWEVER, that the responsibility for claims administration
and financial administration of the Shared Policies are in no way intended to
limit, inhibit or preclude any right to insurance coverage under the Shared
Policies. Olsten shall be entitled to compensation for and reimbursement of
expenses incurred in connection with performing the claims administration and
financial administration of the Shared Policies on a cost basis, as agreed by
the parties and Olsten and OHS shall comply with the provisions of the second
paragraph of Section 5.08 with respect to billing and reimbursement. Olsten
shall use reasonable care and act in good faith with respect to each of its
obligations under Section 5.11.
(ii) OHS shall promptly notify Olsten of any Covered Claim relating to OHS
or any Health Subsidiary under one or more of the Shared Policies relating to
any period prior to the Effective Time, and OHS agrees to cooperate and
coordinate with Olsten concerning any strategy Olsten may reasonably elect to
pursue to secure coverage and payment for such Covered Claim by the appropriate
insurance carrier. Olsten shall have final authority to compromise, settle or
otherwise resolve any claim or action under any Shared Policy, including,
without limitation, decisions to prosecute any action for declaratory relief,
"bad faith" or other extra-contractual damages; provided, that, as a condition
to any compromise or settlement of any such claim or action on behalf of OHS
(x) Olsten obtains a written release on behalf of OHS for such claim or action
and (y) if such settlement or compromise includes any remedy or relief against
OHS, other than monetary damages within the coverage limits of the applicable
Shared Policy, Olsten shall, prior to entering into any such compromise or
settlement, obtain the consent of OHS, which consent shall not be unreasonably
withheld. Notwithstanding anything contained herein, in any other agreement or
Shared Policy or any understanding to the contrary, OHS or the appropriate
Health Subsidiary assumes responsibility for, and shall pay to the appropriate
insurance carriers or otherwise, any premiums, reporting endorsements, tails,
noses, retroactive endorsements, retrospectively-rated premiums, defense costs,
indemnity payments, deductibles, retentions or other charges, as appropriate
(collectively, "Insurance Charges"), whenever arising, which shall become due
and payable under the terms and conditions of any Shared Policy in respect of
any liabilities, losses, claims, actions or occurrences, whenever arising or
becoming known, involving or relating to any of the assets, businesses,
operations or liabilities of the Health Services Business, which charges relate
to the period after the Effective Time. To the extent that the terms of any
applicable Shared Policy provide that Olsten or a Retained Subsidiary, as
appropriate, shall have an obligation to pay or guarantee the payment of any
Insurance Charges, Olsten or such Retained Subsidiary shall be entitled to
demand that OHS or a Health Subsidiary make such payment directly to the person
or entity entitled thereto. In connection with any such demand, Olsten shall
submit to OHS or a Health Subsidiary a copy of any invoice received by Olsten or
any Retained Subsidiary pertaining to such Insurance Charges, together with
appropriate supporting documentation, if available. In the event that OHS or any
of the Health Subsidiaries fails to pay any Insurance Charges when due and
payable, whether at the request of the party entitled to payment or upon demand
by Olsten or a Retained Subsidiary, Olsten or a Retained Subsidiary may (but
shall not be required to) pay such Insurance Charges for and on behalf of OHS or
the Health Subsidiary and, thereafter, OHS or the Health Subsidiary shall
forthwith reimburse Olsten or the Retained Subsidiaries for such payment.
(iii) OHS or a Health Subsidiary, as appropriate, shall be responsible for
all Insurance Charges claims administration and financial administration and
risk management programs relating to the Health Services Business Policies and
any insurance policies established and maintained by OHS and
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the Health Subsidiaries for claims relating to any period on or after the
Effective Time involving OHS or any of the Health Subsidiaries.
(f) ALLOCATION OF INSURANCE PROCEEDS OF SHARED POLICIES. Insurance Proceeds
received with respect to claims, costs and expenses under the Shared Policies
shall be paid to Olsten with respect to Covered Claims of Olsten and shall be
paid to OHS with respect to Liabilities related to Covered Claims of OHS.
Payment of the allocable portions of indemnity costs of Insurance Proceeds
resulting from Shared Policies will be made to the appropriate party upon
receipt from the insurance carrier. For purposes of the prior sentence,
Insurance Proceeds shall include any damages paid or received from prosecution
of claims on a Shared Policy for "bad faith" or extra-contractual damages. In
the event that the aggregate limits on any Shared Policies are exceeded by the
aggregate outstanding Covered Claims by Olsten and the Retained Subsidiaries and
OHS and the Health Subsidiaries and any of the Covered Claims of Olsten or the
Retained Subsidiaries relate to Liabilities arising out of the Health Services
Business (including, but not limited to, the Shareholder Liabilities) prior to
the Effective Time, Olsten shall be entitled to be paid in full all of the
Insurance Proceeds relating to such Liabilities of the Health Services Business
prior to payment of Insurance Proceeds relating to any other claims of Olsten
and the Retained Subsidiaries or OHS and the Health Subsidiaries. Thereafter, or
in the event there are no such Liabilities of Olsten relating the Health
Services Business prior to the Effective Time, the Insurance Proceeds shall be
allocated pro rata to Olsten and the Retained Subsidiaries, on the one hand, and
OHS and the Health Subsidiaries, on the other hand, based upon their respective
bona fide claims or in such other proportions as the parties shall agree based
on an equitable allocation of Insurance Proceeds. The parties agree to use
commercially reasonable efforts to maximize available coverage under the Shared
Policies applicable to it, and to take all commercially reasonable steps to
recover from all other responsible parties in respect of a Covered Claim to the
extent coverage limits under a Shared Policy have been exceeded or would be
exceeded as a result of such Insured Claim.
(g) AGREEMENT FOR WAIVER OF CONFLICT AND SHARED DEFENSE. In the event that
Covered Claims of both Olsten and OHS exist relating to the same occurrence,
Olsten and OHS agree to jointly defend and to waive any conflict of interest
necessary to the conduct of that joint defense. Nothing in this Section 5.11
shall be construed to limit or otherwise alter in any way the obligations of the
parties to this Agreement, including those created by this Agreement, by
operation of law or otherwise.
Section 5.12. FINANCIAL COVENANTS. (a) Immediately prior to the Effective
Time (after giving effect to the transactions contemplated herein):
(i) Indebtedness for borrowed money plus the deferred purchase price of
property less cash on hand of OHS and the Health Subsidiaries shall not
exceed $100 million.
(ii) Indebtedness for borrowed money plus the deferred purchase price of
property of OHS and the Health Subsidiaries shall not exceed $150 million.
(iii) Earnings before interest, taxes, depreciation and amortization of
OHS and its subsidiaries during the period between July 4, 1999 and the
Effective Time shall not be less than $0 (excluding restructuring charges in
connection with the Split-Off) and sales for each of the full monthly
periods between the date hereof and the Effective Time shall average
$100 million per month during such period.
(iv) OHS will have a committed credit facility with a borrowing capacity
of no less than $100 million.
(b) Olsten and OHS jointly represent, warrant and covenant that the Retained
Businesses and the Health Services Business shall, between the date hereof and
the Effective Time, be operated in the ordinary course of business consistent
with past practice, in nature, manner and amount, including, to the extent
practicable, as to levels and relationships of asset, liability, revenue,
expense, and cash flow
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items and totals within the respective businesses (it being understood that
unpaid amounts in respect of settlements of governmental liabilities with
respect to health care operations on terms previously disclosed to Adecco, shall
be considered ordinary course items). Without limiting the generality of the
foregoing, with respect to Olsten, the Retained Subsidiaries and the Retained
Businesses and, through the True-Up Date, OHS and the Health Services Business,
neither Olsten nor OHS nor any of their respective Subsidiaries shall, without
the prior written consent of Adecco, directly or indirectly:
(i) authorize, permit to make or make any capital expenditures other
than pursuant to the capital expenditure plan previously provided by Olsten
to Adecco, or fail to make any investments for capital expenditures
contemplated by such plan;
(ii) permit or make any change to the billing processes for services
rendered or otherwise, other than as may be related to planned system
improvements and the like, or in the processes, method or terms of
collection of accounts receivable;
(iii) cause or permit any discounting, factoring or securitization of
accounts receivables or any other securitization or consignment of any
assets;
(iv) permit or make any change in the aging of accounts payables or in
the payment practices for accounts payable in effect as of the date hereof
(which aging and payment practices are consistent with past practice); or
(v) except for cash transfers made, in the ordinary course of business
through and reflected in the intercompany loan balance, sell, transfer,
pledge, mortgage or otherwise dispose of or encumber any assets, except in
the ordinary course of business and in arms-length transactions and at
market rates (with the parties acknowledging that the management fees paid
consistent with past practice fall within such exception).
(c) To assure conformity with the provisions of clause (b) above and the
other provisions of this Section 5.12, the parties agree that it is the intent
of Section 5.03(a) of the Merger Agreement that representatives of Adecco
reasonably acceptable to Olsten shall be permitted to be present on a daily
basis at the headquarters and other facilities of Olsten to monitor compliance
with such provisions, and Olsten shall fully cooperate with and make all
information reasonably requested promptly available to such monitors. In
addition, and consistent with, and not by way of limitation of, Section 5.03(a)
of the Merger Agreement, the parties hereto agree and acknowledge that Olsten
shall provide Adecco with (y) pro-forma combined balance sheets, statements of
income, statements of cash flows and statements of shareholders equity as of the
close of business on each of the True-Up Date and the last day of each monthly
period thereafter up to the Closing Date of each of (i) Olsten and the Retained
Subsidiaries and (ii) OHS and the Health Subsidiaries, in each case,
(A) prepared in accordance with US GAAP and (B) giving effect to the Split-Off
and the provisions of Section 2.09 hereof and (z) all work papers of Olsten and
OHS and, as applicable, their respective independent public accountants as of
such dates or related to such balance sheets or statements and all other work
papers in respect of the separation of the Health Services Business and the
Retained Businesses contemplated hereby.
(d) The parties agree that any breach of this Section 5.12 by either Olsten
or OHS, other than breaches which are insignificant in both nature and effect,
shall cause a covenant of this Agreement to have been materially breached by
Olsten for purposes of Section 10.01(g) of the Merger Agreement and shall
provide Adecco with the right to terminate the Merger Agreement pursuant to such
Section 10.01(g), subject to the cure right contained therein.
Section 5.13. TAX REFUND ESCROW ACCOUNT. Olsten agrees to deposit any cash
payments received prior to the Effective Time by Olsten from any Net Operating
Loss Refund Claim into an escrow account (the "Tax Refund Escrow Account") which
shall not be removed from such account until the earlier of (i) the Effective
Time, and (ii) the termination of the Merger Agreement.
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Section 5.14. WORKER'S COMPENSATION LETTERS OF CREDIT. On the Closing
Date, OHS agrees to issue, or have issued on its behalf, a letter of credit to
Olsten in an amount equal to the amount of worker's compensation claims pending
on the Closing Date made by any OHS Employee prior to the Effective Time, as
such amount is mutually agreed upon among the parties hereto, determined on a
basis consistent with the Balance Sheet.
ARTICLE VI
RECORDS AND INFORMATION; ACCESS
Section 6.01. CORPORATE RECORDS. (a) Each of Olsten and OHS shall arrange
as soon as practicable following the Closing Date for the delivery to the other
of existing corporate governance documents (e.g. minute books, stock registers,
stock certificates, documents of title, etc.) in its possession relating to the
other or to its business and affairs.
(b) Except as otherwise required by law or agreed to in writing, each party
shall, and shall cause each of its respective subsidiaries to, retain all
information relating to the other party's business in accordance with the past
practice of such party. Notwithstanding the foregoing, except as provided in the
Tax Sharing Agreement, any party may destroy or otherwise dispose of any
information at any time, providing that, prior to such destruction or disposal,
(a) such party shall provide no less than 90 days prior written notice to the
other party, specifying the information proposed to be destroyed or disposed of,
and (b) if the recipient of such notice shall request in writing prior to the
scheduled date for such destruction or disposal that any of the information
proposed to be destroyed or disposed of be delivered to such requesting party,
the party proposing the destruction or disposal shall promptly arrange for the
delivery of such of the information as was requested at the expense of the
requesting party.
Section 6.02. ACCESS TO INFORMATION. From and after the Closing Date, each
of Olsten and OHS shall afford the other, including its accountants, counsel and
other designated representatives, reasonable access (including using reasonable
efforts to give access to persons or firms possessing information) and
duplicating rights during normal business hours to all records, books, contacts,
instruments, computer data and other data and information in such party's
possession relating to the business and affairs of the other (other than data
and information subject to an attorney/client or other privilege), insofar as
such access is reasonably required by the other party including, without
limitation, for audit, accounting and litigation purposes, as well as for
purposes of fulfilling disclosure and reporting obligations.
Section 6.03. ACCESS TO EMPLOYEES. Each of Olsten and OHS shall use
reasonable efforts to make available to the other, upon written request, its
officers, directors, employees and agents as witnesses to the extent that such
persons may reasonably be required in connection with any legal, administrative
or other proceedings arising out of the business of the other prior to the
Closing Date in which the requesting party may from time to time be involved.
Section 6.04. REIMBURSEMENT. Each party providing information or witnesses
under Sections 6.02 or 6.03 to the other shall be entitled to receive from the
recipient, upon the presentation of invoices therefor, payment for all
out-of-pocket costs and expenses as may be reasonably incurred in providing such
information or witnesses.
Section 6.05. CONFIDENTIALITY. Each party shall hold and shall cause its
directors, officers, employees, agents, consultants and advisors to hold, in
strict confidence, unless compelled to disclose by judicial or administrative
process or, in the opinion of its counsel, by other requirements of law, all
confidential, proprietary or other non-public information or trade secrets
concerning the other party except to the extent that such information can be
shown to have been (a) in the public domain through no fault of such party, or
(b) later lawfully acquired on a non-confidential basis from other sources by
the party to which it was furnished or (c) developed independently by the
representatives of such recipient. Neither party shall release or disclose any
such information to any other person, except its auditors, attorneys, financial
advisors, bankers and other consultants and advisors who shall be advised of and
comply with the provisions of this Section 6.05.
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ARTICLE VII
MISCELLANEOUS
Section 7.01. TERMINATION. In the event the Merger Agreement is
terminated, notwithstanding any provision hereof, Adecco shall automatically be
released as a party to this Agreement and this Agreement may be terminated and
the Split-Off abandoned at any time prior to the Effective Time by and in the
sole discretion of the Board of Directors of Olsten without the approval of OHS
or the stockholders of Olsten. In the event of such termination, no party shall
have any liability to any other party pursuant to this Agreement.
Section 7.02. AMENDMENT. This Agreement may not be amended, except by an
instrument in writing signed on behalf of Olsten, OHS and Adecco.
Section 7.03. WAIVER OF COMPLIANCE; CONSENTS. Rights under this Agreement
may be waived only by a written agreement signed by Olsten, OHS and Adecco. Any
waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. Whenever this Agreement
requires or permits consent by or on behalf of any party hereto, such consent
shall be given in writing.
Section 7.04. EXPENSES. Except as specifically provided in this Agreement
or in an Ancillary Agreement, all costs and expenses incurred in connection with
the preparation, execution, delivery and implementation of this Agreement and
with the consummation of the transactions contemplated by this Agreement shall
be paid by the party incurring the expense. The determination of who has
incurred an expense shall be made by the Chief Financial Officer of Olsten,
which determination shall be binding and final upon each of the parties hereto
and not subject to further review.
Section 7.05. NOTICES. All notices and other communications hereunder
shall be in writing and shall be delivered personally, by next-day courier or
mailed by registered or certified mail (return receipt requested), first class
postage prepaid, or sent by facsimile, telegram or telex, to the parties at the
addresses specified below (or at such other address for a party as shall be
specified by like notice; PROVIDED that notices of a change of address shall be
effective only upon receipt thereof). Any such notice shall be effective upon
receipt, if personally delivered or telecommunicated, one day after delivery to
a courier for next-day delivery, or three days after mailing, if deposited in
the U.S. mail, first class postage prepaid.
If to Olsten prior to the Effective Time or OHS prior to or after the
Effective Time, to:
Olsten Corporation
175 Broad Hollow Road
Melville, New York 11747
Attention: Edward A. Blechschmidt
Telephone: (516) 844-7220
Telecopy: (516) 844-7335
With a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Attention: Kenneth W. Orce, Esq.
Telephone: (212) 701-3000
Telecopy: (212) 269-5420
B-23
If to Adecco, prior to or after the Effective Time or to Olsten after the
Effective Time, to:
Adecco SA
1275 Cheserex
Switzerland
Attention: Felix A. Weber
Telephone: 011 41 21 321 6666
Telecopy: 011 41 21 321 6688
With a copy to:
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
Attention: Thomas W. Dobson, Esq.
Telephone: (213) 485-1234
Telecopy: (213) 891-8763
With a copy to:
Baer & Karrer
Rechtsanwaelte
Seefeldstrasse 19
8024 Zurich
Switzerland
Attention: PD Dr. Rolf Watter
Telephone: 011 41 1 26 1 5150
Telecopy: 011 41 25 1 3025
Section 7.06. COUNTERPARTS. This Agreement may be executed in two or more
counterparts each of which shall be deemed an original, but all of which
together shall constitute but one and the same Agreement.
Section 7.07. GOVERNING LAW. This Agreement shall be governed by the laws
of the State of New York (regardless of the laws that might otherwise govern
under applicable New York principles of conflicts of law) as to all matters,
including but not limited to matters of validity, construction, effect,
performance and remedies. Each of the parties hereto irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the courts
of the State of New York and of the United States of America located in the
State of New York (the "New York Courts") for any litigation arising out of or
relating to this Agreement and the transactions contemplated hereby (and agrees
not to commence any litigation relating thereto except in such courts), waives
any objection to the laying of venue of any such litigation in the New York
Courts and agrees not to plead or claim in any New York Court that such
litigation brought therein has been brought in an inconvenient forum. Each of
the parties hereto hereby agrees to service of process in any litigation arising
out of or relating to this Agreement and the transactions contemplated hereby by
certified mail, return receipt requested, postage prepaid, to it at its address
for notice specified in Section 7.05.
Section 7.08. ENTIRE AGREEMENT. This Agreement, including the schedules
and exhibits hereto, together with the Ancillary Agreements, embodies the entire
agreement and understanding of the parties hereto in respect to the subject
matter contained herein and supersedes all prior agreements and understandings
among the parties with respect thereto. There are no representations, promises,
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warranties, covenants or undertakings by any party, other than those expressly
set forth or referred to herein.
Section 7.09. ASSIGNMENT; NO THIRD PARTY BENEFICIARIES. This Agreement and
all of the provisions hereof shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns, but
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties hereto without the prior written consent
of the other parties. Nothing contained in this Agreement, expressed or implied,
is intended to confer any benefits, rights or remedies upon any person or
entity, other than Olsten, OHS and Adecco and, in accordance with Article IV,
the Olsten Indemnitees and the OHS Indemnitees.
Section 7.10. ANCILLARY AGREEMENTS. If any of the terms of this Agreement
are inconsistent with the terms of an Ancillary Agreement regarding the specific
matters covered by such Ancillary Agreement, then the terms of such Ancillary
Agreement shall govern.
Section 7.11. TAX SHARING AGREEMENT. Other than as provided in
Section 4.11, Section 5.05 and clause (iv) of the definition of OHS Liabilities,
this Agreement shall not govern any Tax, and any and all claims, losses,
damages, demands, costs, expenses, liabilities, refunds, deductions, write-offs,
or benefits relating to Taxes shall be exclusively governed by the Tax Sharing
Agreement.
Section 7.12. FURTHER ASSURANCES AND CONSENTS. In addition to the actions
specifically provided for elsewhere in this Agreement, each of the parties
hereto will use its reasonable best efforts to (i) execute and deliver such
further instruments and documents and take such other actions as any other party
may reasonably request in order to effectuate the purposes of this Agreement and
to carry out the terms hereof and (ii) take, or cause to be taken, all actions,
and to do, or cause to be done, all things, reasonably necessary, proper or
advisable under applicable laws, regulations and agreements or otherwise to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation, using its reasonable efforts to obtain any
consents and approvals and to make any filings and applications necessary or
desirable in order to consummate the transactions contemplated by this
Agreement; PROVIDED that no party hereto shall be obligated to pay any
consideration therefor (except for filing fees and other similar charges) to any
third party from whom such consents, approvals and amendments are requested or
to take any action or omit to take any action if the taking of or the omission
to take such action would be unreasonably burdensome to the party or its
business. In connection with the consummation of the transaction contemplated
hereby, the persons listed on Schedule 10 are designated to act as the
"Transition Team" and are authorized to act on behalf of Adecco, Olsten and OHS
in taking any action necessary to consummate the Split-Off. The persons listed
on Schedule 10 who are Adecco employees are authorized to deliver the consent of
Adecco if such consent is required by the terms of this Agreement.
Section 7.13. EXHIBITS AND SCHEDULES. The exhibits and schedules hereto
shall be construed with and as an integral part of this Agreement to the same
extent as if the same had been set forth verbatim herein.
Section 7.14. LEGAL ENFORCEABILITY. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. Without prejudice
to any rights or remedies otherwise available to any party hereto, each party
hereto acknowledges that from and after the Effective Time damages would be an
inadequate remedy for any breach of the provisions of this Agreement and agrees
that the obligations of the parties hereunder shall be specifically enforceable.
Section 7.15. DISPUTE RESOLUTION. (a) Except as otherwise set forth in
Sections 2.06 and 2.08(c), resolution of any and all disputes arising after the
Effective Time from or in connection with this
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Agreement or any of the Ancillary Agreements, whether based on contract, tort,
statute or otherwise, including, but not limited to, disputes over arbitrability
and disputes in connection with indemnification for claims by third parties
(collectively, "Disputes") shall be exclusively governed by and settled in
accordance with the provisions of this Section 7.15; PROVIDED, HOWEVER, that
nothing contained herein shall preclude either party from seeking or obtaining
(a) injunctive relief or (b) equitable or other judicial relief to enforce the
provisions hereof or to preserve the status quo pending resolution of Disputes
hereunder.
(b) Any party hereto (each a "Party") may commence proceedings hereunder
by delivering a written notice to the other Party providing a reasonable
description of the Dispute to the other (the "Demand").
(c) Promptly following a Demand, the Dispute shall be referred to
representatives of the parties for decision, each party being represented by
a senior executive officer who has no direct operational responsibility for
the matters contemplated by this Agreement (the "Representatives"). The
Representatives shall promptly meet in a good faith effort to resolve the
dispute. If the Representatives do not agree upon a decision within 30
calendar days after reference of the matter to them, each of Olsten and OHS
shall be free to exercise the remedies available to them under
Section 7.15(d).
(d) The parties hereby agree to submit all Disputes not resolved by
negotiation pursuant to Section 7.15(c) to arbitration under the terms
hereof, which arbitration shall be final, conclusive and binding upon the
parties, their successors and assigns. The arbitration shall be conducted in
New York by three arbitrators (the "Panel") acting by majority vote selected
by agreement of the Parties not later than 10 days after the failure of the
Representatives to resolve the dispute as set forth in Section 7.15(c) or,
failing such agreement, by three arbitrators appointed pursuant to the
Commercial Arbitration Rules of the American Arbitration Association, as
amended from time to time (the "AAA Rules"). If an arbitrator so selected
becomes unable to serve, his or her successors shall be similarly selected
or appointed. The arbitration shall be conducted pursuant to the United
States Arbitration Act, 9 U.S.C. Section 1, ET SEQ. and such procedures as
the Parties may agree, or, in the absence of or failing such agreement,
pursuant to the AAA Rules. Notwithstanding the foregoing, in connection with
such arbitration: (a) each Party shall have the right to audit the books and
records of the other Party that are reasonably related to the Dispute;
(b) each Party shall provide to the other, reasonably in advance of any
hearing, copies of all documents which a Party intends to present in such
hearing; (c) each party shall be allowed to conduct reasonable discovery
through written requests for information, document requests, requests to
admit and depositions, the nature and extent of which discovery shall be
determined by the Panel, taking into account the needs of the Parties and
the desirability of making discovery expeditious and cost effective. All
hearings shall be conducted on an expedited schedule, and all proceedings
shall be confidential. Either party may at its expense make a stenographic
record thereof. The Panel shall make a final award not later than 30 days
after the conclusion of the hearing and receipt of any post-hearing
submissions requested by the Panel. The award shall be in writing and shall
specify the factual and legal basis for the award. The fees and expenses of
the arbitrators shall be shared equally by the Parties and advanced by them
from time to time as required; PROVIDED that at the conclusion of the
arbitration, the Panel shall allocate costs and expenses (including the
costs of the arbitration previously advanced and the fees and expenses of
attorneys, accountants and other experts) and interest as the Panel
determines is appropriate among the parties. The arbitrators, whether the
Panel or those arbitrators appointed under the AAA Rules, shall not be
empowered to award to any Party any consequential damages, lost profits or
punitive damages in connection with any Dispute and each party hereby
irrevocably waives any right to recover such damages.
Section 7.16. TITLES AND HEADINGS. The article and section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties and shall not in
B-26
any way affect the meaning or interpretation of this Agreement. As used in this
Agreement, (i) the term "Person" shall mean and include an individual, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof and (ii) the
term "subsidiary" of any specified corporation shall mean any corporation of
which at least a majority of the outstanding securities having ordinary voting
power to elect a majority of the board of directors is directly or indirectly
owned or controlled by such specified corporation, any person of which such
corporation is a general partner, or any other person of which at least a
majority of the equity interests therein is, directly or indirectly, owned or
controlled by such specified corporation.
Section 7.17. SURVIVAL OF REPRESENTATIONS AND AGREEMENTS. All
representations, warranties and agreements of the parties hereto contained in
this Agreement shall survive the Effective Time.
B-27
Separation
Agreement
Signature Page
THIS AGREEMENT CONTAINS BINDING ARBITRATION PROVISIONS WHICH MAY BE ENFORCED
BY THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
Olsten Corporation,
a Delaware corporation
By: /s/ Edward A. Blechschmidt
-----------------------------------------
Name: Edward A. Blechschmidt
Title: President and Chief Executive
Officer
Aaronco Corp.,
a Delaware corporation
By: /s/ Edward A. Blechschmidt
-----------------------------------------
Name: Edward A. Blechschmidt
Title: Chairman and Chief Executive
Officer
Adecco S.A.,
a societe anonyme organized
under the laws of Switzerland
By: /s/ John P. Bowmer
-----------------------------------------
Name: John P. Bowmer
Title: Chief Executive Officer
By: /s/ Felix A. Weber
-----------------------------------------
Name: Felix A. Weber
Title: Chief Financial Officer
EXHIBIT A TO
SEPARATION AGREEMENT
[FORM OF EMPLOYEE BENEFITS ALLOCATION AGREEMENT]
EMPLOYEE BENEFITS ALLOCATION AGREEMENT
THIS EMPLOYEE BENEFITS ALLOCATION AGREEMENT is made as of the 17th day of
August, 1999, by and between Olsten Corporation, a Delaware corporation
(together with its successors and permitted assigns, "Olsten"), and Aaronco
Corp., a Delaware corporation (together with its successors and permitted
assigns, "OHS").
W I T N E S S E T H:
WHEREAS, pursuant to a Separation Agreement ("Separation Agreement") dated
as of August 17, 1999, by and between Olsten and OHS (i) the assets and
liabilities related to the Health Services Business (as defined in the
Separation Agreement) will be transferred to OHS and (ii) all the outstanding
shares of OHS will be split off to the shareholders of Olsten in consideration
for the redemption of a portion of the common stock of Olsten ("Split-Off") as
of the Effective Time (as defined in the Separation Agreement).
WHEREAS, the parties desire to set forth their understanding regarding their
respective rights and obligations concerning certain employee benefit and
related matters relative to plans, programs and practices currently maintained
by Olsten for the benefit of employees, officers, directors and former
employees, officers and directors of Olsten and its affiliates;
NOW, THEREFORE, in consideration of the premises, covenants and agreements
set forth herein, and intending to be legally bound (subject to shareholder
approval of the Separation Agreement) the parties hereto do hereby agree as
follows:
1. DEFINITIONS. Capitalized terms used herein without definition have the
meanings given to them in the Separation Agreement. As used herein, the
following terms have the following meanings:
"COBRA" means Code Section 4980B and ERISA Sections 601 through 608, and any
applicable state law establishing employer requirements for continuation of
health care, life insurance or other Welfare Plan benefits for the benefit of
certain current and former employees or dependents thereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Employee" means with respect to any entity, an individual who is
considered, according to the payroll and other records of such entity, to be
employed by such entity, regardless of whether such individual is, at the
relevant time, actively at work or on leave of absence (including vacation,
holiday, sick leave, family and medical leave, disability leave, military leave,
jury duty, layoff with rights of recall, and any other leave of absence or
similar interruption of active employment that is not considered, according to
the policies or practices of such entity, to have resulted in a permanent
termination of such individual's employment), but excluding any individual who
is, as of the relevant time, on long-term disability leave.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"OHS Employee" means (i) any individual who, at the Effective Time, is
actively employed in the Health Services Business, or who, with respect to the
Health Services Business, is on vacation, approved illness absence, short-term
disability, authorized leave of absence (including leave under the Family and
Medical Leave Act) or military service leave of absence as of the Effective Time
and becomes an employee of the OHS Group after the Effective Time, (ii) any
former employee of the Olsten Group who was, at the time of his or her
termination of employment, employed in the Health Services Business or
(iii) Anthony H. Reeves.
"OHS Group" means OHS and its subsidiaries.
"OHS Qualified Beneficiary" means any OHS Employee (or dependent or
beneficiary thereof) who, at or before the Effective Time, was a Qualified
Beneficiary under any Olsten Welfare Plan.
"Olsten Employee" means any current or former employee of the Olsten Group
other than a OHS Employee.
"Olsten Group" means Olsten and its subsidiaries.
"Olsten Qualified Beneficiary" means a Qualified Beneficiary who,
immediately following the Split-Off, is not a OHS Qualified Beneficiary and who,
immediately prior to the Split-Off, was a Qualified Beneficiary under any Olsten
Welfare Plan.
"Olsten Retained Business" means any business or operation of Olsten or its
subsidiaries which is, pursuant to the Separation Agreement, to be conducted by
Olsten following the Split-Off.
"Plan" means any plan, policy, arrangement, contract or agreement providing
compensation benefits for any group of Employees or individual Employees
(including former Employees) or the dependents or beneficiaries of any such
Employee, whether formal or informal or written or unwritten, and including,
without limitation, any means, whether or not legally required, pursuant to
which any benefit is provided by an employer to any such Employee or the
beneficiaries of any such Employee, existing at the Effective Time or prior
thereto.
"Qualified Beneficiary" means an individual (or dependent thereof) who
either (a) experiences a "qualifying event" (as that term is defined in Code
Section 4980B(f)(3) and ERISA Section 603) while a participant in any Plan which
provides health benefits or (b) becomes a "qualified beneficiary" (as that term
is defined in Code Section 4980B(g)(1) and ERISA 607(3)) under any Plan which
provides health benefits.
"Welfare Plan" shall mean any Plan which provides medical, health,
disability, accident, life insurance, death, dental or any other welfare
benefit, including, without limitation, any post-employment welfare benefit, but
excluding vacation benefits covered under Section 11.
2. TRANSFER OF EMPLOYEES.
(a) Olsten and OHS shall take all steps necessary or appropriate so that all
of the Employees of Olsten and its subsidiaries are allocated between the Olsten
Retained Business and the Health Services Business in accordance with the
principles set forth in Section 2(b) below, and so that each individual who is
so allocated to the Health Services Business is, as of the Effective Time and
immediately following the Split-Off, an Employee of a member of the OHS Group,
and each individual who is so allocated to the Olsten Retained Business is, as
of the Effective Time and immediately following the Split-Off, an Employee of a
member of the Olsten Group.
(b) In making the allocation provided for in Section 2(a), Olsten and OHS
shall allocate each Employee who is primarily engaged in the Olsten Retained
Business to the Olsten Group and each Employee who is primarily engaged in the
Health Services Business to the OHS Group. All other Employees shall be
allocated in a mutually agreeable manner that, to the extent possible, takes
into account (i) the Employees' expertise, experience and existing positions and
duties, (ii) the likelihood of unreasonably disrupting either the Olsten
Retained Business or the Health Services Business and (iii) maximizing the
ability of each of the Olsten Group and the OHS Group to manage and operate
their respective businesses after the Effective Time, taking into account the
respective needs of such businesses as established by past practice, and with a
view towards maximizing the value and effectiveness of both the Olsten Retained
Business and the Health Services Business.
(c) Olsten and OHS each agree that, between the date hereof and the
Effective Time, Employees will not be transferred between the Olsten Retained
Business or Health Services Business except (i) as
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necessary to effect the allocation pursuant to this Section 2 or (ii) in the
ordinary course of business consistent with past practice.
(d) As of the Effective Time, Olsten shall assume all obligations and
liabilities for, and arising under all employment and change in control
agreements with respect to Olsten Employees, and OHS shall have no liability or
obligation with respect thereto. As of the Effective Time, OHS shall assume all
obligations and liabilities for and arising under all employment and change in
control agreements with respect to OHS Employees (the "OHS Employment
Agreements"), and Olsten shall have no liability or obligation with respect
thereto. OHS shall take, or cause to be taken, all action necessary and
appropriate to assume, effective as of the Effective Time, all OHS Employment
Agreements, with such changes as may be necessary to reflect the change in the
employer thereunder and such other changes as OHS shall determine. Such OHS
Employment Agreements shall otherwise have the same terms and conditions as in
effect immediately prior to the Effective Time, except that references to
employment by, or termination of employment with, Olsten and its affiliates
shall be changed to references to employment by or termination of employment
with OHS and its affiliates. Notwithstanding any provision of this Agreement to
the contrary, except as otherwise set forth in the Separation Agreement, Olsten
shall retain responsibility for its obligations under (i) the Separation,
Consulting and Non-Competition Agreements between Albert, Olsten and the
following individuals dated August 17, 1999: Edward A. Blechschmidt, William R.
Costantini, Stuart Olsten and Anthony J. Puglisi and (ii) the Separation,
Consulting and Non-Competition Agreement between Olsten and Maureen McGurl dated
August 17, 1999; and OHS shall have no liability under such Agreements.
(e) As of the Effective Time, (i) Olsten shall retain all liabilities
relating to or arising out of claims made by or on behalf of Olsten Employees
for, or with respect to, benefits under any Plan, contract, agreement, statute,
regulation or other arrangement that provides for the payment of severance pay,
salary continuation, pay in lieu of notice, unused vacation pay, or similar
benefits in connection with actual or constructive termination or alleged actual
or constructive termination of employment (collectively, "Termination Benefits")
relating to the actual or constructive termination or alleged actual or
constructive termination of employment of any Olsten Employee with any member of
the Health Services Business or the Olsten Retained Business, whether before, at
or after the Effective Time, and (ii) OHS shall assume all liabilities relating
to or arising out of claims made by or on behalf of OHS Employees for, or with
respect to, Termination Benefits relating to the actual or constructive
termination or alleged actual or constructive termination of employment of any
OHS Employee with any member of the Health Services Business or the Olsten
Retained Business, whether before, at or after the Effective Time.
3. ALLOCATION OF EMPLOYEE LIABILITIES.
(a) At the Effective Time, except to the extent retained or assumed by
Olsten under this Agreement, OHS shall retain or assume, as the case may be,
responsibility as employer for the OHS Employees. At the Effective Time, except
to the extent assumed by OHS under this Agreement, Olsten shall retain
responsibility as employer for the Olsten Employees.
(b) As of the Effective Time, OHS shall assume, retain and be liable for all
wages, salaries, welfare, pension, incentive compensation and other
employee-related liabilities and obligations ("Employee Liabilities") with
respect to the OHS Employees and their dependents and beneficiaries, except as
specifically provided otherwise in this Agreement, and Olsten shall have no
further liability with respect thereto. As of the Effective Time, Olsten shall
assume, retain and be liable for Employee Liabilities with respect to Olsten
Employees and their dependents and beneficiaries, except as specifically
provided otherwise in this Agreement, and OHS shall have no further liability
with respect thereto.
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4. BENEFIT OBLIGATIONS AND PLAN COVERAGE.
(a) Except as specifically provided in this Agreement, or as otherwise
agreed by the parties hereto, (i) Olsten shall retain all benefit obligations
and all related rights in connection with any Plan with respect to Olsten
Employees, and OHS shall have no further liability with respect thereto, and
(ii) as of the Effective Time, OHS shall assume all benefit obligations and all
related rights in connection with any Plan with respect to OHS Employees and
Olsten shall have no further liability with respect thereto.
(b) OHS Employees shall not continue to be participants in Plans maintained
by the Olsten Group after the Effective Time and, instead, shall be eligible to
participate in applicable Plans maintained by OHS, as determined by OHS, as of
the Effective Time. OHS shall treat service of each OHS Employee with the Olsten
Group before the Effective Time as if such service had been with OHS for
purposes of determining eligibility to participate, eligibility for benefits,
benefit forms and vesting under Plans maintained by OHS.
5. QUALIFIED SAVINGS PLANS.
(a) Olsten currently maintains the Olsten Retirement Savings Plan and the
Olsten 1996 Caregiver/ Assignment Employee 401(k) Plan (collectively, the
"Olsten Savings Plans"). OHS shall establish or otherwise maintain by, or as
soon as practicable after, the Effective Time one or more defined contribution
savings plans designed to qualify under Section 401(a) of the Code, and to
preserve "protected benefits", within the meaning of Code Section 411(d)(6),
accrued by OHS Employees who are participants under the Olsten Savings Plans as
of the Effective Time (the "OHS Savings Plans"). OHS Employees will receive
credit for all service with the Olsten Group for purposes of eligibility and
vesting under the OHS Savings Plans.
(b) As soon as practicable after the Effective Time, Olsten and OHS shall
cause the trustees of the Olsten Savings Plans to transfer to the trustees or
other funding agents of the OHS Savings Plans, assets (the "Transferred Assets")
of the Olsten Savings Plans equal to the aggregate account balances of the OHS
Employees and their dependents and beneficiaries under the Olsten Savings Plans,
such amounts to be established as account balances or accrued benefits of such
individuals under the OHS Savings Plans. Each such transfer shall comply with
Section 414(1) of the Code and the requirements of ERISA and the regulations
promulgated thereunder. OHS shall cause the trustees or other funding agents of
the OHS Savings Plans to accept the plan-to-plan transfer from the Olsten
Savings Plans trustees, and to credit the accounts of such OHS Employees under
the OHS Savings Plans with amounts transferred on their behalf. The transfer to
the OHS Savings Plans shall be made in cash, securities, other property, or
notes evidencing plan loans to OHS Employees, and any outstanding balances of
plan loans to OHS Employees shall be transferred with the underlying accounts.
The account balances of the OHS Employees shall be valued as of the date on
which their transfer is made, which value shall include the earnings, gains and
losses, appreciation and depreciation of the investment funds in which the
accounts are invested through the date on which the transfer is made.
(c) Effective on the date of the transfer of assets of the Olsten Savings
Plans to the OHS Savings Plans, (i) OHS and the OHS Savings Plans shall assume
all liabilities to pay benefits in connection with the Transferred Assets, and
(ii) Olsten and the Olsten Savings Plans shall have no further liability to pay
benefits with respect to the Transferred Assets and any liabilities that are
transferred.
(d) OHS and Olsten shall each make timely payment of their respective
portion of all contributions due and unpaid under the Olsten Savings Plans for
the period prior to the Effective Time. For purposes of the preceding sentence,
the respective portions of any contributions due to the Olsten Savings Plans for
the period prior to the Effective Time shall be based on the following rules:
(1) the contributions attributable to OHS Employees shall be allocated to OHS,
and (2) the contributions attributable to Olsten employees shall be allocated to
Olsten. From and after the Effective Time, (i) matching and discretionary
contributions under the Olsten Savings Plans with
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respect to Olsten Employees (and there dependents and beneficiaries) will be
made solely by Olsten pursuant to the terms of the Olsten Savings Plans, and
(ii) matching and discretionary contributions under the OHS Savings Plans with
respect to OHS Employees (and their dependents and beneficiaries) will be made
solely by OHS pursuant to the terms of the OHS Savings Plans.
(e) Olsten and OHS shall, in connection with the plan-to-plan transfer
described in this Section 5, cooperate in making any and all appropriate filings
required by the Securities and Exchange Commission or the Internal Revenue
Service (the "IRS"), or required under the Code or ERISA or any applicable
securities laws and the regulations thereunder, and take all such action as may
be necessary and appropriate to cause such plan-to-plan transfer to take place
as soon as practicable after the Effective Time or otherwise when required by
law. Further, OHS shall seek a favorable IRS determination letter that the OHS
Savings Plans as organized, satisfy all qualification requirements under
Section 401(a) of the Code. Notwithstanding the foregoing, such plan-to-plan
transfers shall take place pending issuance of such favorable determination
letter. OHS shall make any necessary amendments on a retroactive basis to the
OHS Savings Plans as required by the IRS to issue the favorable determination
letter described above.
(f) Olsten shall be responsible for all liabilities incurred by Olsten or
OHS as a result of any failure of the Olsten Savings Plans to be qualified under
Section 401(a) of the Code. OHS shall be responsible for all liabilities
incurred by Olsten or OHS as a result of any failure of the OHS Savings Plans to
be qualified under Section 401(a) of the Code.
(g) The Olsten Group also maintains the IMI Systems Inc. Savings and
Investment Plan and the IMI Systems Inc. Associates 401(k) Plan (collectively,
the "IMI Plans") for the benefit of the employees of its information technology
services business. Olsten and its subsidiaries shall retain the IMI Plans and
all liability with respect thereto.
6. NONQUALIFIED RETIREMENT AND SAVINGS PLANS.
(a) Prior to or on the Effective Time, Olsten shall amend the Olsten
Nonqualified Retirement Plan for Selected Management Employees, the Olsten
Supplemental Retirement Plan, the Olsten Nonqualified Savings Plan for Selected
Management Employees, the Olsten Executive Voluntary Deferred Compensation Plan
and the Olsten Nonqualified Retirement and Savings Plan (collectively, the
"Olsten Nonqualified Plans") to provide that OHS Employees and their dependents
and beneficiaries shall cease accruing benefits thereunder as of the Effective
Time, and that no benefits shall thereafter be payable under the Olsten
Nonqualified Plans to OHS Employees or their dependents or beneficiaries.
(b) As of the Effective Time, OHS shall establish or otherwise make
available by, or as soon as practicable after, such date nonqualified plans
substantially similar to the Olsten Nonqualified Plans (collectively, the "OHS
Nonqualified Plans"), corresponding to the Olsten Nonqualified Plans, and shall
assume, under such plans, all liabilities and obligations with respect to OHS
Employees under the Olsten Nonqualified Plans prior to the Effective Time. All
such liabilities and obligations shall cease to be liabilities or obligations of
Olsten as of the Effective Time.
(c) No termination of an Employee's employment shall be deemed to occur for
purposes of the OHS Nonqualified Plans as a result of any actions taken pursuant
to this Agreement or otherwise as a result of the consummation of the
transactions contemplated by the Separation Agreement, provided that the
Employee remains continuously employed by the OHS Group.
(d) As soon as practicable following the Effective Time, OHS shall establish
one or more trusts to be used in connection with the OHS Nonqualified Plans (the
"OHS Trusts") for the purpose of aiding in the provision of benefits under its
OHS Nonqualified Plans. As of the Effective Time, Olsten shall cause the
trustees of the trust agreements under the Olsten Nonqualified Plans (the
"Olsten Trusts") to transfer to the trustees of the corresponding OHS Trusts any
amounts held in the Olsten Trusts attributable to the benefits of OHS Employees.
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7. WELFARE BENEFIT PLANS.
(a) Olsten currently maintains the Olsten medical plan, dental plan and
other "employee welfare benefit plans," within the meaning of Section 3(l) of
ERISA (collectively, the "Olsten Welfare Plans"), for the benefit of employees
of Olsten and affiliates and their dependents. Effective as of the Effective
Time, OHS shall establish or otherwise maintain medical, dental and other
welfare plans with substantially similar benefits as the Olsten Welfare Plans
("OHS Welfare Plans"). OHS will offer coverage under the OHS Welfare Plans to
OHS Employees and their dependents immediately after the Effective Time and
shall provide that such employees and dependents shall be eligible for immediate
participation in the OHS Welfare Plans with no interruption of coverage and
shall credit the period of coverage under the Olsten Welfare Plans toward any
preexisting conditions limited under the OHS Welfare Plans. All charges and
expenses of such OHS Employees and their eligible dependents which were applied
to the deductible and out-of-pocket maximums under Olsten' medical or dental
plans during the plan year of OHS in which the Effective Time falls shall be
credited toward any deductible and out-of-pocket maximum applicable in such OHS
plan year. For purposes of this Section 7, a health benefit claim is incurred
when the medical services are rendered, and a life insurance claim is incurred
when the covered person dies. A claim for a hospital admission shall be deemed
to have been incurred on the date of admission to the hospital and shall
continue for the duration of that period of hospital confinement, and costs for
all services provided during that period of hospital confinement shall be
included in the claim. A long-term disability claim shall be deemed to have been
incurred on the date the condition causing the disability rendered the employee
disabled.
(b) Except as otherwise provided herein, as of the Effective Time,
(i) Olsten shall assume or retain and shall be responsible for, or cause its
insurance carriers or HMOs to be responsible for, all liabilities and
obligations related to claims asserted or incurred or premiums owed or due as of
and after the Effective Time in respect of any Olsten Employee and his or her
dependents under any Olsten Welfare Plan, and OHS shall have no liability or
obligation with respect thereto, and (ii) OHS shall assume or retain and shall
be responsible for, or cause its insurance carriers or HMOs to be responsible
for, all liabilities and obligations related to claims asserted or incurred or
premiums owed or due as of and after the Effective Time in respect of any OHS
Employee and his or her dependents under any OHS Welfare Plan, and Olsten shall
have no liability or obligation with respect thereto.
(c) As of the Effective Time, Olsten shall be solely responsible for, or
cause its insurance carriers or HMOs to be responsible for, providing and
administering the continuation coverage required by COBRA as it relates to any
Olsten Qualified Beneficiary, and OHS shall have no liability or obligation with
respect thereto. As of the Effective Time, OHS shall be solely responsible for,
or cause its insurance carriers or HMOs to be responsible for, providing and
administering the continuation coverage required by COBRA as it relates to any
OHS Qualified Beneficiary, and Olsten shall have no liability or obligation with
respect thereto.
(d) Notwithstanding the foregoing, Olsten shall permit participants (and
their eligible dependents) to remain covered under the Olsten Welfare Plans
through the end of the month in which the Effective Time occurs and OHS or its
successor shall promptly reimburse Olsten for claims incurred during such period
by such participants and their eligible dependents.
8. FLEXIBLE SPENDING ACCOUNTS. OHS shall establish at or as soon as
practicable after the Effective Time a flexible spending account plan designed
to qualify under Code Section 125 containing both a health care spending account
and a dependent care spending account (the "OHS Flex Plan") with features
substantially similar to those maintained under the Olsten Flexible Spending
Plan (the "Olsten Flex Plan") as of the Effective Time. Those participants in
the Olsten Flex Plan who are OHS Employees shall be eligible for immediate
participation in the OHS Flex Plan. OHS shall assume and fully perform, pay and
discharge all obligations and liabilities of Olsten and the Olsten Flex Plan for
and with respect to the accounts of those Olsten Flex Plan participants who are
OHS Employees.
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9. EQUITY-BASED COMPENSATION PLANS. OHS agrees to assume the options to
purchase Olsten stock held by OHS Employees in accordance with the provisions of
Section 2.05 of the Merger Agreement.
10. OLSTEN BONUS PLANS. OHS shall be responsible for annual bonus payments
for OHS Employees in respect of the calendar year during which the Effective
Time occurs, and Olsten shall have no liability with respect thereto. Olsten
shall be responsible for annual bonus payments for Olsten Employees in respect
of the calendar year during which the Effective Time occurs, and OHS shall have
no liability with respect thereto.
11. VACATION AND SICK PAY LIABILITIES. As of the Effective Time,
(i) Olsten shall retain and shall be responsible for all accrued liabilities
(whether vested or unvested, and whether funded or unfunded) as of the Effective
Time for vacation and sick leave in respect of all Olsten Employees and
(ii) OHS shall assume and shall be responsible for all accrued liabilities
(whether vested or unvested, and whether funded or unfunded) as of the Effective
Time for vacation and sick leave in respect of all OHS Employees. From and after
the Effective Time, (x) Olsten shall be solely responsible for the payment to
Olsten Employees of vacation or sick leave accrued after the Effective Time and
(y) OHS shall be solely responsible for the payment to OHS Employees of vacation
or sick leave accrued after the Effective Time.
12. PAYROLL REPORTING AND WITHHOLDING.
(a) Olsten and OHS may adopt the "alternative procedure" for preparing and
filing IRS Forms W-2 (Wage and Tax Statements), as described in Section 5 of
Revenue Procedure 84-77, 1984-2 IRS Cumulative Bulletin 753 ("Rev. Proc.
84-77"). Under this procedure, OHS as the successor employer shall provide all
required Forms W-2 to all OHS Employees reflecting all wages paid and taxes
withheld by both Olsten as the predecessor and OHS as the successor employer for
the entire year during which the Split-Off takes place. Olsten shall provide all
required Forms W-2 to all Olsten Employees reflecting all wages and taxes paid
and withheld by Olsten before and after the Effective Time. In connection with
the aforesaid agreement under Rev. Proc. 84-77, each business unit or business
operation of Olsten shall be assigned to either Olsten or OHS, depending upon
whether it is a Olsten Retained Business or a Health Services Business, and each
Olsten Employee or OHS Employee associated with such business unit or business
operation shall be assigned for payroll reporting purposes to Olsten or OHS, as
the case may be. Olsten and OHS shall be responsible for filing IRS Forms 941
for their respective Employees.
(b) Olsten and OHS may adopt the alternative procedure of Rev. Proc. 84-77
for purposes of filing IRS Forms W-4 (Employee's Withholding Allowance
Certificate) and W-5 (Earned Income Credit Advance Payment Certificate). Under
this procedure Olsten shall provide to OHS all IRS Forms W-4 and W-5 on file
with respect to each OHS Employee, and OHS will honor these forms until such
time, if any, that such OHS Employee submits a revised form.
(c) With respect to garnishments, tax levies, child support orders, and wage
assignments in effect with Olsten at the Effective Time, OHS shall honor such
payroll deduction authorizations with respect to OHS Employees and will continue
to make payroll deductions and payments to the authorized payee, as specified by
the court or governmental order which was filed with Olsten at or before the
Effective Time, and Olsten will continue to make such payroll deductions and
payments to authorized payees with respect to Olsten Employees.
(d) As of the Effective Time, Olsten shall assume or retain and shall be
responsible for, or cause its insurance carriers or HMOs to be responsible for,
all liabilities and obligations related to claims asserted or incurred or
premiums owed as of and after the Effective Time for post-retirement medical or
life benefits in respect of any Olsten Employee under any Plan and claims
asserted or incurred or premiums due after the Effective Time in respect of any
Olsten Employee under any such Plan, and
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OHS shall have no liability or obligation with respect thereto. As of the
Effective Time, OHS shall assume or retain and shall be responsible for, or
cause its insurance carriers or HMOs to be responsible for, all liabilities and
obligations related to claims asserted or incurred or premiums owed as of and
after the Effective Time for post-retirement medical or life benefits in respect
of any OHS Employee under any Plan and claims asserted or incurred or premiums
due after the Effective Time in respect of any OHS Employee under any such Plan,
and Olsten shall have no liability or obligation with respect thereto.
13. LABOR AND EMPLOYMENT MATTERS. Notwithstanding any other provision of
this Agreement or any other agreement between Olsten and OHS to the contrary,
Olsten and OHS understand and agree that:
(a) At and after the Effective Time and the separation of Employees into
their respective companies, Olsten and OHS will be separate and independent
employers.
(b) With regard to Employees covered by a collective bargaining agreement or
other labor agreement at the Effective Time who are Olsten Employees and become
OHS Employees, Olsten and OHS promise and covenant to each other not to take any
action which disrupts or otherwise negatively impacts the labor relations of the
other. Olsten and OHS will diligently work to substitute the appropriate
employer for Olsten in such collective bargaining agreements and other labor
agreements with respect to OHS Employees.
(c) As of the Effective Time, Olsten shall assume all obligations and
liabilities for, and arising under all release and/or separation agreements with
respect to former Employees of Olsten whose last employment with Olsten was with
a Olsten Retained Business, and OHS shall have no liability or obligation with
respect thereto. As of the Effective Time, OHS shall assume all obligations and
liabilities for, and arising under all release and/or separation agreements with
respect to former Employees of Olsten whose last employment with Olsten was with
the Health Services Business, and Olsten shall have no liability or obligation
with respect thereto.
14. WORKERS' COMPENSATION. As of the Effective Time, (i) Olsten shall
assume or retain and shall be responsible for, or cause its insurance carriers
to be responsible for, all liabilities and obligations related to workers'
compensation claims asserted or benefits relating to any occupational illnesses
and injuries prior to and after the Effective Time in respect of any Olsten
Employee, and OHS shall have no liability or obligation with respect thereto,
and (ii) OHS shall assume or retain and shall be responsible for, or cause its
insurance carriers to be responsible for, subject to Section 5.11 of the
Separation Agreement with respect to pre-Effective Time Claims, all liabilities
and obligations related to workers' compensation claims asserted or benefits
relating to any occupational illnesses and injuries incurred prior to and after
the Effective Time in respect of any OHS Employee, and Olsten shall have no
liability or obligation with respect thereto.
15. OTHER EMPLOYEE BENEFIT PLANS. All Plans maintained by the Olsten Group
not specifically described herein, and all assets, obligations and liabilities
thereunder, shall be apportioned and allocated between Olsten and OHS based on
the relative participation in and accrued benefits under such Plan by Olsten
Employees and OHS Employees, respectively, in accordance with the general terms
and principles of this Agreement.
16. NON-U.S. PLANS GENERALLY. All Plans maintained by the Olsten Group
(the "Foreign Plans") which provide benefits to Employees located outside the
United States, including without limitation expatriates, and to expatriate
Employees located in the United States, and all assets, obligations and
liabilities thereunder, shall be apportioned and allocated between Olsten and
OHS based on the relative participation in and accrued benefits under such
Foreign Plan by Olsten Employees and OHS Employees, respectively, in accordance
with the general terms and principles of this Agreement. Any transfer of assets
or liabilities from a Foreign Plan shall be made on the basis of reasonable
methods
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and assumptions determined by the local actuarial firm that is, as of the date
of this Agreement, serving as the actuary for such Foreign Plan (or another
actuarial firm if the parties hereto so agree) (the "Local Actuary"), in
accordance with applicable legal and regulatory requirements, local practice and
the past practice of Olsten, provided that each of Olsten and OHS shall be
entitled to review such methods and assumptions and object to them if they are
unreasonable, and to review all calculations and determinations of the Local
Actuary for accuracy.
17. RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be deemed or
construed by the parties hereto or any third party as creating the relationship
of principal and agent, partnership or joint venture between the parties hereto,
it being understood and agreed that no provision contained herein, and no act of
the parties hereto, shall be deemed to create any relationship between such
parties other than the relationship set forth herein.
18. ACCESS TO INFORMATION; COOPERATION. The parties hereto shall provide
one another with such information within the scope of this Agreement as is
reasonably necessary to administer each party's Plans. The parties hereto shall
cooperate with each other to minimize the disruption caused by any such access
and providing of information.
19. REIMBURSEMENT. Olsten and OHS acknowledge that Olsten, on the one
hand, and OHS, on the other hand, may incur costs and expenses, including, but
not limited to, contributions to Plans and the payment of insurance premiums
arising from or related to any of the Plans which are, as set forth in this
Agreement, the responsibility of the other party hereto. Accordingly, Olsten and
OHS shall reimburse each other, as soon as practicable, but in any event within
thirty (30) days of receipt from the other party hereto of appropriate
verification, for all such costs and expenses.
20. CREDIT FOR SERVICE PRIOR TO THE EFFECTIVE TIME. An OHS Employee shall
be given credit for all years of service with the Olsten Group performed prior
to the Effective Time with respect to matters of employment generally, including
participation in employee benefit plans, arrangements or practices, whether or
not such service credit is expressly provided for elsewhere in this Agreement as
to any particular employee benefit plan, arrangement or practice.
21. AMENDMENT OR TERMINATION OF EMPLOYEE BENEFIT PLANS. Except as
otherwise expressly provided herein, nothing in this Agreement is intended or
does in fact limit the ability of Olsten or OHS, as applicable, in its sole
discretion, from amending or terminating any employee benefit plan, arrangement
or practice which it now maintains or may hereafter establish at any time or for
any reason; PROVIDED, HOWEVER, that neither party shall amend any Plan to the
extent that such amendment would have the effect of increasing the liabilities
of the other party under any Plan of the other party, without such other party's
consent.
22. FURTHER ASSURANCES. Each party covenants that it will execute such
additional instruments and take such actions as may be reasonably requested by
the other to confirm or perfect or otherwise carry out the intent and purposes
of this Agreement, including, but not limited to, sharing of participant
information as necessary to facilitate administration of employee benefit plans,
arrangements and practices.
23. NO WAIVER. No failure by either party to insist upon the strict
performance of any term, covenant, condition or provision of this Agreement, or
to exercise any right or remedy consequent upon an event of default hereunder,
shall constitute a waiver of any such default or of such term, covenant,
condition or provision or a waiver or relinquishment for the future of the right
to insist upon and to enforce by any appropriate legal remedy a strict
compliance with all the terms, covenants, conditions and provision of this
Agreement, or of the right to exercise any such rights or remedies, if any
default by the other party be continued or repeated. No breach of this Agreement
shall be waived except as set forth in a written instrument executed by the
party waiving such breach. No waiver of any breach shall affect or alter this
Agreement but every term, covenant, condition and provision of this
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Agreement shall continue in full force and effect with respect to any other
existing or subsequent breach hereof. Any failure on the part of any party
hereto to comply with any of its obligations hereunder may be waived by the
other party.
24. CAPTIONS. The captions of the Sections of this Agreement have been
inserted solely for convenience of reference and shall not constitute a part of
this Agreement, nor shall they affect its meaning, construction or effect.
25. AMENDMENT OF AGREEMENT. This Agreement may be amended only by a
written agreement duly executed by each of the parties hereto.
26. APPLICABLE LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of New York without regard to the
principles of conflict of laws thereof, to the extent not preempted by federal
law.
27. MULTIPLE COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be regarded for all purposes as an original
constituting but one and the same instrument.
28. SEVERABILITY. If any one or more of the Sections, sentences or other
portions of this Agreement shall be determined by a court of competent
jurisdiction to be invalid, the invalidity of any such Section, sentence, or
other portion of this Agreement shall in no way affect the validity or
effectiveness of the remainder of this Agreement, and this Agreement shall
continue in force to the fullest extent permitted by law.
29. ASSIGNMENTS. Except as otherwise provided herein, no party hereto
shall give, assign or pledge its rights under this Agreement without the written
consent of the other parties.
30. NOTICES; DEMANDS; REQUESTS. All notices, demands and requests to be
given or made hereunder to or by any party shall be in writing and hand
delivered or mailed by registered or certified mail (return receipt requested)
or sent by any means of electronic message transmission with delivery confirmed
(by voice or otherwise) to the parties at the following addresses and will be
deemed given on the date on which such notice is received:
(a) As to Olsten, prior to the Effective Time and OHS, prior to and after
the Effective Time:
Olsten Corporation
175 Broad Hollow Road
Melville, New York
Attention: Edward A. Belchschmidt
Telephone: (516) 844-7220
Telecopy: (516) 844-7335
With a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Attention: Kenneth W. Orce, Esq.
(b) As to Adecco, prior to or after the Effective Time or to Olsten after
the Effective Time, to:
Adecco SA
1275 Cheserex
Switzerland
B-A-10
Attention: Felix A. Weber
Telephone: 011 41 21 321 6666
Telecopy:
With a copy to:
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
Attention: Thomas W. Dobson, Esq.
Telephone: (213) 485-1234 Telecopy: (213) 891-8763
With a copy to:
Baer & Karrer
Rechtsanwaelte
Seefeldstrasse 19
8024 Zurich
Switzerland
Attention: PD Dr. Rolf Watter
Telephone: 011 41 1 26 1 5150
Telecopy: 011 41 25 1 3025
Any of such addressees and addresses may be changed at any time upon written
notice given in accordance with this Section to the other party by the party
effecting the change. Any time periods commencing with notice prescribed by the
terms of this Agreement shall commence with the date of receipt of written
notice as provided under this Section.
31. SURVIVAL OF COVENANTS. All covenants set forth herein shall survive
the execution of this Agreement.
32. ENTIRE AGREEMENT. This Agreement contains the entire understanding of
the parties with respect to the transactions contemplated hereby and supersedes
all other prior and contemporaneous agreements, undertakings, negotiations,
discussions and representations, oral or written, between the parties.
33. SPECIFIC PERFORMANCE. This Agreement and each and every provision
hereof shall be specifically enforceable. Each party hereto upon the
introduction and presentation to the applicable court having jurisdiction over
the matter of evidence showing a material breach by the other party hereto shall
be entitled to injunctive relief mandating specific performance. In addition,
each party shall have all of the rights and remedies conferred in this Agreement
or now or hereafter conferred at law or in equity, which rights and remedies are
cumulative.
34. NO THIRD PARTY BENEFICIARIES. No person or entity shall be deemed to
be a third party beneficiary with respect to the obligations of any party
hereto.
35. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective legal representatives,
successors and assigns.
B-A-11
IN WITNESS WHEREOF, the parties to this Agreement have caused their
corporate names to be subscribed by officers duly authorized as of the date
first set forth above.
OLSTEN CORPORATION
By: -----------------------------------------
Name: Edward A. Blechschmidt
Title: President and Chief Executive
Officer
AARONCO CORP.
By: -----------------------------------------
Name: William P. Costantini
Title: Executive Vice President
EXHIBIT B TO
SEPARATION AGREEMENT
[FORM OF TAX SHARING AGREEMENT]
TAX SHARING AGREEMENT
This Agreement is entered into as of August 17, 1999 by and between Olsten
Corporation, a Delaware corporation ("Olsten"), Gentiva Health Services, Inc, a
Delaware corporation ("OHS"), and Adecco SA, a societe anonyme organized under
the laws of Switzerland ("Adecco"). Olsten and OHS are sometimes collectively
referred to herein as the "Companies." Capitalized terms used in this Agreement
are defined in Section 1 below. Unless otherwise indicated, all "Section"
references in this Agreement are to sections of this Agreement.
RECITALS
WHEREAS, as of the date hereof, Olsten is the common parent of an affiliated
group of corporations, including OHS, which has elected to file consolidated
federal income tax returns;
WHEREAS, the Companies have entered into a Separation Agreement setting
forth the corporate transactions pursuant to which Olsten will effect the
Split-Off;
WHEREAS, as a result of the Split-Off, OHS and its subsidiaries will cease
to be members of the affiliated group of which Olsten is the common parent,
effective as of the end of the Split-Off Date; and
WHEREAS, the Companies desire to provide for and agree upon the allocation
between the parties of liabilities for Taxes arising prior to, as a result of,
and subsequent to the transactions contemplated by the Separation Agreement, and
to provide for and agree upon other matters relating to Taxes;
NOW, THEREFORE, in consideration of the mutual agreements contained herein,
the Companies hereby agree as follows:
Section 1. DEFINITION OF TERMS. For purposes of this Agreement (including
the recitals hereof), the following terms have the following meanings:
"ACCOUNTING CUTOFF DATE" means, with respect to an entity, any date as of
the end of which there is a closing of the financial accounting records for such
entity.
"ACCOUNTING FIRM" shall have the meaning provided in Section 13.
"ADECCO" means Adecco SA, a societe anonyme organized under the laws of
Switzerland, and any successor.
"ADJUSTMENT REQUEST" means any formal or informal claim or request filed
with any Tax Authority, or with any administrative agency or court, for the
adjustment, refund, or credit of Taxes, including without limitation (a) any
amended Tax return claiming adjustment to the Taxes as reported on a Tax Return
or, if applicable, as previously adjusted, or (b) any claim for refund or credit
of Taxes previously paid.
"AFFILIATE" means any entity that directly or indirectly is "controlled" by
the person or entity in question. "Control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a person, whether through ownership of voting securities, by
contract or otherwise. Except as otherwise provided herein, the term Affiliate
shall refer to Affiliates of a person as determined immediately after the
Split-Off.
"AGREEMENT" shall mean this Tax Sharing Agreement.
"ALLOCATED FEDERAL TAX LIABILITY" shall have the meaning provided in
Section 5.01(b)(i).
"CODE" means the U.S. Internal Revenue Code of 1986, as amended, or any
successor law.
"COMPANIES" means Olsten and OHS, collectively, and "Company" means either
Olsten or OHS.
"CONSOLIDATED OR COMBINED INCOME TAX" means any Income Tax computed by
reference to the assets and activities of members of more than one Group.
"CONSOLIDATED OR COMBINED STATE INCOME TAX" means any State Income Tax
computed by reference to the assets and activities of members of more than one
Group.
"CONSOLIDATED TAX LIABILITY" means, with respect to any Olsten Federal
Consolidated Return, the "tax liability of the group" as that term is used in
Treasury Regulation Section 1.1552-1(a)(1) (including applicable interest,
additions to the tax, additional amounts, and penalties as provided in the
Code), adjusted as follows:
(i) such tax liability shall be treated as including any alternative
minimum tax liability under Code Section 55; and
(ii) in the case of the Tax Period which includes the Split-Off Date,
the Consolidated Tax Liability shall be computed as if the Split-Off Date
were the last day of the Tax Period.
"CONTRIBUTION AND SALE AGREEMENT" means the Contribution and Sale Agreement,
dated as of January 18, 2000, by and among Olsten, OHS and DNH Medical
Management, Inc.
"CUMULATIVE FEDERAL TAX PAYMENT" shall have the meaning provided in
Section 5.01(b)(ii).
"EFFECTIVE TIME" shall have the meaning provided in the Merger Agreement.
"FEDERAL ALLOCATION METHOD" shall have the meaning provided in
Section 2.02(a).
"FEDERAL INCOME TAX" means any Tax imposed by Subtitle A or F of the Code.
"FOREIGN INCOME TAX" means any Tax imposed by any foreign country or any
possession of the United States, or by any political subdivision of any foreign
country or United States possession, which is an income tax as defined in
Treasury Regulation Section 1.901-2.
"GROUP" means the Olsten Group or the OHS Group, as the context requires.
"INCOME TAX" means any Federal Income Tax, State Income Tax, or Foreign
Income Tax.
"JOINT ADJUSTMENT" means any proposed adjustment by a Tax Authority or claim
for refund asserted in a Tax Contest which is neither an OHS Adjustment nor a
Olsten Adjustment.
"MERGER AGREEMENT" means an Agreement and Plan of Merger by and among
Adecco, Staffing Acquisition Corp., a Delaware corporation ("Merger Sub") and
Olsten dated as of August 17, 1999.
"OHS" means Gentiva Health Services, Inc., a Delaware corporation, and any
successor.
"OHS ADJUSTMENT" means any proposed adjustment by a Tax Authority or
Adjustment Request to the extent OHS would be exclusively liable for any
resulting Tax (or exclusively liable for an indemnification payment (including,
without limitation, pursuant to Section 4.06(f))) under this Agreement or
exclusively entitled to receive any resulting Tax Benefit under this Agreement.
"OHS COMMON STOCK" means the shares of common stock, par value $.01, per
share, of OHS.
"OHS CONSOLIDATED NOL" means the portion of any consolidated or combined net
operating loss reported on any original Olsten Federal Consolidated Return or
original Consolidated or Combined State Income Tax Return that is attributable
to one or more members of the OHS Group, excluding, in the case of the taxable
year in which the Split-Off occurs, any deduction attributable to the OHS Group
arising in connection with the transfer (or vesting) of the preferred stock of
OHS pursuant to the Contribution and Sale Agreement.
B-B-2
"OHS GROUP" means OHS and its Affiliates as determined immediately after the
Split-Off.
"OHS GROUP PRIOR FEDERAL TAX LIABILITY" shall have the meaning provided in
Section 2.02(b)(i)(B).
"OHS GROUP PRIOR STATE TAX LIABILITY" shall have the meaning provided in
Section 2.03(b)(ii)(A)(ii).
"OHS GROUP RECOMPUTED FEDERAL TAX LIABILITY" shall have the meaning provided
in Section 2.02(b)(i)(A).
"OHS GROUP RECOMPUTED STATE TAX LIABILITY" shall have the meaning provided
in Section 2.03(b)(ii)(A)(1).
"OLSTEN" means Olsten Corporation, a Delaware corporation, and any
successor.
"OLSTEN ADJUSTMENT" means any proposed adjustment by a Tax Authority or
Adjustment Request to the extent Olsten would be exclusively liable for any
resulting Tax (or exclusively liable for an indemnification payment) under this
Agreement or exclusively entitled to receive any resulting Tax Benefit under
this Agreement.
"OLSTEN COMMON STOCK" means, collectively, the outstanding shares of common
stock, par value $.10 per share, and the Class B common stock, par value $.10
per share, of Olsten.
"OLSTEN FEDERAL CONSOLIDATED RETURN" means any United States federal Tax
Return for the affiliated group (as that term is defined in Code Section 1504)
that includes Olsten as the common parent and includes any member of the OHS
Group.
"OLSTEN GROUP" means Olsten and its Affiliates, excluding any entity that is
a member of the OHS Group.
"OLSTEN HEALTH SERVICES CAPITAL LOSS" means any capital loss recognized by
Olsten on the transfer of the stock of Olsten Health Services, Inc. to OHS
pursuant to the Contribution and Sale Agreement.
"PAYMENT DATE" means, (i) with respect to any Olsten Federal Consolidated
Return, the due date for any required installment of estimated taxes determined
under Code Section 6655, the due date (determined without regard to extensions)
for filing the return determined under Code Section 6072, and the date the
return is filed, and (ii) with respect to any Tax Return for any Consolidated or
Combined State Income Tax, the corresponding dates determined under the
applicable Tax Law.
"POST-SPLIT-OFF PERIOD" means any Tax Period beginning after the Split-Off
Date and, in the case of any Straddle Period, the portion of such Straddle
Period beginning the day after the Split-Off Date.
"PRE-SPLIT-OFF PERIOD" means any Tax Period ending on or before the
Split-Off Date and, in the case of any Straddle Period, the portion of such
Straddle Period ending on the Split-Off Date.
"PRIME RATE" means the base rate on corporate loans charged by The Chase
Manhattan Bank, N.A., New York, New York from time to time, compounded daily on
the basis of a year of 365 or 366 (as applicable) days and actual days elapsed.
"PRIOR INTERCOMPANY TAX ALLOCATION AGREEMENTS" means any written or oral
agreement or any other arrangements relating to allocation of Taxes existing
between or among the Olsten Group and/or the OHS Group as of the Split-Off Date
(other than this Agreement and the Separation Agreement and other than any such
agreement or arrangement between or among persons who are members of a single
Group).
"RESPONSIBLE COMPANY" means, with respect to any Tax Return, the Company
having responsibility for preparing and filing such Tax Return under this
Agreement.
"RESTRUCTURING INCOME TAXES" means (i) any incremental Income Taxes imposed
on the Olsten Group or the OHS Group solely as a result of pre-Effective Time
transfers of assets (including, without limitation, any stock or other debt or
equity interests in entities) or liabilities pursuant to the
B-B-3
Separation Agreement (including, without limitation, any Income Taxes resulting
from the triggering of deferred intercompany gains or excess loss accounts),
whether or not liability for such Income Taxes is triggered by the Split-Off and
(ii) any incremental Income Taxes imposed on the Olsten Group or the OHS Group
that are not described in clause (i) and that result solely from the triggering
of any deferred intercompany gains or excess loss accounts by virtue of the
Split-Off (other than an excess loss account with respect to the stock of OHS),
computed, under both clause (i) and clause (ii), without taking into account any
net operating loss arising in the Olsten Federal Consolidated Returns or
Consolidated or Combined State Income Tax Returns or any Olsten Health Services
Capital Loss; PROVIDED, that no Tax that is a Section 311(b) Tax shall be
considered a Restructuring Income Tax. Notwithstanding anything to the contrary
in this definition, Restructuring Income Taxes shall not include any Taxes
imposed on or attributable to any member of the Olsten Group that would not have
been imposed if the parties had not signed and implemented the Contribution and
Sale Agreement and, in lieu thereof, Olsten had distributed the stock of Olsten
Health Services, Inc. in the Split-Off, which Taxes shall be borne 100% by
Olsten.
"REVIEWING COMPANY" shall have the meaning provided in Section 4.05.
"SECTION 311(B) TAXES" means any incremental Income Taxes imposed on Olsten
with respect to the distribution of OHS stock pursuant to the Split-Off,
pursuant to Section 311(b) of the Code (or any similar provision of state, local
or foreign law) and/or as a result of triggering an excess loss account with
respect to the stock of OHS, computed without taking into account any net
operating loss arising in the Olsten Federal Consolidated Returns or
Consolidated or Combined State Income Tax Returns or any Olsten Health Services
Capital Loss.
"SEPARATE COMPANY TAX" means any Tax computed by reference to the assets and
activities of a member or members of a single Group.
"SEPARATION AGREEMENT" means the agreement, as amended from time to time,
setting forth the corporate transactions required to effect the Split-Off, and
to which this Tax Sharing Agreement is attached as an exhibit.
"SPLIT-OFF" means the distribution by Olsten of all of the outstanding OHS
Common Stock in redemption of a portion of the outstanding Olsten Common Stock.
"SPLIT-OFF DATE" means the date on which the Split-Off occurs.
"STATE INCOME TAX" means any Tax imposed by any State of the United States
or by any political subdivision of any such State which is imposed on or
measured by net income, including state and local franchise or similar Taxes
measured by net income.
"STRADDLE PERIOD" means any Tax Period that begins on or before and ends
after the Split-Off Date.
"TAX" or "TAXES" means (i) any income, gross income, gross receipts,
profits, capital stock, franchise, withholding, payroll, social security,
workers compensation, unemployment, disability, property, ad valorem, stamp,
excise, severance, occupation, service, sales, use, license, lease, transfer,
import, export, value added, alternative minimum, estimated or other similar tax
(including any fee, assessment, or other charge in the nature of or in lieu of
any tax) imposed by any governmental entity or political subdivision thereof,
(ii) any interest, penalties, additions to tax, or additional amounts in respect
of the foregoing and (iii) any transferee, successor, joint and several or
contractual liability for any item described in clauses (i) or (ii).
"TAX AUTHORITY" means, with respect to any Tax, the governmental entity or
political subdivision thereof that imposes such Tax, and the agency (if any)
charged with the collection of such Tax for such entity or subdivision.
"TAX BENEFIT" means any refund, credit, or other reduction in otherwise
required Tax payments (including any reduction in estimated tax payments).
B-B-4
"TAX CONTEST" means an audit, review, examination, or any other
administrative or judicial proceeding with the purpose or effect of
redetermining Taxes of any of the Companies or their Affiliates (including any
administrative or judicial review of any Adjustment Request) for any Tax Period
ending on or before the Split-Off Date or any Straddle Period.
"TAX CONTEST COMMITTEE" shall have the meaning provided in Section 8.02(b).
"TAX ITEM" means, with respect to any Income Tax, any item of income, gain,
loss, deduction, and credit.
"TAX LAW" means the Law of any governmental entity or political subdivision
thereof relating to any Tax.
"TAX PERIOD" means, with respect to any Tax, the period for which the Tax is
reported as provided under the Code or other applicable Tax Law.
"TAX RECORDS" means Tax Returns, Tax Return workpapers, documentation
relating to any Tax Contests, and any other books of account or records required
to be maintained under the Code or other applicable Tax Laws or under any record
retention agreement with any Tax Authority.
"TAX RETURN" means any report of Taxes due, any claims for refund of Taxes
paid, any information return with respect to Taxes, or any other similar report,
statement, declaration, or document required to be filed under the Code or other
Tax Law, including any attachments, exhibits, or other materials submitted with
any of the foregoing, and including any amendments or supplements to any of the
foregoing.
"TRANSACTIONS" means the transactions contemplated by the Separation
Agreement.
"TREASURY REGULATIONS" means the regulations promulgated from time to time
under the Code as in effect for the relevant Tax Period.
Section 2. ALLOCATION OF TAX Liabilities. The provisions of this Section 2
are intended to determine each Company's liability for Taxes with respect to
Pre-Split-Off Periods. Once the liability has been determined under this
Section 2, Section 5 determines the time when payment of the liability is to be
made, and whether the payment is to be made to the Tax Authority directly or to
another Company.
2.01 GENERAL RULE.
(a) OLSTEN LIABILITY. Olsten shall be liable for all Taxes not specifically
allocated to OHS under this Section 2, including, without limitation, all Taxes
specifically allocated to Olsten under this Section 2. Olsten shall indemnify
and hold harmless the OHS Group from and against any liability for Taxes which
Olsten is liable under this Section 2.01(a).
(b) OHS LIABILITY. OHS shall be liable for, and shall indemnify and hold
harmless the Olsten Group from and against any liability for, Taxes which are
specifically allocated to OHS under this Section 2.
(c) TREATMENT OF CERTAIN DEDUCTIONS. For all purposes of this Agreement, any
disallowance on or after the date hereof, pursuant to Section 280G of the Code
(or any similar state or local provision), of the deduction for payments made to
Anthony H. Reeves taken by Olsten on the original Olsten Federal Consolidated
Return and Consolidated or Combined State Income Tax Returns for the taxable
year ended January 1, 1995, in connection with the merger of Lifetime
Corporation with and into Olsten, shall be treated as a disallowed deduction of
a member of the OHS Group. Thus, for example, in determining the OHS Group
Recomputed Federal Tax Liability, the OHS Group Prior Federal Tax Liability, the
OHS Group Recomputed State Tax Liability and the OHS Group Prior State Tax
Liability, any such disallowed deduction shall be treated as an adjustment to
the taxable income (or loss) of the OHS Group at the time such disallowance
occurs.
B-B-5
2.02 ALLOCATION OF UNITED STATES FEDERAL INCOME TAX.
(a) ALLOCATION OF TAX RELATING TO OLSTEN FEDERAL CONSOLIDATED RETURNS FILED
AFTER THE EFFECTIVE TIME. With respect to any Olsten Federal Consolidated Return
filed after the Effective Time (excluding any amended return), the Consolidated
Tax Liability shall be allocated between the Groups in accordance with the
method prescribed in Treasury Regulation Section 1.1552-1(a)(1) (as in effect on
the date hereof) determined by treating each Group as a single member of the
consolidated group (the "Federal Allocation Method"), and by excluding any items
of income for which Tax liability is allocated pursuant to Section 2.04. For
purposes of such allocation, the excess, if any, of (i) Consolidated Tax
Liability over (ii) Consolidated Tax Liability determined without regard to any
alternative minimum tax liability under Code Section 55 shall be allocated
between the Groups in accordance with their respective amounts of alternative
minimum taxable income, and any corresponding alternative minimum tax credit
shall be allocated in accordance with the allocation of such alternative minimum
tax liability. Any amount so allocated to the OHS Group shall be a liability of
OHS to Olsten under this Section 2. Amounts described in Code Section 1561
(relating to limitations on certain multiple benefits) shall be divided equally
among the Olsten Group and the OHS Group to the extent permitted by the Code.
(b) ALLOCATION OF OLSTEN FEDERAL CONSOLIDATED RETURN TAX ADJUSTMENTS. If
there is any adjustment to the reported Tax liability with respect to any Olsten
Federal Consolidated Return, or to such Tax liability as previously adjusted,
OHS shall be liable to Olsten for the lesser of:
(i) the excess (if any) of:
(A) the Consolidated Tax Liability of the OHS Group computed as if all
members of the OHS Group included in the Tax Return had filed a consolidated
Tax Return for such members based on the Tax Items of such members as so
adjusted, and computed without taking into account any items of income for
which Tax liability is allocated pursuant to Section 2.04 and any carryback
of (I) net operating losses arising in the Olsten Federal Consolidated
Returns for the taxable years ended January 3, 1999 and all subsequent Tax
Periods, to the extent such net operating losses are reflected in the Olsten
Federal Consolidated Returns as originally filed or (II) any Olsten Health
Services Capital Loss (the "OHS Group Recomputed Federal Tax Liability");
over
(B) the Consolidated Tax Liability of the OHS Group computed as if such
members of the OHS Group had filed a consolidated Tax Return for such
members based on the Tax items of such members as originally reported (or,
if applicable, as previously adjusted, but only if such Consolidated Tax
Liability as previously adjusted exceeds such Consolidated Tax Liability as
originally reported), and computed without taking into account any items of
income for which Tax liability is allocated pursuant to Section 2.04 and any
carryback of (I) net operating losses arising in the Olsten Federal
Consolidated Returns for the taxable years ended January 3, 1999 and all
subsequent Tax Periods, to the extent such net operating losses are
reflected in the Olsten Federal Consolidated Returns as originally filed or
(II) any Olsten Health Services Capital Loss (the "OHS Group Prior Federal
Tax Liability"); or
(ii) the amount determined under clause (i)(A).
If the OHS Group Prior Federal Tax Liability exceeds the OHS Group
Recomputed Federal Tax Liability, Olsten shall be liable to OHS for such excess,
but, except as provided in Section 4.06(b), only to the extent that the OHS
Group Prior Federal Tax Liability immediately before the adjustment exceeds the
OHS Group Prior Federal Tax Liability as originally reported. For purposes of
this Section 2.02(b), if the OHS Group has a net operating loss after taking
into account the adjustments allocable to such group, the OHS Group Recomputed
Federal Tax Liability shall be less than zero to the extent such net operating
loss produces a Tax Benefit in consolidation for any taxable year. For purposes
of this paragraph, the determination and payment of estimated Taxes (including
the determination and payment of any Tax required to be paid with a request for
an extension of time to file a Tax Return) shall not be treated as an adjustment
to the related Consolidated Tax Liability.
2.03 ALLOCATION OF STATE INCOME TAXES. State Income Taxes shall be allocated
as follows:
(a) SEPARATE COMPANY TAXES. Except as otherwise provided in
Section 2.04, in the case of any State Income Tax which is a Separate
Company Tax, OHS shall be liable for any such Tax imposed on any members of
the OHS Group.
B-B-6
(b) CONSOLIDATED OR COMBINED STATE INCOME TAXES. In the case of any
Consolidated or Combined State Income Tax, the liability of OHS with respect
to such Tax for any Tax Period shall be computed as follows:
(i) ALLOCATION OF TAX REPORTED ON TAX RETURNS FILED AFTER THE
EFFECTIVE TIME. In the case of any Consolidated or Combined State Income
Tax reported on any Tax Return filed after the Effective Time (excluding
any amended return), OHS shall be liable to Olsten for the State Income
Tax liability computed as if all members of the OHS Group included in the
computation of such Tax had filed a Consolidated or Combined Tax Return
for such OHS Group members based on the income, apportionment factors,
and other items of such members, and determined by excluding any items of
income for which Tax liability is allocated pursuant to Section 2.04.
(ii) ALLOCATION OF COMBINED OR CONSOLIDATED STATE INCOME TAX
ADJUSTMENTS. If there is any adjustment to the amount of Consolidated or
Combined State Income Tax reported on any Tax Return, or as previously
adjusted, the liability of the OHS Group shall be recomputed as provided
in this subparagraph. OHS shall be liable to Olsten for the lesser of
(A) the excess (if any) of:
(1) the State Income Tax liability computed as if all members of
the OHS Group included in the Tax Return had filed a consolidated or
combined Tax Return for such members based on the income,
apportionment factors, and other items of such members as so
adjusted, and computed without taking into account any items of
income for which Tax liability is allocated pursuant to Section 2.04
and any carryback of (I) net operating losses arising in a
Consolidated or Combined State Income Tax Return for the taxable
years ended January 3, 1999 and all subsequent Tax Periods, to the
extent such net operating losses are reflected in the Olsten
Consolidated or Combined State Income Tax Returns as originally filed
or (II) any Olsten Health Services Capital Loss (the "OHS Group
Recomputed State Tax Liability"); over
(2) the State Income Tax liability computed as if such members of
the OHS Group had filed a consolidated or combined Tax Return for
such members based on the income, apportionment factors, and other
items of such members as originally reported (or, if applicable, as
previously adjusted, but only if such Tax Liability as previously
adjusted exceeds such Tax Liability as originally reported), and
computed without taking into account any items of income for which
Tax liability is allocated pursuant to Section 2.04 and any carryback
of (I) net operating losses arising in a Consolidated or Combined
State Income Tax Return for the taxable years ended January 3, 1999
and all subsequent Tax Periods, to the extent such net operating
losses are reflected in the Olsten Consolidated or Combined State
Income Tax Returns as originally filed or (II) any Olsten Health
Services Capital Loss (the "OHS Group Prior State Tax Liability"); OR
(B) the amount determined under clause (A)(1).
If the OHS Group Prior State Tax liability exceeds the OHS Group Recomputed
State Tax liability, Olsten shall be liable to OHS for such excess, but, except
as provided in Section 4.06(b), only to the extent that the OHS Group Prior
State Tax Liability immediately before the adjustment exceeds the OHS Group
Prior State Tax Liability as originally reported. For purposes of this
Section 2.03(b), if the OHS Group has a net operating loss after taking into
account the adjustments allocable to such group, the OHS Group Recomputed State
Tax Liability shall be less than zero to the extent such net operating loss
produces a Tax Benefit in consolidation for any taxable year.
For purposes of this paragraph, the determination and payment of estimated
Taxes (including the determination and payment of any Tax required to be paid
with a request for an extension of time to
B-B-7
file a Tax Return) shall not be treated as an adjustment to the related
Consolidated or Combined State Income Tax.
2.04 RESTRUCTURING INCOME TAXES AND SECTION 311(B) TAXES. All Restructuring
Income Taxes shall be allocated 50% to Olsten and 50% to OHS. All
Section 311(b) Taxes shall be allocated 100% to OHS, except for the following
Section 311(b) Taxes, which shall be allocated 100% to Olsten: (1) all
Section 311(b) Taxes to the extent such Taxes exceed the Section 311(b) Taxes
that would have been imposed if the parties had not signed and implemented the
Contribution and Sale Agreement and, in lieu thereof, Olsten had distributed the
stock of Olsten Health Services, Inc. in the Split-Off, (2) all Section 311(b)
Taxes resulting from any appreciation in the stock of OHS after February 29,
2000 and (3) all Section 311(b) Taxes that would not have been imposed but for
some action taken (or caused to be taken) by Adecco, Olsten or their Affiliates
after the Effective Time.
2.05 ALLOCATION OF OTHER TAXES. All Taxes other than Income Taxes shall be
allocated based on the legal entity on which the primary legal incidence of the
Tax is imposed. As between the parties to this Agreement, OHS shall be liable
for all non-Income Taxes imposed on any member of the OHS Group. The Companies
believe that there is no non-Income Tax not specifically allocated pursuant to
Sections 2.02, 2.03 and 2.04 which is legally imposed on more than one legal
entity (e.g., joint and several liability); however, if there is any such Tax,
it shall be allocated in accordance with past practices as reasonably determined
by the affected Companies (as long as there is a reasonable basis to conclude
that the past practice at issue complies with applicable law), or in the absence
of such practices, in accordance with any allocation method agreed upon by the
affected Companies.
Section 3. PRORATION OF TAXES FOR STRADDLE PERIODS
3.01 GENERAL METHOD OF PRORATION. In the case of any Straddle Period, Tax
Items shall be apportioned between Pre-Split-Off Periods and Post-Split-Off
Periods in accordance with the principles of Treasury Regulation
Section 1.1502-76(b) as reasonably interpreted and applied by the Companies. No
election shall be made under Treasury Regulation
Section 1.1502-76(b)(2)(ii) (relating to ratable allocation of a year's items).
If the Split-Off Date is not an Accounting Cutoff Date, the provisions of
Treasury Regulation Section 1.1502-76(b)(2)(iii) will be applied to ratably
allocate the items (other than extraordinary items) for the month which includes
the Split-Off Date.
3.02 TRANSACTION TREATED AS EXTRAORDINARY ITEM. In determining the
apportionment of Tax Items between Pre-Split-Off Periods and Post-Split-Off
Periods, any Tax Items relating to the Transactions shall be treated as an
extraordinary item described in Treasury Regulation
Section 1.1502-76(b)(2)(ii)(C) and shall be allocated to Pre-Split-Off Periods,
and any Taxes related to such items shall be treated under Treasury Regulation
Section 1.1502-76(b)(2)(iv) as relating to such extraordinary item and shall be
allocated to Pre-Split-Off Periods.
Notwithstanding the preceding sentence, (1) all deductions attributable to
payments made under the OHS Supplemental Executive Retirement Plan (including,
without limitation, all payments made in connection with a termination of such
plan) shall be allocated to Post-Split-Off Periods and all such deductions shall
be solely for the benefit of OHS (and shall not be claimed by the Olsten Group)
and (2) all deductions attributable to payments made under the Olsten
Supplemental Executive Retirement Plan (including, without limitation, all
payments made in connection with a termination of such plan) shall be solely for
the benefit of Olsten (and shall not be claimed by the OHS Group).
Section 4. PREPARATION AND FILING OF TAX RETURNS.
4.01 GENERAL. Except as otherwise provided in this Section 4, Tax Returns
shall be prepared and filed when due (including extensions) by the person
obligated to file such Tax Returns under the Code or applicable Tax law. The
Companies shall provide, and shall cause their Affiliates to provide, assistance
and cooperate with one another in accordance with Section 6 with respect to the
preparation and filing of Tax Returns, including providing information required
to be provided in Section 7.
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4.02 OLSTEN RESPONSIBILITY. Olsten shall prepare and file, or shall cause to
be prepared and filed, (a) all Olsten Federal Consolidated Returns and (b) all
Consolidated or Combined State Income Tax Returns that include at least one
member of the Olsten Group and at least one member of the OHS Group.
4.03 TAX ACCOUNTING PRACTICES. Except as otherwise provided in this
Section 4.03, any Tax Return for any Pre-Split-Off Period or any Straddle
Period, and any Tax Return for any Post-Split-Off Period to the extent items
reported on such Tax Return might reasonably affect items reported on any Tax
Return for any Pre-Split-Off Period or any Straddle Period, shall be prepared in
accordance with past Tax accounting practices used with respect to the Tax
Returns in question (unless such past practices are no longer permissible under
the Code or other applicable Tax Law), and to the extent any items are not
covered by past practices (or in the event such past practices are no longer
permissible under the Code or other applicable Tax Law), in accordance with
reasonable Tax accounting practices selected by the Responsible Company.
4.04 CONSOLIDATED OR COMBINED RETURNS. The Companies will elect and join,
and will cause their respective Affiliates to elect and join, in filing
consolidated, unitary, combined, or other similar joint Tax Returns, to the
extent each entity is eligible to join in such Tax Returns, if the Companies
reasonably determine that the filing of such Tax Returns is consistent with past
reporting practices, or in the absence of applicable past practices, will result
in the minimization of the net present value of the aggregate Tax to the
entities eligible to join in such Tax Returns.
4.05 RIGHT TO REVIEW AND CONSENT TO TAX RETURNS. The Responsible Company
with respect to any Tax Return shall make such Tax Return and related workpapers
available for review and consent (prior to filing) by the other Company (the
"Reviewing Company"), to the extent (i) such Tax Return relates to Taxes for
which the Reviewing Company may be liable or, if the Reviewing Company is OHS,
relates to Tax attributes that may give rise to an indemnification obligation
under Section 4.06(f), (ii) such Tax Return relates to Taxes for which the
Reviewing Company may be liable in whole or in part for any additional Taxes
owing as a result of adjustments to the amount of Taxes reported on such Tax
Return, (iii) such Tax Return relates to Taxes for which the Reviewing Company
may have a claim for Tax Benefits under this Agreement, or (iv) at the request
of the Reviewing Company, if such Tax Return is not described in clauses (i),
(ii) or (iii), but the Reviewing Company reasonably determines that it must
inspect such Tax Return to confirm compliance with the terms of this Agreement.
The Responsible Company shall use its reasonable best efforts to make such Tax
Return available for review and consent as required under this paragraph
sufficiently in advance of the due date for filing such Tax Returns (and in no
event less than 21 days before the due date) to provide the Reviewing Company
with a meaningful opportunity to analyze and comment on such Tax Returns and
have such Tax Returns modified before filing, taking into account the person
responsible for payment of the tax (if any) reported on such Tax Return and the
materiality of the amount of Tax liability with respect to such Tax Return. The
Companies shall attempt in good faith to resolve any issues arising out of the
review of such Tax Returns and the prior consent of a Reviewing Company shall
not be unreasonably withheld. If there is an unresolved disagreement as to the
prior consent of a Reviewing Company, such disagreement shall be resolved prior
to the due date for filing the Tax Return at issue as provided in Section 13.
4.06 CLAIMS FOR REFUND, CARRYBACKS, AND SELF-AUDIT ADJUSTMENTS ("ADJUSTMENT
REQUESTS").
(a) ADJUSTMENT REQUESTS RELATED TO CONSOLIDATED OR COMBINED INCOME TAXES.
Except as otherwise provided in paragraph (b) below, unless Olsten consents in
writing, which consent shall not be unreasonably withheld, (i) no Adjustment
Request with respect to any Consolidated or Combined Income Tax for a
Pre-Split-Off Period shall be filed by OHS. Olsten shall be entitled, without
the consent of OHS, to carryback any net operating loss reported on any original
Olsten Federal Consolidated Returns or Consolidated or Combined State Income Tax
Returns (including any portion of such net operating loss attributable to a
member of the OHS Group), and any Olsten Health
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Services Capital Loss, and shall be entitled to 100% of any resulting Tax
Benefit; PROVIDED that control of any Tax Contest with respect to any such
carryback refund claim shall be governed by Section 8.02 and PROVIDED, FURTHER,
that no net operating loss or capital loss described in this sentence shall be
carried back by Olsten to a taxable year ended prior to December 29, 1996.
Subject to the preceding sentence, without the prior written consent of OHS
(which shall not be unreasonably withheld), no member of the Olsten Group shall
seek an Adjustment Request or consent to an adjustment with respect to any
Pre-Split-Off Period if the requested adjustment would materially increase any
payment or indemnification obligation of any member of the OHS Group under this
Agreement. Any Adjustment Request made in accordance with this Section 4.06
shall be prepared and filed by the Responsible Company for the Tax Return to be
adjusted. The Company requesting the Adjustment Request shall provide to the
Responsible Company all information required for the preparation and filing of
such Adjustment Request in such form and detail as reasonably requested by the
Responsible Company.
(b) EXCEPTION FOR ADJUSTMENT REQUESTS RELATED TO AUDIT ADJUSTMENTS. Each of
the Companies shall be entitled, without the consent of the other Company, to
file (or request the other Company to file) an Adjustment Request with respect
to any Pre-Split-Off Tax-Period to take into account any net operating loss, net
capital loss, deduction, credit, or other adjustment attributable to such
Company or any member of its Group corresponding to any adjustment resulting
from any audit by the Internal Revenue Service or other Tax Authority with
respect to Consolidated or Combined Income Taxes for any other Pre-Split-Off Tax
Period.
For example, if the Internal Revenue Service requires a Company to
capitalize an item deducted for the taxable year 1993, the Company shall be
entitled, without the consent of the other Company, to file (or request to be
filed) an Adjustment Request for the taxable year 1994 (and later years) to take
into account any depreciation or amortization deductions in such years directly
related to the item capitalized in 1993.
Any refund received pursuant to this Section 4.06(b) shall be for the
benefit of the Group whose loss or other tax attribute gave rise to such refund.
(c) OTHER ADJUSTMENT REQUESTS PERMITTED. Nothing in this Section 4.06 shall
prevent any Company or its Affiliates from filing any Adjustment Request with
respect to Income Taxes which are not Consolidated or Combined Income Taxes or
with respect to any Taxes other than Income Taxes. Any refund or credit obtained
as a result of any such Adjustment Request (or otherwise) shall be for the
account of the person liable for the Tax under this Agreement.
(d) PAYMENT OF REFUNDS. Any refunds or other Tax Benefits received by any
Company (or any of its Affiliates) as a result of any Adjustment Request which
are for the account of another Company (or member of such other Company's Group)
shall be paid by the Company receiving (or whose Affiliate received) such refund
or Tax Benefit to such other Company within 10 business days of receipt.
(e) NO REATTRIBUTION OF LOSSES OF THE OHS GROUP. Olsten shall not make, and
shall not cause or permit to be made, any election pursuant to Treasury
Regulation Section 1.1502-20(g) or any other election that would have the effect
of reattributing net operating losses or other tax attributes of any member of
the OHS Group.
(f) INDEMNIFICATION OF OLSTEN FOR CERTAIN DISALLOWED CARRYBACKS.
If a refund attributable to a claimed carryback of any OHS Consolidated NOL
for the taxable year ended January 3, 1999 or any subsequent taxable year to a
taxable year ended on or after December 29, 1996 is denied in whole or in part
solely because such OHS Consolidated NOL is disallowed in whole or in part, OHS
shall indemnify Olsten for the resulting reduction in Olsten's carryback refund.
The resulting reduction in an Olsten carryback refund shall be computed
(i) without taking into account any Tax attribute attributable to members of the
Olsten Group that is utilized by
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Olsten in lieu of the disallowed OHS Consolidated NOL to obtain a refund of the
Taxes that were the subject of the disallowed refund claim, except to the extent
that such Olsten Group Tax attribute would not have provided a Tax Benefit to
the Olsten Group in any subsequent Tax Period, (ii) by taking into account any
other Tax attribute attributable to any member of the OHS Group (including,
without limitation, any other OHS Consolidated NOL described in this
section 4.06(f)) that is utilized by Olsten (or any other member of the Olsten
Group) at any time (in accordance with this Agreement) in lieu of the disallowed
OHS Consolidated NOL to obtain a refund of the Taxes that were the subject to
the disallowed refund claim and (iii) without taking into account any disallowed
refund of any Taxes paid after December 31, 1999 by any member of the Olsten
Group or the OHS Group.
Section 5. TAX PAYMENTS AND INTERCOMPANY BILLINGS.
5.01 PAYMENT OF TAXES WITH RESPECT TO OLSTEN FEDERAL CONSOLIDATED RETURNS
FILED AFTER THE EFFECTIVE TIME. In the case of any Olsten Federal Consolidated
Return the due date for which (including extensions) is after the Effective
Time,
(a) COMPUTATION AND PAYMENT OF TAX DUE. At least ten business days prior
to any Payment Date, Olsten shall compute the amount of Tax required to be
paid to the Internal Revenue Service (taking into account the requirements
of Section 4.03 relating to consistent accounting practices) with respect to
such Tax Return on such Payment Date and Olsten will pay such amount to the
Internal Revenue Service on or before such Payment Date.
(b) COMPUTATION AND PAYMENT OF OHS LIABILITY WITH RESPECT TO TAX DUE.
Within 5 days following any Payment Date, OHS will pay to Olsten the excess
(if any) of:
(i) the Consolidated Tax Liability determined as of such Payment Date
with respect to the applicable Tax Period allocable to the members of the
OHS Group as determined by Olsten in a manner consistent with the
provisions of Section 2.02(a) (relating to allocation of the Consolidated
Tax Liability in accordance with the Federal Allocation Method) (the
"Allocated Federal Tax Liability"), over
(ii) the cumulative net payments with respect to such Tax Return
prior to such Payment Date by the members of the OHS Group (the
"Cumulative Federal Tax Payment").
If the OHS Group Cumulative Federal Tax Payment is greater than the OHS
Group Allocated Federal Tax Liability as of any Payment Date, then Olsten
shall pay such excess to OHS within 5 days of Olsten' receipt of the
corresponding Tax Benefit (I.E., through either a reduction in Olsten'
otherwise required Tax payment, or a refund of prior tax payments).
(c) INTEREST ON INTERGROUP TAX ALLOCATION PAYMENTS. In the case of any
payments to Olsten required under paragraph (b) of this subsection 5.01, OHS
shall also pay to Olsten an amount of interest computed at the Prime Rate on
the amount of the payment required based on the number of days from the
applicable Payment Date to the date of payment. In the case of any payments
by Olsten required under paragraph (b) of this subsection 5.01, Olsten shall
also pay to OHS an amount of interest computed at the Prime Rate on the
amount of the payment required based on the number of days from the date of
receipt of the Tax Benefit to the date of payment of such amount to the
payee.
5.02 PAYMENT OF FEDERAL INCOME TAX RELATED TO ADJUSTMENTS.
(a) ADJUSTMENTS RESULTING IN UNDERPAYMENTS. Olsten shall pay to the Internal
Revenue Service when due any additional Federal Income Tax required to be paid
as a result of any adjustment to the Tax liability with respect to any Olsten
Federal Consolidated Return for any Pre-Split-Off Period. Olsten shall compute
the amount attributable to the OHS Group in accordance with Section 2.02(b) and
OHS shall pay to Olsten any amount due Olsten under Section 2.02(b) within
5 days from the later of (i) the date the additional Tax was paid by Olsten or
(ii) the date of receipt by OHS of a written notice and
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demand from Olsten for payment of the amount due, accompanied by evidence of
payment and a statement detailing the Taxes paid and describing in reasonable
detail the particulars relating thereto. Any payments required under this
Section 5.02(a) shall include interest computed at the Prime Rate based on the
number of days from the date the additional Tax was paid by Olsten to the date
of the payment under this Section 5.02(a).
(b) ADJUSTMENTS RESULTING IN OVERPAYMENTS. Within 5 days of receipt by
Olsten of any Tax Benefit resulting from any adjustment to the Consolidated Tax
Liability with respect to any Olsten Federal Consolidated Return for any
Pre-Split-Off Period, Olsten shall pay to OHS, or OHS shall pay to Olsten (as
the case may be), their respective amounts due from or to Olsten as determined
by Olsten in accordance with Section 2.02(b). Any payments required under this
Section 5.02(b) shall include interest computed at the Prime Rate based on the
number of days from the date the Tax Benefit was received by Olsten to the date
of payment to OHS under this Section 5.02(b).
5.03 PAYMENT OF STATE INCOME TAX WITH RESPECT TO RETURNS FILED AFTER THE
EFFECTIVE TIME.
(a) COMPUTATION AND PAYMENT OF TAX DUE. At least ten business days prior to
any Payment Date for any Tax Return with respect to any State Income Tax, the
Responsible Company shall compute the amount of Tax required to be paid to the
applicable Tax Authority (taking into account the requirements of Section 4.03
relating to consistent accounting practices) with respect to such Tax Return on
such Payment Date and:
(i) If such Tax Return is with respect to a Consolidated or Combined
State Income Tax, Olsten will pay such amount to such Tax Authority on or
before such Payment Date.
(ii) If such Tax Return is with respect to a Separate Company Tax, the
Responsible Company shall, if it is not the Company liable for the Tax
reported on such Tax Return, notify the Company liable for such Tax in
writing of the amount of Tax required to be paid on such Payment Date. The
Company liable for such Tax will pay such amount to such Tax Authority on or
before such Payment Date.
5.04 PAYMENT OF STATE INCOME TAXES RELATED TO ADJUSTMENTS.
(a) ADJUSTMENTS RESULTING IN UNDERPAYMENTS. Olsten shall pay to the
applicable Tax Authority when due any additional State Income Tax required to be
paid as a result of any adjustment to the tax liability with respect to any Tax
Return for any Consolidated or Combined State Income Tax for any Pre-Split-Off
Period. OHS shall pay to Olsten its respective share of any such additional Tax
payment determined by Olsten in accordance with Section 2.03(b)(ii) within
5 days from the later of (i) the date the additional Tax was paid by Olsten or
(ii) the date of receipt by OHS of a written notice and demand from Olsten for
payment of the amount due, accompanied by evidence of payment and a statement
detailing the Taxes paid and describing in reasonable detail the particulars
relating thereto. OHS shall also pay to Olsten interest on its respective share
of such Tax computed at the Prime Rate based on the number of days from the date
the additional Tax was paid by Olsten to the date of its payment to Olsten under
this Section 5.04(a).
(b) ADJUSTMENTS RESULTING IN OVERPAYMENTS. Within 5 days of receipt by
Olsten of any Tax Benefit resulting from any adjustment to the tax liability
with respect to any Tax Return for any Consolidated or Combined State Income Tax
for any Pre-Split-Off Period, Olsten shall pay to OHS its respective share of
any such Tax Benefit determined by Olsten in accordance with
Section 2.03(b)(ii). Olsten shall also pay to OHS interest on its respective
share of such Tax Benefit computed at the Prime Rate based on the number of days
from the date the Tax Benefit was received by Olsten to the date of payment to
OHS under this Section 5.04(b).
5.05 PAYMENT OF SEPARATE COMPANY TAXES. Each Company shall pay, or shall
cause to be paid, to the applicable Tax Authority when due all Separate Company
Taxes owed by such Company or a member of such Company's Group.
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5.06 INDEMNIFICATION PAYMENTS. If any Company (the "payor") is required to
pay to a Tax Authority a Tax that another Company (the "responsible party") is
required to pay to such Taxing Authority under this Agreement, the responsible
party shall reimburse the payor within 30 days of delivery by the payor to the
responsible party of an invoice for the amount due, accompanied by evidence of
payment and a statement detailing the Taxes paid and describing in reasonable
detail the particulars relating thereto. The reimbursement shall include
interest on the Tax payment computed at the Prime Rate based on the number of
days from the date of the payment to the Tax Authority to the date of
reimbursement under this Section 5.06.
Section 6. ASSISTANCE AND COOPERATION
6.01 GENERAL. After the Effective Time, each of the Companies shall
cooperate (and cause their respective Affiliates to cooperate) with each other
and with each other's agents, including accounting firms and legal counsel, in
connection with Tax matters relating to the Companies and their Affiliates,
including (i) preparation and filing of Tax Returns, (ii) determining the
liability for and amount of any Taxes due (including estimated Taxes) or the
right to and amount of any refund of Taxes, (iii) examinations of Tax Returns,
and (iv) any administrative or judicial proceeding in respect of Taxes assessed
or proposed to be assessed. Such cooperation shall include making all
information and documents in their possession relating to the other Companies
and their Affiliates available to such other Companies as provided in
Section 7. Each of the Companies shall also make available to each other, as
reasonably requested and available, personnel (including officers, directors,
employees and agents of the Companies or their respective Affiliates)
responsible for preparing, maintaining, and interpreting information and
documents relevant to Taxes, and personnel reasonably required as witnesses or
for purposes of providing information or documents in connection with any
administrative or judicial proceedings relating to Taxes. Any information or
documents provided under this Section 6 shall be kept confidential by the
Company receiving the information or documents, except as may otherwise be
necessary in connection with the filing of Tax Returns or in connection with any
administrative or judicial proceedings relating to Taxes.
6.02 INCOME TAX RETURN INFORMATION. Each Company will provide to the other
Company information and documents relating to their respective Groups required
by the other Company to prepare Tax Returns. The Responsible Company shall
determine a reasonable compliance schedule for such purpose in accordance with
Olsten's past practices. Any additional information or documents the Responsible
Company requires to prepare such Tax Returns will be provided in accordance with
past practices, if any, or as the Responsible Company reasonably requests and in
sufficient time for the Responsible Company to file such Tax Returns timely.
Section 7. TAX RECORDS
7.01 RETENTION OF TAX RECORDS. Except as provided in Section 7.02, each
Company shall preserve and keep all Tax Records exclusively relating to the
assets and activities of their respective Groups for Pre-Split-Off Tax Periods,
and Olsten shall preserve and keep all other Tax Records relating to Taxes of
the Groups for Pre-Split-Off Tax Periods, for so long as the contents thereof
may become material in the administration of any matter under the Code or other
applicable Tax Law, but in any event until the later of (i) the expiration of
any applicable statutes of limitations, and (ii) seven years after the Effective
Time. If, prior to the expiration of the applicable statute of limitations and
such seven-year period, a Company reasonably determines that any Tax Records
which it is required to preserve and keep under this Section 7 are no longer
material in the administration of any matter under the Code or other applicable
Tax Law, such Company may dispose of such records upon 90 days prior notice to
the other Companies. Such notice shall include a list of the records to be
disposed of describing in reasonable detail each file, book, or other record
accumulation being disposed. The notified Companies shall have the opportunity,
at their cost and expense, to copy or remove, within such 90-day period, all or
any part of such Tax Records.
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7.02 STATE INCOME TAX RETURNS. Tax Returns with respect to State Income
Taxes and workpapers prepared in connection with preparing such Tax Returns
shall be preserved and kept, in accordance with the guidelines of Section 7.01,
by the Company responsible for preparing and filing the applicable Tax Return.
7.03 ACCESS TO TAX RECORDS. The Companies and their respective Affiliates
shall make available to each other for inspection and copying during normal
business hours upon reasonable notice all Tax Records in their possession to the
extent reasonably required by the other Company in connection with the
preparation of Tax Returns, audits, litigation, or the resolution of items under
this Agreement.
Section 8. TAX CONTESTS
8.01 NOTICE. Each of the parties shall provide prompt notice to the other
parties of any pending or threatened Tax audit, assessment or proceeding or
other Tax Contest of which it becomes aware related to Taxes for which it may be
indemnified by the other party hereunder (including, without limitation, any
carryback refund claim that could result in an indemnification obligation under
Section 4.06(f)). Such notice shall contain factual information (to the extent
known) describing any asserted Tax liability in reasonable detail and shall be
accompanied by copies of any notice and other documents received from any Tax
Authority in respect of any such matters. If an indemnified party has knowledge
of an asserted Tax liability with respect to a matter for which it is to be
indemnified hereunder and such party fails to give the indemnifying party prompt
notice of such asserted Tax liability, then (i) if the indemnifying party has no
remaining forum in which to contest the asserted Tax liability as a result of
the failure to give prompt notice, the indemnifying party shall have no
obligation to indemnify the indemnified party for any Taxes arising out of such
asserted Tax liability, and (ii) if clause (i) does not apply, but such failure
to give prompt notice actually and materially prejudiced the indemnifying party,
then any amount which the indemnifying party is otherwise required to pay the
indemnified party pursuant to this Agreement shall be reduced, but only to the
extent the indemnifying party was actually and materially prejudiced.
8.02 CONTROL OF TAX CONTESTS.
(a) SEPARATE COMPANY TAXES. In the case of any Tax Contest with respect to
any Separate Company Tax, the Company having liability for the Tax shall have
exclusive control over the Tax Contest, including exclusive authority with
respect to any settlement of such Tax liability.
(b) CONSOLIDATED OR COMBINED INCOME TAXES. In the case of any Tax Contest
with respect to any Consolidated or Combined Income Tax, (i) Olsten shall
control the defense or prosecution of the portion of the Tax Contest directly
and exclusively related to any Olsten Adjustment, including settlement of any
such Olsten Adjustment, (ii) OHS shall control the defense or prosecution of the
portion of the Tax Contest directly and exclusively related to any OHS
Adjustment, including any settlement of any OHS Adjustment, and (iii) a
committee ("the Tax Contest Committee") shall control the defense or prosecution
of Joint Adjustments and any and all administrative matters not directly and
exclusively related to any Olsten Adjustment or OHS Adjustment. The Tax Contest
Committee shall be comprised of two persons, one person selected by OHS (as
designated in writing to Olsten) and one person selected by Olsten (as
designated in writing to OHS). Each person serving on the Tax Contest Committee
shall continue to serve unless and until he or she is replaced by the party
designating such person. Any and all matters to be decided by the Tax Contest
Committee shall require the unanimous approval of both persons serving on the
committee. A Company shall not agree to any Tax liability for which another
Company may be liable under this Agreement, shall not settle or compromise any
other Tax Claim which may give rise to an indemnification obligation of another
Company, and shall not settle or compromise any claim for any Tax Benefit to
which another Company may be entitled under this Agreement, without such other
Company's written consent (which consent may be given or withheld at the sole
discretion of the Company from which the consent would be required).
Section 9. EFFECTIVE DATE; TERMINATION OF PRIOR INTERCOMPANY TAX ALLOCATION
AGREEMENTS. This Agreement shall become effective at the Effective Time. In the
event the Merger Agreement is
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terminated for any reason, notwithstanding any other provision hereof, this
Agreement shall terminate and no party shall have any liability to any other
party pursuant to this Agreement. Immediately prior to the Effective Time,
(i) all Prior Intercompany Tax Allocation Agreements shall be terminated, and
(ii) any remaining obligations under such agreements as of the Split-Off Date
shall be canceled as of the Split-Off Date. Upon such termination and
cancellation, no further payments by or to the Olsten Group or by or to the OHS
Group with respect to such agreements shall be made, and all other rights and
obligations resulting from such agreements between the Companies and their
Affiliates shall cease at such time. Any payments pursuant to such agreements
shall be ignored for purposes of computing amounts due under this Agreement.
Section 10. SURVIVAL OF OBLIGATIONS. The representations, warranties,
covenants and agreements set forth in this Agreement shall be unconditional and
absolute and shall remain in effect without limitation as to time.
Section 11. EMPLOYEE MATTERS. Each of the Companies agrees to utilize, or
cause its Affiliates to utilize, the alternative procedure set forth in Revenue
Procedure 84-77, 1984-2 C.B. 753, with respect to wage reporting.
Section 12. TREATMENT OF PAYMENTS; TAX GROSS UP
12.01 TREATMENT OF TAX INDEMNITY PAYMENTS. In the absence of any change in
tax treatment under the Code or other applicable Tax Law, any Tax indemnity
payments made by a Company under Section 5 shall be reported for Tax purposes by
the payor and the recipient in a manner consistent with Treasury Regulation
Section 1.1552-1(b), but only to the extent the payment does not relate to a Tax
allocated to the payor in accordance with Treasury Regulation
Section 1.1502-33(d) (or under corresponding principles of other applicable Tax
Laws).
12.02 TAX GROSS UP. If, notwithstanding the manner in which Tax indemnity
payments is reported, there is an adjustment to the Tax liability of a Company
as a result of its receipt of a payment pursuant to this Agreement, such payment
shall be appropriately adjusted so that the amount of such payment, reduced by
the amount of all Income Taxes payable with respect to the receipt thereof (but
taking into account all correlative Tax Benefits resulting from the payment of
such Income Taxes), shall equal the amount of the payment which the Company
receiving such payment would otherwise be entitled to receive pursuant to this
Agreement.
12.03 INTEREST UNDER THIS AGREEMENT. Anything herein to the contrary
notwithstanding, to the extent one Company ("indemnitor") makes a payment of
interest to another Company ("indemnitee") under this Agreement with respect to
the period from the date that the indemnitee made a payment of Tax to a Tax
Authority to the date that the indemnitor reimbursed the indemnitee for such Tax
payment, or with respect to the period from the date that the indemnitor
received a Tax Benefit to the date the indemnitor paid the Tax Benefit to the
indemnitee, the interest payment shall be treated as interest expense to the
indemnitor (deductible to the extent provided by law) and as interest income by
the indemnitee (includible in income to the extent provided by law). The amount
of the payment shall not be adjusted under Section 12.02 to take into account
any associated Tax Benefit to the indemnitor or increase in Tax to the
indemnitee.
Section 13. DISAGREEMENTS. If after good faith negotiations the parties
cannot agree on the application of this Agreement to any matter (including,
without limitation, whether the prior consent of a Reviewing Company was
unreasonably withheld under Section 4.05), then the matter will be referred to a
nationally recognized accounting firm acceptable to each of the parties (the
"Accounting Firm"). The Accounting Firm shall furnish written notice to the
parties of its resolution of any such disagreement as soon as practical, but in
any event no later than 45 days after its acceptance of the matter for
resolution or, in the event of a disagreement relating to the filing of a Tax
Return, within 10 days of its acceptance of such matter for resolution. Any such
resolution by the Accounting Firm will be conclusive and binding on all parties
to this Agreement. In accordance with Section 15, each party shall pay its own
fees and expenses (including the fees and expenses of its representatives)
B-B-15
incurred in connection with the referral of the matter to the Accounting Firm.
All fees and expenses of the Accounting Firm in connection with such referral
shall be shared equally by the parties affected by the matter.
Section 14. LATE PAYMENTS. Any amount owed by one party to another party
under this Agreement which is not paid when due shall bear interest at the Prime
Rate plus two percent, compounded semiannually, from the due date of the payment
to the date paid. To the extent interest required to be paid under this
Section 14 duplicates interest required to be paid under any other provision of
this Agreement, interest shall be computed at the higher of the interest rate
provided under this Section 14 or the interest rate provided under such other
provision.
Section 15. EXPENSES. Except as provided in Section 13, each party and its
Affiliates shall bear their own expenses incurred in connection with preparation
of Tax Returns, Tax Contests, and other matters related to Taxes under the
provisions of this Agreement.
Section 16. GENERAL PROVISIONS.
16.01 ADDRESSES AND NOTICES. Any notice, demand, request or report required
or permitted to be given or made to any party under this Agreement shall be in
writing and shall be deemed given or made when delivered to the party or when
sent by first class mail or by other commercially reasonable means of written
communication (including delivery by an internationally recognized courier
service or by facsimile transmission) to the party at the party's address as
follows:
If to Adecco or Olsten:
Adecco SA
1275 Cheserex
Switzerland
Attention: Felix A. Weber
Telephone: 011 41 21 321 6666
Telecopy: 011 41 21 321 6688
With a copy to:
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
Attention: Thomas W. Dobson, Esq.
Telephone: (213) 485-1234
Telecopy: (213) 891-8763
If to OHS:
Gentiva Health Services, Inc.
175 Broad Hollow Road
Melville, New York 11747
Attention: Edward A. Blechschmidt
With a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Attention: Kenneth W. Orce
Telephone: (212) 701-3000
Telecopy: (212) 269-5420
B-B-16
A party may change the address for receiving notices under this Agreement by
providing written notice of the change of address to the other parties.
16.02 BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their successors and assigns.
16.03 WAIVER. No failure by any party to insist upon the strict performance
of any obligation under this Agreement or to exercise any right or remedy under
this Agreement shall constitute waiver of any such obligation, right, or remedy
or any other obligation, rights, or remedies under this Agreement.
16.04 INVALIDITY OF PROVISIONS. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validity,
legality, and enforceability of the remaining provisions contained herein shall
not be affected thereby.
16.05 FURTHER ACTION. The parties shall execute and deliver all documents,
provide all information, and take or refrain from taking action as may be
necessary or appropriate to achieve the purposes of this Agreement, including
the execution and delivery to the other party and its Affiliates and
representatives of such powers of attorney or other authorizing documentation as
is reasonably necessary or appropriate in connection with Tax Contests (or
portions thereof) under the control of such other party in accordance with
Section 8.
16.06 INTEGRATION. This Agreement constitutes the entire agreement between
the parties pertaining to the subject matter of this Agreement and supersedes
all prior agreements and understandings pertaining thereto. In the event of any
inconsistency between this Agreement and the Distribution Agreement or any other
agreements relating to the transactions contemplated by the Distribution
Agreement, the provisions of this Agreement shall control.
16.07 CONSTRUCTION. The language in all parts of this Agreement shall in all
cases be construed according to its fair meaning and shall not be strictly
construed for or against any party.
16.08 NO DOUBLE RECOVERY; SUBROGATION. No provision of this Agreement shall
be construed to provide an indemnity or other recovery for any costs, damages,
or other amounts for which the damaged party has been fully compensated under
any other provision of this Agreement or under any other agreement or action at
law or equity. Unless expressly required in this Agreement, a party shall not be
required to exhaust all remedies available under other agreements or at law or
equity before recovering under the remedies provided in this Agreement. Subject
to any limitations expressly provided in this Agreement (for example, the
limitation on filing claims for refund in Section 4.06), the indemnifying party
shall be subrogated to all rights of the indemnified party for recovery from any
third party.
16.09 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which taken
together shall constitute one and the same instrument.
16.10 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without giving effect to any
provision thereof relating to conflicts of law.
B-B-17
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
the respective officers as of the date set forth above.
OLSTEN CORPORATION
---------------------------------------------
By: Edward A. Blechschmidt
Its: PRESIDENT AND CHIEF
EXECUTIVE OFFICER
AARONCO CORP.
---------------------------------------------
By: William P. Costantini
Its: EXECUTIVE VICE PRESIDENT
ADECCO SA
---------------------------------------------
By: John P. Bowmer
Its: CHIEF EXECUTIVE
---------------------------------------------
By: Felix A. Weber
Its: SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
B-B-18
ANNEX C-1
OPINION OF WARBURG DILLON READ LLC
[Letterhead of Warburg Dillon Read LLC]
The Board of Directors
Olsten Corporation
175 Broad Hollow Road
Melville, New York 11747
August 17, 1999
Members of the Board:
We understand that Olsten Corporation, a Delaware corporation ("Olsten" or
the "Company"), is considering a transaction whereby Adecco SA, a societe
anonyme organized under the laws of Switzerland ("Adecco"), will acquire the
Company. Pursuant to the terms of a Separation Agreement, dated as of
August 17, 1999 (the "Separation Agreement"), by and among Olsten, Aaronco
Corp., a newly formed Delaware corporation ("OHS") and a wholly owned subsidiary
of Olsten, and Adecco, and an Agreement and Plan of Merger, dated as of
August 17, 1999 (the "Purchase Agreement"), by and among Adecco, Staffing
Acquisition Corporation, a Delaware corporation ("Merger Sub") and a wholly
owned subsidiary of Adecco, among other things, (i) Olsten will transfer its
health services business and related liabilities to OHS, (ii) Merger Sub will be
merged with and into Olsten (the "Company Merger"), and (iii) in connection with
the Company Merger, Olsten stockholders will receive shares of common stock, par
value $.01 per share (the "OHS Common Stock"), of OHS in consideration for the
redemption of a portion of their shares of Olsten common stock (the "Split-Off"
and, together with the Company Merger and related transactions, the
"Transaction"). Pursuant to the Company Merger and the Split-Off, Olsten will
become a wholly owned subsidiary of Adecco and each issued and outstanding share
of common stock, par value $.10 per share (the "Olsten Common Stock"), and
Class B common stock, par value $.10 per share ("Olsten Class B Common Stock"
and, together with the Olsten Common Stock, the "Company Common Stock"), of
Olsten (other than Dissenting Shares (as defined in the Purchase Agreement), and
shares, if any, owned by Olsten as treasury stock or owned by Adecco, Merger
Sub, or any of their wholly owned subsidiaries or any wholly owned subsidiary of
Olsten) will be converted into the right to receive (x) shares of OHS Common
Stock (the "Split-Off Consideration") such that all shares of the OHS Common
Stock, except for a nominal number of the outstanding shares of OHS Common Stock
which may be retained by Olsten, will be received by the holders of outstanding
shares of Company Common Stock, and (y) either (A) $8.75 in cash, without
interest (subject to proration, the "Cash Consideration"), (B) 0.12472 Adecco
American Depositary Shares ("Adecco ADSs"), evidenced by American Depositary
Receipts of Adecco ("Adecco ADRs"), representing one-eighth of one share of
Adecco's common shares, par value CHF 10.00 per share ("Adecco Common Stock"),
of Adecco (subject to proration, the "Stock Consideration") or (C) a combination
of a fraction of an Adecco ADS and cash (the foregoing clause (A), (B) or (C),
the "Merger Consideration" and, together with the Split-Off Consideration, the
"Transaction Consideration"). The Purchase Agreement provides the holders of
Company Common Stock with the ability to elect to receive the Merger
Consideration either in the form of the Cash Consideration or the Stock
Consideration, in either case subject to proration. We understand that the
aggregate Cash Consideration and the aggregate Stock Consideration to be issued
to the holders of Company Common Stock in connection with the Company Merger
will be an amount equal to the product of (i) in the case of the Cash
Consideration, (1) $8.75 and (2) (x) 50% of the number of shares of Company
Common Stock outstanding as of immediately prior to the effective time of the
Company Merger (the "Outstanding Company Shares") minus (y)(A) the number of
Dissenting Shares, (B) the number of shares of Company Common Stock for which
cash in lieu of fractional shares of Adecco ADSs is payable pursuant to the
Purchase Agreement, and (C) the number of shares of Company Common Stock, if
any, owned by Olsten as treasury stock or owned by Adecco, Merger Sub, or any of
their wholly owned subsidiaries or any wholly owned subsidiary of Olsten, and
(ii) in the case of the Stock Consideration, (1) 0.12472 Adecco ADSs and (2)(A)
50% of the number of Outstanding Company
C-1-1
Shares minus (B) the number of shares of Company Common Stock, if any, owned by
Olsten as treasury stock or owned by Adecco, Merger Sub, or any of their wholly
owned subsidiaries or any wholly owned subsidiary of Olsten. The terms and
conditions of the Transaction are more fully set forth in the Separation
Agreement and the Purchase Agreement.
We understand that Adecco and Olsten will treat the Split-Off as an integral
part of the Company Merger for all United States federal, state and local tax
purposes, and that Adecco and Olsten expect that (i) holders of Company Common
Stock will be treated as having had a portion of their shares of Company Common
Stock (equal in value to the value of the OHS Common Stock distributed in the
Split-Off) redeemed by the Company in a transaction governed by Section 302(a)
of the Internal Revenue Code of 1986, as amended, and as having sold their
remaining shares of Company Common Stock in a fully taxable transaction for
consideration consisting of the Merger Consideration and (ii) Olsten will
recognize gain, if any, with respect to the OHS Common Stock distributed in the
Split-Off.
You have requested our opinion as to whether, as of the date hereof, the
Transaction Consideration is fair, from a financial point of view, to the
holders of Company Common Stock.
In arriving at our opinion, we have, among other things: (i) reviewed
certain publicly available business and historical financial information
relating to the Company, to OHS, and to Adecco, (ii) reviewed the reported
prices and trading activity for the Olsten Common Stock, the Adecco Common Stock
and the Adecco ADSs, (iii) reviewed certain internal financial information and
other data relating to the business and financial prospects of the Company,
including estimates and financial forecasts prepared by management of the
Company, that were provided to us by the Company and not publicly available,
(iv) reviewed certain internal financial information and other data relating to
the business and financial prospects of OHS, including estimates and financial
forecasts prepared by management of the Company, that were provided to us by the
Company and not publicly available, (v) reviewed certain internal financial
information and other data relating to the business and financial prospects of
Adecco, including estimates and financial forecasts prepared by the management
of Adecco and not publicly available, (vi) conducted discussions with members of
the senior management of the Company, OHS and Adecco, (vii) reviewed publicly
available financial and stock market data with respect to certain other
companies in lines of business we believe to be generally comparable to those of
Adecco and the Company and OHS, (viii) compared the financial terms of the
Transaction with the publicly available financial terms of certain other
transactions which we believe to be generally relevant, (ix) considered certain
pro forma effects of the Transaction on Adecco's financial statements,
(x) reviewed drafts of the Purchase Agreement and the Separation Agreement, and
(xi) conducted such other financial studies, analyses, and investigations, and
considered such other information as we deemed necessary or appropriate.
In connection with our review, at your direction, we have not assumed any
responsibility for independent verification for any of the information reviewed
by us for the purpose of this opinion and have, at your direction, relied on its
being complete and accurate in all material respects. In addition, at your
direction, we have not made any independent evaluation or appraisal of any of
the assets or liabilities (contingent or otherwise) of the Company, OHS, or
Adecco, nor have we been furnished with any such evaluation or appraisal.
Further, we have assumed that OHS will not have any material contingent
liabilities except as reflected in the Company's financial statements. With
respect to the financial forecasts, estimates, and pro forma effects referred to
above, we have assumed, at your direction, that they have been reasonably
prepared on a basis reflecting the best currently available estimates and
judgments of the management of each company as to the future performance of
their respective companies. We also understand that the financial statements,
pro forma financial statements and registration statement of, and relating to,
OHS have not yet been prepared. Our opinion is necessarily based on economic,
monetary, market and other conditions as in effect on, and the information made
available to us as of, the date hereof.
WDR is not expressing any opinion as to the actual value of the OHS Common
Stock when issued to the holders of Company Common Stock in the Split-Off and
the Company Merger or the prices at which such OHS Common Stock will trade
subsequent to the Split-Off and the Company Merger. We
C-1-2
are also not expressing any opinion as to the actual value of the Adecco ADSs
(or Adecco Common Stock) when it has been issued to the holders of Company
Common Stock in the Company Merger or the prices at which such Adecco ADSs (or
Adecco Common Stock) will trade subsequent to the Company Merger. With respect
to our opinion, in advising you as to whether, as of the date hereof, the
Transaction Consideration is fair, from a financial point of view, our opinion
addresses only the financial terms of the Transaction and the Transaction
Consideration to be received by the holders of the Company Common Stock in the
Split-Off and the Company Merger. We have not specifically analyzed the impact
on any individual Company stockholder of exercising the election contemplated by
the Purchase Agreement to receive either the Cash Consideration or the Stock
Consideration. In addition, we have not been asked to and do not express any
opinion as to the after-tax consequences to any holder of Company Common Stock
of the Split-Off, the Company Merger and the other transactions contemplated by
the Separation Agreement and the Purchase Agreement.
Our opinion does not address the Company's underlying business decision to
effect the Transaction or constitute a recommendation to any shareholder of the
Company as to how such shareholder should vote with respect to the Transaction
or as to which election such shareholder should make regarding the form of
Merger Consideration. At your direction, we have not been asked to, nor do we,
offer any opinion as to the material terms of the Purchase Agreement, the
Separation Agreement or the form of the Transaction. In rendering this opinion,
we have assumed, with your consent, that the final executed form of the Purchase
Agreement and of the Separation Agreement do not differ in any material respect
from the drafts that we have examined, and that Adecco, the Company and OHS will
comply with all the material terms of the Purchase Agreement and the Separation
Agreement. We have further assumed, with your consent, that the Transaction will
comply with applicable foreign, federal and state laws, including without
limitation, laws relating to the payment of dividends, bankruptcy, insolvency,
reorganization, fraudulent conveyance, fraudulent transfer or other similar laws
now or hereafter affecting creditors' rights generally.
Warburg Dillon Read LLC ("WDR") and its predecessors have acted as financial
advisor to the Board of Directors of the Company in connection with the
Transaction and will receive a fee upon the consummation thereof. At your
request, we have contacted third parties to solicit indications of interest in a
possible transaction with the Company, both in respect of the Company as a
whole, and in respect of OHS, and held discussions with certain of these parties
prior to the date hereof. In the past, WDR and its predecessors have provided
investment banking services to the Company and received customary compensation
for the rendering of such services. In the ordinary course of business, WDR, its
successors and affiliates may trade or have traded securities of the Company or
Adecco for their own accounts and, accordingly, may at any time hold a long or
short position in such securities.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Transaction Consideration to be received by the holders of the
Company Common Stock in the Split-Off and the Company Merger is fair, from a
financial point of view, to the holders of the Company Common Stock.
Very truly yours,
WARBURG DILLON READ LLC
/s/ William C. McGahan /s/ Kevin C. Knight
William C. McGahan Kevin C. Knight
Managing Director Executive Director
C-1-3
ANNEX C-2
OPINION OF SALOMON SMITH BARNEY INC.
[LETTERHEAD OF SALOMON SMITH BARNEY INC.]
August 17, 1999
The Board of Directors
Olsten Corporation
175 Broad Hollow Road
Melville, New York 11747
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the common stock of Olsten Corporation ("Olsten") of the
Transaction Consideration (defined below) provided for in the Agreement and Plan
of Merger, dated as of August 17, 1999 (the "Merger Agreement"), among Adecco SA
("Adecco"), Staffing Acquisition Corporation, a wholly owned subsidiary of
Adecco ("Merger Sub"), and Olsten. As more fully described in the Merger
Agreement, (i) Olsten will transfer to Aaronco Corp., a wholly owned subsidiary
of Olsten ("OHS"), all of its health services business and related assumed
liabilities (collectively, the "Health Services Business") and the holders of
shares of the common stock, par value $0.10 per share, of Olsten (the "Olsten
Common Stock") and holders of shares of the Class B common stock, par value
$0.10 per share, of Olsten (together with the Olsten Common Stock, the "Olsten
Stock") will receive 100% of the shares of the common stock, par value $0.01 per
share, of OHS (the "OHS Common Stock" and, such transaction, the "Split-Off")
and (ii) Merger Sub will be merged with and into Olsten (the "Merger" and,
together with the Split-Off, the "Transaction") resulting in the transfer to
Adecco of Olsten's staffing services and information services businesses
(together with the Health Services Business, the "Businesses"). The Merger
Agreement provides that, by virtue of the Transaction, each outstanding share of
Olsten Stock will be converted into the right to receive (x) shares of OHS
Common Stock (the "Split-Off Consideration") such that all shares of the OHS
Common Stock, except for a nominal number of outstanding shares of OHS Common
Stock which may be retained by Olsten, will be received by the holders of
outstanding shares of Olsten Stock and (y) subject to certain allocation and
proration procedures specified in the Merger Agreement (as to which we express
no opinion), either (A) $8.75, without interest (the "Cash Consideration"),
(B) 0.12472 American Depositary Shares, evidenced by American Depositary
Receipts, of Adecco, representing one-eighth of one share of the common stock,
par value CHF 10 per share, of Adecco (collectively, the "Adecco Securities"
and, such number of Adecco Securities, the "Stock Consideration") or (C) a
combination thereof (the Cash Consideration and the Stock Consideration being
collectively referred to as the "Merger Consideration" and such Merger
Consideration, taken together with the Split-Off Consideration, being
collectively referred to as the "Transaction Consideration"). The Merger
Agreement further provides that the Merger Consideration will consist of not
more than 50% Cash Consideration and 50% Stock Consideration.
In arriving at our opinion, we reviewed the Merger Agreement and certain
related documents, and held discussions with certain senior officers, directors
and other representatives and advisors of Olsten and certain senior officers and
other representatives and advisors of Adecco concerning the operations and
prospects of the Businesses and Adecco. We examined certain publicly available
business and financial information relating to the Businesses and Adecco as well
as certain financial forecasts for the Businesses and Adecco and other
information and data for the Businesses and Adecco which were provided to or
otherwise discussed with us by the respective managements of Olsten and Adecco,
including information relating to certain strategic implications and operational
benefits anticipated to result from the Merger. We reviewed the financial terms
of the Transaction as set forth in the Merger Agreement in relation to, among
other things: current and historical market prices and trading volumes of the
Olsten Common Stock and Adecco Securities; the financial condition and
historical and projected earnings and other operating data of the Businesses and
Adecco; and the capitalization of
C-2-1
Olsten and Adecco. We considered, to the extent publicly available, the
financial terms of other transactions recently effected which we considered
relevant in evaluating the Merger and analyzed certain financial, stock market
and other publicly available information relating to the businesses of other
companies whose operations we considered relevant in evaluating those of the
Businesses and Adecco. We also evaluated the potential pro forma financial
impact of the Merger on Adecco. In addition to the foregoing, we conducted such
other analyses and examinations and considered such other financial, economic
and market criteria as we deemed appropriate in arriving at our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information and data publicly available or furnished to or otherwise reviewed by
or discussed with us. With respect to financial forecasts and other information
and data provided to or otherwise reviewed by or discussed with us, we have been
advised by the managements of Olsten and Adecco that such forecasts and other
information and data were reasonably prepared on bases reflecting the best
currently available estimates and judgments of the managements of Olsten and
Adecco as to the future financial performance of the Businesses and Adecco and
the strategic implications and operational benefits anticipated to result from
the Merger. We are not expressing any opinion as to what the value of the Adecco
Securities or OHS Common Stock actually will be when issued to Olsten
shareholders pursuant to the Transaction or the prices at which the Adecco
Securities or OHS Common Stock will trade subsequent to the Transaction. We have
not made or been provided with an independent evaluation or appraisal of the
assets or liabilities (contingent or otherwise) of the Businesses or Adecco nor
have we made any physical inspection of the properties or assets of the
Businesses or Adecco. In connection with our engagement, we were not requested
to, and we did not, solicit third party indications of interest in the possible
acquisition of all or a part of Olsten, although Olsten has advised us that such
third party indications of interest were solicited by other representatives of
Olsten. We express no view as to, and our opinion does not address, the relative
merits of the Transaction as compared to any alternative business strategies
that might exist for Olsten or the effect of any other transaction in which
Olsten might engage. Our opinion is necessarily based upon information available
to us, and financial, stock market and other conditions and circumstances
existing and disclosed to us, as of the date hereof.
Salomon Smith Barney Inc. has acted as financial advisor to Olsten in
connection with the proposed Transaction and will receive a fee for such
services, a significant portion of which is contingent upon the consummation of
the Transaction. We also will receive a fee upon the delivery of this opinion.
We and our affiliates have in the past provided investment banking services to
Olsten unrelated to the proposed Transaction, for which services we have
received compensation. In the ordinary course of our business, we and our
affiliates may actively trade or hold the securities of Olsten and Adecco for
our own account or for the account of our customers and, accordingly, may at any
time hold a long or short position in such securities. In addition, we and our
affiliates (including Citigroup Inc. and its affiliates) may maintain
relationships with Olsten, Adecco and their respective affiliates.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of Olsten in its evaluation of the
proposed Transaction, and our opinion is not intended to be and does not
constitute a recommendation to any shareholder as to the form of Merger
Consideration to be elected by such shareholder in the Merger or how such
shareholder should vote on any matter relating to the Transaction.
Based upon and subject to the foregoing, our experience as investment
bankers, our work as described above and other factors we deemed relevant, we
are of the opinion that, as of the date hereof, the Transaction Consideration is
fair, from a financial point of view, to the holders of Olsten Stock.
Very truly yours,
/s/ Salomon Smith Barney Inc.
SALOMON SMITH BARNEY INC.
C-2-2
ANNEX D
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINCIPAL STOCKHOLDERS AGREEMENT
AMONG
ADECCO
AND
CERTAIN STOCKHOLDERS OF
OLSTEN CORPORATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINCIPAL STOCKHOLDERS AGREEMENT
This PRINCIPAL STOCKHOLDERS AGREEMENT (this "Agreement"), dated as of
August 17, 1999, is entered into by and among Adecco, a societe anonyme
("Adecco"), Miriam Olsten, Stuart Olsten, Cheryl Olsten, 1985 Cheryl Ashburn
Trust, 1995 Succeeding GRAT, Trust FBO Stuart Olsten and Trust FBO Cheryl
Olsten, each a record owner of outstanding Class B Common Stock of Olsten
Corporation as well as certain Common Stock of Olsten Corporation, individually
and/or as trustees of certain trusts, all as set forth on EXHIBIT "A"
(collectively, the "STOCKHOLDERS" and each a "STOCKHOLDER").
RECITALS
A. Immediately prior to the execution of this Agreement, Adecco and Olsten
Corporation have entered into an Agreement and Plan of Merger (as such agreement
may hereafter be amended from time to time, the "MERGER AGREEMENT"), pursuant to
which (i) Merger Sub, a wholly-owned subsidiary of Adecco, will be merged with
and into Moses, which will be the surviving corporation in the Merger, and will,
as a result of the Merger, become a wholly-owned subsidiary of Adecco and
(ii) as a result of the Merger, the stockholders of Olsten Corporation will
receive the Closing Consideration.
B. As an inducement and a condition to entering into the Merger Agreement,
Adecco has required that the Stockholders agree, and the Stockholders have
agreed, to enter into this Agreement.
C. Prior to the date hereof, Adecco and the Stockholders had no agreement,
arrangement or understanding (as such terms are used in Section 203 of the
Delaware General Corporation Law) for the purpose of acquiring, holding, voting
or disposing of the Shares (as such term is defined below).
AGREEMENT
In consideration of the Recitals and the mutual promises contained herein,
and other good and valuable consideration the receipt and adequacy of which are
hereby acknowledged, the parties hereto, intending to be legally bound hereby,
agree as follows:
1. CERTAIN DEFINITIONS. Capitalized terms used and not defined herein have
the respective meanings ascribed to them in the Merger Agreement. For purposes
of this Agreement:
"PERMITTED TRANSFER" means a sale, transfer, assignment or other disposition
to a Permitted Transferee.
"PERMITTED TRANSFEREE" means any person who is (A) the spouse or former
spouse of, or any lineal descendent of, or any spouse of such lineal descendant
of, or the grandparent, parent, brother or sister of, or spouse of such brother
or sister of, a Stockholder or Permitted Transferee; (B) upon the death of any
Stockholder or any Permitted Transferee of such person, the executors of the
estate of such Stockholder or such Permitted Transferee, and any of such
Stockholder's or such Permitted Transferee's heirs, testamentary trustees,
devisees, or legatees; (C) any trust principally for the benefit of one or more
of the foregoing Stockholders or Permitted Transferees; (D) upon the disability
of any Stockholder or Permitted Transferee, any guardian or conservator of such
Stockholder or such Permitted Transferee; or (E) any corporation, partnership or
other entity if all of the beneficial ownership is held by Stockholders or
Permitted Transferees; provided that in each case such transferee assumes and
agrees to perform and becomes a party to this Agreement, agrees not to make or
in any way assist in the making of any proposal involving an Acquisition
Transaction, and agrees not to dissent in the Merger, all on terms reasonably
acceptable to Adecco, and provided further that as a result of any such transfer
no Class B Common Stock, par value $.10 per share, of Olsten Corporation is
converted into Common Stock, par value $.10 per share, of Olsten Corporation.
For purposes of this Agreement, when a Permitted Transferee has acquired Shares
in accordance herewith, such person shall be deemed a "Stockholder" hereunder.
"PERSON" shall mean an individual, corporation, limited liability company,
partnership, joint venture, association, trust, unincorporated organization or
other entity.
"SHARES" shall mean the Common Stock, par value $.10 per share, and the
Class B Common Stock, par value $.10 per share, of Olsten Corporation owned by
the Stockholders on the date hereof and any shares acquired by any Stockholder
in any capacity after the date hereof and prior to the termination of this
Agreement. "Shares" shall include Shares acquired upon the exercise of options,
warrants or rights, the conversion or exchange of convertible or exchangeable
securities, or by means of purchase, dividend, distribution, gift, bequest,
inheritance or as a successor in interest in any capacity or otherwise. In the
event of a stock dividend or distribution, or any change in the Common Stock or
Class B Common Stock by reason of any stock dividend, split-up,
recapitalization, reclassification, combination, exchange of shares or the like,
the term "Shares" shall be deemed to refer to and include the Shares as well as
all such stock dividends and distributions and any shares into which or for
which any or all of the Shares may be changed, reclassified or exchanged and
appropriate adjustments shall be made to the terms and provisions of this
Agreement. "Shares" shall also include voting trust certificates issued in
respect of any Shares.
2. VOTING OF SHARES; NO INCONSISTENT AGREEMENTS.
(a) Each Stockholder hereby severally and not jointly and solely with
respect to the Shares held of record by such Stockholder, agrees that during the
period commencing on the date hereof and continuing until the termination of
this Agreement in accordance with its terms, at any meeting (whether annual or
special and whether or not an adjourned or postponed meeting) of the holders of
Common Stock or Class B Common Stock, however called, or in connection with any
written consent of the holders of Common Stock or Class B Common Stock, such
Stockholder shall vote (or cause to be voted) all of the Shares held of record
by such Stockholder (i) in favor of the Merger, the execution, delivery and
performance of the Merger Agreement and the approval and adoption of the terms
thereof and each of the other actions contemplated by the Merger Agreement, the
Separation Agreement and this Agreement and any actions required in furtherance
thereof and hereof (the "SUBJECT TRANSACTIONS"); (ii) against any Acquisition
Transaction (other than the Merger and the transactions contemplated thereby)
and against any action or agreement that would result in a breach in any respect
of any covenant, representation or warranty or any other obligation or agreement
under the Merger Agreement or the Separation Agreement or this Agreement; and
(iii) except as otherwise agreed to in writing in advance by Adecco, and
regardless of the status of the Merger and the transactions contemplated by this
Agreement, the Merger Agreement, or the Separation Agreement, against the
following actions (other than pursuant to the terms of this Agreement, the
Merger Agreement, or the Separation Agreement): (A) any extraordinary corporate
transaction, such as a merger, consolidation or other business combination
involving Olsten Corporation or any of its Subsidiaries; (B) any sale, lease or
transfer by Olsten Corporation of a material amount of assets (including stock)
of Olsten Corporation or any of its Subsidiaries, or a merger, restructuring,
recapitalization, special dividend, dissolution or liquidation of Olsten
Corporation or any of its Subsidiaries; or (C)(1) any change in a majority of
the persons who constitute the board of directors of Olsten Corporation or any
of its Subsidiaries; (2) any change in the present capitalization of Olsten
Corporation or any of its Subsidiaries including any proposal to sell a
substantial equity interest in Olsten Corporation or any of its Subsidiaries;
(3) any amendment of Olsten Corporation's or any of its Subsidiaries' charters
or By-laws; (4) any other change in Olsten Corporation's or any of its
Subsidiaries' corporate structure or business; or (5) any other action which, in
the case of each of the matters referred to in clauses (C)(1), (2), (3) or (4),
is intended, or could reasonably be expected, to impede, interfere with, delay,
postpone, or materially adversely affect this Agreement, the Merger Agreement,
the Separation Agreement, the Merger, the Split-Off or the transactions
contemplated by this Agreement, the Merger Agreement and the Separation
Agreement. In addition, such Stockholder agrees that it will, upon request by
Adecco, furnish written confirmation, in form and substance reasonably
acceptable to Adecco, of such Stockholder's vote in the manner required by
clauses (i)-(iii) of this Section 2(a). Each Stockholder acknowledges receipt
and review of a copy of the Merger Agreement.
D-2
(b) Each Stockholder severally and not jointly agrees that it shall not
enter into any agreement or understanding with any Person the effect of which
would be inconsistent with or violative of the provisions and agreements
contained herein, including in this Section 2, and shall take all such actions
necessary to approve, if so requested by Adecco, all or any actions incident to
the Subject Transactions or the other matters referred to in this Section 2 by
stockholder written consent.
3. OTHER STOCKHOLDER COVENANTS.
(a) RESTRICTION ON TRANSFER; PROXIES AND NON-INTERFERENCE. Except for
Permitted Transfers or as expressly permitted herein, each Stockholder severally
and not jointly agrees that it shall not directly or indirectly:
(i) offer for sale, sell, transfer, tender, pledge, encumber, assign or
otherwise dispose of, or enter into any contract, option or other
arrangement or understanding with respect to, or consent to the offer for
sale, sale, transfer, tender, pledge, encumbrance, assignment or other
disposition of (collectively, "transfer"), any or all of the Shares or any
interest therein; provided that nothing in this Agreement shall in any
manner restrict the ability of the Stockholders to pledge or encumber any
Shares in connection with one or more bona fide loans or advances to such
Stockholder by one or more institutional lenders, but only if and so long as
(A) each such lender expressly (on behalf of itself and any transferee of
the collateral) assumes and agrees to perform and becomes a party to this
Agreement, agrees not to make or assist in any way in the making of a
proposal involving an Acquisition Transaction (other than the Merger and the
transactions contemplated by the Merger Agreement), and agrees not to
dissent in the Merger, which agreement shall be on terms reasonably
acceptable to Adecco, (B) as a result of such pledge or encumbrance the
subject Shares are not converted into Common Stock, par value $.10 per
share, of Olsten Corporation, and (C), in the event of any foreclosure or
other sale or retention of Shares by such a lender, the subject Shares are
not so converted (a loan or advance meeting such requirements being herein
called a "LOAN");
(ii) grant any proxies or powers of attorney, deposit the Shares into a
voting trust or enter into a voting agreement with respect to the Shares;
provided that nothing in this Agreement shall in any manner restrict the
ability of any Stockholder to enter into any voting agreement in connection
with any Loan which is operative only upon default under such Loan and is
not inconsistent with this Agreement; or
(iii) take any action that would make any representation or warranty of
such Stockholder contained herein untrue or incorrect or would result in a
breach by such Stockholder of its obligations under this Agreement or a
breach by Olsten Corporation of its obligations under the Merger Agreement
or the Separation Agreement.
(b) No Solicitation.
(i) From the date hereof through the Closing Date or the earlier
termination of this Agreement in accordance with its terms, each Stockholder
severally and not jointly agrees that it shall not, and shall not permit any
of its Subsidiaries, or any of its or their officers, directors, employees,
representatives, agents or Affiliates (including, without limitation, any
investment banker, attorney or accountant retained by any Stockholder) to,
directly or indirectly, enter into, solicit, initiate or continue any
discussions or negotiations with, or encourage or respond to any inquiries
or proposals by, or participate in any negotiations with, or provide any
information to, or otherwise cooperate in any other way with or facilitate
or encourage, any Person or group, other than Adecco and its Affiliates,
concerning any Acquisition Transaction. Each Stockholder severally and not
jointly agrees that it will immediately notify Adecco if any discussions or
negotiations are sought to be initiated or continued, any inquiry or
proposal is made, or any information or documents is requested with respect
to any Acquisition Transaction, and notify Adecco of the
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terms of any proposal which it may receive in respect of any such
Acquisition Transaction, including the identity of the prospective purchaser
or soliciting party if known;
(ii) Each Stockholder severally and not jointly further agrees to use
its best efforts as a stockholder to cause Olsten Corporation not to,
directly or indirectly, solicit, initiate, seek, or encourage (including by
way of furnishing information or assistance), or take other action to
facilitate, any inquiries or the making of any proposal which constitutes or
may reasonably be expected to lead to, an Acquisition Transaction;
(iii) The provisions of this Section 3(b) shall not prohibit any
director of Olsten Corporation from taking actions in his capacity as such
which are permitted or required under the Merger Agreement.
(c) RELIANCE. Each Stockholder understands and acknowledges that Adecco is
entering into the Merger Agreement in reliance upon each Stockholder's execution
and delivery of this Agreement.
(d) FURTHER ASSURANCES. From time to time, at Adecco's request and without
further consideration, each Stockholder severally and not jointly agrees that it
shall execute and deliver such additional documents and take all such further
lawful action as may be necessary or desirable to consummate and make effective,
in the most expeditious manner practicable, the transactions contemplated by
this Agreement. Without limitation, each Stockholder who is a party to any
agreement that may conflict with this Agreement has caused such other agreement
to be amended to the extent required (if any) to permit him or her to enter into
and perform this Agreement.
(e) NO CONVERSION. No Stockholder shall permit or take any action to cause
any shares of Class B Common Stock, par value $.10 per share, which such
Stockholder owns to be converted into shares of Common Stock, par value $.10 per
share, and shall take any and all action required to prevent such conversion.
4. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS. Each Stockholder hereby
severally and not jointly (and solely with respect to itself and the Shares
owned of record by such Stockholder) represents and warrants to Adecco as
follows:
(a) OWNERSHIP OF SHARES. Such Stockholder is the owner of record of the
Shares set forth on Exhibit A hereto. On the date hereof, the Shares set forth
on Exhibit A hereto constitute all of the Shares owned of record by such
Stockholder. With respect to the number of shares set forth opposite such
Stockholder's name on Exhibit A hereto, and with the exceptions noted thereon,
such Stockholder has sole voting power and sole power to issue instructions with
respect to the matters set forth in Sections 2 and 3 hereof, sole power of
disposition, sole power of conversion, sole power to demand appraisal rights and
sole power to agree to all of the matters set forth in this Agreement, in each
case with respect to all of the Shares with no limitations, qualifications or
restrictions on such rights, subject to applicable securities laws and the terms
of this Agreement. The execution and delivery of this Agreement does not cause
an automatic conversion of the Shares.
(b) DUE AUTHORIZATION; BINDING AGREEMENT. Such Stockholder is, as
applicable, duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization, and has all requisite capacity, power and
authority to execute and deliver this Agreement and perform its obligations
hereunder. The execution and delivery by such Stockholder of this Agreement and
the performance by such Stockholder of its obligations hereunder have been duly
and validly authorized by such Stockholder and no other proceedings on the part
of the such Stockholder are necessary to authorize the execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by such Stockholder and constitutes a valid and binding agreement
enforceable against such Stockholder in accordance with its terms except to the
extent (i) such enforcement may be limited by applicable bankruptcy, insolvency
or similar laws affecting creditors rights and (ii) the remedy of specific
D-4
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(c) NO CONFLICTS. Except for filings, authorizations, consents and approvals
contemplated by the Merger Agreement or the Separation Agreement and necessary
for the consummation of the transactions contemplated hereby and thereby,
(i) no filing with, and no permit, authorization, consent or approval of, any
state or federal public body or authority is necessary for the execution and
delivery of this Agreement by such Stockholder, the consummation by such
Stockholder of the transactions contemplated hereby and the compliance by such
Stockholder with the provisions hereof and (ii) none of the execution and
delivery of this Agreement by such Stockholder, the consummation by such
Stockholder of the transactions contemplated hereby or compliance by such
Stockholder with any of the provisions hereof shall (A) conflict with or result
in any breach of the organizational documents of such Stockholder, (B) result in
a violation or breach of, or constitute (with or without notice or lapse of time
or both) a default (or give rise to any third party right of termination,
cancellation, material modification or acceleration) under any of the terms,
conditions or provisions of any note, loan agreement, bond, mortgage, indenture,
license, contract, commitment, arrangement, understanding, agreement or other
instrument or obligation of any kind, including, without limitation, any voting
agreement, proxy arrangement, pledge agreement, shareholders agreement or voting
trust, to which such Stockholder is a party or by which such Stockholder or any
of its properties or assets may be bound, or (C) violate any order, writ,
injunction, decree, judgment, statute, rule or regulation applicable to such
Stockholder or any of its properties or assets.
(d) NO ENCUMBRANCES. Except as set forth on Exhibit A, the Shares and the
certificates representing such Shares are now, and at all times during the term
hereof, will be, held by such Stockholder or any Permitted Transferee, or by a
nominee, custodian or trust for the benefit of such Stockholder or any Permitted
Transferee, free and clear of all liens, claims, security interests, proxies,
voting trusts or agreements, understandings or arrangements or any other
encumbrances whatsoever, except for any such arising hereunder.
(e) NO FINDER'S FEES. No broker, investment banker, financial advisor or
other person is entitled to any broker's, finder's, financial adviser's or other
similar fee or commission in connection with the transactions contemplated
hereby based upon arrangements made by or on behalf of such Stockholder.
5. REPRESENTATIONS AND WARRANTIES OF ADECCO. Adecco represents and
warrants to the Stockholders as follows:
(a) ORGANIZATION. Adecco is a societe anonyme duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization, and has all requisite corporate power or other power and authority
to execute and deliver this Agreement and perform its obligations hereunder. The
execution and delivery by Adecco of this Agreement and the performance by Adecco
of its obligations hereunder have been duly and validly authorized by its Board
of Directors and, except as contemplated by the Merger Agreement, no other
corporate proceedings on the part of Adecco are necessary to authorize the
execution, delivery or performance of this Agreement or the consummation of the
transactions contemplated hereby.
(b) AGREEMENT. This Agreement has been duly and validly executed and
delivered by Adecco and constitutes a valid and binding agreement of Adecco
enforceable against Adecco in accordance with its terms, except that (i) such
enforcement may be subject to applicable bankruptcy, insolvency, or other
similar laws, now or hereafter in effect, affecting creditors' rights generally,
and (ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceedings therefor may be brought.
(c) NO CONFLICTS. Except for filings, authorizations, consents, and
approvals contemplated by the Merger Agreement or the Separation Agreement and
necessary for the consummation of the
D-5
transactions contemplated hereby and thereby, (i) no filing with, and no permit,
authorization, consent or approval of, any state or federal public body or
authority is necessary for the execution of this Agreement by Adecco and the
consummation by Adecco of the transactions contemplated hereby, and (ii) none of
the execution and delivery of this Agreement by Adecco, the consummation by
Adecco of the transaction contemplated hereby or compliance by Adecco with any
of the provisions hereof shall (A) conflict with or result in any breach of the
charter or bylaws of Adecco, (B) result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default (or give
rise to any third-party right of termination, cancellation, material
modifications or acceleration) under any of the terms, conditions or provisions
of any note, loan agreement, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind to which Adecco is a party or by which Adecco or its
properties or assets may be bound, or (C) violate any order, writ, injunction,
decree, judgment, statute, rule or regulation applicable to Adecco or its
properties or assets.
6. STOP TRANSFER. Each Stockholder severally and not jointly agrees with,
and covenants to, Adecco that such Stockholder shall not request that Olsten
Corporation register the transfer (by book-entry or otherwise) of any
certificate or uncertificated interest representing any of the Shares, unless
such transfer is in compliance with this Agreement.
7. TERMINATION. This Agreement shall terminate upon the earliest of
(i) the Closing Date, or (ii) the termination of the Merger Agreement in
accordance with its terms; provided that the provisions of Section 10 shall
survive any termination of this Agreement, and provided further that no such
termination shall relieve any party of liability for a breach hereof prior to
termination.
8. CONFIDENTIALITY AND PUBLIC ANNOUNCEMENTS. The parties recognize that
successful consummation of the transactions contemplated by this Agreement may
be dependent upon confidentiality with respect to the matters referred to
herein. In this connection, pending public disclosure thereof, each of the
parties hereto severally and not jointly agrees not to disclose or discuss such
matters with anyone not a party to this Agreement (other than its counsel,
advisors, corporate parents and Affiliates) without the prior written consent of
the other parties hereto, except for filings required pursuant to the Exchange
Act and the rules and regulations thereunder or disclosures its counsel advises
are necessary in order to fulfill its obligations imposed by law or the
requirements of any securities exchange. At all times during the term of this
Agreement, the parties hereto will consult with each other before issuing or
making any reports, statements or releases to the public with respect to this
Agreement or the transactions contemplated hereby and will use good faith
efforts to agree on the text of public reports, statements or releases. For
purposes of this Section, any consultation or consent required of Adecco may be
obtained from Dr. Felix A. Weber, and any consultation or consent required from
the Stockholders may be obtained from Stuart Olsten.
9. VOTING AGREEMENT. Adecco agrees that it shall vote (or cause to be
voted) all shares of Common Stock with respect to which Adecco has voting power
in favor of the Merger, the execution and delivery of the Merger Agreement and
the Separation Agreement and the approval and adoption of the terms thereof and
each of the other actions contemplated by the Merger Agreement and the
Separation Agreement and any action required in furtherance thereof.
10. GENERAL PROVISIONS.
(a) NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. Except as
provided in Section 7, none of the representations, warranties, covenants and
agreements in this Agreement shall survive the Closing Date.
(b) EXPENSES. Whether or not the transactions contemplated hereby are
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby
D-6
shall be paid by the party incurring such expenses, except as otherwise
specifically noted herein or in the Merger Agreement.
(c) NOTICES. All notices, requests, demands and other communications which
are required or may be given under this Agreement shall be in writing and shall
be deemed to have been duly given when received if personally delivered; when
transmitted if transmitted by telecopy, electronic or digital transmission
method; the day after it is sent, if sent for next day delivery to a domestic
address by recognized overnight delivery service (e.g., Federal Express); and
upon receipt, if sent by certified or registered mail, return receipt requested.
In each case notice shall be sent to:
(i) if to Adecco, to:
Attention: Dr. Felix A. Weber
1275 Cheserex
Switzerland
Telephone: 011 41 21 321 6666
Telecopy: 011 41 21 321 6688
with copies to:
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
Attention: Thomas W. Dobson, Esq.
Telephone: (213) 485-1234
Telecopy: (213) 891-8763
(ii) if to the Stockholders, to the respective addresses and with the
copies set forth on Exhibit A.
(d) INTERPRETATION. When a reference is made in this Agreement to Sections,
such reference shall be to a Section of this Agreement unless otherwise
indicated. Headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the word "include", "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation". This Agreement shall not be construed for or against either party
by reason of the authorship or alleged authorship of any provision hereof or by
reason of the status of the respective parties. All terms defined in this
Agreement in the singular shall have comparable meanings when used in the
plural, and vice versa, unless otherwise specified.
(e) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and is not intended to confer upon any person other than
the parties hereto any rights or remedies hereunder.
(f) ASSIGNMENT. Except in connection with Permitted Transfers or as
permitted in Section 3(a), neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned (whether by operation of
law or otherwise) by any Stockholder without the consent of Adecco, or by Adecco
without the consent of the Stockholders holding 66% of the Shares subject to
this Agreement. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
(g) GOVERNING LAW. This Agreement shall be construed, interpreted and the
rights of the parties determined exclusively in accordance with the laws of the
State of Delaware (without reference to the choice of law provisions), except
with respect to matters of law concerning the internal corporate affairs
D-7
of any corporate entity which is a party to or the subject of this Agreement,
and as to those matters the law of the jurisdiction under which the respective
entity derives its powers shall govern.
(h) SEVERABILITY. Each party agrees that, should any court or other
competent authority hold any provision of this Agreement or part hereof to be
null, void or unenforceable, or order any party to take any action inconsistent
herewith or not to take an action consistent herewith or required hereby, the
validity, legality and enforceability of the remaining provisions and
obligations contained or set forth herein shall not in any way be affected or
impaired thereby. Upon any such holding that any provision of this Agreement is
null, void or unenforceable, the parties will negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that the transactions contemplated
by this Agreement are consummated to the extent possible. Except as otherwise
contemplated by this Agreement, to the extent that a party hereto took an action
inconsistent herewith or failed to take action consistent herewith or required
hereby pursuant to an order or judgment of a court or other competent authority,
such party shall incur no liability or obligation unless such party did not in
good faith seek to resist or object to the imposition or entering of such order
or judgment.
(i) INJUNCTIVE RELIEF. The parties acknowledge that it will be impossible to
measure in money the damages that would be suffered if the parties fail to
comply with any of the obligations herein imposed on them and that in the event
of any such failure, an aggrieved person or entity will be irreparably damaged
and will not have an adequate remedy at law. Any such person or entity shall,
therefore, be entitled to injunctive relief, including specific performance, to
enforce such obligations, and if any action should be brought in equity to
enforce any of the provisions of this Agreement, none of the parties shall raise
the defense that there is an adequate remedy at law.
(j) ATTORNEYS' FEES. If any party to this Agreement brings an action to
enforce its rights under this Agreement, the prevailing party shall be entitled
to recover its costs and expenses, including without limitation reasonable
attorneys' fees, incurred in connection with such action, including any appeal
of such action.
(k) CUMULATIVE REMEDIES. All rights and remedies of either party hereto are
cumulative of each other and of every other right or remedy such party may
otherwise have at law or in equity, and the exercise of one or more rights or
remedies shall not prejudice or impair the concurrent or subsequent exercise of
other rights or remedies.
(l) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same instrument and
shall become effective when executed and delivered by each of the parties.
(m) AMENDMENTS, WAIVERS, ETC. This Agreement may not be amended, changed,
supplemented, waived or otherwise modified or terminated, except upon the
execution and delivery of a written agreement executed by the parties hereto.
(n) BINDING AGREEMENT. Each Stockholder agrees that this Agreement and the
obligations hereunder shall attach to the Shares and, shall be binding upon any
person or entity to which ownership of such shares shall pass, whether by
operation of law or otherwise, including, without limitation, such Stockholder's
heirs, distributees, guardians, administrators, executors, legal
representatives, or successors or other transferees (for value or otherwise) and
any other successors in interest. Notwithstanding any transfer of Shares, the
transferor shall remain liable for the performance of all obligations under this
Agreement of the transferor.
(o) OBLIGATIONS OF THE STOCKHOLDERS. The liabilities and obligations of each
Stockholder under any provision of this Agreement are several and not joint and
apply solely to such Stockholder and to the Shares held of record by such
Stockholder. No Stockholder shall have any liability or obligation under this
Agreement for any act, omission or breach by any other Stockholder.
D-8
(p) SERVICE OF PROCESS. Each of the parties hereto irrevocably consents to
the service of any process, pleading, notices or other papers by the mailing of
copies thereof by registered, certified or first class mail, postage prepaid, to
such party at such party's address set forth herein, or by any other method
provided or permitted under Delaware law. Additionally, each party hereby
appoints RL&F Service Corp., One Rodney Square, Wilmington, Delaware 19801 as
agent for service of process in Delaware.
(q) CONSENT AND JURISDICTION. Each party irrevocably and unconditionally
agrees and consents that any suit, action or other legal proceeding arising out
of or related to this Agreement shall be brought and heard exclusively in New
Castle County, State of Delaware and each party irrevocably consents to personal
jurisdiction in any and all tribunals in said County.
D-9
IN WITNESS WHEREOF, the parties have executed this Principal Stockholders
Agreement as of the date first written above.
Adecco SA,
a societe anonyme organized
under the laws of Switzerland
By: /s/ John P. Bowmer
------------------------------
Name: John P. Bowmer
Title: Chief Executive Officer
By: /s/ Felix A. Weber
------------------------------
Name: Felix A. Weber
Title: Chief Financial Officer
STOCKHOLDERS
/s/ Miriam Olsten
----------------------------------
Name: Miriam Olsten
/s/ Stuart Olsten
----------------------------------
Name: Stuart Olsten
/s/ Cheryl Olsten
----------------------------------
Name: Cheryl Olsten
/s/ Miriam Olsten
----------------------------------
For the 1985 Cheryl Ashburn Trust
Name: Miriam Olsten
/s/ Cheryl Olsten
----------------------------------
For the 1995 Succeeding GRAT
Name: Cheryl Olsten
/s/ Stuart Olsten
----------------------------------
For the 1995 Succeeding GRAT
Name: Stuart Olsten
/s/ Robert Riedinger
----------------------------------
For the 1995 Succeeding GRAT
Name: Robert Riedinger
/s/ Andrew Heine
----------------------------------
For the Trust FBO Stuart Olsten
Name: Andrew Heine
/s/ Stuart Olsten
----------------------------------
For the Trust FBO Stuart Olsten
Name: Stuart Olsten
/s/ Robert Riedinger
----------------------------------
For the Trust FBO Stuart Olsten
Name: Robert Riedinger
/s/ Andrew Heine
----------------------------------
For the Trust FBO Cheryl Olsten
Name: Andrew Heine
/s/ Cheryl Olsten
----------------------------------
For the Trust FBO Cheryl Olsten
Name: Cheryl Olsten
/s/ Robert Riedinger
----------------------------------
For the Trust FBO Stuart Olsten
Name: Robert Riedinger
EXHIBIT A
TO PRINCIPAL STOCKHOLDERS AGREEMENT
NUMBER OF SHARES
----------------------
CLASS B COMMON
NAME AND ADDRESS FOR NOTICE OF RECORD OF RECORD
- --------------------------- ---------- ---------
Miriam Olsten............................................... 3,138,904 6,600
25 Willets Road
Box 326
Old Westbury, NY 11568
Stuart Olsten............................................... 1,928,629 3,600
67 Willets Road
Old Westbury, NY 11568
Cheryl Olsten............................................... 938,165
6550 Meeting House Road
New Hope, PA 18938
1985 Cheryl Ashburn Trust................................... 936,810
25 Willets Road
Box 326
Old Westbury, NY 11568
1995 Succeeding GRAT........................................ 2,522,837
25 Willets Road
Box 326
Old Westbury, NY 11568
Trust FBO Stuart Olsten..................................... 1,563,805
25 Willets Road
Box 326
Old Westbury, NY 11568
Trust FBO Cheryl Olsten..................................... 1,563,805
25 Willets Road
Box 326
Old Westbury, NY 11568
TOTAL....................................................... 12,592,955 10,200
========== ======
ANNEX E
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
DELAWARE GENERAL CORPORATION LAW
SECTION 262 OF SUBCHAPTER IX
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 Section 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 SectionSection 251 (other than a merger effected
pursuant to Section 251(g) of this title), 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 stockholders of the surviving
corporation as provided in subsection (f) of Section 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
SectionSection 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) 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.
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(3) In the event all of the stock of a subsidiary Delaware corporation party
to a merger effected under Section 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate
of incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the
assets of the corporation. If the certificate of incorporation contains such
a provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting
of stockholders, the corporation, not less than 20 days prior to the
meeting, shall notify each of its stockholders who was such on the record
date for such meeting with respect to shares for which appraisal rights
are available pursuant to subsections (b) or (c) hereof that appraisal
rights are available for any or all of the shares of the constituent
corporations, and shall include in such notice a copy of this section.
Each stockholder electing to demand the appraisal of such stockholder's
shares shall deliver to the corporation, before the taking of the vote on
the merger or consolidation, a written demand for appraisal of such
stockholder's shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such stockholder's
shares. A proxy or vote against the merger or consolidation shall not
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 Section 228 or
Section 253 of this title, each constituent corporation, either before
the effective date of the merger or consolidation or within 10 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 of the shares of such class of series
of stock of such constituent corporation, and shall include in such
notice a copy of this section; provided that, if the notice is given on
or after the effective date of the merger or consolidation, such notice
shall be given by the surviving or resulting corporation to all such
holders of any class or series of stock of a constituent corporation that
are entitled to appraisal rights. Such notice may, and, if given on or
after the effective date of the merger or consolidation, shall, also
notify such stockholders of the effective date of the merger or
consolidation. Any stockholder entitled to appraisal rights may, within
20 days after the date of mailing of such notice, demand in writing from
the surviving or resulting corporation the appraisal of such holder's
shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such holder's shares. If such
notice did not notify stockholders of the effective date of the merger or
consolidation, either (i) each such constituent corporation shall send a
second notice before the effective date of the merger or consolidation
notifying each of the holders of any class or series of stock of such
constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or
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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 of assistant secretary or of the transfer
agent of the corporation that is required to give either notice that such
notice has been given shall, in the absence of fraud, be prima facie
evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent
corporation may fix, in advance, a record date that shall be not more
than 10 days prior to the date the notice is given, provided, that if the
notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation, the
surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the
effective date of the merger or consolidation, any stockholder shall have
the right to withdraw such stockholder's demand for appraisal and to accept
the terms offered upon the merger or consolidation. Within 120 days after
the effective date of the merger or consolidation, any stockholder who has
complied with the requirements of subsections (a) and (d) hereof, upon
written request, shall be entitled to receive from the corporation surviving
the merger or resulting from the consolidation a statement setting forth the
aggregate number of shares not voted in favor of the merger or consolidation
and with respect to which demands for appraisal have been received and the
aggregate number of holders of such shares. Such written statement shall be
mailed to the stockholder within 10 days after such stockholder's written
request for such a statement is received by the surviving or resulting
corporation or within 10 days after expiration of the period for delivery of
demands for appraisal under subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register
in Chancery in which the petition was filed a duly verified list containing
the names and addresses of all stockholders who have demanded payment for
their shares and with whom agreements as to the value of their shares have
not been reached by the surviving or resulting corporation. If the petition
shall be filed by the surviving or resulting corporation, the petition shall
be accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper
of general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail
and by publication shall be approved by the Court, and the costs thereof
shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the stockholders
who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates
to submit their certificates of stock to the Register in Chancery for
notation thereon of the pendency of the appraisal proceedings; and if any
stockholder fails to comply with such direction, the Court may dismiss the
proceedings as to such stockholder.
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(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 such stockholder's
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that
such stockholder is not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares, together
with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders
of shares represented by certificates upon the surrender to the corporation
of the certificates representing such stock. The Court's decree may be
enforced as other decrees in the Court of Chancery may be enforced, whether
such surviving or resulting corporation be a corporation of this State or of
any state.
(j) The costs of the proceeding may be determined by the Court and taxed upon
the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and
the fees and expenses of experts, to be charged pro rata against the value
of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded such stockholder's appraisal rights as provided
in subsection (d) of this section shall be entitled to vote such stock for
any purpose or to receive payment of dividends or other distributions on the
stock (except dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the merger or
consolidation); provided, however, that if no petition for an appraisal
shall be filed within the time provided in subsection (e) of this section,
or if such stockholder shall deliver to the surviving or resulting
corporation a written withdrawal of such stockholder's demand for an
appraisal and an acceptance of the merger or consolidation, either within
60 days after the effective date of the merger or consolidation as provided
in subsection (e) of this section or thereafter with the written approval of
the corporation, then the right of such stockholder to an appraisal shall
cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of
the Court, and such approval may be conditioned upon such terms as the Court
deems just.
(l) The shares of the surviving or resulting corporation to which the shares of
such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
E-4
ANNEX F
GENTIVA HEALTH SERVICES, INC.
EXECUTIVE OFFICERS BONUS PLAN
SECTION 1. PURPOSE.
Gentiva Health Services, Inc. (the "Company") hereby establishes, subject to
shareholder approval, this Executive Officers Bonus Plan (the "Plan") in order
to provide the Company's executive officers with an opportunity to earn annual
bonus compensation, contingent on the achievement of certain performance goals,
as an incentive and reward for their leadership, ability and exceptional
services.
SECTION 2. DEFINITIONS.
2.1 "Award" means the amount of bonus compensation to which an Eligible
Employee is entitled for each Plan Year as determined by the Committee pursuant
to Section 4 of the Plan.
2.2 "Code" means the Internal Revenue Code of 1986, as amended, including
applicable regulations thereunder.
2.3 "Committee" means a committee of the Company's Board of Directors (the
"Board") consisting of not less than two persons who, to the extent required to
satisfy the exception for performance-based compensation under Section 162(m) of
the Code are "outside directors" within the meaning of such section. The members
of the Committee shall serve at the pleasure of the Board.
2.4 "Determination Date" means the day immediately preceding the first day
of a Plan Year or such later date by which the Committee may establish
performance goals for a Plan Year without causing an Award to be treated as
other than performance-based compensation within the meaning of Section 162(m)
of the Code.
2.5 "Eligible Employee" means any executive officer of the Company.
2.6 "Plan Year" means a fiscal year of the Company.
SECTION 3. ADMINISTRATION.
The Plan shall be administered by the Committee. The Committee shall have
the authority to establish performance goals for the awarding of Awards for each
Plan Year, to determine the Eligible Employees to whom Awards are to be made for
each Plan Year; to determine whether performance goals for each Plan Year have
been achieved; to authorize payment of Awards under the Plan; to adopt, alter
and repeal such administrative rules, guidelines and practices governing the
Plan as it shall deem advisable; and to interpret the terms and provisions of
the Plan. All determinations made by the Committee with respect to the Plan and
Awards thereunder shall be final and binding on all persons, including the
Company and all Eligible Employees.
SECTION 4. DETERMINATION OF AWARDS.
The amount of an Award for any Plan Year shall be an amount not greater than
the lesser of 200% of such Eligible Employee's annual base salary or $2.5
million, which amount shall be determined based on the achievement of one or
more performance goals established by the Committee with respect to such
Eligible Employee. Performance goals may vary from Eligible Employee to Eligible
Employee and shall be based upon such one or more of the following performance
criteria as the Committee may deem appropriate: appreciation in share value,
total shareholder return, earnings per share, operating income, net income, pro
forma net income, return on equity, return on designated assets, return on
capital, economic value added, earnings, revenues, expenses, operating profit
margin,
F-1
operating cash flow, gross profit margin, net profit margin, employee turnover,
employee headcount, labor costs, customer service, and accounts receivable. The
performance goals may be determined by reference to the performance of the
Company, or of a subsidiary or affiliate, or of a division or unit of any of the
foregoing. No later than the Determination Date, the Committee shall establish
(i) the Eligible Employees who shall be eligible for an Award for such Plan
Year, (ii) the performance goals for such Plan Year and (iii) the corresponding
Award amounts payable under the Plan upon achievement of such performance goals.
SECTION 5. PAYMENT OF AWARD.
An Award (if any) to any Eligible Employee for a Plan Year shall be paid in
a single lump sum in cash as soon as practicable after the end of the Plan Year,
provided, however, that the Committee shall have first certified in writing
(i) that a performance goal with respect to such Eligible Employee for such Plan
Year was satisfied and the level of such goal attained, and (ii) the amount of
each such Eligible Employee's Award. If an Eligible Employee dies after the end
of a Plan Year but before receiving payment of any Award, the amount of such
Award shall be paid to a designated beneficiary or, if no beneficiary has been
designated, to the Eligible Employee's estate, in the form of a lump sum payment
in cash as soon as practicable after the Award for the Plan Year has been
determined and certified in accordance with this Section 5. Notwithstanding the
foregoing, the Committee may determined, by separate employment agreement with
any Eligible Employee or otherwise, that all or a portion of an Award for a Plan
Year shall be payable to the Eligible Employee upon the Eligible Employee's
death, disability or termination of employment with the Company, or upon a
change of control of the Company, during the Plan Year.
SECTION 6. NON-TRANSFERABILITY.
No Award or rights under this Plan may be transferred or assigned other than
by will or by the laws of descent and distribution.
SECTION 7. AMENDMENTS AND TERMINATION.
The Board may terminate the Plan at any time and may amend it from time to
time, provided, however, that no termination or amendment of the Plan shall
adversely affect the rights of an Eligible Employee or a beneficiary to a
previously certified Award. Amendments to the Plan may be made without
shareholder approval except as required to satisfy Section 162(m) of the Code.
SECTION 8. GENERAL PROVISIONS.
8.1 Nothing set forth in this Plan shall prevent the Board from adopting
other or additional compensation arrangements. Neither the adoption of the Plan
or any Award hereunder shall confer upon an Eligible Employee any right to
continued employment.
8.2 No member of the Board of the Committee, nor any officer or employee of
the Company acting on behalf of the Board or the Committee, shall be personally
liable for any action, determination or interpretation taken or made with
respect to the Plan, and all members of the Board or the Committee and all
officers or employees or the Company acting on their behalf shall, to the extent
permitted by law, be fully indemnified and protected by the Company in respect
of any such action, determination or interpretation.
SECTION 9. EFFECTIVE DATE OF PLAN.
The Plan shall become effective on January 1, 2000, subject to approval by
the shareholders of the Company.
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ANNEX G
GENTIVA HEALTH SERVICES, INC.
1999 STOCK INCENTIVE PLAN
1. PURPOSE.
The purpose of the Gentiva Health Services, Inc. 1999 Stock Incentive Plan
(the "Plan"), is to enable Gentiva Health Services, Inc. (the "Company") and
Related Companies (as defined below) to attract and retain employees, Directors
(as defined below) and Consultants (as defined below) who contribute to the
Company's success by their ability, ingenuity and industry, and to enable such
employees, Directors and Consultants to participate in the long-term success and
growth of the Company by giving them an equity interest in the Company. For
purposes of the Plan, a "Related Company" means any corporation, partnership,
joint venture or other entity in which the Company owns, directly or indirectly,
at least a 20% beneficial ownership interest.
2. TYPES OF AWARDS.
Awards under the Plan may be in the form of (i) incentive stock options
("Incentive Stock Options") within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (hereinafter, including applicable regulations
thereunder, the "Code") or any successor provisions thereto, and (ii) options
that do not qualify as Incentive Stock Options ("Non-Qualified Stock Options")
(collectively, "Stock Options").
3. ADMINISTRATION.
3.1 The Plan shall be administered by a committee (the "Committee") of the
Company's Board of Directors (the "Board") consisting of not less than two
"non-employee directors" (as such term is defined in Rule 16b-3 under the
Securities Exchange Act of 1934 (the "Exchange Act") or any successor rule) who,
to the extent required to satisfy the exception for performance-based
compensation under Section 162(m) of the Code, are also "outside directors"
(within the meaning of Section 162(m) of the Code). The members of the Committee
shall serve at the pleasure of the Board.
3.2 The Committee shall have the authority to grant awards to eligible
employees, Directors and Consultants under the Plan; to adopt, alter and repeal
such administrative rules, guidelines and practices governing the Plan as it
shall deem advisable; to interpret the terms and provisions of the Plan and any
award granted under the Plan; and to otherwise supervise the administration of
the Plan. Subject to the terms of the Plan, the Committee's authority shall
include, but not be limited to, the authority:
(a) to determine whether and to what extent any award will be granted
hereunder;
(b) to select the employees, Directors and Consultants to whom awards
will be granted;
(c) to determine the number of shares of the common stock, par value
$.10 per share of the Company (the "Common Stock") to be covered by each
award granted hereunder; provided, however, that no more than 300,000 shares
(subject to adjustment as provided in Section 4.3 herein) may be awarded
under the Plan to any employee, Director or Consultant in any calendar year;
(d) to determine the form and the terms and conditions of any award
granted hereunder, including, but not limited to, any restrictions based on
performance and such other factors as the Committee may determine, and to
determine whether the terms and conditions of the award are satisfied;
(e) to determine pursuant to a formula or otherwise the fair market
value of the Common Stock on a given date; provided, however, that if the
Committee fails to make such a
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determination, fair market value shall mean the closing sale price of the
Common Stock on the principal stock exchange or stock market on which the
Common Stock may be listed or admitted to trading on a given date;
(f) to amend the terms of any award, prospectively or retroactively;
PROVIDED, HOWEVER, that no amendment shall impair the rights of the award
holder without his or her consent; and
(g) to substitute new Stock Options for previously granted Stock
Options, or for options granted under other plans, in each case including
previously granted options having higher option prices.
3.3 All determinations made by the Committee pursuant to the provisions of
the Plan shall be final and binding on all persons, including the Company and
Plan participants.
3.4 The Committee may delegate to officers or managers of the Company or any
Related Company the authority, subject to such terms as the Committee shall
determine, to perform administrative functions and, with respect to awards
granted to persons not subject to Section 16 of the Exchange Act, to perform
such other functions (including making awards hereunder) as the Committee may
determine, to the extent permitted under Rule 16b-3 of the Exchange Act (if
applicable) and applicable law. Without limiting the foregoing, unless otherwise
determined by the Committee, the Company's Chief Executive Officer, in
consultation with the head of the Company's Human Resources Department, may make
awards of Stock Options to newly hired employees and recently promoted employees
who, in either case, are not subject to Section 16 of the Exchange Act;
PROVIDED, HOWEVER, that the maximum number of shares of Common Stock subject to
any such Stock Option shall be 10,000 shares (subject to adjustment as provided
in Section 4.3 below).
4. STOCK SUBJECT TO PLAN.
4.1 The total number of shares of Common Stock reserved and available for
distribution under the Plan shall be 5,000,000 (subject to adjustment as
provided in Section 4.3 below). Such shares may consist of authorized but
unissued shares or treasury shares.
4.2 To the extent an option terminates without having been exercised, the
shares subject to such award shall again be available for distribution in
connection with future awards under the Plan.
4.3 In the event of any merger, reorganization, consolidation, sale of
substantially all assets, recapitalization, Common Stock dividend, Common Stock
split, spin-off, split-up, split-off, distribution of assets or other change in
corporation structure affecting the Common Stock, a substitution or adjustment,
as may be determined to be appropriate by the Committee in its sole discretion,
shall be made in the aggregate number of shares reserved for issuance under the
Plan, the number of shares available for any individual awards, the number and
kind of shares, other securities or other consideration subject to outstanding
awards and the exercise price to be paid by employees, Directors and Consultants
with respect to outstanding awards; PROVIDED, HOWEVER, that no such adjustment
shall increase the aggregate value of any outstanding award.
5. ELIGIBILITY.
Officers and other employees of the Company or a Related Company, members of
the Board who are not employees of the Company or a Related Company
("Directors"), and Consultants to the Company or a Related Company are eligible
to be granted awards under the Plan; PROVIDED, HOWEVER, that, to the extent
required under Section 422 of the Code, Incentive Stock Options may be granted
only to officers and other employees of the Company or any subsidiary
corporation in which the Company owns, directly or indirectly, stock having 50%
or more of the total combined voting power of all classes of stock, within the
meaning of Section 424(f) of the Code. For purposes hereof, "Consultant" means
an individual who furnishes services to the Company or a Related Company and
(i) is neither an employee of the Company or any Related Company nor a Director
and (ii) in the
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determination of the Committee, has made a significant contribution to the
growth and development of the Company.
The participants under the Plan shall be selected from time to time by the
Committee, in its sole discretion, from among those eligible.
6. TERMS OF STOCK OPTIONS.
6.1 OPTION PRICE. The option price per share of Common Stock purchasable
under a Stock Option shall be determined by the Committee; PROVIDED, HOWEVER,
that the option price of Non-Qualified Stock Options shall not be less than 85%,
and the option price of Incentive Stock Options shall not be less than 100%, of
the fair market value of the Common Stock on the date of award of each such
Stock Option.
6.2 OPTION TERM. The term of each Stock Option shall be ten years from the
date of grant thereof, unless a shorter term is provided for by the Committee at
the time of grant, subject to earlier termination as provided in Sections 6.7
and 6.8 hereof.
6.3 EXERCISABILITY. Except as otherwise provided by the Committee at the
time of grant, or as provided in Section 9 hereof, (i) Stock Options granted to
employees of the Company or a Related Company shall vest and be first
exercisable in annual installments of 25% of the shares originally subject
thereto, commencing on the first anniversary of the date of grant of the Stock
Option, and an additional 25% of such shares each year thereafter, (ii) Stock
Options granted to Directors shall vest and become first exercisable one year
after the date of grant, and (iii) Stock Options granted to Consultants of the
Company or a Related Company shall vest and become first exercisable no earlier
than six months nor later than five years from the date of grant, as determined
by the Committee. The Committee may accelerate an exercise date of any Stock
Option or otherwise waive the installment exercise provisions at any time
(including at time of grant) in whole or in part. Except as provided in
Section 6.7 and 6.8 or otherwise determined by the Committee at any time
(including at the time of grant), a Stock Option shall not be exercisable unless
the optionee is an employee of the Company or a Related Company, or is a
Director of the Company or Consultant to the Company or a Related Company, at
the time of exercise.
6.4 METHOD OF EXERCISE. Stock Options may be exercised in whole or in part
at any time during the option term by giving written notice of exercise to the
Company specifying the number of shares to be purchased, accompanied by payment
of the option price. Payment of the option price shall be made in cash or cash
equivalents or, if permitted by the Committee (either in the option agreement or
at the time of exercise), by delivery of shares of Common Stock already owned by
the optionee or withholding of shares subject to awards hereunder (in each case,
such shares having a fair market value on the date of exercise equal to the
aggregate option price), or in any other manner permitted by law and as
determined by the Committee, or any combination of the foregoing.
6.5 NO SHAREHOLDER RIGHTS. An optionee shall have neither rights to
dividends or other rights of a shareholder with respect to shares subject to a
Stock Option until the optionee has given written notice of exercise and has
paid for such shares.
6.6 NON-TRANSFERABILITY. Except as otherwise determined by the Committee,
(i) no Stock Option shall be transferable by the optionee other than by will or
by the laws of descent and distribution, and (ii) during the optionee's
lifetime, all Stock Options shall be exercisable only by the optionee.
6.7 EFFECT OF TERMINATION OF EMPLOYMENT UNDER CERTAIN CIRCUMSTANCES. If an
optionee who is an employee of the Company or a Related Company ceases to be so
employed, for any reason other than death, retirement, or permanent disability,
any Stock Option held by such optionee under the Plan shall terminate 90 days
after termination of employment. If any such optionee ceases to be an employee
of the Company or a Related Company, by reason of retirement (at age 55 or later
with ten or more
G-3
years of service, at age 62 or later with five or more years of service, at age
65 or later, or at such other age as the Committee may determine) or permanent
disability, any Stock Option held by such optionee may be exercised, to the
extent exercisable on the day preceding the date of such cessation of
employment, at any time within one year after such cessation of employment, at
the end of which period the Stock Option shall terminate. Notwithstanding the
foregoing, the Committee in its sole discretion may provide, at the time of
grant or otherwise, for different rules to apply to the exercisability of Stock
Options held by an optionee at the time of each optionee's cessation of
employment. In no event shall a Stock Option be exercised after the expiration
of the term thereof.
6.8 DEATH OF EMPLOYEE OPTIONEES. If an optionee dies while an employee of
the Company or a Related Company, or within one year after the optionee has
ceased to be an employee by reason of retirement, or by reason of such
optionee's permanent disability, such Stock Option may be exercised, to the
extent exercisable on the day preceding the date such optionee ceases to be an
employee by the estate of such deceased optionee, or by a person or persons who
acquire the right to exercise such option by bequest or inheritance or by reason
of the death of such optionee, at any time within one year after such optionee's
death, or within such shorter period of time as shall be prescribed in the
option agreement, at the end of which period such Stock Option shall terminate.
In no event shall a Stock Option be exercised after the expiration of the term
thereof.
6.9 TERMINATION OF DIRECTOR AND CONSULTANT OPTIONS. Unless otherwise
provided by the Committee at the time of grant or otherwise, Stock Options
granted to Directors and Consultants shall be subject to the following events of
termination:
(a) in the event a Director is removed from the Board, all unexercised
Stock Options held by such Director on the date of such removal (whether or
not vested) shall expire immediately;
(b) in the event a Director ceases to be a member of the Board, other
than by reason of removal, all unexercised Stock Options held by such
Director at the time the Director ceases to be a member of the Board shall
expire, unless vested, and if vested must be exercised within one year of
the Director's last day as a member of the Board; and
(c) in the event a Consultant no longer furnishes services to the
Company or a Related Company, all unexercised Stock Options held by such
Consultant at the time such Consultant ceases to furnish such services shall
expire, unless vested, and if vested must be exercised within ninety
(90) days of the time such Consultant so ceases to furnish services to the
Company.
Notwithstanding the foregoing, in no event shall a Stock Option be exercised
after the expiration of the term thereof.
7. TAX WITHHOLDING.
7.1 Each optionee shall, no later than the date as of which the value of an
award first becomes includible in the optionee's gross income for applicable tax
purposes, pay to the Company, or make arrangements satisfactory to the Committee
regarding payment of, any federal, state, local or other taxes of any kind
required by law to be withheld with respect to the award. The obligations of the
Company under the Plan shall be conditional on such payment or arrangements, and
the Company (and, where applicable, any Related Company), shall to the extent
permitted by law, have the right to deduct any such taxes from any payment of
any kind otherwise due to the optionee.
7.2 To the extent permitted by the Committee, and subject to such terms and
conditions as the Committee may provide, an optionee may elect to have the
withholding tax obligation, or any additional tax obligation with respect to any
awards hereunder, satisfied by (i) having the Company withhold shares of Common
Stock (at its fair market value) otherwise deliverable to the optionee with
respect to the award, or (ii) delivering to the Company shares of Common Stock
(at its fair market value) already owned by the optionee.
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8. AMENDMENTS AND TERMINATION.
The Plan shall terminate on November 11, 2009, and no Stock Option shall be
awarded under the Plan on or after such date. The Board may discontinue the Plan
at any time and may amend it from time to time. No amendment or discontinuation
of the Plan shall adversely affect any award previously granted without the
written consent of the employee, non-employee director or Consultant. Amendments
may be made without shareholder approval except as required to satisfy
Section 162(m) of the Code or, with respect to Incentive Stock Options,
Section 422 of the Code.
9. CHANGE OF CONTROL.
9.1 In the event of a Change of Control, unless otherwise determined by the
Committee at the time of grant or by amendment (with the holder's consent) of
such grant, all outstanding Stock Options awarded under the Plan shall become
fully exercisable and vested.
9.2 A "Change of Control" shall be deemed to occur on the date that any of
the following events occur:
(a) any person or persons acting together which would constitute a
"group" for purposes of Section 13(d) of the Exchange Act (other than the
Company or any subsidiary) shall beneficially own (as defined in Rule 13d-3
of the Exchange Act), directly or indirectly, at least 25% of the total
voting power of all classes of capital stock of the Company entitled to vote
generally in the election of the Board;
(b) either (i) Current Directors (as herein defined) shall cease for any
reason to constitute at least a majority of the members of the Board (for
these purposes, a "Current Director" shall mean any member of the Board as
of the effective date of the Plan, and any successor of a Current Director
whose election, or nomination for election by the Company's shareholders,
was approved by at least two-thirds of the Current Directors then on the
Board) or (ii) at any meeting of the shareholders of the Company called for
the purpose of electing directors, a majority of the persons nominated by
the Board for election as directors shall fail to be elected;
(c) consummation of (i) a plan of complete liquidation of the Company,
or (ii) a merger or consolidation of the Company (A) in which the Company is
not the continuing or surviving corporation (other than a consolidation or
merger with a wholly owned subsidiary of the Company in which all shares of
Common Stock outstanding immediately prior to the effectiveness thereof are
changed into or exchanged for common stock of the subsidiary) or
(B) pursuant to which the Common Stock is converted into cash, securities or
other property, except a consolidation or merger of the Company in which the
holders of the Common Stock immediately prior to the consolidation or merger
have, directly or indirectly, at least a majority of the common stock of the
continuing or surviving corporation immediately after such consolidation or
merger or in which the Board immediately prior to the merger or
consolidation would, immediately after the merger or consolidation,
constitute a majority of the board of directors of the continuing or
surviving corporation; or
(d) consummation of a sale or other disposition (in one transaction or a
series of transactions) of all or substantially all of the assets of the
Company.
10. GENERAL PROVISIONS.
10.1 Each award under the Plan shall be subject to the requirement that, if
at any time the Committee shall determine that (i) the listing, registration or
qualification of the Common Stock subject or related thereto upon any securities
exchange or under any state or federal law, or (ii) the consent or approval of
any government regulatory body or (iii) an agreement by the recipient of an
award with respect to the disposition of Common Stock is necessary or desirable
(in connection with any requirement or interpretation of any federal or state
securities law, rule or regulation) as a
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condition of, or in connection with, the granting of such award or the issuance,
purchase or delivery of Common Stock thereunder, such award shall not be granted
or exercised, in whole or in part, unless such listing, registration,
qualification, consent, approval or agreement shall have been effected or
obtained free of any conditions not acceptable to the Committee.
10.2 Nothing set forth in this Plan shall prevent the Board from adopting
other or additional compensation arrangements. Neither the adoption of the Plan
nor any award hereunder shall confer upon: (i) any employee of the Company, or
of a Related Company, any right to continued employment; (ii) any Director of
the Company any right to continued service on the Board; or (iii) any Consultant
to the Company or a Related Company any right to continued service as a
consultant.
10.3 Determinations by the Committee under the Plan relating to the form,
amount and terms and conditions of awards need not be uniform, and may be made
selectively among persons, who receive or are eligible to receive awards under
the Plan, whether or not such persons are similarly situated.
10.4 With respect to persons subject to Section 16 of the Exchange Act,
transactions under the Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successor under the Exchange Act. To the extent
that any provision of the Plan or action by the Committee fails to so comply, it
shall be deemed null and void, to the extent permitted by law and deemed
advisable by the Committee.
10.5 No member of the Board or the Committee, nor any officer or employee of
the Company acting on behalf of the Board or the Committee, shall be personally
liable for any action, determination or interpretation taken or made with
respect to the Plan, and all members of the Board or the Committee and all
officers or employees of the Company acting on their behalf shall, to the extent
permitted by law, be fully indemnified and protected by the Company in respect
of any such action, determination or interpretation.
11. EFFECTIVE DATE OF PLAN.
The Plan was originally adopted by the Board on November 11, 1999.
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ANNEX H
GENTIVA HEALTH SERVICES, INC.
STOCK & DEFERRED COMPENSATION PLAN
FOR NON-EMPLOYEE DIRECTORS
SECTION 1. INTRODUCTION.
The Gentiva Health Services, Inc. Stock & Deferred Compensation Plan for
Non-Employee Directors (the "Plan") provides for the payment of annual retainer
fees of non-employee directors of Gentiva Health Services, Inc. in the form of
Shares. It also provides an opportunity for the non-employee directors to defer
their annual retainer fees and have them deemed invested in Shares. The Plan is
intended to encourage qualified individuals to accept nominations as directors
of Gentiva Health Services, Inc. and to strengthen the mutuality of interest
between the non-employee directors and Gentiva Health Services, Inc.'s other
shareholders.
SECTION 2. DEFINITIONS.
For purposes of the Plan, the following terms shall be defined as set forth
below:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended from time to
time. References to any provision of the Code shall be deemed to include
successor provisions thereto and regulations thereunder.
(c) "Company" means Gentiva Health Services, Inc., a corporation organized
under the laws of Delaware, or any successor corporation.
(d) "Director" means a member of the Board who is not employed by the
Company or any of its subsidiaries.
(e) "Plan" means this Stock & Deferred Compensation Plan for Non-Employee
Directors.
(f) "Plan Benefits" means the benefits described in Sections 5 and 6 hereof.
(g) "Plan Year" means a period of approximately twelve months beginning on
the date of the Company's annual general meeting of shareholders for a
year and ending on the day immediately preceding the Company's annual
general meeting of shareholders for the following year.
(h) "Shares" means Common Stock, $0.10 par value per share, of the Company.
SECTION 3. ADMINISTRATION.
The Plan shall be administered by the Board. The Board shall have full
authority to construe and interpret the Plan, and any action of the Board with
respect to the Plan shall be final, conclusive, and binding on all persons.
Subject to adjustment as provided in Section 7(g) hereof, the total number of
Shares reserved for issuance under the Plan shall be 150,000.
SECTION 4. ANNUAL RETAINER PAID IN SHARES.
(a) On and after the Effective Date of this Plan, each Director's annual
retainer fee for a Plan Year shall, subject to any deferral election made
pursuant to Section 5 below, be the number of Shares (rounded to the nearest 100
Shares) determined by dividing $25,000 by the average closing price of Shares on
the principal stock exchange or stock market on which the Shares may be listed
or admitted
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to trading for the ten trading days immediately preceding the date of the
Company's annual general meeting of shareholders on the first day of the Plan
Year at which Directors are elected or reelected. Such annual retainer fee shall
be payable on an annual basis 30 days following such annual general meeting of
shareholders. The annual retainer fee payable to a person who becomes a Director
other than at an annual general meeting of shareholders shall be the number of
Shares (rounded up to the nearest Share) determined by multiplying the number of
Shares determined pursuant to the first sentence of this Section 4(a) for the
Plan Year during which such person becomes a Director by a fraction, the
numerator of which is 365 minus the number of days elapsed since the last annual
general meeting of shareholders and the denominator of which is 365. Such Shares
shall be payable on the 30th day following the day on which the person becomes a
Director.
(b) Shares distributed to a Director shall be vested in full at the time of
distribution.
SECTION 5. SHARE UNIT ACCOUNTS.
The Company shall maintain a Share unit account (an "Account") for each
Director. Share units will be credited to each such Account as follows:
(a) Each Director may make an irrevocable election on or before the
December 31 immediately preceding the beginning of a Plan Year by written
notice to the Company, to defer payment of all of the compensation
otherwise payable during the Plan Year as his or her annual retainer fee
for service as a Director. Notwithstanding the foregoing, a Director may
make such an election within 10 days after first becoming eligible to
participate in the Plan, with respect to compensation payable after the
effective date of the election. All compensation which a director elects
to defer pursuant to this Section 5(a) shall be credited in the form of
Share units to the Director's Account. The number of units so credited
will be equal to the number of Shares deferred by the Director in his or
her deferral election. Deferrals of compensation hereunder shall continue
until the Director notifies the Company in writing, on or prior to the
December 31 immediately preceding the commencement of any Plan Year, that
the Director wishes his or her compensation payable during such Plan Year
and succeeding periods to be distributed as shares on a current basis, as
provided above.
(b) If any dividends are payable on Shares during the deferral period,
dividend equivalents equal to the dividend that would have been payable
on the units credited to a Director's Account if such units had
constituted Shares shall be paid to the Director in cash at the time the
corresponding dividends are paid on Shares.
SECTION 6. PLAN BENEFITS.
(a) FORM. The Plan Benefit of a Director shall consist of Shares equal
in number to the Share units in the Director's Account. Such Share units
shall be fully vested at all times. Any fractional Share unit shall be paid
in cash.
(b) DISTRIBUTION.
(i) The Plan Benefit of a Director shall be distributed either (x) in
single lump sum at the time of termination of the Director's service on the
Board or (y) in up to three annual installments beginning at the time of
termination of the Director's service on the Board. Each Director may elect
the form of distribution, and such election must be made in the form
designated by the Company from time to time, must be made within 10 days
after the Director first becomes eligible to participate in the Plan, and
shall be irrevocable once filed with the Company; PROVIDED, HOWEVER, that
Director may file a new election as to the form of distribution if such
election is filed at least one year in advance of termination of service on
the Board. In the absence of a timely election by
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a Director hereunder, the Director shall be deemed to have elected to have
his or her Plan Benefit distributed in a single lump sum at the time of
termination of the Director's service on the Board.
(ii) In the case of the death of a Director, the Director's Plan Benefit
shall be distributed, within a reasonable time as determined by the Company,
after the Director's death to the Director's beneficiary or beneficiaries,
as specified by the Director on a form furnished by and filed with the
Secretary of the Company. If no beneficiary has been designated by the
Director or if no beneficiary survives the Director, the undistributed
balance of his or her Plan Benefit shall be distributed to the Director's
surviving spouse as beneficiary if such spouse is still living or, if not
living, in equal shares to the then living children of the Director as
beneficiaries or, if none, to the Director's estate as beneficiary.
SECTION 7. GENERAL.
(a) NONTRANSFERABILITY. Except as provided in Section 6(b)(ii), no payment
of any Plan Benefit of a Director shall be anticipated, assigned, attached,
garnished, optioned, transferred or made subject to any creditor's process,
whether voluntarily or involuntarily or by operation of law. Any act in
violation of this subsection shall be void.
(b) COMPLIANCE WITH LEGAL AND TRADING REQUIREMENTS. The Plan shall be
subject to all applicable laws, rules and regulations, including, but not
limited to, federal and state laws, rules and regulations, and to such approvals
by any regulatory or governmental agency as may be required. No provision of the
Plan shall be interpreted or construed to obligate the Company to register any
Shares under federal or state securities laws. The transfer by a Director of
Shares distributed pursuant to the Plan will be subject to such restrictions as
the Company deems necessary or desirable in connection with federal or state
securities laws, and Share certificates will bear a legend setting forth any
such restriction.
(c) TAXES. The Company is authorized to withhold from any payment made under
this Plan any amounts of withholding and other taxes due in connection
therewith, and to take such other action as the Company may deem advisable to
enable the Company and a Director to satisfy obligations for the payment of any
withholding taxes and other tax obligations relating thereto.
(d) AMENDMENT. The Board may amend, alter, suspend, discontinue, or
terminate the Plan (including, without limitation, amending the dollar amount
set forth in Section 4(a) hereof) without the consent of shareholders of the
Company or individual Directors; PROVIDED, HOWEVER, that, without the consent of
an affected Director, no amendment, alteration, suspension, discontinuation, or
termination of the Plan may materially impair the rights or, in any other
manner, materially and adversely affect the rights of such Director hereunder.
(e) UNFUNDED STATUS OF AWARDS. This Plan (other than Section 4 hereof) is
intended to constitute an "unfunded" plan of deferred compensation. With respect
to any payments not yet made to a Director, nothing contained in the Plan shall
give any such Director any rights that are greater than those of a general
creditor of the Company; PROVIDED, HOWEVER, that the Company may authorize the
creation of trusts or make other arrangements to meet the Company's obligations
under the Plan to deliver cash, or other property pursuant to any award, which
trusts or other arrangements shall be consistent with the "unfunded" status of
the Plan unless the Company otherwise determines with the consent of each
affected Director.
(f) NONEXCLUSIVITY OF THE PLAN. The adoption of the Plan by the Board shall
not be construed as creating any limitations on the power of the Board to adopt
such other compensation arrangements as it may deem desirable, including,
without limitation, the granting of options on Shares and other awards otherwise
than under the Plan, and such arrangements may be either applicable generally or
only in specific cases.
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(g) ADJUSTMENTS. In the event that subsequent to the Effective Date any
dividend in Shares, recapitalization, Share split, reverse split,
reorganization, merger, consolidation, spin-off, combination, repurchase, or
share exchange, or other such change, affects the Shares such that they are
increased or decreased or changed into or exchanged for a different number or
kind of Shares, other securities of the Company or of another corporation or
other consideration, then in order to maintain the proportionate interest of the
Directors and preserve the value of the Directors' Share units and to maintain
the value of the Plan, there shall automatically be substituted (i) for each
Share unit a new unit and (ii) for the number of Shares set forth in Section 3
above a number of Shares or other consideration, in the case of (i) and
(ii) above, representing the number and kind of Shares, other securities or
other consideration into which each outstanding Share shall be changed or for
which each such Share shall be exchanged. The substituted units shall be subject
to the same terms and conditions as the original Share units.
(h) NO RIGHT TO REMAIN ON THE BOARD. Neither the Plan nor the crediting of
Share units under the Plan shall be deemed to give any individual a right to
remain a director of the Company or create any obligation on the part of the
Board to nominate any Director for reelection by the shareholders of the
Company.
(i) GOVERNING LAW. The validity, construction, and effect of the Plan shall
be determined in accordance with the laws of the State of New York, without
giving effect to principles of conflict of laws thereof.
(j) EFFECTIVE DATE. The Plan shall become effective on the date of the first
annual general meeting of shareholders of the Company at which directors are
elected that occurs after the Effective Time under the Agreement and Plan of
Merger by and among Adecco SA, Staffing Acquisition Corporation and Olsten
Corporation dated as of August 17, 1999 (the "Effective Date").
(k) TITLES AND HEADINGS. The titles and headings of the Sections in the Plan
are for convenience of reference only. In the event of any conflict, the text of
the Plan, rather than such titles or headings, shall control.
H-4
ANNEX I
GENTIVA HEALTH SERVICES, INC.
EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE.
The purpose of this Plan is to provide eligible employees the opportunity to
purchase Gentiva Health Services, Inc. Common Stock on a basis that qualifies
for the tax treatment prescribed by Section 423 of the Code.
2. DEFINITIONS.
The following terms, when used in the Plan, shall have the following
meanings:
(a) "Board" or "Board of Directors" means the Board of Directors of the
Company, as constituted from time to time.
(b) "Code" means the Internal Revenue Code of 1986, as amended from time to
time. References to a particular section of the Code include any successor
provisions.
(c) "Committee" means the committee appointed by the Board of Directors to
administer the Plan pursuant to the provisions of Section 3(a) below.
(d) "Common Stock" means common stock, par value $.10 per share, of the
Company.
(e) "Company" means Gentiva Health Services, Inc., a Delaware corporation.
(f) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
(g) "Fair Market Value" on a particular date means the mean between the
highest and lowest sales prices of a share of Common Stock on the principal
stock exchange or stock market on which the Common Stock may be listed or
admitted to trading. If there were no sales on such date, the respective prices
on the most recent prior day on which sales were reported shall be used. If the
foregoing method of determining fair market value should be inconsistent with
Section 423 of the Code, "Fair Market Value" shall be determined by the
Committee in a manner consistent with Section 423 of the Code and shall mean the
value as so determined.
(h) "Offering" means a period, designated by the Committee in accordance
with the provisions of Section 6 of the Plan, on the first day of which options
will be granted to eligible employees pursuant to Section 8(a) of the Plan and
on the last day of which such options will be deemed exercised or will expire,
as applicable, in accordance with Section 8(b) of the Plan.
(i) "Participant" or "Participating Employee" means an employee of the
Company or a Participating Subsidiary who is eligible to participate in an
Offering under the Plan pursuant to Section 5 below and who elects to
participate in such Offering in accordance with Section 6 below.
(j) "Participating Subsidiary" means, with respect to an Offering under the
Plan, a Subsidiary the employees of which are authorized by the Committee as
provided in Section 5 below to participate in such Offering.
(k) "Plan" means the Gentiva Health Services, Inc. Employee Stock Purchase
Plan set forth herein, as amended from time to time.
(l) "Parent" means a parent corporation as defined in Section 424(e) of the
Code, including a corporation which becomes such a parent in the future.
(m) "Subsidiary" means a subsidiary corporation as defined in
Section 424(f) of the Code, including a corporation which becomes such a
subsidiary in the future.
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(n) "Total Compensation" means, with respect to any Offering, all
remuneration, as defined in Section 3401(a) of the Code (for purposes of income
tax withholding at the source), but determined without regard to any rules that
limit remuneration included in wages based on the nature and location of
employment or the services performed, for services paid to an employee during,
or coincident with the end of, such Offering; PROVIDED, HOWEVER, that "Total
Compensation" shall not include the following items (even if includable in gross
income): (1) reimbursement or other expense allowances; (2) fringe benefits
(cash and noncash); (3) moving expenses and gross up for taxes; (4) welfare
benefits (including disability income from insurance policies); (5) payments on
account of severance of the employee from employment; (6) payments on account of
early retirement of the employee; (7) income arising from the grant or exercise
of stock options; (8) restricted stock awards; and (9) distributions under this
Plan.
3. ADMINISTRATION.
(a) The Plan shall be administered by a committee of the Board consisting of
two or more directors appointed from time to time by the Board.
(b) Subject to the provisions of the Plan, the powers of the Committee shall
include having the authority, in its discretion, to:
(i) define, prescribe, amend and rescind rules, regulations, procedures,
terms and conditions relating to the Plan; and
(ii) interpret, administer and construe the Plan and make all other
determinations necessary or advisable for the administration of the Plan,
including but not limited to correcting defects, reconciling inconsistencies
and resolving ambiguities.
(c) The interpretation by the Committee of the terms and conditions of the
Plan, and its administration of the Plan, and all action taken by the Committee,
shall be final, binding and conclusive on the Company, its stockholders,
Subsidiaries, all Participants and employees, and upon their respective
successors and assigns, and upon all other persons claiming under or through any
of them.
(d) Members of the Board, members of the Committee and persons to whom
authority is delegated under Section 3(e) below acting under this Plan shall be
fully protected in relying in good faith upon the advice of counsel and shall
incur no liability except for gross or willful misconduct in the performance of
their duties.
(e) The Committee may delegate its authority to administer the Plan to any
individuals as the Committee may determine and such individuals shall serve
solely at the pleasure of the Committee. Any individuals who are authorized by
the Committee to administer the Plan shall have the full power to act on behalf
of the Committee, but shall at all times be subordinate to the Committee and the
Committee shall retain ultimate authority for the administration of the Plan.
4. STOCK SUBJECT TO THE PLAN.
(a) Subject to paragraph (c) below, the aggregate number of shares of Common
Stock which may be sold under the Plan is 1,200,000 shares of Common Stock.
(b) If the number of shares of Common Stock that Participating Employees
become entitled to purchase is greater than the number of shares of Common Stock
that are offered in a particular Offering or that remain available under the
Plan, the available shares of Common Stock shall be allocated by the Committee
among such Participating Employees in such manner as it deems fair and
equitable.
(c) In the event of any change in the Common Stock, through
recapitalization, merger, consolidation, stock dividend or split, combination or
exchange of shares, spinoff or otherwise, the
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Committee may make such equitable adjustments in the Plan and the then
outstanding Offerings as it deems necessary and appropriate including, but not
limited to, changing the number of shares of Common Stock reserved under the
Plan, and the purchase price of shares in the current Offering; provided that
any such adjustments shall be consistent with Sections 423 and 424 of the Code.
(d) Shares of Common Stock which are to be delivered under the Plan may be
obtained by the Company from its treasury, by purchasing such shares on the open
market or from private sources, or by issuing authorized but unissued shares of
its Common Stock. Shares of authorized but unissued Common Stock may not be
delivered under the Plan if the purchase price thereof is less than the par
value (if any) of the Common Stock at the time. The Committee may (but need not)
provide at any time or from time to time (including without limitation upon or
in contemplation of a change in control) for a number of shares of Common Stock
equal in number to the number of shares then subject to options under this Plan
to be issued or transferred to, or acquired by, a trust (including but not
limited to a grantor trust) for the purpose of satisfying the Company's
obligations under such options, and, unless prohibited by applicable law, such
shares held in trust shall be considered authorized and issued shares with full
dividend and voting rights, notwithstanding that the options to which such
shares relate might not be exercisable at the time.
5. ELIGIBILITY.
All employees of the Company and any Subsidiaries designated by the
Committee from time to time will be eligible to participate in the Plan, in
accordance with and subject to such rules and regulations as the Committee may
prescribe; provided, however, that (a) such rules shall comply with the
requirements of the Code (including but not limited to Section 423(b)(3),
(4) and (8) thereof), (b) no employee shall be eligible to participate in the
Plan if his or her customary employment is 20 hours or less per week or for not
more than 5 months in any calendar year, unless the Committee determines
otherwise on a uniform and non-discriminatory basis, (c) the Committee may (but
need not) in its discretion exclude employees who have been employed by the
Company or a Participating Subsidiary less than two years and/or highly
compensated employees within the meaning of Section 414(q) of the Code from
being eligible to participate in the Plan or any Offering, but unless and until
otherwise determined by the Committee, only employees who have been employed
less than eight months will be excluded, (d) no employee may be granted an
option under the Plan if such employee, immediately after the option is granted,
owns stock possessing 5% or more of the total combined voting power or value of
all classes of stock of his employer corporation or any Parent or Subsidiary
(with the rules of Section 424(d) of the Code applicable in determining the
stock ownership of an employee, and stock which the employee may purchase under
outstanding options, whether or not such options qualify for the special tax
treatment afforded by Section 421 (a) of the Code, shall be treated as stock
owned by the employee), and (e) all Participating Employees shall have the same
rights and privileges except as otherwise permitted by Section 423(b)(5) of the
Code.
6. OFFERINGS; PARTICIPATION.
The Company may make Offerings of up to 27 months' duration each, to
eligible employees to purchase shares of Common Stock under the Plan, until all
shares authorized to be delivered under the Plan have been exhausted or until
the Plan is sooner terminated by the Board. Subject to the preceding sentence,
the number, commencement date and duration of any Offerings shall be determined
by the Committee in its sole discretion; provided that, unless the Committee
determines otherwise, (a) the first Offering shall commence on February 1, 2000
and shall terminate on June 30, 2000, and (b) a new six-month Offering shall
commence immediately after the end of the previous Offering. The duration of any
Offering need not be the same as the duration of any other Offering, and more
than one Offering may commence or terminate on the same date if the Committee so
provides. Subject to such rules and procedures as the Committee may prescribe,
an eligible employee may elect to participate in an
I-3
Offering at such time(s) as the Committee may permit by authorizing a payroll
deduction for such purpose in one percent increments of up to a maximum of ten
percent of his or her Total Compensation with respect to such Offering or such
lesser amount as the Committee may prescribe. Participant elections may be made
in any manner deemed appropriate by the Committee from time to time, including
by voice response or through the internet. The Committee may (but need not)
permit employee contributions to be made by means other than payroll deductions,
provided that in no event shall an employee's contributions (excluding interest,
if any, credited pursuant to Section 7(a) below) from all sources in any
Offering exceed ten percent of his or her Total Compensation with respect to
such Offering or such lesser amount as the Committee may prescribe. The
Committee may at any time suspend or accelerate the completion of an Offering if
required by law or deemed by the Committee to be in the best interests of the
Company, including in the event of a change in ownership or control of the
Company or any Subsidiary.
7. PAYROLL DEDUCTIONS.
(a) The Company will maintain payroll deduction accounts on its books for
all Participating Employees, and may (but need not) credit such accounts with
interest if (and only if) the Committee so directs at such rate (if any) as the
Committee may prescribe. All employee contributions and any interest thereon
which the Committee may authorize in accordance with the preceding sentence
shall be credited to such accounts. Employee contributions and any interest
credited to the payroll deduction accounts of Participating Employees need not
be segregated from other corporate funds and may be used for any corporate
purpose.
(b) At such times as the Committee may permit and subject to such rules and
procedures as the Committee may prescribe, a Participating Employee may suspend
his or her payroll deduction during an Offering, or may withdraw the balance of
his or her payroll deduction account and thereby withdraw from participation in
an Offering.
(c) Any balance remaining in an employee's payroll deduction account after
shares have been purchased in an Offering pursuant to Section 8(b) below will be
refunded to the Participating Employee. Upon termination of the Plan, all
amounts in the accounts of Participating Employees shall be carried forward into
their payroll deduction accounts under a successor plan, if any, or refunded to
them, as the Committee may decide.
(d) In the event of the termination of a Participating Employee's employment
for any reason, his or her participation in any Offering under the Plan shall
cease, no further amounts shall be deducted pursuant to the Plan and the balance
in the employee's account shall be paid as soon as practicable following such
termination of employment to the employee, or, in the event of the employee's
death, to the employee's beneficiary designated under this Plan or, in the
absence of such a beneficiary designation, to the employee's estate.
8. PURCHASE; LIMITATIONS.
(a) Subject to Section 5 above and within the limitations of Section 8(d)
below, each person who is an eligible employee of the Company or a Participating
Subsidiary on the first day of an Offering under the Plan is hereby granted an
option, on the first day of such Offering, to purchase a number of whole and/or
partial shares of Common Stock at the end of such Offering determined by
dividing ten percent (or such lesser percentage as may be specified by the
Committee as the maximum employee contribution percentage in such Offering) of
such employee's Total Compensation with respect to such Offering, plus such
interest (if any) as the Committee may authorize to be credited during such
Offering in accordance with Section 7(a) above, by 85 percent of the Fair Market
Value of a share of Common Stock on the first date of such Offering or on the
last date of such Offering, whichever is lower, provided that in no event shall
the number of shares of Common Stock that may be purchased
I-4
under any such option exceed 5,000 shares or such higher or lower number of
whole or partial shares as the Committee may have specified in advance of such
Offering as the maximum amount of stock which may be purchased by an employee in
such Offering. The purchase price of such shares under such options shall be
determined in accordance with Section 8(c) below. The Company's obligation to
sell and deliver Common Stock in any Offering or pursuant to any such option
shall be subject to the approval of any governmental authority whose approval
the Committee determines it is necessary or advisable to obtain in connection
with the authorization, issuance, offer or sale of such Common Stock.
(b) As of the last day of the Offering, the payroll deduction account of
each Participating Employee shall be totalled. Subject to the provisions of
Section 7(b) above and 8(d) below, if such account contains sufficient funds as
of that date to purchase one or more whole or partial shares of Common Stock at
the price determined under Section 8(c) below, the Participating Employee shall
be conclusively deemed to have exercised the option granted pursuant to
Section 8(a) above for as many whole or partial shares of Common Stock as the
amount of his or her payroll deduction account (including any contributions made
by means other than payroll deductions and including any interest credited to
the account) at the end of the Offering can purchase (but in no event for more
than the total number of shares that are subject to the option); such employee's
account will be charged for the amount of the purchase and for all purposes
under the Plan the employee will be deemed to have acquired the shares on that
date; and either a stock certificate representing such shares will be issued to
him or her, or the Company's record keeper will make an entry on its books and
records evidencing that such shares have been duly issued or transferred as of
that date, as the Committee may direct. Notwithstanding any provision of the
Plan to the contrary, unless otherwise determined by the Committee, fractional
shares may be purchased under the Plan. Any option granted pursuant to
Section 8(a) above which is not deemed exercised as of the last day of the
Offering in accordance with the foregoing provisions of this Section 8(b) shall
expire on that date.
(c) Unless the Committee determines before the first day of an Offering that
a higher price that complies with Section 423 of the Code shall apply, the price
at which shares of Common Stock may be purchased under each option granted
pursuant to Section 8(a) above shall be the lesser of (i) an amount equal to
85 percent of the Fair Market Value of the Common Stock at the time such option
is granted, or (ii) an amount equal to 85 percent of the Fair Market Value of
the Common Stock at the time such option is exercised.
(d) In addition to any other limitations set forth in the Plan, no employee
may be granted an option under the Plan which permits his or her rights to
purchase stock under the Plan, and any other stock purchase plan of his or her
employer corporation and its Parent and Subsidiary that is qualified under
Section 423 of the Code, to accrue at a rate which exceeds $25,000 of the Fair
Market Value of such stock (determined at the time such option is granted) for
each calendar year in which the option is outstanding at any time. The Committee
may further limit the amount of Common Stock which may be purchased by any
employee during an Offering in accordance with Section 423(b)(5) of the Code.
9. NO TRANSFER.
(a) No option, right or benefit under the Plan may be transferred by any
employee, whether by will, the laws of descent and distribution, or otherwise,
and all options, rights and benefits under the Plan may be exercised during an
employee's lifetime only by such employee.
(b) Book entry accounts and certificates for shares of Common Stock
purchased under the Plan may be maintained or registered, as the case may be,
only in the name of the Participating Employee or, if such employee so indicates
on his or her payroll deduction authorization form, in his or her name jointly
with a member of his or her family, with right of survivorship.
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10. EFFECTIVE DATE AND DURATION OF PLAN.
The Plan shall become effective when adopted by the Board, provided that the
stockholders of the Company approve it within 12 months thereafter. If not so
approved by shareholders, the Plan shall be null, void and of no force or
effect. If so approved, the Plan shall remain in effect until all shares
authorized to be issued or transferred hereunder have been exhausted or until
the Plan is sooner terminated by the Board of Directors, and may continue in
effect thereafter with respect to any options outstanding at the time of such
termination if the Board of Directors so provides.
11. AMENDMENT AND TERMINATION OF THE PLAN.
The Plan may be amended by the Board of Directors, without shareholder
approval, at any time and in any respect, unless shareholder approval of the
amendment in question is required under Section 423 of the Code. The Plan may
also be terminated at any time by the Board of Directors.
12. GENERAL PROVISIONS.
(a) Nothing contained in this Plan shall be deemed to confer upon any person
any right to continue as an employee of or to be associated in any other way
with the Company for any period of time or at any particular rate of
compensation.
(b) No person shall have any rights as a stockholder of the Company with
respect to any shares optioned under the Plan until such shares are issued or
transferred to him or her.
(c) All expenses of adopting and administering the Plan shall be borne by
the Company, and none of such expenses shall be charged to any employee.
(d) The Plan shall be governed by and construed under the laws of the State
of New York, without giving effect to the principles of conflicts of laws of
that State.
(e) The Plan and each Offering under the Plan is intended to qualify as an
"employee stock purchase plan" within the meaning of Section 423 of the Code.
Transactions under the Plan by or with respect to persons subject to
Section 16(b) of the Exchange Act with respect to transactions involving equity
securities of the Company are also intended to qualify for exemption under SEC
Rule 16b-3, unless the Committee specifically determines otherwise. Every
provision of the Plan shall be administered, interpreted and construed to carry
out those intentions.
I-6
ANNEX J
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OMNIBUS AMENDMENT NO. 1
DATED AS OF OCTOBER 7, 1999
BY AND AMONG
OLSTEN CORPORATION
AARONCO CORP.
ADECCO SA,
AND
OLSTEN HEALTH SERVICES HOLDING CORP.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OMNIBUS AMENDMENT
OMNIBUS AMENDMENT NO. 1 dated as of October 7, 1999 (the "Omnibus
Amendment") to each of the Separation Agreement dated as of August 17, 1999, by
and among Olsten Corporation, a Delaware corporation ("Olsten"), Aaronco Corp.,
a Delaware Corporation ("OHS") and Adecco SA, a societe anonyme organized under
the laws of Switzerland ("Adecco") (the "Separation Agreement"); the Employee
Benefits Allocation Agreement dated as of August 17, 1999, by and between Olsten
and OHS (the "Employee Benefits Allocation Agreement"); and the Tax Sharing
Agreement dated as of August 17, 1999, by and among, Olsten, OHS and Adecco (the
"Tax Sharing Agreement" and, collectively with the Separation Agreement and the
Employee Benefits Allocation Agreement, the "Agreements"). Capitalized terms not
otherwise defined in this Omnibus Amendment have the meanings specified in the
Separation Agreement.
W I T N E S S E T H:
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
1. ASSIGNMENT TO OLSTEN HEALTH SERVICES.
1.1 OHS hereby transfers, conveys, assigns and delivers to Olsten Health
Services Holding Corp. all of OHS's rights and interests in the Agreements.
1.2 Olsten Health Services Holding Corp. hereby irrevocably and
unconditionally assumes, and undertakes to pay, honor, discharge and perform
when due or cause to be paid, honored, discharged or performed when due, all of
the debts, liabilities, obligations, commitments and responsibilities of any
nature of OHS pursuant to the Agreements.
1.3 Any and all references to OHS in the Agreements shall, from and after
the date hereof, be deemed to be references to Olsten Health Services Holding
Corp. and, therefore, shall no longer be references to Aaronco Corp.
2. AMENDMENTS TO SEPARATION AGREEMENT.
2.1 The definition of "Consulting Agreements" is deleted in its entirety
and replaced with the following:
"Consulting Agreements" means the Amended and Restated Separation,
Consulting and Non-Competition Agreements dated as of October 7, 1999 by and
among Adecco, Olsten and each of Edward A. Blechschmidt and Stuart Olsten.
3. AMENDMENTS TO EMPLOYEE BENEFITS ALLOCATION AGREEMENT.
3.1 The reference in Section 2(d) to "the Separation, Consulting and
Non-Competition Agreements between Albert, Olsten and the following individuals
dated August 17, 1999;" is hereby amended to refer to "the Amended and Restated
Separation, Consulting and Non-Competition Agreements between Adecco, Olsten and
the following individuals dated as of October 7, 1999".
3.2 The reference in Section 2(d) to "the Separation, Consulting and
Non-Competition Agreement between Olsten and Maureen McGurl dated August 17,
1999" is hereby amended to refer to "the Amended and Restated Separation,
Consulting and Non-Competition Agreement between Olsten and Maureen McGurl dated
as of October 7, 1999".
3.3 The reference in Section 6(a) to the "Olsten Supplemental Retirement
Plan" is deleted.
3.4 New Section 6A is added to read as follows:
6A. Supplemental Executive Retirement Plan.
(a) On or prior to the SERP Transfer Date (as defined below), Olsten
shall amend the Olsten Supplemental Executive Retirement Plan (the "Olsten
SERP") to provide (i) that all accrued benefits thereunder of actively
employed OHS Employees shall be vested in full as of the SERP
Transfer Date (as defined below), (ii) that OHS Employees and their
dependents and beneficiaries shall cease to participate in and accrue
benefits thereunder as of the Olsten SERP transfer date established by
Olsten, which shall be at least two business days prior to the date of the
Effective Time (the "SERP Transfer Date"), and (iii) that no benefits shall
thereafter be payable under the Olsten SERP to OHS Employees, Olsten
Employees who (as of the date hereof) are former Olsten Employees or any of
their dependents or beneficiaries (the "OHS SERP Participants").
(b) As of the SERP Transfer Date, OHS shall establish a nonqualified
supplemental executive retirement plan substantially similar to the Olsten
SERP (the "OHS SERP"), and shall assume all liabilities and obligations with
respect to the OHS SERP Participants under the Olsten SERP, whether arising
prior to on or after the SERP Transfer Date (notwithstanding any subsequent
termination of the Olsten SERP). All such liabilities and obligations shall
cease to be liabilities or obligations of Olsten as of the SERP Transfer
Date.
(c) No termination of an Employee's employment shall be deemed to occur
for purposes of the OHS SERP as a result of any actions taken pursuant to
this Agreement or otherwise as a result of the consummation of the
transactions contemplated by the Separation Agreement, provided that the
Employee remains continuously employed by the OHS Group.
(d) As soon as practicable following the SERP Transfer Date, OHS shall
establish a trust to be used in connection with the OHS SERP (the "OHS SERP
Trust") for the purpose of aiding in the provision of benefits under the OHS
SERP. As of the SERP Transfer Date, Olsten shall cause the trustee of the
trust under the Olsten SERP (the "Olsten SERP Trust") to transfer to the
trustee of the OHS SERP Trust the amount held in the Olsten SERP Trust in
excess of the amount necessary to fully satisfy all remaining benefits and
obligations under the Olsten SERP upon its termination in accordance with
Section 6A(e) and (f) below.
(e) Immediately prior to the Effective Time and after the SERP Transfer
Date, Olsten shall terminate the Olsten SERP, or cause it to be terminated,
shall cause all accrued benefits thereunder of actively employed
participants to be vested in full as of the date of termination of the
Olsten SERP, and all accrued benefits under the Olsten SERP will be
distributed by Olsten, or Olsten will cause such accrued benefits to be
distributed, to each participant or beneficiary as soon as administratively
practicable in the form of a lump sum payment. In the event the amount of
assets in the Olsten SERP Trust (after taking into account the transfer of
assets to the OHS SERP Trust under Section 6A(d) above) exceeds the amount
necessary to pay all accrued benefits in full under the Olsten SERP, the
Closing Intercompany Balance shall be reduced by the amount of such excess.
In the event the amount of assets in the Olsten SERP Trust (after taking
into account the transfer of assets to the OHS SERP Trust under
Section 6A(d) above) is insufficient to pay all accrued benefits under the
Olsten SERP in full, the Closing Intercompany Balance shall be increased by
the amount of such shortfall.
(f) Olsten shall take all actions necessary to effectuate the provisions
of this Section 6A and to terminate the Olsten SERP immediately prior to the
Effective Time and distribute all accrued benefits thereunder in the form of
lump sum payments as soon as practicable thereafter, including, without
limitation, amending the Olsten SERP to provide for (i) vesting of all
accrued benefits of actively employed participants as of the time of
termination of the Olsten SERP and (ii) distribution of all accrued benefits
under the Olsten SERP in the form of a lump sum as soon as administratively
practicable following termination of the Olsten SERP.
4. MISCELLANEOUS.
4.1 Any and all references to Albert in the Agreements shall, from and
after the date hereof, be deemed to be references to Adecco and, therefore,
shall no longer be references to Albert.
J-2
4.2 Any and all references to the Agreements shall refer to the Agreements
as amended by this Omnibus Amendment.
4.3 The execution, delivery and/or effectiveness of this Omnibus Amendment
shall not, except as expressly provided herein, amend, revise, add to or modify
any provision of the Agreements or operate as a waiver of any right, power or
remedy of any party under any of the Agreements, nor constitute a waiver of any
provision of any of the Agreements.
4.4 This Omnibus Amendment shall be governed by, and construed in
accordance with, the laws of the State of Delaware without giving effect to any
provisions thereof relating to conflicts of law.
4.5 This Omnibus Amendment may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement. Delivery of an executed counterpart of a
signature page to this Omnibus Amendment by telecopier shall be effective as
delivery of a manually executed counterpart of this Omnibus Amendment.
J-3
IN WITNESS WHEREOF, the parties hereto have caused this Omnibus Amendment to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
OLSTEN CORPORATION
/s/ EDWARD A. BLECHSCHMIDT
----------------------------------
Name: Edward A. Blechschmidt
Title: President and Chief
Executive Officer
AARONCO CORP.
/s/ EDWARD A. BLECHSCHMIDT
----------------------------------
Name: Edward A. Blechschmidt
Title: President and Chief
Executive Officer
ADECCO SA
/s/ JOHN P. BOWMER
----------------------------------
Name: John P. Bowmer
Title: Chief Executive Officer
/s/ FELIX A. WEBER
----------------------------------
Name: Felix A. Weber
Title: Chief Financial Officer
OLSTEN HEALTH SERVICES HOLDING
CORP., a Delaware corporation
/s/ EDWARD A. BLECHSCHMIDT
----------------------------------
Name: Edward A. Blechschmidt
Title: President and Chief
Executive Officer
J-4
ANNEX K
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- --------------------------------------------------------------------------------
OMNIBUS AMENDMENT NO. 2
DATED AS OF JANUARY 18, 2000
BY AND AMONG
OLSTEN CORPORATION
OLSTEN HEALTH SERVICES HOLDING CORP.
GENTIVA HEALTH SERVICES, INC.
ADECCO SA
AND
STAFFING ACQUISITION CORPORATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OMNIBUS AMENDMENT NO. 2
OMNIBUS AMENDMENT NO. 2 (this "Omnibus Amendment") dated as of January 18,
2000, by and among Olsten Corporation, a Delaware corporation ("Olsten"), Olsten
Health Services Holding Corp., a Delaware corporation ("OHS Holding Corp."),
Gentiva Health Services, Inc., a Delaware corporation ("Gentiva"), Adecco SA, a
societe anonyme organized under the laws of Switzerland ("Adecco"), and Staffing
Acquisition Corporation, a Delaware corporation ("Merger Sub") to each of the
Separation Agreement dated as of August 17, 1999, by and among Olsten, Aaronco
Corp., a Delaware corporation ("OHS") and Adecco (the "Separation Agreement");
the Agreement and Plan of Merger dated as of August 17, 1999 by and among
Adecco, Merger Sub and Olsten (the "Merger Agreement"), the Employee Benefits
Allocation Agreement dated as of August 17, 1999, by and between Olsten and OHS
(the "Employee Benefits Allocation Agreement"); and the Tax Sharing Agreement
dated as of August 17, 1999, by and among Olsten, OHS and Adecco (the "Tax
Sharing Agreement" and, collectively with the Merger Agreement, the Separation
Agreement and the Employee Benefits Allocation Agreement, as certain of the
agreements were previously amended by Omnibus Amendment No. 1 dated as of
October 7, 1999, the "Agreements"). Capitalized terms not otherwise defined in
this Omnibus Amendment have the meanings specified in the Separation Agreement.
W I T N E S S E T H
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
1 ASSIGNMENT TO GENTIVA.
1.1 OHS Holding Corp. hereby transfers, conveys, assigns and delivers to
Gentiva all of OHS Holding Corp.'s rights and interests in the Agreements.
1.2 Gentiva hereby irrevocably and unconditionally assumes, and undertakes
to pay, honor, discharge and perform when due or cause to be paid, honored,
discharged or performed when due, all of the debts, liabilities, obligations,
commitments and responsibilities of any nature of OHS Holding Corp. pursuant to
the Agreements.
1.3 Any and all references to OHS Holding Corp. or OHS in the Agreements
shall, from and after the date hereof, be deemed to be references to Gentiva
and, therefore, shall no longer be references to OHS Holding Corp. or OHS, as
the case may be.
2 AMENDMENTS TO MERGER AGREEMENT. The Merger Agreement is hereby amended
as follows:
2.1 The sixth recital (beginning "Whereas, the Board of Directors of Adecco
. . .") is amended by deleting the language in clause (ii) that reads: "the
increase in the size of the Board of Directors of Adecco and the election of new
directors as contemplated by Section 5.13" and substituting therefor the
following: "the election of Stuart Olsten to the Board of Directors of Adecco".
2.2 Section 2.01(a) is amended by:
2.2.1 Deleting clause (x) in its entirety and substituting the following:
"(x) .25 of a validly issued, fully paid and nonassessable share (the "Split-Off
Consideration") of common stock of OHS (the "OHS Common Stock")"; and
2.2.2 Changing the date of the Deposit Agreement to December 8, 1999.
K-1
2.3 Section 2.01(d) is amended by deleting the last paragraph in its
entirety and substituting the following:
"The 'Cash Election Number' shall be equal to (i) 50% of the number of
shares of Olsten Common Stock outstanding as of immediately prior to the
Effective Time (excluding from outstanding for purposes of the calculation
the number of shares of Olsten Common Stock, if any, owned by Olsten as
treasury stock or owned by Adecco, Merger Sub or any of their wholly-owned
Subsidiaries or by any wholly-owned Subsidiary of Olsten), minus (ii) the
number of shares of Olsten Common Stock represented by Dissenting Shares (as
defined below)."
2.4 Section 2.01(e) is amended by:
2.4.1 Adding the following after the phrase "(i) a number of shares of
Adecco ADSs equal to" in the first sentence of the first paragraph: "the product
of (x) the Stock Consideration and (y)"; and
2.4.2 Deleting the last paragraph in its entirety and substituting the
following:
"The 'Stock Election Number' shall be equal to 50% of the number of shares
of Olsten Common Stock outstanding as of immediately prior to the Effective
Time (excluding from outstanding for purposes of the calculation the number
of shares of Olsten Common Stock, if any, owned by Olsten as treasury stock
or owned by Adecco, Merger Sub or any of their wholly-owned subsidiaries or
by any wholly-owned Subsidiary of Olsten)."
2.5 Section 2.02(c) is amended by deleting the words "Effective Time" each
time it appears and substituting therefor the following: "Olsten Special Meeting
date".
2.6 Section 2.04(a) is amended by deleting the language in the second
sentence that reads: "At least one business day prior to the Effective Time,"
and substituting therefor the following: "Prior to the Effective Time,".
2.7 Section 2.05(b) is amended by:
2.7.1 inserting "and" between "Securities" and "Exchange Commission" in the
penultimate sentence; and
2.7.2 deleting the last sentence in its entirety and substituting the
following:
"If appropriate, the exercise price of the Olsten Options, as adjusted,
shall be converted into CHF at the Federal Reserve's Noon Buying Rate for
U.S. Dollars and CHF on the date on which the Effective Time occurs."
2.8 Section 2.05(i) is amended by deleting the second sentence and
substituting therefor the following:
"Adecco shall take all action necessary to reserve for issuance or otherwise
make available a sufficient number of Adecco ADSs for delivery to holders of
Quantum Debt surrendering the instruments evidencing such Quantum Debt, if
OHS shall have used all reasonable efforts to acquire Adecco ADSs (or Adecco
common stock) to satisfy such obligations to the holder of Quantum Debt
(provided that OHS shall not be required to pay more than fair market value
therefor), and nevertheless shall have failed so to acquire such Adecco
ADSs, upon the request of OHS and upon payment by OHS of the fair market
value of such Adecco ADSs, shall provide such Adecco ADSs to OHS in
satisfaction of such exchange obligation."
2.9 Section 2.06 is amended by deleting in its entirety and substituting the
following:
"Section 2.06 FRACTIONAL SHARES. (a) Notwithstanding any other provision of
this Agreement, each holder of shares of Olsten Common Stock who upon
surrender of all of the Certificates of such holder would be entitled to
receive a fraction of an Adecco ADS or Adecco Common Stock shall
K-2
receive from the Exchange Agent, in lieu of such fractional share, cash
payment representing such holder's proportionate interest in the proceeds
from the sale by the Exchange Agent in one or more transactions of the
number of Adecco ADSs (or shares of Adecco Common Stock represented by such
Adecco ADSs) over the aggregate number of whole Adecco ADSs to be
distributed to the holders of Olsten Common Stock pursuant to Section 2.04
hereof. The sale of such excess Adecco ADSs (or shares of Adecco Common
Stock represented by such excess Adecco ADSs) by the Exchange Agent, as
agent for the holders that would otherwise receive fractional shares, shall
be executed in such amounts and manner as the Exchange Agent may, in its
sole discretion, determine. Until the proceeds of such sale or sales have
been distributed to the holders of Olsten Common Stock who would be
otherwise entitled to receive fractional shares of Adecco ADS or Adecco
Common Stock, the Exchange Agent shall hold such proceeds in trust for such
holders. Without duplication and unless the context otherwise clearly
requires, all references in this Agreement to Adecco ADSs or Adecco Common
Stock to be issued as Stock Consideration shall be deemed to include cash in
lieu of fractional shares of Adecco ADSs or Adecco Common Stock, as
applicable, payable pursuant to this Section 2.06.
(b) Notwithstanding any other provision of this Agreement, each holder
of shares of Olsten Common Stock who upon surrender of all of the
Certificates of such holder would be entitled to receive fractional shares
of OHS Common Stock shall receive, in lieu of such fractional shares, cash
in an amount equal to such fraction multiplied by the Market Value of OHS
Common Stock. "Market Value of OHS Common Stock" shall mean the last
reported sale price of OHS Common Stock as reported on a national securities
exchange or NASDAQ on the first full trading day following the Effective
Time. Without duplication and unless the context otherwise clearly requires,
all references in this Agreement to OHS Common Stock to be issued as
Split-Off Consideration shall be deemed to include any cash in lieu of
fractional shares of OHS Common Stock payable pursuant to this
Section 2.06(b)."
2.10 Section 2.07(a) is amended by adding to the penultimate sentence after
the words "Closing Consideration" the following:
"(with the holder being deemed to have made a Cash Election),"
2.11 Section 5.08 is amended to add the following at the end:
"provided that Adecco shall pay OHS for aggregate out-of-pocket expenses in
the amount of $135,000 to implement the changes contemplated in the
Contribution Agreement (as defined in the Separation Agreement)."
2.12 A new Section 5.19 is hereby added immediately following Section 5.18
as follows:
"Section 5.19 ADECCO LOAN.
(a) DEFINITIONS.
"Incurrence Date" means January 18, 2000 or such other business day as
Adecco, Inc., Adecco and Olsten shall agree upon in writing.
"Promissory Note" means the promissory note to be issued by Olsten to
Adecco, Inc. on the Incurrence Date, substantially in the form attached hereto
as Exhibit E, in the principal amount of $30 million.
"Term Loan" means a term loan in the amount of $30 million that may be made
by Adecco, Inc., a Delaware corporation, to Olsten, subject to the prior
satisfaction of the conditions set forth in Section 5.19(c) hereof, on the
Incurrence Date.
(b) LOAN COMMITMENT. Subject to and upon the conditions set forth in
Section 5.19(c) hereof, Adecco agrees to cause Adecco, Inc. to make the Term
Loan to Olsten on the Incurrence Date, which
K-3
Term Loan: (x) shall be incurred pursuant to a single drawing on the Incurrence
Date and (y) shall be denominated in U.S. dollars. Once repaid, the Term Loan
incurred hereunder may not be reborrowed.
(c) CONDITIONS.
The obligations of Adecco and Adecco, Inc. to Olsten with respect to
Adecco, Inc.'s commitment to make the Term Loan shall be subject to the
satisfaction of the following conditions prior to the disbursement of funds:
(i) No event shall have occurred and be continuing that would
constitute a default, or with the passage of time or the giving of notice or
both, would constitute a default under the Promissory Note or would entitle
Adecco, Inc. to accelerate a balance due, if any, under the Promissory Note;
(ii) On or prior to the Incurrence Date, Olsten shall have issued and
delivered to Adecco, Inc., and Adecco, Inc. shall have received from Olsten,
the Promissory Note;
(iii) On or prior to the Incurrence Date, Olsten and OHS shall have
entered into the Contribution Agreement;
(iv) On the Incurrence Date, Adecco shall have received a certificate,
dated the Incurrence Date and signed by each of the Chief Executive Officer
and the Chief Financial Officer of Olsten, certifying the following:
(1) Olsten has all requisite corporate or other power and authority
to issue, execute, sell and deliver the Promissory Note and to perform
its obligations thereunder;
(2) The Promissory Note (x) has been duly and validly authorized by
Olsten for issuance and delivery to Adecco, Inc. on the Incurrence Date,
(y) has been duly executed and delivered by Olsten and (z) is the legal,
valid and binding obligation of Olsten, enforceable against Olsten in
accordance with its terms;
(3) The issuance of the Promissory Note and the incurrence of the
Term Loan will not (x) violate Olsten's charter or bylaws or other
organizational documents, (y) result in the default in the performance of
any bond, debenture, note, indenture, mortgage, deed of trust or other
agreement or instrument to which it is a party or by which it is bound or
to which any of its properties is subject or (z) violate any local,
state, federal or foreign law, statute, ordinance, rule, regulation,
requirement, judgment or court decree; and
(4) The conditions set forth in Sections 5.19(c)(i)-(iii) hereof
have been satisfied; and
(v) Adecco shall have received copies of such documents and papers as
it may reasonably request in connection with the Term Loan.
2.13 Cross references to terms defined in Section 5.19 are added to
Section 11.01, and the Promissory Note which is Exhibit A to this Omnibus
Amendment is added as Exhibit E to the Merger Agreement.
2.14 Section 7.03 of the Merger Agreement will be amended to read as
follows:
"Section 7.03 MATERIAL ADVERSE EFFECT. No Olsten Material Adverse Effect
shall have occurred since the date of this Agreement and be continuing;
provided that this Section 7.03 shall cease to be a condition to the Closing
from and after January 31, 2000."
2.15 Section 8.03 of the Merger Agreement will be amended to read as
follows:
"Section 8.03 MATERIAL ADVERSE EFFECT. No Adecco Material Adverse Effect
shall have occurred since the date of this Agreement and be continuing;
provided that this Section 8.03 shall cease to be a condition to the Closing
from and after January 31, 2000."
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2.16 Section 10.01(b) is amended by changing references to the date
"March 31, 2000" to "May 31, 2000".
3 AMENDMENTS TO SEPARATION AGREEMENT. The Separation Agreement is hereby
amended as follows:
3.1 Section 1.01 is amended by inserting in alphabetical order the
following:
"CONTRIBUTION AGREEMENT" means the Contribution and Sale Agreement dated as
of January 18, 2000 by and among Olsten, Gentiva Health Services, Inc. and
DNH Medical Management, Inc. in the form attached hereto as Exhibit C.
"GENTIVA" means Gentiva Health Services, Inc., a Delaware corporation which
has assumed the obligations of OHS under this Agreement.
3.2 Section 2.02 is amended by deleting it in its entirety and substituting
the following:
"Section 2.02 CONSIDERATION FOR TRANSFERRED ASSETS. In full consideration
for the Transferred OHS Assets and in accordance with the Contribution
Agreement, (i) prior to the Effective Time, OHS shall issue to Olsten a
number of shares of OHS Common Stock that, together with the shares of OHS
Common Stock held by Olsten prior to that date, shall be sufficient to
enable Olsten and OHS to perform their obligations under the Merger
Agreement, and (ii) OHS shall assume the Assumed OHS Liabilities. In full
consideration of the Transferred Olsten Assets, Olsten shall pay, perform
and discharge the Olsten Liabilities."
3.3 Section 2.03(a) is amended by deleting the language "simultaneously with
the transfer of Assets pursuant to Section 2.01,".
3.4 Section 2.05(b)(v) is amended to read in its entirety as follows:
"(v) The outstanding OHS Common Stock, and the OHS Common Stock to be issued
pursuant to Section 2.02, has been duly authorized and is, or when issued
will be, validly issued, fully paid, nonassessable, and free of preemptive
rights. The Series A Cumulative Non-Voting Redeemable Preferred Stock of
Gentiva to be issued pursuant to the Contribution Agreement has been duly
authorized and when issued will be validly issued, fully paid,
nonassessable, and free of preemptive rights."
3.5 Section 2.08 is amended by:
3.5.1 Deleting all references to "Closing Date" in clause (a) and
substituting therefor "True-Up Date";
3.5.2 Deleting clause (b) in its entirety; and
3.5.3 Adding the following as a new clause (d):
"(d) Without limiting the foregoing, prior to the Effective Time, Olsten and
Gentiva shall enter into and each shall fully perform its respective obligations
under the Contribution Agreement."
3.6 Section 2.09 is amended by:
3.6.1 Deleting clause (c)(ii) in its entirety and substituting the
following:
"(ii) less than $750 million, then the New Intercompany Account shall
reflect a payable by Olsten to OHS equal to the amount of such shortfall
(the "True-Up Amount")":
3.6.2 Deleting clause (d) in its entirety and substituting the following:
"No later than the close of business on the business day following the
Effective Time, the Closing Intercompany Balance shall be settled by OHS or
Olsten, as the case may be, delivering to the
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other a cash payment in an amount equal to the amount owing by such party to
the other, if any, plus applicable accrued and unpaid interest. At the
Effective Time, the True-Up Intercompany Balance shall be contributed to the
capital of OHS."
3.6.3 Adding the following as a new clause (f):
"(f) Olsten represents that, at the close of business on the True-Up Date,
the consolidated indebtedness and cash of Olsten and the Retained
Subsidiaries were $741 million and $30 million, respectively. Olsten
represents that at the close of business on the True-Up Date Net Debt was
$721 million and the True-Up Amount was $29 million. To the extent that
Olsten or any Retained Subsidiary shall after the True-Up Date advance funds
to or on behalf of, or otherwise, actually or contingently, become a
creditor of, OHS or any of the Health Subsidiaries (collectively, an
"Advance"), such Advance shall be reflected in the New Intercompany Account
as a payable in the amount of such Advance by Olsten to OHS. For purposes of
determining the balance at any time of the new Intercompany Account, which
earns interest, all receivables and payables shall be netted. If after
making an Advance, the aggregate amount of Advances after the True-Up Date
would exceed the True-Up Amount, such Advance may be made only in the
ordinary course of business; PROVIDED, HOWEVER, that an Advance may be made
only with the prior written consent of Adecco if, after making such Advance,
the aggregate amount of Advances after the True-Up Date would exceed the
True-Up Amount by $50 million or more. If the aggregate amount of Advances
made after the True-Up Date exceeds the True-Up Amount, the amount of such
excess Advances shall bear interest based on the average daily balance of
Advances at the rate which The Chase Manhattan Bank announces from time to
time as its prime lending rate."
3.64 Adding the following as a new clause (g):
"(g) The True-Up Amount shall bear interest from the True-Up Date to the
earlier of (i) the Effective Time and (ii) the date that Advances made after
the True-Up Date exceed the True-Up Amount, at 6% per annum on the average
daily balance on the excess of the True-Up amount over the Advances."
3.7 A new Section 4.04(g) is hereby added immediately following
Section 4.04(f) as follows:
"(g) For purposes of Article IV, the Shareholder Liabilities shall be
treated as a Third-Party Claim as to which OHS has elected to assume the
defense. The attorneys representing the defendants in the lawsuits
identified in the definition of Shareholder Liabilities set forth in
Section 1.01 shall be treated as attorneys employed by OHS and deemed
satisfactory to Olsten."
3.8 Section 7.02 is amended to read in its entirety as follows:
"Section 7.02. AMENDMENT. Neither this Agreement, nor any agreement attached
as an Exhibit when executed, may be amended except by an instrument in
writing signed on behalf of Olsten, OHS, and Adecco."
3.9 Section 7.04 is amended by adding the following as the last sentence:
"The foregoing notwithstanding Adecco shall pay OHS for aggregate
out-of-pocket expenses in the amount of $135,000 to implement the changes
contemplated by the Contribution Agreement."
3.10 Schedule 1 shall be amended to include Olsten Healthcare Holding Corp.
as a Health Subsidiary.
3.11 Exhibit C shall be added to the Separation Agreement, which shall be
the form of Contribution Agreement attached as Exhibit B to this Omnibus
Amendment.
4 AMENDMENTS TO TAX SHARING AGREEMENT. The Tax Sharing Agreement attached
hereto as Exhibit C is substituted for the Tax Sharing Agreement.
K-6
5 CONDITIONS TO EFFECTIVENESS.
This Omnibus Amendment shall become effective as of the date when, and only
when, (a) Adecco and Olsten shall have received counterparts of this Omnibus
Amendment and the Contribution Agreement executed by the other parties hereto
and thereto, (b) Adecco shall have received the Promissory Note, executed by
Olsten and (c) Olsten shall have received the proceeds from the Term Loan.
6 MISCELLANEOUS.
6.1 Any and all references to the Agreements shall refer to the Agreements
as amended by this Omnibus Amendment.
6.2 The execution, delivery and/or effectiveness of this Omnibus Amendment
shall not, except as expressly provided herein, amend, revise, add to or modify
any provision of the Agreements or operate as a waiver of any right, power or
remedy of any party under any of the Agreements, nor constitute a waiver of any
provision of any of the Agreements.
6.3 This Omnibus Amendment shall be governed by and construed in accordance
with, the laws of the State of Delaware without giving effect to any provision
thereof relating to conflicts of law.
6.4 This Omnibus Amendment may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement. Delivery of an executed counterpart of a
signature page to this Omnibus Amendment by telecopier shall be effective as
delivery of a manually executed counterpart of this Omnibus Amendment.
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IN WITNESS WHEREOF, the parties hereto have caused this Omnibus Amendment
No. 2 to be executed by their respective officers thereunto duly authorized, as
of the date first above written.
OLSTEN CORPORATION
By: /s/ Edward A. Blechschmidt
Name: Edward A. Blechschmidt
Title: President and Chief Executive Officer
GENTIVA HEALTH SERVICES, INC.
By: /s/ Edward A. Blechschmidt
Name: Edward A. Blechschmidt
Title: President and Chief Executive Officer
ADECCO SA
By: /s/ John P. Bowmer
Name: John P. Bowmer
Title: Chief Executive Officer
By: /s/ Felix A. Weber
Name: Felix A. Weber
Title: Chief Financial Officer
OLSTEN HEALTH SERVICES HOLDING CORP.
By: /s/ Edward A. Blechschmidt
Name: Edward A. Blechschmidt
Title: President and Chief Executive Officer
STAFFING ACQUISITION CORPORATION
By: /s/ John P. Bowmer
Name: John P. Bowmer
Title: Chief Executive Officer
By: /s/ Felix A. Weber
Name: Felix A. Weber
Title: Chief Financial Officer
K-8
EXHIBIT A TO
OMNIBUS AMENDMENT NO. 2
[FORM OF PROMISSORY NOTE]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR QUALIFIED UNDER ANY STATE SECURITIES LAW.
U.S. $30,000,000.00 Dated: January 18, 2000
1 PRINCIPAL.
FOR VALUE RECEIVED, the undersigned, OLSTEN CORPORATION., a Delaware
corporation (the "MAKER"), HEREBY PROMISES TO PAY to ADECCO, INC., a Delaware
corporation (the "HOLDER"), the aggregate principal sum of thirty million U.S.
dollars (U.S. $30,000,000.00) (the "PRINCIPAL"), plus interest on the unpaid
Principal from January 18, 2000 (the "INTEREST") at the Prime Rate (as defined)
per annum (computed on the basis of a year of 365 or 366 days, as the case may
be, for the actual number of days elapsed), upon the terms and subject to the
conditions provided for in this Note.
2 PAYMENTS.
2.1 PAYMENT OF INTEREST. The Maker shall pay Interest quarterly on
March 31, June 30 and September 30 and December 31 of each year (each an
"INTEREST PAYMENT DATE"), commencing on June 30, 2000. Interest on this Note
shall accrue from the most recent date to which Interest has been paid or, if no
interest has been paid, from January 18, 2000. The Company shall pay interest on
overdue principal from time to time on demand at a rate that is 1% per annum in
excess of the rate then in effect.
2.2 PRINCIPAL; FINAL MATURITY. All unpaid principal and accrued and unpaid
Interest under this Note shall be due and payable in full on the earlier of
(i) the Effective Time (as defined) and (ii) 90 days after the Notice Date (as
defined) (such earlier date, the "MATURITY DATE").
2.3 PAYMENT DATE. Any payments called for in Sections 2.1 and 2.2 or
otherwise under this Note shall be made on the respective days designated or, if
not a business day, the first business day thereafter. As used herein, "BUSINESS
DAY" means a day other than a Saturday, Sunday or a day on which banks are
authorized to close in New York City.
2.4 ACCELERATION. In the event of (i) any default in payment of Interest
due hereunder which default remains uncured for ten (10) days after written
notice thereof from the Holder to the Maker, (ii) any default in payment of the
principal when the same becomes due and payable at the Maturity Date, (iii) any
failure by any party to the Contribution and Sale Agreement (as defined) to
observe or perform in any material respect any covenant, representation, or
other agreement in the Contribution and Sale Agreement, (iv) any failure by the
Maker or any of its subsidiaries parties to the Separation Agreement (as
defined) to observe or perform in any material respect any covenant,
representation, or other agreement in the Separation Agreement or the Merger
Agreement, (v) a default under any instrument under which there may be issued or
by which there may be secured or evidenced any Indebtedness (as defined) or any
guarantee of Indebtedness by the Maker or any of its Subsidiaries (as defined),
whether such Indebtedness exists on the date of the issuance of this Note, or is
created after the date of the issuance of this Note, which default results or,
with the passage of time or the giving of notice or both, may result in the
acceleration of such Indebtedness prior to its express maturity and, in each
case, the principal amount of such Indebtedness, together with the principal
amount of any other such Indebtedness the maturity of which has been or may be
so accelerated, aggregates $5,000,000 or more, (vi) a final judgment or final
judgments for the payment of money are entered by a court or courts of competent
jurisdiction against the Maker or any of its Subsidiaries and such judgment or
judgments remain undischarged for a period (during which execution shall not be
effectively stayed) of 30 days, provided that the aggregate of all such
undischarged judgments exceeds $1,000,000 of more, (vii) the Maker or any of its
Subsidiaries (a) commences a voluntary case, (b) consents to the entry of
an order for relief against it in an involuntary case, (c) consents to the
appointment of a custodian of it or for all or substantially all of its
property, (d) makes a general assignment for the benefit of its creditors, or
(e) generally is not paying its debts as they become due, in each case, pursuant
to or within the meaning of Bankruptcy Law (as defined), (viii) a court of
competent jurisdiction enters an order or decree under any Bankruptcy Law, which
order or decree remains unstayed and in effect for 30 consecutive days, that
(a) is for relief against the Maker or any of its Subsidiaries in an involuntary
case, (b) appoints a custodian of the Maker or any of its Subsidiaries or for
all or substantially all of the property of the Maker or any of its Subsidiaries
or (c) orders the liquidation of the Maker or any of its Subsidiaries, or
(ix) the Maker fails to comply with any of the provisions of Section 6 hereof,
the Holder may, at his sole discretion, declare this Note in default and, in
such event, all sums of accrued but unpaid Interest and principal shall be
accelerated and be immediately due and payable. Upon a default, Interest shall
continue to accrue at the rate provided for herein on all sums of accrued but
unpaid Interest, together with unpaid principal, until all such sums are paid.
2.5 ORDERING OF PAYMENTS. All payments hereunder shall be credited
(i) first to the payment of costs and expenses to the extent provided for under
Section 5, (2) second to the accrued but unpaid Interest, and (3) third to the
Principal.
3 MANNER OF PAYMENT.
3.1 Each payment under this Note shall be payable to the Holder in lawful
currency of the United States of America and sent to the following address:
Attention: Mark Eaton
Adecco, Inc.
100 Redwood Shores Parkway
Redwood City, CA 94065
or to such address as the Holder shall notify the Maker; PROVIDED, that, such
change of address notice is made in accordance with Section 9 and is received by
the Maker not less than five (5) business days prior to the scheduled date of a
payment.
3.2 Notwithstanding the provisions of Section 3.1, in the event the Holder
provides the Maker with wire transfer instruction not less than five
(5) business days prior to the scheduled date of payment, the Maker shall be
required to make such payment to the Holder by wire transfer of immediately
available funds.
4 PREPAYMENT.
At any time or from time to time the Maker may prepay all or any portion of
the principal amount of this Note, together with Interest accrued but unpaid,
without penalty or premium, with prior written notice to the Holder, which
notice shall specify the date and amount of such prepayment (the "PREPAYMENT
NOTICE"). The Prepayment Notice shall set forth a proposed prepayment date which
shall be not less than five (5) nor more than thirty (30) days after the date of
the Prepayment Notice. A Prepayment Notice shall create an obligation of the
Maker to pay the amount specified on the date specified in such Prepayment
Notice. The Maker may prepay with or without prior notice all or any portion of
accrued Interest at any time without premium or penalty, from time to time.
Any prepayment permitted pursuant to this Note shall be made as provided in
Section 3. Immediately upon any prepayment of this Note as set forth above, the
Holder shall surrender this Note to the Maker for (i) cancellation in the case
of full prepayment or (ii) appropriate notation on, or replacement of, the Note
in the case of a partial prepayment. If the Note is not surrendered upon
prepayment in full of this Promissory Note, such notation shall be made in the
books and records of the Maker.
K-A-2
5 COST INCURRED BY HOLDER.
If any default occurs in any payment due under this Note, the Maker shall
pay all reasonable costs and expenses, including attorneys' fees, incurred by
the Holder in collecting or attempting to collect the indebtedness under this
Note, whether or not any action or proceeding is commenced.
6 WRITTEN CONSENT.
The Maker shall not, and shall not permit any of its Subsidiaries, to incur
any (i) Attributable Debt in respect of any sale and lease back transaction,
(ii) Hedging Obligations or (iii) Capital Lease Obligations, in each case,
without the prior written consent of the Holder.
7 SEVERABILITY.
In the event that any one or more provisions of this Note shall be held to
be illegal, invalid or otherwise unenforceable, the same shall not affect any
other provision of this Note and the remaining provisions of this Note shall
remain in full force and effect.
8 CERTAIN DEFINITIONS.
In this Note:
"ATTRIBUTABLE DEBT" shall mean, in respect of a sale and leaseback
transaction, at the time of determination, the present value of the obligation
of the lessee for net rental payments during the remaining term of the lease
included in such sale and leaseback transaction including any period for which
such lease has been extended or may, at the option of the lessor, be extended.
Such present value shall be calculated using a discount rate equal to the rate
of interest implicit in such transaction, determined in accordance with GAAP.
"BANKRUPTCY LAW" shall mean Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"BUSINESS DAY" shall have the meaning set forth in Section 2.3.
"CAPITAL LEASE OBLIGATIONS" shall mean, at any time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at that time be required to be capitalized on a balance sheet in
accordance with GAAP.
"CAPITAL STOCK" shall mean (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"CONTRIBUTION AND SALE AGREEMENT" shall mean that certain Contribution and
Sale Agreement, dated as of January 18, 2000, by and among the Maker, Gentiva
Health Services, Inc., a Delaware corporation, and DNH Medical
Management, Inc., a California corporation doing business as The Camden Group,
as such agreement may be amended from time to time.
"EFFECTIVE TIME" shall have the meaning assigned to it in the Merger
Agreement.
"GAAP" shall mean generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
K-A-3
"HEDGING OBLIGATIONS" shall mean, with respect to any specified Person, the
obligations of such Person under (i) interest or currency swap agreements,
interest rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates or currency exchange rates.
"HOLDER" shall have the meaning set forth in Section 1.
"INDEBTEDNESS" shall mean, with respect to any specified Person, any
indebtedness of such Person, whether of not contingent, in respect of
(i) borrowed money, (ii) evidenced by bonds, notes, debentures or similar
instruments or letters of credit (or reimbursement agreements in respect
thereof), (iii) banker's acceptances, (iv) the balance deferred and unpaid of
the purchase price of any property, except any such balance that constitutes an
accrued expense or trade payable, (v) indebtedness described in clauses
(i)-(iv) of this definition of any other person secured by a Lien on any asset
of the specified Person (whether or not such Indebtedness is assumed by the
specified Person) and (vi) guarantee by the specified Person of any indebtedness
described in clauses (i)-(v) of this definition of any other Person.
"INTEREST" shall have the meaning set forth in Section 1.
"INTEREST PAYMENT DATE" shall have the meaning set forth in Section 2.1.
"MAKER" shall have the meaning set forth in Section 1.
"MATURITY DATE" shall have the meaning set forth in Section 2.2.
"MERGER AGREEMENT" shall mean that certain Agreement and Plan of Merger,
dated August 17, 1999, by and among the Maker, Adecco SA, a societe anonyme
organized in Switzerland, and Staffing Acquisition Corporation, a Delaware
corporation, as amended from time to time.
"NOTICE DATE" shall mean the first date on which any notice of termination
or abandonment is delivered by any party or parties to the Merger Agreement
pursuant to Article X of the Merger Agreement.
"PERSON" shall mean any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"PREPAYMENT NOTICE" shall have the meaning set forth in Section 4.
"PRIME RATE" shall mean the rate which The Chase Manhattan Bank announces
from time to time as its prime lending rate, the Prime Rate to change when and
as such prime lending rate changes.
"PRINCIPAL" shall have the meaning set forth in Section 1.
"SEPARATION AGREEMENT" shall mean that certain Separation Agreement, dated
August 17, 1999, by and among the Maker, Adecco SA and Aaronco Corp, a Delaware
corporation, as amended from time to time.
"SUBSIDIARY" shall mean, with respect to any specified Person, (i) any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, mangers or
trustees thereof is at the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of that Person (or a
combination thereof and (ii) any partnership (a) the sole general partner or the
managing general partner of which is such Person or a Subsidiary of such Person
or (b) the only general partners of which are such Person or one or more
Subsidiaries of such Person (or any combination thereof).
K-A-4
9 NOTICES.
Other than as the Maker and the Holder may otherwise agree in writing,
notices sent by the Maker or the Holder hereunder shall be made in writing as
follows:
If to the Maker, to:
Olsten Corporation
175 Broad Hollow Road
Melville, New York 11747
Attention: Edward A. Blechschmidt
Telephone: (516) 844-7220
Telecopy: (516) 844-7335
With a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Attention: Kenneth W. Orce, Esq.
Telephone: (212) 701-3000
Telecopy: (212) 269-5420
If to the Holder, to:
Adecco, Inc.
100 Redwood Shores Parkway
Redwood City, CA 94065
Attention: Mark Eaton
Telephone: (650) 610-1000
Telecopy: (650) 413-4480
With a copy to:
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
Attention: Thomas W. Dobson, Esq.
Telephone: (213) 485-1234
Telecopy: (213) 891-8763.
10 HEADINGS.
Headings used in this Note are inserted for convenience only and shall not
be deemed to constitute a part hereof.
11 GOVERNING LAW.
THIS NOTE IS AND SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICT OF LAWS.
12 TRANSFERABILITY.
This Note shall be binding upon and shall inure to the benefit of the Holder
and the Maker and their respective heirs and permitted successors and assigns,
if any.
K-A-5
13 WAIVER OF PRESENTMENT, ETC.
Except as otherwise provided herein, presentment, demand, protest, notice of
dishonor and all other notices are hereby expressly waived by the Maker.
14 USURY.
Nothing contained in this Note shall be deemed to establish or require the
payment of a rate of interest in excess of the maximum rate legally enforceable.
If the rate of interest called for under this Note at any time exceeds the
maximum rate legally enforceable, the rate of interest required to be paid
hereunder shall be automatically reduced to the maximum rate legally
enforceable. If such interest rate is so reduced and thereafter the maximum rate
legally enforceable is increased, the rate of interest required to be paid
hereunder shall be automatically increased to the lesser of the maximum rate
legally enforceable and the rate otherwise provided for in this Note.
15 WAIVER.
No waiver or modification of any of the terms of this Note shall be valid or
binding unless set forth in a writing specifically referring to this Note and
signed by a duly authorized officer of the Maker or the Holder, and then only to
the extent specifically set forth therein. None of the provisions of this Note
and none of the Holder's rights or remedies under this Note on account of any
past or future defaults shall be deemed to have been waived by the Holder's
acceptance of any past due installments or by indulgence granted by the Holder
to the Maker.
(Signature page follows)
K-A-6
IN WITNESS WHEREOF, this Promissory Note has been duly executed as of the
first date set forth above.
OLSTEN CORPORATION
By:
-----------------------------------------
Name:
Title:
K-A-7
EXHIBIT B TO
OMNIBUS AMENDMENT
[FORM OF CONTRIBUTION AND SALE AGREEMENT]
This Contribution and Sale Agreement, dated as of January 18, 2000 (the
"Agreement"), is entered into by and among Olsten Corporation, a Delaware
corporation ("Olsten"), Gentiva Health Services, Inc., a Delaware Corporation
("Gentiva") and DNH Medical Management, Inc., a California corporation doing
business as The Camden Group ("Camden").
RECITALS
A. WHEREAS, Olsten and Adecco SA, ("Adecco") a societe anonyme organized in
Switzerland, entered into an Agreement and Plan of Merger, dated August 17,
1999, as subsequently amended (the "Merger Agreement").
B. WHEREAS, Olsten, Gentiva (formerly named Aaronco Corp.) and Adecco
entered into a Separation Agreement, dated August 17, 1999, as subsequently
amended (the "Separation Agreement").
C. WHEREAS, Olsten owns 100 shares of common stock of Olsten Health Services
Holding Corp. ("OHS"), a Delaware corporation, representing all of the shares of
common stock of OHS issued and outstanding as of the date hereof.
D. WHEREAS, the Merger Agreement and the Separation Agreement contemplate
that the health service businesses of Olsten and it subsidiaries will be
restructured and separated from the other business of Olsten and its
subsidiaries and transferred to OHS prior to the issuance of all issued and
outstanding common stock of OHS to Olsten's shareholders, and the parties hereto
desire to specify in greater detail the manner in which this restructuring shall
occur.
E. WHEREAS, Olsten and Gentiva desire, on the terms and conditions set forth
in this Agreement, to cause all of the shares of common stock of OHS owned by
Olsten to be conveyed and transferred to Gentiva on the Contribution Date (as
defined below) in exchange and consideration for (i) the issuance and conveyance
on the Contribution Date of 100 shares of common stock of Gentiva representing,
together with the shares of common stock of Gentiva then owned by Olsten, all of
the shares of common stock of Gentiva issued and outstanding following such
exchange and (ii) a cash payment of $1,000.00 to Olsten on the earlier of (a) a
date agreed to in writing by each of Olsten and Adecco or (b) the date of the
special meeting of the stockholders of Olsten to vote on the approval of, among
other things, the Merger Agreement (such earlier date, the "Contribution Date").
F. WHEREAS, Gentiva desires to retain Camden's services as a consultant in
the future, pursuant to the terms of a consulting agreement, substantially in
the form attached hereto as Exhibit A, to be entered into by and between Camden
and Gentiva on the date hereof.
G. WHEREAS, Camden and Gentiva have agreed that in partial payment for
services to be provided in the future, Camden, on the Contribution Date, will
purchase 100 shares of Series A Cumulative Non-Voting Redeemable Preferred Stock
of Gentiva (the "Preferred Shares"), as authorized and designated pursuant to
the Certificate of Designations of the Preferred Stock, to be filed on or prior
to the Contribution Date with the Secretary of State of the State of Delaware,
substantially in the form attached hereto as Exhibit B, in consideration for
(i) services to be provided by Camden as a consultant to Gentiva after the
Contribution Date and (ii) a cash payment of $1.00.
H. WHEREAS, parties hereto desire, for other good and valid business and
financial purposes, to effectuate the transactions described herein.
AGREEMENT
In consideration of the recitals and the mutual promises contained herein
and in connection with the transactions described in the Merger Agreement, the
parties agree as follows:
ARTICLE I
EXCHANGE OF STOCK
1.1 REPRESENTATIONS AND WARRANTIES OF OLSTEN.
(a) Olsten is the record and beneficial owner of 100 shares of common stock
of OHS (the "OHS Shares"), representing all of the issued and outstanding
shares of common stock of OHS, and has good and valid title to such
shares, free and clear of any liens, encumbrances, claims, restrictions
on transfer or security interests.
(b) Olsten has the full right, capacity and power to transfer the OHS Shares
to Gentiva in accordance with this Agreement, and upon such transfer, the
OHS Shares will be fully paid and non assessable.
1.2 REPRESENTATIONS AND WARRANTIES OF GENTIVA.
(a) The 100 shares of common stock of Gentiva (the "Gentiva Shares") to be
issued on the Contribution Date to Olsten have been duly authorized and,
when issued to Olsten in accordance with the terms of this Agreement,
will be duly authorized, validly issued, fully paid and non-assessable.
(b) Upon issuance of Gentiva Shares to Olsten in accordance with the terms
of this Agreement, the Gentiva Shares, together with the shares of common
stock of Gentiva then owned by Olsten, shall represent all of the shares
of common stock of Gentiva issued and outstanding.
1.3 EXCHANGE OF COMMON STOCK. Olsten hereby covenants to assign, transfer and
convey to Gentiva on the Contribution Date all of its right, title and
interest in the OHS Shares, which upon such issuance and conveyance, shall
represent all of the common stock of OHS then issued and outstanding (the
"Olsten Contribution"). As consideration therefor, Gentiva hereby covenants
to (i) issue and convey to Olsten the Gentiva Shares, which upon such
issuance and conveyance, shall represent, together with the shares of common
stock of Gentiva then owned by Olsten, all of the common stock of Gentiva
then issued and outstanding and (ii) make a cash payment of $1,000.00 to
Olsten, in each case, concurrently with the Olsten Contribution.
1.4 COVENANTS OF GENTIVA. Gentiva hereby covenants that for a period of two
years from the Effective Time (as such term is defined in the Merger
Agreement), without the prior written consent of Olsten, which consent shall
not be unreasonably withheld, it will not enter into any transaction, or
permit OHS to enter into any transaction, which (a) would involve the
liquidation or dissolution of Gentiva or OHS or (b) would have the effect of
causing OHS to cease to be a wholly owned direct subsidiary of Gentiva,
except for an arm's-length transfer or other disposition to an unrelated
party.
ARTICLE II
EXCHANGE OF PREFERRED SHARES FOR SERVICES
2.1 REPRESENTATION OF GENTIVA. The Preferred Shares have been duly authorized
and, when issued in accordance with the terms of this Agreement, will be
duly authorized, validly issued, fully paid and non-assessable.
K-B-2
2.2 REPRESENTATIONS OF CAMDEN.
(a) Camden represents that it will purchase the Preferred Shares pursuant to
this Agreement for its own account and not as nominee or agent for any
other person and not with a view to, or for offer or sale in connection
with, any distribution thereof (within the meaning of the Securities Act
of 1933, as amended (the "Securities Act")) that would be in violation of
the securities laws of the United States of America or any state thereof
or any other jurisdiction, without prejudice, however, to Camden's right
at all times to sell or otherwise dispose of all or any part of the
Preferred Shares pursuant to a registration statement under the
Securities Act, or pursuant to an exemption from the registration
requirements of the Securities Act, subject to paragraph (c) of this
Section 2.2.
(b) Camden further represents that it is knowledgeable, sophisticated and
experienced in business and financial matters; that it fully understands
the limitations on transfer respecting the Preferred Shares; that it is
able to bear the economic risk of its investment in the Preferred Shares
and is presently able to afford the complete loss of such investment;
that it is an "accredited investor" as defined in Regulation D
promulgated under the Securities Act; and that it has been afforded
access to information about Gentiva and Gentiva's financial condition,
results of operations, business, property, management and prospects
sufficient to enable it to evaluate its investment in the Preferred
Shares. Camden acknowledges that it has conducted its own analysis of
Gentiva's financial condition and other foregoing factors and that it has
not relied upon the analysis of any other person in determining to make
an investment in the Preferred Shares.
(c) Camden acknowledges that the Preferred Shares to be issued pursuant to
this Agreement have not been registered under the Securities Act or any
other applicable securities laws, are being issued and sold in a
transaction not requiring registration under the Securities Act and,
unless so registered, may not be offered, sold or otherwise transferred
except in compliance with the registration requirements of the Securities
Act or any other applicable securities law or pursuant to an exemption
therefrom or in a transaction not subject thereto and in each case in
compliance with the conditions for transfer set forth in paragraph (d) of
this Section 2.2.
(d) Camden understands that the certificates representing the Preferred
Shares to be issued pursuant to this Agreement will, so long as
appropriate, bear the following legend:
THE PREFERRED SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), THE
PREFERRED SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER'S COUNSEL THAT SUCH REGISTRATION IS NOT
REQUIRED.
(e) Camden acknowledges that Gentiva shall be entitled to make a notation on
its records and give instructions to any transfer agent of the Preferred
Shares in order to implement the restrictions on transfer set forth in
this Agreement.
2.3 PURCHASE OF PREFERRED SHARES. Gentiva hereby covenants to issue to Camden on
the Contribution Date, and Camden hereby covenants to purchase from Gentiva
on the Contribution Date, the Preferred Shares in consideration for
(i) services to be provided by Camden as a consultant to Gentiva after the
Contribution Date and (ii) a cash payment of $1.00.
K-B-3
ARTICLE III
MISCELLANEOUS
3.1 AMENDMENT. This Agreement may not be amended except by an instrument in
writing signed on behalf of Olsten, Gentiva and Camden and, prior to the
Effective Time, Adecco.
3.2 WAIVER OF COMPLIANCE; CONSENTS. Rights under this Agreement may be waived
only by a written agreement signed by Olsten, Gentiva and Camden and, prior
to the Effective Time, Adecco. Any waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits consent by or on behalf
of any party hereto, such consent shall be given in writing.
3.3 LEGAL ENFORCEABILITY. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. Without prejudice to
any rights or remedies otherwise available to any party hereto, each party
hereto acknowledges that damages would be an inadequate remedy for any
breach of the provisions of this Agreement and agrees that the obligations
of the parties hereunder shall be specifically enforceable.
3.4 NOTICES. All notices and other communications hereunder shall be in writing
and shall be delivered personally, by next-day courier or mailed by
registered or certified mail (return receipt requested), first class postage
prepaid, or sent by facsimile, telegram or telex, to the parties at the
addresses specified below (or at such other address for a party as shall be
specified by like notice; PROVIDED that notices of a change of address shall
be effective only upon receipt thereof). Any such notice shall be effective
upon receipt, if personally delivered or telecommunicated, one day after
delivery to a courier for next-day delivery, or three days after mailing, if
deposited in the U.S. mail, first class postage prepaid.
If to Olsten prior to the Effective Time or to Gentiva prior to or after the
Effective Time, to:
Olsten Corporation
175 Broad Hollow Road
Melville, New York 11747
Attention: Edward A. Blechschmidt
Telephone: (516) 844-7220
Telecopy: (516) 844-7335
With a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Attention: Kenneth W. Orce, Esq.
Telephone: (212) 701-3000
Telecopy: (212) 269-5420
K-B-4
If to Gentiva after the Effective Time, to:
Gentiva Health Services, Inc.
175 Broad Hollow Road
Melville, New York 11747
Attention: Edward A. Blechschmidt
Telephone: (516) 844-7220
Telecopy: (516) 844-7335
If to Olsten after the Effective Time, to:
Adecco SA
1275 Cheserex
Switzerland
Attention: Felix A. Weber
Telephone: 011 41 21 321 6666
Telecopy: 011 41 21 321 6688
With a copy to:
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
Attention: Thomas W. Dobson, Esq.
Telephone: (213) 485-1234
Telecopy: (213) 891-8763
If to Camden, to:
The Camden Group
100 North Sepulveda
Suite 600
El Segundo, California 90245
Attention: Steven T. Valentine
Telephone: (310) 320-3990
Telecopy: (310) 606-5811
With a copy to:
Pumilia & Adamec, LLP
131 North El Molino Avenue
Suite 120
Pasadena, California 91101
Attention: Richard B. Pumilia, Esq.
Telephone: (626) 584-9600
Telecopy: (626) 584-9699
K-B-5
3.5 COUNTERPARTS. This Agreement may be executed in two or more counterparts
each of which shall be deemed an original, but all of which together shall
constitute but one and the same Agreement.
3.6 GOVERNING LAW. This Agreement shall be governed by the laws of the State of
Delaware (regardless of the laws that might otherwise govern under
applicable Delaware principles of conflicts of law) as to all matters,
including but not limited to matters of validity, construction, effect,
performance and remedies. Each of the parties hereto irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the
courts of the State of Delaware and of the United States of America located
in the State of Delaware (the "Delaware Courts") for any litigation arising
out of or relating to this Agreement and the transactions contemplated
hereby (and agrees not to commence any litigation relating thereto except in
such courts), waives any objection to the laying of venue of any such
litigation in the Delaware Courts and agrees not to plead or claim in any
Delaware Court that such litigation brought therein has been brought in an
inconvenient forum. Each of the parties hereto hereby agrees to service of
process in any litigation arising out of or relating to this Agreement and
the transactions contemplated hereby by certified mail, return receipt
requested, postage prepaid to it at its address for notice specified in
Section 3.4.
3.7 ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding of the parties hereto in respect to the subject matter
contained herein and supersedes all prior agreements and understandings
among the parties with respect thereto. There are no representations,
promises, warranties, covenants or undertakings by any party, other than
those expressly set forth or referred to herein.
3.8 ASSIGNMENT; NO THIRD PARTY BENEFICIARIES. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, but
neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto without the prior
written consent of the other parties. Nothing contained in this Agreement,
expressed or implied, is intended to confer any benefits, rights or remedies
upon any person or entity, other than Olsten, Gentiva, OHS and Camden and,
prior to the Effective Time, Adecco.
3.9 FURTHER ASSURANCES AND CONSENTS. In addition to the actions specifically
provided for elsewhere in this Agreement, each of the parties hereto will
use its reasonable best efforts to (i) execute and deliver such further
instruments and documents and take such other actions as any other party may
reasonably request in order to effectuate the purposes of this Agreement and
to carry out the terms hereof and (ii) take, or cause to be taken, all
actions, and to do, or cause to be done, all things, reasonably necessary,
proper or advisable under applicable laws, regulations and agreements or
otherwise to consummate and make effective the transactions contemplated by
this Agreement, including, without limitation, using its reasonable efforts
to obtain any consents and approvals and to make any filings and
applications necessary or desirable in order to consummate the transactions
contemplated by this Agreement; PROVIDED that no party hereto shall be
obligated to pay any consideration therefor (except for filing fees and
other similar charges) to any third party from whom such consents, approvals
and amendments are requested or to take any action or omit to take any
action if the taking of or the omission to take such action would be
unreasonably burdensome to the party or its business.
3.10 TITLES AND HEADINGS. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
3.11 SURVIVAL OF REPRESENTATIONS AND AGREEMENTS. All representations, warranties
and agreements of the parties hereto contained in this Agreement shall
survive the consummation of the transactions contemplated herein.
K-B-6
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
Olsten Corporation
---------------------------------------------
By:
Title:
Gentiva Health Services, Inc.
---------------------------------------------
By:
Title:
DNH Medical Management, Inc.,
d/b/a The Camden Group
---------------------------------------------
By: Steven T. Valentine
Title: President
K-B-7
EXHIBIT C TO
OMNIBUS AMENDMENT NO. 2
[FORM OF TAX SHARING AGREEMENT]
[Attached as Exhibit B to the Separation Agreement
(Annex B to the Olsten Proxy/Adecco Prospectus/Gentiva Health Services
Prospectus)]
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
DELAWARE CORPORATIONS
Gentiva Health Services, Inc. is incorporated under the laws of the State of
Delaware. Sections 102 and 145 of the Delaware General Corporation Law, or
Delaware code, set forth the conditions and limitations governing the
indemnification of officers, directors and other persons by Delaware
corporations.
Generally, section 145 of the Delaware code provides that a Delaware
corporation shall have the power to indemnify any person who was or is a party
or is threatened to be made a party to any action, suit or proceeding (except
actions by or in the right of the corporation) by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation
against all expenses, judgments, fines and amounts paid in settlement actually
and reasonably incurred by him or her in connection with such action, suit or
proceeding if he or she acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. In addition, a Delaware corporation may
similarly indemnify such person for expenses actually and reasonably incurred by
him or her in connection with the defense or settlement of any action or suit by
or in the right of the corporation, provided such person acted in good faith and
in a manner he or she reasonably believed to be in the best interests of the
corporation, and, in the case of claims, issues and matters as to which such
person shall have been adjudged liable to the corporation, provided that the
Court of Chancery of the State of Delaware or the court in which such action or
suit was brought shall have determined upon application, that, despite the
adjudication of liability but in view of all of the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which such court shall deem proper. To the extent that a present or former
director or officer of a Delaware corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding described above, or in
defense of any claim issue or matter therein, such person shall be indemnified
against expenses actually and reasonably incurred by such person in connection
therewith.
Generally, section 102(b)(7) of the Delaware code provides that the
certificate of incorporation of a Delaware corporation may contain provisions
eliminating or limiting the personal liability of a director to a corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director; PROVIDED that such provision may not eliminate or limit the liability
of a director (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for act or omissions not in good faith or
which involve intentional misconduct or knowing violation of law, (iii) under
section 174 of Title VIII, or (iv) for any transaction from which the director
derived an improper personal benefit. No such provision may eliminate or limit
the liability of a director for any act or omission occurring prior to the date
which such provisions becomes effective.
Section 145 of the Delaware code provides that a Delaware corporation shall
have the power to purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the corporation against any
liability asserted against such person and incurred by such person in any such
capacity, or arising out of such person's status as such, whether or not the
corporation would have the power to indemnify such person against the same
pursuant to the provisions of the Delaware code.
Gentiva Health Services' bylaws provide for indemnification of directors and
officers for liabilities and expenses incurred in defending actions brought
against them in such capacities. Gentiva Health Services' bylaws provide that
Gentiva Health Services shall indemnify directors and officers of Gentiva Health
Services to the maximum extent now or hereafter permitted by law, and may
indemnify employees and agents of Gentiva Health Services to the extent required
by law and may, as authorized
II-1
hereafter by the board of directors, provide further indemnification to
employees and agents of Gentiva Health Services to the maximum extent now or
hereafter permitted by law.
Gentiva Health Services maintains directors' and officers' liability
insurance covering all directors and officers of Gentiva Health Services against
claims arising out of the performance of their duties.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
3.1 Restated Certificate of Incorporation of Registrant+
3.2 Restated By-Laws of Registrant+
4.1 Specimen of common stock**
4.2 Indenture dated October 8, 1993, between Quantum Health
Resources Inc. and First Trust National Association, as
Trustee+
4.3 Supplemental Indenture dated June 28, 1996, between Quantum
Health Resources Inc. and First Trust National Association,
as Trustee+
4.4 Form of Certificate of Designation of Series A Junior
Participating Preferred Stock+
4.5 Form of Certificate of Designation of Series A Cumulative
Non-Voting Redeemable Preferred Stock+
5.1 Opinion of Cahill Gordon & Reindel+
10.1 Separation Agreement dated August 17, 1999, among Olsten
Corporation, Aaronco Corp. and Adecco SA+
10.2 Omnibus Amendment No. 1 dated October 7, 1999, by and among
Olsten Corporation, Aaronco Corp., Adecco SA and Olsten
Health Services Holding Corp.+
10.3 Form of Rights Agreement dated , 2000 between
the Registrant and EquiServe Limited Partnership, as rights
agent+
10.4 Registrant's Executive Officers Bonus Plan+
10.5 Registrant's 1999 Stock Incentive Plan+
10.6 Registrant's Stock & Deferred Compensation Plan for
Non-Employee Directors+
10.7 Registrant's Employee Stock Purchase Plan+
10.8 Omnibus Amendment No. 2 dated January 18, 2000, by and among
Olsten Corporation, Adecco SA, Olsten Health Services
Holding Corp., the Registrant and Staffing Acquisition
Corporation+
10.9 Letter by and between Fleet Capital Corp., FleetBoston,
Robertson Stephens Inc., the Registrant and Olsten Health
Services Holding Corp., dated January 18, 2000+
10.10 Form of commitment letter for convertible trust preferred
securities of the Registrant+
10.11 Form of Employment Agreement with Edward A. Blechschmidt+
10.12 Form of Change in Control Agreement with Executive Officers
of Registrant+
10.13 Form of Change in Control Agreement with Edward
A. Blechschmidt+
10.14 Form of Severance Agreement with Executive Officers of
Registrant+
21.1 List of Subsidiaries of Registrant+
23.1 Consent of PricewaterhouseCoopers LLC, independent
accountants
II-2
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
23.2 Consent of Arthur Andersen LLC, independent accountants
23.3 Consent of Cahill Gordon & Reindel (included in
Exhibit 5.1). Reference is made to Exhibit 5.1+
24.1 Powers of Attorney+
99.1 Consent of Warburg Dillon Read LLC+
99.2 Consent of Salomon Smith Barney Inc.+
99.3 Form of Proxy Card for common stock+
99.4 Form of Proxy Card for class B common stock+
99.5 Form of Letter of Transmittal/Form of Election**
99.6 Letter to Olsten Stockholders**
99.7 Notice of Special Meeting of Stockholders of Olsten
Corporation+
99.8 Letter from accommodating broker dealer to Olsten
Stockholder+
- ------------------------
* To be filed by amendment.
+ Previously filed.
** Previously filed and due to changes filed herewith.
(b) Financial Schedules:
Schedule II Valuation and Qualifying Accounts
ITEM 22. UNDERTAKINGS.
(1) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of their counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(3) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant of section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, hereunto duly authorized in the City of Melville, State of New
York, on the 9th day of February, 2000.
GENTIVA HEALTH SERVICES, INC.
By: /s/ EDWARD A. BLECHSCHMIDT
-----------------------------------------
Name: Edward A. Blechschmidt
Title: PRESIDENT, CHIEF EXECUTIVE OFFICER,
AND CHAIRMAN OF THE BOARD OF DIRECTORS
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ EDWARD A. BLECHSCHMIDT President, Chief Executive February 9, 2000
- ------------------------------ Officer, and Chairman of
Edward A. Blechschmidt the Board of Directors
(Principal Executive
Officer)
/s/ JOHN COLLURA Executive Vice President February 9, 2000
- ------------------------------ (Principal Financial and
John Collura Accounting Officer)
* Director February 9, 2000
- ------------------------------
Victor F. Ganzi
* Director February 9, 2000
- ------------------------------
Steven E. Grabowski
* Director February 9, 2000
- ------------------------------
Stuart R. Levine
* Director February 9, 2000
- ------------------------------
John M. May
* Director February 9, 2000
- ------------------------------
Stuart Olsten
II-4
SIGNATURE TITLE DATE
--------- ----- ----
* Director February 9, 2000
- ------------------------------
Richard J. Sharoff
* Director February 9, 2000
- ------------------------------
Raymond S. Troubh
* Director February 9, 2000
- ------------------------------
Josh S. Weston
*By: /s/ EDWARD A. BLECHSCHMIDT
-----------------------------------
Edward A. Blechschmidt
AS ATTORNEY IN FACT
II-5
SCHEDULE II
SCHEDULE II--VALUATION & QUALIFYING ACCOUNTS
COL. B COL. C COL. E
---------- ---------------- ---------
BALANCE AT ADDITIONS COL. D BALANCE
BEGINNING CHARGED TO COSTS ---------- AT END OF
OF PERIOD AND EXPENSES DEDUCTIONS PERIOD
---------- ---------------- ---------- ---------
Allowance for Doubtful Accounts:
For the Year Ended January 3, 1999............... $19,200 $24,046 $(17,650) $25,596
For the Year Ended December 28, 1997............. $22,171 $25,884 $(28,855) $19,200
For the Year Ended December 29, 1996............. $28,517 $18,430 $(24,776) $22,171