SCHEDULE 14A

(Rule 14a-101)

 

INFORMATION REQUIRED IN PROXY STATEMENT

 

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No.     )

 

Filed by the Registrant þ

 

Filed by a Party other than the Registrant o

 

Check the appropriate box:

 

þ Preliminary Proxy Statement

o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

o Definitive Proxy Statement

o Definitive Additional Materials

o Soliciting Material pursuant to 14a-11(c) or Rule 14a-12

 

Central Parking Corporation

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

 

 

 

 

 

 

 

 

 

 

 

Preliminary Proxy
Subject to Completion; Dated March 28, 2007

 

2401 21st Avenue South, Suite 200

Nashville, Tennessee 37212

 

Dear Shareholders:

 

You are cordially invited to attend a special meeting of shareholders of Central Parking Corporation, a Tennessee corporation, which will be held at our corporate headquarters, 2401 21st Avenue South, Third Floor, Nashville, Tennessee, on          , May   , 2007 at   a.m., local time.

 

At the meeting, you will be asked to consider and vote on a proposal to approve an Agreement and Plan of Merger, dated as of February 20, 2007 (we refer to this agreement as it may be amended from time to time as the merger agreement), among Central Parking, KCPC Holdings, Inc., a Delaware corporation, and KCPC Acquisition, Inc., a Tennessee corporation and wholly-owned subsidiary of KCPC Holdings, which provides for the acquisition of Central Parking by KCPC Holdings by merger of KCPC Acquisition with and into Central Parking. If our shareholders approve the merger agreement and the merger is subsequently completed, Central Parking will become a wholly-owned subsidiary of KCPC Holdings, directly or indirectly through one or more wholly-owned subsidiaries, and you will be entitled to receive $22.53 in cash, without interest and less any applicable tax withholding, for each share of Central Parking common stock that you own. A copy of the merger agreement is attached as Annex A to the accompanying proxy statement, and you are encouraged to read it in its entirety.

 

After careful consideration, our board of directors, acting on the unanimous recommendation of a special committee composed of directors who are not officers or employees of Central Parking and who the board of directors believes meet the New York Stock Exchange criteria as “independent directors,” has unanimously approved the merger agreement and determined that the merger and the merger agreement are advisable and in the best interests of Central Parking and its shareholders. Our board of directors recommends that you vote “FOR” the approval of the merger agreement and the transactions contemplated thereby. In reaching its determination, our board of directors considered a number of factors which are discussed in the attached proxy statement. In considering the recommendation of our board of directors with respect to the merger agreement, you should be aware that some of our directors and executive officers have interests in the merger that are different from, or in addition to, the interests of our shareholders generally. See “The Merger — Interests of Certain Persons in the Merger” beginning on page 40.

 

The accompanying document provides a detailed description of the proposed merger, the merger agreement and related matters. I urge you to read these materials carefully. You may also obtain more information about Central Parking from documents we have filed with the Securities and Exchange Commission.

 

Your vote is very important regardless of the number of shares you own. Because approval of the merger agreement requires the affirmative vote of the holders of a majority of the outstanding shares of Central Parking common stock entitled to vote, a failure to vote will have the same effect as a vote against the approval of the merger agreement.

 

Whether or not you are able to attend the special meeting in person, please complete, sign and date the enclosed proxy card and return it in the envelope provided as soon as possible or submit a proxy through the Internet or by telephone as described in the enclosed proxy card. If you hold shares through a broker or other nominee, you should follow the procedures provided by your broker or nominee. If you attend the special meeting and vote in person, your vote by ballot will revoke any proxy previously submitted.

 

Thank you for your cooperation and your continued support of Central Parking.

 

Sincerely,

 

Monroe J. Carell, Jr.

Executive Chairman of the Board

 

Neither the Securities and Exchange Commission nor any state securities regulatory agency has approved or disapproved of the merger, passed upon the merits or fairness of the merger or passed upon the adequacy or accuracy of the disclosure in the enclosed documents. Any representation to the contrary is a criminal offense.

 

This proxy statement is dated          , 2007, and is first being mailed to shareholders on or about          , 2007.

 

Preliminary Proxy
Subject to Completion; Dated March 28, 2007

 

 

2401 21st Avenue South

Nashville, Tennessee 37212

(615) 297-4255

 

 

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF

CENTRAL PARKING

To Be Held on May   , 2007

 

To the Shareholders of

CENTRAL PARKING CORPORATION:

 

Notice is hereby given that a special meeting of shareholders of Central Parking Corporation (“Central Parking”) will be held at our corporate headquarters, 2401 21st Avenue South, Third Floor, Nashville, Tennessee, on          , May   , 2007, at   a.m., local time, for the following purposes:

 

1. To consider and vote on a proposal to approve the Agreement and Plan of Merger, dated as of February 20, 2007, by and among Central Parking Corporation, KCPC Holdings, Inc., a Delaware corporation, and KCPC Acquisition, Inc., a Tennessee corporation and a wholly-owned subsidiary of KCPC Holdings. The merger agreement, a copy of which is attached as Annex A to the accompanying proxy statement, provides for the acquisition of Central Parking by KCPC Holdings by merger of KCPC Acquisition with and into Central Parking. If our shareholders approve the merger agreement and the merger is subsequently completed, Central Parking will become a wholly-owned subsidiary of KCPC Holdings, directly or indirectly through one or more wholly-owned subsidiaries, and you will be entitled to receive $22.53 in cash, without interest and less any applicable tax withholding, for each share of Central Parking common stock that you own; and

 

2. To transact such other business as may properly come before the meeting or any adjournment or postponement thereof, including to consider any procedural matters incident to the conduct of the special meeting, such as adjournment or postponement of the special meeting to solicit additional proxies in favor of the proposal to approve the merger agreement.

 

Only shareholders of record of our common stock as of the close of business on April 19, 2007 are entitled to notice of, and to vote at, the special meeting and any adjournment or postponement of the special meeting. The affirmative vote of the holders of a majority of the outstanding shares of our common stock entitled to vote is required to approve the merger agreement.

 

If you fail to vote by proxy or in person, it will have the same effect as a vote against the approval of the merger agreement. If you return a properly signed proxy card but do not indicate how you want to vote, your proxy will be counted as a vote “FOR” approval of the merger agreement. Holders of our common stock are not entitled to appraisal rights under the Tennessee Business Corporation Act in connection with the merger. See “The Merger — Dissenters’ Rights” on page 48.

 

By Order of the Board of Directors

 

 

Henry J. Abbott

Secretary

Nashville, Tennessee

 

April   , 2007

 

 

TABLE OF CONTENTS

 

 

This summary term sheet, together with the “Questions and Answers About the Special Meeting and the Merger,” highlights selected information from this proxy statement. It does not contain all of the information that is important to you. Accordingly, we urge you to read this entire proxy statement and the annexes to this proxy statement. In addition, this proxy statement incorporates by reference important business and financial information about Central Parking. You may obtain the information incorporated by reference into this proxy statement without charge by following the instructions in “Where You Can Find More Information” beginning on page 67. Except as otherwise specifically noted in this proxy statement, “Central Parking,” “we,” “our,” “us,” and other similar words refer to Central Parking Corporation and its affiliates. In addition, KCPC Holdings, Inc. may be referred to as “KCPC Holdings” or “Parent” and KCPC Acquisition, Inc. may be referred to as “KCPC Acquisition” or “Merger Sub.”

 

Parties to the Merger (page 66)

 

Central Parking Corporation is a leading provider of parking and related services. As of December 31, 2006, Central Parking operated approximately 3,100 parking facilities containing approximately 1.5 million spaces at locations in 37 states, the District of Columbia, Canada, Puerto Rico, Chile, Colombia, Peru, the United Kingdom, the Republic of Ireland, Spain, Greece, Italy and Switzerland. Central Parking operates or manages multi-level parking facilities and surface lots. It also provides ancillary services, including parking consulting, shuttle bus, valet, parking meter collection and enforcement, and billing services. Central Parking operates parking facilities under three general types of arrangements: management contracts, leases and fee ownership. Our common stock is quoted on the New York Stock Exchange under the symbol “CPC.”

 

KCPC Holdings is a newly formed corporation organized under the laws of the State of Delaware. KCPC Acquisition is a newly formed corporation organized under the laws of the State of Tennessee and is a direct wholly-owned subsidiary of KCPC Holdings. KCPC Holdings and KCPC Acquisition were formed by funds managed by affiliates of Kohlberg & Company, L.L.C., Lubert-Adler Partners, L.P. and Chrysalis Capital Partners, L.P. (collectively referred to in this proxy statement as the “Equity Sponsors”).

 

Structure of the Merger (page 52)

 

Upon the terms and subject to the conditions of the merger agreement, KCPC Acquisition will be merged with and into Central Parking. As a result of the merger, we will cease to be a publicly traded company and will become a wholly-owned subsidiary, directly or indirectly through one or more wholly-owned subsidiaries, of KCPC Holdings. The merger agreement is attached as Annex A to this proxy statement. Please read it carefully.

 

What You Will Receive in the Merger (page 52)

 

Each holder of shares of our common stock will be entitled to receive $22.53 in cash, without interest and less any applicable tax withholding, for each share of our common stock held immediately prior to the merger, other than shares owned by Central Parking, by KCPC Holdings or KCPC Acquisition, and by certain of our employees who agree with KCPC Holdings to exchange equity securities of Central Parking held by them for equity securities of KCPC Holdings.

 

Central Parking Stock Options, Deferred Units and Restricted Stock (page 53)

 

Except as separately agreed to by KCPC Holdings and any holder of Central Parking stock options, each outstanding Central Parking stock option that remains outstanding and unexercised as of the effective time of the merger, whether or not then vested or exercisable, will automatically be converted into the right to receive a cash payment equal to the product of (a) the excess, if any, of the merger consideration of $22.53 per share over the exercise price per share of the stock option, multiplied by (b) the number of shares of common stock issuable upon exercise of the stock option, without interest and less any applicable tax withholding. After the

merger, such stock options will no longer be outstanding and the holders of the options will no longer have any rights to purchase Central Parking stock.

 

Except as separately agreed to by KCPC Holdings and any holder of Central Parking deferred stock units, each deferred stock unit granted under Central Parking’s 1996 Deferred Stock Unit Plan that remains outstanding, whether or not vested, as of the effective time of the merger will automatically vest and be converted into the right to receive a cash payment equal to the product of (a) the merger consideration of $22.53 per share, multiplied by (b) the number of shares of common stock issuable with respect to such deferred unit at the time of vesting, without interest and less any applicable tax withholding. After the merger, such deferred stock units will no longer be outstanding, and the holders of the deferred stock units will no longer have any rights thereunder.

 

Except as separately agreed to by KCPC Holdings and any holder of Central Parking restricted stock, all Central Parking restricted stock will automatically become unrestricted common stock and be converted into the right to receive $22.53 in cash for each share of previously restricted common stock held immediately prior to the merger, without interest and less any applicable tax withholding.

 

Trust Issued Preferred Securities (page 53)

 

The Trust Issued Preferred Securities (TIPS) issued by Central Parking Finance Trust will remain outstanding after the merger. However, in accordance with the terms thereof, the TIPS will cease to be convertible at or after the consummation of the merger into shares of Central Parking common stock, but will instead be convertible into an amount equal to the product of (a) $22.53 times (b) the number of shares of Central Parking common stock into which the TIPS could have been converted as of the consummation of the merger. After the merger, each share of TIPS will remain outstanding until the maturity date of April 1, 2028 unless converted by the holder into $19.18 in cash per TIPS share or redeemed by Central Parking at $25 per TIPS share.

 

Conditions to the Merger (page 59)

 

We and KCPC Holdings will not complete the merger unless a number of conditions are satisfied or waived. These conditions include:

 

 

In addition, our obligation to complete the merger is subject to the satisfaction or waiver of the following conditions:

 

 

In addition, the obligation of KCPC Holdings to complete the merger is subject to the satisfaction or waiver of the following conditions:

 

 

Termination of the Merger Agreement (page 60)

 

We and KCPC Holdings may mutually agree in writing to terminate the merger agreement at any time prior to completing the merger, even after our shareholders have approved the merger agreement. The merger agreement may also be terminated at any time prior to completion of the merger under certain circumstances, including:

 

 

Termination Fee (page 61)

 

We will be required to pay certain affiliates of KCPC Holdings an aggregate termination fee of $22.4 million, if any of the following occur:

 

 

KCPC Holdings will be required to pay us a termination fee of $30.0 million if Central Parking, at any time after May 21, 2007, terminates the merger agreement because KCPC Holdings is unable to close the merger as a result of insufficient proceeds from the financing to consummate the merger within five (5) business days after notice by Central Parking to KCPC Holdings that all other conditions to KCPC Holdings’ obligations to complete the merger have been satisfied.

 

Equity Sponsor Limited Guarantee (page 40)

 

In connection with the merger agreement, the Equity Sponsors have each agreed to a limited guarantee of the due, punctual and complete payment of the payment obligation of KCPC Holdings for the termination fee or arising from an intentional and material breach of the merger agreement by KCPC Holdings, provided the total amount recoverable under the limited guarantees is $30.0 million.

 

No Solicitation (page 58)

 

We have agreed that we will not, until the effective time of the merger or the earlier termination of the merger agreement, initiate, solicit, entertain, encourage or facilitate any acquisition proposal, or otherwise participate in any discussions regarding, or furnish confidential information, for the purpose of encouraging any acquisition proposal (as defined below under “The Merger Agreement — Non-Solicitation of Transactions”). We also have agreed that during such time we will not approve or recommend an acquisition proposal or similar agreement or propose to do so.

 

However, prior to the adoption of the merger agreement by our shareholders and after notifying KCPC Holdings of our intent to do so, we may provide information in response to a request by a third party who has made an unsolicited bona fide written acquisition proposal that is made after February 20, 2007, so long as such proposal:

 

 

The merger agreement provides that prior to the effective time of the merger or the earlier termination of the merger agreement, our board will not withdraw or amend, qualify or modify (or publicly propose to take any such action), in a manner adverse to KCPC Holdings, its approval of the merger agreement or its recommendation that shareholders vote to approve the merger agreement or endorse, approve, adopt or submit to you any alternative acquisition proposal (or propose, publicly or otherwise, to take any such action). However, prior to the adoption of the merger agreement by our shareholders, our board may withhold, withdraw, qualify or modify its recommendation with respect to the merger agreement or approve or recommend any superior proposal made after the date of the merger agreement and not solicited in breach of the merger agreement if our board reasonably determines in good faith, after consultation with its outside legal counsel and financial advisor, that such action is required to comply with its fiduciary obligations. We must provide KCPC Holdings with five business days prior notice if our board intends to take any of these actions, and our board must take into account any changes to the financial and other terms of the merger agreement proposed by KCPC Holdings in determining whether the acquisition proposal continues to constitute a superior proposal.

 

Date, Time and Place (page 12)

 

The special meeting will be held on          , May   , 2007, at   a.m., local time at our corporate headquarters, 2401 21st Avenue South, Third Floor, Nashville, Tennessee.

 

Matters to be Considered (page 12)

 

You will be asked to consider and vote upon a proposal to approve the merger agreement that we have entered into with KCPC Holdings and KCPC Acquisition and to consider any other matters that may properly come before the meeting, including any procedural matters in connection with the special meeting.

 

Record Date (page 12)

 

If you owned shares of our common stock at the close of business on April 19, 2007, the record date for the special meeting, you are entitled to notice of and to vote at the special meeting. You have one vote for each share of our common stock that you own on the record date. As of the close of business on April 19, 2007, there were approximately           shares of our common stock outstanding and entitled to be voted at the special meeting.

 

Required Vote (page 12)

 

Approval of the merger agreement requires the affirmative vote of the holders of a majority of our outstanding shares of common stock entitled to vote at the special meeting. Failure to vote by proxy, either by mail, through the Internet, by telephone or in person, will have the same effect as a vote “AGAINST” approval of the merger agreement.

 

Market Price of Our Common Stock (page 63)

 

Our common stock is quoted on the New York Stock Exchange under the symbol “CPC.” The closing sale price of our common stock on May 31, 2006, which was the last trading day before we engaged The Blackstone Group L.P. to assist in exploring strategic alternatives, was $14.31. The closing sale price of our common stock on November 27, 2006, which was the last trading day before we announced that we had engaged Blackstone, was $17.23. The closing sale price of our common stock on February 20, 2007, which was the last trading day before we announced the execution of the merger agreement, was $21.22. On [          ], 2007, the most recent practicable date before this proxy statement was printed, the closing sale price of our common stock was $[          ]. See “Market Price and Dividend Data” beginning on page 63 for further information, including important limitations you should understand in evaluating the historical trading prices of our common stock.

 

Voting by Proxy (page 12)

 

You may vote by proxy through the Internet, by telephone or by returning the enclosed proxy. If you hold your shares through a broker or other nominee, you should follow the procedures provided by your broker or nominee, which may include submitting a proxy through the Internet or by telephone.

 

Revocability of Proxy (page 13)

 

You may revoke your proxy at any time before it is voted. If you have not submitted a proxy through your broker or nominee, you may revoke your proxy by:

 

 

Simply attending the special meeting will not constitute revocation of your proxy. If your shares are held in “street name,” you should follow the instructions of your broker or nominee regarding revocation of proxies. If your broker or nominee allows you to submit a proxy by telephone or through the Internet, you may be able to change your vote by submitting a proxy again by telephone or through the Internet.

 

Recommendation of Our Board of Directors (page 25)

 

Our board of directors, acting on the unanimous recommendation of our special committee composed of directors who are not officers or employees of Central Parking and who the board of directors believes meet the New York Stock Exchange criteria as “independent directors,” has determined that the merger agreement and the merger are advisable and in the best interests of Central Parking and its shareholders. After receiving the recommendation of the special committee and hearing from the committee’s advisors, our board of directors has unanimously approved the merger agreement and the merger and recommends that you vote “FOR” the approval of the merger agreement.

 

Opinion of Blackstone to the Special Committee of the Board of Directors of Central Parking (page 26)

 

Blackstone delivered an opinion to the special committee, to the effect that, as of February 20, 2007, and based upon the qualifications, assumptions, limitations and other matters set forth in its written opinion, the merger consideration of $22.53 per share in cash, without interest and less any applicable tax withholding, to be received by the holders of shares of our common stock pursuant to the merger was fair, from a financial point of view, to the shareholders of Central Parking.

 

The full text of the written opinion of Blackstone, dated February 20, 2007, which sets forth the assumptions made, the matters considered, and the qualifications and limitations on the review undertaken by Blackstone in connection with its opinion, is attached as Annex B to this proxy statement. The opinion was provided to the special committee of our board for its benefit and use in connection with its consideration as to whether the merger consideration of $22.53 in cash, without interest and less any applicable tax withholding, for each share of Central Parking common stock was fair, from a financial point of view, to our shareholders. The opinion did not constitute a recommendation to the Central Parking special committee, board of directors, or any holder of shares of our common stock as to how to vote in connection with the merger. Under the terms of the engagement letter between Central Parking and Blackstone, Blackstone provided the special committee financial advisory services and Central Parking agreed to pay Blackstone certain fees for such services. As of the date of the proxy statement, $250,000 has been paid to Blackstone pursuant to the engagement letter and an additional $12,321,379 will be paid if the merger is completed at the current price. See “The Merger — Opinion of The Blackstone Group L.P.” beginning on page 26.

 

Voting Agreements (page 62)

 

In connection with the merger agreement, the Equity Sponsors required that Monroe Carell, members of his family and certain related trusts and foundations, representing approximately 47% of the outstanding common stock, enter into voting agreements. Pursuant to the voting agreements, such shareholders agreed to vote, and granted KCPC Holdings a proxy to vote, all the shares of Central Parking common stock over which such shareholders exercise voting control in favor of adoption of the merger agreement and approval of the merger. The voting agreements terminate upon the earliest to occur of the effective time of the merger, the termination of the merger agreement in accordance with its terms, and any reduction in the amount, or any change in the form, of the consideration to be paid to the shareholders pursuant to the merger agreement without the written consent of the shareholder that is a party to the voting agreement.

 

Interests of Certain Persons in the Merger (page 40)

 

In considering the recommendation of our board of directors with respect to the merger agreement, you should be aware that some of our directors and executive officers have interests in the merger that may be in addition to, or different from, the interests of our shareholders generally. The members of our board of directors were aware of these additional interests, and considered them, when they approved the merger agreement. These interests include:

 

 

In addition, we entered into an agreement with Mr. Carell as a material inducement to Mr. Carell and his family entering into voting agreements with KCPC Holdings, which interprets and modifies Mr. Carell’s pre-existing employment and compensation agreements with Central Parking as described in more detail in “The Merger — Interests of Certain Persons in the Merger — Monroe Carell’s Agreements.” Upon the merger, Mr. Carell’s employment relationship with Central Parking will end. We anticipate that up to $10,169,016 may be paid to Mr. Carell under all of his compensation arrangements with Central Parking, as interpreted and modified in this agreement.

 

Financing of the Merger (page 36)

 

KCPC Holdings intends to finance the merger and related transactions through equity investment, senior secured bank financing and real estate financing. The merger agreement does not contain a financing condition as a closing condition. The Equity Sponsors have each entered into an equity commitment letter for $210.0 million in the aggregate. KCPC Holdings has received a debt financing commitment letter from Goldman Sachs Credit Partners L.P. (“GSCP”) pursuant to which GSCP has committed to provide up to $405.0 million of senior secured bank financing. In addition, KCPC Holdings has received a commitment letter from Greenwich Capital Financial Products, Inc. (“GCFP”) and Goldman Sachs Mortgage Company (“GSMP”) pursuant to which, subject to the conditions set forth therein, GCFP and GSMC have committed to lend up to $417.8 million in first mortgage and mezzanine financing.

 

United States Federal Income Tax Consequences to Our Shareholders (page 49)

 

For U.S. federal income tax purposes, the merger will be treated as a taxable transaction for our common stockholders. In general, U.S. holders (as defined under the caption “The Merger — Material U.S. Federal Income Tax Consequences of the Merger to our Shareholders”) will recognize gain or loss for U.S. federal income tax purposes in the merger. Such gain or loss generally will be measured by the difference between the amount of cash received on the closing date of the merger by a U.S. holder and such U.S. holder’s tax basis in its shares of our common stock.

 

Regulatory Matters (page 49)

 

Under the provisions of the HSR Act, Central Parking and KCPC Holdings may not complete the merger until we have made certain filings with the Federal Trade Commission and the United States Department of Justice and the applicable waiting period has expired or been terminated. Central Parking and KCPC Holdings filed pre-merger notifications with the Antitrust Division of the U.S. Department of Justice pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976 on March 6, 2007. We cannot assure you that a challenge to the merger on antitrust grounds will not be made or, if a challenge is made, of the result.

 

Dissenters’ Rights (page 48)

 

Central Parking has concluded that Central Parking shareholders are not entitled under Tennessee law to dissenters’ rights in connection with the merger.

 

Legal Proceedings Related to the Merger (page 49)

 

Central Parking is aware of two putative class action lawsuits related to the merger filed against Central Parking and each of our directors in the Chancery Court for the State of Tennessee, 20th Judicial District, Davidson County, case numbers 07-387-III and 07-397-I.

 

The complaints in these actions allege that the directors breached their fiduciary duties of due care, loyalty, good faith, candor and independence and put their personal interests ahead of the interests of Central Parking’s shareholders. Plaintiffs seek to prohibit permanently the merger, to rescind the merger to the extent it is consummated, an award of damages, attorneys’ fees and other relief. Central Parking and the directors dispute the allegations in the complaints and plan to defend vigorously these actions. Additional lawsuits pertaining to the merger could be filed in the future.

 

The following questions and answers are provided for your convenience, and briefly address some commonly asked questions about the proposed merger and the Central Parking special meeting of shareholders. You should still carefully read this entire proxy statement, including each of the annexes.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

After the merger closes, KCPC Holdings will arrange or cause to be arranged for a letter of transmittal to be sent to each shareholder. The merger consideration will be paid to each shareholder once that shareholder submits the letter of transmittal, properly endorsed stock certificates and any other required documentation.

 

 

 

 

 

 

 

 

 

 

 

 

 

This proxy statement contains forward-looking statements about our plans, objectives, expectations and intentions. You can identify these statements by words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” “may,” “will” and “continue” or similar words. You should read statements that contain these words carefully. They discuss our future expectations or state other forward-looking information, and may involve known and unknown risks over which we have no control, including, without limitation:

 

 

 

and other risks detailed in our current filings with the Securities and Exchange Commission (which we refer to as the SEC), including our most recent filings on Forms 10-Q and 10-K. See “Where You Can Find More Information” on page 67. You should not place undue reliance on forward-looking statements. We cannot guarantee any future results, levels of activity, performance or achievements. The statements made in this proxy statement represent our views as of the date of this proxy statement, and it should not be assumed that the statements made herein remain accurate as of any future date. Moreover, we assume no obligation to update forward-looking statements or update the reasons actual results could differ materially from those anticipated in forward-looking statements, except as required by law.

 

We are furnishing this proxy statement to you, as a shareholder of Central Parking, as part of the solicitation of proxies by our board for use at the special meeting of shareholders.

 

The special meeting will be held at the offices of Central Parking, located at 2401 21st Avenue South, Third Floor, Nashville, Tennessee, on          , May   , 2007, at   a.m., local time. The purpose of the special meeting is:

 

 

Our board has unanimously determined, based on the unanimous recommendation of the special committee, that the merger agreement and the merger are advisable and in the best interests of Central Parking and its shareholders, and it has approved the merger agreement and the merger. Our board unanimously recommends that our shareholders vote “FOR” approval of the merger agreement.

 

The holders of record of shares of our common stock as of the close of business on April 19, 2007, which is the record date for the special meeting, are entitled to receive notice of and to vote at the special meeting.

 

On the record date, there were approximately           shares of our common stock outstanding held by approximately           shareholders of record. Holders of a majority of the shares of our common stock issued and outstanding as of the record date and entitled to vote at the special meeting must be present in person or represented by proxy at the special meeting to constitute a quorum to transact business at the special meeting. Both abstentions and broker “non-votes” will be counted as present for purposes of determining the existence of a quorum. In the event that a quorum is not present at the special meeting, we currently expect that we will adjourn or postpone the meeting to solicit additional proxies.

 

Approval of the merger agreement requires the affirmative vote of the holders of a majority of the shares of our common stock outstanding on the record date and entitled to vote.

 

Each holder of a share of our common stock is entitled to one vote per share. Failure to vote your proxy (either through the Internet, by telephone or by returning a properly executed proxy card) or to vote in person will have the same effect as a vote “AGAINST” approval of the merger agreement.

 

Brokers or other nominees who hold shares of our common stock in “street name” for customers who are the beneficial owners of such shares may not give a proxy to vote those customers’ shares in the absence of specific instructions from those customers. These non-voted shares of our common stock will not be counted as votes cast or shares voting and will have the same effect as votes “AGAINST” approval of the merger agreement.

 

Shareholders may vote their shares by attending the special meeting and voting their shares of our common stock in person, or by completing the enclosed proxy card, signing and dating it and mailing it in the enclosed postage-prepaid envelope. All shares of our common stock represented by properly executed proxies received in time for the special meeting will be voted at the special meeting in the manner specified by the

holder. If a proxy card is signed by a shareholder and returned without instructions, the shares of our common stock represented by the proxy will be voted “FOR” approval of the merger agreement.

 

In addition, shareholders may submit a proxy through the Internet or by telephone by following the instructions included with the enclosed proxy card. If you submit a proxy through the Internet or by telephone, please do not return the proxy card. You should be aware that in submitting a proxy through the Internet, you may incur costs such as telephone and Internet access charges for which you will be responsible. The Internet voting facility and the telephone voting facility for shareholders of record will close at 11:59 p.m., Eastern Daylight Time, on          , 2007.

 

Shareholders who hold their shares of Central Parking common stock in “street name,” meaning in the name of a bank, broker or other person who is the record holder, must either direct the record holder of their shares of our common stock how to vote their shares or obtain a proxy from the record holder to vote their shares at the special meeting.

 

If you are a registered holder of our common stock, you can revoke your proxy at any time before it is voted at the special meeting by:

 

 

If your shares of our common stock are held in the name of a bank, broker, trustee or other holder of record, you must follow the instructions of your broker or other holder of record to revoke a previously given proxy. If your broker or nominee allows you to submit a proxy by telephone or though the Internet, you may be able to change your vote by submitting a proxy again by telephone or through the Internet.

 

This proxy solicitation is being made and paid for by Central Parking on behalf of its board of directors. In addition, we have retained D.F. King to assist in the solicitation. We will pay D.F. King a customary fee of approximately $7,000, plus a per minute charge for handling inbound or outbound calls with shareholders, plus reasonable out-of-pocket expenses for its assistance. Our directors, officers and employees may also solicit proxies by personal interview, mail, e-mail, telephone, facsimile or other means of communication. These persons will not be paid additional remuneration for their efforts. We will also request brokers, banks and other nominees to forward proxy solicitation material to the beneficial owners of shares of common stock that the brokers, banks and nominees hold of record. Upon request, we will reimburse them for their reasonable out-of-pocket expenses related thereto. In addition, we will indemnify D.F. King against any losses arising out of that firm’s proxy soliciting services on our behalf.

 

We are not currently aware of any business to be acted upon at the special meeting other than the matters discussed in this proxy statement. Under our bylaws, business transacted at the special meeting is limited to matters relating to the purposes stated in the notice of special meeting, which is provided at the beginning of this proxy statement, unless otherwise properly brought by our board or a shareholder. If other matters do properly come before the special meeting, or at any adjournment or postponement of the special meeting, we intend that shares of our common stock represented by properly submitted proxies will be voted by and at the discretion of the persons named as proxies on the proxy card. In addition, the grant of a proxy will confer discretionary authority on the persons named as proxies on the proxy card to vote in accordance with their best judgment on procedural matters incident to the conduct of the special meeting, such as a motion to adjourn in the absence of a quorum or a motion to adjourn for other reasons, including to solicit additional votes in favor of approval of the merger agreement.

 

If you have more questions about the merger or how to submit your proxy, or if you need additional copies of this proxy statement or the enclosed proxy card or voting instructions, please call D.F. King at (800) 431-9643.

 

This discussion of the merger is qualified by reference to the merger agreement, which is attached to this proxy statement as Annex A. You should read the entire merger agreement carefully as it is the legal document that governs the merger.

 

For the entire period of time during which our stock has been publicly traded, Monroe Carell, Jr., together with his family and related entities, have collectively owned more of our stock than any other shareholder. Mr. Carell has continuously served as Chairman of Central Parking’s board of directors during this period. In the summer of 2004, Mr. Carell contacted the investment banking firm of Morgan Stanley & Co., Inc. regarding possible ways to sell his substantial ownership interest in Central Parking. Morgan Stanley began analyzing a potential sale of the whole company and a potential sale of the Carell family’s ownership position. At Central Parking’s September 16, 2004 board meeting, all of the directors were made aware of Morgan Stanley’s preliminary work, and the directors, excluding Mr. Carell and Mrs. Kathryn Carell Brown, discussed whether Central Parking should engage Morgan Stanley. The directors ultimately asked Morgan Stanley to continue its work and report back to them without yet being formally engaged.

 

At the October 21, 2004 meeting of our board of directors, Morgan Stanley provided an update regarding its progress and agreed to make a more detailed presentation at the board’s December meeting. At a December 9, 2004 board of directors meeting, Morgan Stanley presented a range of possible strategic alternatives to enhance shareholder value, including a sale of the entire company, buy-outs of unprofitable leases and contracts, increased dividends, share repurchases, and a public offering of Mr. Carell’s stock. Our board of directors established a special committee consisting of directors Nelson, Shell and Smith, none of who are officers or employees of Central Parking, to evaluate and recommend alternatives to enhance shareholder value; each of these directors were believed to be “independent directors” as defined by New York Stock Exchange rules governing its listed companies.

 

On December 21, 2004, Central Parking executed an engagement letter with Morgan Stanley to assist the special committee in evaluating strategic alternatives, including identifying possible buyers of Central Parking. The special committee met in January 2005 to receive an update regarding Morgan Stanley’s work. At the February 17, 2005 meeting of our board of directors, Morgan Stanley provided an update regarding its work to our full board of directors. On March 14, 2005, Central Parking publicly announced that Morgan Stanley had been selected as its financial advisor to assist the company in evaluating various strategic alternatives.

 

Starting in March 2005, Morgan Stanley contacted more than 70 parties regarding their interest in a transaction. This process did not generate any final offers, and the indications of value were all less than $15 per share. Based on periodic updates from Morgan Stanley and after conferring with management and the other directors, the special committee determined that pursuing a sale transaction at that price level was not in the best interests of the shareholders. On June 20, 2005, Central Parking announced that it was terminating discussions to sell the company.

 

In the summer of 2005, our board of directors considered other ways to enhance shareholder value. Morgan Stanley’s engagement was terminated and other advisors were contacted. Among other firms, Banc of America Securities made a presentation to Central Parking that included a review of strategic alternatives. Banc of America Securities recommended that Central Parking pursue a dutch auction tender offer after considering other alternatives such as a one-time large dividend, increased quarterly dividends, and a going-private transaction. In August 2005, after consultation with Banc of America Securities and legal advisors, our board of directors approved, and Central Parking announced a strategic plan to streamline operations, pursue the selective sale of owned properties, and engage in a dutch auction tender offer. Central Parking retained Banc of America Securities to assist in this process, and the dutch auction tender offer was completed in October 2005, resulting in Central Parking purchasing 4,859,674 shares of its common stock at prices at or below $15.50 per share.

 

In the six months after the announcement of its strategic plan and completion of the dutch auction tender offer, Central Parking’s stock price did not rise materially and was trading for less than $15.50 per share in April and May 2006. In May 2006, Mr. Carell again expressed his interest in a sale of his interest in Central Parking and notified Central Parking that he had held preliminary discussions regarding this topic with Blackstone, which had previously been involved in a number of transactions in the parking industry, including advising Central Parking in connection with the acquisition of Allright Corporation, a transaction that was completed in 1999.

 

On May 18, 2006, our board of directors discussed the advisability of appointing a special committee to review and evaluate strategic alternatives, including a potential sale of the company. Given the possibility that Mr. Carell, director Lewis Katz, and/or members of senior management might have special interests in connection with any potential transaction, our board, with advice of legal counsel, appointed a special committee of independent and disinterested directors to review potential strategic alternatives and determine whether any such alternatives would be in the best interest of all Central Parking shareholders. Our board of directors appointed a special committee consisting of current directors Edward G. Nelson, Raymond T. Baker, Claude Blankenship, Owen G. Shell, Jr. and William B. Smith. Our board of directors believe each of these directors to be “independent directors” as defined by the New York Stock Exchange rules governing its listed companies. Mr. Nelson was elected to serve as chairman of this special committee. Our board authorized the special committee to take any and all actions necessary or advisable to consider and evaluate strategic alternatives available to Central Parking, and, if appropriate, to negotiate and make recommendations to our full board of directors regarding strategic transactions involving the company, and retain additional advisors, including financial and legal advisors.

 

The special committee determined to continue the discussions with Blackstone. On May 24, 2006, Blackstone made a presentation regarding its experience with complex transactions generally and specifically in the parking industry and reviewed strategic alternatives for Central Parking, including the sale of the company as a whole, a leveraged recapitalization, an exchange of Carell family stock for real estate owned by Central Parking, and other options such as block sales of stock, continued asset sales, and increased dividends.

 

Near the time of the formation of the special committee, Mr. Carell received an oral expression of interest from a third party concerning the acquisition of the outstanding shares held by him and members of his family and related entities. Mr. Carell informed the company of his interest in further exploring a sale of his stock. On May 24, 2006, Mr. Carell received a written expression of interest from that party to acquire the approximately 47% of Central Parking owned by the Carell family and related entities for a price in the range of $18.53 to $19.81 per share. Mr. Carell informed Blackstone and the special committee of this proposal.

 

On May 31, 2006, the special committee met to consider further the strategic alternatives available to Central Parking and the recent offer received by Mr. Carell. The special committee discussed the effects on other shareholders that could arise from an independent sale of the Carell ownership interests, including the possible receipt of a control premium price that would not be available to other shareholders. The special committee did not believe that the independent sale of the stock of the Carell family and related entities would be in the best interest of all of the Central Parking shareholders. The special committee also discussed the merits of engaging Blackstone to assist in its evaluation of strategic alternatives and authorized legal counsel to negotiate with Blackstone. On June 1, 2006, the special committee retained Blackstone as its financial advisor.

 

On June 12, 2006, Blackstone reviewed with the special committee four specific potential transactions:

 

 

 

After discussion, the special committee decided that it would be in the best interests of shareholders to determine the value that could be obtained in the market place from the various transactions reviewed by Blackstone.

 

On July 12, 2006, the special committee met again to discuss updated financial projections for Central Parking, the third party expression of interest for Mr. Carell’s stock, and procedural issues relating to Mr. Carell’s interest in acquiring all or a portion of the CPC Properties.

 

On July 31, 2006, the special committee met to discuss Blackstone’s analysis of the potential transactions previously outlined and to receive an update on the status of discussions with the third party that had expressed an interest in the Carell family stock. The special committee noted that the third party had requested access to confidential information of Central Parking, and the special committee decided to provide that access only in exchange for that party’s standstill agreement to forego an independent acquisition of the Carell family ownership interest for six months from the date of the agreement.

 

By letter dated August 15, 2006, the third party notified Central Parking of its interest in acquiring all of the common stock of Central Parking at a price at or above $19.81 per share, which represented a premium of 26% over the then most recent closing price. The special committee agreed to negotiate exclusively with such party through September 5, 2006. The special committee then met on August 28, 2006, to discuss the proposal and other strategic planning matters.

 

The third party continued to express interest in Central Parking, including by letter dated September 11, 2006, reaffirming its interest in purchasing all of the outstanding stock at the previously stated price of $19.81 per share. However, the exclusivity period expired without the third party making a definitive offer.

 

On September 12, 2006, the special committee met, and Blackstone provided an update on its discussions with the third party and on the preparation of materials required for the transaction process. After receiving this update, the special committee instructed Blackstone to finish promptly the work necessary to present to potentially interested third parties the strategic transactions discussed at its June meeting. During September and October 2006, Blackstone, at the request of the special committee, met with interested parties and provided confidential information to more than 30 parties. After receipt of the confidential materials, interested parties performed preliminary due diligence investigations of Central Parking.

 

At a meeting of the special committee on September 20, 2006, Blackstone updated the special committee on the process. The special committee also discussed a request from Mr. Carell to participate as a potential bidder for the CPC Properties. The special committee concluded that it was in the best interests of Central Parking shareholders to allow Mr. Carell to participate in the process as a potential buyer of the CPC Properties. After further discussion, the special committee authorized Blackstone, on behalf of the special committee, to treat Mr. Carell in a manner consistent with other potential buyers.

 

On October 20, 2006, Blackstone again updated the special committee.

 

In late October and early November, more than 20 parties submitted preliminary indications of interest to purchase all or a portion of Central Parking. Mr. Carell submitted a preliminary indication of interest for the CPC Properties. The initial indications of interest for the entire company ranged from $17.50 per share to $22.00 per share.

 

On November 7, 2006, Blackstone made a detailed presentation to the special committee on the process, including a review of preliminary indications of interest. As a result of its evaluation of the preliminary indications of interest, including proposed pricing, timing, and certainty, the special committee determined that it was in the best interests of the shareholders to continue to explore strategic alternatives. Following this meeting, Blackstone, at the request of the special committee, introduced parties interested in purchasing CPC Operations with parties interested in purchasing CPC Properties, in an effort to maximize value for the shareholders by making those parties competitive with parties interested in acquiring the entire company. Mr. Carell indicated to Blackstone that he would be willing to make his proposal to acquire CPC Properties

available on the same terms to any party interested in purchasing CPC Operations. As part of this process, Blackstone introduced Mr. Carell to one of the parties, referred to below as Bidder A, interested in buying CPC Operations.

 

On November 28, 2006, Central Parking issued a press release announcing that it had engaged Blackstone to assist Central Parking in evaluating strategic alternatives.

 

The special committee met again on December 5, 2006, and Blackstone updated the special committee on the status of the preliminary indications of interest.

 

Throughout November and December 2006, each of the remaining interested parties continued its due diligence investigation of Central Parking. Management also made presentations to several interested parties.

 

In December 2006, Central Parking delivered a draft merger agreement to the interested parties and advised those parties that “best and final” bids, along with markups of the merger agreement, were due no later than January 9, 2007.

 

In early January, Central Parking received 14 bids, which included bids to purchase the entire company, the CPC Operations, the CPC Properties, and select CPC Properties primarily located in New York City. All of these bids were subject to conditions, including confirmatory diligence items and the negotiation of a definitive transaction agreement. There were four bids for the entire company, and they ranged from a low of $19.00 per share to a high of $22.00 per share. There were four bids for CPC Operations ranging from a low of $19.25 per share to a high of $21.00 per share, each of which assumed that CPC Properties would be sold for $450.0 million and that CPC Operations would be responsible for the taxes arising from the transfer of CPC Properties. There were three bids for CPC Properties, including a bid from Mr. Carell, ranging from a low of $430.0 million to a high of $465.0 million, each of which assumed that CPC Operations would be responsible for the taxes arising from the transfer of CPC Properties. Central Parking also received three bids for various components of the CPC Properties at prices that ranged from $170.0 million to $290.0 million depending on the properties included and related assumptions specified by each bid. In addition, seven of the eight bidders who submitted bids for either the entire company or CPC Operations included as a part of their revisions to the draft merger agreement a condition that Mr. Carell and members of his family and related entities execute voting agreements in favor of its proposed transaction.

 

On January 10 and 11, 2007, the special committee’s advisors held discussions with each of the bidders and their advisors to clarify the assumptions made in their respective bids.

 

On January 11, 2007, the special committee met to consider the bids and address issues relating to the transaction process. The special committee’s financial and legal advisors described for the committee the details of the bids received, including pricing, confirmatory diligence expectations, timing, key contract terms, and timing to closing. Blackstone noted that it anticipated receiving additional CPC Properties bids in the near future. After review and consideration of the bids, the special committee determined that bids for the entire company had certain advantages, including certainty of completion, but that Blackstone should continue to pursue bidders for the CPC Operations and CPC Properties as well in order to maximize value and the potential for a successful transaction. Blackstone noted that the special committee could consider offering expense reimbursement to one or more of the bidders, if requested, to keep parties in the process and assist in generating the best price. Also discussed at the meeting were the key terms of the proposed definitive agreement, the special committee’s expectations concerning the significant terms of any agreement, and the anticipated timing of the negotiation of a final definitive agreement. The special committee directed Blackstone to communicate to bidders that the special committee placed a high priority on the fewest possible closing conditions to achieve maximum certainty of consummation of a transaction.

 

At the conclusion of the January 11, 2007 meeting, the special committee directed Blackstone to continue negotiations with three bidders, referred to as Bidder A, Bidder B, and Kohlberg, because those bidders had submitted the most competitive proposals. At that time, Bidder A had proposed to purchase the entire company but indicated a preference to coordinate with Mr. Carell with respect to a simultaneous sale to Mr. Carell of the CPC Properties. Bidder B had indicated an interest in purchasing the entire company. Kohlberg had indicated an interest in purchasing the CPC Operations but had requested to be partnered with a CPC Properties

bidder. The special committee also instructed Blackstone to inform the other bidders for the entire company and for the CPC Operations that their bids were not competitive. In addition, the special committee instructed Blackstone to continue discussions with CPC Properties bidders.

 

During the week of January 15, 2007, Blackstone informed the bidders identified by the special committee at the January 11 meeting that their bids were not competitive. In response, several bidders attempted to make adjustments to the terms of their bids. One bidder for the entire company, referred to as Bidder C, responded by increasing its bid for the entire company to $21.50 per share.

 

Between January 11 and January 22, 2007, Blackstone introduced Kohlberg to CPC Properties bidders. Blackstone also introduced Bidder B to a CPC Properties bidder when Bidder B indicated that it had an interest in such discussions because of the potential need for additional equity to complete a transaction. Due diligence work by Kohlberg, Bidder A, Bidder B, and Bidder C continued during this period.

 

The special committee met on January 22, 2007, to discuss the status of various bids, including the revised bid from Bidder C. As a result of Bidder C’s revised bid, the special committee decided to allow Bidder C to continue negotiations and due diligence.

 

Lubert-Adler and Chrysalis were among the parties that were informed during the week of January 15 that their bid was not competitive. Two weeks later, as discussed in more detail below, Lubert-Adler and Chrysalis partnered with Kohlberg as equity sponsors. Kohlberg indicated to Central Parking that this arrangement would allow it to make a more competitive bid for the entire company than under arrangements with any of the CPC Properties bidders previously introduced to them.

 

During the week of January 22, 2007, the four primary remaining interested groups of bidders, Bidder A, Bidder B, Bidder C and Kohlberg, did due diligence and had discussions and negotiations of specific contract terms. During this time, Bidder A was engaged in discussions with Mr. Carell regarding Bidder A’s offer and the potential sale of CPC Properties to Mr. Carell. Bidder A advised Blackstone it had reached a preliminary agreement in principle with Mr. Carell regarding the major terms of a transaction involving CPC Properties, but it was willing to proceed with its efforts to purchase the entire company whether or not a definitive agreement was ultimately reached with Mr. Carell. Bidder A continued to move forward with its due diligence and the negotiation of a definitive agreement. Bidder B indicated a willingness to increase its price to $22.00, in part in exchange for the company’s agreement to reimburse it for up to $2 million of its expenses incurred after January 16, 2007. Bidder C raised its bid to $22.50 per share but noted that it would require substantially more time to complete its due diligence prior to entering into a definitive agreement. Because of this timing issue, no expense reimbursement agreement was entered into with Bidder C despite its prior request to do so. Kohlberg indicated a willingness to increase its price to $22.00, in part in exchange for the company’s agreement to reimburse it for up to $1 million of expenses incurred after January 25, 2007.

 

On January 29, 2007, the special committee met to discuss the status of the bids. Blackstone noted for the special committee that although the remaining bidders were very close on price, Bidder A had performed substantial due diligence and had indicated it would be in a position to make a final offer in advance of the other parties. The special committee also gave final approval to expense reimbursement on the terms described above, and the company entered into cost reimbursement agreements with Bidder B and Kohlberg the following week.

 

On February 1, 2007, Kohlberg advised Blackstone that it intended to partner with Lubert-Adler and Chrysalis (collectively, the “Equity Sponsors”) as a bidder for the entire company at a price of $22.00 per share. During the first week of February, Bidder A informed Blackstone that it did not believe it would ultimately reach an agreement with Mr. Carell pursuant to which he would acquire the CPC Properties, but Bidder A reaffirmed that it was still pursuing a bid for the entire company.

 

On February 6, 2007, the special committee was updated on the developments since its last meeting.

 

During the week of February 5, 2007, Bidder A informally indicated to Blackstone that it intended to offer to purchase the entire company at a price of no less than $22.25 per share, with an opportunity to increase this amount to $22.75 per share provided that Central Parking sold certain real estate in New York

City at a specified price prior to closing, with an opportunity for the proposed merger consideration to increase if the those New York City properties were sold above that specified price. However, on February 9, 2007, Bidder A indicated that it had revived its discussions with Mr. Carell, that it was withdrawing this offer, and that Bidder A intended to offer $22.50 for public shareholders and $21.50 for shares held by the Carell family and related entities contemporaneous with a sale to Mr. Carell of the CPC Properties for $448 million plus the assumption of CPC Properties related debt.

 

Between February 9 and February 13, 2007, negotiations over contract terms occurred between our advisors and advisors for both Bidder A and the Equity Sponsors. Terms discussed included the amount of the reverse termination fee, elimination of any third party consents for closing, and elimination of certain real estate closing conditions (particularly relating to title and environmental issues), and other events that could prevent or delay closing.

 

On February 13, 2007, Central Parking received a revised merger agreement from Bidder B with numerous material open issues, and subsequently Bidder B indicated that it needed an additional two to three weeks to finalize contract terms and due diligence and to obtain internal approval of the transaction. On that same date, Bidder C advised Blackstone that it needed an additional three to four weeks to perform its remaining due diligence and to negotiate a merger agreement.

 

On February 13, 2007, the special committee met and was updated on the recent developments. The special committee was also advised, on that same date, that Bidder A had again informed Blackstone that it did not intend to enter into a transaction with Mr. Carell. Mr. Carell also informed the special committee that Mr. Carell and his family would consider entering into a voting agreement with any successful bidder selected by the special committee. On February 14, 2007, Mr. Carell also delivered to the special committee’s legal advisor proposed amendments to his employment agreement and deferred compensation agreement that he believed were appropriate in light of the proposed sale of the company and that he would expect to enter into contemporaneous with entering into a voting agreement.

 

On February 15, 2007, the special committee’s advisors held a conference call with the Equity Sponsors and their advisors to outline the key terms outstanding in the merger agreement negotiations. Also, on February 15, 2007, Bidder A asked to be put in contact with other CPC Properties bidders and indicated a strong preference not to acquire all of the CPC Properties at closing.

 

On February 16, 2007, the special committee’s advisors circulated a revised draft of the merger agreement to the Equity Sponsors and their advisors. At this point, the Equity Sponsors’ offer remained at $22.00 per share. On that same day, Bidder A delivered a revised merger agreement and proposed to acquire the entire company for $22.25 per share, with a reverse termination fee of $20 million and a target date of February 19 for signing a definitive merger agreement. A number of diligence items remained open with respect to Bidder A, as did significant terms of the merger agreement. Bidder A also requested the right to sell real property between signing of a definitive agreement and closing, which necessitated its proposed outside closing date of September 30, 2007. As of this date, Bidder B was significantly behind Bidder A with respect to the diligence process and had also made significantly less progress with respect to contract terms.

 

The special committee met on February 16, 2007 to discuss the status of the bids. The Equity Sponsors also delivered on that same date their debt and equity financing commitments. After a lengthy discussion of the merits of the existing offers, the likelihood of obtaining a higher price later from another interested party, the demands of the diligence process, and the transaction process generally, the special committee instructed Blackstone to continue negotiations with Bidder A and the Equity Sponsors. On a subsequent follow-up call on February 17, 2007 to discuss the February 16 draft merger agreement, the Equity Sponsors indicated that they had substantially completed their diligence and were prepared to reach agreement on the terms proposed by the special committee’s advisors on all of the major issues that remained open other than the amount of the reverse termination fee, and were prepared to execute a definitive agreement immediately.

 

On the morning of February 18, 2007, the special committee’s advisors and Bidder A’s advisors discussed key unresolved contract terms. Bidder A’s advisor indicated strongly that their client would not agree to certain terms being proposed by the special committee in the merger agreement related to the closing conditions for

real estate title, environmental issues, and third party consents. No progress was made on this issue and the call terminated without a discussion of other substantive unresolved issues. The Equity Sponsors had reached agreement on those same proposed terms on the prior day. Later on February 18, 2007, Blackstone discussed these closing conditions further with Bidder A and reiterated the special committee’s position with respect to these closing conditions.

 

Later on February 18, 2007, the Equity Sponsors advised Blackstone that they intended to make a higher offer, provided that such bid would close the process. The Equity Sponsors had reached agreement on the contract terms as proposed by the special committee, including the elimination of closing conditions for real estate title, environmental issues, or third party consents other than the bring-down of the representations and warranties contained in the merger agreement at closing, the provision of a $30 million reverse termination fee and establishing the right to terminate the merger agreement if the closing did not occur on or before July 31, 2007. Based on agreement to these terms, the Equity Sponsors increased their bid to $22.50 per share on February 18, 2007. The Equity Sponsors described this offer as their “best and final” offer.

 

On the evening of February 18, 2007, the special committee legal advisors notified counsel for Mr. Carell that the special committee was close to having an agreement with the Equity Sponsors and that the Equity Sponsors’ willingness to enter into a merger agreement would be conditioned on Mr. Carell, Mrs. Brown, and members of their families and related entities entering into voting agreements in support of the transaction. Counsel for Mr. Carell indicated that Mr. Carell anticipated entering into amendments to his employment agreement and deferred compensation agreement, on the terms proposed to the special committee on February 14, contemporaneous with Mr. Carell, Mrs. Brown, and members of their families and related entities entering into voting agreements. On February 19, 2007, a draft agreement that had been prepared by the special committee’s legal advisors substantially effecting those changes to Mr. Carell’s existing agreements was forwarded to Mr. Carell’s counsel. Later on that date, Mr. Carell’s counsel asked the legal advisors to the special committee to forward this draft agreement to counsel for the Equity Sponsors. The Equity Sponsors then engaged in direct negotiations with Mr. Carell and his counsel regarding this draft agreement on February 19 and 20. The terms of the final executed agreement were substantially the same as those initially requested by Mr. Carell.

 

On February 19, 2007, Bidder A indicated to Blackstone that it was further reducing its price to $22.00 per share and that it would agree to the material terms requested by Central Parking, other than with respect to the reverse termination fee and the outside date for completing the transaction. Bidder A also indicated that it still intended to have Central Parking dispose of certain real estate prior to closing.

 

On the morning of February 19, 2007, the special committee held a meeting to discuss the recent developments. The special committee’s advisors described the events over the last several days, including the numerous discussions with the Equity Sponsors and Bidder A. Blackstone also noted that the Equity Sponsors had provided evidence of debt and equity financing commitments in amounts sufficient to complete the transaction and noted that Bidder A had not yet provided financing commitments. The special committee then instructed its advisors to attempt to finalize the terms of a merger agreement and related agreements with the advisors for the Equity Sponsors.

 

Later that same day, Bidder A, Bidder B, and Bidder C were contacted by Blackstone, and each was informed that its current position on price, contract terms, and/or timing was not competitive and that Central Parking intended to move forward with a different party. Bidder A subsequently contacted Blackstone and indicated that it was prepared to increase its price to $22.50 with a reverse termination fee of $20 million, an outside closing date of August 30, 2007, and a continued intent to have Central Parking dispose of certain estate prior to the closing.

 

On the evening of February 19, 2007, the special committee held another meeting to discuss the developments that occurred since their meeting that morning.

 

On February 20, 2007, Blackstone received a letter from Bidder B increasing its price to $22.50, indicating that it was willing to engage in further merger agreement negotiations and indicating that it anticipated receipt of financing commitments by February 28.

 

On the evening of February 20, 2007, meetings of Central Parking’s special committee and full board of directors were held. During the meeting of the special committee, the full board was invited to hear Blackstone’s presentation regarding the fairness from a financial point of view of the $22.50 per share merger consideration to the common shareholders of Central Parking and the presentation by the special committee’s legal counsel of the proposed transaction terms. Upon learning during the Blackstone presentation that the Equity Sponsors and Bidder B had received reimbursement of certain of their expenses, Mr. Carell reiterated his prior request of the special committee to be reimbursed for costs associated with his bid for CPC Properties, which prior request had not been agreed to by the special committee. The special committee discussed this request without Mr. Carell or Mrs. Brown present. After discussion with its advisors, the special committee directed Blackstone to propose to the Equity Sponsors that they increase their proposed price per share to all shareholders by an amount such that Mr. Carell’s proceeds would be substantially equivalent to the expense reimbursement he had requested. After deliberation, the Equity Sponsors called Blackstone and agreed to increase their price to $22.53 per share for an immediate execution of definitive documentation, and Blackstone then described this response to the special committee and to Mr. Carell. Blackstone then continued to discuss in detail its analyses of the transaction and the price to be received by our shareholders in the transaction. Following its presentation, Blackstone provided orally to the special committee its opinion (which opinion was subsequently confirmed in writing), to the effect that, as of February 20, 2007, and based upon the qualifications, assumptions, limitations and other matters set forth in its written opinion, the merger consideration of $22.53 per share in cash to be received by the holders of shares of our common stock pursuant to the merger was fair, from a financial point of view, to such holders.

 

With the benefit of these presentations and advice, the special committee, along with the other members of our board of directors, discussed the terms and merits of the proposed transaction in more detail. At the conclusion of this discussion, directors Eads, Carell, Brown and Katz were excused from the meeting, and the special committee had final discussions regarding the merits of the proposed transaction and whether it was in the best interests of shareholders. The special committee then unanimously resolved that the merger agreement is fair to and in the best interests of Central Parking and its shareholders and recommended that the board of directors of Central Parking approve the transaction, the merger agreement, and the transactions contemplated by the merger agreement, and that the board of directors recommend to the shareholders of Central Parking that they vote to approve the merger agreement and the transactions contemplated thereby.

 

The special committee then discussed the proposed modifications to Mr. Carell’s compensation arrangement with Central Parking to be offered as a material inducement to Mr. Carell to vote all of his shares in favor of the merger agreement. The specific terms of the modifications are described in detail below in the section titled “Interests of Certain Persons in the Merger - Monroe Carell’s Agreements” on page 40. After discussion of these modifications, including any potential economic impact to Central Parking, the special committee unanimously approved the modifications and authorized Central Parking to enter into an agreement with Mr. Carell on the terms proposed.

 

The meeting of the special committee was then adjourned and a meeting of our board of directors was convened. Our board of directors expressly acknowledged that Mr. Carell’s and Mrs. Brown’s agreements to enter into voting agreements with the Equity Sponsors and the amendment of Mr. Carell’s agreement with Central Parking provided each of them with an interest in the proposed transaction not available to all shareholders. Mr. Eads also informed the directors that while no members of management had any express agreement with the Equity Sponsors regarding their continued employment with Central Parking after the transaction, Mr. Eads anticipated that discussions regarding this topic would occur after execution of the merger agreement. After receiving the special committee’s recommendation, the board discussed and deliberated the proposed transaction with the Equity Sponsors. Our board also acknowledged that Mr. Katz had disclosed to the board that he had prior business dealings with Lubert-Adler and that he had been contacted much earlier in the process and had declined to work with Lubert-Adler with respect to this transaction. Thereafter, our board of directors unanimously determined that the merger agreement is fair to and in the best interests of Central Parking and its shareholders, approved the merger agreement and the transactions contemplated by the merger agreement, and recommended that the shareholders of Central Parking vote to adopt the merger agreement.

 

Following the meeting of the board of directors, the merger agreement was executed by Central Parking and the Equity Sponsors.

 

The Special Committee

 

In the course of reaching its decision to recommend that our board of directors approve the merger agreement and the merger, the special committee consulted with senior management and the special committee’s financial and legal advisors, and reviewed a significant amount of information and considered a number of factors weighing positively in favor of the merger, including the following material factors:

 

 

 

 

 

The special committee also considered a number of factors relating to the procedural safeguards involved in the negotiations, each of which contributes to the belief that the transaction is fair to our shareholders and supports the determinations made by the special committee:

 

 

In the course of its deliberations, the special committee also considered a variety of risks and other countervailing factors weighing negatively against the merger, including:

 

 

The foregoing discussion of the factors considered by the special committee is not intended to be exhaustive, but it does set forth the principal factors considered by the special committee. The special committee reached the unanimous conclusion to recommend that our board of directors approve the merger agreement and the merger in light of the various factors described above and other factors that each member of the special committee felt were appropriate. In view of the wide variety of factors considered by the special committee in connection with its evaluation of the merger and the complexity of these matters, the special committee did not consider it practical, and did not attempt, to quantify, rank or otherwise assign relative weights to the specific factors it considered in reaching its decision and did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable to the ultimate determination of the special committee. Rather, the special committee made its recommendation based on the totality of information presented to, and the investigation conducted by, it. In considering the factors discussed above, individual directors may have given different weights to different factors.

 

Recommendation of Our Board of Directors

 

Our board of directors, acting largely on the recommendation of the special committee and being fully aware of the Carell family’s and management’s interests in the transaction, and after deliberation at a meeting on February 20, 2007 as described above, determined by unanimous vote that the merger agreement was advisable and in the best interests of our shareholders. Accordingly, our board unanimously approved the

merger agreement and the merger. Our board recommends that you vote “FOR” the approval of the merger agreement.

 

The special committee retained Blackstone, by agreement dated June 1, 2006, to provide it with financial advisory services in connection with a possible sale, merger or other strategic business combination involving Central Parking. The special committee selected Blackstone to act as its financial advisor based on Blackstone’s qualifications, expertise, and reputation as a financial advisor to special committees. At the meeting of the special committee on February 20, 2007, and at the meeting of the Central Parking board of directors later on that same day, Blackstone rendered its oral opinion, subsequently confirmed in writing, that as of February 20, 2007, and based upon and subject to the assumptions, qualifications, and limitations set forth in the opinion, the $22.53 per share cash consideration to be received by the Central Parking shareholders pursuant to the merger agreement was fair, from a financial point of view, to such shareholders.

 

The full text of the written opinion of Blackstone, dated as of February 20, 2007, is attached to this proxy statement as Annex B. The opinion sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the scope of the review undertaken by Blackstone in rendering its opinion. You are encouraged to read the entire opinion carefully. Blackstone’s opinion is directed to the special committee of Central Parking’s board of directors and addresses only the fairness as of the date of the opinion, from a financial point of view, of the $22.53 per share cash consideration to be received by the holders of shares of Central Parking’s common stock pursuant to the merger agreement. Blackstone’s opinion does not address any other aspects of the merger or the merger agreement. The opinion, and the other views and analysis of Blackstone referenced throughout this proxy statement, do not constitute a recommendation to any holder of Central Parking common stock as to how to vote at the shareholders’ meeting to be held in connection with this transaction. The summary of the opinion of Blackstone set forth in this proxy statement is qualified in its entirety by reference to the full text of the opinion.

 

In connection with rendering its opinion, Blackstone, among other things:

 

 

 

In arriving at its opinion, Blackstone relied on, without independent verification, the accuracy and completeness of all financial and other information that was available from public sources and all projections and other information provided to Blackstone by Central Parking or otherwise reviewed by or for Blackstone. With respect to financial and other projections and pro forma financial information prepared by Central Parking and the assumptions underlying those projections and such pro forma information, Blackstone assumed that they were reasonably prepared and represented management’s best estimates and judgments as of the date of their preparation. Blackstone relied upon the assurances of the management of Central Parking that they are not aware of any facts that would make the information and projections provided by them inaccurate, incomplete, or misleading. Blackstone did not make any independent evaluation or appraisal of the assets and liabilities (contingent, derivative, off-balance sheet or otherwise) of Central Parking, nor did Blackstone obtain any such appraisals. Blackstone also assumed that the definitive merger agreement, the definitive voting agreement, the definitive limited guarantee and the definitive financing commitments did not differ in any respects material to Blackstone’s analyses from the drafts of such documents furnished to Blackstone.

 

In arriving at its opinion, Blackstone assumed that the merger will be effected in accordance with the terms and conditions set forth in the merger agreement, including that KCPC Holdings and Merger Sub will obtain financing for the merger in accordance with the terms set forth in the financing commitments, without waiver, modification or amendment of any term, condition or agreement material to Blackstone’s analyses and that, in the course of obtaining the necessary regulatory or third party approvals, agreements or consents for merger, no delay, limitation, restriction or condition will be imposed that would have an adverse effect on Central Parking or the contemplated benefits of the merger. Blackstone is not a legal, tax or regulatory advisor and relied upon, without independent verification, the assessment of Central Parking and its legal, tax, and regulatory advisors with respect to such matters.

 

Blackstone’s opinion only addressed the fairness, from a financial point of view, to the holders of Central Parking’s common stock of the $22.53 per share cash consideration to be received by such shareholders in the merger and did not address any other aspect or implication of the merger, the merger agreement or any other agreement, arrangement or understanding entered into in connection with the merger or otherwise. In arriving at its opinion, Blackstone did not express any opinion as to the impact of the merger on the solvency or viability of Central Parking following the merger or the ability of Central Parking to pay its obligations when they become due.

 

Blackstone’s opinion did not address the relative merits of the merger as compared to other business strategies or transactions that might be available to Central Parking or Central Parking’s underlying business decision to effect the merger. Blackstone’s opinion did not constitute a recommendation to any shareholder of Central Parking as to how such shareholder should vote or act with respect to the merger or any other matter. In addition, Blackstone’s opinion did not address the fairness to, or any consideration of, the holders of any class of securities, creditors or other constituencies of Central Parking other than the holders of Central Parking common stock.

 

Blackstone’s opinion was necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to it as of, February 20, 2007. Events occurring after such date may affect Blackstone’s opinion and the assumptions used in preparing it, and Blackstone did not assume any obligation to update, revise or reaffirm its opinion.

 

Blackstone is an internationally recognized financial advisory firm. Blackstone, as part of its investment banking and financial advisory business, is continuously engaged in the valuation of businesses and securities in connection with mergers and acquisitions and restructurings, and valuations for corporate and other purposes. In the past Blackstone provided financial advisory services to Central Parking in connection with its acquisition of Allright Parking and to certain funds managed by affiliates of Kohlberg & Company, L.L.C. in connection with a sale of a portfolio company. Certain affiliates of Blackstone have also been lenders to, and have purchased assets from, portfolio companies of Kohlberg. In addition, Blackstone and its affiliates may in the ordinary course of business actively trade or hold the securities of Central Parking for their own account or for others and may at any time hold a long or short position in such securities.

 

Under the terms of Blackstone’s engagement letter, Central Parking has agreed to pay Blackstone certain fees, substantially all of which are payable upon consummation of any substantial transaction or series of transactions involving Central Parking, including the merger. These fees include: an initial fee of $250,000 which was paid at the time of the engagement letter; a retainer fee of $50,000 per month beginning on November 1, 2006, which monthly fees have not yet been paid; and an additional fee of $12,321,379 which will be paid if the merger is completed at the current price, which is equal to 1.1% of the aggregate consideration to be received in the merger plus an incremental incentive fee for consummating the merger at a price greater than $20 per share, less any fees already paid. Central Parking has also agreed to reimburse Blackstone for certain of its expenses, including attorneys’ fees, incurred in connection with its engagement, provided such expenses shall not exceed, in the aggregate, $100,000 without Central Parking’s prior written consent. In addition, Central Parking has agreed to indemnify Blackstone, its affiliates, their respective partners, members, directors, officers, employees and agents and each person, if any, controlling Blackstone or any of its affiliates against certain liabilities and expenses, including certain liabilities under the U.S. federal securities laws, relating to or arising out of its engagement and any related transactions.

 

Financial Analyses of Blackstone

 

The following is a summary of the material analyses performed by Blackstone in connection with its oral opinion and the preparation of its written opinion letter dated February 20, 2007. In connection with arriving at its opinion, Blackstone did not attribute any particular weight to any analysis described below. Some of these summaries of financial analyses include information presented in tabular format. In order to fully understand the financial analyses used by Blackstone, 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. Blackstone computed the implied equity values summarized below assuming 32.6 million fully diluted shares of Central Parking common stock as of February 16, 2007.

 

Historical Share Price Analysis.  Blackstone performed a historical share price analysis to obtain background information and perspective with respect to the historical share prices of Central Parking common stock.

 

Blackstone also reviewed the historical price performance and average closing prices of Central Parking common stock for various periods ending on November 27, 2006 (the last closing price before Central Parking

announced that it had engaged Blackstone to explore strategic alternatives) and February 16, 2007 and compared them to the per share merger price of $22.53. Blackstone observed the following:

 

 

Blackstone also observed that the 52-week (i) trading range of Central Parking’s common stock through February 16, 2007 was $13.30 to $20.89, which implied a total enterprise value of Central Parking ranging from $561 million to $809 million, and (ii) undisturbed trading range of Central Parking’s common stock through November 27, 2006 (the last closing price before Central Parking announced that it had engaged Blackstone to explore strategic alternatives) was $12.85 to $18.52, which implied a total enterprise value of Central Parking of $547 million to $732 million. Blackstone observed that the per share merger consideration to be received by holders of Central Parking common stock was $22.53.

 

Sum-of-the-Parts Analysis.  Blackstone performed a sum-of-the-parts analysis for Central Parking based upon its estimated valuations of each of Central Parking’s business units as separate and independent business concerns. The business units analyzed were Central Parking’s leased and management business (“Opco”) and its owned real estate business (“Propco”). The Opco business operates parking facilities under leased or managed arrangements. The Propco business owns and operates parking facilities, including traditional garages, surface lots, airport park-and-fly lots, and condominium lots.

 

From the results of its sum-of-the-parts analysis, Blackstone estimated the (i) implied pre-tax enterprise value range of Central Parking’s Opco business of (a) $475 million to $545 million based on the sensitivity case (as discussed below), which implied an equity value range of Central Parking’s Opco business of $10.75 to $12.75 per each share of Central Parking common stock, and (b) $500 million to $600 million based on management’s upside case (as discussed below), which implied an equity value range of Central Parking’s Opco business of $11.50 to $14.50 per each share of Central Parking common stock, and (ii) implied after-tax enterprise value range of Central Parking’s Propco business of $330 million to $361 million, which implied an equity value range of Central Parking’s Propco business of $10.00 to $11.00 per each share of Central Parking common stock.

 

Blackstone then added its implied valuation of the Opco business with its implied valuation of the Propco business. This resulted in an implied total enterprise value for Central Parking ranging from (x) $805 million to $906 million using the sensitivity case for its Opco analysis, which implied a per share equity value range of Central Parking’s common stock of $20.75 to $23.75, and (y) $830 million to $961 million using management’s upside case for its Opco analysis, which implied a per share equity value range of Central Parking’s common stock of $21.50 to $25.50. Blackstone observed that the per share merger consideration to be received by holders of Central Parking common stock was $22.53. Blackstone noted that it believed the implied valuation of $20.75 to $23.50 per share, determined using the sensitivity case for its Opco analysis, is the more reasonable assessment of the Opco business, due to, among other things, historical volatility in Central Parking’s financial performance. Blackstone also noted that Central Parking’s ability to sell any or all of its Opco assets or Propco assets separately would be subject to uncertainty and could result in lost synergies and tax inefficiencies. In addition, third party consents may be required to effect such sales and may not be forthcoming.

 

Set forth below is a summary of the material analyses performed by Blackstone in connection with its valuation of Central Parking’s Opco business and Propco business. In order to fully understand the financial analyses used by Blackstone, the tables below must be read together with the text of each summary set forth below.

 

Opco Business Valuation Analysis.  The following is a summary of the material analyses performed by Blackstone in connection with its valuation of Central Parking’s Opco business.

 

Summary Valuation — Opco Business.  In connection with its valuation of the Opco business, Blackstone performed a comparable companies analysis, a discounted cash flow analysis, and a leveraged buy-out analysis. Blackstone performed these valuations using certain unadjusted management projections and estimates, which are referred to herein as the “upside case.” Blackstone also performed a valuation of the Opco business using the projections and estimates supplied by management, as adjusted to reflect, among other things, lower same-store-sales growth for the managed business in 2007 and subsequent years, lower EBITDA (defined as earnings before interest expense, income taxes and depreciation and amortization) generation from new management contracts in 2007 and subsequent years, higher selling, general and administrative (“SG&A”) expense in 2007, and a higher SG&A expense growth rate after 2007, which are referred to herein as the “sensitivity case.” Blackstone noted that it believed the implied valuation of the Opco business using the sensitivity case is a more reasonable assessment of the Opco business.

 

Summary Valuation — Opco Business (Sensitivity Case).  From the results of the Opco valuation — sensitivity case, Blackstone estimated the implied pre-tax (i) enterprise value of Central Parking’s Opco business ranging from $475 million to $545 million and (ii) per share equity value range of Central Parking’s Opco business of $10.75 to $12.75 per each share of Central Parking common stock.

 

The following table below is a summary of the valuations implied from such sensitivity case analyses. In order to fully understand the financial analyses used by Blackstone, the table must be read together with the text of each summary set forth below. The following table alone does not constitute a complete summary of the financial analyses performed by Blackstone in connection with its sensitivity case valuation of the Opco business.

 

 

 

 

Comparable Companies Analysis — Opco Business (Sensitivity Case).  Blackstone performed a comparable companies analysis that attempted to provide an implied value for Central Parking’s Opco business by comparing its Opco business to similar public companies. For purposes of this analysis, Blackstone reviewed certain public trading multiples for six companies which, based on their experience with companies in the parking industry, Blackstone considered similar to Central Parking’s Opco business in size and business mix. The six companies consisted of (i) ABM Industries, Inc. and Standard Parking Corp., which companies provide parking management services (collectively, the “Parking Services Companies”) and (ii) Compass Group plc, Sodexho Alliance SA, FirstService Corp. and Comfort Systems USA Inc., which companies provide facility management services (collectively, the “Facility Services Companies” and together with the Parking Services Companies, the “Selected Opco Companies”). The multiples used by Blackstone included, among others, ratios of (1) total enterprise value to (a) projected calendar year 2007 (“2007E”) EBITDA, (b) projected 2007E EBITDA minus projected 2007E capital expenditures and (c) 2007E earnings before

interest expense and income taxes (“EBIT”) and (2) equity value to 2007E free cash flow (which is defined as EBITDA less interest expense, cash taxes and capital expenditures). In performing this analysis, Blackstone used publicly available filings and estimates and press releases for the comparable companies and, with respect to Central Parking, estimates provided to Blackstone by Central Parking’s management. Blackstone observed the following:

 

 

Based on the analysis of the relevant metrics for each of the Selected Opco Companies, Blackstone selected representative ranges of financial multiples of the Selected Opco Companies and applied these ranges of multiples to the relevant Central Parking financial statistic using the management projections. Blackstone estimated the implied enterprise value range of Central Parking’s Opco business of $475 million to $550 million. This resulted in an implied per share equity value range of $10.75 to $13.00 per share of Central Parking common stock.

 

No company used in the comparable company analysis is identical to Central Parking’s Opco business. In evaluating the Selected Opco Companies, Blackstone made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of Central Parking, such as the impact of competition on the Opco business and the industry generally, industry growth, and the absence of any adverse material change in the financial condition and prospects of the Opco business or the industry or in the financial markets in general.

 

Discounted Cash Flow Analysis — Opco Business (Sensitivity Case).  Using projections (sensitivity case) for 2007 to 2010, Blackstone performed an analysis to determine the present value of the free cash flows that Central Parking’s Opco business could generate from 2007 and beyond. Blackstone used a weighted average cost of capital range of 11.0% to 12.0%, based on a weighted average cost of capital calculation which factored in the unlevered betas for similar companies identified above under the heading “Comparable Companies Analysis — Opco Business (Sensitivity Case),” and terminal multiple range of 11.5x to 12.5x Opco 2007E EBITDA minus capital expenditures. Blackstone selected terminal EBITDA minus capital expenditures multiples ranging from 11.5x to 12.5x based on current trading multiples reviewed in connection with comparable companies identified above under the heading “Comparable Companies Analysis — Opco Business (Sensitivity Case).” The discounted cash flow analysis determined the discounted present value of the unlevered free cash flow generated over the period covered by the financial forecasts and then added a terminal value based on the terminal multiple range. This resulted in an implied enterprise valuation range of Central Parking’s Opco business of $508 million to $558 million and a range of implied per share equity values of $11.75 to $13.25 for each share of Central Parking common stock.

 

Leveraged Buyout Analysis — Opco Business (Sensitivity Case).  Blackstone also analyzed the Opco business from the perspective of a potential financial buyer that would effect a leveraged buyout using a debt capital structure consistent with the debt structure that the Opco business is expected to have following the merger. Blackstone used management projections (sensitivity case) for 2007 to 2010, and assumed that a financial sponsor could sell the Opco business in 2010 at an aggregate total enterprise value range representative of a multiple of 11.5x to 12.5x projected calendar year 2010 (“2010E”) Opco EBITDA minus capital expenditures based on a review of current and historical trading multiples reviewed in connection with comparable companies identified under the heading “Comparable Companies Analysis — Opco Business (Sensitivity Case).” Blackstone added 2010E cash and subtracted forecasted 2010E debt outstanding to calculate the 2010E equity value for the Opco business. Based on Opco’s assumed 2010E equity value range, Blackstone derived an implied enterprise valuation range of Central Parking’s Opco business ranging from $480 million to $531 million and a range of implied per share equity values of $10.75 to $12.25 for each share of Central Parking common stock, representing implied values per share that a financial sponsor might be willing to pay to acquire the Opco business.

 

Summary Valuation — Opco Business (Upside Case).  From the results of the Opco valuation — upside case, Blackstone estimated the implied pre-tax (i) enterprise value of Central Parking’s Opco business of $500 million to $600 million and (ii) per share equity value range of Central Parking’s Opco business of $11.50 to $14.50 per each share of Central Parking common stock.

 

The following table below is a summary of the valuations implied from such upside case analyses. The analyses summarized in the following table used the same methodologies as described above in connection with the sensitivity case and does not constitute a complete summary of the financial analysis performed by Blackstone in connection with its upside case valuation of the Opco business.

 

 

 

 

Propco Business Valuation Analysis.  The following is a summary of the material analyses performed by Blackstone in connection with its valuation of Central Parking’s Propco business.

 

Summary Valuation — Propco Business.  In connection with its valuation of the Propco business, Blackstone performed a comparable companies analysis and a leveraged buy-out analysis. From the results of such analyses, Blackstone estimated the implied after-tax (i) enterprise value of Central Parking’s Propco business to be $330 million to $361 million and (ii) equity value range of Central Parking’s Propco business to be $10.00 to $11.00 per each share of Central Parking common stock (assumes a sale of Propco would generate a Central Parking tax liability of $95 million to $114 million or $3.00 to $3.50 per share). Blackstone noted that Central Parking management’s internal after-tax valuation of the Propco business was $355 million, assuming a $175 million tax basis and a 38% tax rate.

 

The following table below is a summary of the valuations implied from such analyses. In order to fully understand the financial analyses used by Blackstone, the table must be read together with the text of each summary set forth below. The following table alone does not constitute a complete summary of the financial analyses performed by Blackstone in connection with its valuation of the Propco business.

 

 

 

 

Comparable Companies Analysis — Propco Business.  Blackstone performed a comparable companies analysis that attempted to provide an implied value for Central Parking’s Propco business by comparing its Propco business to similar public companies. For purposes of this analysis, Blackstone reviewed certain public trading multiples for five companies that, based on their experience with companies in the parking industry, Blackstone considered similar to Central Parking’s Propco business in size and business mix. The five companies consisted of American Financial Realty Trust, National Retail Properties, Inc., Entertainment Properties Trust, Getty Realty Corp. and Realty Income Corp. (the “Selected Propco Companies”). The multiples used by Blackstone included, among others, ratios of total enterprise value to 2007E EBITDA and last twelve months (“LTM”) EBITDA. In performing this analysis, Blackstone used publicly available filings and estimates and press releases as well as, with respect to Central Parking, estimates provided to Blackstone by Central Parking’s management. Blackstone observed the following:

 

 

Based on the analysis of the relevant metrics for each of the Selected Propco Companies, Blackstone selected representative ranges of financial multiples of the Selected Propco Companies and applied these ranges of multiples to the relevant Central Parking financial statistic using the management projections. Using this analysis, Blackstone estimated the implied enterprise value of Central Parking’s Propco business to be $415 million to $460 million. This resulted in an implied per share equity value range of $12.75 to $14.00 per share of Central Parking common stock.

 

No company utilized in the comparable company analysis is identical to Central Parking’s Propco business. In evaluating the Selected Propco Companies, Blackstone made judgments and assumptions with

regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of Central Parking, such as the impact of competition on the Propco business and the industry generally, industry growth, and the absence of any adverse material change in the financial condition and prospects of the Propco business or the industry or in the financial markets in general.

 

Leveraged Buyout Analysis — Propco Business.  Blackstone also analyzed the Propco business from the perspective of a potential financial buyer that would effect a leveraged buyout using a debt capital structure consistent with the debt structure that the Propco business is expected to have following the merger. Blackstone used management projections for 2007 to 2010, and assumed that a financial sponsor could sell the Propco business in 2010 at an aggregate total enterprise value range representative of a multiple of 14.5x to 15.5x Propco 2010E EBITDA based on a review of current and historical trading multiples reviewed in connection with comparable companies identified under the heading “Comparable Companies Analysis — Propco Business.” Blackstone added 2010E cash and subtracted 2010E debt outstanding to calculate Propco’s 2010E equity value. Based on Propco’s assumed 2010E equity value range, Blackstone derived a current pre-tax implied enterprise valuation range of Central Parking’s Propco business of $425 million to $475 million and a range of pre-tax implied per share equity values of $13.00 to $14.50 for each share of Central Parking common stock, representing pre-tax implied values per share that a financial sponsor might be willing to pay to acquire the Propco business.

 

Premiums Paid Analysis.  Blackstone performed a premiums paid analysis based upon the premiums paid in twelve precedent cash merger and acquisition transactions. These precedent transactions were announced since January 2005 and had transaction enterprise values between $700 million and $900 million. Blackstone analyzed the transactions to determine the premium paid for the target as determined using the stock price on the date that was one day, one week and one month prior to the deal announcement. Based on this premiums paid analysis, Blackstone utilized a premium reference valuation range of 22% to 27%, which Blackstone applied to Central Parking’s 30-day undisturbed average closing price of $17.43. Blackstone estimated the implied enterprise value of Central Parking to be $821 million to $850 million. This resulted in an implied per share equity value range of $21.26 to $22.14 per share of Central Parking common stock. Blackstone observed that the per share merger consideration to be received by holders of Central Parking common stock was $22.53.

 

Analyst Valuation Range.  Blackstone reviewed certain of the publicly available equity research analyst reports for Central Parking that it viewed as most relevant. Blackstone observed that only one of the more recent equity research reports that Blackstone reviewed provided a range of price targets for Central Parking’s common stock. The range of price targets in this research report (the report was published in December 2006) was $16.00 to $18.00 per share, which implied an estimated enterprise value of $649 million to $715 million. Blackstone observed that the per share merger consideration to be received by holders of Central Parking common stock was $22.53.

 

In connection with the review of the merger by the special committee of our board of directors, Blackstone performed a variety of financial and comparative analyses for purposes of rendering its opinion. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to a partial analysis or summary description. In arriving at its opinion, Blackstone considered the results of all of its analyses as a whole and did not attribute any particular weight to any analysis or factor it considered. Blackstone believed that selecting any portion of its analyses, without considering all analyses as a whole, would create an incomplete view of the process underlying the analyses and opinions. In addition, Blackstone may have given various analyses and factors more or less weight than other analyses and factors, and may have deemed various assumptions more or less probable than other assumptions. As a result, the ranges of valuations resulting from any particular analysis described above should not be taken to be Blackstone’s view of the actual value of Central Parking or its Opco business or Propco business. In performing its analyses, Blackstone made numerous assumptions with respect to industry performance, general business and economic conditions and other matters. Many of these assumptions are beyond the control of Central Parking. Any estimates contained in Blackstone’s analyses are not necessarily indicative of future results or actual values, which may be significantly more or less favorable than those suggested by such estimates.

 

Blackstone conducted the analyses described above solely as part of its analysis of the fairness, as of February 20, 2007, of the consideration pursuant to the merger agreement from a financial point of view to holders of shares of Central Parking common stock and in connection with the delivery of its opinion dated February 20, 2007 to the special committee of the board of directors of Central Parking. These analyses do not purport to be appraisals or to reflect the prices at which shares of common stock of Central Parking might actually trade.

 

The merger consideration was determined through negotiations between the special committee of the board of directors of Central Parking and representatives of KCPC Holdings and was recommended by the special committee for approval by the board of directors and approved by the board of directors. Blackstone provided advice to the special committee during these negotiations. Blackstone did not, however, recommend any specific merger consideration to Central Parking, the special committee or the board of directors or that any specific merger consideration constituted the only appropriate consideration for the merger.

 

In addition, Blackstone’s opinion and its presentation to the special committee were one of many factors taken into consideration by the special committee in deciding to approve the merger. Consequently, the analyses as described above and the other views and analyses of Blackstone referenced throughout this proxy statement should not be viewed as determinative of the opinion of the special committee or of our board of directors with respect to the consideration or of whether the special committee or our board of directors would have been willing to agree to different consideration. The foregoing summary describes the material analyses performed by Blackstone but does not purport to be a complete description of the analyses performed by Blackstone.

 

Central Parking’s management does not as a matter of course make public projections as to future performance or earnings and is especially wary of making projections for extended earnings periods due to the unpredictability of the underlying assumptions and estimates. However, management did provide financial forecasts to the Equity Sponsors, the special committee, and Blackstone in connection with their consideration of the merger. Set forth below is a subset of these projections to give our shareholders access to certain nonpublic information deemed material by the special committee for purposes of considering and evaluating the merger. The inclusion of this information should not be regarded as an indication that the Equity Sponsors, the special committee or board of directors, Blackstone or any other recipient of this information considered, or now considers, it to be a reliable prediction of future results.

 

Central Parking advised the recipients of the projections that its internal financial forecasts, upon which the projections were based, are subjective in many respects. The projections reflect numerous assumptions with respect to industry performance, general business, economic, market and financial conditions and other matters, all of which are difficult to predict and beyond Central Parking’s control. The projections also reflect numerous estimates and assumptions related to the business of Central Parking that are inherently subject to significant economic, political, and competitive uncertainties, all of which are difficult to predict and many of which are beyond Central Parking’s control. As a result, there can be no assurance that the projected results will be realized or that actual results will not be significantly higher or lower than projected.

 

The financial projections were prepared for internal use and to assist the financial advisor to the special committee with their respective due diligence investigations of Central Parking and not with a view toward public disclosure or toward complying with U.S. generally accepted accounting principles, the published guidelines of the SEC regarding projections or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. Central Parking’s independent registered public accounting firm has not examined or compiled any of the financial projections, expressed any conclusion or provided any form of assurance with respect to the financial projections and, accordingly, assumes no responsibility for them. The financial projections do not take into account any circumstances or events occurring after the date they were prepared. Projections of this type are based on estimates and assumptions that are inherently subject to factors such as industry performance, general business, economic, regulatory, market and financial conditions, as well as changes to the business, financial condition

or results of operations of Central Parking, including the factors described under “Cautionary Statement Concerning Forward-Looking Statements” beginning on page 10, which factors may cause the financial projections or the underlying assumptions to be inaccurate. Since the projections cover multiple years, such information by its nature becomes less reliable with each successive year.

 

Since the date of the projections described below, Central Parking has made publicly available its actual results of operations for the quarter ended December 31, 2006. You should review Central Parking’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2006 to obtain this information. Readers of this proxy statement are cautioned not to place undue reliance on the specific portions of the financial projections set forth below. No one has made or makes any representation to any shareholder regarding the information included in these projections. Central Parking does not intend to update or otherwise revise the projections to reflect circumstances existing after the date when made or to reflect the occurrence of future events, even in the event that any or all of the assumptions underlying the projections are shown to be in error.

 

For the foregoing reasons, as well as the bases and assumptions on which the financial projections were compiled, the inclusion of specific portions of the financial projections in this proxy statement should not be regarded as an indication that such projections will be an accurate prediction of future events, and they should not be relied on as such. Except as required by applicable securities laws, Central Parking does not intend to update, or otherwise revise the financial projections or the specific portions presented to reflect circumstances existing after the date when made or to reflect the occurrence of future events, even in the event that any or all of the assumptions are shown to be in error.

 

Blackstone considered two sets of projections in its analysis. One, referred to as the sensitivity case, was prepared by management in May 2006 and updated for recent actual performance and minor adjustments to the assumptions in February 2007. The other set of projections, referred to as the upside case, was prepared by management in September 2006 and was updated for recent performance and minor adjustments in February 2007. The upside case is based on 2007 cash flow estimates generally consistent with management’s 2007 budget and generally contains more optimistic assumptions for higher revenue growth and lower increases in expenses than assumed in the sensitivity case. Central Parking’s results for the first quarter of fiscal year 2007 generally met management’s budget for the first quarter of 2007.

 

Sensitivity Case Projections

 

 

Upside Management Case Projections

 

 

Financing is not a condition to closing. If the merger agreement is terminated by Central Parking after May 21, 2007, because Parent shall not have received financing to close the merger within five business days

after receiving notice that all other conditions to the merger have been satisfied, Parent will be required to pay Central Parking a termination fee of $30.0 million. The Equity Sponsors have each entered into a limited guarantee in which they guarantee their proportionate share of the $30.0 million termination fee.

 

Parent estimates that the total amount of funds necessary to complete the merger is approximately $990.3 million, consisting of: approximately $749.7 million to be paid to Central Parking’s shareholders and holders of other equity-based interests in Central Parking, approximately $151.6 million to refinance our existing indebtedness (assuming the exercise by all holders of outstanding TIPS of the right to convert such TIPS into cash at closing), and approximately $89.0 million to pay fees and expenses and establish reserves in connection with the merger, the financing for the merger and the other transactions contemplated by the merger agreement. These funds are anticipated to come from the following source:

 

 

Pursuant to the merger agreement, Parent and Merger Sub are obligated to use their reasonable best efforts to arrange the debt financing and Central Parking is obligated to use its commercially reasonable efforts to provide all necessary cooperation in connection with the debt financing.

 

The following commitments have been received by Parent to provide the necessary financing for the merger:

 

Equity Financing

 

Parent has received an equity commitment letter dated February 20, 2007 from the Equity Sponsors pursuant to which each of the Equity Sponsors has committed to purchase on or prior to the effective time of the merger equity securities of Parent for a cash purchase price in the aggregate of $210.0 million. The obligation of each Equity Sponsor to fund its portion of the commitment is subject to the satisfaction, in the reasonable independent judgment of such Equity Sponsor (without giving effect to any modification or waiver effected without the prior written consent of such Equity Sponsor), of all conditions to Parent’s obligations set forth in the merger agreement, and subject to the substantially contemporaneous funding in full of the remaining portion of the debt financing contemplated by the debt commitment letter described below. Each Equity Sponsor’s obligation to fund its portion of the commitment may be satisfied in whole or in part by any affiliate of such Equity Sponsor or by a third party.

 

Debt Financing

 

Merger Sub has received a commitment letter dated February 20, 2007 from Goldman Sachs Credit Partners L.P. (“GSCP”) pursuant to which, subject to the conditions set forth therein, GSCP has committed to provide up to $405.0 million of senior secured bank financing (the “Senior Secured Credit Facilities”). Merger Sub has also received a commitment letter dated February 20, 2007, from Greenwich Capital Financial Products, Inc. (“GCFP”) and Goldman Sachs Mortgage Company (“GSMP”) pursuant to which, subject to the conditions set forth therein, GCFP and GSMC have committed to lend up to $417.8 million in first mortgage and mezzanine financing (the “Real Estate Financing”). The definitive documentation governing the debt financing has not been finalized and, accordingly, the actual terms and amounts may differ from those described below and, in certain cases, such differences may be significant. We do not intend to update or

otherwise revise any statements concerning the terms of the financing included in this proxy statement to reflect circumstances existing after the date when such statements were made or to reflect the occurrence of future events even in the event that any of the statements regarding the financing arrangements are shown to be in error or otherwise no longer appropriate. As of the date of this proxy statement, no alternative financing arrangements or alternative financing plans have been made in the event the debt financing described herein is not available as anticipated.

 

Senior Secured Credit Facilities

 

The Senior Secured Credit Facilities will consist of:

 

 

The First Lien Facilities are expected to bear interest at the option of Central Parking, as the surviving corporation, if Central Parking has obtained a corporate family rating of B1 or better by Moody’s and B+ or better by S&P, in each case, on the closing date at the base rate plus 1.25% per annum, or at the reserve adjusted Eurodollar rate plus 2.25% per annum. If the ratings threshold described above is not satisfied on the closing date, the First Lien Facilities are expected to bear interest, at Central Parking’s option, at the base rate plus 1.50% per annum, or at the reserve adjusted Eurodollar rate plus 2.50% per annum. After the first full fiscal quarter after effective time of the merger, the applicable margins will be adjusted as determined by a leverage based grid.

 

The Second Lien Facility is expected to bear interest at Central Parking’s option, if Central Parking has obtained a corporate family rating of B3 or better by Moody’s and B- or better by S&P, in each case, on the closing date at the base rate plus 4.75% per annum, or the reserve adjusted Eurodollar rate plus 5.75% per annum. If the ratings threshold described above is not satisfied on the closing date, the Second Lien Facilities are expected to bear interest, at Central Parking’s option, at the base rate plus 5.00% per annum, or the reserve adjusted Eurodollar rate plus 6.00% per annum.

 

The surviving corporation will pay commitment fees that will decrease upon achievement of specified leverage ratios and letter of credit fees under the First Lien Facilities. The surviving corporation will also pay an administrative agency fee to GSCP for services related to the facilities.

 

The First Lien Facilities may be prepaid in whole or in part without premium or penalty. The Second Lien Facility, subject to the provisions of the First Lien Facilities, may be voluntarily prepaid in whole or in part, subject to a premium of 2.00% of the amount repaid if such repayment occurs on or prior to the first anniversary and 1.00% of the amount repaid if such repayment occurs after the first anniversary of the closing, but prior to the second anniversary of the closing. The borrower will be required to make mandatory prepayments of the First Lien Facilities (with any balance to the Second Lien Facilities) for certain asset sales outside the ordinary course of business (subject to reinvestment rights and other exceptions), for incurrence of indebtedness (other than permitted indebtedness), and for a specified percentage of excess cash flow (to be defined in the definitive documentation).

 

The first lien term loan facility will be payable in equal quarterly amounts of 1.00% per annum through the date that is six years and nine months after the closing with the remaining balance due at maturity. No amortization will be required with respect to the revolving facility, the synthetic letter of credit facility or the Second Lien Facility.

 

The Senior Secured Credit Facilities will be guaranteed by Parent and each of Central Parking’s existing and subsequently acquired or organized wholly-owned domestic subsidiaries (other than the Real Estate SPEs formed in connection with the Real Estate Financing described below). The obligations of Central Parking and

the guarantors under the Senior Secured Credit Facilities will be secured by substantially all of the assets of Central Parking and the guarantors.

 

The Senior Secured Credit Facilities will contain customary representations and warranties and customary affirmative and negative covenants, including, among other things, restrictions on indebtedness, liens, investments, asset sales, mergers and consolidations, dividends and other distributions, redemptions, prepayments of certain indebtedness, and a maximum leverage ratio (applicable only to the Revolving Facility). The senior secured facilities will also include customary events of default, including upon a change of control.

 

Real Estate Financing

 

The Real Estate Financing will consist of first mortgage and mezzanine financing to one or more special purpose entities formed by Central Parking (the “Real Estate SPEs”), the sole assets of which will be direct or indirect interests in certain owned real properties and improvements thereon contributed by Central Parking and its subsidiaries. The aggregate principal amount of the Real Estate Financing will be based on a specified percentage of total collateral value or cost, and is anticipated to be approximately $417.8 million.

 

The Real Estate Financing is expected to bear interest at a one-month LIBOR rate plus 1.90% (payable monthly in arrears), subject to a one-time flexible pricing feature if the merger does not close by an agreed upon date. In addition, an origination fee of 0.75% of the principal amount funded is payable at closing.

 

The initial loan term shall be 24 months with the borrower having the option to extend for up to three 12-month periods, subject to certain conditions and extension fees. The Real Estate Financing may be prepaid in whole or in part without premium or penalty.

 

The Real Estate Financing will be non-recourse to Central Parking, except for indemnification with respect to certain environmental matters and other customary carve-outs. The loan is expected to be structured as two separate loans consisting of a first mortgage loan to the Real Estate SPEs that own the real property and a mezzanine loan to the owner of the equity of the Real Estate SPEs. The first mortgage loan will be cross-collateralized by first mortgages on the properties contributed to the Real Estate SPEs, and the mezzanine loan will be secured by a pledge of 100% of the equity interests in the mortgage borrowers and certain other collateral customary for similar real estate financings.

 

Conditions to Debt Financing

 

The debt financing commitments will expire if not drawn on or prior to July 31, 2007. The debt financing commitments are subject to customary closing conditions, including:

 

 

In connection with the merger agreement, the Equity Sponsors have each agreed to a limited guarantee of the due, punctual and complete payment of the payment obligation of Parent for the termination fee or arising from an intentional and material breach of the merger agreement by Parent, provided the total amount recoverable under the limited guarantees is $30.0 million.

 

We cannot seek specific performance to require Parent and Merger Sub to complete the merger, and our exclusive remedy for the failure of Parent and Merger Sub to complete the merger is the termination fee described above payable to us as provided in the merger agreement and our ability to seek damages from Parent for an intentional and material breach of the merger agreement. In each case the total amount guaranteed by the Equity Sponsors is $30.0 million. See “The Merger Agreement — Termination Fee and Expenses.”

 

In considering the recommendation of our board of directors with respect to the merger agreement, holders of shares of our common stock should be aware that our executive officers, key employees, and directors have interests in the merger that may be different from, or in addition to, those of our shareholders generally. These interests may create potential conflicts of interest. Our board was aware of these potential conflicts of interest and considered them, among other matters, in reaching its decision to approve the merger agreement and to recommend that our shareholders vote in favor of approving the merger agreement.

 

Monroe Carell’s Agreements

 

On December 14, 2004, Central Parking entered into a revised employment agreement and modifications to an existing deferred compensation agreement with Monroe Carell. The revised agreements were negotiated in connection with Mr. Carell’s return to Central Parking as chief executive officer. The employment agreement is described below. The revised deferred compensation agreement replaced the prior deferred compensation agreement between Mr. Carell and Central Parking dated October 1, 1988, as amended. The revised deferred compensation agreement provided that Mr. Carell would continue his service as chairman and chief executive officer and would be subject to non-competition and non-solicitation covenants during the period of employment and for the greater of any period following employment that payments would be made under the agreement, including periods following termination of employment, or for twelve months following the acceleration of amounts payable to Mr. Carell under the agreement upon a change in control (as described below). Following the termination of his employment, for any reason other than death, the revised deferred compensation agreement entitled Mr. Carell to annual payments of $500,000 until his death and, in the event his wife survives him, she would be entitled to annual payments of $500,000 until her death. The agreement further provided that in the event of a change in control the annual payments would cease, and within 90 days after the change in control date, Central Parking would make a lump sum payment to Mr. Carell equal to the then actuarial value of the foregoing annual payments payable under the agreement. Mr. Carell also agreed to provide consulting services to Central Parking following the termination of his employment. In addition, the agreement provided that if Mr. Carell ceases to serve as the chief executive officer, he would be entitled to annual payments of $300,000 until the later of (i) the date he ceased to serve as non-employee chairman of Central Parking’s board of directors or (ii) the date five years following the first payment; provided (i) such payments would cease if Mr. Carell breaches the non-competition or non-solicitation provisions, and (ii) if Mr. Carell did not commence serving or ceased serving as a non-employee chairman prior to the five years following the first payment there would be a six month suspension of payments, which would extend Mr. Carell’s payments six months after the date they would otherwise expire. The arrangements also included an excise tax gross-up provision.

 

The revised deferred compensation agreement was amended on October 27, 2005, to clarify Central Parking’s obligations under the agreement to provide health insurance coverage following termination of employment for Mr. Carell and his wife. Under the amended agreement, Central Parking agreed to reimburse Mr. Carell for the costs of health insurance coverage for Mr. Carell and his wife having substantially the same

level of benefits as Central Parking’s plan. In the event of a change in control, Central Parking would pay Mr. Carell or his widow a lump sum payment equal to the actuarial value of the amounts payable by Central Parking for such coverage. The revised deferred compensation agreement was amended again on May 30, 2006, to provide that (i) the actuarial value of the $500,000 annual payments to be paid to Mr. Carell and his wife for life as described above should instead be paid in a lump sum, (ii) Mr. Carell’s right to the $300,000 of additional compensation described above commenced on October 1, 2005, and (iii) the actuarial value of the insurance coverage for Mr. Carell and his wife would be paid as a lump sum to Mr. Carell in lieu of providing such coverage.

 

On February 20, 2007, with the Equity Sponsors’ consent and approval, the special committee approved an agreement with Mr. Carell, as a material inducement to and as consideration for Mr. Carell, his family and related entities entering into voting agreements in support of the merger (the “2007 Agreement”). The material obligations of Central Parking and Mr. Carell under his employment agreement, as amended, the revised deferred compensation agreement, as amended, and the 2007 Agreement (collectively, the “Carell Agreements”) are as follows:

 

 

 

 

Retention Bonuses

 

Following announcement that Central Parking was pursuing strategic alternatives in November 2006, on December 14, 2006, our compensation committee approved retention arrangements for certain non-executive employees. These retention arrangements generally provide for a bonus equal to 15% of the employee’s base salary if the employee remains employed by Central Parking through the closing of a change-of-control transaction, plus a bonus equal to 15% of the employee’s base salary if the employee remains employed by Central Parking ninety days following the closing of a change-of-control transaction. We anticipate that up to approximately $750,000 may be paid under these retention arrangements.

 

Transaction Bonuses

 

On February 20, 2007, our compensation committee approved transaction bonuses to certain executive officers of Central Parking. The transaction bonuses provide that the officers will be paid a bonus of up to 100% of their twelve months base salary, payable one half at the time of the execution of the merger agreement and one half at the closing of the merger, provided the officer remains with Central Parking at the time of the merger. These transaction bonuses were granted to certain of our executive officers and key employees as described below:

 

 

Treatment of Stock Options

 

As of March 6, 2007, there were approximately 2,317,919 shares of our common stock subject to outstanding stock options granted under our equity incentive plans to our current executive officers and directors. Each outstanding stock option that remains unexercised as of the completion of the merger, whether or not the option is vested or exercisable, will be cancelled, and the holder of such stock option that has an

exercise price of less than $22.53 will be entitled to receive a cash payment, without interest and less any applicable tax withholding, equal to the product of:

 

 

The following table summarizes the outstanding vested and unvested options held by our executive officers and directors as of March 31, 2007, and the consideration that each of them will receive pursuant to the merger agreement in connection with the cancellation of their options:

 

 

Termination of the Deferred Stock Unit Plan and Distribution of Account Balances

 

Upon completion of the merger, we will terminate our nonqualified deferred stock unit plan and will cause all accounts thereunder to be fully vested and distributed in cash to participants, without interest and less any required tax withholding. The following table shows the account balances of our executive officers as of March 31, 2007, in the nonqualified deferred stock unit plan. All account balances will be distributed as soon as practicable following completion of the merger. Members of our board of directors do not participate in the nonqualified deferred stock unit plan.

 

Treatment of Restricted Stock

 

As of March 31, 2007, there were approximately 27,327 shares of our common stock subject to restricted stock granted under our equity incentive plans to our current directors and 267,750 shares of restricted stock granted to one executive officer. But for the merger transaction, these shares issued to directors would have vested 13,334 in 2008, 9,331 in 2009 and 4,662 in 2010. Each share of restricted stock that is unvested as of the completion of the merger will become vested and be entitled to receive a cash payment equal to the merger consideration of $22.53 per share, without interest and less any applicable tax withholding.

 

The following table summarizes the outstanding unvested shares of restricted stock held by our directors and executive officers as of March 31, 2007, and the consideration that each of them will receive pursuant to the merger agreement in connection with the full vesting of their restricted stock:

 

 

Arrangements with the Equity Sponsors

 

As of the date of this proxy statement, no member of our management has entered into any agreement, arrangement or understanding with the Equity Sponsors or their affiliates regarding employment with, or the right to purchase or participate in the equity of, KCPC Holdings. However, the Equity Sponsors have informed us that it is their intention to retain members of our existing management team with the surviving corporation after the merger is completed. Members of management currently are engaged in discussions with representatives of the Equity Sponsors regarding revised terms of employment. In addition to revised terms of employment, the Equity Sponsors have informed us that they anticipate offering members of management the opportunity to convert a portion of their current equity interests in Central Parking into equity in KCPC Holdings. Although we believe members of our management team are likely to enter into new arrangements with the surviving corporation or affiliates of the Equity Sponsors regarding employment with, and the right to purchase or participate in the equity of, the surviving corporation or KCPC Holdings, such matters are subject to further negotiations and discussion and no terms or conditions have been finalized. Any such new arrangements are expected to be entered into prior to the completion of the merger.

 

Employment Agreements

 

Central Parking has entered into employment agreements with Messrs. Carell, Eads, Stormberg, Bond, Bodenhamer, Kahn, and other senior executives that provide for base salary and annual performance-based bonus payments. These employment agreements generally are for a term of one year but automatically renew for additional one-year periods unless notice is provided at least 30 days prior to the end of the term. The agreements may be terminated by the executive upon 30 days’ written notice or may be terminated by Central Parking by complying with the severance provisions provided in the agreements except in the case of a termination for cause, in which case the executive is not entitled to severance. These agreements provide that in the event an executive is terminated without cause (and such termination does not occur within two years following a change in control) or the executive terminates his employment as a result of a constructive discharge, the executive would receive one year of base salary, bonus and welfare benefits, except in the case of Messrs. Carell and Eads, who would receive two years of base salary, bonus and welfare benefits.

Terminated executives would also receive outplacement assistance with a value of up to $25,000, provided, however, that Mr. Carell waived his entitlement to this benefit pursuant to the agreement described on page 41.

 

These agreements, other than Mr. Carell’s agreement, provide that the executive is subject to a non-competition covenant for twelve months following termination of employment and non-solicitation covenants for 24 months following termination except in the case of a termination following a change in control, in which case the non-competition and non-solicitation covenants are waived.

 

These employment agreements further provide generally that in the event of a termination without cause or a termination by the executive for good reason within two years following a change in control, most senior executives would receive severance equal to two times base and bonus plus two years of benefits. Messrs. Carell, Eads and Bond, and certain corporate staff executives, would receive three times base and bonus plus three years of benefits in the event of a termination without cause or for good reason within two years following a change in control, provided that Mr. Carell waived his entitlement to this benefit pursuant to the agreement described on page 41. Unvested stock options and deferred stock units would vest immediately upon a change in control. The arrangements also include an excise tax gross-up provision. A change in control is defined to include: the acquisition of 30% or more of the outstanding stock of Central Parking other than through acquisitions by Central Parking, a subsidiary, an employee benefit plan of Central Parking, or Monroe Carell or family members or related entities; a change in the majority of the board; consummation of a merger, consolidation, or reorganization, unless following such transaction the shareholders prior to the transaction continue to own more than 70% of the outstanding shares, board members prior to the transaction continue to constitute a majority of the board and no person or control group owns more than 30% (and in the case of Mr. Carell’s employment agreement, 50%) of the stock (other than Mr. Carell, family members or related entities); consummation of the sale of all or substantially all of Central Parking’s assets or the adoption of a plan of liquidation; or consummation of a plan of liquidation with respect to the company.

 

The employment agreements generally define “termination for cause” as: executive’s embezzlement, intentional mishandling of Central Parking funds or theft or fraud with respect to the business or affairs of Central Parking; executive’s conviction of a felony or other crime involving moral turpitude which adversely affects executive’s job-related responsibilities; a violation by executive of the non-competition and non-solicitation covenants in the agreement; or executive’s deliberate and willful continuing refusal to substantially perform the duties and obligations of his position. “Constructive discharge” is defined as termination of executive’s employment due to a failure of Central Parking to fulfill its obligations under the agreement in any respect, including any reduction in executive’s base salary or annual incentive award or any other Central Parking incentive plan target other than reductions not to exceed 25% applicable to all executive officers of Central Parking, a substantial reduction of benefits other than a reduction in benefits applicable to all employees, or the reduction in the title, authority and/or duties of the executive other than isolated, insubstantial or inadvertent action.

 

“Good reason” means the occurrence after a change in control of any of the following:

 

 

 

The employment agreements also provide that in the event Central Parking is involved in a change in control transaction, the executive agrees to use his good faith efforts consistent with his duties as a director, officer or employee to cooperate with Central Parking, and as directed by the board of directors, and the potential acquirer, in the due diligence process related thereto. In the event that there is a change in control and the executive thereafter terminates his employment for good reason or voluntarily resigns, the executive agrees to remain with Central Parking for a period of time after the date of such termination or resignation as requested by Central Parking or its acquirer, not to exceed three months from the date of such termination or resignation, provided that Central Parking has paid to executive all amounts due to him in connection with such termination or resignation, together with an additional amount equal to three months’ base salary and pro rated annual incentive award together with all employment benefits and perquisites (“transition payment”). In the event that Central Parking or the acquirer does not request executive to remain after his termination for good reason or resignation, then Central Parking shall pay executive the transition payment in a lump sum upon his departure.

 

The following table shows the amount of potential cash severance payable to each of our current executive officers who is a party to an employment agreement with a change in control severance provisions and including the amount the officer would be entitled to be reimbursed for outplacement expenses, based on compensation and benefit levels in effect on March 27, 2007, and assuming the merger is completed on July 1, 2007, and the executive’s employment terminates under circumstances that entitle him to severance immediately thereafter. The

table also shows the estimated value of continuing welfare and fringe benefits and the estimated tax gross-up payment to each such executive in respect of the excise tax imposed on excess parachute payments.

 

 

 

 

Indemnification of Officers and Directors

 

KCPC Holdings and Merger Sub have agreed that the surviving corporation shall maintain for not less than six years from the effective time of the merger the current policies of directors’ and officers’ fiduciary and liability insurance maintained by Central Parking by purchasing a policy providing “tail coverage.” This tail coverage is required to be for a period of not less than six years from the effective time in a form and with a carrier, or carriers, reasonably agreed upon by Central Parking. Under the merger agreement, KCPC Holdings shall make available to Central Parking evidence of this tail coverage immediately prior to the effective time. Alternatively, in the event that the tail coverage cannot be purchased for a premium in an amount equal to or less than 250% of the last annual premium paid by Central Parking prior to the date of the merger agreement (the “insurance cap”), then KCPC Holdings shall instead cause the surviving corporation to purchase a policy or maintain policies that, in KCPC Holding’s good faith judgment, provide as much comparable insurance as is available for the amount of the insurance cap.

 

After the closing of the merger, KCPC Holdings and the surviving corporation will also indemnify, to the fullest extent permitted under applicable law, Central Parking’s current and former directors and officers, and the current and former directors and officers of any of our subsidiaries, against all losses and expenses (including all losses, costs, obligations, liabilities, settlement payments, awards, judgments, fines, penalties, damages (including compensatory, punitive and consequential damages), demands, claims, actions, causes of action, assessments, deficiencies and other charges and attorneys’ fees) arising out of or pertaining to acts or omissions (or alleged acts or omissions) by them in their capacities as such, for acts or omissions that occurred at or prior to closing. Each indemnified party will be entitled to the prompt advancement of expenses incurred in connection with such indemnification, provided however that to the extent required by law, any person to

whom expenses are advanced must provide an undertaking to repay the advances if it is ultimately determined that such person is not entitled to indemnification.

 

In addition, KCPC Holdings and Merger Sub have agreed that the provisions of the certificate of incorporation and bylaws of the surviving corporation relating to the elimination of liability or the indemnification of officers or directors will not be amended in any manner that would adversely affect the rights of Central Parking’s current officers or directors. Moreover, KCPC Holdings and Merger Sub have agreed that the surviving corporation and any of its respective successors or assigns will make necessary provisions with any third party that merges with, or acquires the properties or assets of, the surviving corporation to assure that this third party assumes the indemnification and coverage obligations described above.

 

Relationships Among Certain Directors

 

Central Parking believes that none of the directors serving on the special committee had any conflict of interest or relationship that prevented him from making an independent decision about the merits of the transaction. None of the members of the special committee has any present business relationship with Central Parking nor with the Carells, apart from their common service on our board of directors. Mr. Nelson and Mr. Carell are both members of the Boards of Trust for Vanderbilt University and for the Vanderbilt Medical Center. Mr. Nelson also formerly served on the board of Vanderbilt Children’s Hospital along with Mr. Carell. In the 1980’s, Mr. Blakenship worked for the Touche Ross accounting firm and provided accounting services to Central Parking and Mr. Carell; this relationship ceased in the late 1980’s. Each member of the special committee was paid $2,500 for each committee meeting attended in person and $1,500 for each committee meeting attended by telephone prior to January 22, 2007. For the special committee meetings held on or after January 22, 2007, each member was paid $2,500 for each committee meeting attended whether in person or by telephone. In addition, Mr. Nelson received a $5,000 retainer for serving as the chairman of the special committee. Members of the special committee also hold shares of common stock, restricted stock, and options that will be exchanged for cash as provided in the merger agreement.

 

If the merger is completed, Central Parking common stock will be delisted from the New York Stock Exchange and deregistered under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act, and Central Parking will no longer file periodic reports with the SEC.

 

No dissenters’ rights are available under Section 48-23-102 of the Tennessee Business Corporation Act in connection with the merger, unless the shares of our common stock are no longer listed on the New York Stock Exchange or another registered exchange on the date of the consummation of the merger.

 

If the merger agreement is not adopted by Central Parking’s shareholders or if the merger is not completed for any other reason, shareholders will not receive any payment for their shares in connection with the merger. Central Parking will remain an independent public company and Central Parking’s stock will continue to be listed and traded on the New York Stock Exchange. We would anticipate that we would continue to operate our business in substantially the same manner as we are currently operating it. The shareholders would be subject to the same risks and opportunities as they are currently, including the risks described in our annual report on Form 10-K. No assurance can be given as to the market price of our common stock if the merger is not completed. Central Parking’s board of directors may from time to time consider, evaluate and review our business operations, properties and dividend policies and may make such changes as it deems appropriate. Our board may continue to seek to identify strategic alternatives to enhance shareholder value. If our shareholders do not adopt the merger agreement or if the merger is not consummated for any other reason, there can be no assurance that any other transaction acceptable to Central Parking will be offered, or that the business, prospects or results of operations of Central Parking will not be adversely

affected. If the merger agreement is terminated because our shareholders do not adopt the merger agreement, under certain circumstances Central Parking will be required to pay certain affiliates of KCPC Holdings an aggregate termination fee of $22.4 million. See “The Merger Agreement — Termination Fee and Expenses.”

 

Central Parking is aware of two putative class action lawsuits related to the merger filed against Central Parking and each of Central Parking’s directors in the Chancery Court for the State of Tennessee, 20th Judicial District, Davidson County, case numbers 07-387-III and 07-397-I.

 

The complaints in these actions allege that the directors breached their fiduciary duties of due care, loyalty, good faith, candor and independence and put their personal interests ahead of the interests of Central Parking’s shareholders. Plaintiffs seek to prohibit permanently the merger, to rescind the merger to the extent it is consummated, an award of damages, attorneys’ fees and other relief. Central Parking and the directors dispute the allegations in the complaints and plan to defend vigorously these actions. Additional lawsuits pertaining to the merger could be filed in the future.

 

United States Antitrust

 

Mergers and acquisitions that may have an impact in the United States are subject to review by the Department of Justice and the Federal Trade Commission to determine whether they comply with applicable antitrust laws. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder, which we refer to as the “HSR Act,” mergers and acquisitions that meet certain jurisdictional thresholds, such as the present transaction, may not be completed until the expiration of a waiting period that follows the filing of notification forms by both parties to the transaction with the Department of Justice and the Federal Trade Commission. The initial waiting period is 30 days, but this period may be shortened if the reviewing agency grants “early termination” of the waiting period, or it may be lengthened if the reviewing agency determines that an in-depth investigation is required and issues a formal request for additional information and documentary material. We and Parent filed pre-merger notifications with the U.S. antitrust authorities pursuant to the HSR Act on March 6, 2007 and, in accordance with the merger agreement, requested “early termination” of the waiting period.

 

It is possible that any of the government entities with which filings are made may seek various regulatory concessions as conditions for granting approval of the merger. There can be no assurance that we will obtain the regulatory approvals necessary to complete the merger or that the granting of these approvals will not involve the imposition of conditions on completion of the merger or require changes to the terms of the merger. These conditions or changes could result in conditions to the merger not being satisfied. For more information, please refer to “The Merger Agreement — Conditions to the Merger.”

 

General

 

Any other filings required in order to complete the merger will be made as soon as reasonably possible. It is possible that any of the governmental authorities with which filings are made may seek, as conditions for granting approval of the merger, various regulatory concessions. There can be no assurance that Parent or Central Parking will be able to satisfy or comply with these conditions or be able to cause our respective subsidiaries to satisfy or comply with these conditions, or that compliance or noncompliance will not have adverse consequences for Parent after completion of the merger, or that the required regulatory approvals will be obtained within the time frame contemplated by Parent and Central Parking or on terms that will be satisfactory to Parent and Central Parking.

 

The following is a summary of the material U.S. federal income tax consequences of the merger to our shareholders of the receipt of cash in exchange for shares of our common stock pursuant to the merger. This

summary does not purport to consider all aspects of U.S. federal income taxation that might be relevant to our shareholders. For purposes of this discussion, we use the term “U.S. holder” to mean a beneficial owner of shares of our common stock that is, for U.S. federal income tax purposes: a citizen or resident of the United States; a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized under the laws of the United States or any of its political subdivisions; a trust that is subject to the supervision of a court within the United States and the control of one or more U.S. persons or has a valid election in effect under applicable United States Treasury Regulations to be treated as a U.S. person; or an estate that is subject to U.S. federal income tax on its income regardless of its source. A “non-U.S. holder” is a person (other than a partnership) that is not a U.S. holder. If a partnership holds our common stock, the tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. A partner of a partnership holding our common stock should consult its tax advisor.

 

This discussion is based on current law, which is subject to change, possibly with retroactive effect. It applies only to beneficial owners who hold shares of our common stock as capital assets, and may not apply to shares of our common stock received in connection with the exercise of employee stock options, through our employee stock purchase plan, through our deferred stock unit plan, through a grant of restricted stock, or otherwise as compensation or certain types of beneficial owners who may be subject to special rules (such as insurance companies, banks, tax-exempt organizations, financial institutions, broker-dealers, partnerships, S corporations or other pass-through entities, mutual funds, traders in securities who elect the mark-to-market method of accounting, shareholders subject to the alternative minimum tax, shareholders that have a functional currency other than the U.S. dollar, or shareholders who hold our common stock as part of a hedge, straddle or a constructive sale or conversion transaction). This discussion does not address the receipt of cash in connection with the cancellation of shares of restricted stock, deferred stock units or options to purchase shares of our common stock, or any other matters relating to equity compensation or benefit plans. This discussion also does not address any aspect of state, local or foreign tax laws or estate and gift tax laws.

 

U.S. Holders

 

The exchange of shares of our common stock for cash in the merger will be a taxable transaction to U.S. holders for U.S. federal income tax purposes. In general, a U.S. holder whose shares of our common stock are converted into the right to receive cash in the merger will recognize capital gain or loss for U.S. federal income tax purposes equal to the difference, if any, between the amount of cash received with respect to such shares (determined before the deduction of any applicable tax withholding) and the shareholder’s adjusted tax basis in such shares. Gain or loss will be determined separately for each block of shares (i.e., shares acquired at the same cost in a single transaction). Such gain or loss will be long-term capital gain or loss provided that a shareholder’s holding period for such shares is more than twelve months at the time of the consummation of the merger. Long-term capital gains of individuals are eligible for reduced rates of taxation. There are limitations on the deductibility of capital losses.

 

Backup withholding, presently at a rate of 28%, and information reporting may apply to the cash received pursuant to the merger. Backup withholding will not apply, however, to a holder who: in the case of a U.S. holder, furnishes a correct taxpayer identification number and certifies that it is not subject to backup withholding on IRS Form W-9 or successor form; in the case of a non-U.S. holder, furnishes an applicable IRS Form W-8 or successor form; or is otherwise exempt from backup withholding and complies with other applicable rules and certification requirements. Backup withholding is not an additional tax and any amount withheld under these rules may be credited against the holder’s United States federal income tax liability and may entitle the holder to a refund if required information is timely furnished to the IRS. Cash received in the merger will also be subject to information reporting unless an exemption applies.

 

Non-U.S. Holders

 

Any gain realized on the receipt of cash in the merger by a non-U.S. holder generally will not be subject to United States federal income tax unless (i) the gain is effectively connected with a trade or business of the non-U.S. holder in the United States (and, if required by an applicable income tax treaty, is attributable to a United States permanent establishment of the non-U.S. holder); (ii) the non-U.S. holder is an individual who is

present in the United States for 183 days or more in the taxable year of that disposition, and certain other conditions are met; or (iii) the shares of our common stock held by the non-U.S. holder constitute a “United States real property interest,” within the meaning of the Foreign Investment in Real Property Tax Act of 1980 (“FIRPTA”) with respect to such non-U.S. holder, as described below.

 

An individual non-U.S. holder described in (i) of the immediately preceding paragraph will be subject to tax on the net gain derived from the merger under regular graduated U.S. federal income tax rates. If a non-U.S. holder is a foreign corporation that is described in (i) of the immediately preceding paragraph, it will be subject to tax on its net gain in the same manner as if it were a U.S. holder and, in addition, may be subject to the branch profits tax equal to 30% of its effectively connected earnings and profits or at such lower rate as may be specified by an applicable income tax treaty. An individual non-U.S. holder described in (ii) of the immediately preceding paragraph will be subject to a flat 30% tax on the gain derived from the merger, which may be offset by U.S. source capital losses, even though the individual is not considered a resident of the United States. A non-U.S. holder described in (iii) of the immediately preceding paragraph will be subject to tax on the net gain derived from the merger under regular graduated U.S. federal income tax rates.

 

Shares are not treated as a United States real property interest with respect to a non-U.S. holder if such class of shares is regularly traded on an established securities market within the meaning of applicable United States Treasury Regulations and the non-U.S. holder did not actually, or constructively under specified Code attribution rules, own more than 5% of that class at any time during the shorter of the five-year period preceding the disposition or the holder’s holding period. Because our shares are regularly traded on the New York Stock Exchange, our shares will not be treated as a United States real property interest, except with respect to a non-U.S. holder meeting the more than 5% ownership requirement. Non-U.S. holders are urged to consult their tax advisors with respect to the treatment of their shares as a United States real property interest pursuant to these rules.

 

We intend to take the position that no amount of the merger consideration payable to a non-U.S. holder is subject to withholding under FIRPTA. If a non-U.S. holder holds its shares through a nominee, that nominee may take a contrary position and conclude that withholding applies under FIRPTA to the share merger consideration payable to such non-U.S. holder. A non-U.S. holder may be entitled to a refund or credit against the holder’s United States tax liability, if any, with respect to the amount withheld, provided that required information is furnished to the IRS on a timely basis. Non-U.S. holders should consult their own tax advisor regarding tax withholding considerations.

 

The U.S. federal income tax consequences set forth above are not intended to constitute a complete description of all tax consequences relating to the merger. Because individual circumstances may differ, each shareholder should consult the shareholder’s tax advisor regarding the applicability of the rules discussed above to the shareholder and the particular tax effects to the shareholder of the merger in light of such shareholder’s particular circumstances, the application of state, local and foreign tax laws, and, if applicable, the tax consequences of the receipt of cash in connection with the cancellation of restricted shares, deferred stock units or options to purchase shares of our common stock, including the transactions described in this proxy statement relating to our equity compensation and benefit plans.

 

The following is a summary of the material terms of the merger agreement. However, because the merger agreement is the primary legal document that governs the merger, you should carefully read the complete text of the merger agreement for its precise legal terms and other information that may be important to you. The merger agreement is included as Annex A to this proxy statement and contains representations and warranties from us to Parent and from Parent and Merger Sub to us. These representations and warranties were made only for the purposes of the merger agreement and solely for the benefit of Parent, Merger Sub, and us, were made as of specific dates, and may be subject to important limitations and qualifications. Furthermore, these representations and warranties may have been made for the purposes of allocating contractual risk between the parties to the merger agreement instead of establishing these matters as facts, and may or may not have been accurate as of any specific date and do not purport to be accurate as of the date of this proxy statement. Accordingly, you should NOT rely upon the descriptions of the representations and warranties in this proxy statement or the actual representations and warranties contained in the merger agreement as characterizations of the actual state of facts. Information about Parent, Merger Sub and Central Parking can be found elsewhere in this proxy statement and in such other public filings Central Parking makes with the Securities and Exchange Commission, which are available without charge at www.sec.gov.

 

If all of the conditions to the merger are satisfied or waived in accordance with the merger agreement, Merger Sub, a wholly-owned subsidiary of Parent created solely for the purpose of engaging in the transactions contemplated by the merger agreement, will merge with and into Central Parking. Upon such a merger, the separate corporate existence of Merger Sub will cease, and Central Parking will survive the merger and will become a wholly-owned subsidiary of Parent, directly or indirectly through one or more wholly-owned subsidiaries. We sometimes refer to Central Parking after the merger as the surviving corporation. We expect to complete the merger as promptly as practicable after our shareholders approve the merger agreement and the transactions contemplated thereby, though the merger agreement provides that the earliest date we can close is May 21, 2007, unless the parties mutually agree to close earlier.

 

The charter and bylaws of Central Parking as in effect immediately prior to the consummation of the merger shall be the charter and bylaws of the surviving corporation until thereafter changed or amended.

 

Upon consummation of the merger, the directors of Merger Sub, none of whom are currently affiliated with Central Parking, will be the initial directors of the surviving corporation and the officers of Central Parking will be the initial officers of the surviving corporation. All surviving corporation officers will hold their positions until their successors are duly elected and qualified or until the earlier of their resignation or removal.

 

Each share of Central Parking common stock issued and outstanding immediately before the merger will automatically be cancelled and will cease to exist and will be converted into the right to receive $22.53 in cash, without interest and less any applicable tax withholding, other than shares held by the company or owned by Parent or Merger Sub, and shares that are contributed to Parent in exchange for shares of Parent’s capital stock pursuant to agreements with employee shareholders of Central Parking, which will be cancelled.

 

After the merger is effective, each holder of a certificate representing any shares of Central Parking common stock will no longer have any rights with respect to the shares except for the right to receive the merger consideration.

 

Upon the consummation of the merger, except as otherwise agreed by the holder and Parent, all outstanding options to acquire Central Parking common stock under our equity incentive plans will become fully vested and immediately exercisable, and all options not exercised prior to the merger will be cancelled and converted into the right to receive a cash payment equal to the number of shares of Central Parking common stock underlying the option multiplied by the amount by which $22.53 exceeds the exercise price for each share of Central Parking common stock underlying the options. Additionally, except as otherwise agreed by the holder and Parent, all deferred stock units will, upon the consummation of the merger, vest and be cancelled and converted into the right to receive a cash payment equal to the number of shares represented by the deferred stock units multiplied by $22.53. With respect to restricted stock, except as otherwise agreed by holder and Parent, all restricted shares of Central Parking common stock that remain restricted immediately prior to the effective time of the merger will automatically become unrestricted shares of Central Parking common stock and be converted into the right to receive $22.53 in cash for each share of previously restricted common stock held immediately prior to the merger. All payments described in this paragraph will be without interest and subject to any applicable tax withholding.

 

The Trust Issued Preferred Securities (“TIPS”) issued by Central Parking Finance Trust will remain outstanding after the merger. However, the TIPS will cease to be convertible at or after the consummation of the merger into shares of Central Parking common stock, but will instead be convertible into cash in an amount equal to the product of $22.53 times the number of shares of Central Parking common stock into which the TIPS could have been converted as of the consummation of the merger. After the merger, each share of TIPS will remain outstanding until the maturity date of April 1, 2028 unless converted by the holder into $19.18 in cash per TIPS share or redeemed by Central Parking at $25 per TIPS share.

 

Central Parking’s board of directors will take all actions necessary to continue the suspension of the 1996 Employee Stock Purchase Plan through the effective time of the merger. The Central Parking board of directors will take all actions necessary to terminate the 1996 Employee Stock Purchase Plan as of the effective time of the merger. Central Parking common stock previously purchased through the Employee Stock Purchase Plan will be treated identically to all other shares of Central Parking common stock.

 

Before the merger, Parent will designate a paying agent reasonably satisfactory to us to make payment of the merger consideration as described above. Prior to the effective time of the merger, Parent or Merger Sub will deposit in trust with the paying agent the funds appropriate to pay the merger consideration to the shareholders.

 

As promptly as practicable after the effective date of the merger, Parent will cause the paying agent to send you a letter of transmittal and instructions advising you how to surrender your certificates in exchange for the merger consideration. Following the closing of the merger, the paying agent will pay you your merger consideration after you have surrendered your certificates to the paying agent and provided to the paying agent your signed letter of transmittal and any other items specified by the letter of transmittal. Interest will not be paid or accrue in respect of the merger consideration. The surviving corporation will reduce the amount of any merger consideration paid to you by any applicable tax withholding. YOU SHOULD NOT FORWARD YOUR STOCK CERTIFICATES TO THE PAYING AGENT WITHOUT A LETTER OF TRANSMITTAL, AND YOU SHOULD NOT RETURN YOUR STOCK CERTIFICATES WITH THE ENCLOSED PROXY.

 

The merger agreement contains customary representations and warranties that we made to Parent regarding, among other things:

 

 

In addition, each of Parent and Merger Sub made representations and warranties regarding, among other things:

 

 

 

Many of our representations and warranties are qualified by a material adverse effect standard. A “material adverse effect” means, with respect to Central Parking, any event, circumstance or change, as applicable, that individually or in the aggregate, is, or is reasonably likely to be, materially adverse to the condition (financial or otherwise), assets, or results of operations of Central Parking and its subsidiaries taken as a whole, except that the following, in and of themselves, will not be considered to constitute a material adverse effect:

 

 

We have agreed in the merger agreement that, except as otherwise permitted or required in the merger agreement, we will, and will cause each of our subsidiaries to:

 

 

We have also agreed that, except as expressly contemplated by the merger agreement or otherwise required to maintain our business and assets consistent with our past practice, we will not, and will not allow any of our subsidiaries to, without the consent of Parent:

 

 

 

 

We have agreed to, and have agreed to cause our subsidiaries and our respective officers, directors, employees, and other representatives to use commercially reasonable efforts to provide all necessary cooperation in connection with the debt financing as may be reasonably requested by Parent, including:

 

 

 

We have agreed that Central Parking and our representatives will:

 

 

However, prior to obtaining shareholder approval of the transaction, Central Parking may provide confidential information to any person concerning an acquisition proposal, but only if:

 

 

We have agreed to notify Parent within 48 hours of receipt of any acquisition proposal or similar inquiry. We must also provide Parent copies of all materials provided to such person not previously provided to Parent. We have also agreed to keep Parent informed in all material respects of the status and details of any acquisition proposal, if any.

 

We have agreed that our board of directors will not (i) (A) withdraw, or publicly propose to withdraw or amend, qualify or modify in a manner adverse to Parent, the approval, adoption or recommendation by such board of directors of the merger or fail to recommend to the shareholders in the proxy statement that they approve the merger and give Central Parking shareholder approval or (B) endorse, approve, adopt, submit to

Central Parking shareholders or recommend, or propose publicly to endorse any acquisition proposal; or (ii) enter into, adopt or recommend, or publicly propose to enter into, adopt or recommend, or allow Central Parking to execute or enter into, any letter of intent, agreement in principle, or other similar contract constituting or related to, or that is intended to or would reasonably be expected to lead to, any acquisition proposal (any actions described in clause (i) or (ii) referred to as an “adverse recommendation change” in this proxy statement). However, at any time prior to the time of the shareholder approval, our board of directors may, in response to an acquisition proposal that it reasonably in its good faith judgment determines, after consultation with its outside counsel and its financial advisors, constitutes a superior proposal that was unsolicited and made after the date of the merger agreement and that did not result in a breach of the terms of the merger agreement:

 

 

We have agreed that Central Parking may not enter into an agreement with respect to another proposal unless the merger agreement is terminated pursuant to its terms and Central Parking has paid KCPC Holdings the amounts due under the merger agreement as a result of such termination. Notwithstanding the foregoing, our board of directors may disclose to our shareholders a position with respect to a tender offer or exchange offer by a third party, provided that our board of directors may not recommend that the shareholders tender their shares in connection with such an offer, or withdraw or modify its approval or recommendation of the merger agreement, unless the provisions above related to fiduciary duty apply.

 

We have agreed to use our reasonable best efforts to obtain from shareholders their approval and adoption of the merger agreement and the transactions contemplated thereby.

 

Conditions to Each Party’s Obligations.  Each party’s obligation to complete the merger is subject to the satisfaction or waiver of the following conditions:

 

 

Conditions to Parent’s Obligations.  The obligation of Parent to complete the merger is subject to the satisfaction or waiver of the following additional conditions:

 

 

 

Conditions to Central Parking’s Obligations.  Our obligation to complete the merger is subject to the satisfaction or waiver of the following further conditions:

 

 

The merger agreement may be terminated at any time prior to the effective time of the merger under the following circumstances:

 

 

 

 

 

 

 

 

We will be required to pay certain affiliates of Parent a termination fee of $22.4 million, if any of the following occur:

 

 

Parent will be required to pay us a termination fee of $30.0 million, if:

 

 

The parties may modify, amend or waive the terms and provisions of the merger agreement by written instrument signed by the party against whom enforcement of any such modification or amendment is sought (or, in the case of a waiver, by the intended beneficiary of the waived term or provision).

 

In connection with the merger agreement, the Equity Sponsors requested that Monroe Carell, members of his family and certain related entities (the “related shareholders”), representing approximately 47% of the outstanding common stock, enter into voting agreements. The voting agreements provide that the related shareholders will:

 

 

 

 

The voting agreements shall terminate upon the earliest to occur of: the effective time of the merger, (y) the termination of the merger agreement in accordance with its terms, and any reduction in the amount, or any change in the form, of the consideration to be paid to the shareholders pursuant to the merger agreement without the written consent of the related shareholders.

 

The voting agreements further provide that the related shareholders, from the date of such agreements until their termination, shall not: directly or indirectly sell, grant, assign, transfer, pledge, encumber, hypothecate or otherwise dispose of any of their beneficially owned common stock, other than transfers to members of the related shareholders’ immediate family or a family trust of the related shareholders, but only if, in each case, prior to the effectiveness of the transfer, the transferee agrees in writing to be bound by the terms of the voting agreement and notice of such transfer is delivered to Parent; tender any beneficially owned common stock into any tender or exchange offer; or grant any proxy with respect to the beneficially owned common stock, deposit the beneficially owned common stock into a voting trust, enter into a voting agreement with respect to any of the beneficially owned common stock or otherwise restrict the ability of the related shareholders freely to exercise all voting rights with respect thereto.

 

The voting agreements apply to the related shareholders solely in such related shareholder’s capacity as the beneficial owner of common stock of Central Parking and nothing in the voting agreement restricts or limits any action taken by such related shareholder in its capacity as a director or officer of Central Parking or any of its affiliates. The taking of any actions (or failure to act) by a related shareholder in its capacity as an officer or director of Central Parking, or any of its affiliates, will not be deemed to constitute a breach of the voting agreement, regardless of the circumstances.

 

Our common stock is listed on the New York Stock Exchange under the symbol “CPC.” The following table sets forth, for the periods indicated, the high and low sales prices for Central Parking’s common stock as reported by the New York Stock Exchange.

 

 

There were, as of April 19, 2007, approximately           holders of Central Parking’s common stock, based on the number of record holders of our common stock and an estimate of the number of individual participants represented by security position listings.

 

The closing sales prices per share of Central Parking common stock, as reported on New York Stock Exchange on November 27, 2006, the last full trading day before the announcement that it had engaged Blackstone to assist in evaluating strategic alternatives, was $17.23, and on          , 2007, the latest practicable date before the printing of this proxy statement, was $     .

 

If the merger is consummated, our common stock will be delisted from the New York Stock Exchange, there will be no further public market for shares of our common stock and each share of our common stock, other than shares held by the company or owned by the Parent or Merger Sub and shares that are contributed to Parent in exchange for shares of Parent’s capital stock pursuant to agreements with employee shareholders of Central Parking, will be cancelled and converted into the right to receive $22.53 in cash, without interest and less any applicable tax withholding.

 

Since April 1997, Central Parking has distributed a quarterly cash dividend of $0.015 per share of Central Parking common stock.

 

The table below sets forth certain information regarding the beneficial ownership of the Common Stock as of March 20, 2007, of (i) each person known to Central Parking to beneficially own 5% or more of the Common Stock, (ii) each director, nominee and Named Executive Officer, and (iii) all directors, nominees and executive officers of Central Parking as a group. On that date, 32,300,416 shares were outstanding. Unless otherwise indicated, the persons listed below have sole voting and investment power over the shares of the Common Stock indicated.