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EXHIBIT 10.3
SHAREHOLDERS' AGREEMENT
This SHAREHOLDERS' AGREEMENT (the "Agreement"), dated as of July 14,
1998, is made by and among American Retirement Corporation, a Tennessee
corporation ("ARC"), and Xxxxxx X. Xxxxxxx ("Xxxxxxx").
WHEREAS, Xxxxxxx has received 822,000 shares of common stock, par value
$.01 per share, of ARC (the "Common Stock") in connection with the merger of
Freedom Group, Inc., a Florida corporation ("FGI"), with and into ARC pursuant
to that certain Agreement and Plan of Merger, dated May 29, 1998, by and among
ARC, FGI, and the shareholders of FGI (the "Merger Agreement"); and
WHEREAS, ARC and Xxxxxxx desire to enter into this Agreement to set
forth certain rights and obligations of Xxxxxxx.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, ARC and Xxxxxxx agree as
follows:
1. Definitions. As used in this Agreement, the following terms shall
have the meanings set forth below:
"Affiliate" means (a) any member of Xxxxxxx'x immediate
family, or (b) any Person that, directly or indirectly through one or more
intermediaries, is controlled by Xxxxxxx or any member of his immediate family,
with control being presumed by a greater than 10% ownership interest.
"Disinterested Members of the Board of Directors of ARC" means
the members of the Board of Directors of ARC other than Xxxxxxx, any Affiliate
of Xxxxxxx, and the director appointed pursuant to Section 2 hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
"Holder" means Xxxxxxx and his Permitted Transferee(s), if
any.
"Merger Shares" means shares of Common Stock received by
Xxxxxxx pursuant to the Merger Agreement.
"Permitted Transferee" means a family member of Xxxxxxx or a
trust for the benefit of Xxxxxxx or a family member of Xxxxxxx; provided such
transferee agrees to be bound by the terms of this Agreement as if such
transferee were originally named as a party herein and delivers to ARC the
agreement set forth as Exhibit A hereto.
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"Person" means an individual, a corporation, a limited
liability company, a partnership, an association, a joint stock company, a
trust, or any unincorporated organization.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated the date hereof, between ARC and certain of the former
shareholders of FGI.
2. Board Representation.
(a) As soon as practicable following the date hereof, the
Board of Directors of ARC shall take action to enlarge the Board of Directors
and appoint Xxxxxxx to serve as a Class II director of ARC, which class will
stand for reelection at ARC's annual meeting of shareholders to be held during
1999. During the term of this Agreement and for so long as the Holders own
greater than fifty percent (50%) of the Merger Shares (the "Director Term"), ARC
shall use its best efforts to cause Xxxxxxx or Xxxxxxx'x designee (the "Xxxxxxx
Designee") to be recommended to ARC's shareholders for election as a Class II
director at each annual meeting of ARC's shareholders at which Class II
directors stand for reelection. In the event the Xxxxxxx Designee serving as a
director ceases to serve as a director of ARC during the Director Term as a
result of death or resignation, ARC shall appoint as a Class II director such
other person as Xxxxxxx may designate.
(b) ARC shall have the right to approve the Xxxxxxx Designee,
such approval not to be unreasonably withheld.
3. Disposition of Shares. So long as this Agreement remains in effect,
except for transfers by Xxxxxxx to a Permitted Transferee or in connection with
the sale of Merger Shares pursuant to the terms of the Registration Rights
Agreement, no Holder or any of his or its Affiliates will, directly or
indirectly, without the prior written consent of the majority of the
Disinterested Members of the Board of Directors of ARC, sell, transfer, pledge,
or otherwise dispose, by gift or otherwise, during any thirty day (30) period a
number of shares of Common Stock which exceeds the greater of: (x) one percent
of the shares of Common Stock then outstanding, and (y) the average weekly
reported trading volume of the Common Stock on the New York Stock Exchange or
such other exchange or quotation system on which the Common Stock is then traded
for the four calender weeks preceding the date of the first such sale, transfer,
pledge, or other disposition.
4. Restrictions on Certain Other Transactions. So long as this
Agreement remains in effect, no Holder or any of his or its Affiliates will,
directly or indirectly, without the prior written consent of the majority of the
Disinterested Members of the Board of Directors of ARC:
(a) acquire, or offer or propose to acquire, beneficial
ownership of any shares of Common Stock or other securities of ARC (or direct or
indirect rights or options to acquire any securities of ARC), except by way of
stock dividends or other distributions made in respect of the Merger Shares;
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(b) acquire or agree to acquire, by purchase or otherwise,
more than one percent (1%) of any class of equity securities of any Person that,
prior to the time of such acquisition, is publicly disclosed (by filing with the
Securities and Exchange Commission or otherwise) or is otherwise known by such
Holder or his or its Affiliate to be the beneficial owner of more than five
percent (5%) of the outstanding shares of Common Stock or other securities of
ARC (or direct or indirect rights or options to acquire any securities of ARC);
(c) solicit proxies, seek to induce any other Person to
solicit proxies, or become a "participant" in a "solicitation" of proxies, as
those terms are defined in Item 4 of Schedule 14A and Rule 14A-1 under the
Exchange Act, in respect of any shares of capital stock of ARC or call any
shareholders meeting or initiate or propose, or otherwise solicit shareholders
of ARC to approve or disapprove, any shareholder proposal;
(d) enter into any shareholders' agreement or other agreement
of similar effect with respect to the ownership or disposition of any shares of
Common Stock, the voting of any shares of Common Stock, or the control of ARC,
or deposit any securities in a voting trust or subject such securities to a
voting trust agreement or any other agreement of similar effect with respect to
ARC, other than, in each such case, an agreement, voting trust, or other
arrangement involving only Holders and their respective Affiliates;
(e) seek to advise, encourage, or influence any Person with
respect to the voting of any securities of ARC, or induce, attempt to induce, or
in any manner assist any other Person in initiating any shareholder proposal for
a tender or exchange offer for securities of ARC or any change of control of
ARC, or for the purpose of convening a shareholders meeting of ARC;
(f) take any action (or permit any investment banker,
attorney, accountant, or any other representative retained by any Holder or
their respective Affiliates to take any action on behalf of such Holder or
Affiliate), directly or indirectly, to (A) acquire or affect control of ARC, (B)
participate in, or encourage the formation of, any "group" (as defined in Rule
13d-5 under the Exchange Act) with respect to any shares of capital stock of ARC
(other than a group consisting solely of Holders and their Affiliates), or (C)
initiate contact with any Person in an effort to solicit, encourage, or assist
that Person in any proposal for a merger or other business combination involving
ARC or for the acquisition of any of ARC's capital stock or any of ARC's assets;
(g) make any public announcement or make any written or oral
proposal or invitation to discuss any possibility, intention, plan, or
arrangement relating to a tender or exchange offer for securities of ARC or a
business combination (or other similar transaction that would result in a change
of control), sale of assets, liquidation, or other extraordinary corporate
transaction between the Holders or any of their respective Affiliates and ARC or
take any action that might require ARC to make a public announcement regarding
any of the foregoing; or
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(h) enter into any oral or written contract, arrangement, or
understanding (including, without limitation, any contract, arrangement, or
understanding referred to in Item 6 of Schedule 13D under the Exchange Act) with
respect to any of the foregoing, except for this Agreement and the Registration
Rights Agreement.
5. Voting of Shares of Common Stock. During the Director Term, the
Holders shall vote, and shall use their best efforts to cause their Affiliates
to vote, at all meetings of shareholders of ARC, all shares of Common Stock then
owned by them in favor of the persons nominated by ARC's Board of Directors to
serve on the Board of Directors of ARC.
6. Termination of this Agreement. This Agreement shall terminate upon
the earlier of (a) the execution and delivery by ARC and the Holders of a
written agreement terminating this Agreement, or (b) such time as the Holders
and their Affiliates own less than 1% of the then outstanding Common Stock.
7. Share Certificates. The certificates representing the Merger Shares
subject to this Agreement shall bear the following legend:
"NOTICE: THE SALE, ASSIGNMENT, TRANSFER, OR OTHER DISPOSITION OR
ENCUMBRANCE OF THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE AND
THE VOTING THEREOF ARE SUBJECT TO CERTAIN TERMS AND RESTRICTIONS CONTAINED IN A
SHAREHOLDERS' AGREEMENT, DATED AS OF JULY 14, 1998, BY AND AMONG AMERICAN
RETIREMENT CORPORATION AND XXXXXX X. XXXXXXX."
8. Assignment; Benefit. This Agreement and all of the provisions hereof
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective heirs, assigns, executors, administrators, or successors.
Neither ARC nor Xxxxxxx shall assign its respective rights or obligations
hereunder without the written consent of the other parties hereto.
9. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of Tennessee
applicable to agreements made and to be performed wholly within that
jurisdiction, without regard to the conflict of laws principles thereof.
10. Notices. All notices or other communications required or permitted
to be given hereunder shall be in writing and shall be effective upon the
earlier of (a) hand delivery or delivery by telecopy or facsimile at the address
or number designated below if delivered on a business day during normal business
hours where such notice is to be received, or the first business day following
such delivery if delivered other than on a business day during normal business
hours where such notice is to be received or (b) on the third business day
following the
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date of mailing, by registered or certified mail, return receipt requested,
postage prepaid, addressed as set forth below:
If to ARC:
American Retirement Corporation
000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Chief Executive Officer
With a copy to:
Bass, Xxxxx & Xxxx PLC
0000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: T. Xxxxxx Xxxxx
If to Xxxxxxx:
Xxxxxx X. Xxxxxxx
0000 Xxxxxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Telecopy:
ARC may from time to time change its address for notices under this
Section 10 by giving at least 10 days' written notice of such changed address to
Xxxxxxx. Xxxxxxx may from time to time change his address for notices under this
Section 10 by giving at least 10 days' written notice of such changed address to
ARC.
11. Entire Agreement; Integration. This Agreement supersedes all prior
and contemporaneous agreements between or among any of the parties hereto with
respect to the subject matter contained herein and therein and this Agreement
embodies the entire understanding among the parties relating to such subject
matter.
12. Injunctive Relief. Each of the parties hereto acknowledges that in
the event of a breach by any of them of any material provision of this
Agreement, the aggrieved party may be without an adequate remedy at law. Each of
the parties therefore agrees that in the event of such a breach hereof the
aggrieved party may elect to institute and prosecute proceedings in any court of
competent jurisdiction to enforce specific performance or to enjoin the
continuing breach hereof. By seeking or obtaining any such relief, the aggrieved
party shall not be precluded from seeking or obtaining any other relief to which
it may be entitled.
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13. Headings. The headings are for convenience of reference only, do
not constitute a part of this Agreement, and shall not be deemed to limit or
affect any of the provisions hereof.
14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, and all of which shall
together constitute one and the same instrument. All signatures need not be on
the same counterpart.
15. Severability. If any provision of this Agreement shall be invalid
or unenforceable, such invalidity or unenforceability shall not affect the
validity and enforceability of the remaining provisions of this Agreement,
unless the result thereof would be unreasonable, in which case the parties
hereto shall negotiate in good faith as to appropriate amendments hereto.
16. Amendment and Waiver. This Agreement may be amended, and the
observance of any term hereof may be waived, only with the written consent of
ARC and Xxxxxxx, or their respective successors and assigns. No such amendment
or waiver will extend to or affect any obligation, covenant, or agreement not
expressly amended or waived or impair any right consequent thereon. No course of
dealing between ARC and Xxxxxxx, or their respective successors and assigns, nor
any delay in exercising any rights hereunder shall operate as a waiver of any
rights hereunder.
17. Attorneys' Fees. In any action or proceeding brought to enforce any
provision of this Agreement, or where any provision hereof is validly asserted
as a defense, the successful party shall be entitled to recover reasonable
attorneys' fees (including any fees incurred in any appeal) in addition to its
costs and expenses and any other available remedy.
18. No Third Party Beneficiaries. This Agreement is intended for the
benefit of ARC and Xxxxxxx and his Permitted Transferees and is not for the
benefit of, nor may any provision hereof be enforced by, any other person.
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IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the date first written above.
AMERICAN RETIREMENT CORPORATION
By: /s/ H. Xxxx Xxxxxxxx
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Name: /s/ H. Xxxx Xxxxxxxx
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Title: Executive Vice President
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XXXXXX X. XXXXXXX
/s/ Xxxxxx X. Xxxxxxx
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Exhibit A
AGREEMENT TO BE BOUND
BY THE SHAREHOLDERS' AGREEMENT
The undersigned, being the transferee of __________ shares of the
common stock, par value $.01 per share, of American Retirement Corporation, a
Tennessee corporation (the "Company"), as a condition to the receipt of such
securities, acknowledges that matters pertaining to such securities are governed
by the Shareholders' Agreement, dated as of _______________, 1998 (the
"Agreement"), initially between the Company and Xxxxxx X. Xxxxxxx ("Xxxxxxx")
and the undersigned hereby (1) acknowledges receipt of a copy of the Agreement,
and (2) agrees to be bound by the terms of the Agreement, with the same effect
as if the undersigned were originally named as a party under the Agreement.
Agreed to this _____ day of ______________, ______.
________________________________
________________________________*
________________________________*
*Include address for notices.
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