Exhibit 2
EXECUTION COPY
------------------------------------------------
AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT
by and among
LAZARD FRERES REAL ESTATE INVESTORS L.L.C.
and
PROMETHEUS ASSISTED LIVING LLC
and
ARV ASSISTED LIVING, INC.
dated as of
October 29, 1997
------------------------------------------------
TABLE OF CONTENTS
Page
ARTICLE 1
Definitions........................................................1
"Adjusted Fully Diluted Basis".................................1
"Affiliate" ...................................................1
"Agreement"....................................................2
"Beneficially Own".............................................2
"Board"........................................................2
"Buyer"........................................................2
"Code".........................................................2
"Company"......................................................2
"Company Charter"..............................................2
"Company Common Stock".........................................2
"Control"......................................................2
"Covered Transaction"..........................................2
"Director".....................................................2
"Early Standstill Termination Event"...........................2
"Exercise Notice"..............................................2
"Extraordinary Transaction"....................................2
"Fully Diluted Basis"..........................................2
"Government Authority".........................................3
"Group"........................................................3
"Investor".....................................................3
"Investor Nominees"............................................3
"Kapson".......................................................3
"Kapson Agreement".............................................3
"Key Committees"...............................................3
"1933 Act".....................................................3
"1934 Act".....................................................3
"Participation Notice".........................................3
"person".......................................................3
"Standstill Period"............................................3
"Stock Purchase Agreement".....................................3
"Termination Event"............................................3
"13D Group"....................................................3
"Transfer".....................................................4
"Voting Securities"............................................4
ARTICLE 2
Board of Directors.................................................4
Section 2.1 Members of the Board..............................4
Section 2.2 [Intentionally Omitted]...........................5
Section 2.3 Vacancies.........................................5
Section 2.4 Officers..........................................5
Section 2.5 President/CEO.....................................5
ARTICLE 3
Voting and Participation Rights....................................5
Page
Section 3.1 Voting Rights.....................................5
Section 3.2 Participation Rights..............................6
ARTICLE 4
Standstill Provisions..............................................8
Section 4.1 Standstill Period.................................8
Section 4.2 Restrictions During Standstill Period.............9
Section 4.3 Restrictions on Transfer.........................10
Section 4.4 Notice to Company................................11
Section 4.5 Compliance with Xxxxxxx Xxxxxxx Policy...........11
Section 4.6 Investment Company Matters.......................11
Section 4.7 Waiver of Restrictions and Limits................11
ARTICLE 5
Additional Covenants..............................................11
Section 5.1 Restrictions on Investments......................11
ARTICLE 6
Miscellaneous.....................................................12
Section 6.1 Counterparts.....................................12
Section 6.2 Governing Law....................................12
Section 6.3 Entire Agreement.................................12
Section 6.4 Expenses.........................................12
Section 6.5 Notices..........................................12
Section 6.6 Successors and Assigns...........................13
Section 6.7 Headings.........................................13
Section 6.8 Amendments and Waivers...........................13
Section 6.9 Interpretation; Absence of Presumption...........13
Section 6.10 Severability....................................14
Section 6.11 Further Assurances..............................14
Section 6.12 Specific Performance............................14
Section 6.13 Investor Breach.................................14
Section 6.14 Confidentiality.................................14
Section 6.15 Public Announcements............................15
THIS AMENDED AND RESTATED STOCKHOLDERS
AGREEMENT (this "Agreement"), dated as of October
29, 1997, is made by and between Lazard Freres
Real Estate Investors L.L.C., a New York limited
liability company (the "Advancing Party"),
Prometheus Assisted Living LLC, a Delaware limited
liability company (the "Buyer"), and ARV Assisted
Living, Inc., a California corporation (the
"Company"). Capitalized terms not otherwise
defined herein have the meaning ascribed to them
in the Stock Purchase Agreement (as hereinafter
defined).
RECITALS:
WHEREAS, the Company, the Buyer and the Advancing Party have
entered into a Stock Purchase Agreement, dated as of July 14, 1997 (as
amended to date, including the Amended and Restated Stock and Note Purchase
Agreement dated as of the date hereof, the "Stock Purchase Agreement"),
that provides for the purchase by Buyer and sale by the Company to Buyer of
shares of Company Common Stock and Company Notes;
WHEREAS, the parties previously entered into a Stockholders
Agreement dated as of July 14, 1997 (the "Stockholders Agreement"),
providing for certain rights and restrictions with respect to the
investment by Investor (as hereinafter defined) in the Company and the
corporate governance of the Company; and
WHEREAS, the Company, the Advancing Party and Buyer desire
to amend and restate the Stockholders Agreement as contemplated by the
Stock Purchase Agreement;
NOW THEREFORE, in consideration of the premises and the
covenants and agreements contained herein and for good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
hereby, agree to amend and restate the Stockholders Agreement as follows:
ARTICLE 1
Definitions
As used in this Agreement, the following terms shall have
the following respective meanings:
"Adjusted Fully Diluted Basis" shall mean on a Fully Diluted
Basis, except that shares of Common Stock issuable upon conversion of the
Convertible Debt or upon exercise of options granted under management
benefit plans shall not be included.
"Affiliate" shall have the meaning ascribed thereto in Rule
12b-2 promulgated under the 1934 Act, and as in effect on the date hereof.
"Agreement" shall have the meaning set forth in the first
paragraph hereof.
"Beneficially Own" shall mean, with respect to any security,
having direct or indirect (including through any Subsidiary or Affiliate)
"beneficial ownership" of such security, as determined pursuant to Rule
13d-3 under the 1934 Act, including pursuant to any agreement, arrangement
or understanding, whether or not in writing; provided, however, that all of
the shares of Company Common Stock that Investor then has the right to
acquire upon conversion of the Company Notes in accordance with their terms
shall be deemed to be Beneficially Owned by Investor.
"Board" shall mean the board of directors of the Company.
"Buyer" shall have the meaning set forth in the first
paragraph hereof.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and any successor thereto, including all of the rules and
regulations promulgated thereunder.
"Company" shall have the meaning set forth in the first
paragraph hereof.
"Company Charter" shall have the meaning set forth in the
Stock Purchase Agreement.
"Company Common Stock" shall have the meaning set forth in
the second paragraph hereof.
"Control" shall mean with respect to any person, the power
to direct the management and policies of such person, directly or
indirectly, whether through ownership of voting securities, by contract or
otherwise. "Controlled" shall have a correlative meaning.
"Convertible Debt" shall mean the Company's 6-3/4%
Convertible Subordinated Notes due 2006.
"Covered Transaction" shall have the meaning set forth in
Section 4.1.
"Director" shall mean a member of the Board.
"Early Standstill Termination Event" shall have the meaning
set forth in Section 4.1.
"Exercise Notice" shall have the meaning set forth in
Section 3.2(b).
"Extraordinary Transaction" shall mean (a) any merger,
consolidation, sale of a material portion of the Company's assets,
recapitalization, other business combination, liquidation, or other similar
action out of the ordinary course of business of the Company, or (b) any
issuance of securities to any person or Group requiring stockholder
approval in accordance with the guidelines of the NASDAQ National Market
(or any stock exchange on which the Company Common Stock is then listed) as
to such matters, as in effect as of the date of the Stock Purchase
Agreement.
"Fully Diluted Basis" shall mean then outstanding Company
Stock plus any shares of stock or other equity or debt exchangeable for
Company Stock and any shares of stock or other equity or debt the holders
of which have the right to vote with the stockholders of the Company on any
matter, and shall include Company Common Stock issuable under the Company
Notes, the Convertible Debt, the instruments listed in
Schedule 3.3(a) of the Stock Purchase Agreement and under option or other
equity-incentive plans listed on Schedule 3.13(b) of the Stock Purchase
Agreement and awards issued pursuant thereto.
"Government Authority" shall mean any government or state
(or any subdivision thereof) of or in the United States, or any agency,
authority, bureau, commission, department or similar body or
instrumentality thereof, or any governmental court or tribunal.
"Group" shall mean a "group" as such term is used in Section
13(d)(3) of the 1934 Act.
"Investor" shall mean the Buyer, and shall also include any
permitted assignee of the Buyer pursuant to the Stock Purchase Agreement
and, for purposes only of the provisions of the Registration Rights
Agreement, any bona fide financial institution to which any Investor has
Transferred (including upon foreclosure of a pledge) shares of Company
Common Stock for the purpose of securing bona fide indebtedness of any
Investor and which has agreed to be bound by this Agreement.
"Investor Nominees" shall have the meaning set forth in
Section 2.1(a).
"Kapson" shall mean Kapson Senior Quarters, Corp.
"Kapson Agreement" shall mean the letter agreement dated as
of September 30, 1997, as amended and restated as of October 29, 1997,
among the Advancing Party, Buyer and the Company relating to Kapson.
"Key Committees" shall have the meaning set forth in Section
2.2(a).
"1933 Act" shall mean the Securities Act of 1933, as
amended.
"1934 Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Participation Notice" shall have the meaning set forth in
Section 3.2(b).
"person" shall mean any individual, corporation,
partnership, limited liability company, joint venture, trust,
unincorporated organization, other form of business or legal entity or
Government Authority.
"Standstill Period" shall have the meaning set forth in
Section 4.1.
"Stock Purchase Agreement" shall have the meaning set forth
in the Recitals hereof.
"Termination Event" shall mean the date on which either (i)
Investor no longer Beneficially Owns a number of shares of Company Common
Stock equal to at least 5% of the outstanding Company Common Stock, on a
Fully Diluted Basis or (ii) Investor no longer Beneficially Owns Company
Common Stock having an aggregate market value of at least $25,000,000.
"13D Group" shall mean any group of persons acquiring,
holding, voting or disposing of Voting Securities which would be required
under Section 13(d) of the 1934 Act and the rules and regulations
thereunder (as in effect, and based on legal interpretations thereof
existing, on the date hereof) to file a statement on Schedule 13D with the
Securities and Exchange Commission as a "person" within the meaning of
Section 13(d)(3) of the 1934 Act if such group beneficially owned Voting
Securities representing more than 5% of any class of Voting Securities then
outstanding.
"Transfer" shall have the meaning set forth in Section 4.3.
"Voting Securities" shall mean at any time shares of any
class of capital stock of the Company which are then entitled to vote
generally in the election of Directors.
ARTICLE 2
Board of Directors
Section 2.1 Members of the Board
(a) As of the Closing Date, the Company and Investor will
take all actions necessary to cause the Board to be structured to consist
of nine members, of which three members will be designees of Investor (at
least one in each class of the Board) (the "Investor Nominees"), and the
Company and Investor will take all actions necessary to cause such nominees
to become members of the Board as of the Closing Date. The initial Investor
Nominees shall be Xxxxxx X. Xxxxxxx, Xxxxx X. Xxxxx and Xxxxxxx X. Xxxxxx.
If necessary to effectuate the placement of Investor Nominees on the Board,
the Company shall solicit the resignations of the appropriate number of
Directors to the extent necessary to permit the Investor Nominees to serve.
Thereafter until the occurrence of a Termination Event, at each annual or
special meeting of stockholders of the Company at, or the taking of action
by written consent of stockholders of the Company with respect to which any
class of Directors is to be elected, Investor shall have the right (but not
obligation) pursuant to this Agreement and pursuant to the By-laws of the
Company to designate three nominees to the Board if the Board is a single
class, and one designee per class if the Board is divided into three
classes.
(b) Investor will not name any person as an Investor Nominee
if (i) such person is not reasonably experienced in business, financial or
real estate matters, (ii) such person has been convicted of, or has pled
nolo contendere to a felony, (iii) the election of such person would
violate any law, or (iv) any event required to be disclosed pursuant to
Item 401(f) of Regulation S-K of the 1934 Act has occurred with respect to
such person. Investor shall use its reasonable efforts to afford the
independent directors of the Company a reasonable opportunity to meet any
individual that Investor is considering naming as an Investor Nominee.
(c) The Company will support the nomination of and the
election of each Investor Nominee to the Board, and the Company will
exercise all authority under applicable law to cause each Investor Nominee
to be elected to the Board. Without limiting the generality of the
foregoing, with respect to each meeting of stockholders of the Company at
which Directors are to be elected, the Company shall use its reasonable
efforts to solicit from the stockholders of the Company eligible to vote in
the election of Directors proxies in favor of each Investor Nominee.
(d) During the period that Investor shall have the right to
designate nominees to the Board under this Agreement, the number of
Directors on the Board shall not exceed nine at any time.
(e) If Investor's right to nominate directors to the Board
is reduced, Investor shall cause the applicable number of its Investor
Nominees to immediately resign (regardless of the remaining term, if any)
from the Board.
(f) It is hereby agreed that any decision to take or omit to
take any action on the Company's behalf with respect to any transaction or
agreement involving or relating to Investor shall be subject only to the
approval of a majority of non-Investor Nominee Directors.
Section 2.2 [Intentionally Omitted]
Section 2.3 Vacancies. In the event that any Investor
Nominee shall cease to serve as a Director for any reason other than the
fact that Investor no longer has a right to nominate a Director, as
provided in Section 2.1(a), the vacancy resulting thereby shall be filled
by an Investor Nominee designated by Investor; provided, however, that any
Investor Nominee so designated shall satisfy the qualification requirements
set forth in Section 2.1(b).
Section 2.4 Officers. The Investor agrees to cooperate with
the Company in connection with the negotiation, execution and delivery of
employment agreements between the Company and certain key employees of the
Company.
Section 2.5 President/CEO. The Company covenants and agrees
to use commercially reasonable efforts to identify, select and retain a new
President/CEO of the Company within 90 days after the Closing Date. The
retention of such President/CEO shall require the prior written consent of
Investor, such approval not to be unreasonably withheld. The Investor
agrees to cooperate with the Company in the identification, selection and
retention of a new President/CEO of the Company. The parties acknowledge
that the identification, selection and retention of a new President/CEO of
the Company is a critical element for the ongoing success of the Company
and the parties agree to act in good faith in connection therewith. Upon
the retention of a new President/CEO of the Company in accordance with this
Section, the Company shall use its best efforts to cause a Director who is
not an Investor Nominee to resign from the Board, the Company will cause
such new President/CEO to be nominated as a director at the next succeeding
annual meeting of the Company and the Company and the Investor will use
their best efforts to cause such new President/CEO to be elected to the
Board.
ARTICLE 3
Voting and Participation Rights
Section 3.1 Voting Rights. Subject to the provisions of this
Section 3.1, Investor may vote the shares of Company Common Stock which it
owns in its sole and absolute discretion. During the Standstill Period the
Advancing Party, the Buyer and Investor and any of their Controlled
Affiliates will vote all shares of Company Common Stock owned by any of
them that represent aggregate ownership in excess of 35.8% of the
outstanding shares of Company Common Stock, in one of the following two
manners, at their option: (x) in accordance with the recommendation of the
Board, or (y) proportionally in accordance with the votes of the other
holders of Company Common Stock. Notwithstanding anything to the contrary
in the foregoing, during the Standstill Period, the Advancing Party, the
Buyer and Investor and any of their Controlled Affiliates shall vote all
shares of Company Common Stock owned by any of them in favor of the
election of all Directors nominated by the nominating committee, if any, or
the Board provided such nominations are in accordance with Section 2.1(a).
Section 3.2 Participation Rights
(a) Rights to Participate. From and after the date hereof
until a Termination Event, if any, Investor shall be entitled to a
participation right to purchase or subscribe up to that number of
additional shares of capital stock (including as "capital stock" for
purposes of this Section 3.2, any security, option, warrant, call,
commitment, subscription, right to purchase or other agreement of any
character that is convertible into or exchangeable or redeemable for shares
of capital stock of the Company or any Subsidiary (and all references in
this Section 3.2 to capital stock shall, as appropriate, be deemed to be
references to any such securities), and also including additional shares of
capital stock to be issued pursuant to the conversion, exchange or
redemption of any security, option, warrant, call, commitment,
subscription, right to purchase or other agreement of a character that is
convertible into or exchangeable or redeemable for shares of capital stock,
as if the price at which such additional shares of capital stock is issued
pursuant to any such conversion, exchange or redemption were the market
price on the date of such issuance) to be issued or sold by the Company
which represents the same proportion (the "shareholder percentage") of the
total number of shares of capital stock to be issued or sold by the Company
(including the shares of capital stock to be issued to Investor upon
exercise of its participation rights hereunder; it being understood and
agreed that the Company will accordingly be required to either increase the
number of shares of capital stock to be issued or sold so that Investor may
purchase additional shares to maintain its proportionate interest, or to
reduce the number of shares of capital stock to be issued or sold to
Persons other than Investor) as is represented by the number of shares of
Company Common Stock Beneficially Owned by Investor prior to such sale or
issuance relative to the number of outstanding shares of Company Common
Stock, on an Adjusted Fully Diluted basis, prior to such sale or issuance
(but in no event more than 35.8% of the total number of shares of capital
stock to be issued or sold by the Company at all subsequent offerings);
provided, however, that the provisions of this Section 3.2 shall not to
apply to (i) the issuance or sale by the Company of any of its capital
stock issued to the Company or any of its Subsidiaries or pursuant to
options, rights or warrants or other commitments or securities in effect or
outstanding as of July 14, 1997 (including without limitation, any options
issued or to be issued pursuant to the Employment Agreements), (ii) the
issuance of capital stock pursuant to the conversion, exchange or
redemption of any other capital stock, but shall, without limitation, apply
to the issuance by the Company of any of its capital stock pursuant to
benefit, option, stock purchase, or other similar plans or arrangements,
including pursuant to or upon the exercise of options, rights, warrants, or
other securities or agreements (including those issued pursuant to the
Company's benefit plans) and (iii) the issuance of stock for consideration
other than cash; provided further, however, that in the case of debt
securities of the Company that entitle the Investor to participation rights
hereunder, such participation rights shall apply only to the issuance of
such debt securities, i.e., the Investor shall have participation rights
with respect to such debt securities, and shall have whatever conversion
rights to which holders of such debt securities are entitled, but shall
have no other participation rights with respect thereto and the Investor
shall only have the right to acquire such debt securities themselves.
Notwithstanding the foregoing, any participation rights provided for in
this Section which arise as a result of the exception contained in clause
(ii) of the preceding sentence shall be deferred until such time as
participation rights shall otherwise arise under this Section 3.2. The
provisions of this Section 3.2 shall apply to the Convertible Debt only
upon conversion, in which event the Company agrees from time to time to
issue the number of additional shares necessary to permit the Buyer to
maintain its shareholder percentage (as defined above), provided that the
purchase price for such shares shall be the closing price of the Company
Common Stock on the date of each such conversion; provided further that the
Company shall provide the Buyer within 15 days after the end of each
calendar quarter with a schedule of the conversions during such quarter
(and the related closing prices for the Common Stock on the dates of
conversion),
the number of additional shares of Common Stock the Buyer is entitled to
purchase hereunder and the purchase price therefor; provided further that
Buyer shall have until 15 days after receipt of such schedule to purchase
such additional shares. Any conversion or exercise of securities acquired
by Investor pursuant to this Section 3.2 shall be deferred by Investor if
it would result in Investor's share percentage exceeding 49.9%.
(b) Notice. In the event the Company proposes to issue or
sell any shares of capital stock in a transaction giving rise to the
participation rights provided for in this Section, the Company shall send a
written notice (the "Participation Notice") to Investor setting forth the
number of shares of such capital stock of the Company that the Company
proposes to sell or issue, the price (before any commission or discount) at
which such shares are proposed to be issued (or, in the case of an
underwritten or privately placed offering in which the price is not known
at the time the Participating Notice is given, the method of determining
such price and an estimate thereof), and all other relevant information as
to such proposed transaction as may be necessary for Investor to determine
whether or not to exercise the rights granted in this Section. At any time
within 20 days after its receipt of the Participation Notice, Investor may
exercise its participation rights to purchase or subscribe for shares of
such shares of capital stock, as provided for in this Section, by so
informing the Company in writing (an "Exercise Notice"). Each Exercise
Notice shall state the percentage of the proposed sale or issuance that the
Investor elects to purchase. Each Exercise Notice shall be irrevocable,
subject to the conditions to the closing of the transaction giving rise to
the participation right provided for in this Section.
(c) Abandonment of Sale or Issuance. The Company shall have
the right, in its sole discretion, at all times prior to consummation of
any proposed sale or issuance giving rise to the participation right
granted by this Section, to abandon, rescind, annul, withdraw or otherwise
terminate such sale or issuance, whereupon all participation rights in
respect of such proposed sale or issuance pursuant to this Section shall
become null and void, and the Company shall have no liability or obligation
to Investor or any Affiliate thereof who has acquired shares of Company
Stock pursuant to the Stock Purchase Agreement or from Investor with
respect thereto by virtue of such abandonment, rescission, annulment,
withdrawal or termination.
(d) Terms of Sale. The purchase or subscription by Investor
or an Affiliate thereof, as the case may be, pursuant to this Section shall
be on the same price and other terms and conditions, including the date of
sale or issuance, as are applicable to the purchasers or subscribers of the
additional shares of capital stock of the Company whose purchases or
subscriptions give rise to the participation rights (except that the price
to Investor to make such purchase or subscription shall be net of payment
of any underwriting, placement agent or similar fee associated with such
purchase or subscription), which price and other terms and conditions shall
be substantially as stated in the relevant Participation Notice (which
standard shall be satisfied if the price, in the case of a negotiated
transaction, is not greater than 110% of the estimated price set forth in
the relevant Participation Notice or, in the case of an underwritten or
privately placed offering, is not greater than of (i) 110% of the estimated
price set forth in the relevant Participation Notice, and (ii) the most
recent closing price on or prior to the date of the pricing of the
offering); provided, however, that in the event the purchases or
subscriptions giving rise to the participation rights are effected by an
offering of securities registered under the 1933 Act and in which offering
it is not legally permissible for the securities to be purchased by
Investor to be included, such securities to be purchased by Investor will
be purchased in a concurrent private placement.
(e) Timing of Sale. If, with respect to any Participation
Notice, Investor fails to deliver an Exercise Notice within the requisite
time period, the Company shall have
120 days after the expiration of the time in which the Exercise Notice is
required to be delivered in which to sell not more than 110% of the number
of shares of capital stock of the Company described in the Participation
Notice (plus, in the event such shares are to be sold in an underwritten
public offering, an additional number of shares of capital stock of the
Company, not in excess of 15% of 110% of the number of shares of capital
stock of the Company described in the Participation Notice, in respect of
any underwriters over allotment option) and not less than 90% of the number
of shares of capital stock of the Company described in the Participation
Notice at a price of not less than 90% of the estimated price set forth in
the Participation Notice. If, at the end of 120 days following the
expiration of the time in which the Exercise Notice is required to be
delivered, the Company has not completed the sale or issuance of capital
stock of the Company in accordance with the terms described in the
Participation Notice (or at a price which is at least 90% of the estimated
price set forth in the Participation Notice), or in the event of any
contemplated sale or issuance within such 120-day period but outside such
price parameters, the Company shall again be obligated to comply with the
provisions of this Section with respect to, and provide the opportunity to
participate in, any proposed sale or issuance of shares of capital stock of
the Company; provided, however, that notwithstanding the foregoing, if the
price at which such capital stock is to be sold in an underwritten offering
(or a privately placed offering in which the price is not less than 97% of
the most recent closing price at the time of the pricing of the offering)
is not at least 90% of the estimated price set forth in the Participation
Notice, the Company may inform Investor of such fact and Investor shall be
entitled to elect, by written notice delivered within two Business Days
following such notice from the Company, to participate in such offering in
accordance with the provisions of this Section 4.2.
ARTICLE 4
Standstill Provisions
Section 4.1 Standstill Period. The "Standstill Period" shall be
the period commencing on the date of this Agreement and ending on the
earlier of (x) the third anniversary of the Settlement Date or (y) the
earliest of:
(i) the occurrence of any event of default on the part of
the Company or any Subsidiary under any debt agreements,
instruments or arrangements (other than those disclosed to the
Advancing Party or Investor prior to the Closing Date) that would
reasonably be expected to result in a Material Adverse Effect,
and, in the case of a non-monetary event of default, which event
of default cannot be, or is not, cured by the Company within the
applicable cure period under such debt agreement, instrument or
arrangement and that would reasonably be expected to result in a
Material Adverse Effect;
(ii) the authorization by the Company or the Board or any
committee thereof (with all Investor Nominees abstaining or
voting against) of the solicitation of offers or proposals or
indications of interest with respect to any merger,
consolidation, other business combination, liquidation, sale of
the Company or all or substantially all of the assets of the
Company or any other change of control of the Company or similar
extraordinary transaction, but excluding any merger,
consolidation or other business combination in which the Company
is the surviving and acquiring corporation and in which the
business or assets so acquired do not, or would not reasonably be
expected to, have a value greater than 50% of the assets of the
Company prior to such merger, consolidation or other business
combination (any of the foregoing, a "Covered Transaction");
(iii)the written submission by any person or Group other
than Investor or any Affiliate thereof of a proposal to the
Company (including to the Board or any agent, representative or
Affiliate of the Company ) with respect to, or otherwise
expressing an interest in pursuing, a Covered Transaction;
provided, however, that the Standstill Period shall not terminate
pursuant to this Section 4.1(a)(iii) if, as soon as practicable
after receipt of any such proposal, the Board determines that
such proposal is not in the best interest of the Company and its
stockholders and for so long as the Board continues to reject
such proposal as a result of such determination;
(iv) in connection with any actual or proposed Covered
Transaction, the removal of any rights plan, provisions of the
Company Charter relating to staggered terms of office for
directors, provisions of the Company Charter or the By-laws of
the Company relating to supermajority voting of the Company's
stockholders, "excess share" provisions of the Company Charter or
the By-laws of the Company, or any other similar arrangements,
agreements, commitments or provisions in the Company Charter or
the By-laws of the Company which would reasonably be expected to
impede the consummation of such actual or proposed Covered
Transaction by action of any Government Authority, the Board, the
stockholders of the Company or otherwise;
(v) 90 days after the occurrence of a Termination Event;
(vi) any breach by the Company of the Stock Purchase
Agreement which is neither cured nor desisted from within 30 days
of receipt of written notice from Investor of such breach and
which would reasonably be expected to materially adversely affect
Investor or cause a Material Adverse Effect; or
(vii)any breach of this Agreement by the Company which is
neither cured nor desisted within 30 days of receipt of written
notice from Investor of such breach and which would reasonably be
expected to materially adversely affect Investor or cause a
Material Adverse Effect.
Any event set forth in clauses (i)-(vii) of this Section 4.1 shall be an
"Early Standstill Termination Event."
Section 4.2 Restrictions During Standstill Period
(a) During the Standstill Period, the Advancing Party, the Buyer,
and Investor will not, and will cause each of their Controlled Affiliates
not to, directly or indirectly:
(i) act in concert with any other person or Group by
becoming a member of a 13D Group, other than any 13D Group
comprised exclusively of Investor and one or more of its
Affiliates;
(ii) purchase or otherwise acquire shares of Company Common
Stock (or options, rights or warrants or other commitments to
purchase and securities convertible into (or exchangeable or
redeemable for) shares of Company Common Stock) as a result of
which, after giving effect to such purchase or acquisition, the
Advancing Party, the Buyer, and Investor and their Controlled
Affiliates will Beneficially Own in the aggregate more than 49.9%
of the outstanding shares of Company Common Stock on an Adjusted
Fully Diluted basis;
(iii) solicit, encourage or propose to effect or negotiate any
Covered Transaction;
(iv) solicit, initiate, encourage or participate in any
"solicitation" of "proxies" or become a "participant" in any
"election contest" (as such terms are defined or used in
Regulation 14A under the 1934 Act, disregarding clause (iv) of
Rule 14a-1(1)(2) and including an exempt solicitation pursuant to
Rule 14a-2(b)(1)); call, or in any way encourage or participate
in a call for, any special meeting of stockholders of the Company
(or take any action with respect to acting by written consent of
the stockholders of the Company); request, or take action to
obtain or retain, any list of holders of any securities of the
Company; or initiate or propose any stockholder proposal or
participate in or encourage the making of, or solicit
stockholders of the Company for the approval of, one or more
stockholder proposals; provided, however, that Investor shall not
be prohibited from communicating with a security holder who is
engaged in any "solicitation" of "proxies" or who is a
"participant" in any "election contest";
(v) seek representation on the Board or a change in the
composition or size of the Board other than as permitted by
Article 2;
(vi) enter into or (to the extent such person has the power
to do so) permit Kapson to enter into sale/leaseback or other
financing arrangements of the type contemplated by the Kapson
Agreement with any public or private company (other than the
Company) the principal business of which is the ownership,
management, operation and development of assisted living
facilities (which shall not include health care real estate
investment trusts) in the United States unless such company
enters into a written standstill agreement with the Company
containing provisions substantially similar to the provisions of
Section 4.1 and this Section 4.2;
(vii)request the Company or any of its directors, officers,
employees or agents to amend or waive any provisions of this
Section 4.2 or seek to challenge the legality or effect thereof;
or
(viii) assist, advise, encourage or act in concert with any
person with respect to, or seek to do, any of the foregoing.
Section 4.3 Restrictions on Transfer. During the Standstill
Period, the Advancing Party, the Buyer and Investor will not, and will
cause each of their Controlled Affiliates not to, directly or indirectly,
Transfer any shares of Company Common Stock or Company Notes except for:
(a) Transfers made in compliance with the requirements of Rule 144 of the
1933 Act, (b) Transfers pursuant to negotiated transactions with third
parties provided that any such Transfer is not made to any public or
private company the principal business of which is, or that derives more
than $15 million of annual revenue from (in either case as of the date of
such Transfer), the ownership, management, operation and development of
assisted living facilities in the United States, unless 75% of the
Directors of the Company (other than Investor Nominees) have consented to
such Transfer and provided further that the transferee acknowledges that it
is subject to the provisions of Article 5 of this Agreement, (c) Transfers
pursuant to or in accordance with the Registration Rights Agreement in a
bona fide public offering, (d) Transfers to one or more Controlled
Affiliates of Investor who agree to be bound by the terms and conditions of
this Agreement, who make the representations set forth in Sections 4.8,
4.10 and 4.11 of the Stock Purchase Agreement and who satisfy the ownership
criteria in the definition of "Investor", and (e) Transfers to a bona fide
financial institution for the purpose of securing bona fide indebtedness of
any Investor. After the expiration of the Standstill Period, there shall be
no restrictions on the ability of the Advancing Party, the Buyer, Investor
and their Controlled Affiliates to Transfer any shares of Company Common
Stock.
Section 4.4 Notice to Company. During the Standstill Period,
if any party wishes to sell pursuant to Section 4.3(a), (b) or (c) any
shares of Company Common Stock or Company Notes, such party shall give the
Company 15 days' prior written notice of such proposed sale, setting forth
the number of shares of Company Common Stock or the principal amount of
Company Notes (as the case may be) that such party proposes to sell, the
expected timing of the proposed sale, and the expected selling price of
such sale, in order to enable the Company to make an offer to purchase such
shares or Company Notes. During the period described in the preceding
sentence, such party shall also notify the Company if such party reaches a
formal board-level decision to sell shares of Company Common Stock, or
Company Notes convertible into shares of Company Common Stock, representing
more than 2% of the shares of Company Common Stock on an Adjusted Fully
Diluted Basis.
Section 4.5 Compliance with Xxxxxxx Xxxxxxx Policy. For as
long as the Advancing Party, the Buyer or Investor Beneficially Owns any
shares of Company Common Stock, such parties will, and will use their
commercially reasonable efforts to cause their directors, officers,
employees, agents, and representatives to, comply with any written policy
of the Company reasonably designed to prevent violations of xxxxxxx xxxxxxx
and similar laws.
Section 4.6 Investment Company Matters. From and after the
Stockholder Approval Date, if any, until a Termination Event, if any,
Investor shall use its reasonable best efforts to not be or become an
"investment company" or any entity "controlled" by an "investment company",
as such terms are defined in the Investment Company Act of 1940, as
amended.
Section 4.7 Waiver of Restrictions and Limits. The Company
shall take all actions, including by providing any necessary conditional
exemptions from or amendments to any agreement or instrument which governs
ownership of shares of Company Stock by any person, necessary to permit
Investor to Beneficially Own up to and including 35.8% of the outstanding
shares of Company Common Stock on an Adjusted Fully Diluted Basis. If any
third party shall be given the right to Beneficially Own more than 35.8% of
the outstanding shares of Company Common Stock on an Adjusted Fully Diluted
Basis, the Company shall take all actions (including by providing the
foregoing exemptions and amendments) to waive any and all restrictions or
limits on Investor. Notwithstanding the foregoing but subject to the
provisions of Section 5.1, Investor or the Company may at any time acquire
Beneficial Ownership of the securities of such other party or its
Affiliates to the extent permitted by applicable law and the provisions of
the organizational documents of such party or its Affiliates, as
applicable, and other agreements from time to time governing the ownership
of such securities.
ARTICLE 5
Additional Covenants
Section 5.1 Restrictions on Investments. Except as
contemplated by the Kapson Agreement, from the date of this Agreement until
the occurrence of a Termination Event or an Early Standstill Termination
Event, the Advancing Party, the Buyer, Investor and their Controlled
Affiliates shall not, directly or indirectly, own any equity interest
(other than a de minimis amount) in any public or private company the
principal business of which is the ownership, management, operation and
development of assisted living facilities in the United States, unless 75%
of the Directors of the Company (other than the Investor Nominees) have
consented to such ownership. Upon the
termination of the Kapson Agreement or any provisions thereof, this Section
5.1 shall terminate and be of no further effect.
ARTICLE 6
Miscellaneous
Section 6.1 Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
instrument, and shall become effective when one or more counterparts have
been signed by each of the parties and delivered to the other party. Copies
of executed counterparts transmitted by telecopy, telefax or other
electronic transmission service shall be considered original executed
counterparts for purposes of this Section, provided receipt of copies of
such counterparts is confirmed.
Section 6.2 Governing Law. THIS AGREEMENT SHALL BE GOV ERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA
WITHOUT REFERENCE TO THE CHOICE OF LAW PRINCIPLES THEREOF.
Section 6.3 Entire Agreement. This Agreement (including
agreements incorporated herein) and the Schedules and Exhibits hereto
contain the entire agreement between the parties with respect to the
subject matter hereof and there are no agreements, understandings,
representations or warranties between the parties and other than those set
forth or referred to herein. This Agreement is not intended to confer upon
any person not a party hereto (and their successors and assigns) any rights
or remedies hereunder.
Section 6.4 Expenses. Except as set forth in the Stock
Purchase Agreement, all legal and other costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby
shall be paid by the Company including, without limitation, those specified
in Section 9.3(a) of the Stock Purchase Agreement.
Section 6.5 Notices. All notices and other communications
hereunder shall be sufficiently given for all purposes hereunder if in
writing and delivered personally, sent by documented overnight delivery
service or, to the extent receipt is confirmed, telecopy, telefax or other
electronic transmission service to the appropriate address or number as set
forth below. Notice to the Company shall be addressed to:
ARV Assisted Living, Inc.
000 Xxxxxxx Xxxxxx, X-0
Xxxxx Xxxx, XX 00000
Attention: President and General Counsel
Telecopy: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxxxx
000 Xxxx Xxxxxx Xxxxx
00xx Xxxxx
Xxxxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx
Telecopy: (000) 000-0000
or at such other address and to the attention of such other person as the
Company may designate by written notice to Investor. Notices to the
Advancing Party, the Buyer or Investor shall be addressed to:
Lazard Freres Real Estate Investors L.L.C.
00 Xxxxxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx,
Xxxxx X. Xxxxx and
Xxxxx Xxxxxxxxxxx
Telecopy: (000) 000-0000
with a copy to:
Cravath, Swaine & Xxxxx
Worldwide Plaza
000 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Telecopy: (000) 000-0000
Section 6.6 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors (including, in the case of the Advancing Party, any
successor to the principal business of the Advancing Party). No party shall
be permitted to assign any of its rights hereunder to any third party,
except that the Buyer, the Advancing Party and any Investor shall be
permitted to assign its rights hereunder to the same extent as the Buyer or
the Advancing Party is permitted to assign its rights under the Stock
Purchase Agreement, provided that such person agrees to be bound by this
Agreement.
Section 6.7 Headings. The Section, Article and other
headings contained in this Agreement are inserted for convenience of
reference only and will not affect the meaning or interpretation of this
Agreement. All references to Sections or Articles contained herein means
Sections or Articles of this Agreement unless otherwise stated.
Section 6.8 Amendments and Waivers. This Agreement may not
be modified or amended except by an instrument or instruments in writing
signed by the party against whom enforcement of any such modification or
amendment is sought. Any party hereto may, only by an instrument in
writing, waive compliance by another party hereto with any term or
provision hereof on the part of such other party hereto to be performed or
complied with. The waiver by any party hereto of a breach of any term or
provision hereof shall not be construed as a waiver of any subsequent
breach.
Section 6.9 Interpretation; Absence of Presumption.
(a) For the purposes hereof, (i) words in the singular shall
be held to include the plural and vice versa and words of one gender shall
be held to include the other gender as the context requires, (ii) the terms
"hereof", "herein", and "herewith" and words of similar import shall,
unless otherwise stated, be construed to refer to this Agreement as a whole
(including all of the Schedules and Exhibits hereto) and not to any
particular provision of this Agreement, and Article, Section, paragraph,
Schedule and Exhibit references are to the Articles, Sections, paragraphs,
Schedules and Exhibits to this Agreement unless otherwise specified, (iii)
the word "including" and words of similar import when used in this
Agreement shall mean "including, without limitation," unless the context
otherwise requires or unless otherwise specified, (iv) the word "or" shall
not
be exclusive, (v) provisions shall apply, when appropriate, to successive
events and transactions and (vi) terms used herein but not otherwise
defined herein shall have the meanings assigned to such terms in the Stock
Purchase Agreement.
(b) This Agreement shall be construed without regard to any
presumption or rule requiring construction or interpretation against the
party drafting or causing any instrument to be drafted.
Section 6.10 Severability. Any provision hereof which is
invalid or unenforceable shall be ineffective to the extent of such
invalidity or unenforceability, without affecting in any way the remaining
provisions hereof.
Section 6.11 Further Assurances. The Company and Investor
agree that, from time to time, each of them will, and will cause their
respective Affiliates to, execute and deliver such further instruments and
take such other action as may be necessary to carry out the purposes and
interests hereof.
Section 6.12 Specific Performance. The Company and Investor
each acknowledge that, in view of the uniqueness of arrangements
contemplated by this Agreement, the parties hereto would not have an
adequate remedy at law for money damages in the event that this Agreement
were not performed in accordance with its terms, and therefore agree that
the parties hereto shall be entitled to specific enforcement of the terms
hereof in addition to any other remedy to which the parties hereto may be
entitled at law or in equity.
Section 6.13 Investor Breach. In the event Investor shall
have breached (i) its obligation to effect a purchase of the Company Notes
pursuant to the Stock Purchase Agreement or (ii) any of its obligations
under this Agreement which breach is neither cured nor desisted from within
30 days of receipt of written notice of such breach and which would
reasonably be expected to materially adversely affect the Company, the
Company shall no longer be required to perform any of its obligations
hereunder.
Section 6.14 Confidentiality. The Advancing Party, the Buyer
and Investor agree that all information provided to any of them or any of
their representatives pursuant to this Agreement shall be kept
confidential, and such parties shall not (x) disclose such information to
any persons other than the directors, officers, employees, financial
advisors, legal advisors, accountants, consultants and affiliates of such
parties who reasonably need to have access to the confidential information
and who are advised of the confidential nature of such information or (y)
use such information in a manner
which would be detrimental to the Company; provided, however, the foregoing
obligation of such parties shall not (a) relate to any information that (i)
is or becomes generally available other than as a result of unauthorized
disclosure by such parties or by persons to whom such parties have made
such information available; (ii) is or becomes available to such parties on
a non-confidential basis from a third party that is not, to such parties'
knowledge, bound by any other confidentiality agreement with the Company,
or (b) prohibit disclosure of any information if required by law, rule,
regulation, court order or other legal or governmental process.
Section 6.15 Public Announcements. Subject to each party's
disclosure obligations imposed by law and any stock exchange or similar
rules and the confidentiality provisions contained herein and in Section
5.4(b) of the Stock Purchase Agreement, all news releases and other public
information disclosures with respect to this Agreement, the Stock Purchase
Agreement and the Transaction Documents and any of the transactions
contemplated hereby or thereby will require the mutual approval of Buyer
and the Company before such release or disclosure is made. If a party is
required by law or any stock exchange or similar rule to issue a news
release or other public announcement, it shall advise the other party in
advance thereof and use reasonable best efforts to cause a mutually
agreeable release or announcement to be issued.
IN WITNESS WHEREOF, this Agreement has been signed by or on
behalf of each of the parties hereto as of the day first above written.
LAZARD FRERES REAL ESTATE INVESTORS
L.L.C.
by /s/ Xxxxxx X. Xxxxxxx
------------------------
Name: Xxxxxx X. Xxxxxxx
Title: President
PROMETHEUS ASSISTED LIVING LLC
by LAZARD FRERES REAL ESTATE
INVESTORS L.L.C.,
by /s/ Xxxxxx X. Xxxxxxx
------------------------
Name: Xxxxxx X. Xxxxxxx
Title: President
ARV ASSISTED LIVING, INC.
by /s/ Xxxxxx X. Xxxxxxx
------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Vice President
