1
EXHIBIT 2.2
CROSS OPTION AGREEMENT
NEITHER THIS CROSS OPTION AGREEMENT NOR THE SECURITIES ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE. THIS CROSS OPTION
AGREEMENT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF, IF ANY, MAY NOT BE
SOLD OR TRANSFERRED EXCEPT UPON SUCH REGISTRATION OR UPON DELIVERY TO PIONEER OR
TRAILBLAZER, AS THE CASE MAY BE, OF AN OPINION OF COUNSEL OR OTHER EVIDENCE
SATISFACTORY TO PIONEER OR TRAILBLAZER, AS THE CASE MAY BE, THAT REGISTRATION IS
NOT REQUIRED FOR SUCH SALE OR TRANSFER.
This CROSS OPTION AGREEMENT (the "Agreement") is entered into November
18, 1998 by and among American Retirement Corporation, a Tennessee corporation
("Pioneer"), and Assisted Living Concepts, Inc., a Nevada corporation
("Trailblazer").
W I T N E S S E T H:
WHEREAS, concurrently with the execution of this Agreement, Pioneer,
Pioneer Merger Corporation, a Tennessee corporation and a wholly-owned
subsidiary of Pioneer ("Merger Sub"), and Trailblazer are entering into an
Agreement and Plan of Merger of even date herewith (the "Merger Agreement";
capitalized terms used but not defined herein shall have the same meaning
assigned to such terms in the Merger Agreement), pursuant to which Pioneer
proposes to combine with Trailblazer by means of a merger (the "Merger") of
Merger Sub with and into Trailblazer in which (a) each issued and outstanding
share of common stock, par value $.01 per share, of Merger Sub shall be
converted into one fully paid and nonassessable share of common stock of the
Surviving Corporation; (b) each issued and outstanding share of common stock,
par value $.01 per share, of Trailblazer (the "Trailblazer Common Stock"), other
than shares of Trailblazer Common Stock that are owned by Trailblazer as
treasury stock and shares of Trailblazer Common Stock, if any, that are owned by
Pioneer, shall automatically be converted into the right to receive 0.85 shares
(the "Exchange Ratio") of the common stock, par value $.01 per share, of Pioneer
("Pioneer Common Stock"); and (c) each option to purchase Trailblazer Common
Stock, each 6.0% Convertible Subordinated Debenture due 2002 and each 5.625%
Convertible Subordinated Debenture due 2003 of Trailblazer (collectively, the
"Trailblazer Debentures"), and each grant of Trailblazer Restricted Stock
outstanding as of the Effective Time shall be assumed by Pioneer as provided in
Section 5.7 of the Merger Agreement; and
WHEREAS, as a condition to the willingness of the parties to enter into
the Merger Agreement and incur expenses and expend time and effort in connection
with the Merger Agreement and the transactions contemplated thereby, Pioneer has
required that Trailblazer agree, and Trailblazer has agreed, among other things,
to grant to Pioneer the Trailblazer Option (as hereinafter defined), and
Trailblazer has required that Pioneer agree, and Pioneer has agreed, among other
things, to grant to Trailblazer the Pioneer Option (as hereinafter defined), in
each case in accordance with the terms of this Agreement.
2
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein and in the Merger Agreement and
intending to be legally bound hereby, the parties hereto hereby agree as
follows:
ARTICLE I
THE TRAILBLAZER STOCK OPTION
1.1 GRANT OF TRAILBLAZER STOCK OPTION. Trailblazer hereby grants to
Pioneer an irrevocable option (the "Trailblazer Stock Option") to purchase,
subject to the terms hereof, 2,583,465 fully paid and nonassessable shares (the
"Trailblazer Option Shares") of Trailblazer Common Stock at a purchase price of
$13.96 per Trailblazer Option Share (the "Trailblazer Stock Purchase Price") in
the manner set forth in Sections 1.2, 1.3, and 1.4; provided, however, that in
no event shall the number of shares of Trailblazer Common Stock for which the
Trailblazer Stock Option is exercisable exceed 14.9% of the number of shares of
Trailblazer Common Stock outstanding immediately before the exercise of the
Trailblazer Stock Option. The number of shares of Trailblazer Common Stock that
may be received upon the exercise of the Trailblazer Stock Option and the
Trailblazer Stock Purchase Price are subject to adjustment as set forth herein.
1.2 EXERCISE OF TRAILBLAZER STOCK OPTION. (a) The Trailblazer Stock
Option may be exercised by Pioneer, in whole or in part, at any time or from
time to time after (i) the occurrence of a Third Party Transaction with respect
to Trailblazer or (ii) the Merger Agreement becomes terminable or is terminated
by Pioneer or Trailblazer under circumstances that could entitle Pioneer to
termination fees under Section 7.2(b) of the Merger Agreement, regardless of
whether the Merger Agreement is actually terminated or whether there occurs a
closing of any Third Party Transaction (any such event by which the Trailblazer
Stock Option becomes exercisable being referred to herein as a "Pioneer
Triggering Event"). In the event Pioneer wishes to exercise all or any part of
the Trailblazer Stock Option, Pioneer shall deliver to Trailblazer a written
notice (a "Pioneer Exercise Notice," with the date of the Pioneer Exercise
Notice being hereafter called the "Pioneer Notice Date"), notifying Trailblazer
of its exercise of the Trailblazer Stock Option and specifying the number of
Trailblazer Option Shares to be purchased. The closing of such exercise of the
Trailblazer Stock Option (a "Trailblazer Option Closing") shall occur at a
place, on a date (not earlier than three nor later than 30 business days from
the Pioneer Notice Date), and at a time designated by Pioneer in the Pioneer
Exercise Notice. The Trailblazer Stock Option shall terminate upon the earlier
of: (i) the Effective Time; (ii) the termination of the Merger Agreement in
accordance with its terms (other than following the occurrence of a Pioneer
Triggering Event); or (iii) 365 days following any termination of the Merger
Agreement following the occurrence of a Pioneer Triggering Event (or, if, at the
expiration of such 365 day period the Trailblazer Stock Option cannot be
exercised by reason of any applicable judgment, decree, order, law, or
regulation, ten business days after such impediment to exercise shall have been
removed or shall have become final and not subject to appeal, but in no event
under this clause (iii) later than March 31, 2000). Notwithstanding the
foregoing, the Trailblazer Stock Option may not be exercised if Pioneer is in
(i) breach of any of its representations or warranties in this Agreement
2
3
or in the Merger Agreement that are qualified with respect to a Material Adverse
Effect on Pioneer or materiality; (ii) material breach of any of its
representations or warranties in this Agreement or the Merger Agreement that are
not so qualified; or (iii) material breach of any of its covenants or agreements
contained in this Agreement or in the Merger Agreement.
(b) Upon receipt of a Pioneer Exercise Notice, Trailblazer
shall be obligated to deliver to Pioneer a certificate or certificates
evidencing the Trailblazer Option Shares, in accordance with the terms of this
Agreement, on the later of (i) the date specified in the Pioneer Exercise Notice
or (ii) the first business day on which the conditions specified in Section 1.3
shall be satisfied.
1.3 CONDITIONS TO DELIVERY OF THE TRAILBLAZER OPTION SHARES. The right
of Pioneer to exercise the Trailblazer Stock Option and the obligation of
Trailblazer to deliver the Trailblazer Option Shares upon any exercise of the
Trailblazer Stock Option is subject to the following conditions:
(a) Such delivery would not in any material respect violate,
or otherwise cause the material violation of, any material law, including,
without limitation, the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder (the "HSR Act") applicable to
such exercise of the Trailblazer Stock Option and the delivery of the
Trailblazer Option Shares; and
(b) There shall be no preliminary or permanent injunction or
other order by any court of competent jurisdiction preventing or prohibiting
such exercise of the Trailblazer Stock Option or the delivery of the Trailblazer
Option Shares in respect of such exercise (and no action or proceeding shall
have been commenced or threatened for purposes of obtaining the same).
1.4 CLOSINGS. At any Trailblazer Option Closing, (i) Trailblazer will
deliver to Pioneer a certificate or certificates evidencing the number of
Trailblazer Option Shares being purchased in the denominations specified in the
Pioneer Exercise Notice and, if the Trailblazer Stock Option has been exercised
in part, a new Trailblazer Stock Option evidencing the right of Pioneer to
purchase the balance of the Trailblazer Option Shares, and (ii) Pioneer will pay
to Trailblazer the aggregate purchase price for the Trailblazer Option Shares to
be purchased by Pioneer. All payments made by Pioneer to Trailblazer pursuant to
this Section 1.4 shall be made, at the option of Pioneer, either by wire
transfer of immediately available funds or by delivery to Trailblazer of a
certified or bank cashier's check or checks payable to or to the order of
Trailblazer, in either case in the amount of the Trailblazer Stock Purchase
Price multiplied by the number of shares to be purchased.
1.5 ADJUSTMENTS UPON SHARE ISSUANCES, CHANGES IN CAPITALIZATION, ETC.
In the event of any change in Trailblazer Common Stock or in the number of
outstanding shares of Trailblazer Common Stock by reason of a stock dividend,
split-up, recapitalization, combination, exchange of shares, or similar
transaction or any other change in the corporate or capital structure of
3
4
Trailblazer (including, without limitation, the declaration or payment of an
extraordinary dividend of cash, securities, or other property), the type and
number of shares or securities to be issued by Trailblazer upon exercise of the
Trailblazer Stock Option shall be adjusted appropriately, and proper provision
shall be made in the agreements governing such transaction, so that Pioneer
shall receive upon exercise of the Trailblazer Stock Option the number, and
class of shares and voting power represented thereby or other securities or
property that Pioneer would have received in respect of Trailblazer Common Stock
if the Trailblazer Stock Option had been exercised immediately prior to such
event, or the record date therefor, as applicable, and elected to the fullest
extent it would have been permitted to elect, to receive such securities, cash,
or other property.
1.6 LEGENDS. The certificate or certificates evidencing the Trailblazer
Option Shares acquired upon exercise of the Trailblazer Stock Option shall bear
a legend in substantially the following form:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR
TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER SUCH ACT OR UNLESS THE ISSUER HAS RECEIVED AN
OPINION OF COUNSEL OR OTHER EVIDENCE, SATISFACTORY TO THE ISSUER AND
ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
It is understood and agreed that the above legend will be removed by
delivery of substitute certificate(s) without such legend if the holder shall
have delivered to Trailblazer a copy of a letter from the staff of the
Commission, or an opinion of counsel in form and substance reasonably
satisfactory to Trailblazer and its counsel, to the effect that such legend is
not required for purposes of the Securities Act.
ARTICLE II
THE PIONEER STOCK OPTION
2.1 GRANT OF PIONEER STOCK OPTION. Pioneer hereby grants to Trailblazer
an irrevocable option (the "Pioneer Stock Option") to purchase, subject to the
terms hereof, 2,549,333 fully paid and nonassessable shares (the "Pioneer Option
Shares") of Pioneer Common Stock at a purchase price of $17.25 per Pioneer
Option Share (the "Pioneer Stock Purchase Price") in the manner set forth in
Sections 2.2, 2.3, and 2.4; provided, however, that in no event shall the number
of shares of Pioneer Common Stock for which the Pioneer Stock Option is
exercisable exceed 14.9% of the number of shares of Pioneer Common Stock
outstanding immediately before the exercise of the Pioneer Stock Option. The
number of shares of Pioneer Common Stock that may be received upon the exercise
of the Pioneer Stock Option and the Pioneer Stock Purchase Price are subject to
adjustment as set forth herein.
4
5
2.2 EXERCISE OF PIONEER STOCK OPTION. (a) The Pioneer Stock Option may
be exercised by Trailblazer, in whole or in part, at any time or from time to
time after (i) the occurrence of a Third Party Transaction with respect to
Pioneer or (ii) the Merger Agreement becomes terminable or is terminated by
Trailblazer or Pioneer under circumstances that could entitle Trailblazer to
termination fees under Section 7.2(a) of the Merger Agreement, regardless of
whether the Merger Agreement is actually terminated or whether there occurs a
closing of any Third Party Transaction (any such event by which the Pioneer
Stock Option becomes exercisable being referred to herein as a "Trailblazer
Triggering Event"). In the event Trailblazer wishes to exercise all or any part
of the Pioneer Stock Option, Trailblazer shall deliver to Pioneer a written
notice (a "Trailblazer Exercise Notice," with the date of the Trailblazer
Exercise notice being hereafter called the "Trailblazer Notice Date") notifying
Pioneer of its exercise of the Pioneer Stock Option and specifying the number of
Pioneer Option Shares to be purchased. The closing of such exercise of the
Pioneer Stock Option (a "Pioneer Option Closing") shall occur at a place, on a
date (not earlier than three nor later than 30 business days from the
Trailblazer Notice Date), and at a time designated by Trailblazer in the
Trailblazer Exercise Notice. The Pioneer Stock Option shall terminate upon the
earlier of: (i) the Effective Time; (ii) the termination of the Merger Agreement
in accordance with its terms (other than following the occurrence of a
Trailblazer Triggering Event); or (iii) 365 days following any termination of
the Merger Agreement following the occurrence of a Trailblazer Triggering Event
(or, if, at the expiration of such 365 day period the Pioneer Stock Option
cannot be exercised by reason of any applicable judgment, decree, order, law, or
regulation, ten business days after such impediment to exercise shall have been
removed or shall have become final and not subject to appeal, but in no event
under this clause (iii) later than March 31, 2000). Notwithstanding the
foregoing, the Pioneer Stock Option may not be exercised if Trailblazer is in
(i) breach of any of its representations or warranties in this Agreement or in
the Merger Agreement that are qualified with respect to a Material Adverse
Effect on Trailblazer or materiality; (ii) material breach of any of its
representations or warranties in this Agreement or the Merger Agreement that are
not so qualified; or (iii) material breach of any of its covenants or agreements
contained in this Agreement or in the Merger Agreement.
(b) Upon receipt of a Trailblazer Exercise Notice, Pioneer
shall be obligated to deliver to Trailblazer a certificate or certificates
evidencing the Pioneer Option Shares, in accordance with the terms of this
Agreement, on the later of (i) the date specified in the Trailblazer Exercise
Notice or (ii) the first business day on which the conditions specified in
Section 2.3 shall be satisfied.
2.3 CONDITIONS TO DELIVERY OF THE PIONEER OPTION SHARES. The right of
Trailblazer to exercise the Pioneer Stock Option and the obligation of Pioneer
to deliver the Pioneer Option Shares upon any exercise of the Pioneer Stock
Option is subject to the following conditions:
(a) Such delivery would not in any material respect violate,
or otherwise cause the material violation of, any material law, including,
without limitation, the HSR Act applicable to such exercise of the Pioneer Stock
Option and the delivery of the Pioneer Option Shares; and
5
6
(b) There shall be no preliminary or permanent injunction or
other order by any court of competent jurisdiction preventing or prohibiting
such exercise of the Pioneer Stock Option or the delivery of the Pioneer Option
Shares in respect of such exercise (and no action or proceeding shall have been
commenced or threatened for purposes of obtaining the same).
2.4 CLOSINGS. At any Pioneer Option Closing, (i) Pioneer will deliver
to Trailblazer a certificate or certificates evidencing the number of Pioneer
Option Shares being purchased in the denominations specified in the Trailblazer
Exercise Notice and, if the Pioneer Stock Option has been exercised in part, a
new Pioneer Stock Option evidencing the right of Trailblazer to purchase the
balance of the Pioneer Option Shares, and (ii) Trailblazer will pay to Pioneer
the aggregate purchase price for the Pioneer Option Shares to be purchased by
Trailblazer. All payments made by Trailblazer to Pioneer pursuant to this
Section 2.4 shall be made, at the option of Trailblazer, either by wire transfer
of immediately available funds, or by delivery to Pioneer of a certified or bank
cashier's check or checks payable to or to the order of Pioneer, in either case
in the amount of the Pioneer Stock Purchase Price multiplied by the number of
shares to be purchased.
2.5 ADJUSTMENTS UPON SHARE ISSUANCES, CHANGES IN CAPITALIZATION, ETC.
In the event of any change in Pioneer Common Stock or in the number of
outstanding shares of Pioneer Common Stock by reason of a stock dividend,
split-up, recapitalization, combination, exchange of shares, or similar
transaction or any other change in the corporate or capital structure of Pioneer
(including, without limitation, the declaration or payment of an extraordinary
dividend of cash, securities, or other property), the type and number of shares
or securities to be issued by Pioneer upon exercise of the Pioneer Stock Option
shall be adjusted appropriately, and proper provision shall be made in the
agreements governing such transaction, so that Trailblazer shall receive upon
exercise of the Pioneer Stock Option the number, and class of shares and voting
power represented thereby or other securities or property that Trailblazer would
have received in respect of Pioneer Common Stock if the Pioneer Stock Option had
been exercised immediately prior to such event, or the record date therefor, as
applicable, and elected to the fullest extent it would have been permitted to
elect, to receive such securities, cash, or other property.
2.6 LEGENDS. The certificate or certificates evidencing the Pioneer
Option Shares acquired upon exercise of the Pioneer Stock Option shall bear a
legend in substantially the following form:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR
TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER SUCH ACT OR UNLESS THE ISSUER HAS RECEIVED AN
OPINION OF COUNSEL OR OTHER EVIDENCE, SATISFACTORY TO THE ISSUER AND
ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
6
7
It is understood and agreed that the above legend will be removed by
delivery of substitute certificate(s) without such legend if the holder shall
have delivered to Pioneer a copy of a letter from the staff of the Commission,
or an opinion of counsel in form and substance reasonably satisfactory to
Pioneer and its counsel, to the effect that such legend is not required for
purposes of the Securities Act.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TRAILBLAZER
Trailblazer hereby represents and warrants to Pioneer as follows:
3.1 AUTHORITY RELATIVE TO THIS AGREEMENT. Trailblazer has all necessary
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder, and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by Trailblazer and the consummation
by Trailblazer of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of Trailblazer, and no other
corporate proceedings on the part of Trailblazer are necessary to authorize this
Agreement or to consummate such transactions. This Agreement has been duly and
validly executed and delivered by Trailblazer and, assuming the due
authorization, execution, and delivery by Pioneer, constitutes a legal, valid,
and binding obligation of Trailblazer, enforceable against Trailblazer in
accordance with its terms.
3.2 AUTHORITY TO ISSUE SHARES. Trailblazer has taken all necessary
corporate action to authorize and reserve and permit it to issue, and at all
times from the date hereof until the Trailblazer Stock Option shall no longer be
exercisable, shall have reserved, all the Trailblazer Option Shares issuable
pursuant to this Agreement, and Trailblazer will take all necessary corporate
action to authorize and reserve and permit it to issue all additional shares of
Trailblazer Common Stock or other securities that may be issued pursuant to
Section 1.5, all of which, upon their issuance and delivery in accordance with
the terms of this Agreement, shall be duly authorized, validly issued, fully
paid and nonassessable, shall be delivered free and clear of all security
interests, liens, claims, pledges, options, rights of first refusal, agreements,
limitations on Pioneer's voting rights, charges, and other encumbrances of any
nature whatsoever (other than this Agreement) and shall not be subject to any
preemptive rights.
3.3 NO VIOLATION. The execution and delivery of this Agreement by
Trailblazer do not, and the performance of this Agreement by Trailblazer will
not, (i) violate or conflict with any provision of any Laws in effect on the
date of this Agreement and applicable to Trailblazer or any Trailblazer
Subsidiary or by which any of their respective properties or assets is bound or
subject; (ii) require Trailblazer or any Trailblazer Subsidiary to obtain any
consent, waiver, approval, license, or authorization or permit of, or make any
filing with, or notification to, any Governmental Entities, based on laws,
rules, regulations, and other requirements of Governmental Entities in effect on
the date of this Agreement (other than (a) the filing of a Pre-Merger
Notification Report under the HSR Act and the expiration of the applicable
waiting period; (b) filings or authorizations required in connection or in
compliance with the provisions of the
7
8
Exchange Act, the Securities Act, the NRS, the Bylaws of the AMEX, or the
"takeover" or "blue sky" laws of various states; or (c) any other filings and
approvals expressly contemplated by this Agreement); (iii) require the consent,
waiver, approval, license, or authorization of any person (other than
Governmental Entities); (iv) violate, conflict with, or result in a breach of or
the acceleration of any obligation under, or constitute a default (or an event
that with notice or the lapse of time or both would become a default) under, or
give to others any right of, or result in any, termination, amendment,
acceleration, or cancellation of, or loss of any benefit or creation of a right
of first refusal, or require or increase any payment under, or result in the
creation of a lien or other encumbrance on any of the properties or assets of
Trailblazer or any Trailblazer Subsidiary pursuant to or under any provision of
any indenture, mortgage, note, bond, lien, lease, license, agreement, contract,
order, judgment, ordinance, Trailblazer Permit (as defined below), or other
instrument or obligation to which Trailblazer or any Trailblazer Subsidiary is a
party or by which Trailblazer or any Trailblazer Subsidiary or any of their
respective properties is bound or subject; or (v) conflict with or violate the
Articles of Incorporation or Bylaws, or the equivalent organizational documents,
in each case as amended or restated, of Trailblazer or any of the Trailblazer
Subsidiaries, except for any such conflicts or violations described in clauses
(i) through (v) as would not, together with all other such conflicts or
violations, have a Material Adverse Effect on Trailblazer and except when the
failure to obtain such consents, approvals, authorizations, or permits, or to
make such filings or notifications would not, either individually or in the
aggregate, (y) prevent Trailblazer from performing any of its obligations under
this Agreement or (z) have a Material Adverse Effect on Trailblazer.
3.4 INVESTMENT INTENT. Trailblazer is acquiring the Pioneer Stock
Option, and the Pioneer Option Shares issuable upon any exercise of the Pioneer
Stock Option, for investment for its own account and not with a view to, or for
resale in connection with, any distribution within the meaning of the Securities
Act.
ARTICLE IV
COVENANTS OF TRAILBLAZER
Trailblazer hereby covenants and agrees as follows:
4.1 LISTING; OTHER ACTION. (a) If Trailblazer Common Stock or any other
securities to be acquired upon exercise of the Trailblazer Stock Option are then
listed on the AMEX or on any other exchange or trading system, Trailblazer, upon
the request of Pioneer, shall, at its expense, promptly file an application to
list such shares or other securities on AMEX or such other exchange or trading
system and will use reasonable best efforts to obtain approval of such listing
on the AMEX or such other exchange or trading system, subject to notice of
issuance, as promptly as practicable.
(b) Trailblazer shall use its reasonable best efforts to take,
or cause to be taken, all appropriate action, and to do, or cause to be done,
all things necessary, proper, or advisable under applicable laws and regulations
to consummate and make effective the transactions
8
9
contemplated hereunder, including, without limitation, using its reasonable best
efforts to obtain all licenses, permits, consents, approvals, authorizations,
qualifications, and orders of Governmental Entities. Without limiting the
generality of the foregoing, Trailblazer shall, when required in order to effect
the transactions contemplated hereunder, make all filings and submissions under
the HSR Act as promptly as practicable.
4.2 REGISTRATION. Upon the request of Pioneer at any time and from time
to time within two (2) years of the first Trailblazer Option Closing,
Trailblazer agrees (i) to effect, as promptly as practicable, up to two
registrations under the Securities Act covering any part or all (as may be
requested by Pioneer) of the securities that have been acquired by or are
issuable to Pioneer upon exercise of the Trailblazer Stock Option, and to use
its best efforts to qualify or exempt such Trailblazer Option Shares or other
securities under any applicable state securities laws and (ii) to include any
part or all of the Trailblazer Option Shares or such other securities in any
registration statement for common stock filed by Trailblazer under the
Securities Act in which such inclusion is permitted under applicable rules and
regulations and to use its reasonable best efforts to keep each such
registration described in clause (i) effective for a period of not in excess of
six (6) months, unless, in the written opinion of counsel to Trailblazer,
addressed to Pioneer and reasonably satisfactory in form and substance to
Pioneer, such registration is not required for the sale and distribution of such
securities in the manner contemplated by Pioneer. If the managing underwriter of
a proposed offering of securities by Trailblazer shall advise Trailblazer in
writing that, in the reasonable opinion of the managing underwriter, the
distribution of the Trailblazer Option Shares requested by Pioneer to be
included in a registration statement concurrently with securities being
registered for sale by Trailblazer would adversely affect the distribution of
such securities by Trailblazer, then Trailblazer shall, at its option, either
(i) include such Trailblazer Option Shares in the registration statement, but
Pioneer shall agree to delay the offering and sale for such period of time as
the managing underwriter may reasonably request (provided that Pioneer may at
any time withdraw its request to include the Trailblazer Option Shares in such
offering) or (ii) include such portion of the Trailblazer Option Shares in the
registration statement as the managing underwriter advises may be included for
sale simultaneously with sales by Trailblazer. The registrations effected under
this Section 4.2 shall be effected at Trailblazer's expense except for
underwriting commissions and discounts and the fees and disbursements of
Pioneer's counsel. With respect to a registration statement that has become
effective pursuant to this Agreement, if the Board of Directors of Trailblazer
shall determine, in its good faith reasonable judgment, that it is necessary to
suspend the availability of such registration statement in light of the
existence of any undisclosed acquisition or financing activity or other
undisclosed material event, circumstance, or condition involving Trailblazer or
Trailblazer Subsidiary, the disclosure of which in any such case could
reasonably be expected to materially disadvantage Trailblazer, and the existence
of which, absent disclosure, would render such registration statement inadequate
as failing to include material information, then Trailblazer may cause the right
of Pioneer to make dispositions of Trailblazer Option Shares pursuant to such
registration statement to be suspended for one or more periods of time not
exceeding 90 days in the aggregate as the Board of Directors of Trailblazer
determines in its good faith reasonable judgment to be necessary. If Trailblazer
determines to suspend the right of the holders pursuant to the
9
10
immediately preceding sentence, Trailblazer shall deliver a notice to Pioneer
that indicates that such registration statement is no longer usable. Upon the
receipt of any such notice, Pioneer shall forthwith discontinue any sale of
Trailblazer Option Shares pursuant to such registration statement and any use of
the prospectus contained therein. As soon as the circumstances that resulted in
the delivery of any such notice cease to exist, Trailblazer shall promptly
notify Pioneer of such cessation, whereupon Pioneer may resume making
dispositions of Trailblazer Option Shares pursuant to such registration
statement. Pioneer shall provide all information reasonably requested by
Trailblazer for inclusion in any registration statement to be filed hereunder.
In connection with any registration pursuant to this Section 4.2, Trailblazer
and Pioneer shall provide each other and any underwriter of the offering with
customary representations, warranties, covenants, indemnification, and
contribution.
4.3 DISTRIBUTION. Trailblazer shall acquire the Pioneer Option Shares
for investment purposes only and not with a view to any distribution thereof in
violation of the Securities Act, and shall not sell any Pioneer Option Shares
purchased pursuant to this Agreement except in compliance with the Securities
Act.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PIONEER
Pioneer hereby represents and warrants to Trailblazer as follows:
5.1 AUTHORITY RELATIVE TO THIS AGREEMENT. Pioneer has all necessary
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder, and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by Pioneer and the consummation by
Pioneer of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of Pioneer, and no other corporate
proceedings on the part of Pioneer are necessary to authorize this Agreement or
to consummate such transactions. This Agreement has been duly and validly
executed and delivered by Pioneer and, assuming the due authorization,
execution, and delivery by Trailblazer, constitutes a legal, valid, and binding
obligation of Pioneer, enforceable against Pioneer in accordance with its terms.
5.2 AUTHORITY TO ISSUE SHARES. Pioneer has taken all necessary
corporate action to authorize and reserve and permit it to issue, and at all
times from the date hereof until the Pioneer Stock Option shall no longer be
exercisable, shall have reserved, all the Pioneer Option Shares issuable
pursuant to this Agreement, and Pioneer will take all necessary corporate action
to authorize and reserve and permit it to issue all additional shares of Pioneer
Common Stock or other securities that may be issued pursuant to Section 2.5, all
of which, upon their issuance and delivery in accordance with the terms of this
Agreement, shall be duly authorized, validly issued, fully paid, and
nonassessable, shall be delivered free and clear of all security interests,
liens, claims, pledges, options, rights of first refusal, agreements,
limitations on Trailblazer's voting rights, charges, and other encumbrances of
any nature whatsoever (other than this Agreement) and shall not be subject to
any preemptive rights.
10
11
5.3 NO VIOLATION. The execution and delivery of this Agreement by
Pioneer do not, the performance of this Agreement by Pioneer will not, (i)
violate or conflict with any provision of any Laws in effect on the date of this
Agreement and applicable to Pioneer or any Pioneer Subsidiary or by which any of
their respective properties or assets is bound or subject; (ii) require Pioneer
or any Pioneer Subsidiary to obtain any consent, waiver, approval, license, or
authorization or permit of, or make any filing with, or notification to, any
Governmental Entities, based on laws, rules, regulations, and other requirements
of Governmental Entities in effect on the date of this Agreement (other than (a)
the filing of a Pre-Merger Notification Report under the HSR Act and the
expiration of the applicable waiting period; (b) filings or authorizations
required in connection or in compliance with the provisions of the Exchange Act,
the Securities Act, the TBCA, the Bylaws of the NYSE, or the "takeover" or "blue
sky" laws of various states; or (c) any other filings and approvals expressly
contemplated by this Agreement); (iii) require the consent, waiver, approval,
license, or authorization of any person (other than Governmental Entities); (iv)
violate, conflict with, or result in a breach of or the acceleration of any
obligation under, or constitute a default (or an event that with notice or the
lapse of time or both would become a default) under, or give to others any right
of, or result in any, termination, amendment, acceleration, or cancellation of,
or loss of any benefit or creation of a right of first refusal, or require or
increase any payment under, or result in the creation of a lien or other
encumbrance on any of the properties or assets of Pioneer or any Pioneer
Subsidiary pursuant to or under any provision of any indenture, mortgage, note,
bond, lien, lease, license, agreement, contract, order, judgment, ordinance,
Pioneer Permit (as defined below), or other instrument or obligation to which
Pioneer or any Pioneer Subsidiary is a party or by which Pioneer or any Pioneer
Subsidiary or any of their respective properties is bound or subject; or (v)
conflict with or violate the Charter or Bylaws, or the equivalent organizational
documents, in each case as amended or restated, of Pioneer or any of the Pioneer
Subsidiaries, except for any such conflicts or violations described in clauses
(i) through (v) as would not, together with all other such conflicts or
violations, have a Material Adverse Effect on Pioneer and except when the
failure to obtain such consents, approvals, authorizations, or permits, or to
make such filings or notifications would not, either individually or in the
aggregate, (y) prevent Pioneer from performing any of its obligations under this
Agreement or (z) have a Material Adverse Effect on Pioneer.
5.4 INVESTMENT INTENT. Pioneer is acquiring the Trailblazer Stock
Option, and the Trailblazer Option Shares upon any exercise of the Trailblazer
Stock Option, for investment for its own account and not with a view to, or for
resale in connection with, any distribution within the meaning of the Securities
Act.
ARTICLE VI
COVENANTS OF PIONEER
Pioneer hereby covenants and agrees as follows:
6.1 LISTING; OTHER ACTION. (a) If Pioneer Common Stock or any other
securities to be acquired upon exercise of the Pioneer Option are then listed on
the NYSE or any other exchange
11
12
or trading system, Pioneer, upon the request of Trailblazer, shall, at its
expense, promptly file an application to list such shares or other securities on
the NYSE or such other exchange or trading system and will use reasonable best
efforts to obtain approval of such listing on the NYSE or such other exchange or
trading system, subject to notice of issuance, as promptly as practicable.
(b) Pioneer shall use its reasonable best efforts to take, or
cause to be taken, all appropriate action, and to do, or cause to be done, all
things necessary, proper, or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated hereunder,
including, without limitation, using its reasonable best efforts to obtain all
licenses, permits, consents, approvals, authorizations, qualifications, and
orders of Governmental Entities. Without limiting the generality of the
foregoing, Pioneer shall, when required in order to effect the transactions
contemplated hereunder, make all filings and submissions under the HSR Act as
promptly as practicable.
6.2 REGISTRATION. Upon the request of Trailblazer at any time and from
time to time within two (2) years of the first Pioneer Option Closing, Pioneer
agrees (i) to effect, as promptly as practicable, up to two registrations under
the Securities Act covering any part or all (as may be requested by Trailblazer)
of the securities that have been acquired by or are issuable to Trailblazer upon
exercise of the Pioneer Stock Option, and to use its best efforts to qualify or
exempt such Pioneer Option Shares or other securities under any applicable state
securities laws and (ii) to include any part or all of the Pioneer Option Shares
or such other securities in any registration statement for common stock filed by
Pioneer under the Securities Act in which such inclusion is permitted under
applicable rules and regulations and to use its reasonable best efforts to keep
each such registration described in clause (i) effective for a period of not in
excess of six (6) months, unless, in the written opinion of counsel to Pioneer,
addressed to Trailblazer and reasonably satisfactory in form and substance to
Trailblazer, such registration is not required for the sale and distribution of
such securities in the manner contemplated by Trailblazer. If the managing
underwriter of a proposed offering of securities by Pioneer shall advise Pioneer
in writing that, in the reasonable opinion of the managing underwriter, the
distribution of the Pioneer Option Shares requested by Trailblazer to be
included in a registration statement concurrently with securities being
registered for sale by Pioneer would adversely affect the distribution of such
securities by Pioneer, then Pioneer shall, at its option, either (i) include
such Pioneer Option Shares in the registration statement, but Trailblazer shall
agree to delay the offering and sale for such period of time as the managing
underwriter may reasonably request (provided that Trailblazer may at any time
withdraw its request to include the Pioneer Option Shares in such offering) or
(ii) include such portion of the Pioneer Option Shares in the registration
statement as the managing underwriter advises may be included for sale
simultaneously with sales by Pioneer. The registrations effected under this
Section 6.2 shall be effected at Pioneer's expense except for underwriting
commissions and discounts and the fees and disbursements of Trailblazer's
counsel. With respect to a registration statement that has become effective
pursuant to this Agreement, if the Board of Directors of Pioneer shall
determine, in its good faith reasonable judgment, that it is necessary to
suspend the availability of such registration statement in light of the
existence of any undisclosed acquisition or financing activity or other
undisclosed material event, circumstance,
12
13
or condition involving Pioneer or any Pioneer Subsidiary, the disclosure of
which in any such case could reasonably be expected to materially disadvantage
Pioneer, and the existence of which, absent disclosure, would render such
registration statement inadequate as failing to include material information,
then Pioneer may cause the right of Trailblazer to make dispositions of Pioneer
Option Shares pursuant to such registration statement to be suspended for one or
more periods of time not exceeding 90 days in the aggregate as the Board of
Directors of Pioneer determines in its good faith reasonable judgment to be
necessary. If Pioneer determines to suspend the right of the holders pursuant to
the immediately preceding sentence, Pioneer shall deliver a notice to
Trailblazer that indicates that such registration statement is no longer usable.
Upon the receipt of any such notice, Trailblazer shall forthwith discontinue any
sale of Pioneer Option Shares pursuant to such registration statement and any
use of the prospectus contained therein. As soon as the circumstances that
resulted in the delivery of any such notice cease to exist, Pioneer shall
promptly notify Trailblazer of such cessation, whereupon Trailblazer may resume
making dispositions of Pioneer Option Shares pursuant to such registration
statement. Trailblazer shall provide all information reasonably requested by
Pioneer for inclusion in any registration statement to be filed hereunder. In
connection with any registration pursuant to this Section 6.2, Pioneer and
Trailblazer shall provide each other and any underwriter of the offering with
customary representations, warranties, covenants, indemnification, and
contribution.
6.3 DISTRIBUTION. Pioneer shall acquire the Trailblazer Option Shares
for investment purposes only and not with a view to any distribution thereof in
violation of the Securities Act, and shall not sell any Trailblazer Option
Shares purchased pursuant to this Agreement except in compliance with the
Securities Act.
ARTICLE VII
MISCELLANEOUS
7.1 EXPENSES. Except as expressly provided herein to the contrary, each
party hereto will pay all of its expenses in connection with the transactions
contemplated by this Agreement, including, without limitation, the fees and
expenses of its counsel and other advisors.
7.2 NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be given (and shall be deemed to
have been duly given upon receipt) by delivery in person, by telecopy or
facsimile, by registered or certified mail (postage prepaid, return receipt
requested), or by a nationally recognized courier service to the parties at the
following addresses (or at such other address for a party as shall be specified
by like changes of address) or, if sent by telecopy or facsimile, to the parties
at the telecopier numbers specified below:
13
14
If to Pioneer: American Retirement Corporation
000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: W.E. Sheriff
Telecopier: (000) 000-0000
With copies to: Bass, Xxxxx & Xxxx PLC
0000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: T. Xxxxxx Xxxxx
Telecopier: (000) 000-0000
If to Trailblazer: Assisted Living Concepts, Inc.
0000 XX Xxxxxxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Xxxxxxx XxXxxxx III
Telecopier: (000) 000-0000
With copies to: Xxxxxx & Xxxxxxx
000 X. Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxx
Telecopier: (000) 000-0000
7.3 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties and supersedes all prior agreements and understandings, both
written and oral, between the parties, or any of them, with respect to the
subject matter hereof.
7.4 ASSIGNMENT. This Agreement shall not be assigned by operation of
law or otherwise.
7.5 GOVERNING LAW. This Agreement, and all matters relating hereto,
shall be governed by, and construed in accordance with the laws of the State of
Tennessee applicable to contracts to be made and performed wholly within such
state without reference to the conflict of laws principles thereof, except to
the extent the laws of the State of Nevada govern the terms, rights, and
conditions of the Trailblazer Stock Option.
7.6 INJUNCTIVE RELIEF. The parties agree that in the event of a breach
of any provision of this Agreement irreparable damage would occur, the aggrieved
party would be without an adequate remedy at law, and damages would be difficult
to determine. The parties therefore agree that in the event of a breach of any
provision of this Agreement, 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 of such provision. By seeking or
obtaining such
14
15
relief, the aggrieved party will not be precluded from seeking or obtaining any
other relief to which it may be entitled at law or in equity.
7.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same document.
7.8 SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
7.9 FURTHER ASSURANCES. Each party hereto will execute and deliver all
such further documents and instruments and take all such further action as may
be necessary in order to consummate the transactions contemplated by this
Agreement.
7.10 THIRD PARTY BENEFICIARIES. Nothing in this Agreement, expressed or
implied, shall be construed to give any person other than the parties hereto any
legal or equitable right, remedy, or claim under or by reason of this Agreement
or any provision contained herein.
7.11 AMENDMENT AND MODIFICATION. This Agreement may be amended,
modified, and supplemented only by a written document executed by Pioneer and
Trailblazer.
[Signature Page Follows]
15
16
IN WITNESS WHEREOF, Pioneer and Trailblazer have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
AMERICAN RETIREMENT CORPORATION
/s/ W.E. Sheriff
-----------------------------------------
By: W.E. Sheriff
-------------------------------------
Title: Chief Executive Officer
----------------------------------
ASSISTED LIVING CONCEPTS, INC.
/s/ Xxxxxxx XxXxxxx III
-----------------------------------------
By: Xxxxxxx XxXxxxx III
-------------------------------------
Title: Chief Executive Officer
-----------------------------------
16
