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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of report (date of earliest event reported): October 29, 1997
ARV ASSISTED LIVING, INC.
(Exact name of Registrant as specified in charter)
CALIFORNIA 33-0160968
(State or other jurisdiction of 000-26980 (I.R.S. Employer
incorporation) (Commission File Number) Identification Number)
245 FISCHER AVENUE 92626
SUITE D-1 (Zip Code)
COSTA MESA, CALIFORNIA
(Address of principal executive offices)
Registrant's telephone number, including area code: (714) 751-7400
None
(Former name or former address, if changed since last report)
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ITEM 5:OTHER EVENTS
ARV Assisted Living, Inc. (the "Company") has entered into the following
agreements: (i) the Amended and Restated Stock and Note Purchase Agreement (the
"Amended Stock and Note Purchase Agreement") dated October 29, 1997, by and
among the Company, Lazard Freres Real Estate Investors L.L.C., a New York
limited liability company ("LFREI") and Prometheus Assisted Living LLC, a
Delaware limited liability company ("Prometheus"); (ii) the Amended and Restated
Stockholders Agreement (the "Amended Stockholders Agreement") dated October 29,
1997, by and among the Company, LFREI and Prometheus; (iii) the Amended and
Restated Registration Rights Agreement (the "Amended Registration Rights
Agreement") dated October 29, 1997, by and between the Company and Prometheus
and (iv) a letter agreement (the "Amended Kapson Letter Agreement") dated
October 29, 1997 by and among the Company, LFREI and Prometheus relating to
LFREI's proposed acquisition of Kapson Senior Quarters Corp. ("Kapson"). Also,
on October 29, 1997, LFREI, Prometheus and certain stockholders of the Company
entered into a Stockholders' Voting Agreement (the "Stockholders Voting
Agreement").
Amended Stock and Note Purchase Agreement. The Amended Stock and Note
Purchase Agreement amended and restated the Stock Purchase Agreement dated July
14, 1997, as amended, between the Company, LFREI and Prometheus (the "Stock
Purchase Agreement"), which provided for the purchase by Prometheus of up to 9.6
million shares of the Common Stock of the Company (the "Common Stock") at a
purchase price of $14.00 per share. On July 23, 1997, pursuant to the Stock
Purchase Agreement, Prometheus purchased 1,921,012 shares of Common Stock for an
aggregate purchase price of $26,894,168.
Under the Amended Stock and Note Purchase Agreement, Prometheus, in lieu
of purchasing the additional shares of Common Stock contemplated by the Stock
Purchase Agreement, purchased $60,000,000 aggregate principal amount of the
Company's 6.75% Convertible Subordinated Notes due 2007 (the "Company Notes").
In connection with the issuance of the Company Notes, the Company and The Chase
Manhattan Bank, N.A. entered into an indenture dated as of October 30, 1997 (the
"Indenture"), and the Company executed a $60,000,000 note in favor of Prometheus
dated as of October 30, 1997 (the "Note").
Pursuant to the provisions of the Indenture and the Note, Prometheus has
the right, exercisable at any time after 90 days following the date of issuance
of the Company Notes, to convert such Company Notes into shares of the Common
Stock at the conversion price of $17.25 per share, subject to certain
adjustments set forth in the Indenture and the Note. In the event of a Change in
Control or a Termination of Trading (as such terms are defined in the
Indenture), Prometheus (i) may elect to require the Company to repurchase the
Company Notes at a purchase price equal to 101% of the principal amount of such
Company Notes or (ii) in the case of a Change of Control not approved by a
majority of the continuing directors of the Company, may require the Company to
convert the Company Notes at a price of $16.25 per share.
The Amended Stockholders Agreement. The Amended Stockholders Agreement
amended and restated the Stockholders Agreement dated July 14, 1997, by and
among the Company, LFREI and Prometheus.
Pursuant to the Amended Stockholders Agreement, as of October 30, 1997,
the Company's Board of Directors (the "Board") was expanded to nine members, of
which three are designees of Prometheus. Until the occurrence of a Termination
Event (which shall occur if either (i) Prometheus no longer owns at least 5% of
the Common Stock on a fully diluted basis or (ii) Prometheus no longer owns at
least $25 million of Common Stock), at each annual or special meeting of
shareholders of the Company, Prometheus will have the right pursuant to the
Amended Stockholders Agreement and the Company's Bylaws to designate three
nominees to the Board if the Board is a single class or one designee per class
if the Board is divided into three classes. The Company has agreed to support
the nomination and the election of each designee of Prometheus to the Board, and
the Company will exercise all authority under applicable law to cause each
designee of Prometheus to be elected to the Board. With respect to each meeting
of shareholders of the Company at which directors are to be elected, the Company
is required to use its reasonable efforts to solicit from the shareholders of
the Company proxies in favor of each designee of Prometheus. During the period
that Prometheus has the right to designate nominees to the Board, the number of
directors on the Board may not exceed nine.
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Under the Amended Stockholders Agreement, the Company is required to use
commercially reasonable efforts to identify, select and retain a new
President/CEO of the Company by the ninetieth day after the closing under the
Amended Stock and Note Purchase Agreement. In connection with the retention of
such President/CEO, the Company is required to obtain the prior written consent
of Prometheus, which consent may not be unreasonably withheld. Upon the
retention of a new President/CEO of the Company, the Company is further required
under the Amended Stockholders Agreement to use its best efforts to cause a
director who not a designee of Prometheus to resign from the Board, and the
Company and Prometheus will use their best efforts to cause such new
President/CEO to be elected to the Board.
From and after the date of the Amended Stockholders Agreement until a
Termination Event, Prometheus will generally have the right to participate in
the Company's future equity offerings for cash by purchasing its proportionate
share of the securities offered therein.
During a standstill period of three years (which period is subject to
early termination in certain circumstances) (the "Standstill Period"),
Prometheus will be subject to certain limitations and restrictions relating to,
among other matters: (a) acquisitions of additional shares of Common Stock
(generally limiting Prometheus to beneficially owning no more than 49.9% of the
shares of Common Stock on a fully diluted basis (except that shares of Common
Stock issuable upon conversion of the Company's convertible debt or upon
exercise of options granted under management benefit plans shall not be
included), (b) acting in concert with others by becoming a member of a "group"
for purposes of Section 13(d) of the Securities Act of 1934 and the rules
promulgated thereunder, (c) soliciting, encouraging or proposing certain
significant transactions involving the Company, (d) soliciting, initiating,
encouraging or participating in the solicitation of proxies in connection with
any election contest involving the Board or initiating or proposing or
participating in or encouraging the making of, or soliciting stockholder
approval of, any stockholder proposal, (e) seeking representation on the Board
other than as contemplated by the Amended Stockholders Agreement, (f) entering
into or permitting Kapson to enter into sale/leaseback or other financing
arrangements of the type contemplated by the Amended Kapson Letter Agreement
with any company (other than the Company) the principal business of which is the
ownership, management, operation and development of assisted living facilities
in the United States, (g) requesting any waiver of the foregoing restrictions or
(h) assisting, advising, encouraging or acting in concert with any person with
respect to any of the foregoing.
During the Standstill Period, Prometheus and its affiliates may not
transfer any shares of Common Stock except (a) in transactions pursuant to Rule
144 under the Securities Act of 1933, (b) in negotiated transfers to third
parties other than certain companies engaged in the business of operating
assisted living facilities, (c) to certain Affiliates who agree to be bound by
the terms of the Amended Stockholders Agreement, (d) in accordance with the
Amended Registration Rights Agreement in a bona fide public offering and (e)
subject to certain conditions, to bona fide financial institutions for the
purpose of securing bona fide indebtedness.
In addition, during the Standstill Period, Prometheus is required to
vote all shares of Common Stock owned by it representing an aggregate ownership
in excess of 35.8% of the outstanding shares of Common Stock in one of the
following two manners: (x) in accordance with the recommendation of the Board or
(y) proportionally in accordance with the votes of the other holders of Common
Stock. Prometheus is also required to vote its shares of Common Stock in favor
of the election of all directors nominated by the nominating committee of the
Company, if any, or the Board, provided such nominations are in accordance with
certain provisions of the Amended Stockholders Agreement.
The Standstill Period will terminate prior to its stated term in the
event of certain occurrences such as a material event of default by the Company
or any subsidiary under any debt agreement or a material violation of a material
covenant under the Amended Stock and Note Purchase Agreement.
Under the terms of the Amended Stockholders Agreement, Prometheus and
certain of its affiliates, including LFREI, shall be restricted from owning any
equity interest in any public or private company engaged primarily in the
assisted living business in the United States without the consent of 75% of the
directors of the Company, excluding those nominated by Prometheus.
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The Amended Registration Rights Agreement. The Amended Registration
Rights Agreement amends and restates the Registration Rights Agreement dated
July 14, 1997 by and between the Company and Prometheus. Pursuant to the Amended
Registration Rights Agreement, the Company has granted Prometheus limited demand
registration rights to facilitate the resale of certain securities owned by it
and certain piggyback rights to sell a portion of its securities in connection
with certain offerings of securities by the Company.
Amended Kapson Letter Agreement. The Amended Kapson Letter Agreement
amended and restated the letter agreement dated September 30, 1997 by and
between LFREI and the Company. Under the terms of the Amended Kapson Letter
Agreement, Prometheus and LFREI have agreed that if LFREI consummates its
proposed acquisition of Kapson, until a Termination Event or such time as LFREI
or its affiliates own less than 10% of the stock of Kapson:
(i) until the date that Prometheus funds its purchase of $60 million
aggregate principal amount of the Company Notes, Kapson will be prohibited from
developing or acquiring any new facilities (other than those in its pipeline at
the time of the closing of the Kapson acquisition) without the written consent
of a majority of the independent non-LFREI affiliated or appointed members of
the Board;
(ii) the Company will have the first right to negotiate management,
lease and/or purchase arrangements on any new developments or acquisitions by
Kapson;
(iii) LFREI will seek in good faith to negotiate with the Company for
leasing or management agreements of all existing or currently-planned facilities
of Kapson;
(iv) LFREI will not enter into or permit Kapson to enter into any
leasing or management arrangements on Kapson's existing facilities other than
with the Company or a Kapson affiliate;
(v) LFREI will grant to the Company or the Company's shareholders, at
the Company's option, the right to acquire from LFREI shares representing up to
19.9% of the stock of Kapson at the pro rata amount of LFREI's investment in
Kapson for a period of 30 days after the later of the completion of the Kapson
Investment or the closing with respect to of the Company Investment; and
(vi) LFREI will explore a joint venture arrangement between the Company
and Kapson which would combine the corporate management of the Company and
Kapson in a separate management company jointly owned by Kapson and the Company
to achieve economies of scale.
LFREI represented to the Company in the Amended Kapson Letter Agreement
that, upon completion of the Kapson acquisition, it will have the necessary
authority to cause Kapson to enter into all of the arrangements described in
(i)-(vi) above.
The parties to the Amended Kapson Letter Agreement agreed that if
mutually agreeable arrangements regarding the matters set forth in paragraph
(iii) above are not entered into by the later of three months following the
closing of the Kapson acquisition or May 1, 1998, then the Amended Kapson
Letter Agreement will terminate.
All transactions between the Company and Kapson will require approval
from the directors of both companies who are not affiliated with LFREI.
Stockholders' Voting Agreement. Under the Stockholders' Voting
Agreement, the following stockholders of the Company have agreed to vote for the
directors nominated by (a) Prometheus and (b) the nominating committee of the
Board, if any, or the Board: John A. Booty; Booty-Jones Family Partnership;
Booty Family Trust; Karen A. Booty Charitable Remainder Trust; John A. Booty
Charitable Remainder Unitrust; David P. Collins; D&V Collins Family Limited
Partnership; Collins Family Community Property Trust; David P. Collins Annuity
Trust; and Graham P. Espley-Jones.
The Amended Stock and Note Purchase Agreement, the Amended Stockholders
Agreement, the Amended Registration Rights Agreement, the Indenture, the Note,
the Amended Kapson Letter Agreement and the Stockholders' Voting Agreement are
each Exhibits to this Current Report. Each of these documents is incorporated
herein by reference, and the descriptions herein of such agreements are
qualified in their entirety by reference to such agreements.
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ITEM 7:FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS.
(a) Exhibits
NUMBER EXHIBIT
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10.1 Amended and Restated Stock and Note Purchase Agreement
dated as of October 29, 1997, by and among the Company,
LFREI and Prometheus (incorporated by reference to Exhibit
1 to the Amendment No. 2 to Schedule 13D filed by
Prometheus and LFREI on November 7, 1997)
10.2 Amended and Restated Stockholders Agreement dated as of
October 29, 1997, by and among the Company, LFREI and
Prometheus (incorporated by reference to Exhibit 2 to the
Amendment No. 2 to Schedule 13D filed by Prometheus and
LFREI on November 7, 1997)
10.3 Amended and Restated Registration Rights Agreement dated as
of October 29, 1997, by and among the Company, LFREI and
Prometheus (incorporated by reference to Exhibit 3 to the
Amendment No. 2 to Schedule 13D filed by Prometheus and
LFREI on November 7, 1997)
10.4 Indenture dated as of October 30, 1997, by and between the
Company and Chase Manhattan Bank, N.A. (incorporated by
reference to Exhibit 5 to the Amendment No. 2 to Schedule
13D filed by Prometheus and LFREI on November 7, 1997)
10.5 Note dated as of October 30, 1997, by the Company in favor
of Prometheus (incorporated by reference to Exhibit 6 to
the Amendment No. 2 to Schedule 13D filed by Prometheus and
LFREI on November 7, 1997)
10.6 Letter Agreement dated October 29, 1997 by and among
Prometheus, LFREI and the Company (incorporated by
reference to Exhibit 7 to the Amendment No. 2 to Schedule
13D filed by Prometheus and LFREI on November 7, 1997)
10.7 Stockholders' Voting Agreement dated as of October 29,
1997, by and among Prometheus, LFREI and certain
stockholders of the Company (incorporated by reference to
Exhibit 4 to the Amendment No. 2 to Schedule 13D filed by
Prometheus and LFREI on November 7, 1997)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DATE: November 14, 1997 ARV ASSISTED LIVING, INC.
By: /s/ SHEILA MULDOON
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Sheila M. Muldoon
Vice President and General Counsel
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