UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
KAPSON SENIOR QUARTERS CORP.
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(Name of Issuer)
Common Stock, $.01 par value
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(Title of Class of Securities)
485624100
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(CUSIP Number)
Murry N. Gunty
Prometheus Senior Quarters LLC
Lazard Freres Real Estate Investors L.L.C.
30 Rockefeller Plaza, 63rd Floor
New York, NY 10020
(212) 632-6000
with a copy to:
Jonathan L. Mechanic, Esq.
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004
(212) 859-8000
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communication)
September 30, 1997
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(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on
Schedule 13G to report the acquisition which is the subject of this
Schedule 13D, and is filing this Schedule because of Rule 13d-1(b)(3)
or (4), check the following box | |.
Note. Six copies of this statement, including all exhibits,
should be filed with the Commission. See Rule 13d-1(a) for other
parties to whom copies are to be sent.
The information required in the remainder of this cover page
shall not be deemed to be "filed" for the purpose of Section 18 of the
Securities Exchange Act of 1934 ("Act") or otherwise subject to the
liabilities of that section of the Act but shall be subject to all
other provisions of the Act (however, see the Notes).
SCHEDULE 13D
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CUSIP NO. 485624100 PAGE 2 OF 11 PAGES
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1 NAME OF REPORTING PERSON PROMETHEUS SENIOR QUARTERS LLC
S.S. OR I.R.S. IDENTIFICATION NO. OF
ABOVE PERSON
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
AF
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(d)OR 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
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NUMBER OF 7 SOLE VOTING POWER
SHARES
3,849,999
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BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
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EACH 9 SOLE DISPOSITIVE POWER
REPORTING
3,849,999
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PERSON 10 SHARED DISPOSITIVE POWER
WITH
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,849,999
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
49.68%
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14 TYPE OF REPORTING PERSON*
OO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
SCHEDULE 13D
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CUSIP NO.485624100 PAGE 3 OF 11 PAGES
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1 NAME OF REPORTING PERSON LAZARD FRERES REAL ESTATE INVESTORS
S.S. OR I.R.S. IDENTIFICATION NO. OF L.L.C.
ABOVE PERSON
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2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
WC, BK
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(d)OR 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
NEW YORK
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NUMBER OF 7 SOLE VOTING POWER
SHARES
3,849,999
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BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
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EACH 9 SOLE DISPOSITIVE POWER
REPORTING
3,849,999
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PERSON 10 SHARED DISPOSITIVE POWER
WITH
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,849,999
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
49.68%
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14 TYPE OF REPORTING PERSON*
OO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
ITEM 1. SECURITY AND ISSUER.
This statement on Schedule 13D (this "Schedule 13D") relates
to the common stock, $.01 par value per share (the "Common Stock"), of
Kapson Senior Quarters Corp., a Delaware corporation (the "Company").
The Company's principal executive offices are located at 125 Froelich
Farm Blvd., Woodbury, New York, 11797.
ITEM 2. IDENTITY AND BACKGROUND.
(a), (b), (c) and (f) This Schedule 13D is filed by
Prometheus Senior Quarters LLC, a Delaware limited liability company
("Prometheus") and Lazard Freres Real Estate Investors L.L.C.
("LFREI," and together with Prometheus, the "Reporting Parties"). The
principal business offices of the Reporting Parties are at 30
Rockefeller Plaza, 63rd Floor, New York, New York, 10020.
LFREI, a New York limited liability company, is the sole
member of Prometheus. LFREI's activities consist principally of acting
as general partner of several real estate investment partnerships. LFREI
disclaims beneficial ownership of any of the shares of Common Stock
reported in this Schedule 13D. The name, business address and
principal occupation or employment of the executive officers of LFREI
are set forth on Schedule 1 hereto and incorporated by reference
herein. Each person listed on such Schedule 1 is a citizen of the
United States.
(d) and (e) During the past five years, none of the
Reporting Parties nor, to the best knowledge of the Reporting Parties,
any of the persons listed on Schedule 1 hereto (i) has been convicted
in a criminal proceeding (excluding traffic violations or similar
misdemeanors), or (ii) has been party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a
result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or
finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Pursuant to the Stockholders Agreement (the "Agreement"),
dated as of September 30, 1997, between Prometheus and Glenn Kaplan,
Wayne L. Kaplan and Evan A. Kaplan (each a "Stockholder" and,
collectively, the "Stockholders") the Stockholders granted Prometheus
or an affiliate thereof an irrevocable option (the "Option") to
purchase from the Stockholders, under certain circumstances and
subject to certain adjustments, 3,849,999 shares of Common Stock (the
"Shares") at a price per share, payable in cash, equal to $16.00. The
Option was granted by the Stockholders as a condition of and in
consideration for Prometheus entering into that certain Agreement and
Plan of Merger (the "Merger Agreement"), dated as of September 30,
1997, by and among Prometheus, Prometheus Acquisition Corp., a
Delaware corporation and a wholly owned subsidiary of Prometheus
("Sub") and the Company.
The exercise of the Option for the full number of the Shares
would require aggregate funds of $61,599,984. It is anticipated that
should Prometheus determine to exercise the Option, Prometheus would
obtain the funds for purchase from LFREI. LFREI would obtain funds
from capital subscriptions from its partners and/or from bank
financing.
A copy of the Agreement is included as Exhibit 2.1 to this
Schedule 13D and is incorporated herein by this reference. The
foregoing description of the Agreement is qualified in its entirety by
reference to such exhibit.
ITEM 4. PURPOSE OF TRANSACTION.
In connection with the execution of the Agreement,
Prometheus, Sub and the Company entered into the Merger Agreement,
pursuant to which, among other matters and subject to the terms and
conditions set forth in the Merger Agreement, Sub will merge with and
into the Company, with the Company as the surviving corporation (the
"Merger"). The Option was granted by the Stockholders as a condition
of and in consideration for Prometheus entering into the Merger
Agreement. Consummation of the Merger is subject to certain
conditions, including, among other matters: (i) receipt of the
approval of the Merger Agreement by the requisite vote of the holders
of the Common Stock and (ii) receipt of all necessary and material
governmental and third party consents and approvals.
A copy of the Merger Agreement is included as Exhibit 2.2 to
this Schedule 13D and is incorporated herein by this reference. The
foregoing description of the Merger Agreement is qualified in its
entirety by reference to such exhibit.
Except as set forth herein, the Reporting Parties do not
have any present plans or proposals that relate to or would result in
any of the actions required to be described in Item 4 of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) Prometheus is currently entitled to purchase under the
Option 3,849,999 shares of Common Stock (the "Shares"), or
approximately 49.68% of the outstanding Common Stock (based upon
7,750,000 shares of Common Stock outstanding as of September 29, 1997,
as represented by the Company in the Merger Agreement). Except as set
forth herein, neither the Reporting Parties nor, to their best
knowledge, any of the persons named on Schedule I attached hereto,
beneficially owns any shares of Common Stock.
(b) Assuming for purposes of this Item 5 that Prometheus
exercised the Option, Prometheus would have sole voting and
dispositive power with respect to the shares of Common Stock subject
to the Option.
(c) Except as set forth herein, no transactions in the
shares of Common Stock have been effected during the past sixty (60)
days by the Reporting Parties nor, to their best knowledge, any of the
persons named on Schedule I attached hereto.
(d) Assuming for purposes of this Item 5 that Prometheus
exercised the Option, no person other than the Reporting Parties would
have the right to receive or the power to direct the receipt of
dividends from, or the proceeds from the sale of, the shares of Common
Stock reported by this Schedule 13D.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
Pursuant to the Agreement, each Stockholder agrees that
during the time the Agreement is in effect, at any meeting of the
stockholders of the Company and in any action by written consent of
the stockholders of the company, each Stockholder shall (i) vote all
of the Shares in favor of the Merger, the Merger Agreement and any of
the transactions contemplated by the Merger Agreement; (ii) vote the
Shares against any action or agreement involving a sale of the Shares,
merger or sale of substantially all of the assets of the Company that
would result in a breach of any obligation of the Company under the
Merger Agreement; and (iii) vote the Shares against any action or
agreement that would reasonably be expected to impede, interfere with,
delay or attempt to discourage the Merger. Each Stockholder further
agrees that, in the event such Stockholder fails to comply with such
provisions of the Agreement, such failure will result in the
irrevocable appointment of Prometheus as the attorney and proxy of such
Stockholder pursuant to the provisions of Delaware General Corporation
Law, with full power of substitution, to vote and otherwise act with
respect to all shares of Common Stock, including the Shares owned by
such Stockholder, that such Stockholder is entitled to vote at any
meeting of stockholders of the Company or consent in lieu of such
meeting or otherwise, on the matters and in the manner specified
directly above.
A copy of the Agreement is included as Exhibit 2.1 to this
Schedule 13D and is incorporated herein by this reference. The
foregoing description of the Agreement is qualified in its entirety by
reference to such exhibit. See Items 3 and 5.
A copy of the Merger Agreement is included as Exhibit 2.2 to
this Schedule 13D and is incorporated herein by this reference. The
foregoing description of the Merger Agreement is qualified in its
entirety by reference to such exhibit. See Item 4.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
The following exhibits are filed as part of this Schedule
13D.
Exhibit 2.1 Stockholders Agreement, dated as of September
30, 1997, by and among Prometheus Senior
Quarters LLC and Glenn Kaplan, Wayne L. Kaplan
and Evan A. Kaplan.
Exhibit 2.2 Agreement and Plan of Merger, dated as of
September 30, 1997, by and among Prometheus
Senior Quarters LLC, Prometheus Acquisition
Corp. and Kapson Senior Quarters Corp.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is
true, complete and correct.
Date: October 10, 1997
PROMETHEUS SENIOR QUARTERS LLC
By: Lazard Freres Real Estate Investors
L.L.C., as sole member,
By: /s/ Robert P. Freeman
-----------------------
Name: Robert P. Freeman
Title: President
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is
true, complete and correct.
Date: October 10, 1997
LAZARD FRERES REAL ESTATE
INVESTORS L.L.C.
By: /s/ Robert P. Freeman
-----------------------
Name: Robert P. Freeman
Title: President
Schedule I
The name, business address, and present principal occupation
or employment of each of the officers of LFREI are set forth below.
Unless otherwise indicated, (i) the business address of each officer
is 30 Rockefeller Plaza, 63rd Floor, New York, New York, 10020.; (ii)
each officer is a citizen of the United States; (iii) such person does
not have any other principal occupation; (iv) in the last five years,
none has been convicted in a criminal proceeding excluding traffic
violations or similar misdemeanor; and (v) in the last five years,
none has been party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation
with respect to such laws.
Name and Present and Principal Occupation:
Arthur P. Solomon
Chairman and Managing Director of LFREI; Director
of American Apartment Communities II, Inc. and
Atlantic American Properties Trust
Anthony E. Meyer
Senior Vice President and Managing Director of
LFREI; Member of partnership committee of DP
Operating Partnership LP
Robert P. Freeman
President and Managing Director of LFREI; Director
of American Apartment Communities II, Inc.,
Commonwealth Atlantic Properties Inc. and Atlantic
American Properties Trust
Klaus P. Kretschmann
Senior Vice President of LFREI; Director of
American Apartment Communities II, Inc.
Murry N. Gunty
Vice President of LFREI; Director of Atlantic
American Properties Trust
Thomas M. Mulroy
Vice President of LFREI
Lorenzo L. Lorenzotti
Secretary of LFREI
EXECUTION COPY
STOCKHOLDERS AGREEMENT
Stockholders Agreement (this "Agreement"), dated as of September
30, 1997, between Prometheus Senior Quarters LLC, a Delaware limited
liability company or an affiliate thereof ("Investor"), and Glenn
Kaplan, Wayne L. Kaplan and Evan A. Kaplan (each a "Stockholder" and,
collectively, the "Stockholders")
WHEREAS, each Stockholder owns (both beneficially and of record)
the number of shares of Common Stock ("Common Stock") of Kapson Senior
Quarters Corp., a Delaware Corporation (the "Company") specified in
Exhibit A hereto (the "Shares");
WHEREAS, concurrently herewith, Investor and a wholly owned
subsidiary of Investor ("Sub") are entering into an agreement and plan
of merger with the Company, dated as of September 30, 1997 (the
"Merger Agreement"), pursuant to which Sub will merger with and into
the Company (the "Merger"); and
WHEREAS, as a condition to the willingness of Investor to enter
into the Merger Agreement, Investor has required that the Stockholders
agree, and in order to induce Investor to enter into the Merger
Agreement, the Stockholders have agreed, among other things, (i) to
grant Investor the option to purchase the Shares, (ii) to appoint
Investor as Stockholders' proxy to vote the Shares, and (iii) with
respect to certain questions put to stockholders of the Company for a
vote, to vote the Shares, in each case, in accordance with the terms
and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein and other good and valuable consideration,
the adequacy of which is hereby acknowledged, and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Stock Option.
1.1 Grant of Stock Option. The Stockholders hereby grant to
Investor an irrevocable option (the "Stock Option") to purchase all,
but not less than all of the Shares at such time as Investor may
exercise the Stock Option at a per share purchase price equal to
$16.00 per share of Common Stock.
1.2 Exercise of Stock Option. (a) The Stock Option may be
exercised by Investor at any time prior to the termination of this
Agreement prior to the earlier to occur (the "Expiration Date") of (i)
one year after the date hereof, (ii) if the Merger Agreement is
terminated by Investor, or the Investor provides written or oral
notice to the Company that it elects not to close the transactions
contemplated by the Merger Agreement, as a result of the failure of
any of the conditions specified in Section 9.3 and at the time of such
termination or notice there shall not exist any Alternative Proposal
(as such term is defined in the Merger Agreement) at $15.00 or more
per share of Common Stock for 75% or more of the outstanding Common
Stock of the Company, the termination of the Merger Agreement and
(iii) if the Merger Agreement is terminated by Investor, or the
Investor provides written or oral notice to the Company that it elects
not to close the transactions contemplated by the Merger Agreements,
as a result of the failure of any of the conditions specified in
Section 9.3 and at the time of such termination or notice there shall
exist any Alternative Proposal at $15.00 or more per share of Common
Stock for 75% or more of the outstanding Common Stock of the Company,
the sixth monthly
2
anniversary of the termination of the Merger Agreement; provided,
however, that if a tender offer shall be commenced by any party or
entity other than investor and its affiliates with respect to the
Common Stock, then, notwithstanding any provision of this Agreement,
the Stockholders may tender all or any of the Shares into the tender
offer on or before the time 48 hours before the expiration of the
offer. The Stockholders shall give prompt notice to Investors of any
such tender by Stockholders, and each of the Stockholders agree to
give notice of revocation of the tender promptly after actual receipt
by such Stockholders of an irrevocable Exercise Notice from Investor;
provided however, that if the Investor provides an Exercise Notice as
contemplated by clause (a) above, the Investor shall not be obligated
to purchase the shares at the applicable Stock Option Closing if the
Merger Agreement has not been terminated in accordance with its terms
and if the applicable Tender Offer is withdrawn without being
consummated prior to the applicable Stock Option Closing.
(b) In the event Investor wishes to exercise the Stock Option,
Investor shall send a written notice (an "Exercise Notice") to the
Stockholders specifying the date, which shall be a Business Day not
more than ten days, 30 days in the case of an Exercise Notice
delivered as contemplated by clause (a) above, after the date of the
Exercise Notice and a place for the closing of such purchase (a "Stock
Option Closing").
(c) Upon receipt of an Exercise Notice, the Stockholders shall be
jointly and severally obligated to deliver to Investor a certificate
or certificates representing the number of Shares specified in such
Exercise Notice, in accordance with the terms of this Agreement, on
the date specified in such Exercise Notice. The date specified in such
Exercise Notice may be as early as two Business Days after the date of
such Exercise Notice.
3
(d) For the purposes of this Agreement, the term "Business Day"
shall mean a day on which banks are not required or authorized to be
closed in the City of New York.
1.3 Condition to Delivery of the Shares. The obligation of
Stockholders to deliver the Shares upon any exercise of a Stock Option
is subject to the following condition: There shall be no preliminary
or permanent injunction or other order by any court of competent
jurisdiction restricting, preventing or prohibiting such exercise of
such Stock Option or the delivery of the Shares subject to such Stock
Option in respect of such exercise.
1.4 Stock Option Closing. At the Stock Option Closing, the
Stockholders will deliver to Investor a certificate or certificates
evidencing all of the Shares, each such certificate being duly
endorsed in blank and accompanied by such stock powers and such other
documents as may be necessary in Investor's judgment to transfer
record ownership of the Shares into Investor's name on the stock
transfer books of the Company and Investor will purchase the delivered
Shares at a purchase price equal to $16.00 per share of Common Stock.
All payments made by Investor to Stockholders pursuant to this Section
1.4 shall be made by wire transfer of immediately available funds to
an account designated by the Stockholders or by certified bank check
payable to the Stockholders, in an amount equal to the sum of the
product of (a) $16.00 and (b) the total number of shares of Common
Stock delivered at the Stock Option Closing.
1.5 Adjustments Upon Changes in Capitalization. In the event of
any change in the number of issued and outstanding shares of Common
Stock by reason of any stock dividend, subdivision, merger,
recapitalization, combination, conversion or exchange of shares, or
any other change in the corporate or capital structure of the Company
(including, without limitation, the declaration or payment of an
extraordinary dividend of cash or securities) which
4
would have the effect of diluting or otherwise adversely affecting
Investor's rights and privileges under this Agreement, the number and
kind of the Shares and the consideration payable in respect of the
Shares shall be appropriately and equitably adjusted to restore to
Investor its rights and privileges under this Agreement. Without
limiting the scope of the foregoing, in any such event, at the option
of Investor, the Stock Option shall represent the right to purchase,
in addition to the number and kind of Shares which Investor would be
entitled to purchase pursuant to the immediately preceding sentence,
whatever securities, cash or other property the Shares subject to the
Stock Option shall have been converted into or otherwise exchanged
for, together with any securities, cash or other property which shall
have been distributed with respect to such Shares.
2. Representations and Warranties of the Stockholders. The
Stockholders hereby jointly and severally represent and warrant to
Investor as follows:
2.1 Title to the Shares. Each of the Stockholders is the owner
(both beneficially and of record) of the number of shares of Common
Stock specified opposite such Stockholder's name on Exhibit A hereto
and the Stockholders do not have any other rights of any nature to
acquire any additional shares of Common Stock or any other shares of
capital stock of the Company. Each of the Stockholders owns that
number of shares of Common Stock specified opposite such Stockholder's
name on Exhibit A hereto free and clear of all security interests,
liens, claims, pledges, options, rights of first refusal, agreements,
limitations on Stockholder's voting rights, charges and other
encumbrances of any nature whatsoever, and, except as provided in this
Agreement, no Stockholder has appointed or granted any proxy, which
appointment or grant is still effective, with respect to any of the
Shares. Upon the exercise of the Stock Option and the delivery to
Investor by the Stockholders of a certificate or certificates
evidencing the
5
Shares, Investor will receive good, valid and marketable title to the
Shares, free and clear of all security interests, liens, claims,
pledges, options, rights of first refusal, agreements, limitations on
Investor's voting rights, charges and other encumbrances of any nature
whatsoever.
2.2 Authority Relative to This Agreement. Each Stockholder has
all necessary power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by each Stockholder and, assuming the
due authorization, execution and delivery by Investor, constitutes a
legal, valid and binding obligation of each Stockholder, enforceable
against each Stockholder in accordance with its terms.
2.3 No Conflict. The execution and delivery of this Agreement by
each Stockholder does not, and the performance of this Agreement each
Stockholder will not, conflict with, violate or result in any breach
of or constitute a default under (or an event which with notice or
lapse of time or both would become a default under) any agreement,
judgment, injunction, order, law, regulation or arrangement to which
any Stockholder is a party or is bound, except in each case to the
extent any such breach or default, whether taken singly or in the
aggregate, would not have a material adverse effect on the ability of
the Stockholders to vote the Shares, perform their respective
obligations hereunder, and consummate the transactions contemplated
hereby.
2.4 Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated hereby based upon arrangements made
by or on behalf of the Stockholders.
6
3. Representations and Warranties of Investor. Investor hereby
represents and warrants to the Stockholders as follows:
3.1 Authority Relative to This Agreement. Investor 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 Investor and the consummation by Investor of the
transactions contemplated hereby have been duly and validly authorized
by all necessary corporate action on the part of Investor. This
Agreement has been duly and validly executed and delivered by Investor
and, assuming the due authorization, execution and delivery by the
Stockholders, constitutes a legal, valid and binding obligation of
Investor, enforceable against Investor in accordance with its terms.
3.2 Investment Intent. Investor hereby represents that any
securities it purchases pursuant to this Agreement are being purchased
for its own account for investment and not with a view to, or for sale
in connection with, any public distribution thereof.
4. Covenants of Stockholder.
4.1 No Disposition or Encumbrance of Shares; No Conversion of
Shares; Acquisition of Additional Shares; No Exercise of Warrants. (a)
Each Stockholder hereby covenants and agrees that, except as
contemplated by this Agreement, each Stockholder shall not, and shall
not offer or agree to, sell, transfer, tender, assign, hypothecate or
otherwise dispose of, or create or permit to exist any security
interest, lien, claim, pledge, option, right of first refusal,
agreement, limitation on such Stockholder's voting rights, charge or
other encumbrance of any
7
nature whatsoever with respect to the Shares now owned or that may
hereafter be acquired by such Stockholder.
(b) Each Stockholder hereby covenants and agrees that any
additional shares of capital stock of the Company acquired by each
Stockholder after the date hereof shall be subject to this Agreement
and shall, for all purposes of this Agreement, be deemed to be
"Shares".
4.2 No Solicitation of Transactions. Each Stockholder shall not,
directly or indirectly, through any agent or representative or
otherwise, solicit, initiate or encourage the submission of any
proposal or offer from any individual, corporation, partnership,
limited partnership, syndicate, person (including, without limitation,
a "person" as defined in section 13(d)(3) of the Securities Exchange
Act of 1934, as amended), trust, association or entity or government,
political subdivision, agency or instrumentality of a government
(collectively, other than Investor, a "Person") relating to (i) any
acquisition or purchase of all or any of the Shares or (ii) any
acquisition or purchase of all or (other than in the ordinary course
of business) any portion of the assets of, or any equity interest in,
the Company or any business combination, whether by merger,
consolidation, or otherwise, with the Company or participate in any
negotiations regarding, or furnish to any Person any information with
respect to, or otherwise cooperate in any way with, or assist or
participate in or facilitate or encourage, any effort or attempt by
any Person to do or seek any of the foregoing. Each Stockholder hereby
represents that neither it nor its agents or representatives is now
engaged in any discussions or negotiations with any Person with
respect to any of the foregoing.
8
4.3 Compliance of Stockholder with This Agreement. Each
Stockholder shall take all actions and forbear from all actions, in
each case, necessary in order that (a) all of such Stockholder's
representations and warranties hereunder are true and correct and (b)
such Stockholder fulfills all of its obligations hereunder.
5. Voting Agreement; Proxy of Stockholder.
5.1 Voting Agreement. Each Stockholder hereby agrees that, during
the time this Agreement is in effect, at any meeting of the
stockholders of the Company, however called, and in any action by
written consent of the stockholders of the Company, each Stockholder
shall, to the extent applicable, (a) vote (or execute a consent in
respect of) all of the Shares in favor of the Merger, the Merger
Agreement (as amended from time to time) and any of the transactions
contemplated by the Merger Agreement; (b) vote (or execute a consent
in respect of) the Shares against any action or agreement involving a
sale of the Shares, merger, or sale of substantially all of the assets
of the Company that would result in a breach in any material respect
of any obligation of the Company under the Merger Agreement; and (c)
vote (or execute a consent in respect of) the Shares against any
action or agreement that would reasonably be expected to impede,
interfere with, delay or attempt to discourage the Merger.
5.2 Irrevocable Proxy. Each Stockholder agrees that, in the event
such Stockholder shall fail to comply with the provisions of Section
5.1 hereof as determined by Investor in its sole discretion, such
failure shall result, without any further action by such Stockholder,
in the irrevocable appointment of Investor as the attorney and proxy
of such Stockholder pursuant to the provisions of Delaware General
Corporation Law, with full power of substitution, to vote, and
otherwise act (by written consent or otherwise) with respect to all
9
shares of Common Stock, including the Shares owned by such
Stockholder, that such Stockholder is entitled to vote at any meeting
of stockholders of the Company (whether annual or special and whether
or not an adjourned or postponed meeting) or consent in lieu of any
such meeting or otherwise, on the matters and in the manner specified
in Section 5.1 hereof. THIS PROXY AND POWER OF ATTORNEY IS IRREVOCABLE
AND COUPLED WITH AN INTEREST. Each Stockholder hereby revokes,
effective upon the execution and delivery of the Merger Agreement by
the parties thereto, all other proxies and powers of attorney with
respect to the Shares that such Stockholder may have heretofore
appointed or granted, and no subsequent proxy or power of attorney
(except in furtherance of such Stockholder's obligations under Section
5.1 hereof) shall be given or written consent executed (and if given
or executed, shall not be effective) by such Stockholder with respect
thereto so long as this Agreement remains in effect.
6. Termination. This Agreement shall terminate on the date (the
"Termination Date") that is the earliest of (i) the date upon which
the Merger is consummated, (ii) one year after the date hereof, (iii)
the Expiration Date, or (iv) a breach by Investor and/or Sub of its
obligations to fund and close the Merger.
7. Election. Each Shareholder agrees that it will elect, at a
minimum, to retain shares in the Surviving Corporation (as such term
is defined in the Merger Agreement) with respect to that number of
shares equal to 9.740% of the shares owned by him.
8. Miscellaneous.
10
8.1 Expenses. Except as otherwise provided herein, all costs and
expenses incurred in connection with the transactions contemplated by
this Agreement shall be paid by the party incurring such expenses.
8.2 Further Assurances. Each Stockholder and Investor shall
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 hereby.
8.3 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this
Agreement were not performed in accordance with the terms hereof and
that the parties shall be entitled to specific performance of the
terms hereof, in addition to any other remedy at law or in equity.
8.4 Entire Agreement. This Agreement constitutes the entire
agreement between Investor and the Stockholders with respect to the
subject matter hereof and supersedes all prior agreements and
understandings, both written and oral, between Investor and the
Stockholders with respect to the subject matter hereof.
8.5 Assignment. This Agreement shall not be assigned by operation
of law or otherwise, except that Investor may assign all or any of its
rights and obligations hereunder to any affiliate of Investor,
provided that no such assignment shall relieve Investor of its
obligations hereunder if such assignee does not perform such
obligations.
8.6 Parties in Interest. This Agreement shall be binding upon,
inure solely to the benefit of, and be enforceable by, the parties
hereto and their successors and permitted assigns. Nothing in this
Agreement, express or implied, is intended to or shall confer upon any
11
other person any right, benefit or remedy of any nature whatsoever
under or by reason of this Agreement.
8.7 Amendment; Waiver. This Agreement may not be amended except
by an instrument in writing signed by the parties hereto. Any party
hereto may (a) extend the time for the performance of any obligation
or other act of any other party hereto, (b) waive any inaccuracy in
the representations and warranties contained herein or in any document
delivered pursuant hereto and (c) waive compliance with any agreement
or condition contained herein. Any such extension or waiver shall be
valid if set forth in an instrument in writing signed by the party or
parties to be bound thereby.
8.8 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any
rule of law, or public policy, all other conditions and provisions of
this Agreement shall nevertheless remain in full force and effect so
long as the economic or legal substance of this Agreement is not
affected in any manner materially adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable
manner in order that the terms of this Agreement remain as originally
contemplated to the fullest extent possible.
8.9 Notices. Except as otherwise provided herein, all notices,
requests, claims, demands and other communications hereunder shall be
in writing and shall be given (and shall be deemed to have been duly
given upon receipt) by delivery in person, by cable, facsimile
transmission, telegram or telex or by registered or certified mail
(postage prepaid, return receipt
12
requested) to the respective parties at the following addresses (or at
such other address for a party as shall be specified in a notice given
in accordance with this Section 8.9):
if to Investor:
Prometheus Senior Quarters LLC
c/o Lazard Freres Real Estate Investors L.L.C.
30 Rockefeller Plaza, 63rd Floor
New York, New York 10020
Attention: Robert P. Freeman and Murry N. Gunty
Facsimile: (212) 332-5980
Telephone: (212) 632-6026
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004-1980
Attention: Jonathan L. Mechanic, Esq.
Facsimile: (212) 859-4000
Telephone: (212) 859-8000
13
if to the Stockholders:
Glenn Kaplan
Kapson Senior Quarters Corp.
125 Froelich Farm Blvd.
Woodbury, New York 11797
Facsimile: (516) 921-8367
Telephone: (516) 921-8900
with a copy to:
Proskauer Rose LLP
1585 Broadway
New York, New York 10036
Attention: Arnold J. Levine, Esq.
Facsimile: (212) 969-2900
Telephone: (212) 969-3000
8.10 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware
applicable to contracts executed in and to be performed in Delaware
without regard to any principles of choice of law or conflicts of law
of such State. All actions and proceedings arising out of or relating
to this Agreement shall be heard and determined in any state or
federal court sitting in Delaware.
8.11 Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Agreement.
8.12 Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and
by the different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original
but all of which taken together shall constitute one and the same
agreement.
14
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed and delivered as of the date first
written above.
By: /s/ Glenn Kaplan
-------------------------------
Glenn Kaplan
By: /s/ Wayne L. Kaplan
-------------------------------
Wayne L. Kaplan
By: /s/ Evan A. Kaplan
-------------------------------
Evan A. Kaplan
PROMETHEUS SENIOR QUARTERS LLC
By: LAZARD FRERES REAL ESTATE INVESTORS
L.L.C.
By: /s/ Robert P. Freeman
-------------------------------
Robert P. Freeman
President
Lazard Freres Real Estate Investors LLC ("LFRE") hereby
irrevocably, unconditionally and completely guarantees and ensures the
full and timely payment and performance of all of Investor's and Sub's
obligations and liabilities under this Agreement and any agreements,
documents or instruments executed or to be executed by either of them
in connection herewith. The obligations and liabilities under this
guaranty constitute primary obligations and liabilities of LFRE and
shall not be affected by the absence of an action to enforce
obligations of, or any proceedings first against, Investor or Sub, any
defense, offset, claim, or any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of LFRE
as a surety or guarantor. LFRE represents and warrants that it is the
sole member of Investor.
LAZARD FRERES REAL ESTATE
INVESTORS LLC
By: /s/ Robert P. Freeman
-------------------------------
Name: Robert P. Freeman
Title: President
Execution Copy
AGREEMENT AND PLAN
OF MERGER
DATED AS OF
September 30, 1997
AMONG
PROMETHEUS SENIOR QUARTERS LLC,
PROMETHEUS ACQUISITION CORP.
AND
KAPSON SENIOR QUARTERS CORP.
TABLE OF CONTENTS
Page
- ----
AGREEMENT AND PLAN OF MERGER.................................................1
ARTICLE I THE MERGER.................................................2
Section 1.1 The Merger...........................................2
Section 1.2 Effective Time of the Merger.........................2
Section 1.3 Company Actions......................................2
ARTICLE II THE SURVIVING CORPORATION..................................3
Section 2.1 Certificate of Incorporation.........................3
Section 2.2 Bylaws...............................................3
Section 2.3 Board of Directors and Officers......................3
Section 2.4 Effects of Merger....................................3
ARTICLE III CONVERSION OF SHARES.................................3
Section 3.1 Retained Share Elections.............................3
Section 3.2 Conversion of Shares.................................5
Section 3.3 Proration............................................6
Section 3.4 Conversion of Common Stock of Sub....................7
Section 3.5 Exchange of Certificates.............................7
Section 3.6 Stock Options.......................................10
Section 3.7 Stockholders' Meetings..............................10
Section 3.8 Closing.............................................10
Section 3.9 Transfer Taxes......................................10
Section 3.10 Form of Transaction.................................11
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF INVESTOR...............................................11
Section 4.1 Organization, Standing and Power....................11
Section 4.2 Authority; NonContravention.........................11
Section 4.3 Financing...........................................12
Section 4.4 Brokers.............................................12
ARTICLE V REPRESENTATIONS AND WARRANTIES OF
THE COMPANY...............................................13
Section 5.1 Organization, Standing and Power....................13
Section 5.2 Capital Structure...................................13
Section 5.3 Subsidiaries........................................14
-i-
Section 5.4 Authority; Non-Contravention........................14
Section 5.5 SEC Documents.......................................16
Section 5.6 Absence of Certain Events...........................17
Section 5.7 Litigation..........................................17
Section 5.8 Compliance with Law.................................18
Section 5.9 Employee Plans......................................21
Section 5.10 Employment Relations and Agreement..................23
Section 5.11 Contracts...........................................24
Section 5.12 Environmental Laws and Regulations..................26
Section 5.13 Property and Leases.................................28
Section 5.14 Patents, Trademarks, Copyrights.....................31
Section 5.15 Insurance...........................................32
Section 5.16 Takeover Statutes...................................32
Section 5.17 Taxes...............................................32
Section 5.18 No Change of Control................................32
Section 5.19 Brokers.............................................33
Section 5.20 Disclosures.........................................33
ARTICLE VI REPRESENTATIONS AND WARRANTIES
REGARDING SUB.............................................33
Section 6.1 Organization and Standing...........................33
Section 6.2 Authority; NonContravention.........................34
ARTICLE VII COVENANTS RELATING TO CONDUCT
OF BUSINESS...............................................34
Section 7.1 Conduct of Business by the Company Pending the
Merger..............................................34
Section 7.2 Conduct of Business of Sub Pending the Merger.......38
ARTICLE VIII ADDITIONAL AGREEMENTS.....................................38
Section 8.1 Registration Statement/Proxy Statement..............38
Section 8.2 Compliance with the Securities Act..................39
Section 8.3 Indemnification.....................................40
Section 8.4 Additional Agreements...............................41
Section 8.5 No Shop.............................................41
Section 8.6 Advice of Changes; SEC Filings......................42
Section 8.7 Registration Rights Agreement.......................42
Section 8.8 Directors...........................................43
-ii-
ARTICLE IX CONDITIONS PRECEDENT......................................43
Section 9.2 Conditions to Obligation of the Company to Effect
the Merger..........................................43
Section 9.3 Conditions to Obligations of Investor and Sub
to Effect the Merger................................44
ARTICLE X TERMINATION, AMENDMENT AND WAIVER.........................45
Section 10.1 Termination by Mutual Consent.......................45
Section 10.2 Termination by Either Investor or the Company.......45
Section 10.3 Termination by Investor.............................45
Section 10.4 Termination by the Company..........................46
ARTICLE XI MISCELLANEOUS.............................................47
Section 11.1 Non-Survival of Representations, Warranties
and Agreements......................................48
Section 11.3 Fees and Expenses...................................49
Section 11.4 Publicity...........................................49
Section 11.5 Specific Performance................................49
Section 11.6 Assignment; Binding Effect..........................49
Section 11.7 Entire Agreement....................................50
Section 11.8 Amendment...........................................50
Section 11.9 Governing Law.......................................50
Section 11.10 Counterparts........................................50
Section 11.11 Headings and Table of Contents......................50
Section 11.12 Interpretation......................................50
Section 11.13 Waivers.............................................51
Section 11.14 Incorporation of Exhibits...........................51
Section 11.15 Severability........................................51
Section 11.16 Subsidiaries........................................51
Schedules
Schedule 2.3 - Directors
Schedule 9.3(c) - Consents and Approvals
Schedule 9.3(f) - Certain Matters
Exhibits
Exhibit A Current Operating Plan and Budget of Company
and its Subsidiaries
Exhibit B Form of Affiliate Letter
-iii-
Defined Terms Index
Affiliate......................................................Section 8.2
Affiliate Letter...............................................Section 8.2
Agreement......................................................Preamble
Alternative Proposal...........................................Section 8.5
Blue Sky Laws..................................................Section 4.2
Budgets........................................................Section 9.3
Capital Expenditure Budget and Schedule........................Section 5.14
Cash Merger Price..............................................Section 3.2
Closing........................................................Section 3.8
Code...........................................................Section 5.10
Common Stock...................................................Section 3.2
Common Stock Cash Merger Price.................................Section 3.2
Company........................................................Preamble
Company Benefit Plan...........................................Section 5.10
Company Disclosure Letter......................................Section 5.2
Company Properties.............................................Section 5.14
Company Property...............................................Section 5.14
Company Reports................................................Section 5.5
Company SEC Documents..........................................Section 5.5
Contracts......................................................Section 5.12
Development Budget and Schedule................................Section 5.14
Development Properties.........................................Section 5.14
DGCL...........................................................Recitals
Dissenting Shares..............................................Section 3.2
Effective Time.................................................Section 1.2
Elected Cash Share.............................................Section 3.1
Elected Retained Share.........................................Section 3.1
Elected Retained Share Number..................................Section 3.3
Election Date..................................................Section 3.1
Election Form..................................................Section 3.1
Employment Agreements..........................................Section 5.11
Environmental Claim............................................Section 5.13
Environmental Laws.............................................Section 5.13
ERISA..........................................................Section 5.10
Exchange Act...................................................Section 4.2
Exchange Fund..................................................Section 3.5
Exchangeable Preferred.........................................Section 3.2
Exchangeable Preferred Cash Merger Price.......................Section 3.2
-iv-
Excluded Shares................................................Section 3.2
Financial Advisor..............................................Section 1.3
Form S-4.......................................................Section 8.1
Governmental Entity............................................Section 4.2
Hazardous Materials............................................Section 5.13
HSR Act........................................................Section 4.2
Indemnified Parties............................................Section 8.3
Investor.......................................................Preamble
Investor Share Amount .........................................Section 3.4
Investor Shares................................................Section 3.4
Investor Share Number..........................................Section 3.4
Leased Property................................................Section 5.14
Liens..........................................................Section 5.14
Maximum Election Amount........................................Section 3.1
Material Adverse Change........................................Section 4.2
Material Adverse Effect........................................Section 4.2
Merger.........................................................Recitals
Minimum Retained Share Number..................................Section 3.3
Multiemployer Plan.............................................Section 5.10
Non-Elected Retained Share.....................................Section 3.3
Notice of Guaranteed Delivery..................................Section 3.1
Option.........................................................Section 3.6
Options........................................................Section 3.6
Owned Property.................................................Section 5.14
Investor Expenses..............................................Section 10.5
Paying Agent...................................................Section 3.1
PCBs...........................................................Section 5.13
Permits........................................................Section 5.9
Permitted Liens................................................Section 5.14
Plan...........................................................Section 5.10
Projects.......................................................Section 5.14
Property.......................................................Section 5.13
Proxy Statement/Prospectus.....................................Section 8.1
Registration Rights Agreement..................................Section 8.7
Retained Share.................................................Section 3.2
Retained Surviving Corporation Shares..........................Section 3.2
SEC............................................................Section 8.1
Section 9.3 Agreements.........................................Section 9.3
Securities Act.................................................Section 4.2
Shares.........................................................Section 3.2
Salomon Brothers Book..........................................Section 9.3
-v-
Special Meeting................................................Section 3.7
Stock Plan.....................................................Section 5.2
Stockholders Agreement.........................................Recitals
Sub............................................................Preamble
Sub Share......................................................Section 3.4
Surviving Corporation..........................................Section 1.1
Tax; Taxes; Taxable............................................Section 5.18
Tax Return.....................................................Section 5.18
Termination Fee................................................Section 10.5
Title Policies.................................................Section 5.14
Transfer Taxes.................................................Section 3.9
UST............................................................Section 5.13
-vi-
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
September 30, 1997, by and among Prometheus Senior Quarters LLC, a Delaware
limited liability company or an affiliate thereof ("Investor"); Prometheus
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Investor ("Sub"); and Kapson Senior Quarters Corp., a Delaware corporation
(the
"Company").
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company has determined
that it is fair and in the best interests of its stockholders for Sub
to merge with and into the Company (the "Merger") pursuant to Section
251 of the Delaware General Corporation Law ("DGCL"), upon the terms
and subject to the conditions set forth herein;
WHEREAS, the Board of Directors of the Company has adopted
resolutions approving the Merger, this Agreement and the transactions
to which the Company is a party contemplated hereby, and has agreed,
upon the terms and subject to the conditions set forth herein, to
recommend that the Company's stockholders approve the Merger and this
Agreement;
WHEREAS, the parties have agreed (subject to the terms and
conditions of this Agreement), as soon as practicable following the
approval by the stockholders of the Company, to effect the Merger, as
more fully described herein;
WHEREAS, it is intended that the Merger be treated as a
recapitalization of the Company for financial reporting purposes;
WHEREAS, concurrently with the execution of this Agreement and as
an inducement to Investor to enter into this Agreement, Investor and
certain stockholders of the Company are entering into a Stockholders
Agreement (the "Stockholders Agreement") pursuant to which such
stockholders have, among other matters, granted to Investor an
irrevocable proxy to vote their Shares (as hereinafter defined) in
favor of the Merger and all other actions necessary to consummate the
Merger, and granted to Investor an option to purchase the Shares (as
hereinafter defined) owned by such stockholder, in each case, upon the
terms and subject to the conditions specified in the Stockholders
Agreement; and
WHEREAS, Investor and the Company desire to make certain
representations, warranties, covenants and agreements in connection
with the Merger and also to prescribe various conditions to the
Merger.
NOW, THEREFORE, in consideration of the foregoing premises and
the representations, warranties and agreements contained herein the
parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger.
Upon the terms and subject to the conditions hereof, on the
Effective Time (as hereinafter defined), Sub shall be merged with and
into the Company and the separate existence of Sub shall thereupon
cease, and the Company, as the corporation surviving the Merger (the
"Surviving Corporation"), shall by virtue of the Merger continue its
corporate existence under the laws of the State of Delaware.
Section 1.2 Effective Time of the Merger.
The Merger shall become effective at the date and time (the
"Effective Time") when a Certificate of Merger meeting the
requirements of Section 251 of the DGCL shall have been duly executed
and filed in accordance with such Section, or at such other time as is
specified in the Certificate of Merger in accordance with the DGCL,
which Certificate of Merger shall be filed as soon as practicable
following fulfillment of the conditions set forth in Article IX
hereof.
Section 1.3 Company Actions.
The Company hereby represents and warrants that (a) its Board of
Directors (at a meeting duly called and held), has (i) determined that
the Merger (upon the terms and subject to the conditions of this
Agreement) is fair to and in the best interests of the stockholders of
the Company, (ii) resolved to approve this Agreement, the Merger and
the Stockholders Agreement, and to recommend approval of the Merger
and this Agreement by the stockholders of the Company, and (iii) taken
all necessary steps to render Section 203 of the DGCL inapplicable to
the Merger and the transactions contemplated by this Agreement and the
Stockholders Agreement, and (b) Salomon Brothers Inc (the "Financial
Advisor") has advised the Company's Board of Directors
-2-
that, in its opinion, the consideration to be received and retained by
the Company's stockholders in the Merger is fair, from a financial
point of view, to such stockholders.
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 Certificate of Incorporation.
The Certificate of Incorporation of the Company as in effect at
the Effective Time shall be the Certificate of Incorporation of the
Surviving Corporation, until further amended in accordance with its
terms and as provided by law and this Agreement.
Section 2.2 By-laws.
The By-laws of Sub as in effect at the Effective Time shall be
the By-laws of the Surviving Corporation, and thereafter may be
amended in accordance with their terms and as provided by law and this
Agreement.
Section 2.3 Board of Directors and Officers.
The persons specified in Schedule 2.3 shall be the directors of
the Surviving Corporation and the officers of the Company immediately
prior to the Effective Time shall be the officers of the Surviving
Corporation, in each case until their respective successors are duly
elected and qualified.
Section 2.4 Effects of Merger.
The Merger shall have the effects set forth in Section 259 of the
DGCL.
ARTICLE III
CONVERSION OF SHARES
Section 3.1 Retained Share Elections. (a) Each person who is a
record holder of Shares at 5:00 p.m., New York City time, on the date
of the Special Meeting (as hereinafter defined) or the date of any
meeting of stockholders held pursuant to any adjournment of the
Special Meeting (the "Election Date") will be entitled, with respect
to no more than 9.740% of his or its Shares (the "Maximum Election
Amount"), to make an election to retain Shares as set forth in, and
subject to the provisions of this Section 3.1.
-3-
The Bank of New York or such other entity mutually agreeable to
Investor and the Company shall be the paying agent for the purpose of
this Agreement (the "Paying Agent").
(b) The Company shall prepare and mail a form of election, which
form shall be subject to the approval of Investor (the "Election
Form"), with the Proxy Statement/Prospectus (as hereinafter defined)
to the record holders of Shares as of the record date for the Special
Meeting, which Election Form shall be used by each record holder of
Shares who wishes to elect to retain Shares up to the Maximum Election
Amount in lieu of such Shares being converted into the right to
receive the Cash Merger Price (as hereinafter defined) for each such
Share. The Company will use commercially reasonable efforts to make
the Election Form and the Proxy Statement/Prospectus available to all
persons who become holders of Shares during the period between such
record date and the Election Date. Any such holder's election to
retain Shares shall have been validly made only if the Paying Agent
shall have received at its designated office, on or prior to the
Election Date, an Election Form properly completed and signed in
accordance with such rules as the Paying Agent may establish pursuant
to Section 3.1(e), and accompanied by either (i) certificates for the
Shares to which such Election Form relates, duly endorsed in blank or
otherwise in form acceptable for transfer on the books of the Company
or (ii) an appropriate guarantee of delivery of such certificates as
set forth in such Election Form from a firm which is a member of a
registered national securities exchange or of the National Association
of Securities Dealers, Inc., or a commercial bank or trust company
having an office or correspondent in the United States (a "Notice of
Guaranteed Delivery"). Notwithstanding anything to the contrary
contained herein, any Election Form accompanied by a Notice of
Guaranteed Delivery shall be deemed not validly made if the
certificate or certificates are in fact delivered to the Paying Agent
after three (3) Nasdaq Stock Market trading days after the date of
execution of such guarantee of delivery.
(c) Any Election Form may be revoked by the stockholder
submitting such Election Form if a written notice of revocation is
received by the Paying Agent prior to 5:00 p.m., New York City time,
on the Election Date. In addition, all Election Forms shall be revoked
automatically if this Agreement is terminated pursuant to Article X.
If an Election Form is revoked, the certificate or certificates (or
guarantees of delivery, as appropriate) for the Shares to which such
Election Form relates shall be returned by the Paying Agent to the
stockholder submitting the same to the Paying Agent.
(d) For purposes of this Agreement, (i) "Elected Retained Share"
shall mean a Share in respect of which an election to retain such
Share is validly made and not validly revoked prior to the Election
Date and (ii) "Elected Cash Share" shall mean a
-4-
Share in respect of which either an election to retain such Share is
not validly made prior to the Election Date or an election to retain
such Share is validly revoked prior to the Election Date.
(e) The Paying Agent may, with the mutual agreement of the
Investor and the Company, make such rules as are consistent with this
Section 3.1 for the implementation of the elections provided for
herein as shall be necessary or desirable fully to effect such
elections.
(f) The Paying Agent in its sole discretion shall determine (i)
whether or not elections to retain Shares have been validly made or
validly revoked pursuant to this Section 3.1 and (ii) when elections
and revocations have been received by it. If the Paying Agent
determines that any election to retain Shares was not validly made,
such Shares shall be converted in the Merger into the right to receive
the Cash Merger Price (as defined below). The Paying Agent shall also
make all computations as to the allocation and the proration
contemplated by Section 3.3. All determinations and calculations by
the Paying Agent shall be conclusive and binding on the holders of
Shares.
Section 3.2 Conversion of Shares. (a) All Shares held in the
treasury of the Company (the "Excluded Shares") shall be canceled and
shall cease to exist as of the Effective Time, without any
consideration being payable therefor.
(b) Notwithstanding anything in this Agreement to the contrary,
Shares which would otherwise constitute Elected Cash Shares hereunder,
which are issued and outstanding immediately prior to the Effective
Time and which are held by stockholders who did not vote in favor of
the Merger and who comply with all of the relevant provisions of
Section 262 of the DGCL (the "Dissenting Shares") shall not be
converted into or be exchangeable for the right to receive the Cash
Merger Price (as defined below), but instead shall be converted into
the right to receive payment from the Surviving Corporation with
respect to such Dissenting Shares in accordance with the DGCL, unless
and until such holders shall have effectively withdrawn or lost their
rights to appraisal under the DGCL. If any such holder shall have
effectively withdrawn or lost such right, such holder's Shares shall
be converted into the right to receive the Cash Merger Price (as
defined below). The Company shall give prompt notice to the Investor
of any demands received by the Company for appraisal of Shares, and
the Investor shall have the right to participate in and direct all
negotiations and proceedings with respect to such demands. The Company
shall not, except with the prior written consent of the Investor, make
any payment with respect to, or settle or offer to settle, any such
demands.
-5-
(c) By virtue of the Merger, each Share issued and outstanding
immediately prior to the Effective Time, other than Excluded Shares
and Dissenting Shares (other than Shares held by the company or any of
its Subsidiaries, which shall be canceled), shall be retained or
converted into the right to receive cash as follows:
(i) Each Share that is an Elected Retained Share and each
Share that is a Non-Elected Retained Share (as hereinafter
defined) (in either case, a "Retained Share") shall be retained
by the holder thereof following the Effective Time, shall remain
outstanding and (i) with respect to the Common Stock, par value
$0.01, of the Company (the "Common Stock"), shall represent one
share of Common Stock, par value $0.01, of the Surviving
Corporation and (ii) with respect to the $2.00 Exchangeable
Preferred Stock par value $0.01 of the Company (the "Exchangeable
Preferred"; the Common Stock, collectively, with the Exchangeable
Preferred, the "Shares"), shall represent 1.92604 shares of
Common Stock, par value $0.01, of the Surviving Corporation
(shares of the Surviving Corporation to which a holder shall be
entitled pursuant to this Section 3.2(c)(i) shall be referred to
herein as "Retained Surviving Corporation Shares"); and
(ii) Subject to Section 3.3(b), each share of Common Stock
that is an Elected Cash Share of Common Stock shall be converted
into the right to receive from the Surviving Corporation $16.00
in cash (the "Common Stock Cash Merger Price") and each share of
Exchangeable Preferred that is an Elected Cash Share shall be
converted into the right to receive from the Surviving
Corporation $30.82 in cash (the "Exchangeable Preferred Cash
Merger Price"; the Common Stock Cash Merger Price and the
Exchangeable Preferred Cash Merger Price, as applicable, the
"Cash Merger Price").
Section 3.3 Proration. (a) Notwithstanding anything in this
Agreement to the contrary, the aggregate number of Retained Shares
retained by holders of Common Stock at their election shall not be
less than a number of Shares equal to 11.1% of the shares of Common
Stock outstanding immediately after the Effective Time (the "Minimum
Retained Share Number").
(b) If the Minimum Retained Share Number is greater than the
aggregate number of Shares constituting Elected Retained Shares with
respect to shares of Common Stock (the "Elected Retained Share
Number"), then the aggregate number of shares of Common Stock which
shall be converted into the right to receive cash pursuant to Section
3.2(c)(ii) shall be decreased by a number of shares of Common Stock
equal to the excess of the Minimum Retained Share Number over the
Elected Retained Share Number (each Share included among such excess,
a "Non-Elected Retained Share"). In such event, each holder of a share
of Common Stock which is an Elected Cash Share
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(other than the Investor with respect to Investor Shares) shall be
allocated a portion of the Non-Elected Retained Shares in lieu of
Elected Cash Shares (without giving effect to Section 3.5(e)) equal to
(i) the number of Elected Cash Shares (other than the Investor Shares)
with respect to shares of Common Stock held by such holder, multiplied
by (ii) a fraction, the numerator of which is the number of
Non-Elected Retained Shares and the denominator of which is the
aggregate number of Elected Cash Shares held by all holders of shares
of Common Stock (other than the Investor with respect to Investor
Shares); provided, however, that notwithstanding the foregoing, no
holder shall be allocated Non-Elected Retained Shares if such
allocation will result in such holder being allocated Retained Shares
in an amount equal to a number which is more than 9.740% of the number
of shares of Common Stock owned by such holder prior to the Effective
Time (in which case the excess number of Non-Elected Retained Shares
which would have been allocated to such holder but for this proviso
will be reallocated to the other holders of Shares of Common Stock
which are Elected Cash Shares in accordance with the formula specified
in this sentence).
Section 3.4 Conversion of Common Stock of Sub. (a) The shares of
common stock, par value $.01 per share (each a "Sub Share"), of Sub,
issued and outstanding immediately prior to the Effective Time shall,
by virtue of the Merger and without any action on the part of the
holder thereof, be converted into and become at the Effective Time a
number of shares of Common Stock of the Surviving Corporation equal to
the number which is equal to (i) $100,000,000 less a dollar amount
equal to (A) the number of Retained Shares multiplied by (B) $16.00,
divided by (ii) $16.00 (the "Investor Share Number").
(b) At the Effective Time, Sub will be capitalized with cash
equity in an amount equal to the Investor Share Number multiplied by
$16.00.
Section 3.5 Exchange of Certificates. (a) On or before the
Effective Time of the Merger, Investor shall cause the Company to
deposit with the Paying Agent, for the benefit of the holders of
Shares, for payment in accordance with this Article III, the funds
necessary to pay the Cash Merger Price for each Share.
(b) As soon as practicable after the Effective Time of the
Merger, each holder of an outstanding certificate or certificates
which prior thereto represented Shares, upon surrender to the Paying
Agent of such certificate or certificates (or delivery of such
customary affidavits and indemnities with respect to a lost
certificate which the Paying Agent and/or the Company's transfer agent
may reasonably require) and acceptance thereof by the Paying Agent,
shall be entitled to a certificate or certificates representing the
number of full Retained Surviving Corporation Shares, if any, to be
retained by the holder thereof as Retained Surviving Corporation
Shares pursuant to this Agreement and
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the amount of cash, if any, into which the number of Shares previously
represented by such certificate or certificates surrendered shall have
been converted pursuant to this Agreement. The Paying Agent shall
accept such certificates upon compliance with such reasonable terms
and conditions as the Paying Agent may impose to effect an orderly
exchange thereof in accordance with normal exchange practices. After
the Effective Time of the Merger, there shall be no further transfer
on the records of the Company or its transfer agent of certificates
representing Shares which have been converted, in whole or in part,
pursuant to this Agreement, into the right to receive cash, and if
such certificates are presented to the Company for transfer, they
shall be canceled against delivery of such cash. If any certificate
for Retained Surviving Corporation Shares is to be issued in, or if
cash is to be remitted to, a name other than that in which the
certificate for Shares surrendered for exchange is registered, it
shall be a condition of such exchange that the certificate so
surrendered shall be properly endorsed, with signature guaranteed or
otherwise in proper form for transfer and that the person requesting
such exchange shall pay to the Company or its transfer agent any
transfer or other taxes required by reason of the issuance of
certificates for such Retained Surviving Corporation Shares in a name
other than that of the registered holder of the certificate
surrendered, or establish to the satisfaction of the Company or its
transfer agent that such tax has been paid or is not applicable. Until
surrendered as contemplated by this Section 3.5(b), each certificate
for Shares shall be deemed at any time after the Effective Time of the
Merger to represent only the right to receive upon such surrender the
Cash Merger Price for each Share (other than any Retained Surviving
Corporation Share) and a new certificate for each Retained Surviving
Corporation Share.
(c) No dividends or other distributions with respect to Retained
Surviving Corporation Shares with a record date after the Effective
Time of the Merger shall be paid to the holder of any certificate for
Shares not surrendered with respect to the Retained Shares represented
thereby and no cash payment in lieu of fractional Shares shall be paid
to any such holder pursuant to Section 3.5(e) until the surrender of
such certificate in accordance with this Article III. Subject to
applicable law, following surrender of any such certificate, there
shall be paid to the holder of the certificate representing whole
Retained Surviving Corporation Shares issued in connection therewith,
without interest (i) at the time of such surrender, the amount of any
cash payable in lieu of a fractional retained share to which such
holder is entitled pursuant to Section 3.5(e) and the proportionate
amount of dividends or other distributions with a record date after
the Effective Time of the Merger therefor paid with respect to such
Retained Surviving Corporation Shares, and (ii) at the appropriate
payment date, the proportionate amount of dividends or other
distributions with a record date after the Effective Time of the
Merger but prior to such surrender and a payment date subsequent to
such surrender payable with respect to such whole Retained Surviving
Corporation Shares.
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(d) All cash paid upon the surrender for exchange of certificates
representing Shares in accordance with the terms of this Article III
(including any cash paid pursuant to Section 3.5(e)) shall be deemed
to have been paid in full satisfaction of all rights pertaining to the
Shares exchanged for cash theretofore represented by such
certificates.
(e) Notwithstanding any other provision of this Agreement, each
holder of Shares retained pursuant to the Merger who would otherwise
have been entitled to retain a fraction of a Retained Surviving
Corporation Share (after taking into account all Shares delivered by
such holder) shall receive, in lieu thereof, a cash payment (without
interest) equal to such fraction multiplied by the applicable Cash
Merger Price.
(f) Any cash deposited with the Paying Agent pursuant to this
Section 3.5 (the "Exchange Fund") which remains undistributed to the
holders of the certificates representing Shares 180 days after the
Effective Time of the Merger shall be delivered to the Surviving
Corporation at such time and any holders of Shares prior to the Merger
who have not theretofore complied with this Article III shall
thereafter look only to the Surviving Corporation and only as general
unsecured creditors thereof for payment of their claim for cash, if
any.
(g) None of the Sub or the Company or the Paying Agent shall be
liable to any person in respect of any cash from the Exchange Fund
delivered to a public office pursuant to any applicable abandoned
property, escheat or similar law. If any certificates representing
Shares shall not have been surrendered prior to two years after the
Effective Time of the Merger (or immediately prior to such earlier
date on which any cash in respect of such certificate would otherwise
escheat to or become the property of any Governmental Entity (as
defined below)), any such cash in respect of such certificate shall,
to the extent permitted by applicable law, become the property of the
Surviving Corporation, free and clear of all claims or interest of any
person previously entitled thereto.
(h) The Paying Agent shall invest any cash included in the
Exchange Fund, as directed by the Investor, on a daily basis. Any
interest and other income resulting from such investments shall be
paid to the Company. To the extent that there are losses with respect
to such investments, or the Exchange Fund diminishes for other reasons
below the level required to make prompt payments of the Cash Merger
Price as contemplated hereby, Investor shall promptly replace or
restore the portion of the Exchange Fund lost through investments or
other events so as to ensure that the Exchange Fund is, at all times,
maintained at a level sufficient to make such payments.
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(i) The Company shall pay all charges and expenses of the Paying
Agent.
Section 3.6 Stock Options. All options (individually, an "Option"
and collectively, the "Options") outstanding immediately prior to the
Effective Time under any Company stock option plan, whether or not
then exercisable, shall be canceled and each holder of an Option will
be entitled to receive from the Surviving Corporation, for each share
of Common Stock subject to an Option, an amount in cash equal to the
excess, if any, of the Merger Consideration over the per share
exercise price of such Option, without interest. All amounts payable
pursuant to this Section 3.6 shall be subject to all applicable
withholding of taxes. The Company shall take all action necessary to
effectuate the foregoing, including obtaining all necessary consents
of the holders of Options. Notwithstanding the foregoing, the Company
will use reasonable efforts to cause the holders of the Options to
exercise such Options on or prior to the Effective Time.
Section 3.7 Stockholders' Meetings. Subject to the provisions or
Sections 8.5 and 10.4, the Company will take all action necessary in
accordance with applicable law and its Certificate of Incorporation
and By-laws to convene a meeting of its stockholders (the "Special
Meeting") as promptly as practicable to consider and vote upon this
Agreement and the transactions contemplated hereby. Subject to the
provisions of Sections 8.5 and 10.4, the Board of Directors of the
Company shall recommend such approval and the Company shall take all
lawful action to solicit such approval, including, without limitation,
timely and promptly mailing the Proxy Statement/Prospectus.
Section 3.8 Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of
Fried, Frank, Harris, Shriver & Jacobson, One New York Plaza, New
York, New York 10004, at 9:00 a.m. local time on the day which is no
later than 20 business days after the day on which the last of the
conditions set forth in Article VIII (other than those that can only
be fulfilled at the Effective Time) is fulfilled or waived or at such
other time and place as Investor and the Company shall agree in
writing.
Section 3.9 Transfer Taxes. Investor and the Company shall
cooperate in the preparation, execution and filing of all returns,
applications or other documents regarding any real property transfer,
stamp, recording, documentary or other taxes and any other fees and
similar taxes which become payable in connection with the Merger other
than transfer or stamp taxes payable in respect of transfers pursuant
to the fourth sentence of Section 3.5(b) (collectively, "Transfer
Taxes"). The Company will pay all of the Transfer Taxes.
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Section 3.10 Form of Transaction. Investor, at its option, shall
have the right to restructure the Merger to a form of transaction,
which may take the form of a two-step transaction (i.e., a tender
offer followed by a merger) or a one step transaction, pursuant to
which all holders of shares of Common Stock of the Company will
receive $16.00 in cash and all holders of Exchangeable Preferred Stock
will receive $30.82 in cash, so long as the other terms and conditions
of such transaction are substantially comparable to the terms of this
Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF INVESTOR
Investor represents and warrants to the Company as follows:
Section 4.1 Organization, Standing and Power. Investor is a
limited liability company duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite
power and authority to carry on its business as now being conducted.
Section 4.2 Authority; Non-Contravention. Investor has all
requisite power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by Investor and the consummation by
Investor of the transactions contemplated hereby have been duly
authorized by all necessary action on the part of Investor. This
Agreement has been duly executed and delivered by Investor and
(assuming the valid authorization, execution and delivery of this
Agreement by the Company) constitutes a valid and binding obligation
of Investor enforceable against Investor in accordance with its terms.
The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby and compliance
with the provisions hereof will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to the loss of a material benefit
under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of Investor
or any of its Subsidiaries under, any provision of (i) the
organizational documents of Investor and any of its Subsidiaries, (ii)
any loan or credit agreement, note, bond, mortgage, indenture, lease
or other agreement, instrument, permit, concession, franchise or
license applicable to Investor or any of its Subsidiaries or (iii) any
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Investor or any of its Subsidiaries or any of their
respective properties or assets, other than, in the case of clauses
(ii) or (iii), any such conflicts, violations, defaults, rights,
liens, security interests, charges or encumbrances that, individually
or in the aggregate, would not have a Material Adverse Effect (as
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hereinafter defined) on Investor, materially impair the ability of
Investor to perform its obligations hereunder or prevent the
consummation of any of the transactions contemplated hereby. No filing
or registration with, or authorization, consent or approval of, any
domestic (federal and state), foreign or supranational court,
commission, governmental body, regulatory or administrative agency,
authority or tribunal (a "Governmental Entity") is required by or with
respect to Investor or any of its Subsidiaries in connection with the
execution and delivery of this Agreement by Investor or is necessary
for the consummation of the Merger and the other transactions
contemplated by this Agreement, except for (i) in compliance with the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), (ii)
the filing of the Certificate of Merger with the Secretary of State of
the State of Delaware and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do
business, (iii) compliance with any applicable requirement of the
Securities Act of 1933, as amended (the "Securities Act"), (iv)
compliance with any applicable foreign or state securities or blue sky
laws (collectively, "Blue Sky Laws") and (v) such other consents,
orders, authorizations, registrations, declarations and filings the
failure of which to be obtained or made would not, individually or in
the aggregate, have a Material Adverse Effect on Investor, materially
impair the ability of Investor to perform its obligations hereunder or
prevent the consummation of any of the transactions contemplated
hereby. For purposes of this Agreement "Material Adverse Change" or
"Material Adverse Effect" means, when used with respect to Investor,
Sub or the Company, as the case may be, any change or effect, either
individually or in the aggregate, that is or is reasonably likely to
be materially adverse to the business, assets, prospects, liabilities,
properties, or financial condition (i) with respect to Investor,
Investor and its Subsidiaries taken as a whole, and (ii) with respect
to the Company, the Company and its Subsidiaries taken as a whole.
Section 4.3 Financing. Investor has available and will make
available to the Company sufficient funds to enable it to consummate
the Merger on the terms contemplated by this Agreement.
Section 4.4 Brokers. No broker, investment banker or other
person, other than Lazard Freres & Co. LLC, the fees and expenses of
which will be paid by the Investor, is entitled to any broker's,
finder's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Investor or Sub.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Investor and Sub as
follows:
Section 5.1 Organization, Standing and Power. The Company and
each of its Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in
which it is incorporated and has the requisite power and authority to
carry on their respective businesses as now being conducted. The
Company and each of its Subsidiaries is duly qualified to do business,
and is in good standing, in each jurisdiction where the character of
its respective properties owned or held under lease or the nature of
its respective activities makes such qualification necessary, except
where the failure to be so qualified would not, individually or in the
aggregate, have a Material Adverse Effect on the Company.
Section 5.2 Capital Structure. The authorized capital stock of
the Company consists of 30,000,000 shares of Common Stock, par value
$0.01 per share, and 10,000,000 shares of preferred stock, par value
$0.01 per share, issuable in one or more series, of which 2,400,000
shares of $2.00 Convertible Exchangeable Preferred Stock have been
designated. At the close of business on September 29, 1997, (i)
7,750,000 shares of Common Stock were issued and outstanding and (ii)
5,222,496 shares of Common Stock were reserved for issuance upon the
exercise of outstanding options, convertible securities and stock
rights in the Company. At the close of business on September 29, 1997,
2,400,000 shares of Exchangeable Preferred Stock were issued and
outstanding. All outstanding shares of capital stock of the Company
are validly issued, fully paid and nonassessable and not subject to
preemptive rights. As of September 29, 1997, the Company had granted
options to acquire an aggregate of 144,350 shares of Common Stock at
$9.625 to $10.00 per share, pursuant to the Company's 1996 Stock
Incentive Plan (the "Stock Plan"). Except as otherwise set forth in
this Section 5.2 or in the Company Disclosure Letter, there are no
options, warrants, rights, commitments, agreements, arrangements or
undertakings of any kind to which the Company is a party or by which
it is bound obligating the Company to issue, deliver or sell, or cause
to be issued, delivered or sold, additional shares of capital stock or
other voting securities of the Company or any of its Subsidiaries,
including any securities pursuant to which rights to acquire capital
stock became exercisable only after a change of control of the Company
or any of its Subsidiaries or upon the acquisition of a specified
amount of the Common Stock or voting powers of the Company or any of
its Subsidiaries. Since September 29, 1997, no shares of the capital
stock of the Company or any of its Subsidiaries have been issued other
than pursuant to the exercise of Company stock options and warrants
already in existence and outstanding on such date,
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or conversion of Exchangeable Preferred Stock, and neither the Company
nor any of its Subsidiaries has granted any stock options, warrants or
other rights to acquire any capital stock of the Company or any of its
Subsidiaries. Except as specified in the Company Disclosure Letter
(the "Company Disclosure Letter"), there are no securities issued by
the Company or agreements, arrangements or other understandings to
which the Company is a party giving any person any right to acquire
equity securities of the Surviving Corporation at or following the
Effective Time and all securities, agreements, arrangements and
understandings relating to the right to acquire equity securities of
the Company (whether pursuant to the exercise of options, warrants or
otherwise) provide that, at and following the Effective Time, such
right shall entitle the holder thereof to receive the consideration he
would have received in the Merger had he exercised his right
immediately before the Effective Time.
Section 5.3 Subsidiaries. Except as set forth in the Company
Disclosure Letter, (i) the Company owns, directly or indirectly
through a Subsidiary, all of the outstanding shares of capital stock
(or other ownership interests having by their terms ordinary voting
power to elect directors or others performing similar functions with
respect to such Subsidiary) of each of the Company's Subsidiaries and
(ii) each of the outstanding shares of capital stock of each of the
Company's Subsidiaries is duly authorized, validly issued, fully paid
and nonassessable, and is owned, directly or indirectly, by the
Company free and clear of all liens, pledges, security interests,
claims or other encumbrances. The Company Disclosure Letter sets forth
for each Subsidiary of the Company: (i) its name and jurisdiction of
incorporation or organization; (ii) its authorized capital stock or
share capital; (iii) the number of issued and outstanding shares of
capital stock or share capital; and (iv) the holder or holders of such
shares. Except for interests in the Company's Subsidiaries or as set
forth in the Disclosure Letter, neither the Company nor any of its
Subsidiaries owns directly or indirectly any interest or investment
(whether equity or debt) in any corporation, partnership, joint
venture, business, trust or other entity.
Section 5.4 Authority; Non-Contravention. The Board of Directors
of the Company has declared the Merger advisable, fair and in the best
interests of the Company and each of the holders of Common Stock and
Exchangeable Preferred Stock, and the Company has all requisite
corporate power and authority to enter into this Agreement and,
subject to approval of the Merger by the stockholders of the Company,
to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the
part of the Company, subject to approval of the Merger by the
stockholders of the Company. The only votes of the holders of any
class or series of Company capital stock necessary to approve the
Merger are the affirmative votes of the
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holders of a majority of the outstanding shares of Common Stock,
voting separately as a class. This Agreement has been duly executed
and delivered by the Company and (assuming the valid authorization,
execution and delivery of this Agreement by Investor and Sub, as
applicable) constitutes a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except
as the enforceability thereof may be limited by creditors' rights
generally or by general principles of equity. Except as set forth in
the Company Disclosure Letter, the execution and delivery of this
Agreement does not, and the consummation of the transactions
contemplated hereby and compliance with the provisions hereof will
not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation
or to the loss of a material benefit under, or result in the creation
of any lien, security interest, charge or encumbrance upon any of the
properties or assets of the Company or any of its Subsidiaries under,
any provision of (i) the Certificate of Incorporation, ByLaws or other
organizational documents of the Company or any of its Subsidiaries
(true and complete copies of which as of the date hereof have been
delivered to Investor), or (ii) any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to the Company or any of
its Subsidiaries or any of their respective properties or assets,
other than, in the case of clause (ii), any such conflicts,
violations, defaults, rights, liens, security interests, charges or
encumbrances that, individually or in the aggregate, would not have a
Material Adverse Effect on the Company, materially impair the ability
of the Company and its Subsidiaries to perform its material
obligations hereunder or prevent the consummation of any of the
material transactions contemplated hereby. No filing or registration
with, or authorization, consent or approval of, any Governmental
Entity is required by or with respect to the Company or any of its
Subsidiaries in connection with the execution and delivery of this
Agreement by the Company or the consummation by the Company of the
transactions contemplated hereby, except for (i) compliance with the
provisions of the Exchange Act, (ii) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware and
appropriate documents with the relevant authorities of other states in
which the Company is qualified to do business, (iii) compliance with
any applicable requirements of the Securities Act, (iv) compliance
with any applicable Blue Sky Laws, (v) those matters including but not
limited to, regulatory consents, approvals and waivers, set forth in
the Company Disclosure Letter, and (vi) such other consents, orders,
authorizations, registrations, declarations and filings the failure of
which to be obtained or made would not, individually or in the
aggregate, have a Material Adverse Effect on the Company, materially
impair the ability of the Company and its Subsidiaries to perform its
obligations hereunder or prevent the consummation of any of the
material transactions contemplated hereby; it being understood and
agreed that the Company is not making any representation or warranty
with respect to third party consents, waivers or amendments required
to be obtained by the Company to consummate the transactions
contemplated hereby.
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Section 5.5 SEC Documents. (a) Since September 1, 1996, the
Company has filed all documents with the SEC required to be filed by
the Company under the Securities Act or the Exchange Act (the "Company
SEC Documents"). As of their respective dates, the Company SEC
Documents complied in all material respects with the requirements of
the Securities Act or the Exchange Act, as the case may be, and none
of the Company SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not
misleading. The Company has delivered to Investor each registration
statement, report, proxy statement or information statement prepared
by it and filed with the SEC, in the form, including any exhibits or
amendments thereto, filed with the SEC (collectively, the "Company
Reports"). The financial statements of the Company included in the
Company SEC Documents and the Company Reports comply as to form in all
material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have
been prepared in accordance with generally accepted accounting
principles (except, in the case of unaudited statements, as permitted
by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated therein or in the notes
thereto) and fairly present in all material respects the financial
position of the Company as at the dates thereof and the results of its
operations and changes in financial position for the periods then
ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments and to any other adjustments set forth
therein).
(b) Except as set forth in the Company Disclosure Letter, the
Company SEC Documents, the Company Reports or the Company Disclosure
Letter, neither the Company nor any of its Subsidiaries has any
liability or obligation of any nature (whether accrued, absolute,
contingent or otherwise), except for liabilities and obligations
incurred in the ordinary course of business consistent with past
practice since June 30, 1997 which would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. Except as
set forth in the Company Disclosure Letter, neither the Company nor
any of its Subsidiaries has any obligation in respect of any rate swap
transaction, basis swap, forward rate transaction, commodity swap,
commodity option, equity or equity index swap, equity or equity index
option, bond option, interest rate option, foreign exchange
transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction,
currency option or any other similar transaction (including any option
with respect to any of the foregoing transactions) or any combination
of the foregoing transactions.
(c) The Company has heretofore made available or promptly shall
make to Investor a complete and correct copy of any amendments or
modifications, which have
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not yet filed with the SEC, to agreements, documents or other
instruments which previously have been filed with the SEC pursuant to
the Exchange Act.
Section 5.6 Absence of Certain Events. Except as set forth in the
Company Disclosure Letter, since June 30, 1997, the Company and each
of its Subsidiaries has operated its respective business only in the
ordinary course consistent with past practice and, except as set forth
in the Company Disclosure Letter, there has not occurred (i) as of the
date hereof any event, occurrence or condition which, individually or
in the aggregate, has, or is reasonably likely to have, a Material
Adverse Effect on the Company; (ii) any entry into any commitment or
transaction that, individually or in the aggregate, has or is
reasonably likely to have, a Material Adverse Effect on the Company;
(iii) any material change by the Company or any of its Subsidiaries in
its accounting methods, principles or practices; (iv) any amendments
or changes in the Certificate of Incorporation, By-Laws or other
organizational documents of the Company or any of its Subsidiaries;
(v) any revaluation by the Company or any of its Subsidiaries of any
of its respective assets, including, without limitation, write-offs of
accounts receivable, other than in the ordinary course of business
consistent with past practices; (vi) any damage, destruction or loss
which resulted in or is reasonably likely to result in a Material
Adverse Effect on the Company; (vii) except with respect to ordinary
dividends paid with respect to the Exchangeable Preferred, any
declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the
Company or any of its Subsidiaries, or any repurchase, redemption or
other acquisition by the Company or any of its Subsidiaries of any
outstanding shares of capital stock or other securities of, or other
ownership interests in, the Company or any of its Subsidiaries; (viii)
any grant of any severance or termination pay to any director or
executive officer of the Company or any of its Subsidiaries; (ix) any
entry into any employment, deferred compensation or other similar
agreement (or any amendment to any such existing agreement) with any
director or executive officer of the Company or any of its
Subsidiaries; (x) any increase in benefits payable under any existing
severance or termination pay policies or employment agreements with
any director or executive officer of the Company or any of its
Subsidiaries; or (xi) any increase in compensation, bonus or other
benefits payable to directors or executive officers of the Company or
any of its Subsidiaries.
Section 5.7 Litigation. Except as set forth in the Company
Disclosure Letter, there are no actions, suits or proceedings pending
against the Company or any of its Subsidiaries or, to the knowledge of
the Company or any of its Subsidiaries, threatened against the Company
or any of its Subsidiaries, at law or in equity, or before or by any
federal or state commission, board, bureau, agency, regulatory or
administrative instrumentality or other Governmental Entity or any
arbitrator or arbitration tribunal, that are reasonably likely to have
a Material Adverse Effect on the
-17-
Company, and, to the knowledge of the Company or any of its
Subsidiaries, no development has occurred with respect to any pending
or threatened action, suit or proceeding that is reasonably likely to
result in a Material Adverse Effect on the Company or would prevent or
delay the consummation of the transactions contemplated hereby.
Section 5.8 Compliance with Law. (a) Except as set forth in the
Company Disclosure Letter, to the knowledge of the Company, (i)
neither the Company nor any of its Subsidiaries is the subject of any
investigation, nor (ii) has any investigation or prosecution or other
action been threatened by any Governmental Entity or any private
entity or person regarding non-compliance with any law and (iii) no
basis exists for any such investigation or prosecution which is
reasonably likely to have a Material Adverse Effect on the Company.
None of the Company or any of the Subsidiaries may reasonably be
expected to have criminal culpability or to be excluded from
participation in the Medicare and Medicaid programs and any other
health care program operated by or financed in whole or in part by any
Governmental Entity (a "Medical Reimbursement Program") for its
corporate actions or failure to act. To the knowledge of the Company,
there is no executive officer of the Company or any Subsidiary
continuing to be employed by the Company or any of the Subsidiaries
who is reasonably likely to have individual culpability for matters
under investigation by the Office of the Inspector General of the
United States Department of Health and Human Services ("OIG") or other
Governmental Entity.
(b) Current billing policies, arrangements, protocols and
instructions of the Company and its Subsidiaries related to services
covered by Medical Reimbursement Programs comply in all material
respects with applicable requirements of Medical Reimbursement
Programs. The Company and each of its Subsidiaries has complied with
all applicable third party payor billing policies, procedures,
limitations and restrictions, and there is no pending or, to the
knowledge of the Company, threatened recoupment or penalty action or
proceedings against the Company or any of its Subsidiaries under any
other third party payor, except for such non-compliance, actions or
proceedings that individually or in the aggregate would not have a
Material Adverse Effect on the Company. The current operations of the
Company and its Subsidiaries do not require compliance with Medicare,
Blue Cross/Blue Shield or CHAMPUS policies, procedures, limitations or
restrictions.
(c) Except as set forth in the Company Disclosure Letter, the
Company and each of its Subsidiaries has obtained, and maintains in
force, all licenses, permits, franchises, certificates of authority,
orders and waivers required from any Governmental Entity ("Permits")
to operate their respective businesses in the manner in which they are
currently operated and to occupy, operate and use any buildings,
improvements, fixtures
-18-
and equipment owned or leased in connection with the operation of
assisted living facilities to provide the services currently provided
by the Company and its Subsidiaries at all locations of the Company
and its Subsidiaries, and all such Permits are valid and in full force
and effect with only such exceptions that would not, individually or
in the aggregate, have a Material Adverse Effect on the Company.
Except as specified in the Company Disclosure Letter, all of the
Permits referenced in the foregoing sentence have been issued in the
name of the Company or the applicable Subsidiary having an ownership,
leasehold, management or operational interest in the facilities
referenced therein. Except as set forth in the Company Disclosure
Letter, no Permits of the Company or any Subsidiary have been
suspended, canceled or terminated and, to the knowledge of the Company
and its Subsidiaries, no suspension, cancellation or termination of
any such Permits is threatened or imminent. To the knowledge of the
Company, each employee of the Company and each of its Subsidiaries
(including, but not limited to, each facility administrator) has
obtained, and maintains in force, all licenses, permits or similar
authorizations required to authorize such employee to perform his or
her duties on behalf of the Company and its Subsidiaries with only
such exceptions that, individually and in the aggregate, would not
have a Material Adverse Effect on the Company.
(d) Neither the Company nor any of its Subsidiaries, nor, to the
knowledge of the Company, any director, officer or employee of the
Company or any of its Subsidiaries acting for or on behalf of the
Company or any of its Subsidiaries, has paid or caused to be paid,
directly or indirectly, in connection with the business of the Company
or any of its Subsidiaries: (i) any bribe, kickback or other similar
payment to any Governmental Entity or any agent of any supplier or
customer; or (ii) any contribution to any political party or candidate
(other than from personal funds of directors, officers or employees
not reimbursed by their respective employers or in compliance with
applicable law).
(e) The Company and its Subsidiaries do not provide services that
are covered by the Medicare program and do not participate in the
Medicare program. The Company and each of its Subsidiaries has filed
or will timely file all material claims or other reports required to
be filed with respect to the purchase of services by third-party
payors, including, but not limited to, the Medical Reimbursement
Programs. All such claims or reports are or will be complete and
accurate in all material respects. The Company and each of its
Subsidiaries has paid or has properly recorded on the Company's
financial statements all actually known and undisputed refunds,
discounts or adjustments which have become due pursuant to such
claims, and neither the Company nor any of its Subsidiaries has any
material liability to any payor with respect thereto, except as has
been fully reserved for in the Company's financial statements. Neither
the Company nor any of its Subsidiaries, nor, to the knowledge of the
Company, any of their
-19-
respective directors or officers has been convicted of, or plead
guilty or nolo contendere to, patient abuse or neglect, or any other
Medicare program-related offense.
(f) The Company, each of its Subsidiaries, and their respective
directors, officers and employees and the other persons and entities
providing professional services for the Company and its Subsidiaries,
have not engaged in any activities which are in violation of Sections
1128A, 1128B, 1128C or 1877 of the Social Security Act (42 U.S.C.
ss.ss. 1320a-7a, 1320a-7b, 1320a-7c and 1395nn), the False Claims Act
(31 U.S.C. ss. 3729 et seq.), the False Statements Acts (18 U.S.C. ss.
2002), the Program Fraud Civil Penalties Act (31 U.S.C. ss. 3801 et
seq.), or related regulations or other federal or state laws and
regulations, including, but not limited to, the following:
(i) knowingly and willfully making or causing to be made a
false statement or representation of a material fact in any
application for any benefit or payment;
(ii) knowingly and willfully making or causing to be made a
false statement or representation of a material fact for use in
determining rights to any benefit or payment;
(iii) failure to disclose knowledge by a Medicare or
Medicaid claimant or a claimant under any Medical Reimbursement
Program of the occurrence of any event affecting the initial or
continued right to any benefit or payment on its own behalf or on
behalf of another, with intent to fraudulently secure such
benefit or payment;
(iv) knowingly and willfully offering, paying, soliciting or
receiving any remuneration (including any kickback, bribe, or
rebate), directly or indirectly, overtly or covertly, in cash or
kind (i) in return for referring an individual to a person for
the furnishing or arranging for the furnishing of any item or
service for which payment may be made in whole in or part by any
Medical Reimbursement Program or (ii) in return for purchasing,
leasing, or ordering, or arranging, or arranging for or
recommending purchasing, leasing, or ordering any good, facility,
service, or item for which payment may be made in whole or in
part by any Medical Reimbursement Program; or
(v) referring or billing a patient for designated health
services (as defined in 42 U.S.C. ss. 1395nn) or providing
designated health services to a patient upon a referral from an
entity or person with which the physician or an immediate family
member has a financial relationship, and to which no exception
under 42 U.S.C. ss. 1395nn applies.
-20-
Section 5.9 Employee Plans. (a) The Company and each of its
Subsidiaries has complied with and performed all contractual
obligations and all obligations under applicable federal, state and
local laws, rules and regulations (domestic and foreign) required to
be performed by it under or with respect to any of the Company Benefit
Plans (as hereinafter defined) or any related trust agreement or
insurance contract, other than where the failure to so comply or
perform does not have, nor is reasonably likely to have, a Material
Adverse Effect on the Company. All contributions and other payments
required to be made by the Company or any of its Subsidiaries to any
Company Benefit Plan or Multiemployer Plan (as hereinafter defined)
prior to the date hereof have been made, other than where the failure
to so contribute or make payments will not have, nor is reasonably
likely to have, a Material Adverse Effect on the Company, and all
material accruals required to be made with respect to any Company
Benefit Plan or Multiemployer Plan have been made. There is no claim,
dispute, grievance, charge, complaint, restraining or injunctive
order, litigation or proceeding pending, or, to the knowledge of the
Company, threatened (other than routine claims for benefits) against
or relating to any Company Benefit Plan or against the assets of any
Company Benefit Plan, which is reasonably likely to have a Material
Adverse Effect on the Company. The Company and each of its
Subsidiaries has not made any promises or commitments to employees or
specifically to any employee regarding any future increase of benefit
levels (or future creations of new benefits) with respect to any
Company Benefit Plan beyond those reflected in the Company Benefit
Plans, which benefit increases or creations, either individually or in
the aggregate, will have or are reasonably likely to have, a Material
Adverse Effect on the Company. The Company and each of its
Subsidiaries does not presently sponsor, maintain, contribute to, nor
is the Company required to contribute to, nor has the Company or any
of its Subsidiaries ever sponsored, maintained, contributed to, or
been required to contribute to, any employee pension benefit plan
within the meaning of section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or any multiemployer plan
within the meaning of section 3(37) or 4001(a)(3) of ERISA, other than
those plans set forth in the Company Disclosure Letter.
(b) Except as set forth in the Company Disclosure Letter, each
Company Benefit Plan can be terminated or otherwise discontinued
without material liability to the Company or any of its Subsidiaries.
With respect to each Company Benefit Plan subject to Title IV of
ERISA, (i) no termination of any Company Benefit Plan has occurred
pursuant to which all liabilities have not been satisfied in full, and
no event has occurred and no condition exists that could reasonably be
expected to result in the Company or any of its Subsidiaries incurring
a liability under Title IV of ERISA or could constitute grounds for
terminating any Plan (as hereinafter defined); (ii) each such Company
Benefit Plan which is subject to Part 3 of Subtitle B of Title I of
ERISA or Section 412 of the Internal Revenue Code of 1986, as amended
(the "Code"), has been
-21-
maintained in compliance with the minimum funding standards of
ERISA and the Code and no such Company Benefit Plan has incurred
any "accumulated funding deficiency," as defined in Section 412
of the Code and Section 302 of ERISA, whether or not waived;
(iii) neither the Company nor any of its Subsidiaries has sought
or received a waiver of its funding requirements with respect to
any Company Benefit Plan and all contributions payable with
respect to each Plan have been timely made; (iv) no reportable
event, within the meaning of Section 4043 of ERISA, and no event
set forth in Section 4062 or 4063 of ERISA, has occurred with
respect to any Company Benefit Plan; and (v) the aggregate
accumulated benefit obligations of each Company Benefit Plan
subject to Title IV of ERISA (as of the date of the most recent
actuarial valuation prepared for such Company Benefit Plan) do
not exceed the fair market value of the assets of such Company
Benefit Plan (as of the date of such valuation).
(c) Neither the Company nor any of its Subsidiaries has incurred,
nor has any event occurred which has imposed or is reasonably likely
to impose upon the Company or any of its Subsidiaries, any withdrawal
liability (partial or complete) in respect of any multiemployer plan
(within the meaning of Section 3(37) or 4001(a)(3) of ERISA) (a
"Multiemployer Plan"), which withdrawal liability has not been
satisfied or discharged in full or which, either individually or in
the aggregate, will cause, or is reasonably likely to cause, a
Material Adverse Effect on the Company.
(d) Except as set forth in the Company Disclosure Letter, the
execution, delivery and performance of this Agreement and the
transactions contemplated hereby will not result in the imposition of
any federal excise tax under Section 4975 of the Code with respect to
any Company Benefit Plan.
(e) Except as set forth in the Company Disclosure Letter, neither
the Company nor any of its Subsidiaries maintains or contributes to
(or has maintained or contributed to) any Company Benefit Plan which
provides, or has a liability to provide, life insurance, medical,
severance, or other employee welfare benefit to any employee upon his
retirement or termination of employment, except as may be required by
Section 4980B of the Code.
(f) (i) "Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase,
stock option, stock ownership, stock appreciation rights, phantom
stock, leave of absence, layoff, vacation, day or dependent care,
legal services, cafeteria, life, health, accident, disability,
workers' compensation or other insurance, severance, separation or
other employee benefit plan, practice, policy or arrangement of any
kind, including, but not limited to, any "employee benefit plan"
within the meaning of section 3(3) of ERISA and (ii) "Company Benefit
Plan" means any employee pension benefit plan and any Plan, other than
a
-22-
Multiemployer Plan, established by the Company or any of its
Subsidiaries or to which the Company or any of its Subsidiaries
contributes or has contributed (including any such Plans not now
maintained by the Company or any of its Subsidiaries or to which the
Company or any of its Subsidiaries does not now contribute, but with
respect to which the Company or any of its Subsidiaries has or may
have any liability). Copies of all Plans (and, if applicable, related
trust agreements) and all amendments thereto and written
interpretations thereof and the two most recent Forms 5500 required to
be filed with respect thereto shall be promptly furnished to Investor
after the date of this Agreement. The Company Disclosure Letter sets
forth each Plan with respect to which benefits will be accelerated,
vested, increased or paid as a result of the transactions contemplated
by this Agreement.
Section 5.10 Employment Relations and Agreement. (a) Except as
set forth in the Company Disclosure Letter, and except as would not
constitute a Material Adverse Effect on the Company, (i) the Company
and each of its Subsidiaries is, and at all times has been, in
compliance in all material respects with all federal, state or other
applicable laws respecting employment and employment practices, terms
and conditions of employment and wages and hours, and has not and is
not engaged in any unfair labor practice; (ii) no unfair labor
practice complaint against the Company or any of its Subsidiaries is
pending before the National Labor Relations Board; (iii) there is no
labor strike, dispute, slowdown or stoppage actually pending or, to
the knowledge of the Company, threatened against or involving the
Company or any of its Subsidiaries; (iv) no representation question
exists and there has been no effort to organize unorganized employees
of the Company or any of its Subsidiaries; (v) neither the Company nor
any of its Subsidiaries is a party to any collective bargaining
agreement; (vi) no collective bargaining agreement is currently being
negotiated by the Company or any of its Subsidiaries; and (vii)
neither the Company nor any of its Subsidiaries has experienced any
material labor difficulty during the last three years. Except as set
forth in the Company Disclosure Letter, as of the date of this
Agreement, to the knowledge of the Company, there has not been any
change in relations with employees of the Company and its Subsidiaries
as a result of the transactions contemplated by this Agreement which
could have a Material Adverse Effect on the Company.
(b) Except as set forth in the Company Disclosure Letter, neither
the Company nor any of its Subsidiaries has any written, or to the
knowledge of the Company, any binding oral employment agreement
("Employment Agreements") which is not terminable by the Company and
its Subsidiaries with payment or penalty of less than $20,000. Copies
of all Employment Agreements and all amendments thereto were furnished
to Investor prior to the date hereof.
-23-
Section 5.11 Contracts. (a) Neither the Company nor any of its
Subsidiaries is in default under or in violation of any provision of
any Contract (as hereinafter defined), except for such defaults or
violations which would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect on the
Company.
(b) Except as set forth in the Company Disclosure Letter, neither
the Company nor any of its Subsidiaries is a party to or bound by any:
(i) employment agreement or employment contract that has an
aggregate future liability in excess of $500,000 and is not
terminable by the Company or a Subsidiary by notice of not more
than 60 days for a cost of less than $100,000;
(ii) employee collective bargaining agreement or other
contract with any labor union;
(iii) covenant of the Company or a Subsidiary not to
compete;
(iv) agreement, contract or other arrangement with any
current or former officer, director, or affiliate or relative
thereof, of the Company or any Subsidiary (other than employment
agreements covered by clause (i) above);
(v) lease, sublease or similar agreement involving annual
payments in excess of $100,000 with any person (other than the
Company or a Subsidiary) under which the Company or a Subsidiary
is a lessor or sublessor of, or makes available for use to any
person (other than the Company or a Subsidiary), (A) any Company
Property (as hereinafter defined) or (B) any portion of any
premises otherwise occupied by the Company or a Subsidiary;
(vi) lease or similar agreement with any person (other than
the Company or a Subsidiary) under which (A) the Company or a
Subsidiary is lessee of, or holds or uses, any machinery,
equipment, vehicle or other tangible personal property owned by
any person or (B) the Company or a Subsidiary is a lessor or
sublessor of, or makes available for use any person, any tangible
personal property owned or leased by the Company or a Subsidiary,
in any such case which has an aggregate annual future liability
or receivable, as the case may be, in excess of $100,000 and is
not terminable by the Company or a Subsidiary by notice of not
more than 60 days for a cost of less than $100,000;
-24-
(vii) (A) continuing contract for the future purchase of
materials, supplies or equipment (other than purchase contracts
and orders for inventory in the ordinary course of business
consistent with past practice) in excess of $100,000 annually,
(B) management, service, consulting or other similar type of
contract or (C) advertising agreement or arrangement, in any such
case which has an aggregate future liability to any person (other
than the Company or a Subsidiary) in excess of $100,000 and is
not terminable by the Company or a Subsidiary by notice of not
more than 60 days for a cost of less than $100,000;
(viii) material license, option or other agreement relating
in whole or in part to intellectual property (including any
license or other agreement under which the Company or a
Subsidiary is licensee or licensor of any such intellectual
property);
(ix) agreement, contract or other instrument under which the
Company or a Subsidiary has borrowed any money from, or issued
any note, bond, debenture or other evidence of indebtedness to,
any person (other than the Company or a Subsidiary) or any other
note, bond, debenture or other evidence of indebtedness issued to
any person (other than the Company or a Subsidiary);
(x) agreement, contract or other instrument (including
so-called take-or-pay or keepwell agreements) under which (A) any
person (including the Company or a Subsidiary) has directly or
indirectly guaranteed indebtedness, liabilities or obligations of
the Company or a Subsidiary or (B) the Company or a Subsidiary
has directly or indirectly guaranteed indebtedness, liabilities
or obligations of any person (in each case other than
endorsements for the purpose of collection in the ordinary course
of business);
(xi) other than inter-company guarantees, agreement,
contract or other instrument under which the Company or a
Subsidiary has, directly or indirectly, made any advance, loan,
extension of credit or capital contribution in excess of $100,000
to, or other investment in, any person (other than the Company or
a Subsidiary);
(xii) mortgage, pledge, security agreement, deed of trust or
other instrument granting a lien or other encumbrance upon any
Company Property;
(xiii) agreement or instrument providing for indemnification
of any person with respect to liabilities relating to any current
or former business of the Company, a Subsidiary or any
predecessor person exclusive of indemnifications
-25-
included in other documents listed in the Company Disclosure
Letter or granted to sellers of real property owned or leased by
the Company or its affiliates; or
(xiv) any other material agreement, contract, management
contract, lease, license, commitment or instrument to which the
Company or any Subsidiary is a party or by or to which it or any
of its assets or business is bound or subject, not covered by any
of the categories specified in clauses (i) through (xiii) above.
Except as set forth in the Company Disclosure Letter, all
agreements, contracts, leases, licenses, commitments or instruments of
the Company or any Subsidiary listed in the Company Disclosure Letter
(collectively, the "Contracts") are valid, binding and in full force
and effect and are enforceable by the Company or the relevant
Subsidiary in accordance with its terms. Except as set forth in the
Company Disclosure Letter, the Company and the Subsidiaries have
performed all material obligations required to be performed by them to
date under the Contracts and they are not (with or without the lapse
of time or the giving of notice, or both) in breach or default in any
material respect thereunder and, to the knowledge of the Company and
its Subsidiaries, no other party to any of the Contracts is (with or
without the lapse of time or the giving of notice, or both) in breach
or default in any material respect thereunder. Except as set forth in
the Company Disclosure Letter there are no change of control or
similar provisions or any obligations arising under any Contract which
are created, accelerated or triggered by the execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby or thereby.
Section 5.12 Environmental Laws and Regulations. (a) Except as
disclosed in the Company Disclosure Letter, (i) the Company and each
of its Subsidiaries is in compliance with all applicable federal,
state and local laws, statutes, ordinances, rules and regulations, and
all amendments thereto relating to pollution or protection of human
health or safety, health or safety of employees, sanitation, or the
environment, emissions, discharges, disseminations, releases or
threatened releases, of Hazardous Materials (as hereinafter defined)
into the air (indoor and outdoor), surface water, groundwater, soil,
land surface or subsurface, buildings, facilities, real or personal
property or fixtures or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport, handling, release or threatened release of Hazardous
Materials (collectively, "Environmental Laws"), which compliance
includes, but is not limited to, the possession by the Company and its
Subsidiaries of all permits, licenses, registrations, consents and
other governmental authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions
thereof; except for non-compliance that, individually or in the
aggregate, would not have a Material Adverse Effect on the Company,
(ii) neither the Company nor any of its Subsidiaries has received
written notice of, or, to the knowledge of the Company or any
-26-
of its Subsidiaries, is the subject of, any action, claim,
investigation, demand or notice by any person or entity alleging
liability under or non-compliance with any Environmental Law (an
"Environmental Claim") that, individually or in the aggregate, would
have a Material Adverse Effect on the Company; (iii) neither the
Company nor any of its Subsidiaries has received any written notice or
other communication that it is or may be a potentially responsible
person or otherwise liable in connection with any waste disposal site
allegedly containing any Hazardous Materials, or other location used
for the disposal of any Hazardous Materials; and (iv) to the knowledge
of the Company and its Subsidiaries, there are no circumstances that
are reasonably likely to prevent or interfere with the continued
compliance of the Company and its Subsidiaries with all Environmental
Laws, or could form the basis of an Environmental Claim, except for
such circumstances which, individually or in the aggregate, would not
have a Material Adverse Effect on the Company.
(b) Except as disclosed in the Company Disclosure Letter, there
are no Environmental Claims which, individually or in the aggregate,
would have a Material Adverse Effect on the Company that are pending
or, to the knowledge of the Company, threatened against the Company or
any of its Subsidiaries or, to the knowledge of the Company or any of
its Subsidiaries, against any person or entity whose liability for an
Environmental Claim the Company or any of its Subsidiaries has or may
have retained or assumed either contractually or by operation of law.
(c) Except as disclosed in the Company Disclosure Letter, there
has been no spill, discharge, leak, emission, injection, disposal,
escape, dumping or release of any kind on, beneath, above or into the
real property owned, leased, operated, used or in which any other
interest is maintained by the Company or any of its Subsidiaries or
any predecessor entity of the Company or any of its Subsidiaries, or
previously owned by, used by, operated by or leased to the Company or
any of its Subsidiaries or any predecessor entity of the Company or
any of its Subsidiaries (collectively, the "Property"), at any time
and by any person or entity, of any pollutants, contaminants,
hazardous substances, hazardous chemicals, toxic substances, hazardous
wastes, infectious agents or wastes, radioactive materials,
pesticides, explosives, flammables, corrosives, petroleum (including
any by-product or any fraction thereof), asbestos, polychlorinated
byphenyls ("PCBs") or solid wastes, including but not limited to those
defined in any Environmental Law (collectively, "Hazardous
Materials"), except such of the foregoing occurrences as will not have
a Material Adverse Effect on the Company.
(d) Except as disclosed in the Company Disclosure Letter, (i)
There has been no past, and there is no current or anticipated
storage, disposal, generation, manufacture, refinement,
transportation, production or treatment of any Hazardous Materials at,
upon or from the Property except such Hazardous Materials that are
used
-27-
and maintained in the ordinary course of the Companies and its
Subsidiaries business and are used and maintained in compliance with
applicable Environmental Laws; (ii) no asbestos or asbestos-containing
materials or PCBs are on any Property; and (iii) there are no
underground storage tanks ("UST"), incinerators or surface
impoundments on the Property, nor has any UST been removed during the
past 5 years.
Section 5.13 Property and Leases. (a) The Company Disclosure
Letter sets forth a complete and accurate list and the address of all
real property and interests in real property owned in fee by the
Company and the Subsidiaries (individually, an "Owned Property"). The
Company Disclosure Letter sets forth a complete list of all real
property and interests in real property leased by the Company and the
Subsidiaries (individually, a "Leased Property"). The Company or a
Subsidiary has (i) good and insurable fee title to all Owned Property
and (ii) good and valid title to the leasehold estates in all Leased
Property (an Owned Property or Leased Property being sometimes
referred to herein, individually, as a "Company Property" and,
collectively, as "Company Properties"), in each case free and clear of
all mortgages, liens, security interests, encumbrances, leases,
assignments, subleases, easements, covenants, rights-of-way and other
similar restrictions of any nature whatsoever, except (A) such as are
set forth in the Company Disclosure Letter, (B) exceptions specified
in the Title Policies (as hereinafter defined), (C) Permitted Liens
(as hereinafter defined), (D) financing statements, easements,
covenants, rights-of-way and other similar restrictions of record and
(E) (I) zoning, building and other similar restrictions, (II)
mortgages, liens, security interests, encumbrances, easements,
covenants, rights-of-way and other similar restrictions that have been
placed by any developer, landlord or other third party on property
over which the Company or any Subsidiary has easement rights or on any
Leased Property and subordination or similar agreements relating
thereto, and (III) unrecorded easements, covenants, rights-of-way and
other similar restrictions, none of which items set forth in clauses
(I), (II) and (III), individually or in the aggregate, materially
impair the continued use and operation of the property to which they
related in the business of the Company and the Subsidiaries, taken as
a whole, as presently conducted. Except as set forth on the Company
Disclosure Letter, to the knowledge of the Company and its
Subsidiaries, the current use by the Company and the Subsidiaries of
the offices and other facilities located on Company Property does not
violate any local zoning or similar land use or government regulations
in any material respect. Except as set forth in the Company Disclosure
Letter, title insurance policies (or marked title insurance
commitments having the same force and effect as title insurance
policies) have been issued by national title insurance companies
insuring the fee simple title of the Company or its Subsidiaries, as
applicable, to each of the Owned Properties, subject only to the
matters set forth therein (the "Title Policies"), and, to the
knowledge of the Company and its Subsidiaries, the Title Policies are
valid and in full force and effect and no claim has been made under
any such policy. As used in this Agreement, the term "Liens" shall
mean all liens, mortgages,
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deeds of trust, deeds to secure debt, security interests, pledges,
claims, charges, easements and other encumbrances of any nature
whatsoever. As used in this Agreement, the term "Permitted Liens"
shall mean (i) Liens for taxes or other assessments or charges of
Governmental Entities that are not yet delinquent or that are being
contested in good faith by appropriate proceedings, in each case, with
respect to which adequate reserves are being maintained by the Company
or its Subsidiaries to the extent required by GAAP, (ii) statutory
Liens of landlords, carriers, warehousemen, mechanics, materialmen and
other Liens imposed by law and created in the ordinary course of
business for amounts not yet overdue or which are being contested in
good faith by appropriate proceedings, in each case, with respect to
which adequate reserves or other appropriate reserves are being
maintained by the Company or its Subsidiaries to the extent required
by GAAP, (iii) easements, rights-of-way, covenants and restrictions
which do not (x) interfere materially with the ordinary conduct of any
Company Property or the business of the Company and its Subsidiaries
as a whole or (y) detract materially from the value or usefulness of
the Company Properties to which they apply and (iv) the other Liens,
if any, specified in the Company Disclosure Letter.
(b) The Company Disclosure Letter sets forth a complete and
accurate list of all material commitments, letters of intent or
similar written understandings made or entered into by the Company or
any of its Subsidiaries as of the date hereof (x) to sell, mortgage,
pledge or hypothecate any Owned Properties, which, individually or in
the aggregate, are material, or to otherwise enter into a material
transaction in respect of the ownership or financing of any Company
Property or (y) to purchase or to acquire an option, right of first
refusal or similar right in respect of any real property, which,
individually or in the aggregate, are material. The Company has
delivered to Investor a true and complete copy of each such
commitment, letter of intent or other understanding. The Company
Disclosure Letter also sets forth a complete and accurate list of all
agreements to purchase real property to which the Company or any
Subsidiary is a party.
(c) Except as set forth in the Company Disclosure Letter, none of
the Company Properties is subject to any outstanding purchase options
nor has the Company or any of its Subsidiaries entered into any
outstanding contracts with others for the sale, mortgage, pledge,
hypothecation, assignment, sublease, lease or other transfer of all or
any part of any Company Property, and no person has any right or
option to acquire, or right of first refusal with respect to, the
Company's or any of its Subsidiaries' interest in any Company Property
or any part thereof. Except as set forth in the Company Disclosure
Letter, none of the Company or any of its Subsidiaries has any
outstanding options or rights of first refusal or has entered into any
outstanding contracts with others for the purchase of any real
property.
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(d) The Company will deliver to Investor prior to the Effective
Time a capital expenditure budget and schedule for each Company
Property, which describes the capital expenditures which the Company
or any Subsidiary has budgeted for such Company Property for the
period ending December 31, 1997 (the "Capital Expenditure Budget and
Schedule"). Except as set forth in the Capital Expenditure Budget and
Schedule there are no capital expenditure budgets or projections for
periods after December 31, 1996 except for the Company's financial
projections for 1998 and 1999 which have heretofore been furnished to
Investor. The costs and time schedules set forth in the Capital
Expenditure Budget and Schedule are reasonable estimates and
projections. Except as set forth in the Company Disclosure Letter,
there are no outstanding or, to the knowledge of the Company,
threatened requirements by any insurance company which has issued an
insurance policy covering any Company Property, or by any board of
fire underwriters or other body exercising similar functions,
requiring any repairs or alterations to be made to any Company
Property that would, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect on the Company.
(e) The Company will deliver to Investor prior to the Effective
Time a list of each Company Property which consists of or includes
undeveloped land or which is in the process of being developed or
redeveloped (collectively, the "Development Properties") and a brief
description of the development or redevelopment intended by the
Company or any Subsidiary to be carried out or completed thereon
(collectively, the "Projects"), including any budget and development
schedule therefor prepared by or for the Company or any Subsidiary
(collectively, the "Development Budget and Schedule"). The Company
Disclosure Letter sets forth all agreements, permits, licenses,
consents and authorizations which have been entered into or obtained
with respect to each Development Property. To the knowledge of the
Company and its Subsidiaries, there are no material impediments to or
constraints on the development or redevelopment of any Project in all
material respects within the time frame and for the cost set forth in
the Development Budget and Schedule applicable thereto. In the case of
each Project the development of which has commenced, to the knowledge
of the Company and its Subsidiaries, the costs and expenses incurred
or to be incurred in connection with such Project and the progress
thereof are consistent and in compliance in all material respects with
the Development Budget and Schedule applicable thereto. The Company
has made available to Investor all feasibility studies, soil tests,
due diligence reports and other studies, tests or reports performed by
or for the Company at any time since the Company's initial public
offering, which relate to the Development Properties or the Projects.
(f) The Company and each of its Subsidiaries have good and
sufficient title to all the personal and non-real properties and
assets reflected in their books and
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records as being owned by them, free and clear of all Liens, except
for Permitted Liens which are not, individually or in the aggregate,
reasonably expected to have a Material Adverse Effect on the Company.
Section 5.14 Patents, Trademarks, Copyrights. (a) All patents and
patent applications owned by or licensed to or used by the Company or
any of its Subsidiaries that are listed in the Company Disclosure
Letter have been duly filed in or issued by the United States Patent
and Trademark Office or the corresponding offices of other countries
or other jurisdictions to the extent set forth in the Company
Disclosure Letter, and have been properly maintained in accordance
with all applicable provisions of law and administrative regulations
in the United States and each such country or other jurisdictions.
Except as set forth in the Company Disclosure Letter: (i) the use of
such patents by the Company and its Subsidiaries does not require the
consent of any third party; (ii) such patents are freely transferable
and are owned exclusively by the Company and its Subsidiaries free and
clear of any attachments, liens, royalties, encumbrances, adverse
claims, licenses or any other ownership or other interest of any other
person whatsoever; (iii) no person has a license from the Company or
any of its Subsidiaries to use any of such patents or any claim which
may arise from the existence of such patent applications; (iv) no
outstanding order, decree, judgment or stipulation, and no proceeding
charging the Company or any of its Subsidiaries with infringement of
any adversely held patent has been served upon the Company or any of
its Subsidiaries at any time during the five-year period prior to and
ending on the date hereof or, to the best of the knowledge of the
Company and its Subsidiaries, is threatened to be filed; (v) the
conduct of the business of the Company and its Subsidiaries as now
conducted or proposed to be conducted will not result in the
infringement of any of such patents; and (vi) to the best of the
knowledge of the Company and its Subsidiaries, no person is infringing
upon any of such patents.
(b) The Company and its Subsidiaries own or possess all other
adequate licenses or other valid rights to use all other material
patents, patent rights, trademarks, trademark rights, trade names,
trade name rights, copyrights, know-how and other proprietary
information used or held for use in connection with the business of
the Company and its Subsidiaries as currently being conducted and is
unaware of any assertions or claims challenging the validity of any of
the foregoing. The conduct of the business of the Company and its
Subsidiaries as now conducted does not conflict with any patents,
patent rights, licenses, trademarks, trademark rights, trade names,
trade name rights or copyrights of others in any material way, which
is reasonably likely to have a Material Adverse Effect on the Company.
No material infringement of any proprietary right owned by or licensed
by or to the Company or any of its Subsidiaries is known to the
Company or any of its Subsidiaries.
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Section 5.15 Insurance. The Company and each of its Subsidiaries
has been and is insured by financially sound and reputable insurers
unaffiliated with the Company or any of its Subsidiaries with respect
to its property and the conduct of its business in such amounts and
against such risks as are reasonably adequate to protect its
properties and business, including, without limitation, comprehensive
general liability (including, without limitation, automotive, public
risk, property and directors' and officers' liability) and products
liability insurance.
Section 5.16 Takeover Statutes. The Board of Directors of the
Company has taken all appropriate action so that neither Investor nor
Sub will be an "interested stockholder" within the meaning of Section
203 of the Act, by virtue of the Investor's or Sub's entry into this
Agreement and the Stockholders Agreement and the consummation of the
transactions contemplated hereunder and thereunder.
Section 5.17 Taxes. Except as set forth in the Company Disclosure
Letter, (i) the Company and each of its Subsidiaries has filed all
material Tax Returns (as hereinafter defined) required to have been
filed, which returns are true and complete in all material respects;
(ii) the Company and each of its Subsidiaries has duly paid or made
provision on its books for the payment of all material Taxes (as
hereinafter defined) (including material estimated Taxes and any
interest or penalties) which are due and payable (whether or not shown
on any such Tax Returns), and the Company has and each of its
Subsidiaries has withheld or collected and paid over pursuant to
applicable law all material Taxes they are required to withhold and
collect, (iii) neither the Company nor any of its Subsidiaries has
waived any statute of limitations in respect of material Taxes of the
Company or any of its Subsidiaries; (iv) no issues that have been
raised in writing by the relevant taxing authority in connection with
the examination of the Tax Returns referred to in clause (i) are
currently pending; and (v) all deficiencies asserted or assessments
made as a result of any examination of the Tax Returns referred to in
clause (i) by a taxing authority have been paid in full. For purposes
of this Agreement (a) "Tax" (and, with correlative meaning, "Taxes"
and "Taxable") means any federal, state, local or foreign income,
gross receipts, property, sales, use, license, excise, franchise,
employment, payroll, premium, withholding, alternative or added
minimum, ad valorem, transfer or excise tax, or any other tax, custom,
duty, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty, imposed by any
governmental authority, and (b) "Tax Return" means any return, report
or similar statement required to be filed with respect to any Tax
(including any attached schedules), including, without limitation, any
information return, claim for refund, amended return or declaration of
estimated Tax.
Section 5.18 No Change of Control. Except as set forth in the
Company Disclosure Letter, the consummation of the Merger and the
transactions contemplated by
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this Agreement will not constitute a "change of control" or similar
event under any contract or agreement of the Company giving use to a
right to terminate or accelerate or resulting in an event of default
thereunder or an increase in the Company's obligations thereunder.
Copies of any such contracts or agreements and all amendments thereto
will be promptly furnished to Investor after the date of this
Agreement.
Section 5.19 Brokers. No broker, investment banker or other
person, other than the Financial Advisor, the fees and expenses of
which will be paid by the Company, is entitled to any broker's,
finder's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company. A copy of the engagement letter
between the Financial Advisor and the Company setting forth the fees
and expenses to be paid by the Company in connection with the
transactions contemplated by this Agreement has been provided to
Investor.
Section 5.20 Disclosures. This Agreement and the Company
Disclosure Letter, taken as a whole, do not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements
contained herein, in light of the circumstances under which they were
made, not misleading.
Section 5.21 Company Disclosure Letter. All of the provisions of
any agreement, document or other item listed on The Company Disclosure
Letter are deemed set forth in the Company Disclosure Letter.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES REGARDING SUB
Investor and Sub jointly and severally represent and warrant to
the Company as follows:
Section 6.1 Organization and Standing. Sub is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware. Sub is wholly owned by Investor and was organized
solely for the purpose of acquiring the Company and engaging in the
transactions contemplated by this Agreement and has not engaged in any
business since it was incorporated which is not in connection with the
acquisition of the Company and this Agreement.
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Section 6.2 Authority; Non-Contravention. Sub has the requisite
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement, the performance by Sub of its obligations hereunder and the
consummation of the transactions contemplated hereby have been duly
authorized by its Board of Directors and Investor as its sole
stockholder, and, except for the corporate filings required by state
law, no other corporate proceedings on the part of Sub are necessary
to authorize this Agreement and the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by Sub
and (assuming the due authorization, execution and delivery hereof by
the Company) constitutes a valid and binding obligation of Sub
enforceable against Sub in accordance with its terms, except as the
enforceability thereof may be limited by creditors' rights generally
or by general principles of equity. The execution and delivery of this
Agreement does not, and the consummation of the transactions
contemplated hereby and compliance with the provisions hereof will
not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation
or to the loss of a material benefit under, or result in the creation
of any lien, security interest, charge or encumbrance upon any of the
properties or assets of Sub under, any provision of (i) the Articles
of Incorporation or By-Laws of Sub, (ii) any loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement, instrument,
permit, concession, franchise or license applicable to Sub or (iii)
any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Sub or any of its properties or assets, other
than, in the case of clauses (ii) or (iii), any such conflicts,
violations, defaults, rights, liens, security interests, charges or
encumbrances that, individually or in the aggregate, would not have a
Material Adverse Effect on Sub, materially impair the ability of Sub
to perform its obligations hereunder or prevent the consummation of
any of the transactions contemplated hereby.
ARTICLE VII
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 7.1 Conduct of Business by the Company Pending the
Merger. Except as otherwise expressly contemplated by this Agreement
or as set forth in the Company Disclosure Letter and except as
contemplated by the Current Operating Plan and Budget of the Company
and its subsidiaries, attached hereto as Exhibit A (including the
right to substitute projects of substantially similar
characteristics), during the period from the date of this Agreement
through the Effective Time, the Company shall, and shall cause each or
its Subsidiaries to, in all material respects carry on its business
in, and not enter into any material transaction other than in
accordance with, the regular and ordinary course and, to the extent
consistent therewith, use its reasonable best efforts to
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preserve intact its current business organization, keep available the
services of its current officers and employees and preserve its
relationships with customers, suppliers and others having business
dealings with it. Without limiting the generality of the foregoing,
and except as otherwise expressly contemplated by this Agreement or as
set forth in the Company Disclosure Letter, and except as contemplated
by the Current Operating Plan and Budget of the Company and its
Subsidiaries, attached hereto as Exhibit A, and subject to the
provisions of Sections 8.5 and 10.4, the Company shall not, and shall
cause each of its Subsidiaries not to, without the prior written
consent of Investor:
(a) other than in connection with (i) the conversion of
Exchangeable Preferred Stock into Common Stock in accordance with
their current terms, (ii) the exercise of options outstanding prior to
the date hereof in accordance with their current terms and (iii) the
payment of dividends on the Exchangeable Preferred Stock in accordance
with their current terms, (x) declare, set aside or pay any dividends
on, or make any other actual, constructive or deemed distributions in
respect of, any of its capital stock, or otherwise make any payments
to its stockholders in their capacity as such, other than dividends
declared prior to the date of this Agreement, (y) split, combine or
reclassify any of its capital stock or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock or (z) purchase, redeem or otherwise
acquire any shares of capital stock of the Company or any of its
Subsidiaries or any other securities thereof or any rights, warrants
or options to acquire any such shares or other securities;
(b) issue, deliver, sell, pledge, dispose of or otherwise
encumber any shares of its capital stock, any other voting securities
or equity equivalent or any securities convertible into, or any
rights, warrants or options to acquire, any such shares, voting
securities or convertible securities or equity equivalent (other than
as specified in clauses (i) through (iii) of paragraph (a) above);
(c) amend its Certificate of Incorporation or By-Laws;
(d) acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial portion of the assets of or equity in,
or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof or
otherwise acquire or agree to acquire any assets that in the aggregate
have a value in excess of 1% of the Company's assets;
(e) sell, lease or otherwise dispose of, or agree to sell, lease
or otherwise dispose of, any of its assets that in the aggregate have
an excess of 1% of the Company's assets;
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(f) amend or otherwise modify, or terminate, any material
Contract, or enter into any joint venture, lease or management
agreement or other material agreement of the Company or any of its
Subsidiaries;
(g) incur any additional indebtedness (including for this purpose
any indebtedness evidenced by notes, debentures, bonds, leases or
other similar instruments, or secured by any lien on any property,
conditional sale obligations, obligations under any title retention
agreement and obligations under letters of credit or similar credit
transaction) in a single transaction or a group of related
transactions, enter into a guaranty, or engage in any other financing
arrangements having a value in excess of 1% of the Company's assets,
or make any loans, advances or capital contributions to, or
investments in, any other person;
(h) alter through merger, liquidation, reorganization,
restructuring or in any other fashion its corporate structure or
ownership;
(i) except as may be required as a result of a change in law or
in generally accepted accounting principles, change any of the
accounting principles or practices used by it;
(j) revalue any of its assets, including, without limitation,
writing down the value of its inventory or writing off notes or
accounts receivable, other than in the ordinary course of business;
(k) make any tax election, change any annual tax accounting
period, amend any tax return, settle or compromise any income tax
liability, enter into any closing agreement, settle any tax claim or
assessment, surrender any right to claim a tax refund or fail to make
the payments or consent to any extension or waiver of the limitations
period applicable to any tax claim or assessment;
(l) except in the ordinary course of business, settle or
compromise any pending or threatened suit, action or claim relating to
the transactions contemplated hereby with a cost of $250,000 or more;
(m) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business of liabilities reflected or reserved
against in, or contemplated by, the financial statements (or the notes
thereto) of the Company or incurred in the ordinary course of business
consistent with past practice;
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(n) increase in any manner the compensation or fringe benefits of
any of its directors, officers and other key employees or pay any
pension or retirement allowance not required by any existing plan or
agreement to any such employees, or become a party to, amend or commit
itself to any pension, retirement, profit-sharing or welfare benefit
plan or agreement or employment agreement with or for the benefit of
any employee, other than increases in the compensation of employees
who are not officers or directors of the Company or any of its
Subsidiaries made in the ordinary course of business consistent with
past practice, or, except to the extent required by law, voluntarily
accelerate the vesting of any compensation or benefit;
(o) waive, amend or allow to lapse any term or condition of any
confidentiality, "standstill", consulting, advisory or employment
agreement to which the Company is a party;
(p) approve any annual operating budgets for the Company and its
Subsidiaries;
(q) change the Company's dividend policy;
(r) enter into any transaction with affiliates;
(s) enter into any business other than the ownership, management,
operation and development of assisted living facilities and business
related thereto;
(t) pursuant to or within the meaning of any bankruptcy law, (i)
commence a voluntary case, (ii) consent to the entry of an order for
relief against it in an involuntary case, (iii) consent to the
appointment of a custodian of it or for all or substantially all of
its property or (iv) make a general assignment for the benefit of its
creditors;
(u) purchase or lease or enter into a binding agreement to
purchase or lease any real property;
(v) enter into any employment agreement with any officer or
employee;
(w) enter into any development agreement, option relating to new
development or any other obligation relating to new development which
in the aggregate would have a cost to the Company in excess of 1% of
the Company's assets;
(x) take, or agree in writing or otherwise to take, any of the
foregoing actions.
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During the period from the date of this Agreement through the
Effective Time, (i) as requested by Investor, the Company shall confer
on a regular basis with one or more representatives of Investor with
respect to material operational matters; (ii) the Company shall,
within 30 days following each fiscal month, deliver to Investor
financial statements, including an income statement and balance sheet
for such month; and (iii) upon the knowledge of the Company or any of
its Subsidiaries of any Material Adverse Change to the Company, any
material litigation or material governmental complaints,
investigations or hearings (or communications indicating that the same
may be contemplated), or the breach in any material respect of any
representation or warranty contained herein, the Company shall
promptly notify Investor thereof.
Notwithstanding any provision contained in this Agreement, action
taken by the Company and its Subsidiaries which is permitted under
this Section 7.1 shall not constitute a misrepresentation or breach of
warranty or covenant. The Company shall have the right to update the
Company Disclosure Letter, as it relates to Section 5.11, between the
date hereof and the Effective Time to reflect actions taken by the
Company and its Subsidiaries which are permitted to be taken pursuant
to this Section 7.1.
Section 7.2 Conduct of Business of Sub Pending the Merger. During
the period from the date of this Agreement through the Effective Time,
Sub shall not engage in any activities of any nature except as
provided in or contemplated by this Agreement.
ARTICLE VIII
ADDITIONAL AGREEMENTS
Section 8.1 Registration Statement/Proxy Statement. The Company
shall promptly prepare and file with the Commission as soon as
practicable, a Registration Statement on Form S-4 (the "Form S-4")
under the Securities Act, with respect to the Retained Surviving
Corporation Shares issuable in the Merger, portions of which
Registration Statement shall also serve as the proxy statement of the
Company with respect to the Special Meeting (the "Proxy
Statement/Prospectus"); provided that, at the Company's election, the
Proxy Statement/Prospectus shall be filed as confidential proxy
material and the filing of the Form S-4 shall be made at such later
date prior to the clearance by the United States Securities and
Exchange Commission (the "SEC") of the Proxy Statement/Prospectus as
Investor shall determine. The Company will cause the Proxy
Statement/Prospectus and the Form S-4 to comply as to form in all
material respects with the applicable provisions of the Securities
Act, the Exchange Act and the rules and regulations thereunder. The
Company shall use all reasonable efforts to have the Form S-4 declared
effective by the SEC as promptly as practicable after the filing
thereof (including, without limitation, responding to any comments
received from the
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Commission with respect thereto) and to keep the Form S-4 effective as
long as is necessary to consummate the Merger. The Company shall, as
promptly as practicable, provide to Investor copies of any written
comments received from the SEC with respect to the Proxy
Statement/Prospectus or the Form S-4 and advise Investor of any oral
comments with respect to the Proxy Statement/Prospectus or the Form
S-4 received from the SEC. Investor will cooperate with the Company in
preparing the Proxy Statement/Prospectus and provide the Company with
the information required to be provided by the Investor in the Proxy
Statement/Prospectus. The Company shall use its best efforts to
obtain, prior to the effective date of the Form S-4, all necessary
state securities law or "Blue Sky" permits or approvals required to
carry out the transactions contemplated by the Merger Agreement and
will pay all expenses incident thereto. Investor agrees that none of
the information supplied or to be supplied by Investor for inclusion
or incorporation by reference in the Form S-4 or the Proxy
Statement/Prospectus (i) in the case of the Proxy Statement/Prospectus
and each amendment or supplement thereto, at the time of mailing
thereof and at the time of the Special Meeting, or (ii) in the case of
the Form S-4 and each amendment or supplement thereto, at the time it
is filed or becomes effective, will contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company
agrees that none of the information supplied or to be supplied by the
Company for inclusion or incorporation by reference in the Form S-4 or
the Proxy Statement/Prospectus (i) in the case of the Proxy
Statement/Prospectus and each amendment or supplement thereto, at the
time of mailing thereof and at the time of the Special Meeting, or,
(ii) in the case of the Form S-4 or any amendment or supplement
thereto, at the time it is filed or becomes effective, will contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. For purposes of the foregoing, it is understood and agreed
that information concerning or related to Investor or Sub will be
deemed to have been supplied by Investor and information concerning or
related to the Company shall be deemed to have been supplied by the
Company. No amendment or supplement to the Proxy Statement/Prospectus
will be made by the Company without the approval of Investor which
will not be unreasonably withheld. The Company will advise Investor
promptly after it receives notice thereof, of the time when the Form
S-4 has become effective or any supplement or amendment has been
filed, the issuance of any stop order, or the suspension of the
qualification of the Retained Surviving Corporation Shares issuable in
connection with the Merger for offering or sale in any jurisdiction.
Section 8.2 Compliance with the Securities Act. At least 30 days
prior to the Effective Time, the Company shall deliver to Investor a
list of names and addresses of those persons who were, in the
Company's reasonable judgment, at the record date for
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the Company Meeting, "affiliates" (each such person, an "Affiliate")
of the Company within the meaning of Rule 145 of the rules and
regulations promulgated under the Securities Act. The Company shall
use all reasonable efforts to deliver or cause to be delivered to
Investor, prior to the Effective Time, from each of the Affiliates of
the Company identified in the foregoing list, an Affiliate Letter in
the form attached hereto as Exhibit B (an "Affiliate Letter").
Investor shall be entitled to place legends as specified in such
Affiliate Letters on the certificates evidencing any Retained
Surviving Corporation Shares to be received by such Affiliates
pursuant to the terms of the Agreement, and to issue appropriate stop
transfer instructions to the transfer agent for the Retained Surviving
Corporation Shares, consistent with the terms of such Affiliate
Letters.
Section 8.3 Indemnification. (a) Investor shall cause the
Surviving Corporation to keep in effect provisions in its Certificate
of Incorporation and Bylaws providing for exculpation of director and
officer liability and indemnification of each person who is now or has
at any time prior to the date hereof been entitled to the benefit of
the indemnification provisions set forth in the Company's Certificate
of Incorporation and Bylaws (the "Indemnified Parties"), to the
fullest extent now or hereafter permitted under the Act, which
provisions shall not be amended except as required by applicable law
or except to make changes permitted by law that would enlarge the
Indemnified Parties' right of indemnification.
(b) The Surviving Corporation shall pay all expenses, including
attorneys' fees, that may be incurred by any Indemnified Parties in
enforcing the indemnity obligations provided for in this Section 8.3.
(c) The rights of each Indemnified Party hereunder shall be in
addition to any other rights such Indemnified Party may have under the
Certificate of Incorporation or Bylaws of the Company, under the DGCL
or otherwise. The provisions of this Section shall survive the
consummation of the Merger and are expressly intended to benefit each
of the Indemnified Parties.
(d) The Surviving Corporation shall maintain in effect for not
less than three years after the Effective Time the current policies of
directors, and officers' liability insurance maintained by the Company
with respect to matters occurring on or prior to the Effective Time;
provided, however, that the Surviving Corporation may substitute
therefor policies of at least the same coverage (with carriers
comparable to the Company's existing carriers) containing terms and
conditions which are no less advantageous to the Indemnified Parties;
provided, however, that the Surviving Corporation shall not be
required in order to maintain or procure such coverage to pay an
annual premium in excess of 150% of the current annual premium paid by
the Company
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for its coverage (the "Cap"); and provided, further, that if
equivalent coverage cannot be obtained, or can be obtained only by
paying an annual premium in excess of the Cap, the Surviving
Corporation shall only be required to obtain as much coverage as can
be obtained by paying an annual premium equal to the Cap.
Section 8.4 Additional Agreements. (a) Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use
all commercially reasonable efforts to take, or cause to be taken, all
actions 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 by this Agreement,
including using all commercially reasonable efforts to obtain all
necessary waivers, consents and approvals, to effect all necessary
registrations and filings and to lift any injunction to the Merger
(and, in such case, to proceed with the Merger as expeditiously as
possible).
(b) In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and/or directors of Investor, the
Company and the Surviving Corporation shall take all such necessary
action.
(c) At the request and expense of Investor, the Company will take
all action reasonably requested by Investor to assist the Investor in
obtaining the necessary financing for the Surviving Corporation to
enable the Investor to cause the Company to consummate the
transactions contemplated hereby.
(d) In the event that any action, suit, proceeding or
investigation relating hereto or to the transactions contemplated by
this Agreement is commenced, whether before or after the Effective
Time, the parties hereto agree to cooperate and use their respective
reasonable efforts to vigorously defend against and respond thereto.
Section 8.5 No Shop. The Company agrees (a) that neither it nor
any of its subsidiaries shall, nor shall its or any of its
Subsidiaries' officers, directors, employees, agents and
representatives (including, without limitation, any investment banker,
attorney or accountant retained by it or any of its subsidiaries)
initiate, solicit or encourage, directly or indirectly, any inquiries
or the making or implementation of any proposal or offer (including,
without limitation, any proposal or offer to its stockholders) with
respect to a merger, acquisition, consolidation or similar transaction
involving, or any purchase of all or any significant portion of the
assets or equity securities of, the Company or any of its subsidiaries
(any such proposal or offer being hereinafter referred to as an
"Alternative Proposal"), or except as may be required in the exercise
of the fiduciary duties of the Company's directors to the Company or
its shareholders after
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receiving advice from outside counsel, engage in any negotiations
concerning, or provide any confidential information or data to, or
have any discussions with, any person relating to an Alternative
Proposal, or release any third party from any obligations under any
existing standstill agreement or arrangement, or otherwise facilitate
any effort or attempt to make or implement an Alternative Proposal;
(b) that it will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing, and it will
take the necessary steps to inform the individuals or entities
referred to above of the obligations undertaken in this Section 8.5;
provided, however, that nothing contained in this Section 8.5 shall
prohibit the Company or its Board of Directors from taking and
disclosing to the Company's stockholders a position with respect to a
tender offer by a third party pursuant to Rule 14d-9 and 14e-2(a)
promulgated under the Exchange Act or from making such disclosure to
the Company's stockholders which, in the judgment of the Board of
Directors of the Company after receiving advice of outside counsel,
may be required under applicable law. From and after the execution of
this Agreement, the Company shall immediately advise Investor in
writing of the receipt, directly or indirectly, of any inquiries,
discussions, negotiations, or proposals relating to an Alternative
Proposal (including the specific terms thereof and the identity of the
other party or parties involved) and furnish to Investor within 24
hours of such receipt an accurate description of all material terms
(including any changes or adjustments to such terms as a result of
negotiations or otherwise) of any such written proposal in addition to
any information provided to any third party relating thereto. In
addition, the Company shall immediately advise Investor, in writing,
if the Board of Directors of the Company shall make any determination
as to any Alternative Proposal.
Section 8.6 Advice of Changes; SEC Filings. The Company shall
confer on a regular basis with Investor on operational matters and
provide Investor with data with respect to the Investor and its
Subsidiaries and access to the personnel of the Company and its
Subsidiaries, in each case, as Investor shall reasonably request.
Investor and the Company shall promptly advise each other orally and
in writing of any change or event that has had, or could reasonably be
expected to have, a Material Adverse Effect on Investor or the
Company, as the case may be. The Company and Investor shall promptly
provide each other (or their respective counsel) copies of all filings
made by such party with the SEC or any other Governmental Entity in
connection with this Agreement and the transactions contemplated
hereby.
Section 8.7 Registration Rights Agreement. Prior to the Effective
Time, the Company shall execute and deliver to Investor a registration
rights agreement (the "Registration Rights Agreement") in a form
mutually acceptable to Investor and the Company which will be
effective as of the Effective Time, such agreement to provide
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Investor with five demand registration rights unlimited piggyback and
S-3 registration rights for its Shares all subject to customary terms
and provisions.
Section 8.8 Directors. At the Effective Time, the Company will
obtain a resignation of each director not specified in Schedule 2.3.
ARTICLE IX
CONDITIONS PRECEDENT
Section 9.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger
shall be subject to the fulfillment at or prior to the Effective Time
of the following conditions:
(a) This Agreement and the transactions contemplated hereby shall
have been approved and adopted by the requisite vote of the holders of
the Common Stock.
(b) The Form S-4 shall have become effective in accordance with
the provisions of the Securities Act. No stop order suspending the
effectiveness of the Form S-4 shall have been issued by the Commission
and remain in effect and all necessary approvals under state
securities laws relating to the issuance or trading of the Retained
Surviving Corporation Shares to be issued to stockholders of the
Company in connection with the Merger shall have been obtained.
(c) No preliminary or permanent injunction or other order by any
federal or state court in the United States of competent jurisdiction
which prevents the consummation of the Merger shall have been issued
and remain in effect (each party agreeing to use all commercially
reasonable efforts to have any such injunction lifted).
Section 9.2 Conditions to Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the
additional following conditions, unless waived by the Company:
(a) Investor and Sub shall have performed in all material
respects their agreements contained in this Agreement required to be
performed on or prior to the Effective Time, and the representations
and warranties of Investor and Sub contained in this Agreement (i)
shall be true in all material respects and (ii) shall not,
individually or in the aggregate, contain any untrue statement(s)
which has had, or is reasonably likely to have, a Investor Material
Adverse Effect, in each case, when made and on and as of the Effective
Time as if made on and as of such date (except to the extent they
relate to a
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particular date), except as expressly contemplated or permitted by
this Agreement, and the Company shall have received a certificate of
the Chief Executive Officer of Investor and Sub to that effect.
Section 9.3 Conditions to Obligations of Investor and Sub to
Effect the Merger. The obligations of Investor and Sub to effect the
Merger shall be subject to the fulfillment at or prior to the
Effective Time of the additional following conditions, unless waived
by Investor:
(a) The Company shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or
prior to the Effective Time, and the representations and warranties of
the Company contained in this Agreement shall not, individually or in
the aggregate, contain any untrue statement(s) which has had, or is
reasonably likely to have, a Material Adverse Effect on the Company,
in each case, when made and on and as of the Effective Time as if made
on and as of such date (except to the extent they relate to a
particular date), except as expressly contemplated or permitted by
this Agreement, and Investor and Sub shall have received a certificate
of the Chief Executive Officer of the Company to that effect.
(b) All filings required to be made prior to the Effective Time
with, and all material consents, approvals, authorizations and Permits
required to be obtained prior to the Effective Time from, any
Governmental Entity in connection with the consummation of the Merger,
shall have been made and/or obtained.
(c) All material, individually or in the aggregate, notices
required to be given by the Company and its subsidiaries prior to the
Effective Time with, and all material, individually or in the
aggregate, consents, approvals, authorizations, waivers and amendments
required to be obtained by the Company and its subsidiaries prior to
the Effective Time from, any third party in connection with the
consummation of the Merger, including, without limitation, the
notices, consents, approvals, authorizations, waivers and amendments
specified in Schedule 9.3(c), shall have been made and/or obtained
without the Company incurring unreasonable costs.
(d) No change, event or circumstances (other than changes, events
or circumstances affecting general economic conditions or affecting
the industry in which the Company operates) shall have occurred since
the date of this Agreement which, either individually or in the
aggregate, is reasonably likely to be materially adverse to the
business, assets, prospects, liabilities, properties or financial
condition of the Company and its Subsidiaries taken as a whole or the
results of operations of the stabilized properties of the Company and
its Subsidiaries taken as a whole.
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(e) The Company shall have delivered to Investor the Capital
Expenditure Budget and Schedule and the Development Budget and
Schedule (the "Budgets"), and the Budgets shall reasonably support the
projections included in the Project Face-Off - Kapson Financial
Overview, prepared by Salomon Inc. (the "Salomon Brothers Book").
(f) The Company shall have delivered to Investor legal, valid and
binding agreements relating to the items specified in Schedule 9.3 (f)
(the "Section 9.3 Agreements"), and the Section 9.3 Agreements
together with other agreements set forth in the Company Disclosure
Letter shall reasonably support the projections specified in the
Salomon Brothers Book.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
Section 10.1 Termination by Mutual Consent. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the
Effective Time, before or after the approval of this Agreement by the
stockholders of the Company, by the mutual consent of Investor and the
Company.
Section 10.2 Termination by Either Investor or the Company. This
Agreement may be terminated and the Merger may be abandoned by action
of the Board of Directors of the Company or by the Investor if (a) the
Merger shall not have been consummated by March 31, 1998 (the
"Termination Date"), (b) the approval of the Company's stockholders
shall not have been obtained at the Special Meeting or at any
adjournment or postponement thereof which shall in any event take
place prior to March 31, 1998, or (c) a United States federal or state
court of competent jurisdiction or United States federal or state
governmental, regulatory or administrative agency or commission shall
have issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree,
ruling or other action shall have become final and non-appealable;
provided, that the party seeking to terminate this Agreement pursuant
to clause (c) above shall have used all commercially reasonable
efforts to remove such injunction, order or decree; and provided, in
the case of a termination pursuant to clause (a) above, that the
terminating party shall not have breached in any material respect its
obligations under this Agreement in any manner that shall have
proximately contributed to the failure to consummate the Merger.
Section 10.3 Termination by Investor. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the
Effective Time, by the Investor, if (i) the Board of Directors of the
Company shall have withdrawn or
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modified in a manner adverse to Investor its approval or
recommendation of this Agreement or the Merger or shall have
recommended an Alternative Proposal to the Company's stockholders or
(ii) any of the conditions specified in Sections 9.1 and 9.3 shall
have not been met or waived by Investor at such time as such condition
can no longer be satisfied (provided that the right of Investor to
terminate this Agreement pursuant to this clause (ii) shall not be
available to Investor if Investor's failure to fulfill any obligation
under this Agreement has been the cause of or resulted in the failure
of any such condition).
Section 10.4 Termination by the Company. (a) This Agreement may
be terminated and the Merger abandoned by the Company at any time
prior to the approval of the Merger by the stockholders of the Company
in accordance with applicable law, if there is an Alternative Proposal
which the Board of Directors of the Company in good faith determines
represents a superior transaction for the stockholders of the Company
as compared to the Merger, and the Board of Directors of the Company
determines, after consultation with counsel, that failure to terminate
this Agreement would be inconsistent with the compliance by the Board
of Directors of the Company with its fiduciary duties to stockholders
imposed by law; provided, however, that the right to terminate this
Agreement pursuant to this Section 10.4(a) shall not be available (i)
if the Company has breached in any material respect its obligations
under Section 8.5, (ii) if the Alternative Proposal is subject to a
financing condition, unless the Board of Directors of the Company is
of the opinion, after receiving a written opinion from a nationally
recognized investment banking firm, that the Alternative Proposal is
financeable. The Company will provide Investor with two days' written
notice of its intention to so terminate the Agreement.
(b) This Agreement may be terminated and the Merger abandoned by
the Company if any of the conditions specified in Sections 9.1 and 9.2
shall not have been met or waived by the Company at such time as such
condition can no longer be satisfied (provided that the right of the
Company to terminate this Agreement pursuant to this paragraph (b)
shall not be available to the Company if the Company's failure to
fulfill any obligation under this Agreement has been the cause of or
resulted in the failure of any such condition).
Section 10.5 Effect of Termination and Abandonment. (a) In the
event that (w) this Agreement is terminated by either party pursuant
to Section 10.2(b), (x) the Board of Directors of the Company shall
have withdrawn or modified in a manner adverse to Investor its
approval or recommendation of this Agreement or the Merger or shall
have recommended an Alternative Proposal to the Company's stockholders
and Investor shall have terminated this Agreement pursuant to Section
10.3(i), (y) this Agreement shall have been terminated by the Company
pursuant to Section 10.4(a) or (z)
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any person shall have made an Alternative Proposal at $15.00 per share
of Common Stock or more for 75% or more of the Common Stock and
thereafter this Agreement is terminated for any reason other than
those set forth in clauses (w), (x) or (y) above and within 6 months
thereafter the Company shall have entered into an agreement with
respect to an Alternative Proposal at $15.00 per share of Common Stock
or more for 75% or more of the Common Stock, then the Company shall
promptly, but in no event later than two days after such termination,
pay Investor a fee of $6,000,000 (a "Termination Fee"). In the event
this Agreement is terminated as a result of the failure of the
conditions specified in Sections 9.3(a), (b), (c), (d), (e) or (f)
then the Company shall promptly reimburse Investor for all
out-of-pocket costs and expenses incurred by Investor in connection
with this Agreement and the transactions contemplated hereby,
including, without limitation, costs and expenses of accountants,
attorneys and financial advisors in an amount not to exceed
$1,000,000. The Company acknowledges that the agreements contained in
this Section 10.5(a) are an integral part of the transactions
contemplated in this Agreement, and that, without these agreements,
Investor and Sub would not enter into this Agreement; accordingly, if
the Company fails to promptly pay the termination fee pursuant to this
Section 10.5(a), and, in order to obtain such payment, Investor or Sub
commences a suit which results in a judgment against the Company for
the fee and expenses set forth in this Section 10.5(a), the Company
shall pay to Investor its costs and expenses (including attorneys'
fees) in connection with such suit, together with interest on the
amount of such fee and expenses at the rate of 10% per annum
compounded quarterly (but in no event at a rate in excess of the rate
permitted by Delaware law). In addition, in the event of termination
of this Agreement and the abandonment of the Merger for any reason,
the parties will cooperate to cause the prompt withdrawal of any
applications for licenses, permits or other consents or approvals
submitted by the Company in anticipation of effectuating the Merger.
The sole rights and remedies of Investor and Sub for any
misrepresentation or breach of warranty or covenant arising under this
Agreement shall be limited to the specific rights and remedies set
forth in this Section 10.5.
(b) In the event of termination of this Agreement and the
abandonment of the Merger pursuant to this Article X, all obligations of the
parties hereto shall terminate, except the obligations of the parties pursuant
to this Section 10.5 and Section 11.3.
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ARTICLE XI
MISCELLANEOUS
Section 11.1 Non-Survival of Representations, Warranties and
Agreements. All representations and warranties set forth in this
Agreement shall terminate at the Effective Time.
Section 11.2 Notices. All notices or other communications under
this Agreement shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by
cable, telegram, telex or other standard form of telecommunications,
or by registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
If to Investor:
Prometheus Senior Quarters LLC
c/o Lazard Freres Real Estate Investors L.L.C.
30 Rockefeller Plaza, 63rd Floor
New York, New York 10020
Attention: Robert P. Freeman and Murry N. Gunty
Facsimile: (212) 332-5980
Telephone: (212) 632-6026
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004-1980
Attention: Jonathan L. Mechanic, Esq.
Facsimile: (212) 859-4000
Telephone: (212) 859-8000
If to the Company:
Glenn Kaplan
Kapson Senior Quarters Corp.
125 Froelich Farm Blvd.
Woodbury, New York 11797
Facsimile: (516) 921-8367
Telephone: (516) 921-8900
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with a copy to:
Proskauer Rose LLP
1585 Broadway
New York, New York 10036
Attention: Arnold J. Levine, Esq.
Facsimile: (212) 969-2900
Telephone: (212) 969-3000
or to such other address as any party may have furnished to the other
parties in writing in accordance with this Section.
Section 11.3 Fees and Expenses. Whether or not the Merger is
consummated, except as provided in Section 10.5, all costs and
expenses incurred in connection with this Agreement and the
transactions contemplated by this Agreement shall be paid by the party
incurring such expenses, whether or not the Merger is consummated
except as expressly provided herein.
Section 11.4 Publicity. So long as this Agreement is in effect,
Investor, Sub and the Company agree to consult with each other in
issuing any press release or otherwise making any public statement
with respect to the transactions contemplated by this Agreement, and
none of them shall issue any press release or make any public
statement prior to such consultation, except as may be required by law
or by obligations pursuant to any listing agreement with any national
securities exchange.
Section 11.5 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions
of this Agreement were not performed in accordance with their specific
terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and
provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
Section 11.6 Assignment; Binding Effect. Neither this Agreement
nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties;
provided, however, that Investor shall have the right to assign any of
its rights or obligations hereunder to any affiliate of Investor so
long as Investor shall not be released from any of its obligations
hereunder. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and
their respective successors and assigns. Notwithstanding anything
contained in this
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Agreement to the contrary, nothing in this Agreement, expressed or
implied, is intended to confer on any person other than the parties
hereto or their respective successors and assigns any rights,
remedies, obligations or liabilities under or by reason of this
Agreement; provided that the Indemnified Parties shall be third-party
beneficiaries of Investor's agreement contained in Section 8.6 hereof.
Section 11.7 Entire Agreement. This Agreement, the Exhibits
hereto, the Company Disclosure Letter, the Confidentiality Agreement
dated September 12, 1997, between the Company and Investor and any
documents delivered by the parties in connection herewith and
therewith constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior
agreements and understandings among the parties with respect thereto.
No addition to or modification of any provision of this Agreement
shall be binding upon any party hereto unless made in writing and
signed by all parties hereto.
Section 11.8 Amendment. This Agreement may be amended by the
parties hereto at any time before or after approval of matters
presented in connection with the Mergers by the stockholders of the
Company, but after any such stockholder approval, no amendment shall
be made which by law requires the further approval of stockholders
without obtaining such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of
the parties hereto.
Section 11.9 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE,
WITHOUT REGARD TO ITS RULES OF CONFLICT OF LAWS.
Section 11.10 Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts
shall together constitute one and the same instrument. Each
counterpart may consist of a number of copies hereof each signed by
less than all, but together signed by all of the parties hereto.
Section 11.11 Headings and Table of Contents. Headings of the
Articles and Sections of this Agreement and the Table of Contents are
for the convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever.
Section 11.12 Interpretation. In this Agreement, unless the
context otherwise requires, words describing the singular number shall
include the plural and
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vice versa, and words denoting any gender shall include all genders
and words denoting natural persons shall include corporations and
partnerships and vice versa.
Section 11.13 Waivers. At any time prior to the Effective Time,
the parties hereto may (i) extend the time for the performance of any
of the obligations or other acts of the other parties hereto, (ii)
waive any inaccuracies in the representations and warranties contained
herein or in any documents delivered pursuant hereto and (iii) waive
compliance with any of the agreements or conditions contained herein.
Any agreement on the part of a party hereto to any such extension or
waiver shall be valid if set forth in an instrument in writing signed
on behalf of such party. Except as provided in this Agreement, no
action taken pursuant to this Agreement, including, without
limitation, any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action of
compliance with any representations, warranties, covenants or
agreements contained in this Agreement. The waiver by any party hereto
of a breach of any provision hereunder shall not operate or be
construed as a waiver of any prior or subsequent breach of the same or
any other provision hereunder.
Section 11.14 Incorporation of Exhibits. The Company Disclosure
Letter and all Exhibits attached hereto and referred to herein are
hereby incorporated herein and made a part hereof for all purposes as
if fully set forth herein.
Section 11.15 Severability. Any term or provision of this
Agreement which is invalid or unenforceable in any jurisdiction shall,
as to that 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, the
provision shall be interpreted to be only so broad as is enforceable.
Section 11.16 Subsidiaries. As used in this Agreement, the word
"subsidiary" when used with respect to any party means any corporation
or other organization, whether incorporated or unincorporated, of
which such party directly or indirectly owns or controls at least a
majority of the securities or other interests having by their terms
ordinary voting power to elect a majority of the board of directors or
others performing similar functions with respect to such corporation
or other organization, or any organization of which such party is a
general partner. It being understood and agreed that each of Senior
Quarters at Forsgate L.L.C. and Senior Quarters at Glen Riddle L.P.
shall be deemed Subsidiaries of the Company for the purpose of this
Agreement. As used in this Agreement, the term "knowledge," with
respect to the Company and its Subsidiaries, shall mean the actual
knowledge of Messrs. Glenn Kaplan, Wayne Kaplan, Evan Kaplan or
Raymond DioGuardi.
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IN WITNESS WHEREOF, Investor, Sub and the Company have caused
this Agreement to be signed by their respective officers thereunder
duly authorized all as of the date first written above.
PROMETHEUS SENIOR QUARTERS LLC
By: LAZARD FRERES REAL ESTATE
INVESTORS L.L.C.
By: /s/ Robert P. Freeman
---------------------------------
Robert P. Freeman
President
PROMETHEUS ACQUISITION CORP.
By: /s/ Robert P. Freeman
---------------------------------
Robert P. Freeman
President
KAPSON SENIOR QUARTERS CORP.
By: /s/ Glenn Kaplan
---------------------------------
Glenn Kaplan
Chairman and Chief Executive Officer
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Lazard Freres Real Estate Investors LLC ("LFRE") hereby
irrevocably, unconditionally and completely guarantees and ensures the
full and timely payment and performance of all of Investor's and Sub's
obligations and liabilities under this Agreement and any agreements,
documents or instruments executed or to be executed by either of them
in connection herewith, including, without limitation, causing Sub to
comply with Section 3.4(b) and Investor to comply with Section 3.5(a)
hereof. The obligations and liabilities under this guaranty constitute
primary obligations and liabilities of LFRE and shall not be affected
by the absence of an action to enforce obligations of, or any
proceedings first against, Investor or Sub, any defense, offset,
claim, or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of LFRE as a surety or
guarantor. LFRE represents and warrants that it is the sole member of
Investor.
LAZARD FRERES REAL ESTATE
INVESTORS LLC
By: /s/ Robert P. Freeman
-------------------------------
Robert P. Freeman
President
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