UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 1)
KAPSON SENIOR QUARTERS CORP.
- ----------------------------------------------------------------------
(Name of Issuer)
- ----------------------------------------------------------------------
Common Stock, $.01 par value
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(Title of Class of Securities)
485624100
(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
- ----------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communication)
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October 14, 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
CUSIP No. 485624100 Page 2 of 9 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
AF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
NUMBER OF 7 SOLE VOTING POWER
SHARES 4,150,000
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY EACH
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH 4,150,000
10 SHARED DISPOSITIVE POWER
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,150,000
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ]
EXCLUDES CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
53.55%
14 TYPE OF REPORTING PERSON*
OO
*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
CUSIP No. 485624100 Page 3 of 9 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
WC,BK
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
NEW YORK
NUMBER OF 7 SOLE VOTING POWER
SHARES 4,150,000
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY EACH
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH 4,150,000
10 SHARED DISPOSITIVE POWER
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,150,000
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ]
EXCLUDES CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
53.55%
14 TYPE OF REPORTING PERSON*
OO
*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 Amendment No. 1 (the "Amendment No. 1") to the
statement on Schedule 13D dated October 10, 1997 (the "Initial
Statement") of Prometheus Senior Quarters LLC ("Prometheus") and
Lazard Freres Real Estate Investors L.L.C. ("LFREI" and together with
Prometheus, the "Reporting Parties") relates to the common stock, $.01
par value per share (the "Common Stock"), of Kapson Senior Quarters
Corp., a Delaware corporation (the "Company"). This Amendment No. 1
supplementally amends the Initial Statement. Capitalized terms used
herein but not defined herein have the meanings ascribed to them in
the Initial Statement.
This Amendment No. 1 is being filed by the Reporting Parties
to report an increase in Prometheus' beneficial ownership of the
Common Stock as set forth below.
ITEM 2. IDENTITY AND BACKGROUND.
No change.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Item 3 of the Initial Statement is hereby amended to read in
its entirety as follows.
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 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 Agreement was amended and restated in its entirety as of
October 14, 1997 (the "Restated Agreement") to increase the number of
shares covered by the Option from 3,849,999 shares to 4,150,000 shares
(the "Shares").
The exercise of the Option for the full number of the Shares
would require aggregate funds of $66,400,000. 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 was included as Exhibit 2.1 to the
Initial Statement and is incorporated herein by this reference. A copy
of the Restated Agreement is included as Exhibit 2.3 to this Amendment
No. 1 and is incorporated herein by this reference. The foregoing
description of the Agreement and the Restated Agreement is qualified
in its entirety by reference to such exhibits.
ITEM 4. PURPOSE OF TRANSACTION.
No change.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
Item 5 of the Initial Statement is hereby amended as
follows.
(a) Prometheus is currently entitled to purchase under the
Option 4,150,000 shares of Common Stock (the "Shares"), or
approximately 53.55% 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 and in the Initial Statement, 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) No change.
(c) No change.
(d) No change.
(e) No change.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR
RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER.
Item 6 of the Initial Statement is hereby amended to add the
following paragraphs at the end thereof.
Under the terms of a letter agreement dated September 30,
1997 (the "Letter Agreement") between LFREI and the Board of Directors
(the "Board") of ARV Assisted Living, Inc. ("ARV"), the Board
unanimously consented to LFREI entering into the Merger Agreement. In
exchange for the Board waiving a covenant not to compete which would
have restricted LFREI from entering into the Merger Agreement, LFREI
made certain representations and agreed to certain matters, all as set
forth in the Letter Agreement.
A copy of the Letter Agreement is included as Exhibit 2.4 to
this Amendment No. 1 and is incorporated herein by this reference. The
foregoing description of the Letter Agreement is qualified in its
entirety by reference to such exhibit.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
The following exhibits are filed as part of the Initial
Statement and this Amendment No. 1.
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 (filed as
Exhibit 2.1 to the Initial Statement and
incorporated herein by reference).
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. (filed
as Exhibit 2.2 to the Initial Statement and
incorporated herein by reference).
Exhibit 2.3 Amended and Restated Stockholders
Agreement, dated as of October 14, 1997, by
and among Prometheus Senior Quarters LLC and
Glenn Kaplan, Wayne L. Kaplan and Evan A.
Kaplan.
Exhibit 2.4 Letter from Lazard Freres Real Estate
Investors L.L.C. ("LFREI") to the Board of
Directors of ARV Assisted Living Inc., dated
September 30, 1997, relating to LFREI's
investment in 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 15, 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 15, 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 Communities II, Inc.
Thomas M. Mulroy
Vice President of LFREI
Lorenzo L. Lorenzotti
Secretary of LFREI
EXECUTION COPY
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
Amended and Restated Stockholders Agreement (this "Agreement"),
dated as of October 14, 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;
WHEREAS, each Stockholder may be deemed to own beneficially an
additional 230,001 shares of Common Stock of the Company that are
owned of record by Herbert Kaplan and an additional 70,000 shares of
Common Stock of the Company that are owned of record by Jean Kaplan
(together with the shares 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 Stockholder 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 of record 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
LAZARD FRERES REAL ESTATE
INVESTORS, L.L.C.
30 Rockefeller Center, 63rd Floor
New York, N.Y. 10029
September 30, 1997
The Board of Directors
ARV Assisted Living, Inc.
245 Fischer Avenue D-1
Costa Mesa, CA 92626
Gentlemen:
Lazard Freres Real Estate Investors, L.L.C. ("LFREI") is a party to a
Stockholders Agreement (the "Stockholders Agreement") with ARV
Assisted Living, Inc., (the "Company") dated as of July 14, 1997,
pursuant to which, among other matters, LFREI agreed not to own any
equity interest in any public or private company, the principal
business of which is the ownership, management, operation and
development of assisted living facilities (the "Non-Compete
Covenant"), unless 75% of the members of the Board of Directors of the
Company (other than the Investor Nominees (as such term is defined in
the Stockholders Agreement)) have consented to such ownership, (the
"Required Board Approval").
As you know, LFREI is considering making an investment in Kapson
Senior Quarters, Corp. (the "Kapson Investment"). The purpose of this
letter is to request a waiver from the Non-Compete Convenant specified
in Section 5.1 of the Stockholders Agreement with respect to the
potential Kapson transaction. It is our intention and we acknowledge
your reliance on this intention in granting the waiver contemplated
hereby, to cause Kapson to enter into the following arrangement.
As consideration for the agreement by the Board of Directors to waive
the Non-Compete Convenant with respect to the proposed Kapson
Investment, effective as of obtaining the Required Board approval, in
the form attached hereto as Exhibit A, and the receipt by the Company
of the required shareholder approval to increase LFREI's investment in
the Company up to 49.9%, in the event LFREI consummates the Kapson
transaction, LFREI agrees to the following (each of which shall
terminate at (i) the time of a Termination Event (as defined in the
Stockholders Agreement) or (ii) the time LFREI and its affiliates
collectively own less than 10% of the stock of Kapson):
1. CONSENT RIGHTS: After the closing of the Kapson Investment, LFREI
will not permit Kapson to and will cause Kapson to enter into an
agreement with ARV under which Kapson will agree not to, enter into
any new developments or acquisitions (other than those in its pipeline
at the closing of the Kapson Investment as disclosed in a schedule to
be delivered at the time) without the written consent of a majority of
the independent non-LFREI afflicted or appointed members of the ARV
Board of Directors, which consent may be withheld at the sold
discretion of those directors.
2. RIGHT OF FIRST OFFER: Without limiting the foregoing, ARV will have
a first right to negotiate management, lease and/or purchase
arrangements on terms commercially reasonable to both parties on any
new developments or acquisitions by Kapson, each right to be exercised
by ARV before Kapson enters into binding site contracts.
3. EXISTING FACILITIES AND DEVELOPMENTS: LFREI will seek in good faith
to negotiate with ARV for, leasing or management agreements, on
commercially reasonable and customary terms, of all existing or
planned facilities of Kapson including those in the above-described
"pipeline" (the "Existing Asset Option"). LFREI agrees it will not
enter into or permit Kapson or any of their respective affiliates to
enter into leasing or management arrangements on the existing
facilities (excluding sale leasebacks, so long as such sale leasebacks
would permit ARV to sublease or manage such facilities) other than
with ARV or controlled affiliates of Kapson.
ARV will have the option to sell development assets to Kapson at fair
market value with the right to leaseback the assets on terms as
described herein providing fair compensation to both parties.
4. OPTION: LFREI will grant to ARV (or to its shareholders, the
selection to be made at ARV's option provided mutual agreement of ARV
and LFREI that such purchase by ARV directly will not adversely affect
Kapson's tax and accounting status) the right to acquire from LFREI
shares representing up to 19.9% of the stock of Kapson at the pro rata
amount of LFREI's all-in cost (defined as LFREI's total equity
investment in Kapson at the close of the Kapson Investment including
reasonable capital carrying costs relating to the Kapson Investment)
for a period of 30 days after the later of the completion of the
Kapson Investment or second closing of the LFREI investment in ARV as
defined in the Stock Purchase Agreement dated July 14, 1997 between
LFREI and ARV (and, if ARV elects to have its shareholders exercise
this option, 30 days after a registration statement is declared
effective with respect to the option). The term of this option will
not extend beyond the timing described in this paragraph despite
LFREI's ongoing ownership of Kapson.
5. JOINT VENTURE: LFREI will explore a joint venture arrangement, on
commercially reasonable terms between the Company and Kapson which
would house top corporate management of both firms to achieve
economies of scale. The management company would be jointly owned by
the company and Kapson. Development personnel and activities would in
all likelihood remain at Kapson. Operating personnel and home health
care would in all likelihood remain at ARV. Savings resulting from
this alliance will be shared by the two companies. LFREI will also
explore having Kapson acquire ARV's development projects.
6. PRESS RELEASES: The company and LFREI will have the right to review
and comment on all press releases regarding the foregoing arrangements
for a period from the date hereof. No such press releases regarding
the foregoing arrangements shall be made without the written consent
of the Company and LFREI.
7. PUBLIC DISCLOSURES: The Company will have the right to review and
comment on all public disclosures (e.g. proxy material, 10-K)
regarding the foregoing arrangements for a period from the date hereof
through six months following the close of the Kapson investment. No
such statement in the public disclosures regarding the foregoing
arrangements, shall be made without the written consent of the
Company, such consent not to be unreasonably withheld or delayed.
8. SHAREHOLDER VOTE: Section 5.2 of the Stockholders Agreement and
Sections 2.8, 5.1(c), 9.1 and 9.3(b) of the Stock Purchase Agreement
to which LFREI and the Company are parties, dated as of July 14, 1997,
are hereby amended to substitute the date of February 15, 1998 for the
date of December 31, 1997 as the the day on or prior to which a
meeting at which the stockholders of the Company are asked to vote
upon the transactions contemplated therein shall have duly occurred.
Further, Section 9.3(b) of the Stock Purchase Agreement is amended to
substitute the date of March 15, 1998 for the Jate of January 31, 1998
as the date by which the Second Closing (as defined therein) shall
have occurred.
LFREI hereby represents that, upon completion of the Kapson
Investment, it shall have the authority to cause Kapson to enter into
all of the foregoing arrangements. With respect to the foregoing
arrangements, it is agreed that all negotiations, determinations,
consents and elections by ARV shall be made by a majority of the
Non-Investor Nominee (as defined in the Stockholder's Agreement)
directors of ARV. It is specifically agreed that any such
determination shall not be subject to the provisions of the
Stockholder's Agreement or any other agreement between LFREI and ARV
regarding the Executive Committee of the Company or the supermajority
viting requirements of the Board of Directors of other similar rights.
LFREI believes strongly that a strong alignment of interests between
LFREI, Kapson, and ARV and the synergies that could be created by a
strategic alliance between these two industry players, will
significantly benefit all shareholders of ARV and Kapson, including
LFREI as their largest shareholder.
Very truly yours,
LAZARD FRERES REAL ESTATE INVESTORS, L.L.C.
By: /s/ Robert P. Freeman
----------------------------------
Name: Robert P. Freeman
Title: President
Exhibit A
Form of Consent
The undersigned, constituting 75% of the Board of Directors of ARV
Assisted Living, Inc., hereby consent to the LFREI investment in
Kapson, as described in the attached letter and subject to the terms
and conditions set forth therein:
- ---------------------- --------------------------
Gary Davidson David Collins
- ---------------------- --------------------------
Bruce Andrews John Rydzewski
- ---------------------- --------------------------
Maurice DeWald James Peters
- ----------------------
John Botty
