<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND
AMENDMENT NO. 4 TO SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
------------------------
KAPSON SENIOR QUARTERS CORP.
(NAME OF SUBJECT COMPANY)
PROMETHEUS ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
PROMETHEUS SENIOR QUARTERS, LLC
(BIDDER)
COMMON STOCK, $.01 PAR VALUE
$2.00 CONVERTIBLE EXCHANGEABLE PREFERRED STOCK, $.01 PAR VALUE
(TITLES OF CLASSES OF SECURITIES)
485624100
(CUSIP NUMBER OF CLASS OF SECURITIES) (COMMON STOCK)
ROBERT P. FREEMAN AND MURRY N. GUNTY
C/O LAZARD FRERES REAL ESTATE INVESTORS, L.L.C.
30 ROCKEFELLER PLAZA, 63RD FLOOR
NEW YORK, NEW YORK 10020
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDER)
Copies to:
JONATHAN L. MECHANIC, ESQ.
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
ONE NEW YORK PLAZA
NEW YORK, NEW YORK 10004-1980
(212) 859-8000
MARCH 2, 1998
(DATE OF EVENT WHICH REQUIRES FILING STATEMENT ON SCHEDULE 14D-1)
------------------------
CALCULATION OF FILING FEE
TRANSACTION VALUATION* AMOUNT OF FILING FEE*
---------------------- ---------------------
$181,467,450 $36,293.50
* For the purpose of calculating the fee only, this amount assumes the purchase
of 7,750,000 shares of Common Stock of Kapson Senior Quarters Corp. at $14.50
per share, options to purchase 142,100 shares of Common Stock at $14.50 per
share and 2,400,000 shares of $2.00 Convertible Exchangable Preferred Stock
of Kapson Senior Quarters Corp. at $27.93 per share. Such number of shares
includes all outstanding shares as of February 20, 1998, and assumes the
exercise of outstanding stock options to purchase an aggregate of 142,100
shares of Common Stock. The amount of the filing fee, calculated in
accordance with Rule 0-11(d) under the Securities Exchange Act of 1934,
equals 1/50 of one percent of the cash offered by the Bidder.
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
AMOUNT PREVIOUSLY PAID: N/A FILING PARTY: N/A
FORM OR REGISTRATION NO.: N/A DATE FILED: N/A
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Prometheus Acquisition Corp.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
(a) / /
(b) /x/
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3 SEC USE ONLY
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4 SOURCES OF FUNDS (SEE INSTRUCTIONS)
AF
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(e) OR 2(f) / /
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,150,000 shares of Common Stock (see Item 6)
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8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 7 EXCLUDES CERTAIN SHARES (SEE
INSTRUCTIONS) / /
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9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 7
54% (see Item 6)
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10 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
CO
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2
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Prometheus Senior Quarters, LLC
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
(a) / /
(b) /x/
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3 SEC USE ONLY
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4 SOURCES OF FUNDS (SEE INSTRUCTIONS)
AF
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(e) OR 2(f) / /
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,150,000 shares of Common Stock (see Item 6)
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8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 7 EXCLUDES CERTAIN SHARES (SEE
INSTRUCTIONS) / /
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9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 7
54% (see Item 6)
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10 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
00
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3
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
LF Strategic Realty Investors II L.P.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
(a) / /
(b) /x/
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3 SEC USE ONLY
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4 SOURCES OF FUNDS (SEE INSTRUCTIONS)
AF, BK*
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(e) OR 2(f) / /
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,150,000 shares of Common Stock (see Item 6)
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8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 7 EXCLUDES CERTAIN SHARES (SEE
INSTRUCTIONS) / /
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9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 7
54% (see Item 6)
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10 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
00
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4
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Lazard Freres Real Estate Investors, L.L.C.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
(a) / /
(b) /x/
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3 SEC USE ONLY
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4 SOURCES OF FUNDS (SEE INSTRUCTIONS)
AF
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(e) OR 2(f) / /
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,150,000 shares of Common Stock (see Item 6)
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8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 7 EXCLUDES CERTAIN SHARES (SEE
INSTRUCTIONS) / /
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9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 7
54% (see Item 6)
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10 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
00
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5
<PAGE>
This Statement relates to a tender offer by Prometheus Acquisition Corp., a
Delaware corporation (the 'Offeror') and a wholly owned subsidiary of Prometheus
Senior Quarters, LLC, a Delaware limited liability company ('Parent'), to
purchase all outstanding shares of (i) Common Stock, par value $.01 per share
(the 'Common Stock') and (ii) $2.00 Convertible Exchangable Preferred Stock, par
value $.01 per share (the 'Preferred Stock' and, together with the Common Stock,
the 'Shares'), of Kapson Senior Quarters Corp, a Delaware corporation (the
'Company'), at a purchase price of $14.50 per share of Common Stock (the 'Common
Stock Offer Price') and $27.93 per share of Preferred Stock (the 'Preferred
Stock Offer Price'), in each case net to the seller in cash, without interest,
upon the terms and subject to the conditions set forth in the Offer to Purchase,
dated March 2, 1998 (the 'Offer to Purchase'), and in the Letters of Transmittal
relating to such Shares (which, as either may be amended or supplemented related
from time to time, collectively constitute the 'Offer'), copies of which are
filed as Exhibits a(1) and a(2) hereto, respectively, and which are incorporated
herein by reference. This Statement shall also constitute an Amendment No. 4 to
Schedule 13D with respect to shares of Common Stock which Parent or the Offeror
may be deemed to beneficially own.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Kapson Senior Quarters Corp. The
address of the principal executive offices of the Company is set forth in
Section 8 ('Certain Information Concerning the Company') of the Offer to
Purchase and is incorporated herein by reference.
(b) The exact titles of the classes of equity securities of the Company
being sought in the Offer are Common Stock, par value $.01 per share, and $2.00
Convertible Exchangeable Preferred Stock, par value $.01 per share. The
information set forth in the Introduction to the Offer to Purchase is
incorporated herein by reference.
(c) The information set forth in Section 6 ('Price Range of Common Stock;
Dividends') of the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a) through (d), (g) The information set forth in the Introduction and
Section 9 ('Certain Information Concerning the Offeror and Parent') of the Offer
to Purchase, and in Schedules I and II thereto, is incorporated herein by
reference.
(e) and (f) None the Offeror, Parent, LF Strategic Realty Investors II
L.P., Lazard Freres Real Estate Investors, L.L.C., nor, to the best of their
knowledge, any of the persons listed in Schedules I and II of the Offer to
Purchase, has during the last five years (i) been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or (ii) been a
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 activities
subject to, federal or state securities laws or finding any violation of such
laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) The information set forth in Section 11 ('Background of the Offer; Past
Contacts with the Company') of the Offer to Purchase is incorporated herein by
reference.
(b) The information set forth in the Introduction and Section 11
('Background of the Offer; Past Contacts with the Company'), Section 8 ('Certain
Information Concerning the Company') and Section 9 ('Certain Information
Concerning the Offeror and Parent') of the Offer to Purchase is incorporated
herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) and (b) The information set forth in Section 10 ('Source and Amount of
Funds') of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
6
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ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a) through (e) The information set forth in the Introduction, Section 11
('Background of the Offer; Past Contacts with the Company') and Section 12
('Purpose of the Offer; Short Form Merger; Plans for the Company') and Section
13 ('The Merger Agreement and Related Agreements') of the Offer to Purchase is
incorporated herein by reference.
(f) and (g) The information set forth in Section 7 ('Effect of the Offer on
Market for Common Stock and Registration under the Exchange Act') of the Offer
to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) and (b) The information set forth in the Introduction, Section 9
('Certain Information Concerning the Offeror and Parent') and Section 13 ('The
Merger Agreement and Related Agreements') of the Offer to Purchase is
incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction, Section 11 ('Background of
the Offer; Past Contacts with the Company') and Section 13 ('The Merger
Agreement and Related Agreements') of the Offer to Purchase is incorporated
herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Introduction and in Section 17 ('Fees and
Expenses') of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 9 ('Certain Information Concerning the
Offeror and Parent') of the Offer to Purchase is hereby incorporated by
reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in Section 11 ('Background of the Offer; Past
Contacts with the Company'), Section 12 ('Purpose of the Offer; Short Form
Merger; Plans for the Company') and Section 13 ('The Merger Agreement and
Related Agreements') of the Offer to Purchase is incorporated herein by
reference.
(b) and (c) The information set forth in Section 16 ('Certain Legal
Matters; Required Regulatory Approvals') of the Offer to Purchase is
incorporated herein by reference.
(d) The information set forth in Section 7 ('Effect of the Offer on the
Market for Common Stock and Registration under the Exchange Act') is
incorporated herein by reference.
(e) None.
(f) The information set forth in the Offer to Purchase and the Letters of
Transmittal is incorporated herein by reference in its entirety.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase, dated March 2, 1998.
(a)(2) Letters of Transmittal relating to Common Stock and Preferred Stock.
(a)(3) Letter from Lazard Freres & Co. LLC, as Dealer Manager, to Brokers,
Dealers, Commercial Banks, Trust Companies and Other Nominees.
(a)(4) Letter from Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees to Clients.
(a)(5) Notice of Guaranteed Delivery relating to Common Stock and
Preferred Stock.
7
<PAGE>
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Press Release issued by Parent and the Company on February 24,
1998, and tombstone advertisement dated March 2, 1998.
(c)(1) Amended and Restated Agreement and Plan of Merger, dated as of
February 23, 1998, among Parent, the Offeror and the Company.
(c)(2) Second Amended and Restated Stockholder Agreement, dated as of
February 23, 1998, between Parent and the Kaplans.
(c)(3) Escrow Agreement, dated as of February 23, 1998, among the Kaplans,
the Company and the Offeror.
(c)(4) Amended and restated employment agreements, dated as of February 23,
1998, between the Company and each of the following employees: (1) Glenn Kaplan
as Chief Executive Officer; (2) Evan A. Kaplan as Chief Operating Officer; (3)
Wayne L. Kaplan as Senior Executive Vice President, Secretary or General
Counsel; and (4) Raymond DioGuardi as Chief Financial Officer.
(c)(5) Letter Agreement, dated as of February 23, 1998 among the Company,
the Kaplans, the Offeror and Parent.
(c)(6) Letter from Lazard Freres Real Estate Investors, L.L.C. to the Board
of Directors of ARV Assisted Living Inc., dated October 29, 1997, amending and
restating the terms of the letter agreement, dated September 30, 1997, between
the same parties.
(d) None.
(e) Not applicable.
(f) None.
8
<PAGE>
SIGNATURE
AFTER DUE INQUIRY AND TO THE BEST OF ITS KNOWLEDGE AND BELIEF, EACH OF THE
UNDERSIGNED CERTIFIES THAT THE INFORMATION SET FORTH IN THIS STATEMENT IS TRUE,
COMPLETE AND CORRECT.
Dated: March 2, 1998
PROMETHEUS ACQUISITION CORP.
By: /s/ Robert P. Freeman
__________________________________
Name: Robert P. Freeman
Title: President
PROMETHEUS SENIOR QUARTERS, LLC
By: LF STRATEGIC REALTY INVESTORS II L.P.,
its Sole Member
By: LAZARD FRERES REAL ESTATE
INVESTORS, L.L.C., its General Partner
By: /s/ Robert P. Freeman
__________________________________
Name: Robert P. Freeman
Title: Principal
LF STRATEGIC REALTY INVESTORS II L.P.
By: LAZARD FRERES REAL ESTATE INVESTORS,
L.L.C., its General Partner
By: /s/ Robert P. Freeman
__________________________________
Name: Robert P. Freeman
Title: Principal
LAZARD FRERES REAL ESTATE INVESTORS, L.L.C.
By: /s/ Robert P. Freeman
__________________________________
Name: Robert P. Freeman
Title: Principal
9
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT
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<S> <C>
(a)(1) Offer to Purchase, dated March 2, 1998.
(a)(2) Letters of Transmittal relating to Common Stock and Preferred Stock.
(a)(3) Letter from Lazard Freres & Co. LLC, as Dealer Manager, to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(a)(4) Letter from Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees to Clients.
(a)(5) Notice of Guaranteed Delivery relating to Common Stock and Preferred Stock.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
(a)(7) Press Release issued by the Parent and the Company on February 24, 1998, and tombstone advertisement
dated March 2, 1998.
(c)(1) Amended and Restated Agreement and Plan of Merger, dated as of February 23, 1998, among Parent, the
Offeror and the Company.
(c)(2) Second Amended and Restated Stockholder Agreement, dated as of February 23, 1998, between Parent and
the Kaplans.
(c)(3) Escrow Agreement, dated as of February 23, 1998, among the Kaplans, the Company and the Offeror.
(c)(4) Amended and restated employment agreements, dated as of February 23, 1998, between the Company and
each of the following employees: (1) Glenn Kaplan as Chief Executive Officer; (2) Evan A. Kaplan as
Chief Operating Officer; (3) Wayne L. Kaplan as Senior Executive Vice President, Secretary or General
Counsel; and (4) Raymond DioGuardi as Chief Financial Officer.
(c)(5) Letter Agreement, dated as of February 23, 1998, among the Company, the Kaplans, the Offeror and
Parent.
(c)(6) Letter from Lazard Freres Real Estate Investors, L.L.C. to the Board of Directors of ARV Assisted
Living Inc., dated October 29, 1997, amending and restating the terms of the letter agreement, dated
September 30, 1997, between the same parties.
(d) None.
(e) Not applicable.
(f) None.
</TABLE>
10
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK AND
$2.00 CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
OF
KAPSON SENIOR QUARTERS CORP.
AT
$14.50 NET PER SHARE OF COMMON STOCK AND
$27.93 NET PER SHARE OF $2.00 CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
BY
PROMETHEUS ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
PROMETHEUS SENIOR QUARTERS, LLC
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, MARCH 27, 1998, UNLESS THE OFFER IS EXTENDED.
THE OFFER (THE 'OFFER') IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE
BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE THAT
NUMBER OF SHARES OF COMMON STOCK REPRESENTING AT LEAST A MAJORITY OF THE
OUTSTANDING SHARES OF COMMON STOCK ('COMMON STOCK') ON A FULLY DILUTED BASIS OF
KAPSON SENIOR QUARTERS CORP. (THE 'COMPANY'), AND FOR THE PURPOSE OF THE
SATISFACTION OF SUCH CONDITION, THE TENDER OF EACH SHARE OF $2.00 CONVERTIBLE
EXCHANGEABLE PREFERRED STOCK ('PREFERRED STOCK') OF THE COMPANY WILL BE DEEMED
TO BE THE TENDER OF 1.92604 SHARES OF COMMON STOCK AND (2) SATISFACTION OF
CERTAIN OTHER TERMS AND CONDITIONS. SEE SECTIONS 1 AND 15.
THE OFFER IS BEING MADE PURSUANT TO THE AMENDED AND RESTATED AGREEMENT AND
PLAN OF MERGER, DATED AS OF FEBRUARY 23, 1998 (THE 'MERGER AGREEMENT'), AMONG
PROMETHEUS SENIOR QUARTERS, LLC, PROMETHEUS ACQUISITION CORP. AND THE COMPANY.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER, THE
MERGER AGREEMENT AND THE MERGER CONTEMPLATED BY THE MERGER AGREEMENT (THE
'MERGER'), HAS DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO
AND IN THE BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS AND RECOMMENDS THAT THE
COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES OF COMMON STOCK
AND PREFERRED STOCK PURSUANT TO THE OFFER.
------------------------
IMPORTANT
Any stockholder desiring to tender shares of Common Stock or Preferred
Stock should either (1) complete and sign the appropriate Letter of Transmittal
(or a facsimile thereof) in accordance with the instructions in such Letter of
Transmittal, including any required signature guarantees, and mail or deliver
such Letter of Transmittal (or such facsimile) with the certificate(s) for the
tendered shares and all other required documents to the Depositary (as
hereinafter defined) or tender such shares pursuant to the procedures for
book-entry transfer set forth in Section 3, or (2) request such stockholder's
broker, dealer, commercial bank, trust company or other nominee to effect the
transaction for such stockholder. Stockholders having shares registered in the
name of a broker, dealer, commercial bank, trust company or other nominee must
contact such broker, dealer, commercial bank, trust company or other nominee if
they desire to tender shares so registered.
Any stockholder who desires to tender shares of Common Stock or Preferred
Stock and whose certificates representing such shares are not immediately
available, or who cannot comply with the procedures for book-entry transfer on a
timely basis, must tender such shares by following the procedures for guaranteed
delivery set forth in Section 3.
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
set forth on the back cover of this Offer to Purchase. Additional copies of this
Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery
and other related materials may also be obtained from the Information Agent or
from brokers, dealers, commercial banks or trust companies.
------------------------
The Dealer Manager for the Offer is:
[LOGO OF LAZARD
FRERES & CO. LLC]
------------------------
March 2, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<C> <S> <C>
INTRODUCTION............................................................................................... 1
THE TENDER OFFER........................................................................................... 2
1. Terms of the Offer................................................................................... 2
2. Acceptance for Payment and Payment for Shares........................................................ 4
3. Procedure for Tendering Shares....................................................................... 5
4. Withdrawal Rights.................................................................................... 8
5. Certain Federal Income Tax Consequences.............................................................. 8
6. Price Range of Common Stock; Dividends............................................................... 9
7. Effect of the Offer on the Market for Common Stock and Registration
under the Exchange Act............................................................................... 9
8. Certain Information Concerning the Company........................................................... 10
9. Certain Information Concerning the Offeror and Parent................................................ 13
10. Source and Amount of Funds........................................................................... 14
11. Background of the Offer; Past Contacts with the Company.............................................. 14
12. Purpose of the Offer; Short Form Merger; Plans for the Company....................................... 16
13. The Merger Agreement and Related Agreements.......................................................... 18
14. Dividends and Distributions.......................................................................... 27
15. Certain Conditions of the Offer...................................................................... 27
16. Certain Legal Matters; Required Regulatory Approvals................................................. 28
17. Fees and Expenses.................................................................................... 30
18. Miscellaneous........................................................................................ 30
</TABLE>
i
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To: All Holders of Common Stock and $2.00 Convertible Exchangeable Preferred
Stock of Kapson Senior Quarters Corp.
INTRODUCTION
Prometheus Acquisition Corp. (the 'Offeror'), a Delaware corporation and a
wholly owned subsidiary of Prometheus Senior Quarters, LLC, a Delaware limited
liability company ('Parent'), hereby offers to purchase all outstanding shares
of Common Stock, par value $.01 per share (the 'Common Stock'), and all
outstanding shares of $2.00 Convertible Exchangeable Preferred Stock, par value
$.01 per share (the 'Preferred Stock' and, together with the Common Stock, the
'Shares'), at a purchase price of $14.50 per share of Common Stock (the 'Common
Stock Offer Price') and $27.93 per share of Preferred Stock (the 'Preferred
Stock Offer Price') of Kapson Senior Quarters Corp., a Delaware corporation (the
'Company'), in each case net to the seller in cash, without interest, upon the
terms and subject to the conditions set forth in this Offer to Purchase and in
the Letter of Transmittal relating to such Shares (which, as either may be
amended or supplemented from time to time, collectively constitute the 'Offer').
Tendering holders of Shares will not be obligated to pay brokerage fees or
commissions or, except as set forth in the appropriate Letter of Transmittal,
transfer taxes on the purchase of Shares by the Offeror pursuant to the Offer.
The Offeror will pay all charges and expense of IBJ Schroder Bank & Trust
Company, which firm is acting as the depositary (the 'Depositary'), and of
MacKenzie Partners, Inc., which firm is acting as the information agent (the
'Information Agent'), incurred in connection with the Offer. See Section 17.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER,
THE MERGER AGREEMENT (AS HEREINAFTER DEFINED) AND THE MERGER (AS HEREINAFTER
DEFINED), HAS DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO
AND IN THE BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS AND RECOMMENDS THAT THE
COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE
OFFER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE THAT NUMBER OF SHARES OF
COMMON STOCK REPRESENTING AT LEAST A MAJORITY OF THE OUTSTANDING SHARES OF
COMMON STOCK ON A FULLY DILUTED BASIS (THE 'MINIMUM CONDITION'), AND FOR THE
PURPOSE OF THE SATISFACTION OF THE MINIMUM CONDITION, THE TENDER OF EACH SHARE
OF PREFERRED STOCK WILL BE DEEMED TO BE THE TENDER OF 1.92604 SHARES OF COMMON
STOCK (THE NUMBER OF SHARES OF COMMON STOCK INTO WHICH EACH SHARE OF PREFERRED
STOCK IS CURRENTLY CONVERTIBLE). THE OFFER IS ALSO CONDITIONED UPON CERTAIN
OTHER TERMS AND CONDITIONS CONTAINED HEREIN. SEE SECTIONS 1 AND 15.
SALOMON SMITH BARNEY ('SALOMON') AND J.P. MORGAN SECURITIES INC. ('J.P.
MORGAN'), THE COMPANY'S FINANCIAL ADVISORS, HAVE DELIVERED TO THE COMPANY'S
BOARD OF DIRECTORS THEIR WRITTEN OPINIONS, EACH DATED FEBRUARY 23, 1998, TO THE
EFFECT THAT THE CONSIDERATION TO BE RECEIVED BY THE STOCKHOLDERS OF THE COMPANY
PURSUANT TO THE OFFER AND THE MERGER IS FAIR TO SUCH STOCKHOLDERS FROM A
FINANCIAL POINT OF VIEW. A COPY OF EACH SUCH OPINION IS CONTAINED IN THE
COMPANY'S STATEMENT ON SCHEDULE 14D-9, WHICH IS BEING MAILED TO STOCKHOLDERS OF
THE COMPANY HEREWITH.
The Offer is being made pursuant to the Amended and Restated Agreement and
Plan of Merger (the 'Merger Agreement'), dated as of February 23, 1998, among
Parent, the Offeror and the Company, pursuant to which, following the
consummation of the Offer and the satisfaction or waiver of certain conditions
set forth in the Merger Agreement and in accordance with the General Corporation
Law of the State of Delaware (the 'DGCL'), the Offeror will be merged with and
into the Company (the 'Merger'), the separate existence of the Offeror will
cease and the Company will continue as the surviving corporation following the
Merger (the 'Surviving Corporation'). At the effective time of the Merger (the
'Effective Time'), each outstanding Share (other than Shares held in the
treasury of the Company, Shares owned by any subsidiary of the Company, Shares
owned by the Offeror or Parent or Shares with respect to which appraisal rights
are properly exercised under the DGCL (the 'Dissenting Shares')) will be
converted into and represent the right to receive, in the case of the Common
Stock, the Common Stock Offer Price (the 'Common Stock Merger Consideration')
and, in the case
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of the Preferred Stock, the Preferred Stock Offer Price (the 'Preferred Stock
Merger Consideration' and, together with the Common Stock Merger Consideration,
the 'Merger Consideration'), in each case in cash, without interest. See Section
5 for a description of certain federal income tax consequences of the Offer and
the Merger. Lazard Freres Real Estate Investors, L.L.C., a New York limited
liability company ('LFREI'), unconditionally guaranteed the obligations of
Parent and the Offeror under the Merger Agreement.
In connection with the execution of the Merger Agreement, Parent entered
into a Second Amended and Restated Stockholder Agreement, dated as of February
23, 1998 (the 'Stockholder Agreement'), with Glenn Kaplan, Wayne L. Kaplan and
Evan A. Kaplan (the 'Kaplans'), each a director and executive officer of the
Company, who agreed, among other things, to tender all shares of Common Stock
beneficially owned by them in the Offer and to grant Parent an irrevocable
option, subject to the terms and conditions of the Stockholder Agreement, to
purchase these shares of Common Stock at the Common Stock Offer Price. The
shares of Common Stock beneficially owned by the Kaplans and subject to the
Stockholder Agreement, 4,150,000 shares, represented approximately 54% of the
shares of Common Stock represented by the Company to be outstanding
(approximately 34% of the shares of Common Stock on a fully diluted basis) as of
February 20, 1998.
The Company has advised the Offeror that, as of February 20, 1998, there
were issued and outstanding (a) 7,750,000 shares of Common Stock, (b) 2,400,000
shares of Preferred Stock, and (c) options to acquire an aggregate of 142,100
shares of Common Stock at exercise prices ranging from $9.625 to $10.00 per
share. As of the date hereof, neither the Offeror nor Parent beneficially owns
any Shares (other than as a result of the Stockholder Agreement). Each share of
Preferred Stock is currently convertible into 1.92604 shares of Common Stock.
Accordingly, based upon information provided by the Company, the Minimum
Condition will be satisfied if at least 6,257,299 shares of Common Stock are
validly tendered prior to the expiration of the Offer and not withdrawn. For the
purpose of the satisfaction of the Minimum Condition, the tender of each share
of Preferred Stock will be deemed to be the tender of 1.92604 shares of Common
Stock (the number of shares of Common Stock into which each share of Preferred
Stock is currently convertible).
The Offeror would have sufficient voting power to approve the Merger
without the affirmative vote of any other stockholder if it acquires a
sufficient number of Shares to satisfy the Minimum Condition. If the Offeror
acquires at least 90% of the outstanding Common Stock and at least 90% of the
outstanding Preferred Stock through the Offer or otherwise, the Offeror and
Parent would be able to effect the Merger pursuant to the short form merger
provisions of the DGCL, without prior notice to, or any action by, any other
stockholder of the Company. See Section 12.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
Holders of Preferred Stock can tender their shares in the Offer. They are
not required to convert their shares into Common Stock in order to participate
in the Offer. THE CERTIFICATE OF DESIGNATION FOR THE PREFERRED STOCK PROVIDES
FOR PAYMENT OF A QUARTERLY DIVIDEND OF $.50 PER SHARE ON MARCH 31, 1998 AND THE
SETTING OF A RECORD DATE NOT LATER THAN 10 DAYS PRIOR TO THE PAYMENT DATE. SUCH
DIVIDENDS WILL BE PAID BY THE COMPANY TO HOLDERS OF THE PREFERRED STOCK ON THE
RECORD DATE FOR THE MARCH 31, 1998 DIVIDEND, REGARDLESS OF WHETHER SUCH HOLDERS
TENDER THEIR PREFERRED STOCK IN THE OFFER.
THE TENDER OFFER
1. TERMS OF THE OFFER. Upon the terms and subject to the conditions of the
Offer (including, if the Offer is extended or amended, the terms and conditions
of any such extension or amendment), the Offeror will accept for payment and
thereby purchase all Shares validly tendered and not theretofore withdrawn in
accordance with the procedures set forth in Section 4 hereto prior to the
Expiration Date. The term 'Expiration Date' means 12:00 Midnight, New York City
time, on Friday, March 27, 1998, unless the Offeror shall have extended the
period of time for which the Offer is open, in which event the term 'Expiration
Date' shall mean the latest time and date at which the Offer, as so extended by
the Offeror, will expire.
If the Offeror decides, in its sole discretion, to increase the
consideration offered in the Offer to holders of Shares and if, at the time that
notice of such increase is first published, sent or given to holders of Shares
in the manner specified below, the Offer is scheduled to expire at any time
earlier than the expiration of a period ending on the tenth business day from,
and including, the date that such notice is first so published, sent or given,
then
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the Offer will be extended until the expiration of 10 business days from the
date the notice of such increase is first published, sent or given to holders of
Shares. For purposes of the Offer, a 'business day' means any day other than a
Saturday, Sunday or a federal holiday, and consists of the time period from
12:01 a.m. through 12:00 Midnight, New York City time. IF, PRIOR TO THE
EXPIRATION DATE, THE OFFEROR INCREASES THE CONSIDERATION BEING PAID FOR SHARES
ACCEPTED FOR PAYMENT PURSUANT TO THE OFFER, SUCH INCREASED CONSIDERATION WILL BE
PAID TO ALL STOCKHOLDERS WHOSE SHARES ARE PURCHASED PURSUANT TO THE OFFER
WHETHER OR NOT SUCH SHARES WERE TENDERED PRIOR TO SUCH INCREASE IN
CONSIDERATION.
THE OFFER IS CONDITIONED UPON SATISFACTION OF THE MINIMUM CONDITION. THE
OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS. SEE SECTION 15. The Offeror
reserves the right (but will not be obligated), in accordance with applicable
rules and regulations of the United States Securities and Exchange Commission
(the 'Commission'), subject to the limitations set forth in the Merger Agreement
and described below, to waive or reduce the Minimum Condition or to waive any
other condition of the Offer. If the Minimum Condition or any of the other
conditions set forth in Section 15 have not been satisfied by 12:00 Midnight,
New York City time, on Friday, March 27, 1998 (or any other time then set as the
Expiration Date), the Offeror may, subject to the terms of the Merger Agreement
as described below, elect to (1) extend the Offer and, subject to applicable
withdrawal rights, retain all tendered Shares until the expiration of the Offer,
as extended, (2) subject to complying with applicable rules and regulations of
the Commission, accept for payment all Shares so tendered and not extend the
Offer or (3) terminate the Offer (whether or not any Shares have theretofore
been accepted for payment) and not accept for payment any Shares and return all
tendered Shares to tendering stockholders. Under the terms of the Merger
Agreement, the Offeror may not (except as described in the next sentence),
without prior written consent of the Company, waive the Minimum Condition,
reduce the number of Shares subject to the Offer, decrease the Common Stock
Offer Price or the Preferred Stock Offer Price to be paid pursuant to the Offer,
change the form of consideration payable in the Offer or extend the Offer, if
all the Offer conditions are satisfied or waived. Notwithstanding the foregoing,
the Offeror may, without the consent of the Company, extend the Offer (i) if, at
the then scheduled Expiration Date, any of the conditions to the Offeror's
obligation to accept for payment and pay for the Shares have not been satisfied
or waived, until such time as such conditions are satisfied or waived; (ii) for
any period required by any rule, regulation, interpretation or position of the
Commission or its staff applicable to the Offer; (iii) until 10 business days
following the expiration of the 10 business day period following the Company's
Board of Directors having (A) modified or amended its recommendation of the
Offer in any manner adverse to Parent, (B) withdrawn its recommendation of the
Offer, (C) recommended acceptance of any Alternative Proposal (as hereinafter
defined), (D) resolved to do any of the foregoing or (E) failed to reject any
Alternative Proposal within 10 business days after receipt by the Company or
public announcement thereof and if any of the foregoing continues, for so long
as Parent and the Offeror determine until, in their sole discretion, all Offer
conditions are satisfied; and (iv) for an aggregate period of not more than 10
business days beyond the initial Expiration Date if all conditions have been
satisfied but less than 90% of the then outstanding shares of Common Stock and
less than 90% of the then outstanding shares of Preferred Stock have been
validly tendered and not withdrawn (not including Shares covered by Notices of
Guaranteed Delivery). In addition, the Merger Agreement provides that unless it
is terminated in accordance with its terms (in which case the Offer, whether or
not previously extended, shall expire on such date of termination), at the
request of the Company, Parent and the Offeror shall extend the Expiration Date
from time to time to the earlier of (i) the date on which the Offeror purchases
or becomes obligated to purchase that number of Shares that would satisfy the
Minimum Condition and (ii) the date 60 business days after the date of its
commencement. Assuming the prior satisfaction or waiver of the conditions of the
Offer, the Offeror will, and Parent will cause the Offeror to, accept for
payment and pay for the Shares validly tendered and not withdrawn pursuant to
the Offer as soon as legally permitted after the commencement thereof.
Subject to the limitations set forth in the Merger Agreement and described
above, the Offeror expressly reserves the right (but will not be obligated) in
its sole discretion, at any time and from time to time, to extend the period
during which the Offer is open for any reason by giving oral or written notice
of such extension to the Depositary and by making a public announcement of such
extension. There can be no assurance that the Offeror will exercise its right to
extend the Offer. During any such extention, all Shares previously tendered and
not withdrawn will remain subject to the Offer and subject to the right of a
tendering stockholder to withdraw such Shares.
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Subject to the applicable rules and regulations of the Commission and
subject to the limitations set forth in the Merger Agreement, the Offeror also
expressly reserves the right, at any time and from time to time, in its sole
discretion, (i) to delay payment for any Shares regardless of whether such
Shares had theretofore been accepted for payment, or to terminate the Offer and
not to accept for payment or pay for any Shares not theretofore accepted for
payment or paid for, upon the occurrence of any of the conditions set forth in
Section 15, by giving oral or written notice of such delay or termination to the
Depositary and (ii) at any time or from time to time, to amend the Offer in any
respect. The Offeror's right to delay payment for any Shares or not to pay for
any Shares theretofore accepted for payment is subject to the applicable rules
and regulations of the Commission, including Rule 14e-1(c) under the Securities
Exchange Act of 1934, as amended (the 'Exchange Act'), relating to the Offeror's
obligation to pay the consideration offered or return tendered Shares promptly
after the termination or withdrawal of the Offer.
Any extension of the period during which the Offer is open, delay in
acceptance for payment or payment, termination or amendment of the Offer will be
followed, as promptly as practicable, by public announcement thereof, such
announcement in the case of an extension to be issued not later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date in accordance with the public announcement requirements of Rules
14d-4(c) and 14e-1(d) under the Exchange Act. Without limiting the obligation of
the Offeror under such rule or the manner in which the Offeror may choose to
make any public announcement, the Offeror currently intends to make
announcements by issuing a press release to the Dow Jones News Service and
making any appropriate filing with the Commission.
If the Offeror makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer (including a waiver of the Minimum Condition), the Offeror will
disseminate additional tender offer materials and extend the Offer if and to the
extent required by Rules 14d-4(c), 14d-6(d) and 14(e)-1 under the Exchange Act
or otherwise. The minimum period during which a tender offer must remain open
following material changes in the terms of such offer or the information
concerning such offer, other than a change in price or a change in percentage of
securities sought, will depend upon the facts and circumstances, including the
relative materiality of the terms or information changes. With respect to a
change in price or a change in the percentage of securities sought, a minimum of
10 business days is generally required to allow for adequate dissemination to
stockholders.
The Company has provided the Offeror with the Company's list of
stockholders and security position listings for the purpose of disseminating the
Offer to holders of Shares. This Offer to Purchase and the related Letter of
Transmittal will be mailed to record holders of the Shares and will be furnished
to brokers, dealers, commercial banks, trust companies and similar persons whose
names, or the names of whose nominees, appear on the list of stockholders or, if
applicable, who are listed as participants in a clearing agency's security
position listing for subsequent transmittal to beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and
subject to the conditions of the Offer (including, if the Offer is extended or
amended, the terms and conditions of the Offer as so extended or amended), the
Offeror will accept for payment and will pay for all Shares validly tendered
prior to the Expiration Date and not theretofore withdrawn in accordance with
Section 4 promptly after the later to occur of (a) the Expiration Date and (b)
subject to compliance with Rule 14e-1(c) under the Exchange Act, the
satisfaction or waiver of the conditions set forth in Section 15. Subject to
compliance with Rule 14e-1(c) under the Exchange Act, the Offeror expressly
reserves the right to delay payment for Shares in order to comply in whole or in
part with any applicable law. See Sections 1 and 16.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (i) certificates for
such Shares or timely confirmation (a 'Book-Entry Confirmation') of a book-entry
transfer of such Shares into the Depositary's account at The Depository Trust
Company or The Philadelphia Depository Trust Company (each a 'Book-Entry
Transfer Facility'), pursuant to the procedures set forth in Section 3, (ii) a
properly completed and duly executed Letter of Transmittal (or a manually signed
facsimile thereof) with all required signature guarantees or, in the case of
Shares, an Agent's Message (as hereinafter defined) in connection with a
book-entry transfer and (iii) any other documents required by the Letter of
Transmittal.
The term 'Agent's Message' means a message transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry
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Transfer Facility has received an express acknowledgment from the participant in
such Book-Entry Transfer Facility tendering the Shares that such participant has
received and agrees to be bound by the terms of the related Letter of
Transmittal and that the Offeror may enforce such agreement against the
participant.
For purposes of the Offer, the Offeror will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not withdrawn, if
and when the Offeror gives oral or written notice to the Depositary of the
Offeror's acceptance of such Shares for payment pursuant to the Offer. In all
cases, upon the terms and subject to the conditions of the Offer, payment for
Shares purchased pursuant to the Offer will be made by deposit of the purchase
price with the Depositary, which will act as agent for tendering stockholders
for the purpose of receiving payment from the Offeror and transmitting such
payment to validly tendering stockholders. If, for any reason whatsoever,
acceptance for payment of any Shares tendered pursuant to the Offer is delayed,
or the Offeror is unable to accept for payment Shares tendered pursuant to the
Offer, then, without prejudice to the Offeror's rights under Section 1, the
Depositary may, nevertheless, on behalf of the Offeror, retain tendered Shares,
and such Shares may not be withdrawn, except to the extent that the tendering
stockholders are entitled to withdrawal rights as described in Section 4 below
and as otherwise required by Rule 14e-1(c) under the Exchange Act. UNDER NO
CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE FOR SHARES BE PAID BY THE
OFFEROR, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH
PAYMENT.
If any tendered Shares are not accepted for payment pursuant to the terms
and conditions of the Offer for any reason, or if certificates are submitted for
more Shares than tendered, certificates for such unpurchased or untendered
Shares will be returned, without expense to the tendering stockholder (or, in
the case of Shares delivered by book-entry transfer into the Depositary's
account at a Book-Entry Transfer Facility, such Shares will be credited to an
account maintained within such Book-Entry Transfer Facility), as promptly as
practicable following the expiration, termination or withdrawal of the Offer.
3. PROCEDURE FOR TENDERING SHARES.
VALID TENDERS
For Shares to be validly tendered pursuant to the Offer, a properly
completed and duly executed Letter of Transmittal relating to the Common Stock
or the Preferred Stock, as the case may be (or a manually signed facsimile
thereof), with any required signature guarantees, or, in the case of a
book-entry transfer, an Agent's Message, and any other required documents, must
be received by the Depositary at one of its addresses set forth on the back
cover of this Offer to Purchase on or prior to the Expiration Date, or the
tendering stockholder must comply with the guaranteed delivery procedures set
forth below. In addition, either (i) certificates representing such Shares must
be received by the Depositary or such Shares must be tendered pursuant to the
procedures for book-entry set forth below, and a Book-Entry Confirmation must be
received by the Depositary, in each case prior to the Expiration Date or (ii)
the guaranteed delivery procedures set forth below must be complied with. No
alternative, conditional or contingent tenders will be accepted.
THE METHOD OF DELIVERY OF SHARES, THE RELATED LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH A BOOK-ENTRY TRANSFER
FACILITY, IS AT THE OPTION AND SOLE RISK OF THE TENDERING STOCKHOLDER, AND THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY
(INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION).
IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
BOOK-ENTRY TRANSFER
The Depositary will make a request to establish an account with respect to
the Shares at each Book-Entry Transfer Facility for purposes of the Offer within
two business days after the date of this Offer to Purchase. Any financial
institution that is a participant in a Book-Entry Transfer Facility's system may
make book-entry delivery of Shares by causing such Book-Entry Transfer Facility
to transfer such Shares into the Depositary's account at a Book-Entry Transfer
Facility in accordance with such Book-Entry Transfer Facility's procedures for
such transfer. Although delivery of Shares may be effected through book-entry
transfer at a Book-Entry Transfer Facility prior to the Expiration Date, (i) an
appropriate Letter of Transmittal (or a manually signed facsimile
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thereof), properly completed and duly executed, with any required signature
guarantees, or an Agent's Message in connection with a book-entry transfer, and
any other required documents, must, in any case, be transmitted to and received
by the Depositary at one of its addresses set forth on the back cover of this
Offer to Purchase or (ii) the guaranteed delivery procedures described below
must be complied with. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY
IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE DEPOSITARY.
SIGNATURE GUARANTEE
Signatures on all Letters of Transmittal must be guaranteed by a member in
good standing of the Securities Transfer Agents Medallion Program, or by any
other bank, broker, dealer, credit union, savings association or other entity
which is an 'eligible guarantor institution,' as such term is defined in Rule
17Ad-15 under the Exchange Act (each of the foregoing being referred to as an
'Eligible Institution'), unless the Shares tendered thereby are tendered (i) by
a registered holder of Shares who has not completed either the box labeled
'Special Delivery Instructions' or the box labeled 'Special Payment
Instructions' on the Letter of Transmittal or (ii) for the account of any
Eligible Institution. See Instructions 1 and 5 of the related Letter of
Transmittal.
If the certificates evidencing Shares are registered in the name of a
person or persons other than the signer of the Letter of Transmittal, or if
payment is to be made, or delivered to, or certificates for unpurchased Shares
are to be issued or returned to, a person other than the registered holder or
holders, then the tendered certificates must be endorsed or accompanied by duly
executed stock powers, in either case signed exactly as the name or names of the
registered holder or holders appear on the certificates, with the signatures on
the certificates or stock powers guaranteed by an Eligible Institution as
provided in the Letter of Transmittal. See Instructions 1 and 5 of the related
Letter of Transmittal.
GUARANTEED DELIVERY
If a stockholder desires to tender Shares pursuant to the Offer and such
stockholder's certificates for such Shares are not immediately available or time
will not permit all required documents to reach the Depositary on or prior to
the Expiration Date or the procedures for book-entry transfer cannot be
completed on a timely basis, such Shares may nevertheless be tendered if all of
the following guaranteed delivery procedures are duly complied with:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Offeror herewith, is
received by the Depositary, as provided below, prior to the Expiration
Date; and
(iii) the certificates for all tendered Shares, in proper form for
transfer (or a Book-Entry Confirmation), together with a properly completed
and duly executed Letter of Transmittal relating to the Common Stock or
Preferred Stock, as the case may be (or a manually signed facsimile
thereof), and any required signature guarantees, or, in the case of a
book-entry transfer, an Agent's Message, and any other documents required
by the Letter of Transmittal are received by the Depositary within three
Nasdaq National Market trading days after the date of such Notice of
Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, telex, facsimile transmission or mail to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in the
Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (i) certificates for such Shares or a Book-Entry
Confirmation, (ii) a properly completed and duly executed Letter of Transmittal
relating to the Common Stock or Preferred Stock, as the case may be (or a
manually signed facsimile thereof), with all required signature guarantees, or,
in the case of a book-entry transfer, an Agent's Message and (iii) any other
documents required by the Letter of Transmittal. Accordingly, tendering
stockholders may be paid at different times depending upon when certificates for
Shares or Book-Entry Confirmations are actually received by the Depositary.
Under no circumstances will interest on the purchase price of the Shares be paid
by the Offeror, regardless of any extension of the Offer or any delay in making
such payment.
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BACKUP WITHHOLDING
In order to avoid 'backup withholding' of federal income tax on payments of
cash pursuant to the Offer, a stockholder surrendering Shares in the Offer must
provide the Depositary with such stockholder's correct taxpayer identification
number ('TIN') on a Substitute Form W-9 and certify under penalties of perjury
that such TIN is correct and that such stockholder is not subject to backup
withholding. Certain stockholders (including, among others, all corporations and
certain foreign individuals and entities) are exempt recipients not subject to
backup withholding. If a stockholder does not provide its correct TIN or fails
to provide the certifications described above, the Internal Revenue Service may
impose a penalty on such stockholder, and payment of cash to such stockholder
pursuant to the Offer may be subject to backup withholding of 31%. All
stockholders surrendering Shares pursuant to the Offer should complete and sign
the main signature form and the Substitute Form W-9 included as part of the
Letter of Transmittal to provide the information and certification necessary to
avoid backup withholding (unless an applicable exemption exists and is proved in
a manner satisfactory to the Offeror and the Depositary). Non-corporate foreign
stockholders should complete and sign the main signature form and a Form W-8,
Certificate of Foreign Status, a copy of which may be obtained from the
Depositary, in order to avoid backup withholding. See Instruction 9 to the
Letter of Transmittal.
DETERMINATION OF VALIDITY
All questions as to the form of documents and the validity, eligibility
(including time of receipt) and acceptance for payment of any tender of Shares
will be determined by the Offeror, in its sole discretion, and its determination
will be final and binding on all parties. The Offeror reserves the absolute
right to reject any or all tenders of any Shares that are determined by it not
to be in proper form or the acceptance of or payment for which may, in the
opinion of the Offeror, be unlawful. The Offeror also reserves the absolute
right to waive any of the conditions of the Offer, subject to the limitations
set forth in the Merger Agreement, or any defect or irregularity in the tender
of any particular Shares, whether or not similar defects or irregularities are
waived in the case of other Shares.
The Offeror's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the Instructions thereto) will be final
and binding on all parties. No tender of Shares will be deemed to have been
validly made until all defects and irregularities have been cured or waived by
the Offeror. None of the Offeror or any of its affiliates or assignees, the
Parent, the Depositary, the Information Agent or any other person will be under
any duty to give notification of any defects or irregularities in tenders or
incur any liability for failure to give any such notification.
APPOINTMENT
By executing the appropriate Letter of Transmittal as set forth above, a
tendering stockholder irrevocably appoints designees of the Offeror as such
stockholder's attorneys-in-fact and proxies, each with full power of
substitution, in the manner set forth in the Letter of Transmittal, to the full
extent of such stockholder's right with respect to the Shares tendered by such
stockholder and accepted for payment by the Offeror (and any and all other
Shares or other securities or rights issued or issuable in respect of such
Shares on or after February 23, 1998). All such powers of attorney and proxies
will be considered irrevocable and coupled with an interest in the tendered
Shares. This appointment is effective upon the acceptance for payment of such
Shares by the Offeror in accordance with the terms of the Offer. Upon acceptance
for payment, all prior proxies given by the stockholder with respect to such
Shares or other securities or rights will, without further action, be revoked
and no subsequent proxies may be given or written consent executed (and, if
given or executed, will not be deemed effective). The designees of the Offeror
will, with respect to the Shares and other securities or rights, be empowered to
exercise all voting and other rights of such stockholder as they in their sole
judgment deem proper in respect of any annual or special meeting of the
Company's stockholders, or any adjournment or postponement thereof, or by
consent in lieu of any such meeting or otherwise. The Offeror reserves the right
to require that, in order for Shares to be deemed validly tendered, immediately
upon the Offeror's payment for such Shares, the Offeror or its designee must be
able to exercise full voting and other rights with respect to such Shares and
the other securities or rights issued or issuable in respect of such Shares,
including voting of shares of Common Stock at any stockholders meeting (whether
annual or special or whether or not adjourned) in respect of such Shares.
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4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 4,
tenders of Shares made pursuant to the Offer are irrevocable. Shares tendered
pursuant to the Offer may be withdrawn at any time prior to the Expiration Date
and, unless theretofore accepted for payment pursuant to the Offer, may also be
withdrawn at any time after April 30, 1998. If purchase of or payment for Shares
is delayed for any reason or if the Offeror is unable to purchase or pay for
Shares for any reason, then, without prejudice to the Offeror's rights under the
Offer, tendered Shares may be retained by the Depositary on behalf of the
Offeror and may not be withdrawn except to the extent that tendering
stockholders are entitled to withdrawal rights as set forth in this Section 4,
subject to Rule 14e-1(c) under the Exchange Act, which provides that no person
who makes a tender offer shall fail to pay the consideration offered or fail to
return the securities deposited by or on behalf of security holders promptly
after the termination or withdrawal of the Offer.
For a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase. Any notice of withdrawal must specify the name of the person who
tendered the Shares to be withdrawn, the type of Shares to be withdrawn (i.e.,
Common Stock or Preferred Stock), the number of Shares to be withdrawn and the
name in which the certificates representing such Shares are registered, if
different from that of the person who tendered the Shares. If certificates for
Shares to be withdrawn have been delivered or otherwise identified to the
Depositary, then, prior to the physical release of such certificates, the serial
numbers shown on such certificates must be submitted to the Depositary and,
unless such Shares have been tendered by an Eligible Institution, the signatures
on the notice of withdrawal must be guaranteed by an Eligible Institution. If
Shares have been tendered pursuant to the procedure for book-entry transfer set
forth in Section 3, any notice of withdrawal must also specify the name and
number of the account at the applicable Book-Entry Transfer Facility to be
credited with the withdrawn Shares, in which case a notice of withdrawal will be
effective if delivered to the Depositary by any method of delivery described in
the first sentence of this paragraph. Withdrawals of Shares may not be
rescinded. Any Shares properly withdrawn will be deemed not validly tendered for
purposes of the Offer, but may be retendered at any subsequent time prior to the
Expiration Date by following any of the procedures described in Section 3.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Offeror, in its sole discretion,
and its determination will be final and binding on all parties. None of the
Offeror, the Parent, the Depositary, the Information Agent or any other person
will be under any duty to give notification of any defects or irregularities in
any notice of withdrawal or incur any liability for failure to give any such
notification.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following is a summary of
the principal federal income tax consequences of the Offer and the Merger to
holders whose Shares are purchased pursuant to the Offer or whose Shares are
converted into the right to receive cash in the Merger (including pursuant to
the exercise of appraisal rights). The discussion applies only to holders of
Shares in whose hands Shares are capital assets, and may not apply to Shares
received upon conversion of securities or exercise of warrants or other rights
to acquire Shares or pursuant to the exercise of stock options or otherwise as
compensation, or to holders of Shares who are in special tax situations (such as
insurance companies, tax-exempt organizations, non-U.S. persons, dealers in
securities or commodities, or persons who hold Shares as a position in a
'straddle' or as part of a 'hedging' or 'conversion' transaction for United
States federal income tax purposes).
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW ARE INCLUDED FOR
GENERAL INFORMATIONAL PURPOSES ONLY AND ARE BASED UPON CURRENT LAW. BECAUSE
INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH HOLDER OF SHARES SHOULD CONSULT SUCH
HOLDER'S OWN TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE RULES DISCUSSED
BELOW TO SUCH STOCKHOLDER AND THE PARTICULAR TAX EFFECTS OF THE OFFER AND THE
MERGER, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER INCOME
TAX LAWS.
The receipt of cash for Shares pursuant to the Offer or the Merger
(including pursuant to the exercise of appraisal rights) will be a taxable
transaction for federal income tax purposes (and also may be a taxable
transaction under applicable state, local and other income tax laws). In
general, for federal income tax purposes, a holder of Shares will recognize gain
or loss equal to the difference between his adjusted tax basis in the Shares
8
<PAGE>
sold pursuant to the Offer or converted into the right to receive cash in the
Merger and the amount of cash received therefor. Gain or loss must be determined
separately for each block of Shares (i.e., Shares acquired at the same cost in a
single transaction) sold pursuant to the Offer or converted to cash in the
Merger. Such gain or loss will be capital gain or loss (other than, with respect
to the exercise of appraisal rights, amounts, if any, which are or are deemed to
be interest for federal income tax purposes, which amounts will be taxed as
ordinary income) and will be long-term gain or loss if, on the date of sale (or,
if applicable, the date of the Merger), the Shares were held for more than one
year. In the case of an individual, net long-term capital gain may be subject to
a reduced rate of tax (which will be further reduced in the case of Shares held
for more than 18 months) and net capital losses may be subject to limits on
deductibility.
6. PRICE RANGE OF COMMON STOCK; DIVIDENDS. According to the Company's
Annual Report on Form 10-K for the year ended December 31, 1996, the Common
Stock has been trading on the Nasdaq National Market since September 26, 1996
(the date of the Company's initial public offering of Common Stock) under the
symbol 'KPSQ.' The following table sets forth, for the periods indicated, the
high and low sales prices for the Common Stock as reported on the Nasdaq
National Market:
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1998:
First Quarter (through February 27, 1998).................................. $15.88 $14.13
1997:
Fourth Quarter............................................................. 15.50 13.38
Third Quarter.............................................................. 15.38 10.50
Second Quarter............................................................. 12.13 9.63
First Quarter.............................................................. 11.50 7.38
1996:
Fourth Quarter............................................................. 10.00 6.38
Third Quarter (from September 26, 1996).................................... 10.25 10.00
</TABLE>
On September 29, 1997, the last trading day before public announcement of
the execution of the Original Merger Agreement (as hereinafter defined), the
last sale price of Common Stock, as reported on the Nasdaq National Market, was
$14.625 per share. On February 23, 1998, the last trading day before public
announcement of the execution of the Merger Agreement, the last sale price of
Common Stock, as reported on the Nasdaq National Market, was $15.00 per share.
On February 27, 1998, the last full trading day prior to the commencement of the
Offer, the closing price per share as reported on the Nasdaq National Market was
$14.19. Stockholders are urged to obtain current market quotations for the
Common Stock.
The Preferred Stock is not publicly traded and, accordingly, no information
regarding the prices at which sales, if any, of such securities have been
effected is available to the Offeror.
The Company has never paid any dividends on the Common Stock. Dividends on
the Preferred Stock are payable quarterly at an annual rate of $2.00 per share,
as and when declared by the Board of Directors of the Company. THE CERTIFICATE
OF DESIGNATION FOR THE PREFERRED STOCK PROVIDES FOR PAYMENT OF A QUARTERLY
DIVIDEND OF $.50 PER SHARE ON MARCH 31, 1998 AND THE SETTING OF A RECORD DATE
NOT LATER THAN 10 DAYS PRIOR TO THE PAYMENT DATE. SUCH DIVIDENDS WILL BE PAID BY
THE COMPANY TO HOLDERS OF THE PREFERRED STOCK ON THE RECORD DATE FOR THE MARCH
31, 1998 DIVIDEND, REGARDLESS OF WHETHER SUCH HOLDERS TENDER THEIR PREFERRED
STOCK IN THE OFFER.
7. EFFECT OF THE OFFER ON THE MARKET FOR COMMON STOCK AND REGISTRATION
UNDER THE EXCHANGE ACT. The purchase of shares of Common Stock pursuant to the
Offer will reduce the number of shares of Common Stock that might otherwise
trade publicly and will reduce the number of holders of Common Stock, which will
likely adversely affect the liquidity and market value of the remaining Common
Stock held by stockholders other than the Offeror. The extent of the public
market, if any, for shares of Common Stock and the availability of price
quotations in respect thereof following the purchase of Shares pursuant to the
Offer will be dependent upon the number of holders of shares of Common Stock
remaining at such time, the interest in maintaining a market in such shares on
the part of securities firms, the possible termination of registration of such
shares under the Exchange Act, as described below, and other factors.
9
<PAGE>
The Common Stock is listed on the Nasdaq National Market. According to the
Nasdaq National Market's published guidelines, the Common Stock may no longer be
included in the Nasdaq National Market if, among other things, the number of
shares of publicly held Common Stock (excluding Common Stock held directly or
indirectly by officers, directors and any person who is a beneficial owner of
more than 10% of the Common Stock) is less than 200,000, the aggregate market
value of publicly held Common Stock is less than $1,000,000 or there are fewer
than 400 holders of the Common Stock or 300 holders in round lots. If these
standards are not met, quotations might continue to be published in the
over-the-counter 'additional list' or one of the 'local lists' unless, as set
forth in the Nasdaq National Market's published guidelines, the number of shares
of publicly held Common Stock is less than 100,000, or there are fewer than 300
holders in total. On August 22, 1997, the Commission approved Nasdaq National
Market rule changes, effective February 22, 1998, increasing the maintenance
requirements for a Nasdaq National Market listing. As described below, the
Offeror intends to cause the Company to terminate its Nasdaq National Market
listing and Exchange Act registration if there are fewer than 300 holders of
record of Common Stock following consummation of the Offer. If the Nasdaq
National Market were to delist the Common Stock, the market therefor could be
adversely affected.
The Common Stock is currently registered under the Exchange Act. Such
registration may be terminated upon application by the Company to the Commission
if there are fewer than 300 record holders of Common Stock. It is the intention
of the Offeror to seek to cause an application for such termination to be made
as soon after consummation of the Offer as the requirements for termination of
registration of Common Stock are met. Termination of registration of the Common
Stock under the Exchange Act would substantially reduce the information required
to be furnished by the Company to its stockholders and to the Commission and
would make certain provisions of the Exchange Act no longer applicable to the
Company. For example, if such registration were terminated, the Company would no
longer legally be required to disclose publicly in proxy materials distributed
to stockholders the information which it now must provide under the Exchange Act
or to make public disclosure of financial and other information in annual,
quarterly and other reports required to be filed with the Commission under the
Exchange Act; the requirements of Rule 13e-3 under the Exchange Act with respect
to 'going private' transactions would no longer be applicable to the Company;
and the officers, directors and 10% stockholders of the Company would no longer
be subject to the 'short-swing' insider trading reporting and profit recovery
provisions of the Exchange Act. Furthermore, if such registration were
terminated, persons holding 'restricted securities' of the Company may be
deprived of their ability to dispose of such securities under Rule 144
promulgated under the Securities Act of 1933, as amended.
The Preferred Stock is not currently publicly traded or registered under
the Securities Act of 1933, as amended. Because shares of the Preferred Stock
are convertible into shares of the Common Stock, the effects of the Offer on the
Common Stock described above also may be relevant to holders of the Preferred
Stock and the liquidity and market value of such securities.
MARGIN REGULATIONS
Shares of Common Stock are currently 'margin securities' under the
regulations of the Board of Governors of the Federal Reserve System (the
'Federal Reserve Board'), which has the effect, among other things, of allowing
brokers to extend credit on the collateral of the Common Stock. Depending upon
factors similar to those described above regarding listing and market
quotations, following the Offer it is possible that the Common Stock would no
longer constitute 'margin securities' for the purposes of the margin regulations
of the Federal Reserve Board and therefore could no longer be used as collateral
for loans made by brokers.
8. CERTAIN INFORMATION CONCERNING THE COMPANY. The Company is a Delaware
corporation with its principal executive offices located at 125 Froehlich Farm
Blvd., Woodbury, New York 11797. Except as otherwise set forth herein, the
information concerning the Company contained in this Offer to Purchase,
including financial information, has been furnished by the Company or has been
taken from or based upon publicly available documents and records on file with
the Commission and other public sources. Although neither the Offeror nor Parent
has any knowledge that would indicate that statements contained herein based
upon such documents are untrue, none of the Offeror, Parent, the Information
Agent assumes any responsibility for the accuracy or completeness of the
information concerning the Company, furnished by the Company, or contained in
such documents and records or for any failure by the Company to disclose events
which may have occurred or
10
<PAGE>
may affect the significance or accuracy of any such information but which are
unknown to the Offeror and Parent.
Set forth below is certain summary consolidated financial data with respect
to the Company excerpted or derived from financial information contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996 and
the Company's Form 10-Q for the quarter ended September 30, 1997. More
comprehensive financial information is included in such reports and other
documents filed by the Company with the Commission, and the following summary is
qualified in its entirety by reference to such reports and such other documents
and all the financial information (including any related notes) contained
therein. Such reports and other documents should be available for inspection and
copies thereof should be obtainable in the manner set forth below.
KAPSON SENIOR QUARTERS CORP.
SELECTED SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------------------ --------------------------------------------
THE
THE COMPANY PREDECESSOR(1) THE PREDECESSOR(1)
------------ -------------- --------------------------------------------
1997 1996 1996 1995 1994
------------ -------------- ----------- -------------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Total revenues.................... $ 25,309,846 $ 16,079,060 $23,614,078 $ 14,763,374 $13,754,402
Total operating expenses.......... 23,632,128 14,127,914 20,709,172 11,206,873 10,158,918
Operating income.................. 1,677,718 1,951,146 2,904,906 3,556,501 3,595,484
Income (loss) before income taxes,
minority interest and
extraordinary item............. (2,980,537) (2,635,195) (3,274,916) (369,126) 107,044
Income (loss) before extraordinary
item........................... (1,616,924) (1,762,601) (4,389,652) (353,281) 107,044
Extraordinary item, net........... (776,612) -- -- -- 4,398,672
------------ -------------- ----------- -------------- -----------
Net income (loss)................. (2,393,536) (1,762,601) (4,389,652) (353,281) 4,505,716
Preferred dividend................ 1,086,667 -- -- -- --
------------ -------------- ----------- -------------- -----------
Net income (loss) available to
common stockholders............ $ (3,480,203) $ (1,762,601) $(4,389,652) $ (353,281) $ 4,505,716
------------ -------------- ----------- -------------- -----------
------------ -------------- ----------- -------------- -----------
Loss before extraordinary item.... $ (0.35)
Extraordinary item, net........... (0.10)
------------
Net loss per common share......... $ (0.45)
------------
------------
BALANCE SHEET DATA:
Total current assets.............. $ 30,712,838 $17,211,369 $ 3,740,472 $ 2,134,970
Total assets...................... 164,803,628 95,988,252 54,406,792 34,294,355
Total current liabilities......... 6,847,037 4,756,866 7,336,551 19,846,936
Total liabilities................. 91,694,103 82,748,131 62,754,978 41,554,879
Stockholders' and partners' equity
(deficit)...................... $ 65,798,218 $12,291,196 $ (9,811,457) $(8,739,640)
</TABLE>
- ------------------
(1) The Company was formed in order to consolidate and expand the assisted
living business of the 'Predecessor' and completed its initial public
offering of Common Stock on October 1, 1996. The financial data for the year
ended December 31, 1996 represents nine months of operations of the
Predecessor and three months of operations of the Company.
11
<PAGE>
CERTAIN COMPANY PROJECTIONS
To the knowledge of Parent and the Offeror, the Company does not as a
matter of course make public forecasts as to its future financial performance.
However, in connection with the discussions and negotiations described in
Section 11, the Company furnished Parent with certain financial projections
which Parent and the Offeror believe are not publicly available. Neither Parent
nor the Offeror verified the accuracy of such financial projections and neither
Parent nor Offeror relied on them in evaluating whether or not to proceed with
the Offer.
In September of 1997, prior to the execution of the Original Merger
Agreement, the Company furnished Parent with projections indicating that the
Company's total revenues for the years ending December 31, 1998 and 1999 would
be $94.2 million and $173.9 million, respectively, and that the Company's EBIT
(earnings before interest and taxes) for such years would be $20.0 million and
$38.0 million, respectively. In February of 1998, prior to the execution of the
Merger Agreement on February 23, 1998, the Company furnished Parent with revised
projections indicating that the Company's total revenues for the years ending
December 31, 1998 and 1999 would be $76.2 million and $145.9 million,
respectively, and that the Company's EBIT for such years would be $18.0 million
and $33.1 million, respectively.
IT IS THE UNDERSTANDING OF PARENT AND THE OFFEROR THAT THE PROJECTIONS WERE
NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR COMPLIANCE WITH PUBLISHED
GUIDELINES OF THE COMMISSION OR THE GUIDELINES ESTABLISHED BY THE AMERICAN
INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING PROJECTIONS OR FORECASTS AND
ARE INCLUDED HEREIN ONLY BECAUSE SUCH INFORMATION WAS PROVIDED TO PARENT AND THE
OFFEROR. THESE FORWARD-LOOKING STATEMENTS (AS THAT TERM IS DEFINED IN THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995) ARE SUBJECT TO CERTAIN RISKS
AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE
PROJECTIONS. THE COMPANY HAS ADVISED THE OFFEROR AND PARENT THAT ITS INTERNAL
FINANCIAL FORECASTS (UPON WHICH THE PROJECTIONS PROVIDED TO PARENT WERE BASED IN
PART) ARE, IN GENERAL, PREPARED SOLELY FOR INTERNAL USE AND CAPITAL BUDGETING
AND OTHER MANAGEMENT DECISIONS, AND ARE SUBJECTIVE IN MANY RESPECTS AND THUS
SUSCEPTIBLE TO INTERPRETATIONS AND PERIODIC REVISION BASED ON ACTUAL EXPERIENCE
AND BUSINESS DEVELOPMENTS. THE PROJECTIONS ALSO REFLECT NUMEROUS ASSUMPTIONS
(NOT ALL OF WHICH WERE PROVIDED TO PARENT), ALL MADE BY MANAGEMENT OF THE
COMPANY, WITH RESPECT TO INDUSTRY PERFORMANCE, GENERAL BUSINESS, ECONOMIC,
MARKET AND FINANCIAL CONDITIONS AND OTHER MATTERS, INCLUDING EFFECTIVE TAX RATES
CONSISTENT WITH HISTORICAL LEVELS FOR THE COMPANY, ALL OF WHICH ARE DIFFICULT TO
PREDICT, MANY OF WHICH ARE BEYOND THE COMPANY'S CONTROL AND NONE OF WHICH WERE
SUBJECT TO APPROVAL BY PARENT OR THE OFFEROR. ACCORDINGLY, THERE CAN BE NO
ASSURANCE THAT THE ASSUMPTIONS MADE IN PREPARING THE PROJECTIONS WILL PROVE
ACCURATE, AND ACTUAL RESULTS MAY BE MATERIALLY GREATER OR LESS THAN THOSE
CONTAINED IN THE PROJECTIONS. THE INCLUSION OF THE PROJECTIONS HEREIN SHOULD NOT
BE REGARDED AS AN INDICATION THAT ANY OF PARENT, THE OFFEROR, THE COMPANY OR
THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES CONSIDERED OR CONSIDER THE
PROJECTIONS TO BE A RELIABLE PREDICTION OF FUTURE EVENTS, AND THE PROJECTIONS
SHOULD NOT BE RELIED UPON AS SUCH. NONE OF PARENT, THE OFFEROR, THE COMPANY NOR
ANY OF THEIR RESPECTIVE AFFILIATES ASSUMES ANY RESPONSIBILITY FOR THE VALIDITY,
REASONABLENESS, ACCURACY OR COMPLETENESS OF THE PROJECTIONS. NONE OF PARENT, THE
OFFEROR, THE COMPANY OR ANY OF THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES
HAS MADE, OR MAKES, ANY REPRESENTATION TO ANY PERSON REGARDING THE INFORMATION
CONTAINED IN THE PROJECTIONS AND NONE OF THEM INTENDS TO UPDATE OR OTHERWISE
REVISE THE PROJECTIONS TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE WHEN
MADE OR TO REFLECT THE OCCURRENCE OF FUTURE EVENTS EVEN IN THE EVENT THAT ANY OR
ALL OF THE ASSUMPTIONS UNDERLYING THE PROJECTIONS ARE SHOWN TO BE IN ERROR.
The Company has advised Parent and the Offeror that, as part of the
Company's ongoing business strategy, the Company engages from time to time in
discussions and negotiations concerning the Company's possible
12
<PAGE>
acquisition of businesses or assets to complement its existing business. The
Company has advised Parent and the Offeror that five of the Company's 17
assisted living facilities have been acquired since the Company's initial public
offering of Common Stock in October 1996. The Company has further advised Parent
and the Offeror that it is currently engaged in preliminary discussions
concerning the acquisition of a number of assisted living facilities or
businesses. However, the Company has informed Parent and the Offeror that there
can be no assurance that the Company will consummate any such new acquisition.
AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Exchange Act
and, in accordance therewith, is required to file reports and other information
with the Commission relating to its business, financial condition and other
matters. Information as of particular dates concerning the Company's directors
and officers, their remuneration, stock options and other matters, the principal
holders of the Company's securities and any material interest of such persons in
transactions with the Company is required to be disclosed in proxy statements
distributed to the Company's stockholders and filed with the Commission. Such
reports, proxy statements and other information should be available for
inspection at the public reference facilities of the Commission located at 450
Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located in the Citicorp Center, 500 West Madison Street (suite 1400),
Chicago, Illinois 60661, and at Seven World Trade Center, 13th Floor, New York,
New York 10048. Such reports, proxy statements and other information may also be
obtained at the web site that the Commission maintains at http://www.sec.gov.
Copies may be obtained by mail, upon payment of the Commission's customary
charges, by writing to the Commission's principal office at 450 Fifth Street,
N.W., Washington, DC 20549. Such information should also be on file at the
offices of Nasdaq Operations, l735 K Street, N.W., Washington, D.C. 20006.
9. CERTAIN INFORMATION CONCERNING THE OFFEROR AND PARENT. The Offeror, a
Delaware corporation and wholly owned subsidiary of Parent, was organized by
Parent for the purpose of effecting the Merger by merging with and into the
Company. Parent is a special purpose acquisition vehicle, whose sole member is
LF Strategic Realty Investors II L.P., a Delaware limited partnership (the
'Fund'). Parent was formed for the purpose of consummating the Merger and
carrying out the related transactions. Neither the Offeror nor Parent engages in
any other business activity except in connection with the Offer and the Merger,
and neither the Offeror nor Parent will have any assets or liabilities other
than those arising under the Merger Agreement or in connection with the Offer
and the Merger. The Fund, a limited partnership comprised of institutional
investors, has firm commitments from its partners to provide the Fund with an
aggregate capital contribution of $655 million, of which approximately $450
million has been drawn upon and approximately $205 million remains undrawn. The
Fund primarily engages in the business of investing in real estate related
companies, such as ARV Assisted Living Inc. ('ARV'), The Fortress Group, Inc.,
The Rubenstein Company, L.P. and American Apartment Communities, Inc.
LFREI is the general partner of the Fund. LFREI is the general partner of
several real estate limited partnerships. LFREI, through the partnerships for
which it acts as a general partner, manages approximately $2.5 billion in
capital targeting equity and debt investments. Since LFREI began operations in
1991, it has invested on behalf of the partnerships for which it acts as a
general partner an aggregate of $1.7 billion in 10 equity transactions and $0.4
billion in 13 mezzanine debt and commercial mortgage-backed securities
transactions.
The managing members of LFREI are Lazard Freres & Co. LLC ('Lazard') and
Prometheus Realty Investors, L.L.C. ('Prometheus'). Lazard is an investment bank
that provides general investment banking, investment advisory, financial and
other advisory services. Prometheus is a special purpose entity formed for the
purpose of acting as a managing member of LFREI. In addition, Lazard is acting
as Dealer Manager in connection with the Offer and has provided certain
financial advisory services to Parent and the Offeror in connection with the
proposed acquisition of the Shares. See Section 17.
The name, business address, present principal occupation or employment,
five-year employment history and citizenship of each director and of each
executive officer of the Offeror are set forth in Schedule I hereto. The name,
business address, present principal occupation or employment, five-year
employment history and citizenship of (i) each managing member of Prometheus
(one of the two managing members of LFREI) and
13
<PAGE>
(ii) each member of the management committee of Lazard (one of the two managing
members of LFREI) are set forth in Schedule II hereto.
Except with respect to the Stockholder Agreement (see Section 13), neither
the Offeror nor, to the best knowledge of the Offeror, any of the persons listed
on Schedules I and II hereto or any associate of the Offeror, including Parent,
or any of the persons so listed, beneficially owns or has a right to acquire
directly or indirectly and securities of the Company. Neither the Offeror nor
Parent, nor to the best knowledge of the Offeror, any of the persons or entities
referred to above, or any of the respective executive officers, directors or
subsidiaries of any of the foregoing, has effected any transactions in the
securities of the Company during the past 60 days.
Except as described in this Offer to Purchase, and except with respect to
the Stockholder Agreement and Escrow Agreement (see Section 13), neither the
Offeror nor Parent, nor to the best knowledge of the Offeror, any of the persons
listed on Schedules I and II hereto, has any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of the Company, including, but not limited to, contracts,
arrangements, understandings or relationships concerning the transfer or voting
of such securities, joint ventures, loan or option arrangements, puts or calls,
guaranties of loans, guaranties against loss or the giving or withholding or
proxies. Except as described in this Offer to Purchase, neither the Offeror nor
Parent, nor to the best knowledge of the Offeror, any of the persons listed on
Schedules I and II hereto, has had since the formation of the Company any
business relationships or transactions with the Company or any of its executive
officers, directors or affiliates that are required to be reported under the
rules and regulations of the Commission applicable to the Offer. Except as
described in this Offer to Purchase, since the formation of the Company, there
have been no contracts, negotiations or transactions between the Offeror, Parent
or, to the best knowledge of the Offeror, any of the persons listed in Schedules
I and II hereto, on the one hand, and the Company or its affiliates, on the
other hand, concerning a merger, consolidation or acquisition, a tender offer or
other acquisition of securities, an election of directors, or a sale or other
transfer of a material amount of assets.
10. SOURCE AND AMOUNT OF FUNDS. The total amount of funds required by
Parent and the Offeror to purchase Shares validly tendered pursuant to the
Offer, consummate the Merger and to pay related fees and expenses is estimated
to be approximately $190 million. The Offeror will obtain all of such funds
through Parent, which in turn will obtain such funds through the Fund. The Fund
will obtain such funds from (i) capital contributions from its partners, which
contributions such partners are unconditionally required to make at the Fund's
request and (ii) borrowings from one or more sources. As of the date hereof, the
Fund is in discussion with several lenders with respect to such borrowings and
has not entered into any agreement with any such lenders. It is anticipated that
any borrowings will be repaid from funds generated internally by the Surviving
Corporation or other sources, which may include the proceeds of debt or equity
financing of the Surviving Corporation. No decisions have been made concerning
these matters and such decisions will be based on Parent's view of the Surviving
Corporation's business and the advisability of particular transactions, as well
as on prevailing interest rates and other financial and market conditions. In
addition, as of the date hereof, the Fund has not determined what portion of the
amount of funds required to purchase Shares validly tendered pursuant to the
Offer, consummate the Merger and to pay related fees and expenses will come from
borrowings and what portion will come from capital contributions from the Fund's
partners.
The Offer is not subject to a financing condition.
11. BACKGROUND OF THE OFFER; PAST CONTACTS WITH THE COMPANY. On September
12, 1997, Salomon Brothers Inc ('Salomon Brothers') introduced LFREI to the
Company and the parties conducted preliminary discussions regarding a possible
transaction. On September 15, 1997, LFREI made a proposal to the Company to
acquire 100% of the Common Stock at a price of $16 per share and 100% of the
Preferred Stock at a price of $30.82 per share (which represents the number of
shares of Common Stock into which the Preferred Stock is convertible, multiplied
by $16.00), subject to the execution of a definitive agreement and the
completion of customary due diligence. On September 17, 1997, the Company and
LFREI commenced negotiations to discuss the terms and structure of a potential
transaction, which negotiations continued over the course of that week. On
September 24, 1997, due to certain accounting considerations, LFREI withdrew its
all cash offer and offered instead a cash and stock proposal along the lines of
a draft of the Original Merger Agreement, under which, among other things, each
share of Common Stock would be converted into the right to receive $16.00 in
cash (the 'Original Common Stock Consideration') and each share of Preferred
Stock would be converted into the right
14
<PAGE>
to receive $30.82 in cash (the 'Original Preferred Stock Consideration' and,
together with the Original Common Stock Consideration, the 'Original Merger
Consideration'), provided that holders of Common Stock would have been required
to retain, in the aggregate, an approximately 11% equity interest in the Company
(in lieu of cash) after the transaction. During September, LFREI and its legal,
accounting and other advisors conducted a detailed due diligence review of the
Company on a non-exclusive basis. During this same period, the Company and
LFREI, through their respective counsel, exchanged drafts of the Original Merger
Agreement and related documents, including draft employment agreements for each
of the Kaplans and Raymond DioGuardi, Chief Financial Officer of the Company,
and a draft stockholder agreement, pursuant to which the Kaplans would agree to
vote their shares of Common Stock in favor of the proposed merger and to grant
Parent an option to acquire their shares. With regard to the employment
agreements, it was agreed that the terms and conditions would be identical to
the Kaplans' existing agreements, with the exception of compensation, which
would be lower on an overall basis when compared to the Kaplans' then current
overall compensation, and more heavily weighted towards incentives, rather than
straight, guaranteed salary. The provisions in the stockholder agreement were
standard and customary conditions found in other merger transactions involving
companies with significant stockholders and were required by LFREI as a
condition to entering into the Original Merger Agreement. LFREI insisted that
the Kaplans retain a substantial number of shares in the Company so that their
interests would continue to be closely aligned with those of other stockholders,
including LFREI.
On September 30, 1997, a special meeting of the Board of Directors of the
Company was called to discuss the proposed Original Merger Agreement and to
receive a report from Salomon Brothers concerning the proposed Original Merger.
At such meeting, the Board of Directors of the Company unanimously approved the
Original Merger Agreement and related documents.
On September 30, 1997, the parties executed the Original Merger Agreement
and related documents and Parent and the Kaplans executed a stockholder
agreement. On October 2, 1997, the parties issued a press release announcing the
Original Merger.
Subsequent to the execution of the Original Merger Agreement, the Company,
the Offeror and Parent worked together to satisfy the conditions to the
consummation of the Original Merger. Toward the end of January, the Company, the
Offeror and Parent separately began to be concerned about the possibility that
the conditions to the consummation of the Original Merger would not be satisfied
prior to March 31, 1998, the date on which either Parent or the Company would
have the right to terminate the Original Merger Agreement in accordance with its
terms. In particular, the Company was concerned that further delays in
consummating the Original Merger Agreement might adversely affect the Company's
business, including the Company's ability to effect acquisitions, develop new
facilities, obtain financing on competitive terms, retain and attract key
employees or otherwise make long-range plans. Parent and the Offeror were
concerned that the Company would not be able to satisfy certain conditions to
the closing of the Original Merger Agreement as specified therein relating to
the Company's delivery to Parent and the Offeror of certain information which
would support the projections provided by the Company to the Offeror and Parent
prior to the execution of the Original Merger Agreement, which projections, were
in part, the basis for the Original Merger Consideration.
On February 2, 1998, the Offeror and Parent met with the Company to discuss
the status of the transaction and express their respective concerns. At the
meeting, the parties discussed three possible alternatives. The first
alternative was an extension of the termination date specified in the Original
Merger Agreement. The second alternative was to make no change to the Original
Merger Agreement and to wait until March 31, 1998 to determine whether or not
the conditions to the Original Merger were met, and if they were not, the
parties would at that time determine whether to amend, extend or terminate the
Original Merger Agreement. However, in each case, representatives of the Company
expressed the concern that any continued delay in consummating the Original
Merger would adversely affect the Company for the reasons described in the
preceding paragraph.
The third alternative discussed was to restructure the transaction as an
all-cash tender offer by the Offeror for all of the outstanding capital stock of
the Company. All of the participants at the meeting agreed that this alternative
would be in the best interest of all parties, since a successful cash tender
offer would allow the transaction to be consummated on an expedited basis.
However, representatives of the Offeror and Parent indicated that the
consideration per share of Common Stock to be offered in an all-cash tender
offer would have to be reduced to $14.50 from $16.00 (the value as provided in
the Original Merger Agreement). The Offeror and
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Parent believed that such reduction was justified as a result of their view that
the value of the Company had declined from the time the Original Merger
Agreement was negotiated and executed and the need to compensate Parent and the
Offeror for the additional cost of structuring the transaction as an all-cash
tender offer, which could not be characterized for accounting purposes as a
'recapitalization' transaction. Representatives of the Company indicated at such
meeting that an all-cash tender offer would be attractive to the Company only if
the Offeror and Parent would agree that the conditions to the consummation of
the Offer would not include conditions relating to (i) material adverse changes,
(ii) the accuracy of representations and warranties contained in the Original
Merger Agreement, (iii) obtaining various consents and approvals and (iv) the
delivery by the Company to the Offeror and Parent of material to support the
financial projections provided by the Company to Parent (collectively, the
'Financial Conditions'), which were conditions to the Original Merger. The
meeting concluded with the parties agreeing that an all-cash tender offer was
the preferred structure for a transaction if the Company, the Offeror and Parent
could agree on the terms thereof.
Subsequent to this meeting, in February the parties continued to attempt to
satisfy the conditions in the Original Merger Agreement while, at the same time,
the Offeror and Parent commenced a due diligence review of the Company to
determine whether they would be agreeable to commence an all-cash tender offer
which would not include the Financial Conditions. As a result of this due
diligence review, the Offeror and Parent determined that, in light of the
Company's current operations, the Company would not be able to provide the
Offeror and Parent with supporting material affirming the projections provided
by the Company to the Offeror and Parent prior to the execution of the Original
Merger Agreement, which was a condition to Parent's and the Offeror's obligation
to consummate the Original Merger.
In mid February, it became apparent to the Company that certain conditions
to the Original Merger specified in the Original Merger Agreement were not
capable of being met prior to March 31, 1998. In addition, in mid February, the
respective legal counsels of Parent, the Offeror and the Company began
exchanging and negotiating documents relating to a possible all-cash offer.
On February 21, 1998, Parent and the Offeror notified the Company that they
would agree to restructure the transaction as an all-cash tender offer for all
of the capital stock of the Company at $14.50 per share of Common Stock and
$27.93 per share of Preferred Stock and to the deletion of the Financial
Conditions as conditions to the consummation of the Offer.
On February 22, 1998, the Board of Directors of the Company reviewed final
drafts of the Merger Agreement and related documents. On February 22 and
February 23, 1998, the Board of Directors of the Company discussed the Merger
Agreement and the Offer. Salomon and J.P. Morgan participated in such meetings
and on February 23, 1998, each delivered its opinion to the effect that the
consideration to be received by the stockholders of the Company in the Offer and
the Merger was fair to such stockholders from a financial point of view. On
February 23, 1998, the Board of Directors approved the Merger Agreement and the
Offer, the Merger Agreement was executed and delivered by all parties thereto
and a press release relating thereto was issued.
12. PURPOSE OF THE OFFER; SHORT FORM MERGER; PLANS FOR THE COMPANY.
PURPOSE
The purpose of the Offer, the Merger, the Merger Agreement, the Stockholder
Agreement and other agreements described in Section 13 is for Parent to acquire
control of, and the entire equity interest in, the Company. Following the Offer,
the Offeror and Parent intend to acquire any remaining equity interest in the
Company not acquired in the Offer by consummating the Merger. Upon consummation
of the Merger, the Company will become a wholly owned subsidiary of Parent.
VOTE REQUIRED TO APPROVE MERGER
The DGCL requires, among other things, that the adoption of any plan of
merger or consolidation of the Company must be approved by the Board of
Directors and by the holders of a majority of the outstanding shares of Common
Stock, which is the only class of the Company's securities entitled to vote. The
Board of Directors of the Company has approved the Offer and the Merger;
consequently, the only additional action of the Company
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that may be necessary to effect the Merger is approval by such stockholders if
the short form merger procedure described below is not available. If the Offeror
acquires, through the Offer or otherwise, voting power with respect to at least
a majority of the outstanding shares of Common Stock on a fully diluted basis
(which would be the case if the Minimum Condition were satisfied and the Offeror
were to accept for payment Shares tendered pursuant to the Offer), it would have
sufficient voting power to effect the Merger without the vote of any other
stockholder of the Company. The Company would, however, be required to provide
certain notice of the Merger to stockholders, as required by law. However, the
DGCL also provides that if a parent company owns at least 90% of each class of
stock of a subsidiary, the parent company can effect a 'short form' merger with
that subsidiary without the action of the other stockholders of the subsidiary.
Accordingly, if, as a result of the Offer or otherwise, the Offeror acquires or
controls at least 90% of the outstanding Common Stock and at least 90% of the
outstanding Preferred Stock, the Offeror could, and intends to, effect the
Merger without prior notice to, or any action by, other stockholders of the
Company.
PLANS FOR THE COMPANY
Prometheus Assisted Living LLC, a wholly owned subsidiary of LFREI, owns
approximately 47.9% of the outstanding common stock of ARV, and three of the
nine members of the Board of Directors of ARV are designees of LFREI. LFREI
entered into a stockholder agreement with ARV on July 14, 1997, pursuant to
which, among other things, 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
ARV (other than directors affiliated with or appointed by LFREI) consent to such
ownership. By letter dated September 30, 1997, ARV waived the Non-Compete
Covenant (and LFREI received the required approval of the Board of Directors of
ARV) further for the express purpose of permitting LFREI to consummate the
Original Merger.
In an amendment to a letter agreement, dated October 29, 1997 among the
Company, ARV and LFREI (the 'Letter Agreement'), and to induce ARV to consent to
LFREI entering into the Original Merger Agreement through its affiliates, the
parties agreed that ARV will have the first right to negotiate management, lease
and/or purchase arrangements on any developments or acquisitions by the Company,
that LFREI will seek in good faith to negotiate with ARV leasing or management
agreements for all existing or planned facilities of the Company (including
those facilities in the Company's pipeline on the date of the consummation of
the Merger) and that LFREI will not enter into, or permit the Company or any of
its affiliates to enter into, leasing or management arrangements with respect to
the Company's existing facilities, subject to certain exceptions, other than
with ARV or controlled affiliates of the Company. Under the terms of the Letter
Agreement, LFREI granted to ARV (or its shareholders, as will be determined by
ARV subject to certain tax and accounting considerations) the right to acquire
from LFREI Shares representing up to 19.9% of the stock of the Company to be
acquired by LFREI at the pro rata amount of LFREI's all-in cost (defined as
LFREI's total equity investment in the Company on the date of the consummation
of the Merger, including reasonable capital carrying costs relating to the
Merger) for a period of 30 days after the Effective Time (or, if ARV elects to
have its shareholders exercise this option, 30 days after a registration
statement with respect to the option is declared effective). Finally, the Letter
Agreement contemplates that LFREI would explore a joint venture between the
Company and ARV, pursuant to which the Company and ARV would jointly own a
management company while development personnel and activities would in all
likelihood remain at the Company and operating personnel and home health care
would in all likelihood remain at ARV.
Except as set forth in this Offer to Purchase, it is expected that,
initially following the Merger, the business and operations of the Company will
be continued by the Company as the corporation surviving the Merger
substantially as they are currently being conducted. The directors of the
Offeror and Glenn Kaplan and Evan A. Kaplan will be the initial directors of the
Surviving Corporation, and the officers of the Company will be the initial
officers of the Surviving Corporation. Parent will conduct a detailed review of
the Company and its assets, corporate structure, dividend policy,
capitalization, operations, properties, policies, management and personnel and
to consider, subject to the terms of the Merger Agreement, what, if any, changes
would be desirable in light of the circumstances then existing, and will take
such actions or effect such changes as it deems desirable.
Except as otherwise described in this Offer to Purchase, the Offeror and
Parent have no current plans or proposals that would relate to, or result in,
any extraordinary corporate transaction involving the Company, such
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as a reorganization or liquidation involving the Company or any of its
subsidiaries, a sale or transfer of a material amount of assets of the Company
or any of its subsidiaries, any change in the Company's capitalization or
dividend policy or any other material change in the Company's business,
corporate structure or personnel.
DISSENTERS' RIGHTS
Holders of Shares do not have dissenters' rights as a result of the Offer.
However, if the Merger is consummated, holders of Shares will have certain
rights pursuant to the provisions of Section 262 of the DGCL to dissent and
demand appraisal of, and to receive payment in cash of the fair value of, their
Shares. If the statutory procedures were complied with, such rights could lead
to a judicial determination of the fair value required to be paid in cash to
such dissenting holders for their Dissenting Shares. Any such judicial
determination of the fair value of the Dissenting Shares could be based upon
considerations other than, or in addition to, the Common Stock Offer Price, or
the Preferred Stock Offer Price, as the case may be, the market value of the
Dissenting Shares, including asset values and the investment value of the
Dissenting Shares. The value so determined could be greater or lower than the
Common Stock Offer Price or the Preferred Stock Offer Price, as the case may be.
If any holder of Shares who demands appraisal under Section 262 of the DGCL
fails to perfect, or effectively withdraws or loses his right to appraisal, as
provided in the DGCL, the Shares of such stockholder will be converted into the
right to receive the Merger Consideration (as hereinafter defined) in accordance
with the Merger Agreement. A stockholder may withdraw his demand for appraisal
by delivery to Parent of a written withdrawal of his demand for appraisal and
acceptance of the terms of the Merger.
A stockholder seeking to exercise dissenters' rights under Section 262 of
the DGCL may not tender his Shares in the Offer and will be further advised by
the Company as to the steps necessary to exercise such rights. FAILURE TO FOLLOW
THE STEPS REQUIRED BY SECTION 262 OF THE DGCL FOR PERFECTING APPRAISAL RIGHTS
MAY RESULT IN THE LOSS OF SUCH RIGHTS.
GOING PRIVATE TRANSACTIONS
The Merger would have to comply with any applicable federal law operative
at the time of its consummation. Rule 13e-3 under the Exchange Act is applicable
to certain 'going private' transactions. The Offeror does not believe that Rule
13e-3 will be applicable to the Merger unless the Merger is consummated more
than one year after the termination of the Offer. If applicable, Rule 13e-3
would require, among other things, that certain financial information concerning
the Company and certain information relating to the fairness of the Merger and
the consideration offered to minority stockholders be filed with the Commission
and disclosed to minority shareholders prior to consummation of the Merger.
13. THE MERGER AGREEMENT AND RELATED AGREEMENTS. The following is a
summary of certain provisions of the Merger Agreement, the Stockholder Agreement
and certain other agreements, copies of which are filed as exhibits to the
Schedule 14D-1 filed by Parent and the Offeror with respect to the Offer and
referred to in Section 18. This summary is not intended to be a complete
description of these agreements and is qualified in its entirety by reference to
the complete text of these agreements. LFREI unconditionally guaranteed the
obligations of Parent and the Offeror under the Merger Agreement.
THE MERGER AGREEMENT
THE OFFER
The Offeror commenced the Offer in accordance with the terms of the Merger
Agreement.
THE MERGER
The Merger Agreement provides that upon the terms and subject to the
conditions therein, and in accordance with the DGCL, at the Effective Time the
Offeror will be merged with and into the Company and the separate corporate
existence of the Offeror will cease and the Company will continue as the
Surviving Corporation. The Certificate of Incorporation and By-laws of the
Company, as in effect immediately prior to the Effective Time, will be the
Certificate of Incorporation and By-laws of the Surviving Corporation. The
directors of the Offeror immediately prior to the Effective Time and Glenn
Kaplan and Evan A. Kaplan will be the directors of the
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Surviving Corporation and the officers of the Company immediately prior to the
Effective Time will be the officers of the Surviving Corporation as of the
Effective Time.
CONVERSION OF SECURITIES
At the Effective Time, (1) each share of Common Stock issued and
outstanding immediately prior thereto will be converted into the right to
receive the Common Stock Merger Consideration, without interest and (2) each
share of Preferred Stock issued and outstanding immediately prior thereto will
be converted into the right to receive the Preferred Stock Merger Consideration,
without interest (except in each such case for Shares held by the Company as
treasury shares, Shares owned by Parent or any of its subsidiaries, including
the Offeror, all of which will be canceled and no consideration will be
delivered in exchange therefor, and Dissenting Shares). 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, will 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 Common Stock Merger Consideration over the per share exercise price
of such Option, without interest.
DISSENTING SHARES
The Merger Agreement provides that, if required by the DGCL, Dissenting
Shares will not be exchangeable for the right to receive the Merger
Consideration and holders of such Dissenting Shares will be entitled to receive
payment of the appraised value of their Dissenting Shares in accordance with the
DGCL unless such holders fail to perfect or withdraw or lose their right to
appraisal and payment under the DGCL. If, after the Effective Time, any holder
fails to perfect or effectively withdraws or loses such right, such Dissenting
Shares will thereupon be treated as if they had been converted into, at the
Effective Time, the right to receive, without interest, the Merger
Consideration.
MERGER WITHOUT MEETING OF STOCKHOLDERS
If the Offeror, or any other direct or indirect subsidiary of Parent,
acquires at least 90% of the outstanding shares of the Common Stock and at least
90% of the outstanding shares of the Preferred Stock, the parties agree to take
all necessary and appropriate action to cause the Merger to become effective as
soon as practicable after the expiration of the Offer without a meeting of
stockholders of the Company in accordance with Section 253 of the DGCL.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains customary representations and warranties of
the Company and its subsidiaries relating to: (a) organization, standing and
power; (b) capital structure; (c) subsidiaries; (d) authority and
non-contravention; (e) documents filed by the Company with the Commission; (f)
absence of certain events; (g) litigation; (h) compliance with law; (i) employee
plans; (j) employment relations and agreements; (k) contracts; (l) environmental
laws and regulations; (m) property and leases; (n) patents, trademarks and
copyrights; (o) insurance; (p) takeover statutes; (q) taxes; (r) absence of
change of control; (s) brokers; and (t) disclosures.
The Merger Agreement also contains customary representations and warranties
of Parent relating to: (a) organization, standing and power; (b) authority and
non-contravention; (c) financing; and (d) brokers. In addition, the Merger
Agreement contains representations and warranties of the Offeror relating to:
(a) organization and standing; and (b) authority and non-contravention.
CONDUCT OF BUSINESS
Pursuant to the Merger Agreement, the Company has agreed that, prior to the
Effective Time, the Company will, and will cause each of 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 preserve
intact its current business organization, keep available the services of its
current officers and employees and preserve its relationships with customers,
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suppliers and others having business dealings with it. Without limiting the
generality of the foregoing, and except as otherwise expressly contemplated by
the Merger Agreement, the Merger Agreement provides that the Company will not,
and will cause each of its subsidiaries not to, without the prior written
consent of Parent: (a) other than in connection with (i) the conversion of
Preferred Stock into Common Stock in accordance with its terms, (ii) the
exercise of options outstanding prior to the date hereof in accordance with
their terms and (iii) the payment of dividends on the Preferred Stock in
accordance with its 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, (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) and (ii) 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 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; (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 by the Merger
Agreement 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; (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,
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(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; or (x) take, or agree in writing or
otherwise to take, any of the foregoing actions.
The Merger Agreement also provides that, prior to the Effective Time, as
requested by Parent, (i) the Company will confer on a regular basis with one or
more representatives of Parent with respect to material operational matters;
(ii) the Company will, within 30 days following each fiscal month, deliver to
Parent 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 (as defined in the Merger Agreement)
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 therein, the Company will promptly notify Parent thereof.
ALTERNATIVE PROPOSAL
Pursuant to the Merger Agreement, the Company agrees (a) that neither it
nor any of its subsidiaries will, nor will 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 stockholders after 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 prior to the execution of
the Merger Agreement 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 described in this paragraph; provided, however, that the Company or
its Board of Directors may take and disclose to the Company's stockholders a
position with respect to a tender offer by a third party pursuant to Rules 14d-9
and 14e-2(a) promulgated under the Exchange Act or may make 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. The Merger Agreement provides that the Company will immediately
advise Parent in writing of the receipt, directly or indirectly, of any inquiry,
discussion, negotiation, or proposal relating to an Alternative Proposal
(including the specific terms thereof and the identity of the other party or
parties involved) and furnish to Parent 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 Merger Agreement provides that the Company will
immediately advise Parent, in writing, if the Board of Directors of the Company
makes any determination as to any Alternative Proposal.
COMPANY STOCKHOLDER APPROVAL; PROXY STATEMENT
The Merger Agreement provides that if approval or action in respect of the
Merger by the stockholders of the Company is required by applicable law, the
Company will, if appropriate, call a meeting of its stockholders (the
'Stockholder Meeting') for the purpose of voting upon the Merger and will use
its reasonable best efforts to obtain stockholders' approval of the Merger. The
Merger Agreement provides that the Stockholder Meeting will be held as soon as
practicable following the purchase of Shares pursuant to the Offer and the
Company will, through its Board of Directors but subject to the fiduciary duties
of its Board of Directors under applicable law as determined by the Board of
Directors in good faith after consultation with the Company's outside counsel,
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recommend to its stockholders the approval of the Merger and not rescind its
declaration that the Merger is advisable. The record date for the Stockholder
Meeting will be a date subsequent to the date Parent or the Offeror becomes a
record holder of Shares purchased pursuant to the Offer. The Merger Agreement
also provides that if required by applicable law, the Company will, as soon as
practicable following the expiration of the Offer, prepare and file a
preliminary proxy statement or, if applicable, an information statement with the
Commission with respect to the Stockholder Meeting and will use its reasonable
best efforts to respond to any comments of the Commission or its staff and to
cause such proxy statement or information statement to be cleared by the
Commission. As promptly as practicable after the proxy statement or, if
applicable, the information statement has been cleared by the Commission, the
Company will mail the proxy statement or, if applicable the information
statement to the stockholders of the Company.
The Merger Agreement provides that the Company will use its reasonable best
efforts to obtain any necessary approvals by its stockholders of the Merger, the
Merger Agreement and the transactions contemplated thereby and that Parent will
cause all Shares purchased pursuant to the Offer and all other Shares owned by
the Offeror or any other subsidiary of Parent to be voted in favor of the
approval of the Merger.
INDEMNIFICATION AND INSURANCE
The Merger Agreement provides that Parent will cause the Surviving
Corporation to keep in effect provisions in its Certificate of Incorporation and
By-laws 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
of the Merger Agreement been entitled to the benefit of the indemnification
provisions set forth in the Company's Certificate of Incorporation and By-laws
(the 'Indemnified Parties'), to the fullest extent now or hereafter permitted
under the DGCL, which provisions will 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. Pursuant to the Merger Agreement,
the Surviving Corporation will pay all expenses, including attorneys' fees, that
may be incurred by any Indemnified Parties in enforcing the indemnity
obligations provided for in this paragraph. The Merger Agreement provides that
the rights of each Indemnified Party thereunder will be in addition to any other
rights such Indemnified Party may have under the Certificate of Incorporation or
By-laws of the Company, under the DGCL or otherwise. Further, the Merger
Agreement provides that for the period from the time the Offeror first purchases
Shares pursuant to the Offer through the Effective Time, Parent will not permit
the Company to amend the provisions in its Certificate of Incorporation or
By-laws providing for exculpation of directors' and officers' liability and
indemnification of the Indemnified Parties.
Under the Merger Agreement, the Surviving Corporation will 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 will not be required to maintain or procure such coverage to pay an
annual premium in excess of 150% of the current annual premium paid by the
Company 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 will be required to obtain only
as much coverage as can be obtained by paying an annual premium equal to the
Cap.
BOARD REPRESENTATION; DIRECTORS
Pursuant to the Merger Agreement, promptly upon the purchase of shares of
Common Stock pursuant to the Offer, Parent will be entitled to designate such
number of directors, rounded up to the next whole number, on the Board of
Directors of the Company as will give Parent, subject to compliance with Section
14(f) of the Exchange Act, representation on the Board of Directors equal to the
product of (a) the total number of directors on the Board of Directors and (b)
the percentage that the number of shares of Common Stock purchased by Parent
bears to the number of shares of Common Stock outstanding, and the Company will,
upon request by Parent, promptly increase the size of the Board of Directors
and/or exercise its reasonable best efforts to secure the resignations of such
number of directors as is necessary to enable Parent's designees to be elected
to the Board of Directors and will cause Parent's designees to be so elected.
The Merger Agreement provides that the Company will take, at its
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expense, all action required pursuant to Section 14(f) of the Exchange Act and
Rule 14f-1 thereunder in order to fulfill its obligations under this paragraph
and will include in the Schedule 14D-9 or otherwise timely mail to its
stockholders such information with respect to the Company and its officers and
directors as is required by such Section 14(f) and Rule 14f-1 in order to
fulfill its obligations under this paragraph. Parent will supply to the Company
in writing and be solely responsible for any information with respect to itself
and its nominees, officers, directors and affiliates required by such Section
14(f) and Rule 14f-1.
FEES AND EXPENSES
The Merger Agreement provides that whether or not the Merger, the Offer or
the other transactions contemplated by the Merger Agreement are consummated,
except as described below under 'Effect of Termination and Abandonment,' all
costs and expenses incurred in connection with the Merger Agreement and the
transactions contemplated thereby will be paid by the party incurring such
expenses.
CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER
The respective obligations of each party to effect the Merger will be
subject to the fulfillment at or prior to the Effective Time of the following
conditions: (a) if approval of the Merger by the holders of the Common Stock is
required by applicable law, the Merger will have been approved by the requisite
vote of such holders; and (b) 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 will have been issued
and remain in effect (each party agreeing to use all commercially reasonable
efforts to have any such injunction lifted).
TERMINATION BY MUTUAL CONSENT
The Merger Agreement provides that it may be terminated and the Merger may
be abandoned at any time prior to the Effective Time, before or after any
approval by the stockholders of the Company, by the mutual consent of Parent and
the Company prior to the purchase of the Shares pursuant to the Offer.
TERMINATION BY EITHER PARENT OR THE COMPANY
The Merger Agreement may be terminated and the Merger may be abandoned by
action of the Board of Directors of the Company or by Parent if: (a) the Merger
has not have been consummated by December 31, 1998; provided, however, that the
right to terminate the Merger Agreement pursuant to this clause will not be
available (i) to Parent, if the Offeror or any affiliate of the Offeror acquires
Shares pursuant to the Offer, or (ii) to any party whose failure to fulfill any
obligation of the Merger Agreement has been the cause of, or resulted in, the
failure of the Merger to have occurred on or prior to the aforesaid date; or (b)
upon a vote at a duly held meeting or upon any adjournment thereof, the
stockholders of the Company have failed to give any approval required by
applicable law; 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 has issued an order, decree or ruling or
taken any other action permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by the Merger Agreement and such
order, decree, ruling or other action has become final and non-appealable;
provided that the party seeking to terminate the Merger Agreement pursuant to
this clause has used all commercially reasonable efforts to remove such
injunction, order or decree; or (d) as the result of the failure of any of the
conditions set forth in Section 15 or otherwise, the Offer has terminated or
expired in accordance with its terms without the Offeror having purchased any
Shares pursuant to the Offer; provided, however, that the right to terminate the
Merger Agreement pursuant to this clause (d) will not be available to any party
whose failure to fulfill any of its obligations under the Merger Agreement
results in the failure of any such condition; or (e) Parent has reasonably
determined that any Offer condition (other than the Minimum Condition) is not
capable of being satisfied at any time in the future and the Offeror has not
purchased Shares pursuant to the Offer; provided, however, that the right to
terminate the Merger Agreement pursuant to this clause (e) will not be available
to any party whose failure to fulfill any obligation of the Merger Agreement has
been the cause of, or resulted in, such Offer condition being incapable of
satisfaction.
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TERMINATION BY PARENT
The Merger Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time by Parent if the Board of Directors of the
Company has failed to recommend, or has withdrawn, modified or amended in any
material respect its approval or recommendations of the Offer or the Merger or
has resolved to do any of the foregoing, or has recommended an Alternative
Proposal to the Company's stockholders.
TERMINATION BY THE COMPANY
The Merger 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, 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 the Merger 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 the
Merger Agreement pursuant to this paragraph will not be available (i) if the
Company has breached in any material respect its obligations under the Merger
Agreement or (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 can be financed. The Company will provide
Parent with two days' written notice of its intention to so terminate the Merger
Agreement.
EFFECT OF TERMINATION AND ABANDONMENT
(a) If (w) the Merger Agreement is terminated by either party pursuant to
clause (b) under the paragraph above, 'Termination by Either Parent or the
Company,' (x) the Board of Directors of the Company withdraws or modifies in a
manner adverse to Parent its approval or recommendation of the Offer or the
Merger or recommends an Alternative Proposal to the Company's stockholders and
Parent terminates the Merger Agreement pursuant to the paragraph above,
'Termination by Parent,' (y) the Merger Agreement is terminated by the Company
pursuant to the paragraph above, 'Termination by the Company,' or (z) any person
makes an Alternative Proposal at $14.50 per share of Common Stock or more for
75% or more of the Common Stock and thereafter the Merger Agreement is
terminated for any reason other than those set forth in clause (w), (x) or (y)
above and within six months thereafter the Company enters into an agreement with
respect to an Alternative Proposal at $14.50 per share of Common Stock or more
for 75% or more of the Common Stock, then the Merger Agreement provides that the
Company will pay Parent $6,000,000 (a 'Termination Fee'). The Merger Agreement
further provides that if the Merger Agreement is terminated as a result of the
failure of the conditions specified in Exhibit A thereto (See Section 15), then
the Company will promptly reimburse Parent for all out-of-pocket costs and
expenses incurred by Parent in connection with the Offer, the Merger Agreement
and the transactions contemplated thereby, including costs and expenses of
accountants, attorneys and financial advisors in an amount not to exceed
$1,000,000.
THE STOCKHOLDER AGREEMENT
Pursuant to the Stockholder Agreement, the Kaplans, who beneficially own in
the aggregate approximately 54% of the outstanding shares of Common Stock, have
agreed to tender and sell to Parent pursuant to the Offer all the Common Stock
held by them and not to withdraw any shares of Common Stock tendered in the
Offer.
Each of the Kaplans has further agreed to: (1) vote all of the shares of
Common Stock beneficially owned by him in favor of the Merger, the Merger
Agreement and the transactions contemplated by the Merger Agreement; (2) vote
the shares of Common Stock beneficially owned by him against any action or
agreement involving a sale of such 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 (3)
vote the shares of Common Stock beneficially owned by him against any action or
agreement that would reasonably be expected to impede, interfere with, delay or
attempt to discourage the Merger. If any of the Kaplans fails to comply with the
foregoing, as determined by Parent in its sole discretion, such failure will
result in the automatic, irrevocable appointment of Parent as the attorney and
proxy of such Kaplan, with full power of substitution, to vote, and otherwise
act with respect to, all shares of Common Stock that such Kaplan is entitled to
vote on any of the foregoing matters.
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The Kaplans also have granted to Parent an irrevocable option (the 'Stock
Option') to purchase for $14.50 per share (i) all, but not less than all, of the
shares of Common Stock beneficially owned by the Kaplans and (ii) any additional
shares of Common Stock acquired by the Kaplans during the term of the
Stockholder Agreement. The Stockholder Agreement sets no limitation on the
number of shares of Common Stock the Kaplans can own. The Stock Option may be
exercised by Parent at any time prior to the termination of the Stockholder
Agreement and prior to the earliest to occur of (i) the first anniversary of the
date of the Stockholder Agreement, (ii) if the Merger Agreement is terminated,
or Parent provides written or oral notice to the Company that it elects not to
consummate the Offer or close the transactions contemplated by the Merger
Agreement, as a result of the failure of any of the conditions specified in
Exhibit A to the Merger Agreement, and at the time of such termination or notice
there does not exist any Alternative Proposal at $14.50 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, or Parent provides written or oral notice to the Company that it
elects not to consummate the Offer or close the transactions contemplated by the
Merger Agreement, as a result of the failure of any of the conditions specified
in Exhibit A to the Merger Agreement, and at the time of such termination or
notice there exists any Alternative Proposal at $14.50 or more per share of
Common Stock for 75% or more of the outstanding Common Stock of the Company, the
date six months after the date of the termination of the Merger Agreement;
provided, however, that if a tender offer is commenced by any party or entity
other than Parent and its affiliates with respect to the Common Stock, then,
notwithstanding any provision of the Stockholder Agreement, the Kaplans may
tender all or any of their shares of Common Stock into such tender offer on or
before the time 48 hours before the expiration of such offer.
Each of the Kaplans has also made certain covenants with respect to the
disposition or encumbrance of the shares of Common Stock beneficially owned by
him, the acquisition of additional Shares and the solicitation of transactions
relating to the shares of Common Stock beneficially owned by him. Each of the
Kaplans has further agreed that, in the event of any change in the
capitalization of the Company, he will adjust the number and kind of shares of
Common Stock beneficially owned by him and the consideration payable in respect
of such shares so as to restore to Parent its rights and privileges under the
Stockholder Agreement.
THE EMPLOYMENT AGREEMENTS
In connection with the execution of the Merger Agreement, the Company has
entered into an amended and restated employment agreement with each of the
following employees: (1) Glenn Kaplan as Chief Executive Officer; (2) Evan A.
Kaplan as Chief Operating Officer; (3) Wayne L. Kaplan as Senior Executive Vice
President, Secretary or General Counsel; and (4) Raymond DioGuardi as Chief
Financial Officer. Base compensation under the employment agreements will be not
less than $250,000 per year for Glenn Kaplan, not less than $225,000 per year
for Evan A. Kaplan, not less than $200,000 per year for Wayne L. Kaplan, and not
less than $175,000 per year for Mr. DioGuardi. In addition, each of the
employees will be entitled to receive a target bonus, based upon the Company's
achievement of certain operating and/or financial goals, equal to a specified
percentage of each employee's then current annual base salary (up to 75% in the
case of Glenn Kaplan and Wayne L. Kaplan, up to 100% in the case of Evan A.
Kaplan, and up to 50% in the case of Mr. DioGuardi). With respect to each of
Glenn Kaplan, Evan A. Kaplan and Wayne L. Kaplan, any bonus payable in respect
of the fiscal year beginning January 1, 1998 shall be payable, with interest at
an annual rate equal to 4%, within five days following the end of fiscal year
1999; provided, however, that no bonus shall be payable for such fiscal year in
the event the employee's employment with the Company shall have been terminated
by the Company for 'Cause' (as defined in such employee's employment agreement)
or voluntarily by the employee without 'Good Reason' (as defined in such
employee's employment agreement) on or prior to December 31, 1999. The Board of
Directors may increase an employee's bonus for any fiscal year to an amount
greater than the percentages specified above; provided, however, that the
Company has attained no less than 95% of the applicable operating or financial
goals for such fiscal year. Each of the employees shall be eligible to
participate in all benefit plans and receive all fringe benefits available to
similarly situated employees which, in the aggregate, shall be no less favorable
than those provided to any other employee of the Company determined as of the
date of the employment agreements.
The term of each employment agreement is for two years commencing at the
Effective Time, which term will be automatically renewed for successive one-year
terms unless either party gives written notice no less than six months prior to
the then applicable term that the term will not be so extended. The Company may
terminate
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the employees at any time and for any reason, but the employees may resign only
for Good Reason. If an employee's employment with the Company is terminated: (i)
by the Company other than for Cause, death or disability; or (ii) voluntarily by
the employee with Good Reason, the employment agreement provides that the
Company will continue to pay such employee an amount equal to his then current
annual base salary for the remainder of the then applicable employment term, and
the Company will continue such employee's then current medical coverage for a
period of two years following the termination of the employee's employment.
Pursuant to non-competition covenants contained in the employment
agreements, each of the employees has agreed that he will not, during the term
of his employment and for a period of three years after the date of his
termination (five years if he is terminated for Cause), directly or indirectly
own, manage, operate, join, control, be employed by or participate in the
ownership, management, operation or control of, or be connected in any manner,
including, but not limited to, holding the positions of stockholder, director,
officer, consultant, independent contractor, employee, partner or investor, with
any person or entity engaged in the business of providing assisted living,
independent living, skilled nursing facilities or continuing care retirement
centers (containing assisted living, independent living and skilled nursing
facilities in one campus) (each 'a Competitive Business') within a 25-mile
radius of any such business operated or in the pipeline to be operated (to the
extent the employee has knowledge thereof after due inquiry) by the Company,
LFREI or any affiliate of LFREI (each a 'Competing Enterprise'); provided,
however, that, if Mr. DioGuardi's employment with the Company shall be
terminated by his giving notice of his intention not to extend his employment
past the second anniversary of the effective date of his employment agreement
(the 'Initial Term'), he shall not be precluded from accepting the position of
chief financial officer with any Competing Enterprise, and provided, further,
that, in the event that Mr. DioGuardi's employment is terminated by the Company
giving notice of its intention not to extend his employment beyond the Initial
Term (a 'Limited DioGuardi Termination'), Mr. DioGuardi shall have no
restriction on his employment after the Initial Term.
In addition, during the term of his employment and for a period of two
years thereafter, each of the employees has agreed not to interfere with the
Company's relationship with, or endeavor to entice away from the Company, any
person who at any time during the employee's term of employment was an employee
or customer of the Company or otherwise had a material business relationship
with the Company. With respect to each of Glenn Kaplan, Evan A. Kaplan and Wayne
L. Kaplan, the foregoing shall not apply with respect to Mr. DioGuardi if (i)
Mr. DioGuardi's employment shall have terminated pursuant to a Limited DioGuardi
Termination; and (ii) Mr. DioGuardi shall not be employed in any Competitive
Business.
THE ESCROW AGREEMENT
Pursuant to an Escrow Agreement, dated as of February 23, 1998, among the
Kaplans, the Company, the Offeror and Parent and a letter agreement among the
same parties dated as of the same date (collectively, the 'Escrow Agreement'),
the Kaplans have agreed that $6,000,000 of the proceeds from the shares tendered
by them in the Offer or sold by the Kaplans to Parent pursuant to the
Stockholder Agreement will be placed in escrow. The escrowed funds will be
delivered to the Company if the Kaplans or any of the Kaplans licensed to
operate certain of the Company's facilities loses any such operating certificate
or if the Kaplans cause any such facility to be without a licensed operator as a
result of the breach by the Kaplans of their obligations under certain
agreements between the Kaplans and the Company (a 'License Loss Breach') to the
extent that such License Loss Breach damages the Company. The escrowed funds
will be delivered to the Kaplans upon (i) the retention by the Kaplans of such
operating certificates for a given period of time, (ii) the issuance of such
operating certificates for all such facilities to a Replacement Operator (as
defined in the Escrow Agreement) or (iii) the satisfaction of certain other
conditions.
HOME HEALTH AGENCY LETTER AGREEMENT
Pursuant to a letter agreement among the Company, the Kaplans, the Offeror
and Parent, dated February 23, 1998, the Kaplans have agreed, for no monetary
consideration, to use their reasonable best efforts to arrange and obtain
regulatory approval for the transfer of responsibility for the operation of the
Kapson Licensed Home Care Services Agency ('KLHCSA'), which is currently owned
and operated by The Kapson Group, a partnership comprised of the Kaplans, to the
Company promptly after the consummation of the Offer or the Merger. The Kaplans
have also agreed to cause KLHCSA to maintain its existing business arrangements
with the Company and its subsidiaries until the ownership of KLHCSA is
transferred to the Company, which the parties
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acknowledge may take a considerable period of time due to the need for
regulatory review of the transfer application by the New York Department of
Health.
14. DIVIDENDS AND DISTRIBUTIONS. As noted in Section 6, the Company has
not paid cash dividends on the Common Stock and pays dividends on the Preferred
Stock at an annual rate of $2.00 per share, as and when declared by the Board of
Directors of the Company. The Certificate of Designation for the Preferred Stock
provides for the payment of a quarterly dividend of $.50 per share on March 31,
1998 and the setting of a record date not later than 10 days prior to the
payable date. Such dividends will be paid by the Company to holders of the
Preferred Stock on the record date for the March 31, 1998 dividend regardless of
whether such holders tender their Preferred Stock in the Offer. The Merger
Agreement provides that the Company will not, among other things, prior to the
Effective Time (i) declare, set aside or pay any dividend or make any other
distribution or payment with respect to any shares of its capital stock (other
than dividends on the Preferred Stock in accordance with its current terms),
(ii) directly or indirectly redeem, purchase or otherwise acquire any shares of
capital stock of the Company or capital stock of any of its subsidiaries or make
any commitment for any such action or (iii) split, combine or reclassify any of
its capital stock.
15. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other term of the
Offer, the Offeror will not be required to accept for payment or pay for,
subject to any applicable rules and regulations of the Commission, including
Rule 14e-1(c) under the Exchange Act, any Shares not theretofore accepted for
payment or paid for and may terminate or amend the Offer as to such Shares
unless there have been validly tendered and not withdrawn prior to the
expiration of the Offer that number of Shares which would represent at least a
majority of the sum of all outstanding shares of Common Stock on a fully diluted
basis including shares issuable upon (i) the exercise of options (other than
options the holders of which have executed agreements which provide that, so
long as the Merger Agreement is in effect, such holders will not exercise such
options prior to the Effective Time, which agreements are in full force and
effect at the time of the expiration of the Offer), warrants or other rights to
acquire Shares (whether or not currently exercisable or vested) having an
exercise price equal to or less than the Common Stock Offer Price and (ii) the
conversion of outstanding shares of Preferred Stock (it being understood and
agreed that for purposes of satisfying the Minimum Condition, each share of
Preferred Stock tendered in the Offer will be deemed to account for 1.92604
shares of Common Stock). Furthermore, notwithstanding any other term of the
Offer, the Offeror will not be required to accept for payment or, subject as
aforesaid, to pay for any Shares not theretofore accepted for payment or paid
for, and may terminate or amend the Offer if at any time on or after February
23, 1998 and before the acceptance of such Shares for payment or the payment
therefor, any of the following conditions exist or have occurred and remain in
effect:
(a) there has been instituted, pending or threatened any action or
proceeding by any governmental, regulatory or administrative agency or
authority, which (i) seeks to challenge the acquisition by Parent of Shares
pursuant to the Offer, restrain, prohibit or delay the making or
consummation of the Offer or the Merger, or obtain any material damages in
connection therewith, (ii) seeks to make the purchase of or payment for
some or all of the Shares pursuant to the Offer or the Merger illegal,
(iii) seeks to impose limitations on the ability of Parent (or any of its
affiliates) effectively to acquire or hold, or to require Parent or the
Company or any of their respective affiliates to dispose of or hold
separate, any portion of the assets or the business of Parent and its
affiliates taken as a whole or the Company, or (iv) seeks to impose
material limitations on the ability of Parent (or any of its affiliates) to
exercise full rights of ownership of the Shares purchased by it, including,
without limitation, the right to vote the Shares purchased by it on all
matters properly presented to the stockholders of the Company; or
(b) there has been promulgated, enacted, entered, enforced or deemed
applicable to the Offer or the Merger, by any state, federal or foreign
government or governmental authority or by any court, domestic or foreign,
any statute, rule, regulation, judgment, decree, order or injunction that
could reasonably be expected to, in the judgment of Parent, directly or
indirectly, result in any of the consequences referred to in clauses (i)
through (iv) of subsection (a) above; or
(c) there has occurred (i) any general suspension of trading in, or
limitation on prices for, securities on any national securities exchange or
in the over-the-counter market in the United States or (ii) the declaration
of a banking moratorium or any suspension of payments in respect of banks
in the United States; or
(d) the Company and Parent have reached an agreement or understanding
that the Offer or the Merger Agreement be terminated or the Merger
Agreement has been terminated in accordance with its terms; or
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(e) the Company's Board of Directors has modified or amended its
recommendation of the Offer in any manner adverse to Parent or has
withdrawn its recommendation of the Offer, or has recommended acceptance of
any Acquisition Proposal or has resolved to do any of the foregoing, or has
failed to reject any Acquisition Proposal within 10 business days after
receipt by the Company or public announcement thereof; or
(f) (i) any corporation, entity or 'group' (as defined in Section
13(d)(3) of the Exchange Act) ('person'), other than Parent, one or more of
its affiliates or any beneficial owner of Shares on the date hereof, has
acquired beneficial ownership of 30% or more of the outstanding shares of
Common Stock, or has been granted any options or rights, conditional or
otherwise, to acquire a total of 30% or more of the outstanding shares of
Common Stock; (ii) any new group has been formed which beneficially owns
30% or more of the outstanding shares of Common Stock; (iii) any person
(other than Parent, one or more of its affiliates or any beneficial owner
of Shares on the date hereof) has entered into an agreement in principle or
definitive agreement with the Company with respect to a tender or exchange
offer for any Shares or a merger, consolidation or other business
combination with or involving the Company; or (iv) any person (other than
Parent, one or more of its affiliates or any beneficial owner of Shares on
the date hereof) has offered to tender or exchange for 30% or more of the
outstanding shares of Common Stock, or offered to merge, consolidate or
effect some other business combination with or involving the Company.
The foregoing conditions are for the sole benefit of Parent and may be
asserted by Parent regardless of the circumstances giving rise to any such
condition (unless the failure to satisfy any such condition has been caused by
or resulted from the failure by Parent to fulfill any of its obligations under
the Merger Agreement), and any such condition may be waived by Parent, in whole
or in part, at any time and from time to time, in the sole discretion of Parent.
The failure by Parent at any time to exercise any of the foregoing rights will
not be deemed a waiver of any right, the waiver of such right with respect to
any particular facts or circumstances will not be deemed a waiver with respect
to any other facts or circumstances, and each right will be deemed an ongoing
right which may be asserted at any time and from time to time.
Should the Offer be terminated pursuant to the foregoing provisions, all
tendered Shares not theretofore accepted for payment will forthwith be returned
by the Paying Agent to the tendering stockholders.
16. CERTAIN LEGAL MATTERS; REQUIRED REGULATORY APPROVALS. Except as set
forth in this Offer to Purchase, including under the caption 'State Approvals'
below, based on its review of publicly available filings by the Company with the
Commission and other publicly available information regarding the Company, the
Offeror is not aware of any licenses or regulatory permits that appear to be
material to the business of the Company and its subsidiaries, taken as a whole,
and that might be adversely affected by the Offeror's acquisition of Shares as
contemplated herein, or any filings, approvals or other actions by or with any
governmental authority or administrative or regulatory agency that would be
required for the acquisition or ownership of the Shares by the Offeror pursuant
to the Offer as contemplated herein. Should any such approval or other action be
required, it is presently contemplated that such approval or action would be
sought except as described below under 'State Takeover Laws.' Should any such
approval or other action be required, there can be no assurance that any such
approval or action, if needed, would be obtained without substantial conditions
or that adverse consequences might not result to the Company's or its
subsidiaries' businesses, or that certain parts of the Company's, the Offeror's
or any of their respective subsidiaries' businesses might not have to be
disposed of or held separate or other substantial conditions complied with in
order to obtain such approval or action or in the event that such approvals were
not obtained or such actions were not taken. The Offeror's obligation to
purchase and pay for Shares is subject to certain conditions, including
conditions with respect to litigation and governmental actions. See
'Introduction' and Section 15 for a description thereof.
STATE TAKEOVER LAWS
A number of states (including Delaware, where the Company is incorporated)
have adopted takeover laws and regulations which purport, to varying degrees, to
be applicable to attempts to acquire securities of corporations which are
incorporated in such states or which have substantial assets, stockholders,
principal executive offices or principal places of business therein. To the
extent that certain provisions of certain of these state takeover statutes
purport to apply to the Offer, the Offeror believes that such laws conflict with
federal law and constitute an unconstitutional burden on interstate commerce. In
1982, the Supreme Court of the United States, in Edgar v. Mite Corp.,
invalidated on constitutional grounds the Illinois Business Takeovers Statute,
which, as a matter of state securities law, made takeovers of corporations
meeting certain requirements more difficult, and the reasoning in such decision
is likely to
28
<PAGE>
apply to certain other state takeover statutes. In 1987, however, in CTS Corp.
v. Dynamics Corp. of America, the Supreme Court of the United States held that
the State of Indiana could, as a matter of corporate law and, and in particular,
those aspects of corporate law concerning corporate governance, constitutionally
disqualify a potential acquiror from voting on the affairs of a target
corporation without the prior approval of the remaining stockholders, provided
that such laws were applicable only under certain conditions. Subsequently, in
TLX Acquisition Corp. v. Telex Corp., a Federal district court in Oklahoma ruled
that the Oklahoma statutes were unconstitutional insofar as they apply to
corporations incorporated outside Oklahoma in that they would subject such
corporations to inconsistent regulations. Similarly, in Tyson Foods, Inc. v.
McReynolds, a Federal district court in Tennessee ruled that four Tennessee
takeover statutes were unconstitutional as applied to corporations incorporated
outside Tennessee. This decision was affirmed by the United States Court of
Appeals for the Sixth Circuit. In December 1988, a Federal district court in
Florida held in Grand Metropolitan PLC v. Butterworth, that the provisions of
the Florida Affiliated Transactions Act and Florida Control Share Acquisition
Act were unconstitutional as applied to corporations incorporated outside of
Florida.
The Offeror has not attempted to comply with any state takeover statutes in
connection with the Offer. The Offeror reserves the right to challenge the
validity or applicability of any state law allegedly applicable to the Offer and
nothing in this Offer to Purchase nor any action taken in connection herewith is
intended as a waiver of that right. In the event that it is asserted that one or
more takeover statutes apply to the Offer and it is not determined by an
appropriate court that such statute or statutes do not apply or are invalid as
applied to the Offer, the Offeror may be required to file certain documents
with, or receive approvals from, the relevant state authorities, and the Offeror
might be unable to accept for payment or purchase Shares tendered pursuant to
the Offer or be delayed in continuing or consummating the Offer. In such case,
the Offeror may not be obligated to accept for purchase, or pay for, any Shares
tendered.
STATE APPROVALS
Connecticut and New Jersey are states in which the Company has existing
facilities or facilities in development where regulations clearly require prior
approval of the transfer of ownership that will be effectuated pursuant to the
Merger Agreement. In California, where the Company is a manager co-licensee with
the owner of the two California facilities, the Company has been advised by the
California district offices responsible for the facilities managed by the
Company that prior approval of the transfer of ownership of the manager is not
required. The Company has been advised by Pennsylvania regulators that the
transfer of stock of a corporation does not constitute the type of change of
ownership that would require any regulatory approval or change in the operating
licenses for the two Pennsylvania facilities. Because of New York law and
regulations, the Kaplans individually currently are, and subsequent to any
consummation of the Offer or the Merger will continue to be, the operators of
most of the Company's assisted living facilities located in New York until such
time as a successor entity controlled by one of the Kaplans and an individual
associated with LFREI is approved as a replacement operator in accordance with
applicable law.
The Company has given timely notice of the transfer of ownership pursuant
to the Original Merger Agreement (within 90 days of the proposed change of
ownership) and has received approval from the Connecticut Department of Public
Health ('DPH') licensing division to transfer the beneficial ownership of the
Company's Connecticut Assisted Living Services Agency. LFREI will inform DPH as
to the reduction of the Kaplans' ownership interest pursuant to the Merger
Agreement when such notice is provided.
The Company has been advised by the New Jersey Department of Health and
Senior Services ('DHSS') based on the transfer of ownership pursuant to the
Original Merger Agreement that the Company will have to obtain prior approval
for new licenses involving at least two of the Company's four New Jersey
facilities and new certificates of needs ('CON') for one and perhaps two other
facilities under an expedited CON process. Of the two latter facilities, one is
in development and will not be completed before the transfer of ownership
pursuant to the Merger Agreement. The other facility is licensed by the New
Jersey Department of Community Affairs ('DCA') as a Class C Boarding House. The
Company is seeking to establish a recently completed 50-bed extension to the
Class C Boarding House as a comprehensive personal care home, which requires
licensure by DHSS. Licensure of the 50-bed extension as a comprehensive personal
care home may or may not be obtained from DHSS before the transfer of ownership
pursuant to the Merger Agreement is effectuated. Prior approval of the transfer
of ownership pursuant to the Merger Agreement is not required by DCA for the
Class C Boarding House but would be required by DHSS if the 50-bed extension is
licensed prior to the transfer of ownership pursuant to the Merger Agreement.
29
<PAGE>
LFREI submitted the requisite transfer of license and CON applications on
December 31, 1997 in order to qualify for the next CON review cycle that began
on January 2, 1998. DHSS is entitled by regulation to have 90 days to review
expedited CON applications, and approval of transfer of license applications
generally take up to 45 days. The Company believes that DHSS may review all of
the CON and license applications concurrently and within a shorter period of
time. In February 1998, one of the CON applications was amended to substitute
Parent as applicant in lieu of a subsidiary of the Company and LFREI will inform
DHSS about the ownership structure under the Merger Agreement. If it is
necessary to obtain any other CONs, the relevant applications will also be
amended. DHSS recently granted approval to transfer the licenses of the two
facilities referred to above but as that approval was based specifically on the
ownership structure under the Original Merger Agreement, LFREI will be seeking
to extend the approvals already received to include the ownership structure
under the Merger Agreement. There can be no assurances that the CONs will be
approved in less than 90 days after January 2, 1998, that extension of the two
license approvals already received to include the ownership structure under the
Merger Agreement will be granted before the transfer of ownership occurs, that
approval for the third license will be granted prior to the transfer of
ownership if such approval becomes necessary, or that the February 1998
amendment will not delay the approval beyond the period otherwise expected.
17. FEES AND EXPENSES. Neither the Offeror nor Parent, nor any officer,
director, stockholder, agent or other representative of the Offeror or Parent,
will pay any fees or commissions to any broker, dealer or other person (other
than the Dealer Manager, the Information Agent and the Depositary) for
soliciting tenders of Shares pursuant to the Offer. Brokers, dealers, commercial
banks and trust companies and other nominees will, upon request, be reimbursed
by the Offeror for customary mailing and handling expenses incurred by them in
forwarding materials to their customers.
Lazard is acting as Dealer Manager in connection with the Offer and has
provided certain financial advisory services to Parent and the Offeror in
connection with the proposed acquisition of the Shares. In connection with such
services, Lazard will be paid $2 million at the Effective Time. In addition, the
Offeror has agreed to reimburse Lazard for all its expenses incurred in
connection with the Offer, including the reasonable fees of its counsel, and to
indemnify Lazard against certain liabilities and expenses, including certain
liabilities under the federal securities laws.
The Offeror has retained MacKenzie Partners, Inc., as Information Agent,
and IBJ Schroder Bank & Trust Company, as Depositary, in connection with the
Offer. The Information Agent and the Depositary will receive reasonable and
customary compensation for their services hereunder and reimbursement for their
reasonable out-of-pocket expenses. The Information Agent and the Depositary will
also be indemnified by the Offeror against certain liabilities in connection
with the Offer.
18. MISCELLANEOUS. The Offer is not being made to, nor will tenders be
accepted from or on behalf of, holders of Shares residing in any jurisdiction in
which the making or acceptance thereof would not be in compliance with the
securities, blue sky or other laws of such jurisdiction. In any jurisdiction
where the securities, blue sky or other laws require the Offer to be made by a
licensed broker or dealer, the Offer will be deemed to be made on behalf of the
Offeror by one or more registered brokers or dealers licensed under the laws of
such jurisdiction.
No person has been authorized to give any information or make any
representation on behalf of the Offeror other than as contained in this Offer to
Purchase or in the Letter of Transmittal, and, if any such information or
representation is given or made, it should not be relied upon as having been
authorized by the Offeror.
The Offeror and the Parent have filed with the Commission the Schedule
14D-1, pursuant to Section 14(d)(1) of the Exchange Act and Rule 14d-1
promulgated thereunder, furnishing certain information with respect to the
Offer. Such Schedule 14D-1 and any amendments, including exhibits, may be
examined and copies may be obtained at the same places and in the same manner as
set forth with respect to the Company in Section 8 (except that they will not be
available at the regional offices of the Commission).
March 2, 1998 PROMETHEUS ACQUISITION CORP.
30
<PAGE>
SCHEDULE I
CERTAIN INFORMATION CONCERNING THE DIRECTORS
AND EXECUTIVE OFFICERS OF THE OFFEROR
1. DIRECTORS AND THE EXECUTIVE OFFICERS OF THE OFFEROR. Set forth below is the
name, age, present principal occupation or employment and five-year
employment history of each director and executive officer of the Offeror.
All persons listed below are citizens of the United States of America, and
each such person's business address is 30 Rockefeller Plaza, New York, New
York 10020.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT;
NAME OFFICE HELD IN OFFEROR FIVE-YEAR EMPLOYMENT HISTORY
- ------------------------------------ ------------------------------------ ------------------------------------
<S> <C> <C>
Robert P. Freeman................... President Mr. Freeman has been a General
Member of Lazard Freres & Co. LLC
since January 1998 and a Principal
of Lazard Freres Real Estate
Investors, L.L.C. ('LFREI') since
January 1993. Mr. Freeman is
currently a director of American
Apartment Communities, Inc.,
Atlantic American Properties
Trust, Commonwealth Atlantic
Properties, ARV Assisted Living
Inc. ('ARV') and The Rubenstein
Company, L.P. ('TRC').
Murry N. Gunty...................... Vice President Mr. Gunty is a Principal of LFREI,
which he joined in 1995. From 1995
to 1996, Mr. Gunty was a Vice
President of LFREI. From 1993 to
1995, he was associated with J.E.
Robert Company, a real estate
investment company. He is
currently a director of Atlantic
American Properties Trust, ARV and
TRC.
</TABLE>
<PAGE>
SCHEDULE II
CERTAIN INFORMATION CONCERNING MEMBERS OF PROMETHEUS
AND MANAGING MEMBERS OF LAZARD
Set forth below is the name, age, present principal occupation or
employment and five-year employment history of (I) each managing member of
Prometheus Realty Investors, LLC ('Prometheus') (one of the two managing members
of Lazard Freres Real Estate Investors, L.L.C. ('LFREI')) and (II) each member
of the Management Committee of Lazard Freres & Co. LLC ('Lazard') (one of the
two managing members of LFREI). Except for Michel David-Weill, who is a citizen
of France, all persons listed below are citizens of the United States of
America, and each such person's business address is 30 Rockefeller Plaza, New
York, New York 10020.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AND FIVE-YEAR EMPLOYMENT HISTORY
- ------------------------------------- --------------------------------------------------------------------------
<S> <C>
I. PROMETHEUS REALTY INVESTORS, LLC
Arthur P. Solomon Mr. Solomon has been a General Member of Lazard since May 1995 and Senior
Principal of LFREI since January 1993. Mr. Solomon was a General Partner
of Lazard Freres & Co., the predecessor to Lazard ('Lazard Freres'),
until April 1995.
Anthony P. Meyer Mr. Meyer has been a General Member of Lazard since January 1998 and a
Principal of LFREI since January 1994. From February 1993 until December
1993, he was employed as a consultant.
Robert P. Freeman Mr. Freeman has been a General Member of Lazard since January 1998 and a
Principal of LFREI since January 1993.
II. LAZARD FRERES & CO. LLC
Michel David-Weill Mr. David-Weill has been Chairman and Chief Executive Officer of Lazard
since May 1995. Mr. David-Weill was a General Partner of Lazard Freres
until April 1995. Mr. David-Weill is a General Partner of Lazard Freres
& Cie. in Paris. Mr. David-Weill has been the Deputy Chairman of Lazard
Brothers & Co., Limited in London since January 1997.
Steven Rattner Mr. Rattner has been the Deputy Chief Executive Officer of Lazard since
May 1997 and a General Member of Lazard since May 1995. Mr. Rattner was
a General Partner of Lazard Freres until April 1995.
Norman Eig Mr. Eig has been a Vice Chairman of Lazard since May 1997 and a General
Member of Lazard since May 1995. Mr. Eig was a General Partner of Lazard
Freres until April 1995.
Steven J. Golub Mr. Golub has been the Chief Financial Officer of Lazard since May 1997
and a General Member of Lazard since May 1995. Mr. Golub was a General
Partner of Lazard Freres until April 1995.
Herbert W. Gullquist Mr. Gullquist has been a Vice Chairman of Lazard since May 1997 and a
General Member of Lazard since May 1995. Mr. Gullquist was a General
Partner of Lazard Freres until April 1995.
Melvin L. Heineman Mr. Heineman has been the Chief Administrative Officer and a General
Member of Lazard since May 1995. Mr. Heineman was a General Partner of
Lazard Freres until April 1995.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AND FIVE-YEAR EMPLOYMENT HISTORY
- ------------------------------------- --------------------------------------------------------------------------
<S> <C>
Damon Mezzacappa Mr. Mezzacappa has been a Vice Chairman of Lazard since May 1997 and a
General Member of Lazard since May 1995. Mr. Mezzacappa was a General
Partner of Lazard Freres until April 1995.
Gerald Rosenfeld Mr. Rosenfeld has been the head of Investment Banking of Lazard since
November 1997 and a General Member of Lazard since May 1995. Mr.
Rosenfeld was a General Partner of Lazard Freres until April 1995.
Kendrick R. Wilson, III Mr. Wilson has been a Vice Chairman of Lazard since May 1997 and a General
Member of Lazard since May 1995. Mr. Wilson was a General Partner of
Lazard Freres until April 1995.
</TABLE>
<PAGE>
Facsimile copies of the Letters of Transmittal, properly completed and duly
executed, will be accepted. The Letters of Transmittal, certificates for Shares
and any other required documents should be sent or delivered by each stockholder
of the Company or his broker, dealer, commercial bank, trust company or other
nominee to the Depositary at one of its addresses set forth below:
The Depositary for the Offer is:
IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Facsimile By Hand or Overnight Delivery:
P.O. Box 84 (for eligible financial institutions only): One State Street
Bowling Green Station (212) 858-2611 New York, New York 10004
New York, New York 10274-0084 Attn: Securities Processing
Attn: Reorganization Window, Sub-cellar One
Department
Confirm Facsimile by Telephone:
(212) 858-2103
</TABLE>
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
set forth below. Additional copies of this Offer to Purchase, the Letters of
Transmittal and other tender offer materials may be obtained from the
Information Agent as set forth below, and will be furnished promptly at the
Purchaser's expense. You may also contact your broker, dealer, commercial bank,
trust company or other nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
[LOGO OF
MACKENZIE
PARTNERS, INC.]
156 FIFTH AVENUE
NEW YORK, NEW YORK 10010
(212) 929-5500 (CALL COLLECT)
OR
TOLL-FREE (800)322-2885
The Dealer Manager for the Offer is:
[LOGO OF
LAZARD FRERES & CO. LLC]
30 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10020
(212) 632-6167 (CALL COLLECT)
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
KAPSON SENIOR QUARTERS CORP.
PURSUANT TO THE OFFER TO PURCHASE
DATED MARCH 2, 1998
BY
PROMETHEUS ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
PROMETHEUS SENIOR QUARTERS, LLC
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME,
ON MARCH 27, 1998, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Facsimile By Hand or Overnight Delivery:
P.O. Box 84 (for eligible financial One State Street
Bowling Green Station institutions only): New York, New York 10004
New York, New York 10274-0084 (212) 858-2611 Attn: Securities Processing
Attn: Reorganization Department Window, Sub-cellar One
Confirm facsimile by Telephone:
(212) 858-2103
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A
NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by stockholders of Kapson
Senior Quarters Corp. if certificates evidencing shares of Common Stock (as
defined in the Offer to Purchase, dated March 2, 1998 (the 'Offer to Purchase'))
are to be forwarded herewith or, unless an Agent's Message (as defined in the
Offer to Purchase) is utilized, if tenders of shares of Common Stock are to be
made by book-entry transfer to an account maintained by IBJ Schroder Bank &
Trust Company (the 'Depositary') at The Depository Trust Company or The
Philadelphia Depository Trust Company (each a 'Book-Entry Transfer Facility' and
collectively referred to as the 'Book-Entry Transfer Facilities'), pursuant to
the procedures set forth in Section 3 of the Offer to Purchase. Stockholders who
tender shares of Common Stock by book-entry transfer are referred to herein as
'Book-Entry Stockholders.'
Holders of shares of Common Stock whose certificates for such shares (the
'Share Certificates') are not immediately available or who cannot deliver their
Share Certificates and all other required documents to the Depositary on or
prior to the Expiration Date (as defined in the Offer to Purchase), or who
cannot complete the procedures for book-entry transfer on a timely basis, must
tender their shares of Common Stock according to the guaranteed delivery
procedures set forth in Section 3 of the Offer to Purchase. See Instruction 2.
DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE
DELIVERY TO THE DEPOSITARY.
<PAGE>
DESCRIPTION OF SHARES TENDERED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF
REGISTERED HOLDER(S) (PLEASE FILL
IN, IF BLANK, EXACTLY AS NAME(S)
APPEAR(S) ON SHARE SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY)
- -------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES
SHARE REPRESENTED BY NUMBER OF
CERTIFICATE SHARE SHARES
NUMBER(S)* CERTIFICATE(S) TENDERED**
------------ -------------- ----------
<S> <C> <C> <C>
------------ -------------- ----------
------------ -------------- ----------
------------ -------------- ----------
------------ -------------- ----------
TOTAL SHARES
- -------------------------------------------------------------------------------
</TABLE>
* Need not be completed by Book-Entry Stockholders.
** Unless otherwise indicated, it will be assumed that all Shares represented by
Share Certificates delivered to the Depositary are being tendered. See
Instruction 4.
- -------------------------------------------------------------------------------
/ / CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN
ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER FACILITY AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution: _____________________________________________
Check Box of Book-Entry Transfer Facility:
/ / The Depository Trust Company
/ / The Depository Trust Company of Philadelphia
Account Number: _____________________________________________________________
Transaction Code Number: ____________________________________________________
/ / CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING.
PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY.
Name(s) of Registered Holder(s): ____________________________________________
Window Ticket Number (if any): ______________________________________________
Date of Execution of Notice of Guaranteed Delivery: _________________________
Name of Institution which Guaranteed Delivery: ______________________________
If Delivery by Book-Entry Transfer Facility:
/ / The Depository Trust Company
/ / The Depository Trust Company of Philadelphia
Account Number: _____________________________________________________________
Transaction Code Number: ____________________________________________________
2
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Prometheus Acquisition Corp., a Delaware
corporation (the 'Offeror'), the above-described shares of common stock, par
value $.01 per share (the 'Shares'), of Kapson Senior Quarters Corp., a Delaware
corporation (the 'Company'), at a purchase price of $14.50 per Share, net to the
seller in cash, without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase, receipt of which is hereby
acknowledged, and in this Letter of Transmittal (which, together with the Offer
to Purchase and any amendments or supplements hereto or thereto, collectively
constitute the 'Offer'). The undersigned understands that the Offeror reserves
the right to transfer or assign, in whole or from time to time in part, to one
or more of its subsidiaries or affiliates the right to purchase all or any
portion of the Shares tendered pursuant to the Offer.
Subject to, and effective upon, acceptance for payment of and payment for
the Shares tendered herewith in accordance with the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of any such extension or amendment), the undersigned hereby
sells, assigns and transfers to, or upon the order of, the Offeror all right,
title and interest in and to all the Shares that are being tendered hereby, and
constitutes and irrevocably appoints the Depositary the true and lawful agent,
attorney-in-fact and proxy of the undersigned to the full extent of the
undersigned's rights with respect to such Shares, with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to: (i) deliver Share Certificates for such Shares,
or transfer ownership of such Shares on the account books maintained by any of
the Book-Entry Transfer Facilities, together with all accompanying evidences of
transfer and authenticity, to or upon the order of the Offeror upon receipt by
the Depositary, as the undersigned's agent, of the purchase price, (ii) present
such Shares for transfer on the books of the Company; and (iii) receive all
benefits and otherwise exercise all rights of beneficial ownership of such
Shares, all in accordance with the terms subject to the conditions of the Offer.
The undersigned hereby irrevocably appoints Robert P. Freeman the
attorney-in-fact and proxy of the undersigned, with full power of substitution,
to vote in such manner as he or his substitute shall, in his sole discretion,
deem proper, and otherwise act (including pursuant to written consent) with
respect to all of the Shares tendered hereby which have been accepted for
payment by the Offeror prior to the time of such vote or action which the
undersigned is entitled to vote at any meeting of stockholders (whether annual
or special and whether or not an adjourned meeting) of the Company, or by
written consent in lieu of such meeting, or otherwise. This power of attorney
and proxy is coupled with an interest in the Company and in the Shares and is
irrevocable and is granted in consideration of, and is effective upon, the
acceptance for payment of such Shares by the Offeror in accordance with the
terms of the Offer. Such acceptance for payment shall revoke, without further
action, any other power of attorney or proxy granted by the undersigned at any
time with respect to such Shares and no subsequent powers of attorney or proxies
will be given (and if given will be deemed not to be effective) with respect
thereto by the undersigned. The undersigned understands that the Offeror
reserves the right to require that, in order for the Shares to be deemed validly
tendered, immediately upon the Offeror's acceptance for payment of such Shares,
the Offeror or its designees is able to exercise full voting rights with respect
to such Shares, and other securities, including voting at any meeting of
stockholders.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby and that, when and to the extent the same are accepted for
payment by the Offeror, the Offeror will acquire good, marketable and
unencumbered title thereto, free and clear of all liens, restrictions, charges,
encumbrances, conditional sales agreements or other obligations relating to the
sale or transfer thereof, and the same will not be subject to any adverse
claims. The undersigned, upon request, will execute and deliver any additional
documents deemed by the Depositary or the Offeror to be necessary or desirable
to complete the sale, assignment and transfer of the Shares tendered hereby.
All authority herein conferred or agreed to be conferred shall not be
affected by, and shall survive, the death or incapacity of the undersigned, and
any obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, legal representatives, successors and assigns of the
undersigned. Except as stated in the Offer, this tender is irrevocable, provided
that the Shares tendered pursuant to the Offer may be withdrawn at any time
prior to the Expiration Date and, unless theretofore accepted for payment as
provided in the Offer to Purchase, may also be withdrawn at any time after April
30, 1998 (or such later date as may apply in case the Offer is extended).
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Offeror upon the terms and subject to the conditions of the Offer.
3
<PAGE>
Unless otherwise indicated under 'Special Payment Instructions,' please
issue the check for the purchase price and/or return any Share Certificates not
tendered or accepted for payment in the name(s) of the undersigned. Similarly,
unless otherwise indicated under 'Special Delivery Instructions,' please mail
the check for the purchase price and/or any Share Certificates not tendered or
accepted for payment (and accompanying documents, as appropriate) to the
undersigned at the address shown below the undersigned's signature. In the event
that both 'Special Payment Instructions' and 'Special Delivery Instructions' are
completed, please issue the check for the purchase price and/or return any Share
Certificates not tendered or accepted for payment in the name(s) of, and deliver
such check and/or return certificates to, the person(s) so indicated.
Stockholders tendering Shares by book-entry transfer may request that any Shares
not accepted for payment be returned by crediting such account maintained at
such Book-Entry Transfer Facility as such stockholder may designate by making an
appropriate entry under 'Special Payment Instructions.' The undersigned
recognizes that the Offeror has no obligation pursuant to the 'Special Payment
Instructions' to transfer any Shares from the name of the registered holder(s)
thereof if the Offeror does not accept for payment any of such Shares.
SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON PAGE 9)
________________________________________________________________________________
________________________________________________________________________________
SIGNATURE(S) OF OWNER(S)
Dated:______________________________
(Must be signed by registered holder(s) exactly as name(s) appear(s) on the
Share Certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by Share Certificates and documents
transmitted herewith. If signature is by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of a corporation or others acting in a
fiduciary or representative capacity, please provide the necessary information.
See Instruction 5.)
Name(s):________________________________________________________________________
________________________________________________________________________
(PLEASE PRINT)
Capacity (full title): _________________________________________________________
Address: _______________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number: ________________________________________________
Tax Identification or Social Security No.: _____________________________________
(SEE SUBSTITUTE W-9 ON PAGE 9)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED--SEE INSTRUCTIONS 1 AND 6)
Authorized Signature: __________________________________________________________
Name: __________________________________________________________________________
Name of Firm: __________________________________________________________________
Address: _______________________________________________________________________
(INCLUDE ZIP CODE)
Title: _________________________________________________________________________
Area Code and Telephone Number: ________________________________________________
Dated: ___________________________
4
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if Share Certificates not tendered or not purchased and/or
the check for the purchase price of Shares purchased are to be issued in the
name of someone other than the undersigned, or if Shares tendered by book-entry
transfer which are not purchased are to be returned by credit to an account
maintained at a Book-Entry Transfer Facility other than that designated on the
front cover.
Issue check and/or certificates to:
Name: __________________________________________________________________________
(PLEASE PRINT)
Address: _______________________________________________________________________
________________________________________________________________________________
(INCLUDE ZIP CODE)
________________________________________________________________________________
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO.)
(SEE SUBSTITUTE FORM W-9 ON PAGE 9)
/ / Credit unpurchased Shares tendered by book-entry transfer to the Book-Entry
Transfer Facility account set forth below:
/ / DTC / / PDTC
________________________________________________________________________________
(ACCOUNT NUMBER)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if Share Certificates not tendered or not purchased and/or
the check for the purchase price of Shares purchased are to be sent to someone
other than the undersigned, or to the undersigned at an address other than that
shown on the front cover.
Mail check and/or certificates to:
Name: __________________________________________________________________________
(PLEASE PRINT)
Address: _______________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(INCLUDE ZIP CODE)
________________________________________________________________________________
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO.)
5
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required (i) if this Letter of Transmittal is signed by the
registered holder (which term, for purposes of this Letter of Transmittal, shall
include any participant in a Book-Entry Transfer Facility whose name appears on
a security position listing as the owner of Shares) of the Shares tendered
herewith, unless such holder has completed either the box entitled 'Special
Delivery Instructions' or the box entitled 'Special Payment Instructions' on the
inside front cover hereof or (ii) if such Shares are tendered for the account of
a firm that is a bank, broker, dealer, credit union, savings association or
other entity which is a member in good standing of the Securities Transfer
Agents Medallion Program (an 'Eligible Institution'). In all other cases, all
signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARE CERTIFICATES. This Letter
of Transmittal is to be used either if Share Certificates to be forwarded
herewith or, unless an Agent's Message is utilized, if tenders are to be made
pursuant to the procedures for tender by book-entry transfer set forth in
Section 3 of the Offer of Purchase. Share Certificates, or timely confirmation
(a 'Book-Entry Confirmation') of a book-entry transfer of such Shares into the
Depositary's account at a Book-Entry Transfer Facility, as well as this Letter
of Transmittal (or a manually signed facsimile hereof), properly completed and
duly executed, with any required signature guarantees, or an Agent's Message in
the case of a book-entry delivery, and any other documents required by this
Letter of Transmittal, must be received by the Depositary at one of its
addresses set forth herein prior to the Expiration Date.
Stockholders whose Share Certificates are not immediately available or who
cannot deliver their Share Certificates and all other required documents to the
Depositary prior to the Expiration Date or who cannot complete the procedure for
delivery by book-entry transfer on a timely basis may tender their Shares if all
of the guaranteed delivery procedures set forth in Section 3 of the Offer to
Purchase are duly complied with. Pursuant to such procedures: (i) such tender
must be made by or through an Eligible Institution, (ii) a properly completed
and duly executed Notice of Guaranteed Delivery, substantially in the form made
available by the Offeror, must be received by the Depositary prior to the
Expiration Date, and (iii) the Share Certificates (or a Book-Entry Confirmation)
representing all tendered Shares, in proper form for transfer together with a
properly completed and duly executed Letter of Transmittal (or a manually signed
facsimile hereof), with any required signature guarantees (or, in the case of a
book-entry delivery, an Agent's Message) and any other documents required by
this Letter of Transmittal, must be received by the Depositary within three
Nasdaq National Market trading days after the date of execution of such Notice
of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile transmission or mail to the Depositary and must include a guarantee
by an Eligible Instruction on the form set forth in such notice.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THIS LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH A BOOK-ENTRY
TRANSFER FACILITY, IS AT THE OPTION AND SOLE RISK OF THE TENDERING STOCKHOLDER,
AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
DEPOSITARY (INCLUDING IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY
CONFIRMATION). IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by executing
this Letter of Transmittal or facsimile thereof, waives any right to receive any
notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares and any other required
information should be listed on a separate schedule and attached hereto and
separately signed on each page thereof in the same manner as this Letter of
Transmittal.
4. PARTIAL TENDERS (NOT APPLICABLE TO BOOK-ENTRY STOCKHOLDERS). If fewer
than all the Shares evidenced by any certificate submitted are to be tendered,
fill in the number of Shares that are to be tendered in the box entitled 'Number
of Shares Tendered.' In such case, a new certificate(s) for the remainder of the
Shares that were evidenced by your old Share Certificate(s) will be sent to you,
unless otherwise provided in the appropriate box marked 'Special Payment
Instructions' and/or 'Special Delivery Instructions' on this Letter of
Transmittal, as soon as practicable
6
<PAGE>
after the Expiration Date. All Shares represented by Share Certificates
delivered to the Depositary will be deemed to have been tendered unless
otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signatures(s) must correspond with the name(s) as written
on the face of the Share Certificates without alteration, enlargement or any
change whatsoever.
If any of the Shares tendered hereby is held of record by two or more joint
owners, all such persons must sign this Letter of Transmittal.
If any tendered Shares are registered in different names on several Share
Certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of Share
Certificates.
If this Letter of Transmittal or any certificates or stock powers are
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of corporations or others acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to the Offeror of their authority so to act must be submitted.
When this Letter of Transmittal is signed by the registered holder(s) of
the Shares listed and transmitted hereby, no endorsements of Share Certificates
or separate stock powers are required unless payment to be made to or Share
Certificates for Shares not tendered or purchased are to be issued in the name
of a person other than the registered owner(s). Signatures on such Share
Certificates or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, Share Certificates
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case, signed exactly as the name(s) of the
registered holder(s) appear(s) on such Share Certificate(s). Signature(s) on any
such Share Certificates or stock powers must be guaranteed by an Eligible
Institution. See Instruction 1.
6. STOCK TRANSFER TAXES. Except as provided in this Instruction 6, the
Offeror will pay or cause to be paid any stock transfer taxes with respect to
the sale and transfer of any purchased Shares to it or its order pursuant to the
Offer. If, however, payment of the purchase price is to be made to, or if Share
Certificates for Shares not tendered or not purchased are to be registered in
the name of, any person other than the registered holder(s), or if tendered
Shares are registered in the name of, any person other than the registered
holder, or if tendered Share Certificates are registered in the name of any
person other then the person(s) signing this Letter of Transmittal, the amount
of any stock transfer taxes (whether imposed on the registered holder(s) or such
person) payable on account of the transfer to such person will be deducted from
the purchase price unless satisfactory evidence of the payment of such taxes or
exemption therefrom is submitted.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued
in the name of and/or certificates for unpurchased Shares are to be returned to
a person other than the signer of this Letter of Transmittal or if a check is to
be sent and/or such certificates are to be returned to someone other than the
signer of this Letter of Transmittal or to an address other than that shown on
the front cover hereof, the appropriate boxes on this Letter of Transmittal
should be completed. Stockholders tendering Shares by book-entry transfer may
request that Shares not purchased be credited to such account maintained at such
Book-Entry Facility as such stockholder may designate hereon. If no such
instructions are given, such Shares not purchased will be returned by crediting
the account at the Book-Entry Transfer Facility designated above. See
Instruction 1.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance
may be directed to the Information Agent at its addresses set forth below.
Requests for additional copies of the Offer to Purchase and this Letter of
Transmittal may be directed to the Information Agent or to brokers, dealers,
commercial banks or trust companies.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. federal income
tax law, a stockholder whose tendered Shares are accepted for payment is
required to provide the Depositary with such stockholder's correct taxpayer
identification number ('TIN') on Substitute Form W-9 below. To prevent backup
federal income tax withholding on payments of the purchase price for Shares, a
tendering stockholder must provide the Depositary a completed Substitute Form
W-9 certifying as to the stockholder's correct TIN and that such stockholder is
not subject to backup withholding. If the Depositary is not provided with the
correct TIN, the Internal Revenue Service may subject the stockholder or other
payee to a $50 penalty. In addition, payments that are made to such stockholder
or other payee with respect to Shares purchased pursuant to the Offer may be
subject to 31% backup withholding.
7
<PAGE>
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are exempt recipients not subject to these backup
withholding and reporting requirements. In order for a foreign individual to
qualify as an exempt recipient, the stockholder must submit a Form W-8, signed
under penalties of perjury, attesting to that individual's exempt status. A Form
W-8 can be obtained from the Depositary. See the enclosed 'Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9' for more
instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any payments made to the stockholder or other payee. Backup withholding is
not an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If backup withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
The stockholder is required to give the Depositary the TIN (e.g., social
security number or employer identification number) of the record owner of the
Shares or of the last transferee appearing on the transfers attached to, or
endorsed on, the Shares. If the Shares are in more than one name or are not in
the name of the actual owner, consult the enclosed 'Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9' for additional
guidance on which number to report. The box in Part 3 of the Substitute Form W-9
may be filled out if the tendering stockholder has not been issued a TIN and has
applied for a TIN or intends to apply for a TIN in the near future. If the box
in Part 3 is filled out, the stockholder or other payee must also complete the
Certificate of Awaiting Taxpayer Identification Number below in order to avoid
backup withholding. Notwithstanding that the box in Part 3 is filled out and the
Certificate of Awaiting Taxpayer Identification Number is completed, the
Depositary will withhold 31% of all payments made prior to the time a properly
certified TIN is provided to the Depositary.
10. LOST, DESTROYED OR STOLEN CERTIFICATES. If any Share Certificate(s)
has been lost, destroyed or stolen, the stockholder should promptly notify the
Depositary. The stockholder will then be instructed as to the steps that must be
taken in order to replace such Share Certificate(s). This Letter of Transmittal
and related documents cannot be processed until the procedures for replacing
lost or destroyed Share Certificates have been followed.
11. WAIVER OF CONDITIONS. The Conditions to the Offer may be waived, in
whole or in part, by the Offeror in its sole discretion, at any time and from
time to time, in the case of any Shares tendered.
IMPORTANT. THIS LETTER OF TRANSMITTAL (OR A FACSIMILE COPY HEREOF) OR AN
AGENT'S MESSAGE TOGETHER WITH SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY
TRANSFER AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE DEPOSITARY ON
OR PRIOR TO THE EXPIRATION DATE.
8
<PAGE>
TO BE COMPLETED BY ALL TENDERING STOCKHOLDERS
(SEE INSTRUCTION 9)
<TABLE>
<S> <C>
PAYOR'S NAME:
PART 1--PLEASE PROVIDE YOUR TIN IN THE PART 3--Social Security Number or
BOX AT THE RIGHT AND CERTIFY BY SIGNING Employer Identification Number
AND DATING BELOW. ________________________________________
(If awaiting TIN write 'Applied
For')
PART 2--For Payees exempt from backup withholding, see the enclosed Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9 and
complete as instructed therein.
SUBSTITUTE Certification--Under penalties of perjury, I certify that:
FORM W-9 (1) The number shown on this form is my correct TIN (or I am waiting for a
DEPARTMENT OF THE TREASURY number to be issued to me); and
INTERNAL REVENUE SERVICE (2) I am not subject to backup withholding either because I have not been
PAYOR'S REQUEST FOR notified by the Internal Revenue Service (IRS) that I am subject to backup
TAXPAYER withholding as a result of a failure to report all interest or dividends, or
IDENTIFICATION the IRS has notified me that I am no longer subject to backup withholding.
NUMBER ('TIN') CERTIFICATION INSTRUCTIONS--You must cross out Item (2) above if you have been
notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after being
notified by the IRS that you were subject to backup withholding, you received
another notification from the IRS that you were no longer subject to backup
withholding, do not cross out item (2). (Also see instructions in the enclosed
Guidelines).
SIGNATURE:________________________________________ DATE:_______________________
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (1) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate IRS Center or
Social Security Administration Office or (2) I intend to mail or deliver an
application in the near future. I understand that if I do not provide a taxpayer
identification number by the time of payment, 31% of all reportable payments
made to me will be withheld, but that such amounts will be refunded to me if I
then provide a taxpayer identification number within sixty (60) days.
Signature: ____________________________________ Date: ________________________
9
<PAGE>
FACSIMILE COPIES OF THIS LETTER OF TRANSMITTAL, PROPERLY COMPLETED AND DULY
EXECUTED, WILL BE ACCEPTED. THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES AND
ANY OTHER REQUIRED DOCUMENTS SHOULD BE SENT OR DELIVERED BY EACH TENDERING
STOCKHOLDER OF THE COMPANY OR HIS BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY
OR OTHER NOMINEE TO THE DEPOSITARY AT ONE OF ITS ADDRESSES SET FORTH BELOW:
The Depositary for the Offer is:
IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Facsimile By Hand or Overnight Delivery:
P.O. Box 84 (for eligible financial institutions only): One State Street
Bowling Green Station (212) 858-2611 New York, New York 10004
New York, New York 10274-0084 Attn: Securities Processing
Attn: Reorganization Window, Sub-cellar One
Department
Confirm Facsimile by Telephone:
(212) 858-2103
</TABLE>
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
set forth below. Additional copies of the Offer to Purchase, this Letter of
Transmittal and other tender offer materials may be obtained from the
Information Agent as set forth below, and will be furnished promptly at the
Offeror's expense. You may also contact your broker, dealer, commercial bank,
trust company or other nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
[LOGO OF MACKENZIE PARTNERS, INC.]
156 FIFTH AVENUE
NEW YORK, NEW YORK 10010
(212) 929-5500 (CALL COLLECT)
OR
TOLL-FREE (800)322-2885
The Dealer Manager for the Offer is:
[LOGO OF LAZARD FRERES & CO. LLC]
30 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10020
(212) 632-6167 (CALL COLLECT)
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF $2.00 CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
OF
KAPSON SENIOR QUARTERS CORP.
PURSUANT TO THE OFFER TO PURCHASE
DATED MARCH 2, 1998
BY
PROMETHEUS ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
PROMETHEUS SENIOR QUARTERS, LLC
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME,
ON MARCH 27, 1998, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Facsimile By Hand or Overnight Delivery:
P.O. Box 84 (for eligible financial One State Street
Bowling Green Station institutions only): New York, New York 10004
New York, New York 10274-0084 (212) 858-2611 Attn: Securities Processing
Attn: Reorganization Department Window, Sub-cellar One
Confirm facsimile by Telephone:
(212) 858-2103
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A
NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by holders of Kapson Senior
Quarters Corp. Preferred Stock (as defined in the Offer to Purchase, dated March
2, 1998 (the 'Offer to Purchase')).
Holders of shares of Preferred Stock whose certificates for such shares
(the 'Share Certificates') are not immediately available or who cannot deliver
their Share Certificates and all other required documents to the Depositary on
or prior to the Expiration Date (as defined in the Offer to Purchase) must
tender their shares of Preferred Stock according to the guaranteed delivery
procedures set forth in Section 3 of the Offer to Purchase. See Instruction 2.
<PAGE>
DESCRIPTION OF SHARES TENDERED
<TABLE>
NAME(S) AND ADDRESS(ES) OF
REGISTERED HOLDER(S) (PLEASE FILL
IN, IF BLANK, EXACTLY AS NAME(S)
APPEAR(S) ON SHARE SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY)
- -------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES
SHARE REPRESENTED BY NUMBER OF
CERTIFICATE SHARE SHARES
NUMBER(S) CERTIFICATE(S) TENDERED*
------------ --------------- ---------
<S> <C> <C> <C>
------------ --------------- ---------
------------ --------------- ---------
------------ --------------- ---------
------------ --------------- ---------
TOTAL SHARES
- -------------------------------------------------------------------------------
</TABLE>
* Unless otherwise indicated, it will be assumed that all Shares represented by
Share Certificates delivered to the Depositary are being tendered. See
Instruction 4.
- -------------------------------------------------------------------------------
/ / CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING.
PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY.
Name(s) of Registered Holder(s): ____________________________________________
Window Ticket Number (if any): ______________________________________________
Date of Execution of Notice of Guaranteed Delivery: _________________________
Name of Institution which Guaranteed Delivery: ______________________________
2
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Prometheus Acquisition Corp., a Delaware
corporation (the 'Offeror'), the above-described shares of preferred stock, par
value $.01 per share (the 'Shares'), of Kapson Senior Quarters Corp., a Delaware
corporation (the 'Company'), at a purchase price of $27.93 per Share, net to the
seller in cash, without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase, receipt of which is hereby
acknowledged, and in this Letter of Transmittal (which, together with the Offer
to Purchase and any amendments or supplements hereto or thereto, collectively
constitute the 'Offer'). The undersigned understands that the Offeror reserves
the right to transfer or assign, in whole or from time to time in part, to one
or more of its subsidiaries or affiliates the right to purchase all or any
portion of the Shares tendered pursuant to the Offer.
Subject to, and effective upon, acceptance for payment of and payment for
the Shares tendered herewith in accordance with the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of any such extension or amendment), the undersigned hereby
sells, assigns and transfers to, or upon the order of, the Offeror all right,
title and interest in and to all the Shares that are being tendered hereby, and
constitutes and irrevocably appoints the Depositary the true and lawful agent,
attorney-in-fact and proxy of the undersigned to the full extent of the
undersigned's rights with respect to such Shares, with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to: (i) deliver Share Certificates for such Shares,
together with all accompanying evidences of transfer and authenticity, to or
upon the order of the Offeror upon receipt by the Depositary, as the
undersigned's agent, of the purchase price, (ii) present such Shares for
transfer on the books of the Company; and (iii) receive all benefits and
otherwise exercise all rights of beneficial ownership of such Shares, all in
accordance with the terms subject to the conditions of the Offer.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby and that, when and to the extent the same are accepted for
payment by the Offeror, the Offeror will acquire good, marketable and
unencumbered title thereto, free and clear of all liens, restrictions, charges,
encumbrances, conditional sales agreements or other obligations relating to the
sale or transfer thereof, and the same will not be subject to any adverse
claims. The undersigned, upon request, will execute and deliver any additional
documents deemed by the Depositary or the Offeror to be necessary or desirable
to complete the sale, assignment and transfer of the Shares tendered hereby.
All authority herein conferred or agreed to be conferred shall not be
affected by, and shall survive, the death or incapacity of the undersigned, and
any obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, legal representatives, successors and assigns of the
undersigned. Except as stated in the Offer, this tender is irrevocable, provided
that the Shares tendered pursuant to the Offer may be withdrawn at any time
prior to the Expiration Date and, unless theretofore accepted for payment as
provided in the Offer to Purchase, may also be withdrawn at any time after April
30, 1998 (or such later date as may apply in case the Offer is extended).
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Offeror upon the terms and subject to the conditions of the Offer.
Unless otherwise indicated under 'Special Payment Instructions,' please
issue the check for the purchase price and/or return any Share Certificates not
tendered or accepted for payment in the name(s) of the undersigned. Similarly,
unless otherwise indicated under 'Special Delivery Instructions,' please mail
the check for the purchase price and/or any Share Certificates not tendered or
accepted for payment (and accompanying documents, as appropriate) to the
undersigned at the address shown below the undersigned's signature. In the event
that both 'Special Payment Instructions' and 'Special Delivery Instructions' are
completed, please issue the check for the purchase price and/or return any Share
Certificates not tendered or accepted for payment in the name(s) of, and deliver
such check and/or return certificates to, the person(s) so indicated. The
undersigned recognizes that the Offeror has no obligation pursuant to the
'Special Payment Instructions' to transfer any Shares from the name of the
registered holder(s) thereof if the Offeror does not accept for payment any of
such Shares.
3
<PAGE>
SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON PAGE 9)
________________________________________________________________________________
________________________________________________________________________________
SIGNATURE(S) OF OWNER(S)
Dated:____________________________________
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
the Share Certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by Share Certificates and documents
transmitted herewith. If signature is by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of a corporation or others acting in a
fiduciary or representative capacity, please provide the necessary information.
See Instruction 5.)
Name(s):________________________________________________________________________
________________________________________________________________________
(PLEASE PRINT)
Capacity (full title):__________________________________________________________
Address:________________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone No.:____________________________________________________
Tax Identification or Social Security No.:______________________________________
(SEE SUBSTITUTE W-9 ON PAGE 9)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED - SEE INSTRUCTIONS 1 AND 6)
Authorized Signature:___________________________________________________________
Name:___________________________________________________________________________
Name of Firm:___________________________________________________________________
Address:________________________________________________________________________
(INCLUDE ZIP CODE)
Title:__________________________________________________________________________
Area Code and Telephone Number:_________________________________________________
Dated:___________________________
4
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if Share Certificates not tendered or not purchased and/or
the check for the purchase price of Shares purchased are to be issued in the
name of someone other than the undersigned.
Issue check and/or certificates to:
Name: __________________________________________________________________________
(PLEASE PRINT)
Address: _______________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(INCLUDE ZIP CODE)
________________________________________________________________________________
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO.)
(SEE SUBSTITUTE FORM W-9 ON PAGE 9)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if Share Certificates not tendered or not purchased and/or
the check for the purchase price of Shares purchased are to be sent to someone
other than the undersigned, or to the undersigned at an address other than that
shown on the front cover.
Mail check and/or certificates to:
Name: __________________________________________________________________________
(PLEASE PRINT)
Address: _______________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(INCLUDE ZIP CODE)
________________________________________________________________________________
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO.)
5
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required (i) if this Letter of Transmittal is signed by the
registered holder of the Shares tendered herewith, unless such holder has
completed either the box entitled 'Special Delivery Instructions' or the box
entitled 'Special Payment Instructions' on the inside front cover hereof or (ii)
if such Shares are tendered for the account of a firm that is a bank, broker,
dealer, credit union, savings association or other entity which is a member in
good standing of the Securities Transfer Agents Medallion Program (an 'Eligible
Institution'). In all other cases, all signatures on this Letter of Transmittal
must be guaranteed by an Eligible Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARE CERTIFICATES. Share
Certificates, as well as this Letter of Transmittal (or a manually signed
facsimile hereof), properly completed and duly executed, with any required
signature guarantees, and any other documents required by this Letter of
Transmittal, must be received by the Depositary at one of its addresses set
forth herein prior to the Expiration Date.
Stockholders whose Share Certificates are not immediately available or who
cannot deliver their Share Certificates and all other required documents to the
Depositary prior to the Expiration Date may tender their Shares if all of the
guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase
are duly complied with. Pursuant to such procedures: (i) such tender must be
made by or through an Eligible Institution, (ii) a properly completed and duly
executed Notice of Guaranteed Delivery, substantially in the form made available
by the Offeror, must be received by the Depositary prior to the Expiration Date,
and (iii) the Share Certificates representing all tendered Shares, in proper
form for transfer together with a properly completed and duly executed Letter of
Transmittal (or a manually signed facsimile hereof), with any required signature
guarantees and any other documents required by this Letter of Transmittal, must
be received by the Depositary within three Nasdaq National Market trading days
after the date of execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile transmission or mail to the Depositary and must include a guarantee
by an Eligible Instruction on the form set forth in such notice.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THIS LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
STOCKHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY
THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by executing
this Letter of Transmittal or facsimile thereof, waives any right to receive any
notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares and any other required
information should be listed on a separate schedule and attached hereto and
separately signed on each page thereof in the same manner as this Letter of
Transmittal.
4. PARTIAL TENDERS. If fewer than all the Shares evidenced by any
certificate submitted are to be tendered, fill in the number of Shares that are
to be tendered in the box entitled 'Number of Shares Tendered.' In such case, a
new certificate(s) for the remainder of the Shares that were evidenced by your
old Share Certificate(s) will be sent to you, unless otherwise provided in the
appropriate box marked 'Special Payment Instructions' and/or 'Special Delivery
Instructions' on this Letter of Transmittal, as soon as practicable after the
Expiration Date. All Shares represented by Share Certificates delivered to the
Depositary will be deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signatures(s) must correspond with the name(s) as written
on the face of the Share Certificates without alteration, enlargement or any
change whatsoever.
If any of the Shares tendered hereby is held of record by two or more joint
owners, all such persons must sign this Letter of Transmittal.
6
<PAGE>
If any tendered Shares are registered in different names on several Share
Certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of Share
Certificates.
If this Letter of Transmittal or any certificates or stock powers are
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of corporations or others acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to the Offeror of their authority so to act must be submitted.
When this Letter of Transmittal is signed by the registered holder(s) of
the Shares listed and transmitted hereby, no endorsements of Share Certificates
or separate stock powers are required unless payment to be made to or Share
Certificates for Shares not tendered or purchased are to be issued in the name
of a person other than the registered owner(s). Signatures on such Share
Certificates or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, Share Certificates
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case, signed exactly as the name(s) of the
registered holder(s) appear(s) on such Share Certificate(s). Signature(s) on any
such Share Certificates or stock powers must be guaranteed by an Eligible
Institution. See Instruction 1.
6. STOCK TRANSFER TAXES. Except as provided in this Instruction 6, the
Offeror will pay or cause to be paid any stock transfer taxes with respect to
the sale and transfer of any purchased Shares to it or its order pursuant to the
Offer. If, however, payment of the purchase price is to be made to, or if Share
Certificates for Shares not tendered or not purchased are to be registered in
the name of, any person other than the registered holder(s), or if tendered
Shares are registered in the name of, any person other than the registered
holder, or if tendered Share Certificates are registered in the name of any
person other then the person(s) signing this Letter of Transmittal, the amount
of any stock transfer taxes (whether imposed on the registered holder(s) or such
person) payable on account of the transfer to such person will be deducted from
the purchase price unless satisfactory evidence of the payment of such taxes or
exemption therefrom is submitted.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued
in the name of and/or certificates for unpurchased Shares are to be returned to
a person other than the signer of this Letter of Transmittal or if a check is to
be sent and/or such certificates are to be returned to someone other than the
signer of this Letter of Transmittal or to an address other than that shown on
the front cover hereof, the appropriate boxes on this Letter of Transmittal
should be completed.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance
may be directed to the Information Agent at its addresses set forth below.
Requests for additional copies of the Offer to Purchase and this Letter of
Transmittal may be directed to the Information Agent or to brokers, dealers,
commercial banks or trust companies.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. federal income
tax law, a stockholder whose tendered Shares are accepted for payment is
required to provide the Depositary with such stockholder's correct taxpayer
identification number ('TIN') on Substitute Form W-9 below. To prevent backup
federal income tax withholding on payments of the purchase price for Shares, a
tendering stockholder must provide the Depositary a completed Substitute Form
W-9 certifying as to the stockholder's correct TIN and that such stockholder is
not subject to backup withholding. If the Depositary is not provided with the
correct TIN, the Internal Revenue Service may subject the stockholder or other
payee to a $50 penalty. In addition, payments that are made to such stockholder
or other payee with respect to Shares purchased pursuant to the Offer may be
subject to 31% backup withholding.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are exempt recipients not subject to these backup
withholding and reporting requirements. In order for a foreign individual to
qualify as an exempt recipient, the stockholder must submit a Form W-8, signed
under penalties of perjury, attesting to that individual's exempt status. A Form
W-8 can be obtained from the Depositary. See the enclosed 'Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9' for more
instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any payments made to the stockholder or other payee. Backup withholding is
not an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If backup withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
The stockholder is required to give the Depositary the TIN (e.g., social
security number or employer identification number) of the record owner of the
Shares or of the last transferee appearing on the transfers attached to, or
endorsed on, the Shares. If the Shares are in more than one name or are not in
the name of the actual owner, consult the enclosed 'Guidelines
7
<PAGE>
for Certification of Taxpayer Identification Number on Substitute Form W-9' for
additional guidance on which number to report. The box in Part 3 of the
Substitute Form W-9 may be filled out if the tendering stockholder has not been
issued a TIN and has applied for a TIN or intends to apply for a TIN in the near
future. If the box in Part 3 is filled out, the stockholder or other payee must
also complete the Certificate of Awaiting Taxpayer Identification Number below
in order to avoid backup withholding. Notwithstanding that the box in Part 3 is
filled out and the Certificate of Awaiting Taxpayer Identification Number is
completed, the Depositary will withhold 31% of all payments made prior to the
time a properly certified TIN is provided to the Depositary.
10. LOST, DESTROYED OR STOLEN CERTIFICATES. If any Share Certificate(s)
has been lost, destroyed or stolen, the stockholder should promptly notify the
Depositary. The stockholder will then be instructed as to the steps that must be
taken in order to replace such Share Certificate(s). This Letter of Transmittal
and related documents cannot be processed until the procedures for replacing
lost or destroyed Share Certificates have been followed.
11. WAIVER OF CONDITIONS. The Conditions to the Offer may be waived, in
whole or in part, by the Offeror in its sole discretion, at any time and from
time to time, in the case of any Shares tendered.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE COPY HEREOF) AND ALL
OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE DEPOSITARY ON OR PRIOR TO THE
EXPIRATION DATE.
8
<PAGE>
TO BE COMPLETED BY ALL TENDERING STOCKHOLDERS
(SEE INSTRUCTION 9)
<TABLE>
<S> <C>
PAYOR'S NAME:
PART 1--PLEASE PROVIDE YOUR TIN IN THE PART 3--Social Security Number or
BOX AT THE RIGHT AND CERTIFY BY SIGNING Employer Identification Number
AND DATING BELOW. ________________________________________
(If awaiting TIN write 'Applied
For')
PART 2--For Payees exempt from backup withholding, see the enclosed Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9 and
complete as instructed therein.
SUBSTITUTE Certification--Under penalties of perjury, I certify that:
FORM W-9 (1) The number shown on this form is my correct TIN (or I am waiting for a
DEPARTMENT OF THE TREASURY number to be issued to me); and
INTERNAL REVENUE SERVICE (2) I am not subject to backup withholding either because I have not been
PAYOR'S REQUEST FOR notified by the Internal Revenue Service (IRS) that I am subject to backup
TAXPAYER withholding as a result of a failure to report all interest or dividends, or
IDENTIFICATION the IRS has notified me that I am no longer subject to backup withholding.
NUMBER ('TIN') CERTIFICATION INSTRUCTIONS--You must cross out Item (2) above if you have been
notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after being
notified by the IRS that you were subject to backup withholding, you received
another notification from the IRS that you were no longer subject to backup
withholding, do not cross out item (2). (Also see instructions in the enclosed
Guidelines).
SIGNATURE:____________________________________ DATE:_______________________
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (1) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate IRS Center or
Social Security Administration Office or (2) I intend to mail or deliver an
application in the near future. I understand that if I do not provide a taxpayer
identification number by the time of payment, 31% of all reportable payments
made to me will be withheld, but that such amounts will be refunded to me if I
then provide a taxpayer identification number within sixty (60) days.
Signature: ____________________________________ Date: ________________________
9
<PAGE>
FACSIMILE COPIES OF THIS LETTER OF TRANSMITTAL, PROPERLY COMPLETED AND DULY
EXECUTED, WILL BE ACCEPTED. THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES AND
ANY OTHER REQUIRED DOCUMENTS SHOULD BE SENT OR DELIVERED BY EACH TENDERING
STOCKHOLDER OF THE COMPANY OR HIS BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY
OR OTHER NOMINEE TO THE DEPOSITARY AT ONE OF ITS ADDRESSES SET FORTH BELOW:
The Depositary for the Offer is:
IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Facsimile By Hand or Overnight Delivery:
P.O. Box 84 (for eligible financial institutions only): One State Street
Bowling Green Station (212) 858-2611 New York, New York 10004
New York, New York 10274-0084 Attn: Securities Processing
Attn: Reorganization Window, Sub-cellar One
Department
Confirm Facsimile by Telephone:
(212) 858-2103
</TABLE>
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
set forth below. Additional copies of the Offer to Purchase, this Letter of
Transmittal and other tender offer materials may be obtained from the
Information Agent as set forth below, and will be furnished promptly at the
Offeror's expense. You may also contact your broker, dealer, commercial bank,
trust company or other nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
[LOGO OF MACKENZIE PARTNERS, INC.]
156 FIFTH AVENUE
NEW YORK, NEW YORK 10010
(212) 929-5500 (CALL COLLECT)
OR
TOLL-FREE (800)322-2885
The Dealer Manager for the Offer is:
[LOGO OF LAZARD FRERES & CO. LLC]
30 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10020
(212) 632-6167 (CALL COLLECT)
<PAGE>
Exhibit 99.(a)(3)
Lazard Freres & Co. LLC
30 Rockefeller Plaza
New York, New York 10020
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK AND
$2.00 CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
OF
KAPSON SENIOR QUARTERS CORP.
AT
$14.50 NET PER SHARE OF COMMON STOCK AND
$27.93 NET PER SHARE OF $2.00 CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
BY
PROMETHEUS ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
PROMETHEUS SENIOR QUARTERS, LLC
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON MARCH 27, 1998, UNLESS THE OFFER IS EXTENDED
MARCH 2, 1998
TO BROKERS, DEALERS, COMMERCIAL BANKS,
TRUST COMPANIES AND OTHER NOMINEES:
We have been appointed by Prometheus Acquisition Corp. (the 'Offeror'), a
Delaware corporation and a wholly owned subsidiary of Prometheus Senior
Quarters, LLC, a Delaware limited liability company ('Parent'), to act as
financial advisor and Dealer Manager in connection with the Offeror's offer to
purchase all outstanding shares of common stock, par value $.01 per share (the
'Common Stock'), and all outstanding shares of $2.00 convertible exchangeable
preferred stock, par value $.01 per share (the 'Preferred Stock' and, together
with the Common Stock, the 'Shares'), of Kapson Senior Quarters Corp., a
Delaware corporation (the 'Company'), at a purchase price of $14.50 per share of
Common Stock and $27.93 per share of Preferred Stock, in each case net to the
seller in cash, without interest, upon the terms and subject to the conditions
set forth in the Offer to Purchase, dated February 23, 1998 (the 'Offer to
Purchase'), and in the related Letter of Transmittal (which, together with any
amendments or supplements thereto, collectively constitute the 'Offer') enclosed
herewith. The Offer is made in connection with the Amended and Restated
Agreement and Plan of Merger, dated as of February 23, 1998 (the 'Merger
Agreement'), among Parent, the Offeror and the Company. Holders of Shares whose
certificates for such Shares (the 'Share Certificates') are not immediately
available or who cannot deliver their Share Certificates and all other required
documents to the Depositary (as hereinafter defined) on or prior to the
Expiration Date (as hereinafter defined), or who cannot complete the procedures
for book-entry transfer on a timely basis, must tender their Shares according to
the guaranteed delivery procedures set forth in Section 3 of the Offer to
Purchase.
Please furnish copies of the enclosed materials to those of your clients
for whose accounts you hold Shares in your name or in the name of your nominee.
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the Expiration Date that number of shares of
Common Stock representing at least a majority of the outstanding shares of
Common Stock on a fully diluted basis, and for the purpose of the satisfaction
of such condition, the tender of each share of Preferred Stock will be deemed to
be the tender of 1.92604 shares of Common Stock (the number of shares of Common
Stock into which each share of Preferred Stock is currently convertible). The
Offer is also conditioned upon certain other terms and conditions contained in
the Offer to Purchase. See the
<PAGE>
Introduction and Sections 1 and 15 of the Offer to Purchase. The Board of
Directors of the Company has unanimously approved the Offer, the Merger
Agreement and the Merger (as defined in the Offer to Purchase), has determined
that the terms of the Offer and the Merger are fair to and in the best interests
of the Company's stockholders and recommends that the Company's stockholders
accept the Offer and tender their Shares pursuant to the Offer.
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. The Offer to Purchase, dated March 2, 1998.
2. The related Letter of Transmittal to tender Shares for your use and for
the information of your clients. Facsimile copies of the Letter of Transmittal
may be used to tender Shares.
3. The Notice of Guaranteed Delivery for Shares to be used to accept the
Offer if Share Certificates are not immediately available or if such Share
Certificates and all other required documents cannot be delivered to IBJ
Schroder Bank & Trust Company (the 'Depositary') by the Expiration Date or if,
in the case of book-entry delivery of Shares, the procedures for book-entry
transfer set forth in Section 3 of the Offer to Purchase cannot be completed by
the Expiration Date.
4. A printed form of letter which may be sent to your clients for whose
accounts you hold Shares registered in your name or in the name of your nominee,
with space provided for obtaining such clients' instructions with regard to the
Offer.
5. Guidelines of the Internal Revenue Service for Certification of Taxpayer
Identification Number on Substitute Form W-9.
6. A return envelope addressed to the Depositary.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MARCH 27, 1998 (THE 'EXPIRATION
DATE'), UNLESS THE OFFER IS EXTENDED.
In order to accept the Offer, an appropriate duly executed and properly
completed Letter of Transmittal and any required signature guarantees, or an
Agent's Message (as defined in the Offer to Purchase) in connection with a
book-entry delivery of Shares and any other documents required by the Letter of
Transmittal should be sent to the Depositary and either Share Certificates
representing the tendered Shares should be delivered to the Depositary, or, in
the case of book-entry delivery of Shares, such Shares should be tendered by
book-entry transfer into the Depositary's account maintained at one of the Book
Entry Transfer Facilities (as described in the Offer to Purchase), all in
accordance with the instructions set forth in the Letter of Transmittal and the
Offer to Purchase.
If holders of Shares wish to tender, but it is impracticable for them to
forward their Share Certificates or other required documents on or prior to the
Expiration Date or to comply with the book-entry transfer procedures on a timely
basis, a tender may be effected by following the guaranteed delivery procedures
specified in Section 3 of the Offer to Purchase.
The Offeror will not pay any commissions or fees to any broker, dealer or
other person (other than the Dealer Manager and the Information Agent, as
described in the Offer to Purchase) for soliciting tenders of Shares pursuant to
the Offer. The Offeror will, however, upon request, reimburse you for customary
clerical and mailing expenses incurred by you in forwarding any of the enclosed
materials to your clients. The Offeror will pay or cause to be paid any stock
transfer taxes payable on the transfer of Shares to it, except as otherwise
provided in Instruction 6 of the Letter of Transmittal.
2
<PAGE>
Any inquiries you may have with respect to the Offer should be addressed
to, and additional copies of the enclosed material may be obtained from, the
Dealer Manager or the Information Agent, at their respective addresses and
telephone numbers set forth on the back cover of the Offer to Purchase.
Very truly yours,
LAZARD FRERES & CO. LLC
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF THE OFFEROR, THE DEALER MANAGER, THE COMPANY,
THE DEPOSITARY OR THE INFORMATION AGENT, OR ANY AFFILIATE OF ANY OF THEM, OR
AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT ON
BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED
DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
3
<PAGE>
Exhibit 99.(a)(4)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK AND
$2.00 CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
OF
KAPSON SENIOR QUARTERS CORP.
AT
$14.50 NET PER SHARE OF COMMON STOCK AND
$27.93 NET PER SHARE OF $2.00 CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
BY
PROMETHEUS ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
PROMETHEUS SENIOR QUARTERS, LLC
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON MARCH 27, 1998, UNLESS THE OFFER IS EXTENDED
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated March 2,
1998 (the 'Offer to Purchase'), and the related Letter of Transmittal (which,
together with any amendments thereto, collectively constitute the 'Offer')
relating to the offer by Prometheus Acquisition Corp. (the 'Offeror'), a
Delaware corporation and a wholly owned subsidiary of Prometheus Senior
Quarters, LLC, a Delaware limited liability company ('Parent'), to purchase all
outstanding shares of Common Stock, par value $.01 per share (the 'Common
Stock'), and all outstanding shares of $2.00 Convertible Exchangeable Preferred
Stock, par value $.01 per share (the 'Preferred Stock' and, together with the
Common Stock, the 'Shares'), of Kapson Senior Quarters Corp., a Delaware
corporation (the 'Company'), at a purchase price of $14.50 per share of Common
Stock and $27.93 per share of Preferred Stock, in each case net to the seller in
cash, without interest, upon the terms and subject to the conditions set forth
in the Offer to Purchase and in the related Letter of Transmittal enclosed
herewith. The Offer is made in connection with the Amended and Restated
Agreement and Plan of Merger, dated as of February 23, 1998 (the 'Merger
Agreement'), among Parent, the Offeror and the Company. Holders of Shares whose
certificates for such Shares (the 'Share Certificates') are not immediately
available or who cannot deliver their Share Certificates and all other required
documents to the Depositary on or prior to the Expiration Date (as hereinafter
defined), or who cannot complete the procedures for book-entry transfer on a
timely basis, must tender their Shares according to the guaranteed delivery
procedures set forth in Section 3 of the Offer to Purchase.
WE ARE THE HOLDER OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER
OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS. THE RELATED LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR
YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES.
Accordingly, we request instructions as to whether you wish to have us
tender on your behalf any or all Shares held by us for your account pursuant to
the terms and conditions set forth in the Offer.
Please note the following:
1. The Offer price is $14.50 per share of Common Stock and $27.93 per
share of Preferred Stock, in each case net to you in cash without interest
thereon, upon the terms and subject to the conditions set forth in the
Offer.
2. The Offer is being made for all outstanding Shares.
3. The Board of Directors of the Company has unanimously approved the
Offer, the Merger Agreement and the Merger (as defined in the Offer to
Purchase), has determined that the terms of the Offer and the
<PAGE>
Merger are fair to and in the best interests of the Company's stockholders
and recommends that the Company's stockholders accept the Offer and tender
their Shares pursuant to the Offer.
4. The Offer is conditioned upon, among other things, there being
validly tendered and not withdrawn prior to the Expiration Date (as
hereinafter defined) that number of shares of Common Stock representing at
least a majority of the outstanding shares of Common Stock on a fully
diluted basis, and for the purpose of the satisfaction of such condition,
the tender of each share of Preferred Stock tendered in the Offer will be
deemed to be the tender of 1.92604 shares of Common Stock (the number of
shares of Common Stock into which each share of Preferred Stock is
currently convertible). The Offer is also subject to satisfaction of other
terms and conditions. See the Introduction and Sections 1 and 15 of the
Offer to Purchase.
5. Tendering stockholders will not be obligated to pay brokerage fees
or commissions or, except as otherwise provided in Instruction 6 of the
Letter of Transmittal, stock transfer taxes on the purchase of Shares by
the Offeror pursuant to the Offer.
6. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on March 27, 1998 (the 'Expiration Date'), unless the Offer
is extended.
7. Payment for Shares purchased pursuant to the Offer will in all
cases be made only after timely receipt by IBJ Schroder Bank & Trust
Company (the 'Depositary') of (a) Share Certificates or, in the case of
book-entry delivery of Shares, timely confirmation of the book-entry
transfer of such Shares into the account maintained by the Depositary at
The Depository Trust Company or The Depository Trust Company of
Philadelphia (collectively, the 'Book-Entry Transfer Facilities'), pursuant
to the procedures set forth in Section 3 of the Offer to Purchase, (b) the
related Letter of Transmittal (or a facsimile thereof), properly completed
and duly executed, with any required signature guarantees or an Agent's
Message (as defined in the Offer to Purchase), in connection with a
book-entry delivery, and (c) any other documents required by the
appropriate Letter of Transmittal. Accordingly, payment may not be made to
all tendering stockholders at the same time depending upon when Share
Certificates or, in the case of book-entry delivery of Shares,
confirmations of book-entry transfer of such Shares into the Depositary's
account at a Book-Entry Transfer Facility are actually received by the
Depositary.
If you wish to have us tender any or all of the Shares held by us for your
account, please so instruct us by completing, executing, detaching and returning
to us the instruction form set forth on the back page of this letter. If you
authorize the tender of your Shares, all such Shares will be tendered unless
otherwise specified on the back page of this letter. An envelope to return your
instructions to us is enclosed. Your instructions should be forwarded to us in
ample time to permit us to submit a tender on your behalf prior to the
expiration of the Offer.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares residing in any jurisdiction in which the making of
the Offer or the acceptance thereof would not be in compliance with the
securities, blue sky or other laws of such jurisdiction. However, the Offeror
may, in its discretion, take such action as it may deem necessary to make the
Offer in any jurisdiction and extend the Offer to holders of Shares in such
jurisdiction.
In any jurisdiction where the securities, blue sky or other laws require
the Offer to be made by a licensed broker or dealer, the Offer will be deemed to
be made on behalf of the Offeror by Lazard Freres & Co. LLC, the Dealer Manager
for the Offer, or one or more registered brokers or dealers that are licensed
under the laws of such jurisdiction.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE
FOR CASH ALL SHARES OF COMMON STOCK AND
$2.00 CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
OF
KAPSON SENIOR QUARTERS CORP.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase, dated March 2, 1998 (the 'Offer to Purchase'), and the
related Letter of Transmittal (which, together with any amendments thereto,
collectively constitute the 'Offer') in connection with the offer by Prometheus
Acquisition Corp. (the 'Offeror'), a Delaware corporation and a wholly owned
subsidiary of Prometheus Senior Quarters, LLC, a Delaware limited liability
company ('Parent'), to purchase all outstanding shares of Common Stock, par
value $.01 per share (the 'Common Stock'), and all outstanding shares of $2.00
Convertible Exchangeable Preferred Stock, par value $.01 per share (the
'Preferred Stock' and, together with the Common Stock, the 'Shares'), of Kapson
Senior Quarters Corp., a Delaware corporation (the 'Company'), at a purchase
price of $14.50 per share of Common Stock and $27.93 per share of Preferred
Stock, in each case net to the seller in cash, without interest thereon, in each
case upon the terms and subject to the conditions set forth in the Offer to
Purchase.
This will instruct you to tender to the Offeror the number of shares of
Common Stock and/or Preferred Stock, indicated below (or if no number is
indicated below, all shares of Common Stock and/or Preferred Stock) which are
held by you for the account of the undersigned, upon the terms and subject to
the conditions set forth in the Offer.
Number of shares of Common Stock to be Tendered: Shares
Number of shares of Preferred Stock to be Tendered: Shares
Unless otherwise indicated, it will be assumed that you instruct us to
tender all shares of Common Stock and/or Preferred Stock held by us for your
account.
SIGN HERE
Signature(s)
(Print Name(s))
(Print Address (es))
(Area Code and Telephone Number(s))
(Taxpayer Identification or Social Security Number(s))
3
<PAGE>
Exhibit 99.(a)(5)
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF ALL SHARES OF COMMON STOCK AND
$2.00 CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
OF
KAPSON SENIOR QUARTERS CORP.
TO
PROMETHEUS ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
PROMETHEUS SENIOR QUARTERS, LLC
This Notice of Guaranteed Delivery or one substantially equivalent hereto
must be used to accept the Offer (as hereinafter defined) if certificates
representing shares of Common Stock, par value $.01 per share (the 'Common
Stock'), or $2.00 Convertible Exchangeable Preferred Stock, par value $.01 per
share (the 'Preferred Stock' and, together with the Common Stock, the 'Shares'),
of Kapson Senior Quarters Corp., a Delaware corporation (the 'Company'), are not
immediately available or time will not permit all required documents to reach
IBJ Schroder Bank & Trust Company (the 'Depositary') on or prior to the
Expiration Date (as defined in the Offer to Purchase, dated March 2, 1998 (the
'Offer to Purchase')), or the procedures for delivery of Shares by book-entry
transfer cannot be completed on a timely basis. This Notice of Guaranteed
Delivery may be delivered by hand or sent by facsimile transmission or mail to
the Depositary. See Section 3 of the Offer to Purchase.
The Depositary for the Offer is:
IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Facsimile: By Hand or Overnight Delivery:
P.O. Box 84 (for eligible financial One State Street
Bowling Green Station institutions only): New York, New York 10004
New York, New York 10274-0084 (212) 858-2611 Attn: Securities Processing
Attn: Reorganization Department Confirm Facsimile by Telephone: Window, Sub-cellar One
(212) 858-2103
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO
A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN 'ELIGIBLE INSTITUTION' UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE
SIGNATURE BOX ON SUCH LETTER OF TRANSMITTAL.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Prometheus Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Prometheus Senior Quarters, LLC, a
Delaware limited liability company, upon the terms and subject to the conditions
set forth in the Offer to Purchase and in the related Letter of Transmittal
(which, together with any amendments or supplements thereto, collectively
constitute the 'Offer'), receipt of each of which is hereby acknowledged, the
number of Shares indicated below pursuant to the guaranteed delivery procedures
set forth in Section 3 of the Offer to Purchase.
Number of Common Stock: _________________________________________________ shares
Certificate No(s). (if available): _____________________________________________
________________________________________________________________________________
________________________________________________________________________________
If shares of Common Stock will be tendered by book-entry transfer, check one
box:
/ / The Depository Trust Company
/ / The Depository Trust Company of Philadelphia
Account Number: ________________________________________________________________
Date: __________________________________________________________________________
Number of Preferred Stock: ______________________________________________ shares
Certificate No(s). (if available): _____________________________________________
________________________________________________________________________________
________________________________________________________________________________
Name(s) of Record Holder(s): ___________________________________________________
________________________________________________________________________________
Address(es): ___________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Area Code and Telephone Number(s): _____________________________________________
________________________________________________________________________________
Signature (s): _________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Name(s) of Record Holder(s): ___________________________________________________
________________________________________________________________________________
Address(es): ___________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Area Code and Telephone Number(s): _____________________________________________
________________________________________________________________________________
Signature (s): _________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
2
<PAGE>
THE GUARANTEE BELOW MUST BE COMPLETED
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a bank, broker, dealer, credit union,
savings association or other entity which is a member in good standing of the
Securities Transfer Agents Medallion Program, hereby (a) represents that the
tender of Shares effected hereby complies with Rule 14e-4 under the Securities
Exchange Act of 1934, as amended, and (b) guarantees to deliver to the
Depositary, at one of its addresses set forth above, the certificates
representing all tendered Shares in proper form for transfer, or, in the case of
book-entry delivery of Shares, a Book-Entry Confirmation (as defined in the
Offer to Purchase), together with a properly completed and duly executed Letter
of Transmittal (or facsimile thereof), with any required signature guarantees,
or, in the case of book-entry delivery of Shares, an Agent's Message (as defined
in the Offer to Purchase), and any other documents required by the Letter of
Transmittal within, in the case of Shares, three Nasdaq National Market trading
days after the date of execution of this Notice of Guaranteed Delivery.
Name of Firm: __________________________________________________________________
Address: _______________________________________________________________________
________________________________________________________________________________
Area Code and
Telephone Number: ______________________________________________________________
________________________________________________________________________________
(Authorized Signature)
Title: _________________________________________________________________________
Name: __________________________________________________________________________
________________________________________________________________________________
(Please print or type)
Date: __________________________________________________________________________
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE OF GUARANTEED
DELIVERY. CERTIFICATES FOR SHARES SHOULD BE SENT WITH YOUR LETTER OF
TRANSMITTAL.
3
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ----------------------------------------------------------------
<S> <C> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner of the account or,
(joint account) if combined funds, any one of the
individuals(1)
3. Husband and wife The actual owner of the account or,
(joint account) if joint funds, either person(1)
4. Custodian account of a minor (Uniform The minor(2)
Gift to Minors Act)
5. Adult and minor The adult or, if the minor is the
(joint account) only contributor, the minor(1)
6. Account in the name of guardian or The ward, minor, or incompetent
committee for a designated ward, person(3)
minor, or incompetent person
7. a. The usual revocable savings trust The grantor-trustee(1)
account (grantor is also trustee)
b. So-called trust account that is The actual owner(1)
not a legal or valid trust under
State law
8. Sole proprietorship account The owner(4)
</TABLE>
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
GIVE THE EMPLOYER IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ----------------------------------------------------------------
<S> <C> <C>
9. A valid trust, estate, or pension The legal entity (Do not furnish the
trust identifying number of the personal
representative or trustee unless the
legal entity itself is not
designated in the account title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or educational The organization
organization account
12. Partnership account held in the name The partnership
of the business
13. Association, club, or other The organization
tax-exempt organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of The public entity
Agriculture in the name of a public
entity (such as a State or local
government, school district, or
prison) that receives agricultural
program payments
</TABLE>
- ----------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
o A corporation.
o A financial institution.
o An organization exempt from tax under section 501(a), or an individual
retirement plan.
o The United States or any agency or instrumentality thereof.
o A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
o A foreign government, a political subdivision of a foreign government, or any
agency or instrumentality thereof.
o An international organization or any agency, or instrumentality thereof.
o A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
o A real estate investment trust.
o A common trust fund operated by a bank under section 584(a).
o An exempt charitable remainder trust, or a nonexempt trust described in
section 4947(a)(1).
o An entity registered at all times under the Investment Company Act of 1940.
o A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:
o Payments to nonresident aliens subject to withholding under section 1441.
o Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
o Payments of patronage dividends where the amount received is not paid in
money.
o Payments made by certain foreign organizations.
o Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
o Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid in
the course of the payer's trade or business and you have not provided your
correct taxpayer identification number to the payer.
o Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
o Payments described in section 6049(b)(5) to non-resident aliens.
o Payments on tax-free covenant bonds under section 1451.
o Payments made by certain foreign organizations.
o Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE 'EXEMPT' ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041(a),
6045, and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1984, payers must generally
withhold 20% of taxable interest, dividend, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an
under-payment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.-- Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
EXHIBIT 99.(a)(7)
FOR IMMEDIATE RELEASE Contact: Douglas Donsky
Principal Communications
(212) 303-7608
KAPSON SENIOR QUARTERS, LAZARD FRERES AFFILIATE
AMEND MERGER AGREEMENT
WOODBURY, N.Y., February 24, 1998 -- Kapson Senior Quarters Corp. (NASDAQ:
KPSQ) and Prometheus Senior Quarters LLC, an affiliate of Lazard Freres Real
Estate Investors, LLC, today announced that they have amended their previously
announced plan of merger. Under the amended agreement a subsidiary of
Prometheus will commence a tender offer within five business days to acquire
all of the outstanding shares of Kapson at $14.50 per share in cash and all of
the outstanding shares of preferred stock at $27.93 per share in cash.
The offer would be subject to certain customary conditions including a minimum
condition relating to the tender of shares of common and preferred stock
representing a majority of the outstanding shares of common stock on a fully
diluted basis. Certain shareholders of Kapson beneficially owning
approximately 54% of the outstanding common stock (approximately 33% on a
fully diluted basis) have agreed to tender their shares in the offer. The
offer is expected to close in approximately 30 days unless extended.
The transaction was unanimously approved by the Board of Directors of Kapson.
Kapson Senior Quarters Corp., founded in 1972, owns, manages and/or operates
23 assisted living facilities with 2,510 units in Connecticut, New Jersey, New
York and Pennsylvania. The company, based in Woodbury, Long Island, currently
has another 11 facilities under construction with 1,264 units and 18
facilities under development with 2,271 units in its current markets, as well
as in North Carolina and South Carolina. The company's initial public offering
occurred in September 1996 at $10.00 a share.
Lazard Freres Real Estate Investors, LLC is the real estate investment
affiliate of Lazard Freres & Co. LLC, a leading global investment bank. Lazard
manages several real estate investment funds including the LF Strategic Realty
Advisors, LP, a strategic investment program capitalized with approximately $2
billion in equity capital. Since its inception, Lazard has acquired sizable
investment stakes in a select group of leading real estate-related operating
companies, including Alexander Haagen Properties, Inc.; American Apartment
Communities; ARV Assisted Living, Inc.; Bell Atlantic Properties (renamed
Atlantic American Properties Trust); Dermody Properties; The Fortress Group;
RF&P Corporation (renamed Commonwealth Atlantic Properties); and The
Rubenstein Company, LP.
<PAGE>
This announcement is neither an offer to purchase nor a solicitation of an
offer to sell these securities. The Offer is made only by the Offer to
Purchase and the related Letter of Transmittal and is not being made
to (nor will tenders be accepted from) holders of Shares in any
jurisdiction in which the Offer or the acceptance thereof would
not be in compliance with the securities laws of such
jurisdiction. In those jurisdictions where securities laws
require the Offer to be made by a licensed broker or dealer,
the Offer shall be deemed to be made on behalf of the
Offeror by Lazard Freres & Co. LLC or one or more
registered brokers or dealers licensed
under the laws of such jurisdiction.
Notice of Offer to Purchase for Cash
All Outstanding Shares of Common Stock and
$2.00 Convertible Exchangeable Preferred Stock
of
Kapson Senior Quarters Corp.
at
$14.50 Net Per Share of Common Stock and
$27.93 Net Per Share of $2.00 Convertible
Exchangeable Preferred Stock
by
Prometheus Acquisition Corp.
a wholly owned subsidiary of
Prometheus Senior Quarters, LLC
Prometheus Acquisition Corp. (the "Offeror"), a Delaware corporation and a
wholly owned subsidiary of Prometheus Senior Quarters, LLC, a Delaware limited
liability company ("Parent"), is offering to purchase all outstanding shares of
Common Stock, par value $.01 per share (the "Common Stock"), and all outstanding
shares of $2.00 Convertible Exchangeable Preferred Stock, par value $.01 per
share (the "Preferred Stock" and, together with the Common Stock, the "Shares"),
of Kapson Senior Quarters Corp., a Delaware corporation (the "Company"), at a
purchase price of $14.50 per share of Common Stock (the "Common Stock Offer
Price") and $27.93 per share of Preferred Stock (the "Preferred Stock Offer
Price"), in each case net to the seller in cash, without interest, upon the
terms and subject to the conditions set forth in the Offer to Purchase and in
the applicable Letter of Transmittal relating to such Shares (which, as either
may be amended or supplemented from time to time, collectively constitute the
"Offer").
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON FRIDAY, MARCH 27, 1998, UNLESS THE OFFER IS EXTENDED.
The Offer is being made pursuant to an Amended and Restated Agreement and
Plan of Merger, dated as of February 23, 1998 (the "Merger Agreement"), among
Parent, the Offeror and the Company, pursuant to which, following the
consummation of the Offer and the satisfaction or waiver of certain conditions
set forth in the Merger Agreement and in accordance with the General Corporation
Law of the State of Delaware (the "DGCL"), the Offeror will be merged with and
into the Company (the "Merger"), the separate existence of the Offeror will
cease and the Company will continue as the surviving corporation following the
Merger (the "Surviving Corporation"). At the effective time of the Merger (the
"Effective Time"), each outstanding Share (other than Shares held in the
treasury of the Company, Shares owned by any subsidiary of the Company, Shares
owned by the Offeror or Parent or Shares with respect to which appraisal rights
are properly exercised under the DGCL (the "Dissenting Shares")), will be
converted into and represent the right to receive, in the case of the Common
Stock, the Common Stock Offer Price, and in the case of the Preferred Stock, the
Preferred Stock Offer Price, in each case in cash without interest.
The Offer is conditioned upon, among other things, (1) there being validly
tendered and not withdrawn prior to the Expiration Date (as hereinafter defined)
that number of shares of Common Stock representing at least a majority of the
outstanding shares of Common Stock on a fully diluted basis, and for the purpose
of the satisfaction of such condition, the tender of each share of Preferred
Stock will be deemed to be the tender of 1.92604 shares of Common Stock and (2)
satisfaction of certain other terms and conditions. See Sections 1 and 15 of the
Offer to Purchase.
The Board of Directors of the Company has unanimously approved the Offer
and the Merger, has determined that the terms of the Offer and the Merger are
fair to and in the best interests of the stockholders of the Company and
recommends that the Company's stockholders accept the Offer and tender their
Shares pursuant to the Offer.
Subject to the terms of the Merger Agreement and applicable law, the
Offeror expressly reserves the right in its sole discretion, at any time and
from time to time, to extend the period of time during which the Offer is open
for any reason by giving oral or written notice of such extension to the
Depositary (as defined in the Offer to Purchase) and by making a public
announcement of such extension. Under no circumstances will interest on the
purchase price for Shares be paid by the Offeror. Any such extension of the
period during which the Offer is open will be followed by public announcement
thereof by no later than 9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date. During any such extension, all
Shares previously tendered and not withdrawn will remain subject to the Offer
and subject to the right of a tendering stockholder to withdraw such Shares.
Without limiting the manner in which the Offeror may choose to make any public
announcement, the Offeror will have no obligation to publish, advertise or
otherwise communicate any such announcement other than by issuing a release to
the Dow Jones News Service or as otherwise may be required by law.
For purposes of the Offer, the Offeror will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not withdrawn, if
and when the Offeror gives oral or written notice to the Depositary of the
Offeror's acceptance of such Shares for payment pursuant to the Offer. In all
cases, upon the terms and subject to the conditions of the Offer, payment for
Shares tendered pursuant to the Offer will be made by deposit of the purchase
price with the Depositary, which will act as agent for tendering stockholders
for the purpose of receiving payment from the Offeror and transmitting such
payment to validly tendering stockholders. Payment for Shares accepted for
payment pursuant to the Offer will be made only after timely receipt by the
Depositary of certificates for such Shares or timely confirmation of a
book-entry transfer of such Shares into the Depositary's account at the
Book-Entry Transfer Facilities (as defined in the Offer to Purchase), pursuant
to the procedures set forth in the Offer to Purchase and timely receipt by the
Depositary of a properly completed and duly executed Letter of Transmittal (or
manually signed facsimile thereof) with all required signature guarantees or, in
the case of book-entry delivery of Shares, an Agent's Message (as defined in the
Offer to Purchase) in connection with a book-entry transfer and any other
documents required by the Letter of Transmittal.
If any of the conditions set forth in the Offer to Purchase that relate to
the Offeror's obligations to purchase the Shares are not satisfied by 12:00
Midnight, New York City time, on Friday, March 27, 1998 (or any other time then
set as the Expiration Date), the Offeror may, subject to the terms of the Merger
Agreement, (1) extend the Offer and, subject to applicable withdrawal rights,
retain all tendered Shares until the expiration of the Offer, as extended, (2)
subject to complying with applicable rules and regulations of the Securities and
Exchange Commission, accept for payment all Shares so tendered and not extend
the Offer or (3) terminate the Offer (whether or not any Shares have theretofore
been accepted for payment) and not accept for payment any Shares and return all
tendered Shares to tendering stockholders. The term "Expiration Date" means
12:00 Midnight, New York City time, on Friday, March 27, 1998, unless the
Offeror shall have extended the period of time for which the Offer is open, in
which event the term "Expiration Date" will mean the latest time and date at
which the Offer, as so extended by the Offeror, will expire. The Offeror
expressly reserves the right in its sole discretion, at any time or from time to
time, subject to applicable law and to the terms of the Merger Agreement, to
extend the period during which the Offer is open by giving oral or written
notice of such extension to the Depositary followed by, as promptly as
practicable, a public announcement thereof no later than 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date.
Except as otherwise provided in Section 4 of the Offer to Purchase, tenders
of Shares made pursuant to the Offer are irrevocable. Shares tendered pursuant
to the Offer may be withdrawn at any time prior to the Expiration Date, and,
unless theretofore accepted for payment pursuant to the Offer, may also be
withdrawn at any time after April 30, 1998. For a withdrawal to be effective, a
written, telegraphic, telex or facsimile transmission notice of withdrawal must
be timely received by the Depositary at one of its addresses set forth on the
back cover of the Offer to Purchase. Any notice of withdrawal must specify the
name of the person who tendered the Shares to be withdrawn, the type of shares
to be withdrawn (i.e., Common Stock or Preferred Stock), the number of Shares to
be withdrawn and the name in which the certificates representing such Shares are
registered, if different from that of the person who tendered the Shares. If
certificates for Shares to be withdrawn have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such
certificates, the serial numbers shown on such certificates must be submitted to
the Depositary and, unless such Shares have been tendered by an Eligible
Institution (as defined in the Offer to Purchase), the signatures on the notice
of withdrawal must be guaranteed by an Eligible Institution. All questions as to
the form and validity (including time of receipt) of notices of withdrawal will
be determined by the Offeror, in its sole discretion, and its determination will
be final and binding on all parties.
The information required to be disclosed by Paragraph (e)(1)(vii) of Rule
14d-6 of the General Rules and Regulations under the Securities Exchange Act of
1934, as amended, is contained in the Offer to Purchase and is incorporated
herein by reference.
The Company has provided the Offeror with the Company's list of
stockholders and security position listings for the purpose of disseminating the
Offer to holders of Shares. The Offer to Purchase and the related Letters of
Transmittal are being mailed to record holders of the Shares and will be
furnished to brokers, dealers, commercial banks, trust companies and
similar persons whose names, or the names of whose nominees, appear on the list
of stockholders or, if applicable, who are listed as participants in a clearing
agency's security position listing for subsequent transmittal to beneficial
owners of Shares.
The Offer to Purchase and the related Letters of Transmittal contain
important information which should be read before any decision is made with
respect to the Offer.
Requests for copies of the Offer to Purchase and the related Letters of
Transmittal and other tender offer materials may be directed to the Information
Agent or the Dealer Manager as set forth below, and copies will be furnished
promptly at the Offeror's expense. Questions and requests for assistance may
also be directed to the Information Agent or the Dealer Manager. No fees or
commissions will be payable to brokers, dealers or other persons other than the
Information Agent, the Dealer Manager and the Depositary for soliciting tenders
of Shares pursuant to the Offer.
The Information Agent for the Offer is:
[MacKenzie Logo]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
Call Toll-Free (800) 322-2885
The Dealer Manager for the Offer is:
LAZARD FRERES & CO. LLC
30 Rockefeller Plaza
New York, New York 10020
(212) 632-6717
(call collect)
March 2, 1998
<PAGE>
EXHIBIT 99.(c)(1)
Execution Copy
AMENDED AND RESTATED
AGREEMENT AND PLAN
OF MERGER
DATED AS OF
February 23, 1998
AMONG
PROMETHEUS SENIOR QUARTERS LLC,
PROMETHEUS ACQUISITION CORP.
AND
KAPSON SENIOR QUARTERS CORP.
TABLE OF CONTENTS
Page
ARTICLE I THE OFFER.........................................................2
Section 1.1 The Offer......................................................2
Section 1.2 Company Actions................................................4
ARTICLE II THE MERGER.......................................................5
Section 2.1 The Merger.....................................................5
Section 2.2 Effective Time of the Merger...................................5
Section 2.3 Certificate of Incorporation...................................6
Section 2.4 By-laws........................................................6
Section 2.5 Board of Directors and Officers................................6
Section 2.6 Effects of Merger..............................................6
ARTICLE III CONVERSION OF SHARES............................................6
Section 3.1 Conversion of Shares...........................................6
Section 3.2 Exchange of Certificates.......................................7
Section 3.3 Dissenting Company Shares......................................9
Section 3.4 Merger Without Meeting of Stockholders.........................9
Section 3.5 No Further Ownership Rights in the Shares......................9
Section 3.6 Closing of Company Transfer Books.............................10
Section 3.7 Stock Options.................................................10
Section 3.8 Closing.......................................................10
Section 3.9 Transfer Taxes................................................10
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF INVESTOR......................10
Section 4.1 Organization, Standing and Power..............................10
Section 4.2 Authority; Non-Contravention..................................11
Section 4.3 Offer Documents and Proxy Statement...........................12
Section 4.4 Financing.....................................................12
Section 4.5 Brokers.......................................................12
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................12
Section 5.1 Organization, Standing and Power..............................13
Section 5.2 Capital Structure.............................................13
Section 5.3 Subsidiaries..................................................14
Section 5.4 Authority; Non-Contravention..................................14
Section 5.5 SEC Documents.................................................15
Section 5.6 Offer Documents and Proxy Statement...........................16
Section 5.7 Absence of Certain Events.....................................17
Section 5.8 Litigation....................................................18
Section 5.9 Compliance with Law...........................................18
Section 5.10 Employee Plans...............................................21
Section 5.11 Employment Relations and Agreement...........................23
Section 5.12 Contracts....................................................24
Section 5.13 Environmental Laws and Regulations...........................27
Section 5.14 Property and Leases..........................................28
Section 5.15 Patents, Trademarks, Copyrights..............................31
Section 5.16 Insurance....................................................32
Section 5.17 Takeover Statutes............................................32
Section 5.18 Taxes........................................................32
Section 5.19 No Change of Control.........................................33
Section 5.20 Brokers......................................................33
Section 5.21 Disclosures..................................................33
Section 5.22 Company Disclosure Letter....................................33
ARTICLE VI REPRESENTATIONS AND WARRANTIES REGARDING SUB....................33
Section 6.1 Organization and Standing.....................................34
Section 6.2 Authority; Non-Contravention..................................34
ARTICLE VII COVENANTS RELATING TO CONDUCT OF BUSINESS......................34
<PAGE>
Section 7.1 Conduct of Business by the Company Pending the Merger.........35
Section 7.2 Conduct of Business of Sub Pending the Merger.................38
ARTICLE VIII ADDITIONAL AGREEMENTS.........................................38
Section 8.1 Company Stockholder Approval; Proxy Statement.................38
Section 8.2 Indemnification...............................................39
Section 8.3 Additional Agreements.........................................40
Section 8.4 No Shop.......................................................41
Section 8.5 Advice of Changes; SEC Filings................................42
Section 8.6 Board Representation; Directors...............................42
ARTICLE IX CONDITIONS PRECEDENT............................................42
Section 9.1 Conditions to Each Party's Obligation to Effect the Merger....42
ARTICLE X TERMINATION, AMENDMENT AND WAIVER................................43
Section 10.1 Termination by Mutual Consent................................43
Section 10.2 Termination by Either Investor or the Company................43
Section 10.3 Termination by Investor......................................44
Section 10.4 Termination by the Company...................................44
Section 10.5 Effect of Termination and Abandonment........................45
ARTICLE XI MISCELLANEOUS...................................................46
Section 11.1 Non-Survival of Representations, Warranties and Agreements...46
Section 11.2 Notices......................................................47
Section 11.3 Fees and Expenses............................................48
Section 11.4 Publicity....................................................48
Section 11.5 Specific Performance.........................................48
Section 11.6 Assignment; Binding Effect...................................48
Section 11.7 Entire Agreement.............................................48
Section 11.8 Amendment....................................................49
Section 11.9 Governing Law................................................49
Section 11.10 Counterparts................................................49
Section 11.11 Headings and Table of Contents..............................49
Section 11.12 Interpretation..............................................49
Section 11.13 Waivers.....................................................49
Section 11.14 Incorporation of Exhibits...................................50
Section 11.15 Severability................................................50
Section 11.16 Subsidiaries................................................50
Exhibits
Exhibit A Conditions of the Offer
Exhibit B Operating Plan and Budget
Defined Terms Index
Agreement......................................................Preamble
Alternative Proposal...........................................Section 8.4
Blue Sky Laws..................................................Section 4.2
Budgets........................................................Exhibit A
Cap............................................................Section 8.3
Capital Expenditure Budget and Schedule........................Section 5.14
Certificates...................................................Section 3.1
Closing........................................................Section 3.8
Code...........................................................Section 5.10
Common Stock...................................................Recitals
Common Stock Cash Merger Price.................................Section 3.1
Common Stock Certificates......................................Section 3.1
Common Stock Merger Consideration..............................Section 3.1
Common Stock Offer Price.......................................Recitals
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 Company Shares......................................Section 3.3
Effective Time.................................................Section 2.2
Employment Agreements..........................................Section 5.11
Environmental Claim............................................Section 5.13
Environmental Laws.............................................Section 5.13
ERISA..........................................................Section 5.10
Exchange Act...................................................Section 1.1
Exchange Fund..................................................Section 3.2
Exchangeable Preferred.........................................Recitals
Exchangeable Preferred Certificates............................Section 3.1
Exchangeable Preferred Merger Consideration....................Section 3.1
Exchangeable Preferred Offer Price.............................Recitals
Fairness Opinion...............................................Section 2.1
Financial Advisor..............................................Section 1.2
Governmental Entity............................................Section 4.2
Hazardous Materials............................................Section 5.13
Indemnified Parties............................................Section 8.2
Information Statement..........................................Section 4.3
Investor.......................................................Preamble
Knowledge......................................................Section 11.6
Leased Property................................................Section 5.14
<PAGE>
LFREI..........................................................Guaranty
Liens..........................................................Section 5.14
Material Adverse Change........................................Section 4.2
Material Adverse Effect........................................Section 4.2
Medical Reimbursement Program..................................Section 5.9
Merger.........................................................Recitals
Merger Consideration...........................................Section 3.1
Minimum Condition..............................................Exhibit A
Multiemployer Plan.............................................Section 5.10
Offer..........................................................Recitals
Offer Documents................................................Section 1.1
OIG............................................................Section 5.9
Option.........................................................Section 3.7
Options........................................................Section 3.7
Owned Property.................................................Section 5.14
Paying Agent...................................................Section 3.2
PCBs...........................................................Section 5.13
Permits........................................................Section 5.9
Permitted Liens................................................Section 5.14
Plan...........................................................Section 5.10
Prior Agreement................................................Recitals
Projects.......................................................Section 5.14
Property.......................................................Section 5.13
Proxy Statement................................................Section 4.3
Schedule 14D-9.................................................Section 2.1
SEC............................................................Section 1.1
Section 9.3 Agreements.........................................Section 9.3
Securities Act.................................................Section 4.2
Shares.........................................................Recitals
Salomon Brothers Book..........................................Exhibit A
Stock Plan.....................................................Section 5.2
Stockholder Meeting............................................Section 8.1
Stockholders Agreement.........................................Recitals
Sub............................................................Preamble
Sub Share......................................................Section 3.1
Subsidiary.....................................................Section 11.6
Surviving Corporation..........................................Section 2.1
Tax; Taxes; Taxable............................................Section 5.18
Tax Return.....................................................Section 5.18
Termination Date...............................................Section 10.2
Termination Fee................................................Section 10.5
Title Policies.................................................Section 5.14
Transfer Taxes.................................................Section 3.9
UST............................................................Section 5.13
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (this "Agreement"),
dated as of February 23, 1998, 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, Investor, Sub and the Company previously entered into that certain
Agreement and Plan of Merger, dated as of September 30, 1997 (the "Prior
Agreement"), and each now desires to amend and restate the Prior Agreement in
its entirety;
WHEREAS, the Board of Directors of the Company has approved the acquisition
of the Company by Investor pursuant to a tender offer (such tender offer, as it
may be amended or supplemented from time to time as permitted under this
Agreement, the "Offer") by Sub for (i) all of the outstanding shares of Common
Stock, par value $.01 per share ("Common Stock"), of the Company at a price of
$14.50 per share, net to the seller in cash, without interest (the "Common Stock
Offer Price") and (ii) all of the outstanding shares of the $2.00 Convertible
Exchangeable Preferred Stock of the Company (the "Exchangeable Preferred") at a
price per share of $27.93, net to the seller in cash, without interest (the
"Exchangeable Preferred Offer Price") (the Exchangeable Preferred, together with
the Common Stock, the "Shares"), followed by a merger (the "Merger") of Sub with
and into the Company upon the terms and subject to the conditions set forth
herein;
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 an Amended and Restated
Stockholders Agreement (the "Stockholders Agreement") pursuant to which such
stockholders have, among other matters, agreed to tender their shares of Common
Stock in the Offer and have granted to Investor an option to purchase the shares
of Common Stock owned by such stockholders, in each case, upon the terms and
subject to the conditions specified in the Stockholders Agreement;
WHEREAS, the Board of Directors of the Company has determined
<PAGE>
that it is fair and in the best interests of its stockholders for Sub to merge
with and into the Company 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 Offer, the Merger, the Stockholders Agreement, this Agreement and
the transactions to which the Company is a party contemplated hereby and
thereby, and has agreed, upon the terms and subject to the conditions set forth
herein, to recommend that the Company's stockholders accept the Offer and tender
their shares;
WHEREAS, pursuant to the Merger, each issued and outstanding Share not
owned directly or indirectly by Investor or the Company, except Shares held by
holders who comply with the provisions of the DGCL regarding the right of
stockholders to dissent from the Merger and require appraisal of their Shares,
will be converted into the right to receive the per share consideration paid
pursuant to the Offer in respect of the Common Stock and the Exchangeable
Preferred, as the case may be; and
WHEREAS, Investor and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Offer and the Merger
and also to prescribe various conditions to the Offer and 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 OFFER
Section 1.1 The Offer. (a) Subject to the provisions of this Agreement and
as soon as practicable, but in any event within five business days after the
first public announcement of this Agreement, Sub shall, and Investor shall cause
Sub to, commence, within the meaning of Rule 14d-2 under the Exchange Act (as
hereinafter defined), the Offer. The obligation of Sub to, and of Investor to
cause Sub to, commence the Offer and accept for payment, and pay for, any Shares
tendered pursuant to the Offer shall be subject to the conditions set forth in
Exhibit A and to the terms and conditions of this Agreement. The Offer shall
initially expire 20 business days after the date of its commencement (subject to
the other provisions of this Section 1.1); provided, however, that unless this
Agreement is terminated in accordance with Article X, in which case the Offer
(whether or not previously extended in accordance with the terms hereof) shall
expire on such date of termination, at the request of the Company, Investor and
Sub shall extend the expiration date of the Offer from time to time to the
earlier of (i) the date on which Sub purchases or becomes obligated to purchase
that number of Shares that would satisfy the Minimum Condition (as defined in
Exhibit A) and (ii) the date 60 business days after the date of its
commencement. Without the prior written consent of the Company, Sub shall not
(i) waive the Minimum Condition, (ii) reduce the number of Shares subject to the
Offer, (iii) reduce the price per share of either class of the Shares to be paid
pursuant to the Offer, (iv) except as provided in the following sentence, extend
the Offer, if all of the conditions of the Offer are satisfied or waived, or (v)
change the form of consideration payable in the Offer. Notwithstanding the
foregoing, Sub may, without the consent of the Company, extend the Offer at any
time, and from time to time: (i) if at the then scheduled expiration date of the
Offer any of the conditions to Sub's obligation to accept for payment and pay
for the Shares shall not have been satisfied or waived, until such time as such
conditions are satisfied or waived; (ii) for any period required by any rule,
regulation, interpretation or position of the SEC (as hereinafter defined) or
its staff applicable to the Offer; (iii) until 10 business days following the
expiration of the 10 business day period referred to in the condition in clause
(f) of Exhibit A and if such condition (f) shall not have been satisfied, for as
long as Investor and Sub shall determine until, in their sole discretion, all
conditions of the Offer are satisfied; and (iv) if all conditions of the Offer
are satisfied or waived but the number of Shares tendered is less than 90% of
the then outstanding number of shares of Common Stock and less than 90% of the
then outstanding shares of Exchangeable Preferred, for an aggregate period of
not more than 10 business days (for all such extensions) beyond the latest
expiration date that would be permitted under clause (i), (ii) or (iii) of this
sentence. Subject to the terms and conditions of the Offer and this Agreement,
Sub shall, and Investor shall cause Sub to, pay for all of the Shares validly
tendered and not withdrawn pursuant to the Offer as soon as practicable after
the expiration of the Offer.
(b) On the date of commencement of the Offer, Investor and Sub shall file
with the Securities and Exchange Commission (the "SEC") a Tender Offer Statement
on Schedule 14D-1 with respect to the Offer, which shall contain an offer to
purchase and a related letter of transmittal (such Schedule 14D-1 and the
documents therein pursuant to which the Offer will be made, together with any
supplements or amendments thereto, the "Offer Documents"). The Company and its
<PAGE>
counsel shall be given an opportunity to review and comment upon the Offer
Documents prior to the filing thereof with the SEC. Investor and Sub hereby
covenant that the Offer Documents shall comply as to form in all material
respects with the requirements of the Securities Exchange Act of 1934, as
amended (including the rules and regulations promulgated thereunder, the
"Exchange Act"), and on the date filed with the SEC and on the date first
published, sent or given to the Company's stockholders, the Offer Documents
shall not contain any untrue statement of a material fact or omit to state any
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, except that no representation is made by Investor or Sub with
respect to information supplied by the Company for inclusion in the Offer
Documents. Each of Investor, Sub and the Company agrees to correct promptly any
information provided by it for use in the Offer Documents if and to the extent
that such information shall have become false or misleading in any material
respect, and each of Investor, Sub and Company further agrees to take all steps
necessary to cause the Offer Documents as so corrected to be filed with the SEC
and to be disseminated to holders of Shares, in each case as and to the extent
required by applicable federal securities laws.
Section 1.2 Company Actions. (a) The Company hereby approves of and
consents to the Offer and represents and warrants that the Board of Directors of
the Company at a meeting duly called and held has duly adopted resolutions (i)
approving this Agreement, the Stockholders Agreement, the Offer and the Merger,
(ii) determining that the Merger is advisable and that the terms of the Offer
and Merger are fair to, and in the best interests of, the Company, and the
holders of shares of Common Stock and the holders of shares of Exchangeable
Preferred and (iii) recommending that the Company's stockholders accept the
Offer and tender their Shares and approve the Merger and this Agreement. The
Company hereby consents to the inclusion in the Offer Documents of such
recommendation of the Board of Directors of the Company. The Company represents
and warrants that its Board of Directors has received the written opinions (the
"Fairness Opinions") of Salomon Smith Barney and J.P. Morgan Securities Inc.
(together, the "Financial Advisors") that the proposed consideration to be
received by the holders of shares of Common Stock and the holders of shares of
Exchangeable Preferred pursuant to the Offer and the Merger is fair to such
holders from a financial point of view. The Company has been authorized by the
Financial Advisors to permit, subject to the prior review and consent by the
Financial Advisors (such consent not to be unreasonably withheld), the inclusion
of the Fairness Opinions (or a reference thereto) in the Offer Documents, the
Schedule 14D-9 (as hereinafter defined) and the Proxy Statement (as hereinafter
defined). The Company represents and warrants that its Board of Directors has
taken all necessary steps to render Section 203 of the DGCL inapplicable to the
Offer, the Merger and the transactions contemplated by this Agreement and the
Stockholders Agreement.
(b) On the date the Offer Documents are filed with the SEC, the Company
shall file with the SEC a Solicitation/Recommendation Statement on Schedule
14D-9 with respect to the Offer (such Schedule 14D-9, as amended from time to
time, the "Schedule 14D-9") containing the recommendations set forth in
paragraph (a) above and shall mail the Schedule 14D-9 to the stockholders of the
Company as required by Rule 14d-9 promulgated under the Exchange Act. To the
extent practicable, the Company shall cooperate with Investor in mailing or
otherwise disseminating the Schedule 14D-9 with the appropriate Offer Documents
to the Company's stockholders. Investor and its counsel shall be given an
opportunity to review and comment upon the Schedule 14D-9 prior to the filing
thereof with the SEC. The Company hereby covenants that the Schedule 14D-9 shall
comply as to form in all material respects with the requirements of the Exchange
Act and, on the date filed with the SEC and on the date first published, sent or
given to the Company's stockholders, shall not contain any untrue statement of a
material fact or omit to state any 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, except that no
representation is made by the Company with respect to information supplied by
Investor or Sub for inclusion in the Schedule 14D-9. Each of the Company,
Investor and Sub agrees to correct promptly any information provided by it for
use in the Schedule 14D-9 if and to the extent that such information shall have
become false or misleading in any material respect, and the Company further
agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected
to be filed with the SEC and disseminated to the holders of Shares, in each case
as and to the extent required by applicable federal securities laws. The Company
agrees to provide Investor and Sub and their counsel in writing with any
comments the Company or its counsel may receive from the SEC or its staff with
respect to the Schedule 14D-9 promptly after the receipt of such comments.
(c) In connection with the Offer, the Company shall cause its transfer
agent to promptly furnish Sub with a list of the holders of Shares and mailing
labels containing the names and addresses of the record holders of Shares as of
a recent date and of those persons becoming record holders subsequent to such
date, together with copies of all lists of stockholders, security position
listings (including Shares held by depositories) and computer files and all
other
<PAGE>
information in the Company's possession or control regarding the beneficial
owners of Shares, and shall furnish to Sub such information and assistance
(including updated lists of stockholders, security position listings and
computer files) as Sub may reasonably request in communicating the Offer to the
Company's stockholders. The Company acknowledges that Sub intends to commence
the Offer by sending Offer materials to the holders of the Shares and,
therefore, the obligations of the Company as set forth in this subparagraph are
extremely time-sensitive.
ARTICLE II
THE MERGER
Section 2.1 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the DGCL, 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 2.2 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 2.3 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 2.4 By-laws. The By-laws of the Company 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 2.5 Board of Directors and Officers. The directors of Sub at the
Effective Time and Glenn Kaplan and Evan A. Kaplan shall, from and after the
Effective Time, be the initial directors of the Surviving Corporation and the
officers of the Company shall be the officers of the Surviving Corporation, in
each case until their respective successors have been duly elected or appointed
and qualified or until their earlier death, resignation or removal, in
accordance with the Surviving Corporation's Articles of Incorporation and
By-laws.
Section 2.6 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 Conversion of Shares. As of the Effective Time, by virtue of
the Merger and without any action on the part of any stockholder of the Company:
(a) All Shares that are held in the treasury of the Company and any Shares
owned by Investor, Sub or any other wholly owned Subsidiary (as hereinafter
defined) of Investor shall be canceled and no consideration shall be delivered
in exchange therefor.
(b) Each share of Common Stock issued and outstanding immediately prior to
the Effective Time (other than shares of Common Stock to be canceled in
accordance with Section 3.1(a) and other than Dissenting Company Shares (as
hereinafter defined)) shall be converted into the right to receive from the
Surviving Corporation in cash, without interest, the Common Stock Offer Price,
without interest (the "Common Stock Merger Consideration"). All such shares of
Common Stock, when so converted, shall no longer be outstanding and shall
automatically be canceled and retired and each holder of a certificate or
certificates (the "Common Stock Certificates") representing any such shares of
Common Stock shall cease to have any rights with respect thereto, except the
right to receive the Common Stock Merger Consideration.
(c) Each Share of Exchangeable Preferred issued and outstanding immediately
prior to the Effective Time (other than shares of Exchangeable Preferred to be
canceled in accordance with Section 3.1(a) and other than Dissenting Company
Shares) shall be converted into the right to receive from the Surviving
Corporation in cash, without interest, the Exchangeable Preferred Offer Price,
without interest (the "Exchangeable Preferred Merger Consideration" and,
together with the Common Stock Merger Consideration, the "Merger
Consideration"). All such shares of Exchangeable Preferred, when so converted,
shall no longer be outstanding and shall automatically be canceled and retired
and each holder of a certificate or certificates
<PAGE>
(the "Exchangeable Preferred Certificates" and, together with the Common Stock
Certificates, the "Certificates") representing any such shares shall cease to
have any rights with respect thereto, except the right to receive the
Exchangeable Preferred Merger Consideration.
(d) Each share 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 one fully paid and
nonassessable share of common stock, par value $.01 per share, of the Surviving
Corporation.
Section 3.2 Exchange of Certificates. (a) Paying Agent. Prior to the
Effective Time, Investor shall appoint IBJ Schroder Bank & Trust Company or a
commercial bank or trust company mutually agreeable to Investor and the Company
to act as paying agent hereunder (the "Paying Agent") for the payment of the
Merger Consideration upon surrender of the Certificates. All of the fees and
expenses of the Paying Agent shall be borne by Investor.
(b) Surviving Corporation to Provide Funds. Investor shall take all steps
necessary to enable and cause the Surviving Corporation to provide the Paying
Agent with cash in amounts necessary to pay for all of the Shares pursuant to
Section 3.1 (determined as though there are no Dissenting Company Shares), when
and as such amounts are needed by the Paying Agent (such amounts, the "Exchange
Fund"). 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 Investor. 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 Merger Consideration 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. Any portion of the Exchange Fund
(including the proceeds of any interest and other income received by the Paying
Agent in respect of such funds) that remains undistributed to the holders of
Shares 180 days after the Effective Time of the Merger shall be delivered to the
Surviving Corporation at such time. After six months following the Effective
Time, holders of Shares shall look only to the Surviving Corporation (subject to
the terms of this Agreement) as a general creditor for payment of the Merger
Consideration, without interest, upon the surrender of any Certificates held by
them.
(c) Exchange Procedures. As soon as practicable after the Effective Time,
the Paying Agent shall mail to each holder of record of a Certificate, other
than Investor and the Company, (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon actual delivery of the Certificates to the Paying Agent
and shall be in a form and have such other provisions as Investor may reasonably
specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate (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) for cancellation to the Paying Agent or
to such other agent or agents as may be appointed by the Surviving Corporation,
together with such letter of transmittal, duly executed, and such other
documents as may reasonably be required by the Paying Agent, the holder of such
Certificate shall be entitled to receive in exchange therefor the amount of cash
into which the Shares theretofore represented by such Certificate shall have
been converted pursuant to Section 3.1, and the Certificates so surrendered
shall forthwith be canceled. No interest will be paid or will accrue on the cash
payable upon the surrender of any Certificate. If payment is to be made to a
person other than the person in whose name the Certificate so surrendered is
registered, it shall be a condition of payment that such Certificate shall be
properly endorsed or otherwise in proper form for transfer and that the person
requesting such payment shall pay any transfer or other taxes required by reason
of such Certificate or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable. Until surrendered
as contemplated by this Section 3.2, each Certificate (other than Certificates
representing Dissenting Company Shares and Certificates representing any Shares
held in the treasury of the Company) shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
amount of cash, without interest, into which the Shares theretofore represented
by such Certificate shall have been converted pursuant to Section 3.1. If any
Certificate shall not have been surrendered prior to three years after the
Effective Time (or immediately prior to such time on which any payment in
respect hereof would otherwise escheat or become the property of any
governmental unit or agency), the payment 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. Notwithstanding the foregoing, none of the Paying Agent, the
Surviving Corporation or any party hereto shall be liable to any former
stockholder of the Company for any cash or interest delivered to a public
official pursuant to
<PAGE>
applicable abandoned property, escheat or similar laws.
Section 3.3 Dissenting Company Shares. Notwithstanding any provision of
this Agreement to the contrary, if required by the DGCL but only to the extent
required thereby, Shares which are issued and outstanding immediately prior to
the Effective Time and which are held by holders of such Shares who have
properly exercised appraisal rights with respect thereto in accordance with
Section 262 of the DGCL (the "Dissenting Company Shares") will not be
exchangeable for the right to receive the Merger Consideration, and holders of
such Shares will be entitled to receive payment of the appraised value of such
Shares in accordance with the provisions of such Section 262 unless and until
such holders fail to perfect or effectively withdraw or lose their rights to
appraisal and payment under the DGCL. If, after the Effective Time, any such
holder fails to perfect or effectively withdraws or loses such right, such
Shares will thereupon be treated as if they had been converted into and have
become exchangeable for, at the Effective Time, the right to receive the Merger
Consideration, without any interest thereon. Upon the Company's receipt of any
notice of election to dissent in accordance with the provisions of such Section
262, the Company shall promptly provide Investor with a copy of such notice of
election to dissent. The Company shall not, except with the prior written
consent of Investor, make any payment with respect to any such election to
dissent or offer to settle or settle any such election to dissent.
Section 3.4 Merger Without Meeting of Stockholders. In the event that Sub,
or any other direct or indirect Subsidiary of Investor, shall acquire at least
90% of the outstanding shares of Common Stock and at least 90% of the
outstanding shares of the Exchangeable Preferred, the parties hereto agree to
take all necessary and appropriate action to cause the Merger to become
effective as soon as practicable after the expiration of the Offer without a
meeting of stockholders of the Company, in accordance with Section 253 of the
DGCL.
Section 3.5 No Further Ownership Rights in the Shares. From and after the
Effective Time, the holders of Shares which were outstanding immediately prior
to the Effective Time shall cease to have any rights with respect to such Shares
except as otherwise provided in this Agreement or by applicable law. All cash
paid upon the surrender of Certificates in accordance with the terms hereof
shall be deemed to have been issued in full satisfaction of all rights
pertaining to the Shares.
Section 3.6 Closing of Company Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of Shares
shall thereafter be made. If, after the Effective Time, Certificates are
presented to the Surviving Corporation, they shall be canceled and exchanged as
provided in this Article III.
Section 3.7 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 Common Stock Merger
Consideration over the per share exercise price of such Option, without
interest. All amounts payable pursuant to this Section 3.7 shall be subject to
all applicable withholding of taxes and shall be paid as soon as practicable
following the Effective Time. 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 3.8 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 two business days after
the day on which the last of the conditions set forth in Article IX (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 (collectively, "Transfer Taxes"). The Company will
pay all of the Transfer Taxes.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF INVESTOR
Investor represents and warrants to the Company as follows:
<PAGE>
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 (as hereinafter
defined) 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 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 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 Offer Documents and Proxy Statement. None of the information to
be supplied by Investor or Sub for inclusion or incorporation by reference in
the Schedule 14D-9, the information statement, if any, filed by the Company in
connection with the Offer or the Merger pursuant to Regulation 14C or Rule 14f-1
promulgated under the Exchange Act or otherwise (together with any amendments or
supplements thereto, the "Information Statement"), or, if applicable, the proxy
statement (together with any amendments or supplements thereto, the "Proxy
Statement") relating to the Stockholder Meeting (as hereinafter defined) (i) in
the case of the Schedule 14D-9, at the time the Schedule 14D-9 is filed with the
SEC or first published, sent or given to the Company's stockholders, or (ii) in
the case of the Proxy Statement or the Information Statement, as applicable, at
the time of the mailing of the Proxy Statement or Information Statement and at
the time of the Stockholder Meeting or the taking of the action contemplated by
the Information Statement (as applicable), will contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
Section 4.4 Financing. Investor has available and will make available to
Sub sufficient funds to enable it to consummate the Offer and the Merger on the
terms contemplated by this Agreement.
<PAGE>
Section 4.5 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.
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 $.01 per share, and
10,000,000 shares of preferred stock, par value $.01 per share, issuable in one
or more series, of which 2,400,000 shares of Exchangeable Preferred have been
designated. At the close of business on February 20, 1998, (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,
options available for grant, convertible securities and stock rights in the
Company. At the close of business on February 20, 1998, 2,400,000 shares of
Exchangeable Preferred 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 February 20, 1998, the Company had
outstanding options to acquire an aggregate of 142,100 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 (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 February 20, 1998, 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, or
conversion of Exchangeable Preferred, 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, 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
<PAGE>
(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, 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 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, By-laws 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.
Section 5.5 SEC Documents. (a) Except as set forth in the Company
Disclosure Letter, 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, except that no representation is made by the
Company with respect to information supplied by Investor, Sub or their
respective Subsidiaries for inclusion in the Company SEC Documents. 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 Company has delivered to Investor the preliminary
proxy materials relating to the Merger, as filed with the SEC prior to the date
hereof, and the comment letters of the SEC received by the Company with respect
thereto. The financial
<PAGE>
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 September 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 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 Offer Documents and Proxy Statement. None of (a) the
information supplied or to be supplied by the Company for inclusion or
incorporation by reference in the Offer Documents at the time such documents are
filed with the SEC or first published, sent or given to the Company's
stockholders or (b) the Proxy Statement or the Information Statement (as
applicable) at the time of the mailing of the Proxy Statement or the Information
Statement and at the time of the Stockholder Meeting or the taking of the action
contemplated by the Information Statement (as applicable), will contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading, except
that no representation is made by the Company with respect to information
supplied by Investor, Sub or their respective Subsidiaries for inclusion in any
of such documents. If at any time prior to the Effective Time any event with
respect to the Company, its officers and directors should occur which is
required to be set forth in an amendment of, or a supplement to, the Proxy
Statement or the Information Statement (as the case may be), such event shall be
so set forth, and such amendment or supplement shall be promptly filed with the
SEC and, as required by law, disseminated to the stockholders of the Company.
The Proxy Statement and the Information Statement shall comply as to form in all
material respects with the requirements of the Exchange Act.
Section 5.7 Absence of Certain Events. Except as set forth in the Company
Disclosure Letter, since September 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
<PAGE>
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 5.8 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 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 5.9 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 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.
<PAGE>
(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 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.
Section 5.10 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,
<PAGE>
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
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
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
<PAGE>
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 5.11 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.
Section 5.12 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;
(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,
<PAGE>
(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 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 5.13 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
<PAGE>
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 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 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 5.14 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
<PAGE>
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, 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.
(d) The Company has made available to Investor 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 has made available to Investor a list of each Company
Property which consists of or includes undeveloped land or which is in the
process of being developed or redeveloped
<PAGE>
(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 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 5.15 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.
Section 5.16 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 5.17 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.
<PAGE>
Section 5.18 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 5.19 No Change of Control. Except as set forth in the Company
Disclosure Letter, the consummation of the Merger and the transactions
contemplated by 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 5.20 Brokers. No broker, investment banker or other person, other
than the Financial Advisors, 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 letters between each of the Financial Advisors 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 5.21 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 5.22 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.
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
<PAGE>
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
B (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 of 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 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 B, and subject to the
provisions of Sections 8.4 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 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 in accordance with its 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;
(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;
<PAGE>
(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;
(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.
During the period from the date of this Agreement through the
<PAGE>
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 5.12, 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 Company Stockholder Approval; Proxy Statement. (a) If approval
or action in respect of the Merger by the stockholders of the Company is
required by applicable law, the Company shall, if appropriate, call a meeting of
its stockholders (the "Stockholder Meeting") for the purpose of voting upon the
Merger and shall use its reasonable best efforts to obtain stockholder approval
of the Merger. The Stockholder Meeting shall be held as soon as practicable
following the purchase of Shares pursuant to the Offer and the Company shall,
through its Board of Directors but subject to the fiduciary duties of its Board
of Directors under applicable law as determined by the Board of Directors in
good faith after consultation with the Company's outside counsel, recommend to
its stockholders the approval of the Merger and not rescind its declaration that
the Merger is advisable. The record date for the Stockholder Meeting shall be a
date subsequent to the date Investor or Sub becomes a record holder of Shares
purchased pursuant to the Offer.
(b) If required by applicable law, the Company shall, as soon as
practicable following the expiration of the Offer, prepare and file a
preliminary Proxy Statement or, if applicable, an Information Statement, with
the SEC and shall use its reasonable best efforts to respond to any comments of
the SEC or its staff and to cause the Proxy Statement or the Information
Statement to be cleared by the SEC. The Company shall notify Investor of the
receipt of any comments from the SEC or its staff and of any request by the SEC
or its staff for amendments or supplements to the Proxy Statement, or the
Information Statement or for additional information and shall supply Investor
with copies of all correspondence between the Company or any of its
representatives, on the one hand, and the SEC or its staff, on the other hand,
with respect to the Proxy Statement, the Information Statement or the Merger.
The Company shall give Investor and its counsel the opportunity to review the
Proxy Statement or, if applicable, the Information Statement, prior to its being
filed with the SEC and shall give Investor and its counsel the opportunity to
review all amendments and supplements to the Proxy Statement or, if applicable,
the Information Statement, and all responses to requests for additional
information and replies to comments prior to their being filed with, or sent to,
the SEC. Each of the Company and Investor agrees to use its reasonable best
efforts, after consultation with the other parties hereto, to respond promptly
to all such comments of and requests by the SEC. As promptly as practicable
after the Proxy Statement or, if applicable, the Information Statement, has been
cleared by the SEC, the Company shall mail the Proxy Statement or, if
applicable, the Information Statement, to the stockholders of the Company.
(c) The Company shall use its reasonable best efforts to obtain any
necessary approvals by its stockholders of the Merger, this Agreement and the
transactions contemplated hereby.
(d) Investor agrees, subject to applicable law, to cause all Shares
purchased pursuant to the Offer and all other Shares owned by Sub or any other
Subsidiary of Investor to be voted in favor of the approval of the Merger.
Section 8.2 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
<PAGE>
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 8.2.
(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 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.
(e) For the period from the time when Sub first purchases Shares pursuant
to the Offer through the Effective Time, Investor shall not permit the Company
to amend the provisions in its Certificate of Incorporation and Bylaws providing
for exculpation of director and officer liability and indemnification of the
Indemnified Parties.
Section 8.3 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) 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 8.4 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 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
<PAGE>
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 8.5 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 8.6 Board Representation; Directors. Promptly upon the purchase of
shares of Common Stock pursuant to the Offer, Investor shall be entitled to
designate such number of directors, rounded up to the next whole number, on the
Board of Directors of the Company as will give Investor, subject to compliance
with Section 14(f) of the Exchange Act, representation on the Board of Directors
equal to the product of (a) the total number of directors on the Board of
Directors and (b) the percentage that the number of shares of Common Stock
purchased by Investor bears to the number of shares of Common Stock outstanding,
and the Company shall, upon request by Investor, promptly increase the size of
the Board of Directors and/or exercise its reasonable best efforts to secure the
resignations of such number of directors as is necessary to enable Investor's
designees to be elected to the Board of Directors and shall cause Investor's
designees to be so elected. The Company shall take, at its expense, all action
required pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 thereunder
in order to fulfill its obligations under this Section 8.8 and shall include in
the Schedule 14D-9 or otherwise timely mail to its stockholders such information
with respect to the Company and its officers and directors as is required by
such Section 14(f) and Rule 14f-1 in order to fulfill its obligations under this
Section 8.8. Investor shall supply to the Company in writing and be solely
responsible for any information with respect to itself and its nominees,
officers, directors and affiliates required by such Section 14(f) and Rule
14f-1. At the Effective Time, the Company will obtain a resignation of each
director not specified in Schedule 2.5.
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) Common Stockholder Approval. If approval of the Merger by the holders
of the Common Stock is required by applicable law, the Merger shall have been
approved by the requisite vote of such holders.
(b) No Order. 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).
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 any approval by the stockholders of the Company, by the
mutual consent of Investor and the Company prior to the purchase of the Shares
pursuant to the Offer.
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:
<PAGE>
(a) the Merger shall not have been consummated by December 31, 1998 (the
"Termination Date"); provided, however, that the right to terminate this
Agreement pursuant to this clause shall not be available (i) to Investor, if Sub
or any affiliate of Sub acquires Shares pursuant to the Offer, or (ii) to any
party whose failure to fulfill any obligation of this Agreement has been the
cause of, or resulted in, the failure of the Merger to have occurred on or prior
to the aforesaid date; or
(b) upon a vote at a duly held meeting or upon any adjournment thereof, the
stockholders of the Company shall have failed to give any approval required by
applicable law; 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 this clause (c) shall have
used all commercially reasonable efforts to remove such injunction, order or
decree; or
(d) pursuant to the provisions of Section 1.1 or as the result of the
failure of any of the conditions set forth in Exhibit A hereto, the Offer shall
have terminated or expired in accordance with its terms without Sub having
purchased any Shares pursuant to the Offer; provided, however, that the right to
terminate this Agreement pursuant to this clause (d) shall not be available to
any party whose failure to fulfill any of its obligations under this Agreement
results in the failure of any such condition; or
(e) Investor shall have reasonably determined that any Offer condition
(other than the Minimum Condition) is not capable of being satisfied at any time
in the future and Investor has not purchased Shares pursuant to the Offer;
provided, however, that the right to terminate this Agreement pursuant to this
clause (e) shall not be available to any party whose failure to fulfill any
obligation of this Agreement has been the cause of, or resulted in, such Offer
condition being incapable of satisfaction.
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 the Board of Directors of the Company shall have failed to
recommend, or shall have withdrawn, modified or amended in any material respect
its approval or recommendations of the Offer or the Merger or shall have
resolved to do any of the foregoing, or shall have recommended an Alternative
Proposal to the Company's stockholders.
Section 10.4 Termination by the Company. 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 8.4 or (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.
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 the Offer 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, (y) this Agreement shall have been terminated by the Company
pursuant to Section 10.4 or (z) any person shall have made an Alternative
Proposal at $14.50 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 $14.50 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 Exhibit A then
<PAGE>
the Company shall promptly reimburse Investor for all out-of-pocket costs and
expenses incurred by Investor in connection with the Offer, 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.
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) 632-6000
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 Froehlich 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
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, the Offer or the
other transactions contemplated hereby are 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.
<PAGE>
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
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 8.2 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,
(including, without limitation, the Prior Agreement). 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
Merger 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 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. Subject to applicable law, 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
<PAGE>
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 Glenn Kaplan, Wayne Kaplan,
Evan Kaplan or Raymond DioGuardi.
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: LF STRATEGIC REALTY
INVESTORS II L.P., its Sole Member
By: LAZARD FRERES REAL ESTATE INVESTORS
L.L.C., its General Partner
By: /s/ Robert P. Freeman
-----------------------------------
Robert P. Freeman
Principal
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
Lazard Freres Real Estate Investors L.L.C. ("LFREI") 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 LFREI 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 LFREI as a surety or
guarantor. LFREI represents and warrants that it is the sole member of Investor.
LAZARD FRERES REAL ESTATE
INVESTORS L.L.C.
<PAGE>
By: /s/ Robert P. Freeman
-----------------------------
Robert P. Freeman
Principal
EXHIBIT A
---------
CONDITIONS OF THE OFFER
-----------------------
Notwithstanding any other term of the Offer or this Agreement, Sub shall
not be required to accept for payment or pay for, subject to any applicable
rules and regulations of the SEC, including Rule 14e-1(c) of the Exchange Act,
any Shares not theretofore accepted for payment or paid for and may terminate or
amend the Offer as to such Shares unless there shall have been validly tendered
and not withdrawn prior to the expiration of the Offer that number of Shares
which would represent at least a majority of the sum of all outstanding shares
of Common Stock on a fully-diluted basis including shares issuable upon (i) the
exercise of options (other than options the holders of which have executed
agreements which provide that, for so long as the Agreement shall be in effect,
such holders will not exercise such options prior to the Effective Time, which
agreements are in full force and effect at the time of the expiration of the
Offer), warrants or other rights to acquire shares (whether or not currently
exercisable or vested) having an exercise price equal to or less than the Common
Stock Offer Price and (ii) the conversion of outstanding Shares of Exchangeable
Preferred (it being understood and agreed that for purposes of satisfying the
Minimum Condition (as hereinafter defined), each share of Exchangeable Preferred
tendered in the Offer shall be deemed to account for 1.92604 shares of Common
Stock)(the "Minimum Condition"). Furthermore, notwithstanding any other term of
the Offer or this Agreement, Sub shall not be required to accept for payment or,
subject as aforesaid, to pay for any Shares not theretofore accepted for payment
or paid for, and may terminate or amend the Offer if at any time on or after the
date of this Agreement and before the acceptance of such Shares for payment or
the payment therefor, any of the following conditions exist or shall occur and
remain in effect:
(a) there shall have been instituted, pending or threatened any
action or proceeding by any governmental, regulatory or administrative
agency or authority, which (i) seeks to challenge the acquisition by
Investor of Shares pursuant to the Offer, restrain, prohibit or delay the
making or consummation of the Offer or the Merger, or obtain any material
damages in connection therewith, (ii) seeks to make the purchase of or
payment for some or all of the Shares pursuant to the Offer or the Merger
illegal, (iii) seeks to impose limitations on the ability of Investor (or
any of its affiliates) effectively to acquire or hold, or to require
Investor or the Company or any of their respective affiliates to dispose
of or hold separate, any portion of the assets or the business of Investor
and its affiliates taken as a whole or the Company, or (iv) seeks to
impose material limitations on the ability of Investor (or any of its
affiliates) to exercise full rights of ownership of the Shares purchased
by it, including, without limitation, the right to vote the Shares
purchased by it on all matters properly presented to the stockholders of
the Company; or
(b) there shall have been promulgated, enacted, entered, enforced or
deemed applicable to the Offer or the Merger, by any state, federal or
foreign government or governmental authority or by any court, domestic or
foreign, any statute, rule, regulation, judgment, decree, order or
injunction that could reasonably be expected to, in the judgment of
Investor, directly or indirectly, result in any of the consequences
referred to in clauses (i) through (iv) of subsection (a) above; or
(c) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on any national securities
exchange or in the over-the-counter market in the United States or (ii)
the declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States;or
(d) the Company and Investor shall have reached an agreement or
understanding that the Offer or this Agreement be terminated or this
Agreement shall have been terminated in accordance with its terms; or
(e) the Company's Board of Directors shall have modified or amended
its recommendation of the Offer in any manner adverse to Investor or shall
have withdrawn its recommendation of the Offer, or shall have recommended
acceptance of any Alternative Proposal or shall have resolved to do any of
the foregoing, or shall have failed to reject any Alternative Proposal
within 10 business days after receipt by the Company or public
announcement thereof; or
<PAGE>
(f) (i) any corporation, entity or "group" (as defined in Section
13(d)(3) of the Exchange Act) ("person"), other than Investor, one or more
of its affiliates or any beneficial owner of Shares on the date hereof,
shall have acquired beneficial ownership of 30% or more of the outstanding
shares of Common Stock or shall have been granted any options or rights,
conditional or otherwise, to acquire a total of 30% or more of the
outstanding shares of Common Stock; (ii) any new group shall have been
formed which beneficially owns 30% or more of the outstanding shares of
Common Stock; (iii) any person (other than Investor, one or more of its
affiliates or any beneficial owner of Shares on the date hereof) shall
have entered into an agreement in principle or definitive agreement with
the Company with respect to a tender or exchange offer for any Shares or a
merger, consolidation or other business combination with or involving the
Company; or (iv) any person (other than Investor, one or more of its
affiliates or any beneficial owner of Shares on the date hereof) shall
have offered to tender or exchange for 30% or more of the outstanding
shares of Common Stock, or offered to merge, consolidate or effect some
other business combination with or involving the Company.
The foregoing conditions are for the sole benefit of Investor and may be
asserted by Investor regardless of the circumstances giving rise to any such
condition, unless the failure of the satisfaction of any such condition has been
caused by or resulted from the failure by Investor to fulfill any of its
obligations under this Agreement, and any such condition may be waived by
Investor, in whole or in part, at any time and from time to time, in the sole
discretion of Investor. The failure by Investor at any time to exercise any of
the foregoing rights will not be deemed a waiver of any right, the waiver of
such right with respect to any particular facts or circumstances shall not be
deemed a waiver with respect to any other facts or circumstances, and each right
will be deemed an ongoing right which may be asserted at any time and from time
to time.
Should the Offer be terminated pursuant to the foregoing provisions, all
tendered Shares not theretofore accepted for payment shall forthwith be returned
by the Paying Agent to the tendering stockholders.
<PAGE>
EXHIBIT 99.(c)(2)
STOCKHOLDERS AGREEMENT
----------------------
Second Amended and Restated Stockholders Agreement (this "Agreement"),
dated as of February 23, 1998, 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, Investor and each Stockholder previously entered into that certain
Stockholders Agreement, dated as of September 30, 1997, which was amended and
restated in its entirety as of October 14, 1997 (as so previously amended and
restated, the "Prior Agreement") and Investor and each Stockholder now desire to
amend and restate the Prior Agreement in its entirety;
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 amended and restated agreement and plan of
merger with the Company, dated as of February 23, 1998 (the "Merger Agreement"),
pursuant to which Sub will (i) offer to purchase pursuant to a tender offer all
of the outstanding shares of Common Stock at a price of $14.50 per share and all
of the outstanding shares of the $2.00 Convertible Exchangeable Preferred Stock
of the Company at a price of $27.93 per share (the "Offer") and (ii) subsequent
to the consummation of the Offer, merge with and into the Company (the
"Merger"), each upon the terms and subject to the conditions set forth in the
Merger Agreement; 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 tender the Shares in the Offer, (iii) to appoint Investor as
Stockholders' proxy to vote the Shares, and (iv) 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 $14.50 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 and prior to
the earlier to occur (the "Expiration Date") of (i) one year after the date
hereof, (ii) if the Merger Agreement is terminated, or the Investor provides
written or oral notice to the Company that it elects not to consummate the Offer
or close the transactions contemplated by the Merger Agreement, as a result of
the failure of any of the conditions specified in Exhibit A, 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 $14.50 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, or the Investor provides written or oral notice to the Company that
it elects not to consummate the Offer or close the transactions contemplated by
the Merger Agreements, as a result of the failure of any of the conditions
specified in Exhibit A and at the time of such termination or notice there shall
exist any Alternative Proposal at $14.50 or more per share of Common Stock for
75% or more of the outstanding Common Stock of the Company, the sixth monthly
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
<PAGE>
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 Investor
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 (b)
below, 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.
(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 $14.50 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) $14.50 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 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
<PAGE>
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 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 by 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.
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 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
<PAGE>
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.
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
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. Tender of Shares; Automatic Exercise of Option.
----------------------------------------------
6.1. Tender of Shares. Each Stockholder hereby agrees that, during the
time this Agreement is in effect, each Stockholder shall, to the extent
applicable, tender (and/or cause to be tendered) all of the Shares to Investor
immediately upon consummation of the Offer.
6.2. Automatic Exercise. Each Stockholder agrees that, in the event
such Stockholder shall fail to comply with the provisions of Section 6.1 hereof
as determined by Investor in its sole discretion, such failure shall result,
without any further action by such Stockholder or Investor, in the automatic and
irrevocable exercise of the Stock Option by Investor and the provisions of this
Agreement applicable to such exercise, the delivery of the Shares and the Stock
Option Closing shall take effect as though an Exercise Notice had been delivered
to the Stockholders pursuant to Section 1.2(b) of this Agreement.
7. 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.
8. Miscellaneous.
-------------
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
<PAGE>
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 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 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) 632-6000
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 Stockholders:
Glenn Kaplan
Kapson Senior Quarters Corp.
125 Froehlich Farm Blvd.
Woodbury, New York 11797
Facsimile: (516) 921-8367
Telephone: (516) 921-8900
with a copy to:
<PAGE>
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.
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: LF STRATEGIC REALTY INVESTORS II
L.P., its Sole Member
By: LAZARD FRERES REAL ESTATE INVESTORS
L.L.C., its General Partner
By: /s/ Robert P. Freeman
---------------------------------
Robert P. Freeman
Principal
EXHIBIT A
---------
Stockholder Number of Shares
----------- ----------------
Glenn Kaplan 1,283,333
Wayne L. Kaplan 1,283,333
Evan A. Kaplan 1,283,333
=========
TOTAL: 3,849,999
<PAGE>
EXHIBIT 99.(c)(3)
THE AMENDED AND RESTATED ESCROW AGREEMENT
This Amended and Restated Escrow Agreement (this "Agreement") is dated
as of February 23, 1998, by and among Prometheus Senior Quarters, LLC (the
"Parent"), Prometheus Acquisition Corp. (the "Merging Corporation"), Kapson
Senior Quarters Corp. (the "Company"), Glenn Kaplan, Wayne L. Kaplan and Evan A.
Kaplan, d/b/a G.W.E. Partnership, (each, a "Partner", and collectively, the
"Partners") and Harris Trust and Savings Bank, an Illinois banking corporation
(the "Escrow Agent").
RECITALS
WHEREAS, Parent, Merging Corporation, Company, Partners and Escrow
Agent (collectively, the "Parties") entered into that certain Escrow Agreement,
dated as of September 30, 1997 (the "Prior Escrow Agreement") relating to an
Agreement and Plan of Merger, dated as of September 30, 1997 among Parent,
Merging Corporation and Company (the "Merger Agreement"), pursuant to which the
Merging Corporation was to merge with and into Company (the "Merger");
WHEREAS, Parent, Merging Corporation and Company amended and restated
the Merger Agreement as of February 23, 1998 (the "Restated Merger Agreement")
to provide for a tender offer by Merging Corporation for all of the outstanding
shares of Common Stock, par value $.0l per share and $2.00 convertible
exchangeable preferred stock of the Company;
WHEREAS, the Parties contemplate establishing an escrow to give Company
recourse in the event that the Partners or any Partner licensed to operate any
facility (each a "Facility" and collectively, the "Facilities") listed on
Exhibit A hereto, incorporated herein by this reference (but including only the
licensed portion of each facility if the entire facility is not licensed), were
to lose their or his operating certificate or cause any Facility to be without a
licensed operator (to the extent, for Facilities that have not yet received such
certificates, that such operating certificates were obtained) due to a breach by
any of the Partners of his respective obligations (a "License Loss Breach")
under (i) an employment agreement with the Company, (ii) any Management
Agreement relating to a Facility, (iii) the Operating Agreement relating to a
Facility, or (iv) the Letter Agreement, dated as of September 30, 1997, as
amended and restated as of February 23, 1998, from Kapson Senior Quarters Corp.
to Prometheus Senior Quarters, LLC and Prometheus Acquisition Corp. (the "Escrow
Side Letter" and collectively, the "Ancillary Agreements");
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements contained herein, the Parties hereby agree as follows:
1. DEFINED TERMS. Capitalized terms used herein and not otherwise
defined shall have the meanings ascribed thereto in the Restated Merger
Agreement.
<PAGE>
2. APPOINTMENT OF ESCROW AGENT. Parent, Merging Corporation, Company
and Partners hereby appoint the Escrow Agent as the escrow agent under this
Agreement, and the Escrow Agent hereby accepts such appointment.
3. COMPENSATION. Parent shall compensate the Escrow Agent for its
services hereunder in an amount as is reasonable and customary for such
services.
4. ESTABLISHMENT OF ESCROW. The Parties agree that $6,000,000 of funds
(the "Consideration") relating to the acquisition by Parent of shares of Common
Stock of the Company from or controlled by the Partners (the "Shares") shall be
deposited into escrow so that the Escrow Agent may carry out the terms and
conditions of this Agreement. Simultaneously with the execution hereof the
Partners shall give the irrevocable instructions in the form set forth as
Exhibit B hereto, incorporated herein by this reference (the "Instructions") to
the Paying Agent (as defined in the Restated Merger Agreement) that the Paying
Agent shall transfer $6,000,000 in consideration for the Shares to the Escrow
Agent in the event that the Partners tender the Shares to Parent pursuant to the
Second Amended and Restated Stockholders Agreement dated as of February 23, 1998
between Parent and the Partners (the "Stockholders Agreement"). In the event
that (a) the Paying Agent does not obtain Shares sufficient to provide at least
$6,000,000 to the Escrow Agent and (b) Parent purchases Shares by exercising the
Stock Option (as defined in the Stockholders Agreement), then (1) Paying Agent
shall transfer to the Escrow Agent all proceeds from the tendered Shares and (2)
Parent shall transfer to the Escrow Agent from the proceeds of the Shares it
purchased under the Stock option the difference between $6,000,000 and the sum
transferred by the Paying Agent.
Subject to and in accordance with the terms and conditions hereof, the
Escrow Agent shall hold the Consideration in escrow and release amounts
therefrom to the Partners and/or Company in accordance with Section 5 hereof
(the "Transferees") without further action by the Partners.
The Escrow Agent agrees to hold the Consideration for the benefit of
the Transferees and to invest such Consideration, according to the instructions
that follow. Upon the receipt of written instructions from at least two of the
Partners, the Escrow Agent shall invest the Consideration in any Merrill Lynch
money fund investing in securities with an average maturity of less than two
years. Upon the written instructions of at least two of the Partners and the
Parent, the Escrow Agent shall otherwise invest the Consideration as such
instructions may direct. Any interest and other income resulting from such
investments shall be paid out to the Partners each quarter. As and when any
amounts invested as above are needed for disbursement as herein provided, the
Escrow Agent shall cause a sufficient amount of such investments to be sold or
otherwise converted into cash to make such disbursement. The Escrow Agent shall
not be held liable for any loss of income due to the liquidation of any
investment which the Escrow Agent, in its sole discretion and acting in good
faith, believes necessary to make payments or disbursements in accordance with
this Agreement.
5. ESCROW RELEASE INSTRUCTIONS. The Escrow Agent shall make payments of
Consideration to the Partners or the Company, as applicable, upon receipt of a
letter executed by each of the Partners and the Company (or by an Arbitrator
they selected under Section 14(c) below)
2
<PAGE>
specifying an amount of Consideration that it shall pay in the name of the
Partners and/or the Company.
6. SCOPE OF UNDERTAKING. The Escrow Agent's duties and responsibilities
in connection with this Agreement shall be limited to those set forth in this
Agreement. The Escrow Agent is not a principal, participant or beneficiary in
any transaction underlying this Agreement. The Escrow Agent shall not be liable
for any error in judgment, any act or omission, any mistake of law or fact, or
for anything it may do or refrain from doing in accordance with this Agreement,
except for its own willful misconduct or negligence. The Escrow Agent may rely
on, and shall not be liable for following the Escrow Release Instructions set
forth in Section 5 or any other instructions contained in any written notice,
instruction or request furnished to it hereunder or pursuant hereto and
reasonably believed by it to have been signed or presented by the proper Party
or Parties. The Escrow Agent shall be responsible for holding and releasing the
Consideration pursuant to this Agreement. Escrow Agent is not responsible or
liable in any manner whatsoever for the transaction or transactions requiring or
underlying the execution of this Agreement.
7. INDEMNIFICATION. Each of Parent, Merging Corporation, Company and
Partners, jointly and severally, hereby indemnifies the Escrow Agent against,
and holds the Escrow Agent harmless from, any and all expenses reasonably
suffered or incurred by the Escrow Agent in connection with or arising from or
out of this Agreement, except such acts or omissions as may result from any
breach of this Agreement by the Escrow Agent or its willful misconduct or
negligence.
8. NOTICES. Any notice or other communication required or permitted to
be given under this Agreement by any Party hereto shall be given to all other
Parties hereto and shall be considered as properly given if in writing and (a)
delivered by hand, (b) mailed by registered or certified mail, return receipt
requested and postage prepaid, or (c) sent by telecopier, in each case addressed
as follows:
If to Parent, to:
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
Telecopier: (212) 332-5980
Telephone: (212) 632-6000
3
<PAGE>
Copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004-1980
Attention: Jonathan L. Mechanic, Esq.
Telephone: (212) 859-8000
Telecopier: (212) 859-4000
If to Merging Corporation, to:
Prometheus Acquisition Corp.
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
Telecopier: (212) 332-5980
Telephone: (212) 632-6000
Copy to:
Jonathan L. Mechanic, Esq.
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004-1980
Telephone: (212) 859-8000
Telecopier: (212) 859-4000
If to any Partner, to:
G.W.E. Partnership
125 Froehlich Farm Boulevard
Woodbury, New York 11797
Attention: Mr. Glenn Kaplan
Telephone: (516) 921-8900
Telecopier: (516) 921-8998
4
<PAGE>
Copy to:
Arnold J. Levine, Esq.
Proskauer Rose LLP
1585 Broadway
New York, New York 10036-8299
Telephone: (212) 969-3000
Telecopier: (212) 969-2900
If to Escrow Agent:
Harris Trust and Savings Bank
311 West Monroe Street, 14th Floor
Chicago, Illinois 60606
Attention: Mr. Palmer Haffner
Telephone: (312) 461-3565
Telecopier: (312) 461-1530
Delivery of any communication given in accordance herewith shall be effective
only upon actual receipt thereof by the Party or Parties to whom such
communication is directed. Any Party to this Agreement may change the address to
which communications hereunder are to be directed by giving written notice to
the other Party or Parties hereto in the manner provided in this Section 8.
9. RESIGNATION OR CHANGE IN ESCROW AGENTS. The Escrow Agent may resign
at any time by delivering written notice at least 30 days prior to the date upon
which such resignation is to become effective to the Parties, who hereby agree
to designate, by a written instrument delivered to the Escrow Agent, a successor
Escrow Agent. After the effective date of such resignation, the Escrow Agent
shall be under no further obligation to perform any of the duties of the Escrow
Agent under the terms of this Agreement other than to deliver the entire amount
of Consideration it then holds to a properly designated successor Escrow Agent.
Any successor Escrow Agent shall have all of the duties, powers, rights and
immunities conferred upon the Escrow Agent hereby. In addition, Parent may elect
at any time to transfer the responsibilities of Escrow Agent to the Paying
Agent, and Escrow Agent shall cooperate in such transfer of responsibilities.
10. GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York without giving effect to
choice of law principles.
11. ASSIGNMENT. This Agreement shall inure to the benefit of, and be
binding upon, the Parties and their respective heirs, devisees, executors,
administrators, personal representatives, successors, assigns, trustees and
receivers.
12. 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, such term or provision shall be
5
<PAGE>
ineffective to the extent of such invalidity or unenforceability without
rendering the remaining terms of this Agreement invalid or unenforceable. 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.
13. TERMINATION. This Agreement shall terminate upon (a) release of all
of the Consideration in accordance with Section 5 hereof and (b) unless the
Escrow Agent shall otherwise elect, full and final payment of all amounts
required to be paid to the Escrow Agent hereunder (whether fees, expenses, costs
or otherwise); provided, however, that in the event all such amounts required to
be paid to the Escrow Agent hereunder are not fully and finally paid prior to
termination, the provisions of Section 7 hereof shall survive the termination
hereof. This Agreement solely creates partial security for the obligations of
Partners pursuant to the Ancillary Agreements and does not limit the
availability of any remedy available to a Party by law or in equity pursuant to
any Ancillary Agreement of the Restated Merger Agreement.
14. PROPOSED INSTRUCTIONS AND DISPUTE RESOLUTION.
--------------------------------------------
(a) The Company and each of the Partners agree that they shall
execute a letter or letters to be delivered to the Escrow Agent under Section 5
on the earlier of the date that (i) a Replacement Operator (as defined in the
Escrow Side Letter) for each Facility has been installed and approved by the
necessary regulatory authorities in accordance with the Escrow Side Letter (in
which case all Consideration then in escrow shall be paid to the Partners); (ii)
the One Year No Fault Condition of the Escrow Side Letter (as defined in the
Escrow Side Letter) has been satisfied; (iii) there is a determination by an
Arbitrator that there has been a License Loss Breach (in which case an amount of
Consideration determined under Section 14(b), if any, shall be paid to the
Company); (iv) is the second (2nd) anniversary of the earlier to occur of the
Effective Time or December 31, 1998 if no claim related to a License Loss Breach
has been submitted to the Arbitrator prior thereto (in which case all
Consideration then in escrow shall be paid to the Partners) or (v) all claims
submitted to the Arbitrator by the second (2nd) anniversary of the earlier of
the Effective Time or December 31, 1998 have been resolved (in which case an
amount of Consideration determined under Section 14(b), if any, shall be paid to
the Company and any remaining Consideration shall be paid to the Partners).
(b) Any Party (other than the Escrow Agent) may submit escrow
release instructions to the other Parties for signature by the Company and all
of the Partners, and submission to the Escrow Agent for implementation. If any
Party fails to sign escrow release instructions presented to such Party, then
the presenting Party may submit such matter to arbitration within fifteen days
after such failure. The Arbitrator shall sign the escrow release instructions on
behalf of any Party, if he or she determines the escrow release instructions
appropriately should have been signed under Section 14(a). If any Party alleges
that there has been a License Loss Breach, the Arbitrator shall determine
whether there has been such a License Loss Breach and the financial damages
caused to Company by the License Loss Breach, based upon calculations of a
nationally recognized independent certified public accountant or valuation firm
jointly selected by Partners and Parent, or if no such independent valuation
firm can be agreed to by the Parties, selected by the
6
<PAGE>
Arbitrator pursuant to Section 14(c) hereof (the "Accountant"), made on the
assumption that any Facility affected by a License Loss Breach would have
otherwise continued to be as profitable absent such change in status as it
previously had been. The Arbitrator shall determine the amount of Consideration
to be transferred to Company to pay for damages from a License Loss Breach, if
any, and shall give the Escrow Agent appropriate instructions as to such
transfer under Section 5. All claims of a License Loss Breach shall be submitted
to the Arbitrator by the second (2nd) anniversary of the Effective Time. After
the final claim of License Loss Breach has been resolved, the Arbitrator shall
give notice to the Escrow Agent under Section 14(a)(iv).
(c) The Arbitrator is authorized to award reasonable fees in
whole or in part, to any Party, if the Arbitrator determines that another Party
has acted unreasonably in the conduct of the arbitration or in rejecting any
settlement proposed by the Arbitrator, and the Parties shall be bound by any
such award.
(d) Any dispute in connection with or relating to this
Agreement shall be submitted to binding arbitration under the auspices and rules
of the American Arbitration Association. A neutral arbitrator (the "Arbitrator")
shall be jointly chosen by the Parties hereto. If a single, neutral arbitrator
cannot be agreed upon by the Parties within ten (10) business days, the
Commercial Panel of the American Arbitration Association (the "CPAAA") shall
select a single neutral arbitrator as the Arbitrator.
15. GENERAL. The section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. This Agreement and any affidavit, certificate,
instrument, agreement or other document required to be provided hereunder (other
than the Certificate) may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which taken together shall constitute
one and the same instrument. Unless the context shall otherwise require, the
singular shall include the plural and each pronoun in any gender shall include
all other genders. This Agreement, or any provision hereof, may be amended,
modified, waived or terminated only by written instrument duly signed by the
Parties.
7
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement to be
effective as of the date first above written.
PROMETHEUS SENIOR QUARTERS, LLC
By: LF STRATEGIC REALTY
INVESTORS II L.P., its Sole Member
By: LAZARD FRERES REAL ESTATE INVESTORS,
L.L.C., its General Partner
By: /s/Robert P. Freeman
----------------------------------------
Robert P. Freeman
Principal
PROMETHEUS ACQUISITION CORP.
By: /s/Robert P. Freeman
-----------------------------------------
Robert P. Freeman
President
KAPSON SENIOR QUARTERS CORP.
By: /s/Glenn Kaplan
-----------------------------------------
Name: Glenn Kaplan
Title: Chairman and Chief Executive Officer
G.W.E. PARTNERSHIP
/s/Glenn Kaplan
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Glenn Kaplan
/s/Wayne L. Kaplan
--------------------------------------
Wayne L. Kaplan
/s/Evan A. Kaplan
--------------------------------------
Evan A. Kaplan
HARRIS TRUST AND SAVINGS BANK
By: /s/ Palmer Haffner
______________________________________
Name: Palmer Haffner
Title:
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EXHIBIT A TO
ESCROW AGREEMENT
The Facilities:
1. An adult care facility with approximately 149 units, all or most of
which will be enriched housing units under construction at the site known as
Plainview Plaza Hotel, located at 150 Sunnyside Boulevard, Plainview, New York.
2. An approximately 200 bed adult care facility known as Senior
Quarters, located at 1025 Pleasantville Road, Briarcliff Manor, New York 11797.
3. An approximately 125 unit, 200 bed adult care facility known as
Senior Quarters, located at 345 Northern Boulevard, Albany, New York.
4. An approximately 79 bed adult care facility known as Town Gate
Manor, located at 150 Towngate Road, Rochester, New York 14626.
5. An approximately 120 bed adult care facility known as Town Gate
East, located at 2006 Five Mile Line Road, Penfield, NewYork 14526.
6. An approximately 144 unit, 166 bed adult care facility, all or most
of which will be enriched housing program units currently under construction to
be known as Senior Quarters, located at 51 Great Neck Road, Great Neck Plaza,
New York 11024.
7. An approximately 198 bed, 99 unit adult care facility known as
Senior Quarters located at 165 Beverly Road, Huntington Station, New York 11746.
8. An approximately 200 bed adult care facility known as Senior
Quarters at East Northport, located at 10 Cheshire Place, East Northport, New
York 11731.
9. An approximately 200 bed adult care facility known a Senior
Quarters, located at 168 Red Schoolhouse Road, Chestnut Ridge, New York 10977.
10. An approximately 200 bed adult care facility known as North Shore
Lodge (Senior Quarters) (Centereach I), located at 4089 Nesconset Highway,
Centereach, New York 11720.
11. An approximately 238 bed facility (with a license for 46 enriched
housing program beds) known as Greenpoint Senior Living, located at 150 Old
Liverpool Road, Liverpool, New York 11797.
12. An approximately 111 bed facility with approximately 105 enriched
housing program beds known as Castle Gardens, located at 1715 Castle Gardens
Road, Vestal, New York 13850 (license pending).
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13. An approximately 90-bed facility known as Senior Quarters
Wellspring, located at 140 Washington Avenue Extension, Albany, New York 11203,
with a license application pending for 80 enriched housing beds.
14. Any adult care facility for which any Partner receives an operating
certificate prior to the Effective Time or for which a license application is
pending at the Effective Time which the Company (or an entity wholly-owned by
it) manages.
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EXHIBIT B TO
ESCROW AGREEMENT
Glenn Kaplan
Wayne L. Kaplan
Evan A. Kaplan
G.W.E. Partnership
125 Froehlich Farm Boulevard
Woodbury, New York 11797
February 23, 1998
IBJ Schroder Bank & Trust Company
One State Street
New York, New York
ATTN: Securities Processing Window Subcellar One
Dear Sir or Madam:
By this letter we hereby notify IBJ Schroder Bank & Trust Company (the
"Paying Agent") that in the event that we tender to Prometheus Senior Quarters,
LLC, a Delaware limited liability company ("Investor") Common Stock of Kapson
Senior Quarters Corp. (the "Shares") pursuant to the terms and conditions of a
Second Amended and Restated Stockholders Agreement, dated as of February 23,
1998, between Investor and Glenn Kaplan, Wayne L. Kaplan and Evan A. Kaplan, you
are instructed to issue $6,000,000 (or such lesser amount of proceeds as are
derived from such tender) to Harris Trust and Savings Bank (the "Escrow Agent")
at the following address:
Harris Trust and Savings Bank
311 West Monroe Street, 14th Floor
Chicago, Illinois 60606
Attention: Mr. Palmer Haffner
Re: Escrow for Kapson Senior Quarters Corp., Glenn Kaplan,
Wayne L. Kaplan and Evan A. Kaplan, d/b/a G.W.E. Partnership
The above instructions regarding the payment of consideration from the
Shares are irrevocable. Any remaining proceeds from the Shares may be paid as
specified by us herewith or in the future.
The undersigned will, upon request, execute and deliver any additional
documents deemed appropriate or necessary by the Paying Agent in connection
herewith.
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The instructions contained herein shall be binding upon the successors,
assigns, heirs, executors, administrators and legal representatives of the
undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned.
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Date Glenn Kaplan
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Date Wayne L. Kaplan
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Date Evan A. Kaplan
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EXHIBIT 99.(c)(4)
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT made as of this 23rd day of February, 1998, by and between
Kapson Senior Quarters Corp., a Delaware corporation (the "Company") and Glenn
Kaplan (the "Employee").
WHEREAS, the Employee has been and is presently employed by the
Company; and
WHEREAS, the Employee possesses an intimate knowledge of the business
and affairs of the Company and its policies, procedures, methods and personnel;
and
WHEREAS, pursuant to the Amended and Restated Agreement and Plan of
Merger dated as of the date hereof by and among Prometheus Senior Quarters LLC
("Investor"), Prometheus Acquisition Corp. ("PAC") and the Company (the "Merger
Agreement") PAC will be merged into the Company as of the Effective Time (as
defined in the Merger Agreement); and
WHEREAS, Employee was employed pursuant to an employment agreement with
the Company dated as of September 25, 1996 (the "Former Employment Agreement")
and this Agreement as in effect prior to the date hereof superseded the Former
Employment Agreement; and
WHEREAS, the Employee is a partner of the G.W.E. Partnership which
partnership is a party to various operating agreements (the "Operating
Agreements") pursuant to which the Employee, as the holder of one or more
operating certificates has agreed to operate certain facilities of the Company;
WHEREAS, the Company desires to amend and restate this Agreement to
ensure the continued services and employment of the Employee on behalf of the
Company and the Employee is willing to render such continued services on the
terms and conditions set forth herein.
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. Employment Term. Subject to the terms and provisions of this
Agreement, the Company hereby agrees to employ the Employee and Employee hereby
agrees to be employed by the Company for the period commencing on the date on
which the Effective Time occurs (the "Effective Date") and ending on the second
anniversary of the date hereof, unless renewed or terminated sooner as
hereinafter provided (the "Employment Term"). The Employment Term shall be
automatically renewed for successive one-year terms unless either party gives
written notice to the other at least six (6) months prior to the expiration of
the then Employment Term of such party's intention that the Employment Term
shall not be so extended. The term of this Agreement shall be coincident with
the Employment Term.
2. Duties. During the Employment Term the Employee shall serve as Chief
Executive Officer of the Company or such other position as may be agreed upon by
Company and Employee and shall perform such duties, services and
responsibilities incident to such position(s) as determined from time to time by
the Board of Directors of the Company (the "Board"). The Employee also agrees to
perform such other duties, services and responsibilities which are consistent
with his position as may from time to time be reasonably requested by the Board.
The Employee shall devote his full business time, attention and skill
to the performance of such duties, services and responsibilities, and will use
his best efforts to promote the interests of the Company. The Employee will not,
without the prior written approval of the Board, engage in any other business
activity which would interfere with the performance of his duties, services and
responsibilities hereunder or which is in violation of policies established from
time to time by the Company. Notwithstanding the foregoing, the Employee shall
be entitled to: (a) serve on corporate, civic or charitable
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boards or committees, (b) deliver lectures, fulfill speaking engagements or
teach at educational institutions, and (c) manage personal investments (but in
no event may the Employee own more than 5% of the shares of any publicly traded
company or entity), so long as such activities do not materially interfere with
the performance of Employee's duties or responsibilities pursuant to this
Agreement.
3. Compensation. (a) Salary. In consideration of the performance
by the Employee of the Employee's obligations during the Employment Term
(including any services as an officer, director, employee, member of any
committee of the Company, or otherwise), the Company will during the Employment
Term pay the Employee a salary (the "Salary") at an annual rate of not less than
$250,000. The Employee's salary shall be reviewed annually by the Company and
shall be increased as of the first day of each fiscal year beginning on or after
January 1, 1999 by no less than the increase in the Consumer Price Index - Urban
Wage Earners (or, in the event such index is no longer published, such other
index as is determined in good faith by the Board to be comparable) from the
penultimate month prior to the beginning of the fiscal year being completed to
the penultimate month of the fiscal year being completed (as so increased,
"Salary"). The Salary will be reduced by any amounts paid to the Employee under
any of the Operating Agreements, the manner in which such reductions are to be
effected shall be determined by the Board taking into account the expected
timing of payments pursuant to the Operating Agreements.
(b) Bonus. (i) In further consideration of the performance by the
Employee of the Employee's obligations during the Employment Term (including any
services as an officer, director, employee, member of any committee of the
Company, or otherwise), the Company will pay the Employee an annual bonus (the
"Bonus") in respect of each fiscal year beginning on or after January 1, 1998 of
up to 75% of the Employee's Salary (the "Target Bonus"). Any bonus payable in
respect of the fiscal
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year beginning January 1, 1998, shall be payable, with interest at an annual
rate equal to four percent (4%), within five (5) days following the end of the
fiscal year 1999; provided, however, that no bonus shall be payable for such
fiscal year in the event the Employee's employment with the Company shall have
been terminated by the Company for Cause (as defined below) or voluntarily by
the Employee without Good Reason (as defined below) on or prior to December 31,
1999. The actual amount paid will be determined in accordance with the following
provisions of this Section 3(b).
(ii) If the Company's actual performance for an applicable
fiscal year is at least 90% or more of the budgeted performance (as set forth in
clause (iii) below), the Employee shall be entitled to receive 100% of the
Target Bonus. If the Company's actual performance for an applicable fiscal year
is 85% or more but less than 90% of the budgeted performance, the Employee shall
be entitled to receive 50% of the Target Bonus. If the Company's actual
performance for an applicable fiscal year is less than 85% of the budgeted
performance, the Employee shall not be entitled to any portion of the Target
Bonus. Notwithstanding the foregoing, if for any fiscal year the Employee is
entitled to less than 100% of the Target Bonus, the Board, in its sole
discretion, may award the Employee with a bonus equal to all or any portion of
the amount by which the amount, if any, to which he is entitled pursuant to this
Section 3(b)(ii) is less than the Target Bonus. If the Company's actual
performance for an applicable fiscal year is greater than 95% of the budgeted
performance, the Board may in its sole discretion determine to increase the
Employee's Bonus to an amount greater than 100% of the Target Bonus.
(iii) For purposes of this Section 3(b), the budget for each
of the fiscal years beginning January 1, 1998 and 1999 is set forth on Appendix
A hereto. The budget for any future fiscal year shall be established by the
Board in a manner
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consistent with past practice. It is understood that the budget is prepared on a
property by property basis but that the Company's actual performance versus
budgeted performance is to be measured on an overall basis. If during any fiscal
year new properties are acquired or development is commenced with respect to any
new properties not contemplated by the budget, appropriate adjustments to the
budget as established pursuant to this Section 3(b)(iii) will be made by the
Board.
(iv) The Employee's Salary and any bonus shall be payable in
accordance with the normal payroll practices of the Company then in effect and
subject to all applicable taxes required to be withheld by the Company pursuant
to federal, state or local law. The Employee shall be solely responsible for
taxes imposed on the Employee by reason of any compensation and benefits
provided hereunder.
4. Disability. If the Employee is unable to substantially
perform his duties, services and responsibilities hereunder by reason of a
physical or mental infirmity for a total of 180 calendar days in any
twelve-month period during the Employment Term ("Disability"), the Company shall
not be obligated to pay the Employee any Salary or Bonus for any period of
absence in excess of such 180 calendar days.
5. Benefits. (a) In addition to the payment of the Salary and
Bonus described above, the Employee shall be entitled to participate in any
employee benefit plans then in effect for similarly situated employees and
receive any other fringe benefits that the Company then provides to similarly
situated employees to the extent the Employee meets the eligibility requirements
for any such plan or benefit. In no event shall the employee benefits provided
to the Employee be, in the aggregate, less favorable to the Employee than the
employee benefits provided to the Employee by the
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Company as of the date hereof. Stock options shall not be taken into account for
purposes of the foregoing sentence.
(b) The Company shall, during the Employment Term, provide
Employee with a leased automobile at a level and under arrangements commensurate
with the automobile provided under the Former Employment Agreement immediately
prior to the Effective Date.
(c) The Company shall, during the Employment Term, provide
long term disability coverage for the Employee providing for a benefit of at
least sixty-five (65%) of the Employee's Salary based on his own occupation or
comparable occupation level and with a waiting period of not longer than six (6)
months ("Long Term Disability Coverage"), provided such level of Long Term
Disability Coverage is obtainable on commercially reasonable terms.
(d) The Company shall, during the Employment Term, pay any
dues or other fees for the Employee's membership in the country club of which he
is a member as of the Effective Date, or such other club as is approved by the
Board. The Employee shall be responsible for any income tax due as a result of
his personal use of such country club. The Company, to the extent permitted by
law, shall not treat the Employee's business use of such country club as
compensation to him.
6. Vacations. During the Employment Term the Employee shall be entitled
to the number of paid vacation days in each calendar year determined by the
Company from time to time, but not less than four (4) weeks in any calendar
year.
7. Expenses. The Company shall reimburse the Employee in accordance
with its expense reimbursement policy as in effect from time to time for all
reasonable expenses incurred by the Employee in connection with the performance
of
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his duties under this Agreement upon the presentation by the Employee of an
itemized account of such expenses and appropriate receipts.
8. Termination. The Employee's employment with the Company and the
Employment Term shall terminate upon the expiration of the Employment Term or
upon the earlier occurrence of any of the following events:
(a) The death of the Employee ("Death").
(b) The mutual agreement between the Company and the Employee
on an early termination date.
(c) The termination of employment by the Company for Cause.
"Cause" shall mean (a) the Employee being convicted of (or pleading nolo
contendere to) a felony (other than a traffic violation); (b) the repeated
refusal of the Employee to attempt to properly perform his obligations under
this Agreement, or follow any direction of the Board consistent with this
Agreement, which in either case is not remedied within ten (10) business days
after receipt by the Employee of written notice from the Company specifying the
details thereof, provided the refusal to follow a direction shall not be Cause
if the Employee in good faith believes that such direction is not legal, ethical
or moral or not within the scope of his duties pursuant to this Agreement and
promptly notifies the Board in writing of such belief; and provided further
that, upon his request, the Employee shall be entitled to a hearing before the
Board within seven (7) business days following his receipt of written notice
from the Company; (c) the Employee's gross negligence with regard to his duties
or willful misconduct with regard to the business, assets or employees of the
Company which in either event has a material adverse effect on the Company and
its subsidiaries in the aggregate; (d) any other breach by the Employee of a
material provision of this Agreement that remains uncured for twenty (20)
business days after written notice thereof is given to the Employee or such
longer period as may reasonably
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be required to remedy the default, provided that the Employee endeavors in good
faith to remedy the default; or (e) any act of fraud or misappropriation of
funds involving the Company.
(d) The termination of employment by the Company for
Disability.
(e) The termination of employment by the Company other than
for Cause, Disability or Death.
(f) The termination of the Employee's employment upon the date
specified in the written resignation of the Employee for Good Reason stating
with specificity the details of the Good Reason, if the stated Good Reason is
not cured within twenty (20) days of the giving of such notice. Notice of Good
Reason shall be given within one hundred eighty (180) days of occurrence of the
Good Reason event. "Good Reason" shall mean (a) any reduction in title or a
material reduction in authority, duties or responsibilities (except temporarily
during any period of physical or mental illness); (b) failure to elect the
Employee to the Board of Directors; (c) relocation of the Company's principal
place of business more than thirty (30) miles from the Company's current
principal place of business located at Woodbury, New York; (d) the Employee
being required to report to other than the Board or (e) any other material
breach of any provision of this Agreement by the Company.
In the event of termination of this Agreement, for whatever
reason, the Employee agrees to cooperate with the Company and to be reasonably
available to the Company with respect to continuing and/or future matters
arising out of the Employee's employment or any other relationship with the
Company, whether such matters are business-related, legal or otherwise. The
Company shall not require the Employee to make himself available to the Company
pursuant to this paragraph in any manner that will materially interfere with his
then existing employment relationship. The provisions of this paragraph shall
survive termination of this Agreement.
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9. Termination Payments. (a) If the Employee's employment with the
Company terminates for whatever reason, the Company will pay the Employee any
portion of the Salary accrued hereunder on or prior to the date of termination
but not paid to the Employee as of such date.
(b) If the Employee's termination is pursuant to Section 8(e)
or Section 8(f), the Company shall continue to pay the Employee an amount equal
to his Salary (at the rate in effect at the time of his termination of
employment) during the period commencing on the effective date of the Employee's
termination of employment and ending on the second anniversary of the Effective
Date (or the expiration of the then current Employment Term if the Agreement has
been extended pursuant to Section 1). In addition, the Company shall continue
the Employee's then current medical coverage for a period of two (2) years
following termination of the Employee's employment.
(c) If the Employee's termination is pursuant to Section 8(a),
the Company shall pay the Employee's Beneficiary (as defined below) an amount
equal to his Salary (at the rate in effect at the time of the Employee's
termination of employment) for a period of six months following the date of the
Employee's Death. For purposes of this provision, the Employee's Beneficiary
shall be the Employee's spouse; if the Employee is not married on his date of
Death, the Employee's children, per stirpes; and otherwise, the Employee's
estate.
(d) If the Employee's termination is pursuant to Section 8(d),
the Company shall continue to pay the Employee an amount equal to his Salary (at
the rate in effect at the time of his termination of employment) for a period of
six months following the effective date of the Employee's termination of
employment.
The foregoing payments upon termination shall constitute the exclusive
payments due to or in respect of the Employee upon the termination of his
employment under this Agreement, but shall have no effect on any benefits which
may be due the
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Employee under any plan of the Company which provides benefits after termination
of employment, other than severance pay or salary continuation which shall be
reduced by the amount of any payment received by the Employee following his
termination pursuant to this Agreement. In the event any payments are required
to be made to the Employee pursuant to this Section 9, the Employee shall be
under no obligation to seek other employment and, in such case, there shall be
no offset against any amounts due to the Employee under this Agreement on
account of any remuneration attributable to any subsequent employment that the
Employee may obtain.
10. Transfer of License. (a) The Employee agrees and understands that
the operating certificates (the "Certificates") issued to and held by him
individually and in his capacity as a partner of G.W.E. Partnership are
essential to the operation of the business of the Company. Accordingly, the
Employee agrees that (i) he shall continue as an Operator under each Operating
Agreement for so long as he is employed by the Company and (ii) if, immediately
following his termination of employment with the Company for any reason, the
Company would have no other officer or agent who is a holder of a valid
operating certificate in respect of each of the Company's facilities, he shall
continue to act in his capacity as an operator under any Operating Agreements
with facilities that the Company or an affiliate operates or manages until the
earlier of the fifth anniversary of the Effective Date or the date on which a
Replacement Operator (as such term is defined in that certain letter agreement
dated October 1, 1997) shall have been installed and shall have been approved by
all appropriate regulatory authorities to operate the Company's facilities. In
the event of a termination that triggers the provisions of the foregoing
sentence, the Company shall use its best efforts to ensure that one of its
officers or agents secures a valid operating certificate in respect of each of
the Company's facilities as soon as reasonably possible following such
termination.
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(b) The Employee agrees that any breach of the terms of this
Section 10 would result in irreparable injury and damage to the Company for
which the Company would have no adequate remedy at law; the Employee therefore
also agrees that in the event of said breach or any threat of breach, the
Company shall be entitled to an immediate injunction and restraining order to
prevent such breach and/or threatened breach and/or continued breach by the
Employee, without having to prove damages, and to all costs and expenses,
including reasonable attorney's fees and costs, in addition to any other
remedies to which the Company may be entitled at law or in equity. The Employee
also agrees that in the event of a breach of this Section 10 he shall not be
entitled to any payments that he might otherwise be entitled to under Section 9.
The terms of this paragraph shall not prevent the Company from pursuing any
other available remedies for any breach or threatened breach hereof, including
but not limited to the recovery of damages from the Employee and those remedies
set forth in the Escrow Agreement, dated as of the date hereof, by and among
Prometheus Senior Quarters LLC, Prometheus Acquisition Corp. and Glenn Kaplan,
Wayne L. Kaplan and Evan A. Kaplan d/b/a G.W.E. Partnership and Harris Trust and
Savings Bank.
11. Employee Covenants.
(a) Unauthorized Disclosure. The Employee agrees and understands
that in the Employee's position with the Company, the Employee has been and will
be exposed to and receive information relating to the confidential affairs of
the Company, including but not limited to technical information, business and
marketing plans, strategies, customer information, other information concerning
the Company's products, promotions, development, financing, expansion plans,
business policies and practices, and other forms of information considered by
the Company to be confidential and/or in the nature of trade secrets. The
Employee agrees that during the Employment Term and thereafter, the Employee
will keep such information confidential and not
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disclose such information, either directly or indirectly, to any third person or
entity without the prior written consent of the Company. This confidentiality
covenant has no temporal, geographical or territorial restriction. Upon
termination of this Agreement, the Employee will promptly supply to the Company
all material property, keys, notes, memoranda, writings, lists, files, reports,
customer lists, correspondence, tapes, disks, cards, surveys, maps, logs,
machines, technical data or any other tangible product or document which has
been produced by, received by or otherwise submitted to the Employee during or
prior to the Employment Term. Any material breach of the terms of this paragraph
shall be considered Cause.
(b) Non-competition. By and in consideration of the Company's
entering into this Agreement and the Salary, Bonus and benefits to be provided
by the Company hereunder, and further in consideration of the Employee's
exposure to the proprietary information of the Company, the Employee agrees that
the Employee will not, during the Employment Term and for a period of three (3)
years thereafter (or five (5) years thereafter if he is terminated by the
Company for Cause), directly or indirectly own, manage, operate, join, control,
be employed by, or participate in the ownership, management, operation or
control of, or be connected in any manner, including but not limited to holding,
the positions of shareholder, director, officer, consultant, independent
contractor, employee, partner, or investor, with any Competing Enterprise. For
purposes of this paragraph, the term "Competing Enterprise" shall mean any
person, corporation, partnership or other entity engaged in any Competitive
Business within a twenty-five (25) mile radius of any such business operated, or
in the pipeline to be operated (to the extent the Employee has knowledge after
due inquiry of such proposal), by the Company, Lazard Freres Real Estate
Investors LLC ("LFREI") or any affiliate of LFREI. For purposes of this
paragraph, the term "Competitive Business" shall mean assisted living,
independent living, skilled nursing facilities and continuing care retirement
centers
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(containing assisted living, independent living and skilled nursing facilities
in one campus). During the five years following termination of this Agreement,
upon request, the Employee shall notify the Company of the Employee's then
current employment status.
(c) Non-solicitation. During the Employment Term and for a period
of two years thereafter, the Employee shall not interfere with the Company's
relationship with, or endeavor to entice away from the Company, any person who
at any time during the Employment Term was an employee (other than the
Employee's secretary or Raymond DioGuardi ("Mr. DioGuardi") but, with respect to
Mr. DioGuardi, only if (i) Mr. DioGuardi's employment with the Company shall
have been terminated by the Company giving notice to Mr. DioGuardi of its
intention not to extend his Employment Term past the second anniversary of the
Effective Date (each, as defined in the Employment Agreement, dated as of the
date hereof, between the Company and Mr. DioGuardi); and (ii) Mr. DioGuardi
shall not be employed in any Competitive Business)) or customer of the Company
or otherwise had a material business relationship with the Company.
(d) Remedies. The Employee agrees that any breach of the terms of
this Section 11 would result in irreparable injury and damage to the Company for
which the Company would have no adequate remedy at law; the Employee therefore
also agrees that in the event of said breach or any threat of breach, the
Company shall be entitled to an immediate injunction and restraining order to
prevent such breach and/or threatened breach and/or continued breach by the
Employee and/or any and all persons and/or entities acting for and/or with the
Employee, without having to prove damages, and to all costs and expenses,
including reasonable attorneys' fees and costs, in addition to any other
remedies to which the Company may be entitled at law or in equity. The terms of
this paragraph shall not prevent the Company from pursuing any other available
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remedies for any breach or threatened breach hereof, including but not limited
to the recovery of damages from the Employee. The Employee and the Company
further agree that the provisions of the covenant not to compete are reasonable.
Should a court or arbitrator determine, however, that any provision of the
covenant not to compete is unreasonable, either in period of time, geographical
area, or otherwise, the parties hereto agree that the covenant should be
interpreted and enforced to the maximum extent which such court or arbitrator
deems reasonable.
The provisions of this Section 11 shall survive any termination of this
Agreement and the Employment Term and the existence of any claim or cause of
action by the Employee against the Company, whether predicated on this Agreement
or otherwise, shall not constitute a defense to the enforcement by the Company
of the covenants and agreements of this Section 11.
12. Proprietary Rights. The Employee represents and warrants that all
patents, patent applications, rights to inventions, copyright registrations and
other license, trademark and trade name rights heretofore owned by the Employee
and relating to the business of the Company or any of its subsidiaries have been
duly transferred to such corporation.
13. Non-Waiver of Rights. The failure to enforce at any time the
provisions of this Agreement or to require at any time performance by the other
party of any of the provisions hereof shall in no way be construed to be a
waiver of such provisions or to affect either the validity of this Agreement or
any part hereof, or the right of either party to enforce each and every
provision in accordance with its terms.
14. Notices. Every notice relating to this Agreement shall be in
writing and shall be given by personal delivery or by overnight courier or
registered or certified mail, postage prepaid, return receipt requested, as
follows:
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(i) If to the Company
Kapson Senior Quarters Corp.
125 Froelich Farm Blvd.
Woodbury, New York 11797
(i) If to the Employee
Glenn Kaplan
c/o Kapson Senior Quarters Corp.
125 Froelich Farm Blvd.
Woodbury, New York 11797
Notices shall be considered effective when received.
15. Binding Effect/Assignment. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
executors, personal representatives, estates, successors (including, without
limitation, by way of merger) and assigns. Notwithstanding the provisions or the
immediately preceding sentence, the Employee shall not assign all or any portion
of this Agreement without the prior written consent of the Company.
16. Entire Agreement. This Agreement sets forth the entire
understanding of the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements, written or oral, between them as to such
subject matter including without limitation the Former Employment Agreement
which shall be null and void as of the date hereof, and the Employee agrees that
he is not entitled to any further benefits thereunder, including, without
limitation, benefits that would or may otherwise have been payable thereunder
upon or following the Merger. This Agreement may not be amended, nor may any
provision hereof be modified or waived, except by an instrument in writing duly
signed by the party to be charged.
17. Severability. If any provision of this Agreement, or any
application thereof to any circumstances, is invalid, in whole or in part, such
provision or application
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shall to that extent be severable and shall not affect other provisions or
applications of this Agreement.
18. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, without reference to
the principles of conflict of laws.
19. Modifications and Waivers. No provision of this Agreement may be
modified, altered or amended except by an instrument in writing executed by the
parties hereto. No waiver by either party hereto of any breach by the other
party hereto of any provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions at the time
or at any prior or subsequent time.
20. Headings. The headings contained herein are solely for the purposes
of reference, are not part of this Agreement and shall not in any way affect the
meaning or interpretation of this Agreement.
21. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
22. Excise Tax Limitation
(a) Notwithstanding anything contained in this Agreement to the
contrary, to the Fextent that any payment or distribution of any type to or for
the benefit of the Employee by the Company, any affiliate of the Company, any
person who acquires ownership or effective control of the Company or ownership
of a substantial portion of the Company's assets (within the meaning of Section
280G of the Internal Revenue Code of 1986, as amended (the "Code"), and the
regulations thereunder), or any affiliate of such person, whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise (the "Total Payments") is or will be subject to the excise tax
imposed under Section 4999 of the Code (the "Excise Tax"), then the Total
Payments
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shall be reduced (but not below zero) if and to the extent that a reduction in
the Total Payments would result in the Employee retaining a larger amount, on an
after-tax basis (taking into account federal, state and local income taxes and
the Excise Tax), than if the Employee received the entire amount of such Total
Payments. Unless the Employee shall have given prior written notice specifying a
different order to the Company to effectuate the foregoing, the Company shall
reduce or eliminate the Total Payments, by first reducing or eliminating the
portion of the Total Payments which are not payable in cash and then by reducing
or eliminating cash payments, in each case in reverse order beginning with
payments or benefits which are to be paid the farthest in time from the
Determination (as hereinafter defined). Any notice given by the Employee
pursuant to the preceding sentence shall take precedence over the provisions of
any other plan, arrangement or agreement governing the Employee's rights and
entitlements to any benefits or compensation.
(b) The determination of whether the Total Payments shall be
reduced as provided in Section 22(a) and the amount of such reduction shall be
made at the Company's expense by an accounting firm selected by the Company from
among the six largest accounting firms in the United States (the "Accounting
Firm"). The Accounting Firm shall provide its determination (the
"Determination"), together with detailed supporting calculations and
documentation to the Company and the Employee within ten (10) days of the
Termination Date. If the Accounting Firm determines that no Excise Tax is
payable by the Employee with respect to the Total Payments, it shall furnish the
Employee with an opinion reasonably acceptable to the Employee that no Excise
Tax will be imposed with respect to any such payments and, absent manifest
error, such Determination shall be binding, final and conclusive upon the
Company and the Employee. If the Accounting Firm determines that an Excise Tax
would be payable, the Employee shall have the right to accept the Determination
of the Accounting Firm as to
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the extent of the reduction, if any, pursuant to Section 22(a), or to have such
Determination reviewed by an accounting firm selected by the Employee from among
the six largest accounting firms in the United States, at the expense of the
Employee, in which case the determination of such second accounting firm shall
be binding, final and conclusive upon the Company and the Employee.
23. Indemnification. During the Employment Term and thereafter, the
Company shall indemnify the Employee to the fullest extent permitted by law
against any judgments, fines, amounts paid in settlement and reasonable expenses
(including attorneys' fees), and advance amounts necessary to pay the foregoing
at the earliest time and to the fullest extent permitted by law, in connection
with any claim, action or proceeding (whether civil or criminal) against the
Employee as a result of the Employee serving as an officer or director of the
Company or in any capacity at the request of the Company, in or with regard to
any other entity, employee benefit plan or enterprise (other than arising out of
the employee's acts of willful misconduct, misappropriation of funds or fraud).
This indemnification shall be in addition to, and not in lieu of, any other
indemnification the Employee shall be entitled to pursuant to the Company's
Certificate of Incorporation or By-laws or otherwise. Following the Employee's
termination of employment, the Company shall continue to cover the Employee
under the Company's directors and officers insurance for the period during which
the Employee may be subject to potential liability for any claim, action or
proceeding (whether civil or criminal) as a result of his service as an officer
or director of the Company or in any capacity at the request of the Company, at
the highest level then maintained for any then or former officer or director.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by authority of its Board of Directors, and the Employee has hereunto
set his hand, the day and year first above written.
Kapson Senior Quarters Corp.
By: /s/ Wayne L. Kaplan
------------------------------------
Name: Wayne L. Kaplan
Title: Senior Executive Vice President
By: /s/ Glenn Kaplan
-------------------------------------
Glenn Kaplan
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AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT made as of this 23rd day of February, 1998, by and between
Kapson Senior Quarters Corp., a Delaware corporation (the "Company") and Wayne
L. Kaplan (the "Employee").
WHEREAS, the Employee has been and is presently employed by the
Company; and
WHEREAS, the Employee possesses an intimate knowledge of the business
and affairs of the Company and its policies, procedures, methods and personnel;
and
WHEREAS, pursuant to the Amended and Restated Agreement and Plan of
Merger dated as of the date hereof by and among Prometheus Senior Quarters LLC
("Investor"), Prometheus Acquisition Corp. ("PAC") and the Company (the "Merger
Agreement") PAC will be merged into the Company as of the Effective Time (as
defined in the Merger Agreement); and
WHEREAS, Employee was employed pursuant to an employment agreement with
the Company dated as of September 25, 1996 (the "Former Employment Agreement")
and this Agreement as in effect prior to the date hereof superseded the Former
Employment Agreement; and
WHEREAS, the Employee is a partner of the G.W.E. Partnership which
partnership is a party to various operating agreements (the "Operating
Agreements") pursuant to which the Employee, as the holder of one or more
operating certificates has agreed to operate certain facilities of the Company;
WHEREAS, the Company desires to amend and restate this Agreement to
ensure the continued services and employment of the Employee on behalf of the
Company and the Employee is willing to render such continued services on the
terms and conditions set forth herein.
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NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. Employment Term. Subject to the terms and provisions of this
Agreement, the Company hereby agrees to employ the Employee and Employee hereby
agrees to be employed by the Company for the period commencing on the date on
which the Effective Time occurs (the "Effective Date") and ending on the second
anniversary of the date hereof, unless renewed or terminated sooner as
hereinafter provided (the "Employment Term"). The Employment Term shall be
automatically renewed for successive one-year terms unless either party gives
written notice to the other at least six (6) months prior to the expiration of
the then Employment Term of such party's intention that the Employment Term
shall not be so extended. The term of this Agreement shall be coincident with
the Employment Term.
2. Duties. During the Employment Term the Employee shall serve as
Senior Executive Vice President, Secretary or General Counsel of the Company or
such other position as may be agreed upon by Company and Employee and shall
perform such duties, services and responsibilities incident to such position(s)
as determined from time to time by the Board of Directors of the Company (the
"Board"). The Employee also agrees to perform such other duties, services and
responsibilities which are consistent with his position as may from time to time
be reasonably requested by the Board.
The Employee shall devote his full business time, attention and skill
to the performance of such duties, services and responsibilities, and will use
his best efforts to promote the interests of the Company. The Employee will not,
without the prior written approval of the Board, engage in any other business
activity which would interfere with the performance of his duties, services and
responsibilities hereunder or which is in violation of policies established from
time to time by the Company. Notwithstanding the foregoing, the Employee shall
be entitled to: (a) serve on corporate, civic or charitable
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boards or committees, (b) deliver lectures, fulfill speaking engagements or
teach at educational institutions, and (c) manage personal investments (but in
no event may the Employee own more than 5% of the shares of any publicly traded
company or entity), so long as such activities do not materially interfere with
the performance of Employee's duties or responsibilities pursuant to this
Agreement.
3. Compensation. (a) Salary. In consideration of the performance by the
Employee of the Employee's obligations during the Employment Term (including any
services as an officer, director, employee, member of any committee of the
Company, or otherwise), the Company will during the Employment Term pay the
Employee a salary (the "Salary") at an annual rate of not less than $200,000.
The Employee's salary shall be reviewed annually by the Company and shall be
increased as of the first day of each fiscal year beginning on or after January
1, 1999 by no less than the increase in the Consumer Price Index - Urban Wage
Earners (or, in the event such index is no longer published, such other index as
is determined in good faith by the Board to be comparable) from the penultimate
month prior to the beginning of the fiscal year being completed to the
penultimate month of the fiscal year being completed (as so increased,
"Salary"). The Salary will be reduced by any amounts paid to the Employee under
any of the Operating Agreements, the manner in which such reductions are to be
effected shall be determined by the Board taking into account the expected
timing of payments pursuant to the Operating Agreements.
(b) Bonus. (i) In further consideration of the performance by the
Employee of the Employee's obligations during the Employment Term (including any
services as an officer, director, employee, member of any committee of the
Company, or otherwise), the Company will pay the Employee an annual bonus (the
"Bonus") in respect of each fiscal year beginning on or after January 1, 1998 of
up to 75% of the Employee's Salary (the "Target Bonus"). Any bonus payable in
respect of the fiscal
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year beginning January 1, 1998, shall be payable, with interest at an annual
rate equal to four percent (4%), within five (5) days following the end of the
fiscal year 1999; provided, however, that no bonus shall be payable for such
fiscal year in the event the Employee's employment with the Company shall have
been terminated by the Company for Cause (as defined below) or voluntarily by
the Employee without Good Reason (as defined below) on or prior to December 31,
1999. The actual amount paid will be determined in accordance with the following
provisions of this Section 3(b).
(ii) If the Company's actual performance for an applicable
fiscal year is at least 90% or more of the budgeted performance (as set forth in
clause (iii) below), the Employee shall be entitled to receive 100% of the
Target Bonus. If the Company's actual performance for an applicable fiscal year
is 85% or more but less than 90% of the budgeted performance, the Employee shall
be entitled to receive 50% of the Target Bonus. If the Company's actual
performance for an applicable fiscal year is less than 85% of the budgeted
performance, the Employee shall not be entitled to any portion of the Target
Bonus. Notwithstanding the foregoing, if for any fiscal year the Employee is
entitled to less than 100% of the Target Bonus, the Board, in its sole
discretion, may award the Employee with a bonus equal to all or any portion of
the amount by which the amount, if any, to which he is entitled pursuant to this
Section 3(b)(ii) is less than the Target Bonus. If the Company's actual
performance for an applicable fiscal year is greater than 95% of the budgeted
performance, the Board may in its sole discretion determine to increase the
Employee's Bonus to an amount greater than 100% of the Target Bonus.
(iii) For purposes of this Section 3(b), the budget for each
of the fiscal years beginning January 1, 1998 and 1999 is set forth on Appendix
A hereto. The budget for any future fiscal year shall be established by the
Board in a manner
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consistent with past practice. It is understood that the budget is prepared on a
property by property basis but that the Company's actual performance versus
budgeted performance is to be measured on an overall basis. If during any fiscal
year new properties are acquired or development is commenced with respect to any
new properties not contemplated by the budget, appropriate adjustments to the
budget as established pursuant to this Section 3(b)(iii) will be made by the
Board.
(iv) The Employee's Salary and any bonus shall be payable in
accordance with the normal payroll practices of the Company then in effect and
subject to all applicable taxes required to be withheld by the Company pursuant
to federal, state or local law. The Employee shall be solely responsible for
taxes imposed on the Employee by reason of any compensation and benefits
provided hereunder.
4. Disability. If the Employee is unable to substantially perform his
duties, services and responsibilities hereunder by reason of a physical or
mental infirmity for a total of 180 calendar days in any twelve-month period
during the Employment Term ("Disability"), the Company shall not be obligated to
pay the Employee any Salary or Bonus for any period of absence in excess of such
180 calendar days.
5. Benefits. (a) In addition to the payment of the Salary and Bonus
described above, the Employee shall be entitled to participate in any employee
benefit plans then in effect for similarly situated employees and receive any
other fringe benefits that the Company then provides to similarly situated
employees to the extent the Employee meets the eligibility requirements for any
such plan or benefit. In no event shall the employee benefits provided to the
Employee be, in the aggregate, less favorable to the Employee than the employee
benefits provided to the Employee by the
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Company as of the date hereof. Stock options shall not be taken into account for
purposes of the foregoing sentence.
(b) The Company shall, during the Employment Term, provide
Employee with a leased automobile at a level and under arrangements commensurate
with the automobile provided under the Former Employment Agreement immediately
prior to the Effective Date.
(c) The Company shall, during the Employment Term, provide
long term disability coverage for the Employee providing for a benefit of at
least sixty-five (65%) of the Employee's Salary based on his own occupation or
comparable occupation level and with a waiting period of not longer than six (6)
months ("Long Term Disability Coverage"), provided such level of Long Term
Disability Coverage is obtainable on commercially reasonable terms.
(d) The Company shall, during the Employment Term, pay any
dues or other fees for the Employee's membership in the country club of which he
is a member as of the Effective Date, or such other club as is approved by the
Board. The Employee shall be responsible for any income tax due as a result of
his personal use of such country club. The Company, to the extent permitted by
law, shall not treat the Employee's business use of such country club as
compensation to him.
6. Vacations. During the Employment Term the Employee shall be entitled
to the number of paid vacation days in each calendar year determined by the
Company from time to time, but not less than four (4) weeks in any calendar
year.
7. Expenses. The Company shall reimburse the Employee in accordance
with its expense reimbursement policy as in effect from time to time for all
reasonable expenses incurred by the Employee in connection with the performance
of
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his duties under this Agreement upon the presentation by the Employee of an
itemized account of such expenses and appropriate receipts.
8. Termination. The Employee's employment with the Company and the
Employment Term shall terminate upon the expiration of the Employment Term or
upon the earlier occurrence of any of the following events:
(a) The death of the Employee ("Death").
(b) The mutual agreement between the Company and the Employee
on an early termination date.
(c) The termination of employment by the Company for Cause.
"Cause" shall mean (a) the Employee being convicted of (or pleading nolo
contendere to) a felony (other than a traffic violation); (b) the repeated
refusal of the Employee to attempt to properly perform his obligations under
this Agreement, or follow any direction of the Board consistent with this
Agreement, which in either case is not remedied within ten (10) business days
after receipt by the Employee of written notice from the Company specifying the
details thereof, provided the refusal to follow a direction shall not be Cause
if the Employee in good faith believes that such direction is not legal, ethical
or moral or not within the scope of his duties pursuant to this Agreement and
promptly notifies the Board in writing of such belief; and provided further
that, upon his request, the Employee shall be entitled to a hearing before the
Board within seven (7) business days following his receipt of written notice
from the Company; (c) the Employee's gross negligence with regard to his duties
or willful misconduct with regard to the business, assets or employees of the
Company which in either event has a material adverse effect on the Company and
its subsidiaries in the aggregate; (d) any other breach by the Employee of a
material provision of this Agreement that remains uncured for twenty (20)
business days after written notice thereof is given to the Employee or such
longer period as may reasonably
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be required to remedy the default, provided that the Employee endeavors in good
faith to remedy the default; or (e) any act of fraud or misappropriation of
funds involving the Company.
(d) The termination of employment by the Company for
Disability.
(e) The termination of employment by the Company other than
for Cause, Disability or Death.
(f) The termination of the Employee's employment upon the date
specified in the written resignation of the Employee for Good Reason stating
with specificity the details of the Good Reason, if the stated Good Reason is
not cured within twenty (20) days of the giving of such notice. Notice of Good
Reason shall be given within one hundred eighty (180) days of occurrence of the
Good Reason event. "Good Reason" shall mean (a) any reduction in title or a
material reduction in authority, duties or responsibilities (except temporarily
during any period of physical or mental illness); (b) relocation of the
Company's principal place of business more than thirty (30) miles from the
Company's current principal place of business located at Woodbury, New York; or
(c) any other material breach of any provision of this Agreement by the Company.
In the event of termination of this Agreement, for whatever reason, the
Employee agrees to cooperate with the Company and to be reasonably available to
the Company with respect to continuing and/or future matters arising out of the
Employee's employment or any other relationship with the Company, whether such
matters are business-related, legal or otherwise. The Company shall not require
the Employee to make himself available to the Company pursuant to this paragraph
in any manner that will materially interfere with his then existing employment
relationship. The provisions of this paragraph shall survive termination of this
Agreement.
9. Termination Payments. (a) If the Employee's employment with the
Company terminates for whatever reason, the Company will pay the Employee any
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portion of the Salary accrued hereunder on or prior to the date of termination
but not paid to the Employee as of such date.
(b) If the Employee's termination is pursuant to Section 8(e)
or Section 8(f), the Company shall continue to pay the Employee an amount equal
to his Salary (at the rate in effect at the time of his termination of
employment) during the period commencing on the effective date of the Employee's
termination of employment and ending on the second anniversary of the Effective
Date (or the expiration of the then current Employment Term if the Agreement has
been extended pursuant to Section 1). In addition, the Company shall continue
the Employee's then current medical coverage for a period of two (2) years
following termination of the Employee's employment.
(c) If the Employee's termination is pursuant to Section 8(a),
the Company shall pay the Employee's Beneficiary (as defined below) an amount
equal to his Salary (at the rate in effect at the time of the Employee's
termination of employment) for a period of six months following the date of the
Employee's Death. For purposes of this provision, the Employee's Beneficiary
shall be the Employee's spouse; if the Employee is not married on his date of
Death, the Employee's children, per stirpes; and otherwise, the Employee's
estate.
(d) If the Employee's termination is pursuant to Section 8(d),
the Company shall continue to pay the Employee an amount equal to his Salary (at
the rate in effect at the time of his termination of employment) for a period of
six months following the effective date of the Employee's termination of
employment.
The foregoing payments upon termination shall constitute the exclusive
payments due to or in respect of the Employee upon the termination of his
employment under this Agreement, but shall have no effect on any benefits which
may be due the Employee under any plan of the Company which provides benefits
after termination of employment, other than severance pay or salary continuation
which shall be reduced by
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the amount of any payment received by the Employee following his termination
pursuant to this Agreement. In the event any payments are required to be made to
the Employee pursuant to this Section 9, the Employee shall be under no
obligation to seek other employment and, in such case, there shall be no offset
against any amounts due to the Employee under this Agreement on account of any
remuneration attributable to any subsequent employment that the Employee may
obtain.
10. Employee Covenants.
(a) Unauthorized Disclosure. The Employee agrees and understands
that in the Employee's position with the Company, the Employee has been and will
be exposed to and receive information relating to the confidential affairs of
the Company, including but not limited to technical information, business and
marketing plans, strategies, customer information, other information concerning
the Company's products, promotions, development, financing, expansion plans,
business policies and practices, and other forms of information considered by
the Company to be confidential and/or in the nature of trade secrets. The
Employee agrees that during the Employment Term and thereafter, the Employee
will keep such information confidential and not disclose such information,
either directly or indirectly, to any third person or entity without the prior
written consent of the Company. This confidentiality covenant has no temporal,
geographical or territorial restriction. Upon termination of this Agreement, the
Employee will promptly supply to the Company all material property, keys, notes,
memoranda, writings, lists, files, reports, customer lists, correspondence,
tapes, disks, cards, surveys, maps, logs, machines, technical data or any other
tangible product or document which has been produced by, received by or
otherwise submitted to the Employee during or prior to the Employment Term. Any
material breach of the terms of this paragraph shall be considered Cause.
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(b) Non-competition. By and in consideration of the Company's
entering into this Agreement and the Salary, Bonus and benefits to be provided
by the Company hereunder, and further in consideration of the Employee's
exposure to the proprietary information of the Company, the Employee agrees that
the Employee will not, during the Employment Term and for a period of three (3)
years thereafter (or five (5) years thereafter if he is terminated by the
Company for Cause), directly or indirectly own, manage, operate, join, control,
be employed by, or participate in the ownership, management, operation or
control of, or be connected in any manner, including but not limited to holding,
the positions of shareholder, director, officer, consultant, independent
contractor, employee, partner, or investor, with any Competing Enterprise. For
purposes of this paragraph, the term "Competing Enterprise" shall mean any
person, corporation, partnership or other entity engaged in any Competitive
Business within a twenty-five (25) mile radius of any such business operated, or
in the pipeline to be operated (to the extent the Employee has knowledge after
due inquiry of such proposal), by the Company, Lazard Freres Real Estate
Investors LLC ("LFREI") or any affiliate of LFREI. For purposes of this
paragraph, the term "Competitive Business" shall mean assisted living,
independent living, skilled nursing facilities and continuing care retirement
centers (containing assisted living, independent living and skilled nursing
facilities in one campus). During the five years following termination of this
Agreement, upon request, the Employee shall notify the Company of the Employee's
then current employment status.
(c) Non-solicitation. During the Employment Term and for a period of
two years thereafter, the Employee shall not interfere with the Company's
relationship with, or endeavor to entice away from the Company, any person who
at any time during the Employment Term was an employee (other than the
Employee's secretary or Raymond DioGuardi ("Mr. DioGuardi") but, with respect to
Mr. DioGuardi, only if (i)
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Mr. DioGuardi's employment with the Company shall have been terminated by the
Company giving notice to Mr. DioGuardi of its intention not to extend his
Employment Term past the second anniversary of the Effective Date (each, as
defined in the Employment Agreement, dated as of the date hereof, between the
Company and Mr. DioGuardi); and (ii) Mr. DioGuardi shall not be employed in any
Competitive Business)) or customer of the Company or otherwise had a material
business relationship with the Company.
(d) Remedies. The Employee agrees that any breach of the terms of
this Section 10 would result in irreparable injury and damage to the Company for
which the Company would have no adequate remedy at law; the Employee therefore
also agrees that in the event of said breach or any threat of breach, the
Company shall be entitled to an immediate injunction and restraining order to
prevent such breach and/or threatened breach and/or continued breach by the
Employee and/or any and all persons and/or entities acting for and/or with the
Employee, without having to prove damages, and to all costs and expenses,
including reasonable attorneys' fees and costs, in addition to any other
remedies to which the Company may be entitled at law or in equity. The terms of
this paragraph shall not prevent the Company from pursuing any other available
remedies for any breach or threatened breach hereof, including but not limited
to the recovery of damages from the Employee. The Employee and the Company
further agree that the provisions of the covenant not to compete are reasonable.
Should a court or arbitrator determine, however, that any provision of the
covenant not to compete is unreasonable, either in period of time, geographical
area, or otherwise, the parties hereto agree that the covenant should be
interpreted and enforced to the maximum extent which such court or arbitrator
deems reasonable.
The provisions of this Section 10 shall survive any termination of this
Agreement and the Employment Term and the existence of any claim or cause of
action
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by the Employee against the Company, whether predicated on this Agreement
or otherwise, shall not constitute a defense to the enforcement by the Company
of the covenants and agreements of this Section 10.
11. Proprietary Rights. The Employee represents and warrants that all
patents, patent applications, rights to inventions, copyright registrations and
other license, trademark and trade name rights heretofore owned by the Employee
and relating to the business of the Company or any of its subsidiaries have been
duly transferred to such corporation.
12. Non-Waiver of Rights. The failure to enforce at any time the
provisions of this Agreement or to require at any time performance by the other
party of any of the provisions hereof shall in no way be construed to be a
waiver of such provisions or to affect either the validity of this Agreement or
any part hereof, or the right of either party to enforce each and every
provision in accordance with its terms.
13. Notices. Every notice relating to this Agreement shall be in
writing and shall be given by personal delivery or by overnight courier or
registered or certified mail, postage prepaid, return receipt requested, as
follows:
(i) If to the Company
Kapson Senior Quarters Corp.
125 Froelich Farm Blvd.
Woodbury, New York 11797
(i) If to the Employee
Wayne L. Kaplan
c/o Kapson Senior Quarters Corp.
125 Froelich Farm Blvd.
Woodbury, New York 11797
Notices shall be considered effective when received.
14. Binding Effect/Assignment. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
executors, personal
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representatives, estates, successors (including, without limitation, by way of
merger) and assigns. Notwithstanding the provisions or the immediately preceding
sentence, the Employee shall not assign all or any portion of this Agreement
without the prior written consent of the Company.
15. Entire Agreement. This Agreement sets forth the entire
understanding of the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements, written or oral, between them as to such
subject matter including without limitation the Former Employment Agreement
which shall be null and void as of the date hereof, and the Employee agrees that
he is not entitled to any further benefits thereunder, including, without
limitation, benefits that would or may otherwise have been payable thereunder
upon or following the Merger. This Agreement may not be amended, nor may any
provision hereof be modified or waived, except by an instrument in writing duly
signed by the party to be charged.
16. Severability. If any provision of this Agreement, or any
application thereof to any circumstances, is invalid, in whole or in part, such
provision or application shall to that extent be severable and shall not affect
other provisions or applications of this Agreement.
17. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, without reference to
the principles of conflict of laws.
18. Modifications and Waivers. No provision of this Agreement may be
modified, altered or amended except by an instrument in writing executed by the
parties hereto. No waiver by either party hereto of any breach by the other
party hereto of any provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions at the time
or at any prior or subsequent time.
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19. Headings. The headings contained herein are solely for the purposes
of reference, are not part of this Agreement and shall not in any way affect the
meaning or interpretation of this Agreement.
20. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
21. Excise Tax Limitation
(a) Notwithstanding anything contained in this Agreement to the
contrary, to the extent that any payment or distribution of any type to or for
the benefit of the Employee by the Company, any affiliate of the Company, any
person who acquires ownership or effective control of the Company or ownership
of a substantial portion of the Company's assets (within the meaning of Section
280G of the Internal Revenue Code of 1986, as amended (the "Code"), and the
regulations thereunder), or any affiliate of such person, whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise (the "Total Payments") is or will be subject to the excise tax
imposed under Section 4999 of the Code (the "Excise Tax"), then the Total
Payments shall be reduced (but not below zero) if and to the extent that a
reduction in the Total Payments would result in the Employee retaining a larger
amount, on an after-tax basis (taking into account federal, state and local
income taxes and the Excise Tax), than if the Employee received the entire
amount of such Total Payments. Unless the Employee shall have given prior
written notice specifying a different order to the Company to effectuate the
foregoing, the Company shall reduce or eliminate the Total Payments, by first
reducing or eliminating the portion of the Total Payments which are not payable
in cash and then by reducing or eliminating cash payments, in each case in
reverse order beginning with payments or benefits which are to be paid the
farthest in time from the Determination (as hereinafter defined). Any notice
given by the Employee pursuant to
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the preceding sentence shall take precedence over the provisions of any other
plan, arrangement or agreement governing the Employee's rights and entitlements
to any benefits or compensation.
(b) The determination of whether the Total Payments shall be
reduced as provided in Section 21(a) and the amount of such reduction shall be
made at the Company's expense by an accounting firm selected by the Company from
among the six largest accounting firms in the United States (the "Accounting
Firm"). The Accounting Firm shall provide its determination (the
"Determination"), together with detailed supporting calculations and
documentation to the Company and the Employee within ten (10) days of the
Termination Date. If the Accounting Firm determines that no Excise Tax is
payable by the Employee with respect to the Total Payments, it shall furnish the
Employee with an opinion reasonably acceptable to the Employee that no Excise
Tax will be imposed with respect to any such payments and, absent manifest
error, such Determination shall be binding, final and conclusive upon the
Company and the Employee. If the Accounting Firm determines that an Excise Tax
would be payable, the Employee shall have the right to accept the Determination
of the Accounting Firm as to the extent of the reduction, if any, pursuant to
Section 21(a), or to have such Determination reviewed by an accounting firm
selected by the Employee from among the six largest accounting firms in the
United States, at the expense of the Employee, in which case the determination
of such second accounting firm shall be binding, final and conclusive upon the
Company and the Employee.
22. Indemnification. During the Employment Term and thereafter, the
Company shall indemnify the Employee to the fullest extent permitted by law
against any judgments, fines, amounts paid in settlement and reasonable expenses
(including attorneys' fees), and advance amounts necessary to pay the foregoing
at the earliest time and to the fullest extent permitted by law, in connection
with any claim, action or
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proceeding (whether civil or criminal) against the Employee as a result of the
Employee serving as an officer or director of the Company or in any capacity at
the request of the Company, in or with regard to any other entity, employee
benefit plan or enterprise (other than arising out of the employee's acts of
willful misconduct, misappropriation of funds or fraud) . This indemnification
shall be in addition to, and not in lieu of, any other indemnification the
Employee shall be entitled to pursuant to the Company's Certificate of
Incorporation or By-laws or otherwise. Following the Employee's termination of
employment, the Company shall continue to cover the Employee under the Company's
directors and officers insurance for the period during which the Employee may be
subject to potential liability for any claim, action or proceeding (whether
civil or criminal) as a result of his service as an officer or director of the
Company or in any capacity at the request of the Company, at the highest level
then maintained for any then or former officer or director.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by authority of its Board of Directors, and the Employee has hereunto
set his hand, the day and year first above written.
Kapson Senior Quarters Corp.
By: /s/ Glenn Kaplan
----------------------------------
Name: Glenn Kaplan
Title: Chairman and Chief
Executive Officer
By: /s/ Wayne L. Kaplan
----------------------------------
Wayne L. Kaplan
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AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT made as of this 23rd day of February, 1998, by and
between Kapson Senior Quarters Corp., a Delaware corporation (the "Company") and
Evan A. Kaplan (the "Employee").
WHEREAS, the Employee has been and is presently employed by the
Company; and
WHEREAS, the Employee possesses an intimate knowledge of the business
and affairs of the Company and its policies, procedures, methods and personnel;
and
WHEREAS, pursuant to the Amended and Restated Agreement and Plan of
Merger dated as of the date hereof by and among Prometheus Senior Quarters LLC
("Investor"), Prometheus Acquisition Corp. ("PAC") and the Company (the "Merger
Agreement") PAC will be merged into the Company as of the Effective Time (as
defined in the Merger Agreement); and
WHEREAS, Employee was employed pursuant to an employment agreement with
the Company dated as of September 25, 1996 (the "Former Employment Agreement")
and this Agreement as in effect prior to the date hereof superseded the Former
Employment Agreement; and
WHEREAS, the Employee is a partner of the G.W.E. Partnership which
partnership is a party to various operating agreements (the "Operating
Agreements") pursuant to which the Employee, as the holder of one or more
operating certificates has agreed to operate certain facilities of the Company;
WHEREAS, the Company desires to amend and restate this Agreement to
ensure the continued services and employment of the Employee on behalf of the
Company and the Employee is willing to render such continued services on the
terms and conditions set forth herein.
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NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. Employment Term. Subject to the terms and provisions of this
Agreement, the Company hereby agrees to employ the Employee and Employee hereby
agrees to be employed by the Company for the period commencing on the date on
which the Effective Time occurs (the "Effective Date") and ending on the second
anniversary of the date hereof, unless renewed or terminated sooner as
hereinafter provided (the "Employment Term"). The Employment Term shall be
automatically renewed for successive one-year terms unless either party gives
written notice to the other at least six (6) months prior to the expiration of
the then Employment Term of such party's intention that the Employment Term
shall not be so extended. The term of this Agreement shall be coincident with
the Employment Term.
2. Duties. During the Employment Term the Employee shall serve as Chief
Operating Officer of the Company or such other position as may be agreed upon by
Company and Employee and shall perform such duties, services and
responsibilities incident to such position(s) as determined from time to time by
the Board of Directors of the Company (the "Board"). The Employee also agrees to
perform such other duties, services and responsibilities which are consistent
with his position as may from time to time be reasonably requested by the Board.
The Employee shall devote his full business time, attention and skill
to the performance of such duties, services and responsibilities, and will use
his best efforts to promote the interests of the Company. The Employee will not,
without the prior written approval of the Board, engage in any other business
activity which would interfere with the performance of his duties, services and
responsibilities hereunder or which is in violation of policies established from
time to time by the Company. Notwithstanding the foregoing, the Employee shall
be entitled to: (a) serve on corporate, civic or charitable
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boards or committees, (b) deliver lectures, fulfill speaking engagements or
teach at educational institutions, and (c) manage personal investments (but in
no event may the Employee own more than 5% of the shares of any publicly traded
company or entity), so long as such activities do not materially interfere with
the performance of Employee's duties or responsibilities pursuant to this
Agreement.
3. Compensation. (a) Salary. In consideration of the performance by the
Employee of the Employee's obligations during the Employment Term (including any
services as an officer, director, employee, member of any committee of the
Company, or otherwise), the Company will during the Employment Term pay the
Employee a salary (the "Salary") at an annual rate of not less than $225,000.
The Employee's salary shall be reviewed annually by the Company and shall be
increased as of the first day of each fiscal year beginning on or after January
1, 1999 by no less than the increase in the Consumer Price Index - Urban Wage
Earners (or, in the event such index is no longer published, such other index as
is determined in good faith by the Board to be comparable) from the penultimate
month prior to the beginning of the fiscal year being completed to the
penultimate month of the fiscal year being completed (as so increased,
"Salary"). The Salary will be reduced by any amounts paid to the Employee under
any of the Operating Agreements, the manner in which such reductions are to be
effected shall be determined by the Board taking into account the expected
timing of payments pursuant to the Operating Agreements.
(b) Bonus. (i) In further consideration of the performance by the
Employee of the Employee's obligations during the Employment Term (including any
services as an officer, director, employee, member of any committee of the
Company, or otherwise), the Company will pay the Employee an annual bonus (the
"Bonus") in respect of each fiscal year beginning on or after January 1, 1998 of
up to 100% of the Employee's Salary (the "Target Bonus"). Any bonus payable in
respect of the fiscal
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year beginning January 1, 1998, shall be payable, with interest at an annual
rate equal to four percent (4%), within five (5) days following the end of the
fiscal year 1999; provided, however, that no bonus shall be payable for such
fiscal year in the event the Employee's employment with the Company shall have
been terminated by the Company for Cause (as defined below) or voluntarily by
the Employee without Good Reason (as defined below) on or prior to December 31,
1999. The actual amount paid will be determined in accordance with the following
provisions of this Section 3(b).
(ii) If the Company's actual performance for an applicable
fiscal year is at least 90% or more of the budgeted performance (as set forth in
clause (iii) below), the Employee shall be entitled to receive 100% of the
Target Bonus. If the Company's actual performance for an applicable fiscal year
is 85% or more but less than 90% of the budgeted performance, the Employee shall
be entitled to receive 50% of the Target Bonus. If the Company's actual
performance for an applicable fiscal year is less than 85% of the budgeted
performance, the Employee shall not be entitled to any portion of the Target
Bonus. Notwithstanding the foregoing, if for any fiscal year the Employee is
entitled to less than 100% of the Target Bonus, the Board, in its sole
discretion, may award the Employee with a bonus equal to all or any portion of
the amount by which the amount, if any, to which he is entitled pursuant to this
Section 3(b)(ii) is less than the Target Bonus. If the Company's actual
performance for an applicable fiscal year is greater than 95% of the budgeted
performance, the Board may in its sole discretion determine to increase the
Employee's Bonus to an amount greater than 100% of the Target Bonus.
(iii) For purposes of this Section 3(b), the
budget for each of the fiscal years beginning January 1, 1998 and 1999 is set
forth on Appendix A hereto. The budget for any future fiscal year shall be
established by the Board in a manner
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consistent with past practice. It is understood that the budget is prepared on a
property by property basis but that the Company's actual performance versus
budgeted performance is to be measured on an overall basis. If during any fiscal
year new properties are acquired or development is commenced with respect to any
new properties not contemplated by the budget, appropriate adjustments to the
budget as established pursuant to this Section 3(b)(iii) will be made by the
Board.
(iv) The Employee's Salary and any bonus shall be payable in
accordance with the normal payroll practices of the Company then in effect and
subject to all applicable taxes required to be withheld by the Company pursuant
to federal, state or local law. The Employee shall be solely responsible for
taxes imposed on the Employee by reason of any compensation and benefits
provided hereunder.
4. Disability. If the Employee is unable to substantially perform his
duties, services and responsibilities hereunder by reason of a physical or
mental infirmity for a total of 180 calendar days in any twelve-month period
during the Employment Term ("Disability"), the Company shall not be obligated to
pay the Employee any Salary or Bonus for any period of absence in excess of such
180 calendar days.
5. Benefits. (a) In addition to the payment of the Salary and Bonus
described above, the Employee shall be entitled to participate in any employee
benefit plans then in effect for similarly situated employees and receive any
other fringe benefits that the Company then provides to similarly situated
employees to the extent the Employee meets the eligibility requirements for any
such plan or benefit. In no event shall the employee benefits provided to the
Employee be, in the aggregate, less favorable to the Employee than the employee
benefits provided to the Employee by the
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Company as of the date hereof. Stock options shall not be taken into account for
purposes of the foregoing sentence.
(b) The Company shall, during the Employment Term, provide Employee
with a leased automobile at a level and under arrangements commensurate with the
automobile provided under the Former Employment Agreement immediately prior to
the Effective Date.
(c) The Company shall, during the Employment Term, provide long
term disability coverage for the Employee providing for a benefit of at least
sixty-five (65%) of the Employee's Salary based on his own occupation or
comparable occupation level and with a waiting period of not longer than six (6)
months ("Long Term Disability Coverage"), provided such level of Long Term
Disability Coverage is obtainable on commercially reasonable terms.
(d) The Company shall, during the Employment Term, pay any dues or
other fees for the Employee's membership in the country club of which he is a
member as of the Effective Date, or such other club as is approved by the Board.
The Employee shall be responsible for any income tax due as a result of his
personal use of such country club. The Company, to the extent permitted by law,
shall not treat the Employee's business use of such country club as compensation
to him.
6. Vacations. During the Employment Term the Employee shall be entitled
to the number of paid vacation days in each calendar year determined by the
Company from time to time, but not less than four (4) weeks in any calendar
year.
7. Expenses. The Company shall reimburse the Employee in accordance
with its expense reimbursement policy as in effect from time to time for all
reasonable expenses incurred by the Employee in connection with the performance
of
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his duties under this Agreement upon the presentation by the Employee of an
itemized account of such expenses and appropriate receipts.
8. Termination. The Employee's employment with the Company and the
Employment Term shall terminate upon the expiration of the Employment Term or
upon the earlier occurrence of any of the following events:
(a) The death of the Employee ("Death").
(b) The mutual agreement between the Company and the Employee on an
early termination date.
(c) The termination of employment by the Company for Cause. "Cause"
shall mean (a) the Employee being convicted of (or pleading nolo contendere to)
a felony (other than a traffic violation); (b) the repeated refusal of the
Employee to attempt to properly perform his obligations under this Agreement, or
follow any direction of the Board consistent with this Agreement, which in
either case is not remedied within ten (10) business days after receipt by the
Employee of written notice from the Company specifying the details thereof,
provided the refusal to follow a direction shall not be Cause if the Employee in
good faith believes that such direction is not legal, ethical or moral or not
within the scope of his duties pursuant to this Agreement and promptly notifies
the Board in writing of such belief; and provided further that, upon his
request, the Employee shall be entitled to a hearing before the Board within
seven (7) business days following his receipt of written notice from the
Company; (c) the Employee's gross negligence with regard to his duties or
willful misconduct with regard to the business, assets or employees of the
Company which in either event has a material adverse effect on the Company and
its subsidiaries in the aggregate; (d) any other breach by the Employee of a
material provision of this Agreement that remains uncured for twenty (20)
business days after written notice thereof is given to the Employee or such
longer period as may reasonably
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be required to remedy the default, provided that the Employee endeavors in good
faith to remedy the default; or (e) any act of fraud or misappropriation of
funds involving the Company.
(d) The termination of employment by the Company for Disability.
(e) The termination of employment by the Company other than for
Cause, Disability or Death.
(f) The termination of the Employee's employment upon the date
specified in the written resignation of the Employee for Good Reason stating
with specificity the details of the Good Reason, if the stated Good Reason is
not cured within twenty (20) days of the giving of such notice. Notice of Good
Reason shall be given within one hundred eighty (180) days of occurrence of the
Good Reason event. "Good Reason" shall mean (a) any reduction in title or a
material reduction in authority, duties or responsibilities (except temporarily
during any period of physical or mental illness); (b) failure to elect the
Employee to the Board of Directors; (c) relocation of the Company's principal
place of business more than thirty (30) miles from the Company's current
principal place of business located at Woodbury, New York; or (d) any other
material breach of any provision of this Agreement by the Company.
In the event of termination of this Agreement, for whatever reason, the
Employee agrees to cooperate with the Company and to be reasonably available to
the Company with respect to continuing and/or future matters arising out of the
Employee's employment or any other relationship with the Company, whether such
matters are business-related, legal or otherwise. The Company shall not require
the Employee to make himself available to the Company pursuant to this paragraph
in any manner that will materially interfere with his then existing employment
relationship. The provisions of this paragraph shall survive termination of this
Agreement.
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9. Termination Payments. (a) If the Employee's employment with the
Company terminates for whatever reason, the Company will pay the Employee any
portion of the Salary accrued hereunder on or prior to the date of termination
but not paid to the Employee as of such date.
(b) If the Employee's termination is pursuant to Section 8(e) or
Section 8(f), the Company shall continue to pay the Employee an amount equal to
his Salary (at the rate in effect at the time of his termination of employment)
during the period commencing on the effective date of the Employee's termination
of employment and ending on the second anniversary of the Effective Date (or the
expiration of the then current Employment Term if the Agreement has been
extended pursuant to Section 1). In addition, the Company shall continue the
Employee's then current medical coverage for a period of two (2) years following
termination of the Employee's employment.
(c) If the Employee's termination is pursuant to Section 8(a), the
Company shall pay the Employee's Beneficiary (as defined below) an amount equal
to his Salary (at the rate in effect at the time of the Employee's termination
of employment) for a period of six months following the date of the Employee's
Death. For purposes of this provision, the Employee's Beneficiary shall be the
Employee's spouse; if the Employee is not married on his date of Death, the
Employee's children, per stirpes; and otherwise, the Employee's estate.
(d) If the Employee's termination is pursuant to Section 8(d), the
Company shall continue to pay the Employee an amount equal to his Salary (at the
rate in effect at the time of his termination of employment) for a period of six
months following the effective date of the Employee's termination of employment.
The foregoing payments upon termination shall constitute the exclusive
payments due to or in respect of the Employee upon the termination of his
employment under this Agreement, but shall have no effect on any benefits which
may be due the
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Employee under any plan of the Company which provides benefits after termination
of employment, other than severance pay or salary continuation which shall be
reduced by the amount of any payment received by the Employee following his
termination pursuant to this Agreement. In the event any payments are required
to be made to the Employee pursuant to this Section 9, the Employee shall be
under no obligation to seek other employment and, in such case, there shall be
no offset against any amounts due to the Employee under this Agreement on
account of any remuneration attributable to any subsequent employment that the
Employee may obtain.
10. Employee Covenants.
(a) Unauthorized Disclosure. The Employee agrees and understands
that in the Employee's position with the Company, the Employee has been and will
be exposed to and receive information relating to the confidential affairs of
the Company, including but not limited to technical information, business and
marketing plans, strategies, customer information, other information concerning
the Company's products, promotions, development, financing, expansion plans,
business policies and practices, and other forms of information considered by
the Company to be confidential and/or in the nature of trade secrets. The
Employee agrees that during the Employment Term and thereafter, the Employee
will keep such information confidential and not disclose such information,
either directly or indirectly, to any third person or entity without the prior
written consent of the Company. This confidentiality covenant has no temporal,
geographical or territorial restriction. Upon termination of this Agreement, the
Employee will promptly supply to the Company all material property, keys, notes,
memoranda, writings, lists, files, reports, customer lists, correspondence,
tapes, disks, cards, surveys, maps, logs, machines, technical data or any other
tangible product or document which has been produced by, received by or
otherwise submitted to the
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Employee during or prior to the Employment Term. Any material breach of the
terms of this paragraph shall be considered Cause.
(b) Non-competition. By and in consideration of the Company's
entering into this Agreement and the Salary, Bonus and benefits to be provided
by the Company hereunder, and further in consideration of the Employee's
exposure to the proprietary information of the Company, the Employee agrees that
the Employee will not, during the Employment Term and for a period of three (3)
years thereafter (or five (5) years thereafter if he is terminated by the
Company for Cause), directly or indirectly own, manage, operate, join, control,
be employed by, or participate in the ownership, management, operation or
control of, or be connected in any manner, including but not limited to holding,
the positions of shareholder, director, officer, consultant, independent
contractor, employee, partner, or investor, with any Competing Enterprise. For
purposes of this paragraph, the term "Competing Enterprise" shall mean any
person, corporation, partnership or other entity engaged in any Competitive
Business within a twenty-five (25) mile radius of any such business operated, or
in the pipeline to be operated (to the extent the Employee has knowledge after
due inquiry of such proposal), by the Company, Lazard Freres Real Estate
Investors LLC ("LFREI") or any affiliate of LFREI. For purposes of this
paragraph, the term "Competitive Business" shall mean assisted living,
independent living, skilled nursing facilities and continuing care retirement
centers (containing assisted living, independent living and skilled nursing
facilities in one campus). During the five years following termination of this
Agreement, upon request, the Employee shall notify the Company of the Employee's
then current employment status.
(c) Non-solicitation. During the Employment Term and for a period
of two years thereafter, the Employee shall not interfere with the Company's
relationship with, or endeavor to entice away from the Company, any person who
at any
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time during the Employment Term was an employee (other than the Employee's
secretary or Raymond DioGuardi ("Mr. DioGuardi") but, with respect to Mr.
DioGuardi, only if (i) Mr. DioGuardi's employment with the Company shall have
been terminated by the Company giving notice to Mr. DioGuardi of its intention
not to extend his Employment Term past the second anniversary of the Effective
Date (each, as defined in the Employment Agreement, dated as of the date hereof,
between the Company and Mr. DioGuardi); and (ii) Mr. DioGuardi shall not be
employed in any Competitive Business) or customer of the Company or otherwise
had a material business relationship with the Company.
(d) Remedies. The Employee agrees that any breach of the terms of
this Section 10 would result in irreparable injury and damage to the Company for
which the Company would have no adequate remedy at law; the Employee therefore
also agrees that in the event of said breach or any threat of breach, the
Company shall be entitled to an immediate injunction and restraining order to
prevent such breach and/or threatened breach and/or continued breach by the
Employee and/or any and all persons and/or entities acting for and/or with the
Employee, without having to prove damages, and to all costs and expenses,
including reasonable attorneys' fees and costs, in addition to any other
remedies to which the Company may be entitled at law or in equity. The terms of
this paragraph shall not prevent the Company from pursuing any other available
remedies for any breach or threatened breach hereof, including but not limited
to the recovery of damages from the Employee. The Employee and the Company
further agree that the provisions of the covenant not to compete are reasonable.
Should a court or arbitrator determine, however, that any provision of the
covenant not to compete is unreasonable, either in period of time, geographical
area, or otherwise, the parties hereto agree that the covenant should be
interpreted and enforced to the maximum extent which such court or arbitrator
deems reasonable.
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The provisions of this Section 10 shall survive any termination of this
Agreement and the Employment Term and the existence of any claim or cause of
action by the Employee against the Company, whether predicated on this Agreement
or otherwise, shall not constitute a defense to the enforcement by the Company
of the covenants and agreements of this Section 10.
11. Proprietary Rights. The Employee represents and warrants that all
patents, patent applications, rights to inventions, copyright registrations and
other license, trademark and trade name rights heretofore owned by the Employee
and relating to the business of the Company or any of its subsidiaries have been
duly transferred to such corporation.
12. Non-Waiver of Rights. The failure to enforce at any time the
provisions of this Agreement or to require at any time performance by the other
party of any of the provisions hereof shall in no way be construed to be a
waiver of such provisions or to affect either the validity of this Agreement or
any part hereof, or the right of either party to enforce each and every
provision in accordance with its terms.
13. Notices. Every notice relating to this Agreement shall be in
writing and shall be given by personal delivery or by overnight courier or
registered or certified mail, postage prepaid, return receipt requested, as
follows:
(i) If to the Company
Kapson Senior Quarters Corp.
125 Froelich Farm Blvd.
Woodbury, New York 11797
(i) If to the Employee
Evan A. Kaplan
c/o Kapson Senior Quarters Corp.
125 Froelich Farm Blvd.
Woodbury, New York 11797
Notices shall be considered effective when received.
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14. Binding Effect/Assignment. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
executors, personal representatives, estates, successors (including, without
limitation, by way of merger) and assigns. Notwithstanding the provisions or the
immediately preceding sentence, the Employee shall not assign all or any portion
of this Agreement without the prior written consent of the Company.
15. Entire Agreement. This Agreement sets forth the entire
understanding of the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements, written or oral, between them as to such
subject matter including without limitation the Former Employment Agreement
which shall be null and void as of the date hereof, and the Employee agrees that
he is not entitled to any further benefits thereunder, including, without
limitation, benefits that would or may otherwise have been payable thereunder
upon or following the Merger. This Agreement may not be amended, nor may any
provision hereof be modified or waived, except by an instrument in writing duly
signed by the party to be charged.
16. Severability. If any provision of this Agreement, or any
application thereof to any circumstances, is invalid, in whole or in part, such
provision or application shall to that extent be severable and shall not affect
other provisions or applications of this Agreement.
17. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, without reference to
the principles of conflict of laws.
18. Modifications and Waivers. No provision of this Agreement may be
modified, altered or amended except by an instrument in writing executed by the
parties hereto. No waiver by either party hereto of any breach by the other
party hereto of any
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provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions at the time or at any prior or
subsequent time.
19. Headings. The headings contained herein are solely for the purposes
of reference, are not part of this Agreement and shall not in any way affect the
meaning or interpretation of this Agreement.
20. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
21. Excise Tax Limitation
(a) Notwithstanding anything contained in this Agreement to the
contrary, to the extent that any payment or distribution of any type to or for
the benefit of the Employee by the Company, any affiliate of the Company, any
person who acquires ownership or effective control of the Company or ownership
of a substantial portion of the Company's assets (within the meaning of Section
280G of the Internal Revenue Code of 1986, as amended (the "Code"), and the
regulations thereunder), or any affiliate of such person, whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise (the "Total Payments") is or will be subject to the excise tax
imposed under Section 4999 of the Code (the "Excise Tax"), then the Total
Payments shall be reduced (but not below zero) if and to the extent that a
reduction in the Total Payments would result in the Employee retaining a larger
amount, on an after-tax basis (taking into account federal, state and local
income taxes and the Excise Tax), than if the Employee received the entire
amount of such Total Payments. Unless the Employee shall have given prior
written notice specifying a different order to the Company to effectuate the
foregoing, the Company shall reduce or eliminate the Total Payments, by first
reducing or eliminating the portion of the Total Payments which are not payable
in cash and then by reducing or eliminating cash payments, in each case in
reverse order
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beginning with payments or benefits which are to be paid the farthest in time
from the Determination (as hereinafter defined). Any notice given by the
Employee pursuant to the preceding sentence shall take precedence over the
provisions of any other plan, arrangement or agreement governing the Employee's
rights and entitlements to any benefits or compensation.
(b) The determination of whether the Total Payments shall be
reduced as provided in Section 21(a) and the amount of such reduction shall be
made at the Company's expense by an accounting firm selected by the Company from
among the six largest accounting firms in the United States (the "Accounting
Firm"). The Accounting Firm shall provide its determination (the
"Determination"), together with detailed supporting calculations and
documentation to the Company and the Employee within ten (10) days of the
Termination Date. If the Accounting Firm determines that no Excise Tax is
payable by the Employee with respect to the Total Payments, it shall furnish the
Employee with an opinion reasonably acceptable to the Employee that no Excise
Tax will be imposed with respect to any such payments and, absent manifest
error, such Determination shall be binding, final and conclusive upon the
Company and the Employee. If the Accounting Firm determines that an Excise Tax
would be payable, the Employee shall have the right to accept the Determination
of the Accounting Firm as to the extent of the reduction, if any, pursuant to
Section 21(a), or to have such Determination reviewed by an accounting firm
selected by the Employee from among the six largest accounting firms in the
United States, at the expense of the Employee, in which case the determination
of such second accounting firm shall be binding, final and conclusive upon the
Company and the Employee.
22. Indemnification. During the Employment Term and thereafter, the
Company shall indemnify the Employee to the fullest extent permitted by law
against any judgments, fines, amounts paid in settlement and reasonable expenses
(including
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attorneys' fees), and advance amounts necessary to pay the foregoing at the
earliest time and to the fullest extent permitted by law, in connection with any
claim, action or proceeding (whether civil or criminal) against the Employee as
a result of the Employee serving as an officer or director of the Company or in
any capacity at the request of the Company, in or with regard to any other
entity, employee benefit plan or enterprise (other than arising out the
employee's acts of willful misconduct, misappropriation of funds or fraud). This
indemnification shall be in addition to, and not in lieu of, any other
indemnification the Employee shall be entitled to pursuant to the Company's
Certificate of Incorporation or By-laws or otherwise. Following the Employee's
termination of employment, the Company shall continue to cover the Employee
under the Company's directors and officers insurance for the period during which
the Employee may be subject to potential liability for any claim, action or
proceeding (whether civil or criminal) as a result of his service as an officer
or director of the Company or in any capacity at the request of the Company, at
the highest level then maintained for any then or former officer or director.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by authority of its Board of Directors, and the Employee has hereunto
set his hand, the day and year first above written.
Kapson Senior Quarters Corp.
By: /s/ Glenn Kaplan
-------------------------------------
Name: Glenn Kaplan
Title: Chairman and
Chief Executive Officer
By: /s/ Evan A. Kaplan
------------------------------------
Evan A. Kaplan
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AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT made as of this 23rd day of February, 1998, by and between
Kapson Senior Quarters Corp., a Delaware corporation (the "Company") and Raymond
DioGuardi (the "Employee").
WHEREAS, the Employee has been and is presently employed by the
Company; and
WHEREAS, the Employee possesses an intimate knowledge of the business
and affairs of the Company and its policies, procedures, methods and personnel;
and
WHEREAS, pursuant to the Amended and Restated Agreement and Plan of
Merger dated as of the date hereof by and among Prometheus Senior Quarters LLC
("Investor"), Prometheus Acquisition Corp. ("PAC") and the Company (the "Merger
Agreement") PAC will be merged into the Company as of the Effective Time (as
defined in the Merger Agreement); and
WHEREAS, Employee was employed pursuant to an employment agreement with
the Company dated as of ____________, 199_ (the "Former Employment Agreement")
and this Agreement as in effect prior to the date hereof superseded the Former
Employment Agreement; and
WHEREAS, the Company desires to amend and restate this Agreement to
ensure the continued services and employment of the Employee on behalf of the
Company and the Employee is willing to render such continued services on the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. Employment Term. Subject to the terms and provisions of this
Agreement, the Company hereby agrees to employ the Employee and Employee hereby
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agrees to be employed by the Company for the period commencing on the date on
which the Effective Time occurs (the "Effective Date") and ending on the second
anniversary of the date hereof, unless renewed or terminated sooner as
hereinafter provided (the "Employment Term"). The Employment Term shall be
automatically renewed for successive one-year terms unless either party gives
written notice to the other at least six (6) months prior to the expiration of
the then Employment Term of such party's intention that the Employment Term
shall not be so extended. The term of this Agreement shall be coincident with
the Employment Term.
2. Duties. During the Employment Term the Employee shall serve as Chief
Financial Officer of the Company or such other position as may be agreed upon by
Company and Employee and shall perform such duties, services and
responsibilities incident to such position(s) as determined from time to time by
the Board of Directors of the Company (the "Board"). The Employee also agrees to
perform such other duties, services and responsibilities which are consistent
with his position as may from time to time be reasonably requested by the Board.
The Employee shall devote his full business time, attention and skill
to the performance of such duties, services and responsibilities, and will use
his best efforts to promote the interests of the Company. The Employee will not,
without the prior written approval of the Board, engage in any other business
activity which would interfere with the performance of his duties, services and
responsibilities hereunder or which is in violation of policies established from
time to time by the Company. Notwithstanding the foregoing, the Employee shall
be entitled to: (a) serve on corporate, civic or charitable boards or
committees, (b) deliver lectures, fulfill speaking engagements or teach at
educational institutions, and (c) manage personal investments (but in no event
may the Employee own more than 5% of the shares of any publicly traded company
or entity), so
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long as such activities do not materially interfere with the performance of
Employee's duties or responsibilities pursuant to this Agreement.
3. Compensation. (a) Salary. In consideration of the performance by the
Employee of the Employee's obligations during the Employment Term (including any
services as an officer, director, employee, member of any committee of the
Company, or otherwise), the Company will during the Employment Term pay the
Employee a salary (the "Salary") at an annual rate of not less than $175,000.
The Employee's salary shall be reviewed annually by the Company and shall be
increased as of the first day of each fiscal year beginning on or after January
1, 1999 by no less than the increase in the Consumer Price Index - Urban Wage
Earners (or, in the event such index is no longer published, such other index as
is determined in good faith by the Board to be comparable) from the penultimate
month prior to the beginning of the fiscal year being completed to the
penultimate month of the fiscal year being completed (as so increased,
"Salary"). The Salary will be reduced by any amounts paid to the Employee under
any of the Operating Agreements, the manner in which such reductions are to be
effected shall be determined by the Board taking into account the expected
timing of payments pursuant to the Operating Agreements .
(b) Bonus. (i) In further consideration of the performance by the
Employee of the Employee's obligations during the Employment Term (including any
services as an officer, director, employee, member of any committee of the
Company, or otherwise), the Company will pay the Employee an annual bonus (the
"Bonus") in respect of each fiscal year beginning on or after January 1, 1998 of
up to 50% of the Employee's Salary (the "Target Bonus"). The actual amount paid
will be determined in accordance with the following provisions of this Section
3(b).
(ii) If the Company's actual performance for an applicable
fiscal year is at least 90% or more of the budgeted performance (as set forth in
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clause (iii) below), the Employee shall be entitled to receive 100% of the
Target Bonus. If the Company's actual performance for an applicable fiscal year
is 85% or more but less than 90% of the budgeted performance, the Employee shall
be entitled to receive 75% of the Target Bonus. If the Company's actual
performance for an applicable fiscal year is less than 85% of the budgeted
performance, the Employee shall not be entitled to any portion of the Target
Bonus. Notwithstanding the foregoing, if for any fiscal year the Employee is
entitled to less than 100% of the Target Bonus, the Board, in its sole
discretion, may award the Employee with a bonus equal to all or any portion of
the amount by which the amount, if any, to which he is entitled pursuant to this
Section 3(b)(ii) is less than the Target Bonus. If the Company's actual
performance for an applicable fiscal year is greater than 95% of the budgeted
performance, the Board may in its sole discretion determine to increase the
Employee's Bonus to an amount greater than 100% of the Target Bonus.
(iii) For purposes of this Section 3(b), the budget for each
of the fiscal years beginning January 1, 1998 and 1999 is set forth on Appendix
A hereto. The budget for any future fiscal year shall be established by the
Board in a manner consistent with past practice. It is understood that the
budget is prepared on a property by property basis but that the Company's actual
performance versus budgeted performance is to be measured on an overall basis.
If during any fiscal year new properties are acquired or development is
commenced with respect to any new properties not contemplated by the budget,
appropriate adjustments to the budget as established pursuant to this Section
3(b)(iii) will be made by the Board.
(iv) The Employee's Salary and any bonus shall be payable in
accordance with the normal payroll practices of the Company then in effect and
subject to all applicable taxes required to be withheld by the Company pursuant
to federal, state
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or local law. The Employee shall be solely responsible for taxes imposed on the
Employee by reason of any compensation and benefits provided hereunder.
4. Disability. If the Employee is unable to substantially perform his
duties, services and responsibilities hereunder by reason of a physical or
mental infirmity for a total of 180 calendar days in any twelve-month period
during the Employment Term ("Disability"), the Company shall not be obligated to
pay the Employee any Salary or Bonus for any period of absence in excess of such
180 calendar days.
5. Benefits. (a) In addition to the payment of the Salary and Bonus
described above, the Employee shall be entitled to participate in any employee
benefit plans then in effect for similarly situated employees and receive any
other fringe benefits that the Company then provides to similarly situated
employees to the extent the Employee meets the eligibility requirements for any
such plan or benefit. In no event shall the employee benefits provided to the
Employee be, in the aggregate, less favorable to the Employee than the employee
benefits provided to the Employee by the Company as of the date hereof. Stock
options shall not be taken into account for purposes of the foregoing sentence.
(b) The Company shall, during the Employment Term, provide Employee
with a leased automobile at a level and under arrangements commensurate with the
automobile provided under the Former Employment Agreement immediately prior to
the Effective Date.
(c) The Company shall, during the Employment Term, provide long
term disability coverage for the Employee providing for a benefit of at least
sixty-five (65%) of the Employee's Salary based on his own occupation or
comparable
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occupation level and with a waiting period of not longer than six (6) months
("Long Term Disability Coverage"), provided such level of Long Term Disability
Coverage is obtainable on commercially reasonable terms.
(d) The Company shall, during the Employment Term, pay any dues or
other fees for the Employee's membership in the country club of which he is a
member as of the Effective Date, or such other club as is approved by the Board.
The Employee shall be responsible for any income tax due as a result of his
personal use of such country club. The Company, to the extent permitted by law,
shall not treat the Employee's business use of such country club as compensation
to him.
6. Vacations. During the Employment Term the Employee shall be entitled
to the number of paid vacation days in each calendar year determined by the
Company from time to time, but not less than four (4) weeks in any calendar
year.
7. Expenses. The Company shall reimburse the Employee in accordance
with its expense reimbursement policy as in effect from time to time for all
reasonable expenses incurred by the Employee in connection with the performance
of his duties under this Agreement upon the presentation by the Employee of an
itemized account of such expenses and appropriate receipts.
8. Termination. The Employee's employment with the Company and the
Employment Term shall terminate upon the expiration of the Employment Term or
upon the earlier occurrence of any of the following events:
(a) The death of the Employee ("Death").
(b) The mutual agreement between the Company and the Employee on an
early termination date.
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(c) The termination of employment by the Company for Cause. "Cause"
shall mean (a) the Employee being convicted of (or pleading nolo contendere to)
a felony (other than a traffic violation); (b) the repeated refusal of the
Employee to attempt to properly perform his obligations under this Agreement, or
follow any direction of the Board consistent with this Agreement, which in
either case is not remedied within ten (10) business days after receipt by the
Employee of written notice from the Company specifying the details thereof,
provided the refusal to follow a direction shall not be Cause if the Employee in
good faith believes that such direction is not legal, ethical or moral or not
within the scope of his duties pursuant to this Agreement and promptly notifies
the Board in writing of such belief; and provided further that, upon his
request, the Employee shall be entitled to a hearing before the Board within
seven (7) business days following his receipt of written notice from the
Company; (c) the Employee's gross negligence with regard to his duties or
willful misconduct with regard to the business, assets or employees of the
Company which in either event has a material adverse effect on the Company and
its subsidiaries in the aggregate; (d) any other breach by the Employee of a
material provision of this Agreement that remains uncured for twenty (20)
business days after written notice thereof is given to the Employee or such
longer period as may reasonably be required to remedy the default, provided that
the Employee endeavors in good faith to remedy the default; or (e) any act of
fraud or misappropriation of funds involving the Company.
(d) The termination of employment by the Company for Disability.
(e) The termination of employment by the Company other than for
Cause, Disability or Death.
(f) The termination of the Employee's employment upon the date
specified in the written resignation of the Employee for Good Reason stating
with specificity the details of the Good Reason, if the stated Good Reason is
not cured within
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twenty (20) days of the giving of such notice. Notice of Good Reason shall be
given within one hundred eighty (180) days of occurrence of the Good Reason
event. "Good Reason" shall mean (a) any reduction in title or a material
reduction in authority, duties or responsibilities (except temporarily during
any period of physical or mental illness); (b) relocation of the Company's
principal place of business more than thirty (30) miles from the Company's
current principal place of business located at Woodbury, New York; or (c) any
other material breach of any provision of this Agreement by the Company.
In the event of termination of this Agreement, for whatever reason, the
Employee agrees to cooperate with the Company and to be reasonably available to
the Company with respect to continuing and/or future matters arising out of the
Employee's employment or any other relationship with the Company, whether such
matters are business-related, legal or otherwise. The Company shall not require
the Employee to make himself available to the Company pursuant to this paragraph
in any manner that will materially interfere with his then existing employment
relationship. The provisions of this paragraph shall survive termination of this
Agreement.
9. Termination Payments. (a) If the Employee's employment with the
Company terminates for whatever reason, the Company will pay the Employee any
portion of the Salary accrued hereunder on or prior to the date of termination
but not paid to the Employee as of such date.
(b) If the Employee's termination is pursuant to Section 8(e) or
Section 8(f), the Company shall continue to pay the Employee an amount equal to
his Salary (at the rate in effect at the time of his termination of employment)
during the period commencing on the effective date of the Employee's termination
of employment and ending on the second anniversary of the Effective Date (or the
expiration of the then current Employment Term if the Agreement has been
extended pursuant to Section 1). In
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addition, the Company shall continue the Employee's then current medical
coverage for a period of two (2) years following termination of the Employee's
employment.
(c) If the Employee's termination is pursuant to Section 8(a), the
Company shall pay the Employee's Beneficiary (as defined below) an amount equal
to his Salary (at the rate in effect at the time of the Employee's termination
of employment) for a period of six months following the date of the Employee's
Death. For purposes of this provision, the Employee's Beneficiary shall be the
Employee's spouse; if the Employee is not married on his date of Death, the
Employee's children, per stirpes; and otherwise, the Employee's estate.
(d) If the Employee's termination is pursuant to Section 8(d), the
Company shall continue to pay the Employee an amount equal to his Salary (at the
rate in effect at the time of his termination of employment) for a period of six
months following the effective date of the Employee's termination of employment.
The foregoing payments upon termination shall constitute the exclusive
payments due to or in respect of the Employee upon the termination of his
employment under this Agreement, but shall have no effect on any benefits which
may be due the Employee under any plan of the Company which provides benefits
after termination of employment, other than severance pay or salary continuation
which shall be reduced by the amount of any payment received by the Employee
following his termination pursuant to this Agreement. In the event any payments
are required to be made to the Employee pursuant to this Section 9, the Employee
shall be under no obligation to seek other employment and, in such case, there
shall be no offset against any amounts due to the Employee under this Agreement
on account of any remuneration attributable to any subsequent employment that
the Employee may obtain.
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10. Employee Covenants.
(a) Unauthorized Disclosure. The Employee agrees and understands
that in the Employee's position with the Company, the Employee has been and will
be exposed to and receive information relating to the confidential affairs of
the Company, including but not limited to technical information, business and
marketing plans, strategies, customer information, other information concerning
the Company's products, promotions, development, financing, expansion plans,
business policies and practices, and other forms of information considered by
the Company to be confidential and/or in the nature of trade secrets. The
Employee agrees that during the Employment Term and thereafter, the Employee
will keep such information confidential and not disclose such information,
either directly or indirectly, to any third person or entity without the prior
written consent of the Company. This confidentiality covenant has no temporal,
geographical or territorial restriction. Upon termination of this Agreement, the
Employee will promptly supply to the Company all material property, keys, notes,
memoranda, writings, lists, files, reports, customer lists, correspondence,
tapes, disks, cards, surveys, maps, logs, machines, technical data or any other
tangible product or document which has been produced by, received by or
otherwise submitted to the Employee during or prior to the Employment Term. Any
material breach of the terms of this paragraph shall be considered Cause.
(b) Non-competition. By and in consideration of the Company's
entering into this Agreement and the Salary, Bonus and benefits to be provided
by the Company hereunder, and further in consideration of the Employee's
exposure to the proprietary information of the Company, the Employee agrees that
the Employee will not, during the Employment Term and for a period of three (3)
years thereafter (or five (5) years thereafter if he is terminated by the
Company for Cause), directly or indirectly own, manage, operate, join, control,
be employed by, or participate in the ownership,
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management, operation or control of, or be connected in any manner, including
but not limited to holding, the positions of shareholder, director, officer,
consultant, independent contractor, employee, partner, or investor, with any
Competing Enterprise; provided, however, in the event the Employee's employment
with the Company shall have been terminated by the Employee giving notice to the
Company of his intention not to extend the Employment Term past the second
anniversary of the Effective Date, this Section 10(b) shall not prohibit the
Employee from accepting the position of "Chief Financial Officer" with any
Competing Enterprise but only if such position is equivalent in all respects to
the Employee's position with the Company including, without limitation, the
Employee's responsibilities and duties provided under this Agreement; provided,
further, in the event the Employee's employment with the Company shall have been
terminated by the Company giving notice to the Employee of its intention not to
extend the Employment Term past the second anniversary of the Effective Date,
this Section 10(b) shall be of no force and effect as of the expiration of the
Employment Term. For purposes of this paragraph, the term "Competing Enterprise"
shall mean any person, corporation, partnership or other entity engaged in any
Competitive Business within a twenty-five (25) mile radius of any such business
operated, or in the pipeline to be operated (to the extent the Employee has
knowledge after due inquiry of such proposal), by the Company, Lazard Freres
Real Estate Investors LLC ("LFREI") or any affiliate of LFREI. For purposes of
this paragraph, the term "Competitive Business" shall mean assisted living,
independent living, skilled nursing facilities and continuing care retirement
centers (containing assisted living, independent living and skilled nursing
facilities in one campus). During the five years following termination of this
Agreement, upon request, the Employee shall notify the Company of the Employee's
then current employment status.
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(c) Non-solicitation. During the Employment Term and for a period
of two years thereafter, the Employee shall not interfere with the Company's
relationship with, or endeavor to entice away from the Company, any person who
at any time during the Employment Term was an employee (other than the
Employee's secretary) or customer of the Company or otherwise had a material
business relationship with the Company.
(d) Remedies. The Employee agrees that any breach of the terms of
this Section 10 would result in irreparable injury and damage to the Company for
which the Company would have no adequate remedy at law; the Employee therefore
also agrees that in the event of said breach or any threat of breach, the
Company shall be entitled to an immediate injunction and restraining order to
prevent such breach and/or threatened breach and/or continued breach by the
Employee and/or any and all persons and/or entities acting for and/or with the
Employee, without having to prove damages, and to all costs and expenses,
including reasonable attorneys' fees and costs, in addition to any other
remedies to which the Company may be entitled at law or in equity. The terms of
this paragraph shall not prevent the Company from pursuing any other available
remedies for any breach or threatened breach hereof, including but not limited
to the recovery of damages from the Employee. The Employee and the Company
further agree that the provisions of the covenant not to compete are reasonable.
Should a court or arbitrator determine, however, that any provision of the
covenant not to compete is unreasonable, either in period of time, geographical
area, or otherwise, the parties hereto agree that the covenant should be
interpreted and enforced to the maximum extent which such court or arbitrator
deems reasonable.
The provisions of this Section 10 shall survive any termination of this
Agreement and the Employment Term and the existence of any claim or cause of
action by the Employee against the Company, whether predicated on this Agreement
or
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otherwise, shall not constitute a defense to the enforcement by the Company of
the covenants and agreements of this Section 10.
11. Proprietary Rights. The Employee represents and warrants that all
patents, patent applications, rights to inventions, copyright registrations and
other license, trademark and trade name rights heretofore owned by the Employee
and relating to the business of the Company or any of its subsidiaries have been
duly transferred to such corporation.
12. Non-Waiver of Rights. The failure to enforce at any time the
provisions of this Agreement or to require at any time performance by the other
party of any of the provisions hereof shall in no way be construed to be a
waiver of such provisions or to affect either the validity of this Agreement or
any part hereof, or the right of either party to enforce each and every
provision in accordance with its terms.
13. Notices. Every notice relating to this Agreement shall be in
writing and shall be given by personal delivery or by overnight courier or
registered or certified mail, postage prepaid, return receipt requested, as
follows:
(i) If to the Company
Kapson Senior Quarters Corp.
125 Froelich Farm Blvd.
Woodbury, New York 11797
(i) If to the Employee
Raymond DioGuardi
c/o Kapson Senior Quarters Corp.
125 Froelich Farm Blvd.
Woodbury, New York 11797
Notices shall be considered effective when received.
14. Binding Effect/Assignment. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
executors, personal
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representatives, estates, successors (including, without limitation, by way of
merger) and assigns. Notwithstanding the provisions or the immediately preceding
sentence, the Employee shall not assign all or any portion of this Agreement
without the prior written consent of the Company.
15. Entire Agreement. This Agreement sets forth the entire
understanding of the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements, written or oral, between them as to such
subject matter including without limitation the Former Employment Agreement
which shall be null and void as of the date hereof, and the Employee agrees that
he is not entitled to any further benefits thereunder, including, without
limitation, benefits that would or may otherwise have been payable thereunder
upon or following the Merger. This Agreement may not be amended, nor may any
provision hereof be modified or waived, except by an instrument in writing duly
signed by the party to be charged.
16. Severability. If any provision of this Agreement, or any
application thereof to any circumstances, is invalid, in whole or in part, such
provision or application shall to that extent be severable and shall not affect
other provisions or applications of this Agreement.
17. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, without reference to
the principles of conflict of laws.
18. Modifications and Waivers. No provision of this Agreement may be
modified, altered or amended except by an instrument in writing executed by the
parties hereto. No waiver by either party hereto of any breach by the other
party hereto of any provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions at the time
or at any prior or subsequent time.
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19. Headings. The headings contained herein are solely for the purposes
of reference, are not part of this Agreement and shall not in any way affect the
meaning or interpretation of this Agreement.
20. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
21. Excise Tax Limitation
(a) Notwithstanding anything contained in this Agreement to the
contrary, to the extent that any payment or distribution of any type to or for
the benefit of the Employee by the Company, any affiliate of the Company, any
person who acquires ownership or effective control of the Company or ownership
of a substantial portion of the Company's assets (within the meaning of Section
280G of the Internal Revenue Code of 1986, as amended (the "Code"), and the
regulations thereunder), or any affiliate of such person, whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise (the "Total Payments") is or will be subject to the excise tax
imposed under Section 4999 of the Code (the "Excise Tax"), then the Total
Payments shall be reduced (but not below zero) if and to the extent that a
reduction in the Total Payments would result in the Employee retaining a larger
amount, on an after-tax basis (taking into account federal, state and local
income taxes and the Excise Tax), than if the Employee received the entire
amount of such Total Payments. Unless the Employee shall have given prior
written notice specifying a different order to the Company to effectuate the
foregoing, the Company shall reduce or eliminate the Total Payments, by first
reducing or eliminating the portion of the Total Payments which are not payable
in cash and then by reducing or eliminating cash payments, in each case in
reverse order beginning with payments or benefits which are to be paid the
farthest in time from the Determination (as hereinafter defined). Any notice
given by the Employee pursuant to
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the preceding sentence shall take precedence over the provisions of any other
plan, arrangement or agreement governing the Employee's rights and entitlements
to any benefits or compensation.
(b) The determination of whether the Total Payments shall be
reduced as provided in Section 21(a) and the amount of such reduction shall be
made at the Company's expense by an accounting firm selected by the Company from
among the six largest accounting firms in the United States (the "Accounting
Firm"). The Accounting Firm shall provide its determination (the
"Determination"), together with detailed supporting calculations and
documentation to the Company and the Employee within ten (10) days of the
Termination Date. If the Accounting Firm determines that no Excise Tax is
payable by the Employee with respect to the Total Payments, it shall furnish the
Employee with an opinion reasonably acceptable to the Employee that no Excise
Tax will be imposed with respect to any such payments and, absent manifest
error, such Determination shall be binding, final and conclusive upon the
Company and the Employee. If the Accounting Firm determines that an Excise Tax
would be payable, the Employee shall have the right to accept the Determination
of the Accounting Firm as to the extent of the reduction, if any, pursuant to
Section 21(a), or to have such Determination reviewed by an accounting firm
selected by the Employee from among the six largest accounting firms in the
United States, at the expense of the Employee, in which case the determination
of such second accounting firm shall be binding, final and conclusive upon the
Company and the Employee.
22. Indemnification. During the Employment Term and thereafter, the
Company shall indemnify the Employee to the fullest extent permitted by law
against any judgments, fines, amounts paid in settlement and reasonable expenses
(including attorneys' fees), and advance amounts necessary to pay the foregoing
at the earliest time and to the fullest extent permitted by law, in connection
with any claim, action or
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proceeding (whether civil or criminal) against the Employee as a result of the
Employee serving as an officer or director of the Company or in any capacity at
the request of the Company, in or with regard to any other entity, employee
benefit plan or enterprise (other than arising out of the employee's acts of
willful misconduct, misappropriation of funds or fraud) . This indemnification
shall be in addition to, and not in lieu of, any other indemnification the
Employee shall be entitled to pursuant to the Company's Certificate of
Incorporation or By-laws or otherwise. Following the Employee's termination of
employment, the Company shall continue to cover the Employee under the Company's
directors and officers insurance for the period during which the Employee may be
subject to potential liability for any claim, action or proceeding (whether
civil or criminal) as a result of his service as an officer or director of the
Company or in any capacity at the request of the Company, at the highest level
then maintained for any then or former officer or director.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by authority of its Board of Directors, and the Employee has hereunto
set his hand, the day and year first above written.
Kapson Senior Quarters Corp.
By: /s/ Glenn Kaplan
-------------------------------------
Name: Glenn Kaplan
Title: Chairman and
Chief Executive Officer
By: /s/ Raymond DioGuardi
-------------------------------------
Raymond DioGuardi
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EXHIBIT 99.(c)(5)
KAPSON SENIOR QUARTERS CORP.
February 23, 1998
PROMETHEUS SENIOR QUARTERS LLC
PROMETHEUS ACQUISITION CORP.
Ladies and Gentlemen:
Reference is made to that certain Amended and Restated Agreement and Plan of
Merger (the "Amended and Restated Merger Agreement") of even date herewith,
among Prometheus Senior Quarters LLC (the "Parent"), Prometheus Acquisition
Corp. (the "Merging Corporation"), and Kapson Senior Quarters Corp. (the
"Company"), pursuant to which Investor shall acquire Company pursuant to a
tender offer of all of the outstanding shares of the Company and the Merging
Corporation shall merge with and into the Company. Capitalized terms used
herein and not otherwise defined shall have the meanings ascribed thereto in
the Amended and Restated Merger Agreement.
The Kapson Licensed Home Care Services Agency ("KLHCSA") provides services to
several of the New York facilities and is seeking to expand its license to
additional counties in order to provide services to additional New York
facilities. KLHCSA's license, which is granted by the New York Department of
Health ("NYDOH"), is held in the name of the Kapson Group, a partnership
comprised of Wayne, Evan and Glenn Kaplan (the "Kaplans") jointly. The Kaplans
agree to use their reasonable best efforts to obtain regulatory approval for
and to arrange for the transfer of responsibility for the operation of KLHCSA
to the Company promptly after the Effective Time. Review of such transfer
application by NYDOH may take a considerable period of time. The Kaplans shall
cause KLHCSA to maintain its existing business arrangements with the Company
or any of its subsidiaries until the ownership of KLHCSA is transferred to the
Company.
<PAGE>
Please confirm that this letter correctly sets forth our agreement by signing
a counterpart copy where designated below.
Very truly yours,
KAPSON SENIOR QUARTERS CORP.
By: /s/ Glenn Kaplan
---------------------------
Title: Chairman and Chief Executive Officer
GLENN KAPLAN
/s/ Glenn Kaplan
- --------------------------------
WAYNE L. KAPLAN
/s/ Wayne L. Kaplan
- --------------------------------
EVAN A. KAPLAN
/s/ Evan A. Kaplan
- ---------------------------------
AGREED:
PROMETHEUS SENIOR QUARTERS LLC
By: LF STRATEGIC REALTY
INVESTORS II L.P., its Sole Member
By: LAZARD FRERES REAL ESTATE PROMETHEUS ACQUISITION CORP.
INVESTORS L.L.C.,
its General Partner
By: /s/ Robert P. Freeman By: /s/ Robert P. Freeman
------------------------ --------------------------
Robert P. Freeman Robert P. Freeman
Principal President
<PAGE>
LAZARD FRERES REAL ESTATE
INVESTORS, L.L.C.
30 Rockefeller Center, 63rd Floor
New York, N.Y. 10020
------
Telephone (212) 632-6017
October 29, 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") and Prometheus Assisted
Living LLC ("Prometheus") are parties 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 Stockholder Agreement) have consented to such ownership
(the "Required Board Approval").
Based on a letter agreement dated September 30, 1997 (the "Original Letter
Agreement"), the Company consented (with the Required Board Approval) to a
one-time waiver to the Non-Compete Covenant to permit an investment by an
affiliate of LFREI (the "Kapson Investment") in Kapson Senior Quarters, Corp.
("Kapson"). Subsequent to that date and the announcement of the proposed Kapson
Investment, the parties have agreed, among other things, to amend the Original
Letter Agreement as set forth herein.
The substantive terms of the Original Letter Agreement are hereby amended and
restated as follows:
Subject to the consummation of the Kapson Investment, LFREI and Prometheus agree
to the following (each of which shall terminate at (i) the time of a Termination
Event (as defined in the Stockholders Agreement as amended and restated on
October 29, 1997 (the "Amended Stockholders Agreement")) or (ii) the time, after
the consummation of the Kapson Investment, LFREI or its affiliates owns 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 that time) without the
written consent of a majority of the independent non-LFREI affiliated or
appointed members of the ARV Board of Directors, which consent may be withheld
at the sole discretion of those directors; provided that upon the funding of
that certain $60,000,000 6 3/4% Convertible Subordinated Note due 2007 by LFREI
or an affiliate this paragraph shall terminate and be of no further effect.
2) Right of First Offer. After the closing of the Kapson Investment, 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, upon
commercially reasonable notice, before Kapson enteres into binding site
contracts.
<PAGE>
The Board of Directors
ARV Assisted Living, Inc.
October 29, 1997
Page 2
3) Existing Facilities and Developments. LFREI and Prometheus will seek in
good faith to negotiate with ARV for the 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." LFREI
and Prometheus will agree not to enter into or permit Kapson or any of their
respective affilites 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 commercially reasonable and
customary terms.
4) Option. LFREI hereby grants to ARV (or 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 at
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 completion of the Kapson Investment (or, 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 and
home health care would in all likelihood remain at ARV. Savings resulting from
this alliance will be shared by the two companies.
6) Press Releases. The Company and LFREI will have the right to review and
comment on all press releases regarding the foregoing arrangement for a period
from the date hereof through October 29, 1998. 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) of Kapson
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 net to be
unreasonably withheld or delayed.
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 Amended Stockholders
Agreement) directors of ARV.
The parties hereby agree that if mutually agreeable arrangements regarding the
matters set forth in paragraph 3 above are not entered into by the later of
three months following the closing of the Kapson Investment or May 1, 1998, then
this letter agreement shall terminate without further obligation of any party.
<PAGE>
The Board of Directors
ARV Assisted Living, Inc.
October 29, 1997
Page 3
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.
<PAGE>
The Board of Directors
ARV Assisted Living, Inc.
October 29, 1997
Page 4
Very truly yours,
LAZARD FRERES REAL ESTATE INVESTORS L.L.C.
By: /s/ Robert P. Freeman
---------------------------------------
Robert P. Freeman
President
PROMETHEUS ASSISTED LIVING L.L.C.
By: LAZARD FRERES REAL ESTATE INVESTORS, L.L.C.
By: /s/ Robert P. Freeman
---------------------------------------
Robert P. Freeman
President
ACKNOWLEDGED AND AGREED:
ARV ASSISTED LIVING, INC.
By: /s/ Sheila Muldoon
---------------------------------------
Sheila Muldoon
Authorized Signatory
