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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of report (date of earliest event reported): October 13, 1997
ARV ASSISTED LIVING, INC.
(Exact name of Registrant as specified in charter)
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CALIFORNIA 33-0160968
(State or other jurisdiction of 000-26980 (I.R.S. Employer
incorporation) (Commission File Number) Identification Number)
245 FISCHER AVENUE 92626
SUITE D-1 (Zip Code)
COSTA MESA, CALIFORNIA
(Address of principal executive offices)
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Registrant's telephone number, including area code: (714) 751-7400
None
(Former name or former address, if changed since last report)
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ITEM 5: OTHER EVENTS
Effective as of October 13, 1997, Gary L. Davidson, resigned from his
offices as Chairman, CEO and President of ARV Assisted Living, Inc. (the
"Company"), and as director of the Company. John J. Rydzewski, one of the
outside directors, has been appointed Chairman of the Board, and John A. Booty,
the co-founder and former President of the Company, and a director of the
Company, has been appointed President and Chief Executive Officer of the Company
on an interim basis. The Company is continuing its search for a permanent
President and Chief Operating Officer and has begun a search of a new Chief
Executive Officer.
In connection with Mr. Davidson's resignation, the Company and Mr.
Davidson entered into a Confidential Separation Agreement dated as of October
13, 1997 (the "Separation Agreement"). Under the Separation Agreement, Mr.
Davidson will be paid approximately $1,052,200 in two equal installments, the
first to be paid no later than October 24, 1997 and the second to be paid on the
earliest of (i) April 12, 1997, (ii) the vote of the Company's shareholders on
the proposed transaction with Prometheus Assisted Living LLC in which Prometheus
will purchase up to 49.9% of the Company's common stock at $14 per share (the
"Prometheus Transaction") and (iii) a determination by the Company's Board of
Directors not to seek shareholder approval of the Prometheus Transaction (the
"Second Payment Date").
The Separation Agreement provides that until to the Second Payment
Date, Mr. Davidson (i) will not solicit, encourage or endorse any Competing
Transaction (as defined in the Stock Purchase Agreement dated July 14, 1997, as
amended, among the Company, Prometheus and Lazard Freres Real Estate Investors
L.L.C.) and (ii) will not sell or otherwise transfer his shares of common stock
of the Company unless the recipient agrees to vote the transferred shares in
favor of the Prometheus Transaction and related matters. The agreement also
contains customary non-disparagement and confidentiality provisions.
Concurrently with the execution of the Separation Agreement, Mr. Davidson and
the Company executed a mutual release of all claims against one another.
A copy of the Separation Agreement is attached hereto as Exhibit 10.1.
ITEM 7: FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits
NUMBER EXHIBIT
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10.1 Confidential Separation Agreement, dated as of October 13,
1997, between the Company and Gary L. Davidson
99.1 Press Release, dated October 15, 1997 by the Company
announcing the resignation of Gary L. Davidson
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DATE: October 22, 1997 ARV ASSISTED LIVING, INC.
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By: /s/ Sheila M. Muldoon
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Sheila M. Muldoon
Vice President and
General Counsel
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EXHIBIT INDEX
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NUMBER EXHIBIT PAGE
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10.1 Confidential Separation Agreement, dated as of October 13, 1997, E-1
between the Company and Gary L. Davidson
99.1 Press Release, dated October 15, 1997 by the Company announcing E-10
the resignation of Gary L. Davidson
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EXHIBIT 10.1
CONFIDENTIAL SEPARATION AGREEMENT
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THIS CONFIDENTIAL SEPARATION AGREEMENT ("Agreement") is made and
entered into as of October 13, 1997, (the "Date of this Agreement") by and
between Gary L. Davidson ("Employee") and ARV Assisted Living, Inc. (the
"Company").
RECITALS
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A. WHEREAS Employee and the Company are parties to an Employment
Agreement dated October 1, 1995 and amended as of April 23, 1997 (the
"Employment Agreement").
B. WHEREAS Employee and the Company desire to specify the terms of
Employee's resignation from his employment with the Company.
AGREEMENT
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NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
promises contained herein, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
1. Resignation. Employee hereby tenders his resignation as Chairman of
the Board, Chief Executive Officer and President of the Company and as a member
of the Company's Board of Directors and from all offices and directorships of
subsidiaries of the Company, in each case effective October 13, 1997. Employee
agrees to execute appropriate documents to accomplish his resignation in any
partnership affiliated with the Company upon request. Employee understands and
agrees that all benefits of employment for Employee cease as of that date;
however, Employee shall be eligible to continue his healthcare and dental
benefits in accordance with COBRA at the Company's expense.
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2. Payments to Employee. Not later than ten (10) days after execution
of this Agreement by Employee, the Company will pay to Employee $526,099.41,
less amounts required to be withheld under state or federal law (the "Initial
Payment"). On the earlier of the 180th day after the Date of this Agreement, the
shareholder vote on the Lazard Investment or the determination by the Board of
Directors of the Company not to have a shareholder vote on the Lazard Investment
(but in no event earlier than January 2, 1998), the Company shall make a second
payment to Employee in an amount equal to the Initial Payment (the "Second
Payment"). The Company shall also reimburse Employee for reasonable attorney's
fees incurred by him in negotiating this Agreement in an amount not to exceed
$20,000. Employee shall be paid any accrued, unused vacation within 72 hours of
the date of this Agreement, and shall be reimbursed for all business expenses
incurred on or before October 13, 1997 in connection with Company business in
accordance with the Company's regular practice and/or policy. Employee will
tender all claims and receipts of reimbursement no later than November 30, 1997.
3. Execution of Release. Concurrently with the execution of this
Agreement, Employee will execute a release of all claims against the Company in
the form attached hereto as Exhibit A. This Agreement shall be null and void in
its entirety if Employee fails to execute a release of all claims in the form
attached hereto as Exhibit "A", or if Employee revokes that release in
accordance with its terms.
4. Termination of Employment Agreement. Employee acknowledges and
agrees that all rights he may have had under the Employment Agreement are hereby
terminated in their entirety, including without limitation, Employee's rights to
compensation, bonuses, benefits and severance pay. Employee acknowledges the
amounts paid under this Agreement are paid in lieu of any amounts due to
Employee under the Employment Agreement. Employee
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expressly acknowledges that he has complied, and will continue to comply in the
future, with his obligations under Paragraphs 6 and 7.4 of the Employment
Agreement which survive the termination of that Agreement. Provided, however,
that Employee may retain the computer and fax machine provided by the Company
for use at his home; the fax machine provided by the Company for use at his
desert home; and the cellular phone provided him by the Company. Employee shall
be provided access to his former office to remove personal items provided such
removal is completed within 10 days of the Date of this Agreement.
5. Nondisparagement. Employee and the Company agree not to make any
public statement disparaging each other and Employee agrees not to make any
public statement disparaging the products, services, business practices,
business strategies or other activities of the Company. Employee further agrees
not to make any materially disparaging comment concerning any and all present
and future arrangements between the Company and Lazard Freres Real Estate
Investors L.L.C. ("LFREI"), Prometheus Assisted Living L.L.C. ("Prometheus") and
any affiliates (the "Lazard Investment"). Employee understands and agrees that
his agreement contained in the immediately preceding sentence is a material term
of this Agreement, and that in the event of a breach of such agreement by
Employee, if the arbitrator so rules, Employee will not be entitled to receive
the Second Payment or will be obligated to return the Second Payment if it has
been made.
6. Confidential Information. Employee also acknowledges his obligation
to maintain as confidential and not to use for any purpose non-public
information he has received concerning the business plans of the Company;
personnel information regarding its employees; and any other trade secret or
proprietary information of the Company. Any dispute concerning this provision
shall be resolved in accordance with the provisions of Paragraph 20; provided,
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however, that in addition to the powers granted to the arbitrator and procedures
set forth therein, the arbitrator shall have the power to grant injunctive
relief and sanctions, including, without limitation, sanctions against the
Employee not to exceed the amount paid to Employee pursuant to this Agreement.
7. Lazard Investment. Until the earlier of the shareholder vote on the
Lazard Investment; the determination by the Board of Directors of the Company
not to have a shareholder vote on the Lazard Investment; or 180 days after the
Date of this Agreement, Employee agrees not to, directly or indirectly,
initiate, solicit or knowingly encourage (including by way of furnishing
non-public information or assistance or otherwise), or take any other action to
facilitate knowingly, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, a Competing Transaction
(as defined in the certain Stock Purchase Agreement dated July 14, 1997 by and
among the Company, Lazard and Prometheus, as such agreement may be amended from
time to time), or enter into or maintain or continue discussions or negotiate
with any person or entity in furtherance of such inquiries or to obtain a
Competing Transaction, or agree to or endorse any Competing Transaction or
authorize or knowingly permit any of his representatives to take any such
action. From the Date of this Agreement until the earlier of (i) the shareholder
vote on the Lazard Investment, (ii) 180 days after the Date of this Agreement
and (iii) a determination by the Board of Directors of the Company not to seek
shareholder approval of the Lazard Investment (the "Restricted Period"),
Employee agrees not to sell or otherwise transfer any of his shares of common
stock of the Company or grant a proxy with respect to any matters which may be
presented to the shareholders of the Company; provided, however, that Employee
may, subject to his obligations under that certain Stockholders' Voting
Agreement dated July 14, 1997 between the Company
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and Prometheus Assisted Living LLC, sell or otherwise transfer his shares of
common stock of the Company during the Restricted Period so long as each
recipient of the sold or transferred shares enters into a written agreement with
Lazard in the form attached hereto as Exhibit B pursuant to which such person or
entity agrees to vote the transferred shares in favor of the Lazard Investment
during the Restricted Period.
8. Approval of Press Release. Prior to issuing a press release
concerning Employee's resignation, the Company shall submit such press release
to Employee for his review. Employee may approve, or disapprove, the form of
press release, provided, however, that such approval shall not be unreasonably
withheld. In the event that Employee fails to approve or disapprove the press
release on the day which it is tendered to him, the Company may issue such press
release without Employee's approval.
9. Review of Proposed Proxy Disclosure. At least 24 hours prior to
filing with the Securities and Exchange Commission the revised proxy statement
relating to, among other things, the Lazard Investment, the Company shall submit
to Employee for his review a draft of the disclosure in such proxy statement
that relates to Employee's resignation. The Company shall not be required to
obtain Employee's approval of such disclosure.
10. E-Mail from Employee. Employee shall be entitled to issue one all
employee e-mail concerning his resignation. Employee shall submit the contents
of the e-mail in draft form to Jim Peters, a member of the Board of Directors at
the Company, for his review. Mr. Peters shall review the e-mail and notify
Employee of his approval or disapproval of the e-mail on the business day on
which it is tendered to him. Mr. Peters' approval shall not be unreasonably
withheld.
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11. Voting Agreement. Employee agrees to continue to honor the terms of
that certain Stockholders' Voting Agreement dated July 14, 1997 entered into
between him and LFREI, Prometheus and certain other stockholders of the Company.
12. Stock Options. Employee acknowledges that all options which have
not vested as of October 13, 1997 are terminated and Employee has no rights
thereunder. As of this Date of this Agreement, Employee has 33,695 vested
non-qualified options with an exercise price of $14 per share (the "Vested
Options"). The Company will allow Employee to exercise the Vested Options
through the earlier of the 30th day after a shareholders' vote on the Lazard
Investment or the determination by the Board of Directors of the Company not to
have a shareholder vote on the Lazard Investment; or 180 days after the Date of
this Agreement (but in no event earlier than the 150th day after the Date of
this Agreement).
13. Specific Performance. Employee and the Company agree that a
monetary remedy for a breach of Paragraphs 4, 5, 6, 7 and 10 of this Agreement
will be inadequate and will be impracticable and extremely difficult to prove,
and further agree that such a breach would cause the Company irreparable harm
and that the Company shall be entitled to temporary and permanent injunctive
relief without the necessity of proving actual damages. Employee agrees that the
Company shall be entitled to such injunctive relief, including temporary
restraining orders, preliminary injunctions and permanent injunctions, without
the necessity of posting bond or other undertaking in connection therewith. Any
such requirement of bond or undertaking is hereby waived by Employee and
Employee agrees that in the absence of such a waiver, a bond or undertaking may
be required by the court. Such remedy shall not be exclusive and shall be in
addition to any other remedy to which the Company may be entitled.
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14. Waiver of Breach. Waiver by Employee or the Company of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach by either party.
15. Successors and Assigns. This Agreement shall be binding upon the
Company and its successors and assigns, and shall inure to the benefit of
Employee's heirs, executors and administrators.
16. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original and all of which taken together shall
constitute but one and the same instrument.
17. Severability. The provisions of this Agreement are severable, and
if any part of it is found to be unenforceable, the other paragraphs shall
remain fully valid and enforceable.
18. No Admission. Nothing contained in this Agreement shall be
construed in any way as an admission by the Company or Employee that it or he
has acted wrongfully with respect to the other or with respect to any other
person, and the Company or Employee specifically disclaims any liability to, or
wrongful acts against the other, on the part of itself or its or his
representatives, affiliates, associates, employees or agents.
19. No Charges or Actions. Employee and the Company represent and agree
that he and it have not filed any notices, complaints, charges or lawsuits of
any kind whatsoever against the other with any court, any governmental agency or
any other regulatory body, and will not do so at any time hereafter with regard
to any matter related to or arising out of Employee's employment by the Company
or its affiliates, or his resignation thereof; provided, however, that the
foregoing shall not preclude or limit Employee or the Company in any way from
enforcing
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his or its rights under this Agreement or from taking any actions required by
law to be taken by him or it, nor shall this Agreement prohibit Employee from
seeking unemployment compensation which the Company will not contest.
20. Arbitration. Except for claims for equitable or injunctive relief,
the parties hereby agree to submit any claim or dispute arising out of the terms
of this Agreement (including exhibits) and/or any dispute arising out of or
relating to Employee's employment with the Company in any way, to private and
confidential arbitration by a single neutral arbitrator. Subject to the terms of
this paragraph, the arbitration proceedings shall be governed by the then
current JAMS Employment Arbitration Rules, and shall take place in Orange
County, California. The arbitrator shall be selected as follows: JAMS shall
provide the parties with a list of eleven (11) arbitrators drawn from its panel
of employment dispute arbitrators; each party may strike all names on the list
it deems unacceptable. If only one common name remains on the lists of all
parties, that individual shall be designated as the arbitrator. If more than one
common name remains on the lists of all parties, the parties shall strike names
alternately from the list of common names until only one remains. The party who
did not initiate the claim shall strike first. If no common name exists on the
lists of the parties, then the parties shall strike alternately from a second
list, with the party initiating the claim striking first, until only one name
remains. That person shall be designated as the arbitrator. The decision of the
arbitrator shall be final and binding on all parties to this Agreement, and
judgment thereon may be entered in any court having jurisdiction. The Company
will advance the arbitrator's fee; however, all costs of the arbitration
proceeding or litigation to enforce this Agreement, including attorneys' fees
and witness expenses, shall be paid as the arbitrator or court awards. Except
for claims for equitable
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or injunctive relief, this arbitration procedure is intended to be the exclusive
method of resolving any claim relating to the obligations set forth in this
Agreement (including exhibit "A" hereto).
21. Sole and Entire Agreement. This Agreement represents the sole and
entire agreement among the parties and supersedes all prior agreements,
negotiations, and discussions between the parties hereto and/or their respective
counsel with respect to the subject matters covered thereby. Any amendment to
this Agreement must be in writing, signed by duly authorized representatives of
the parties, and stating the intent of the parties to amend this Agreement.
22. California Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of California.
23. Representation by Counsel. Because both parties have had an
opportunity to be represented by counsel and this Agreement was negotiated at
arms length, the usual presumption that an agreement be interpreted against the
drafter shall not apply.
WHEREOF, the parties hereto have each executed this Agreement as of the
date first above written.
/s/ Gary L. Davidson
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Gary L. Davidson
ARV Assisted Living, Inc.
By: /s/ John A. Booty
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Name: John A. Booty
Title: President & CEO
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EXHIBIT 99.1
FOR IMMEDIATE RELEASE CONTACT: OWEN BLICKSILVER
PRINCIPAL COMMUNICATIONS
(212) 303-7603
GARY DAVIDSON RESIGNS AS CHAIRMAN, CHIEF EXECUTIVE OFFICER
AND PRESIDENT OF ARV ASSISTED LIVING
COSTA MESA, CA, OCTOBER 15, 1997 -- ARV Assisted Living, Inc. (NASDAQ: ARVI)
today announced that Gary L. Davidson has resigned from his offices as Chairman,
Chief Executive Officer and President of the Company and as a director of the
Company. John J. Rydzewski, one of the outside directors, has been appointed
Chairman of the Board, and John A. Booty, the co-founder and former President of
the Company and a director of the Company, will become President and Chief
Executive Officer on an interim basis. The Company will continue its current
search for a permanent President and Chief Operating Officer and begin a search
for a new Chief Executive Officer.
Upon his resignation, Mr. Davidson reconfirmed his agreement to vote for the
Company's proposed transaction with Prometheus Assisted Living LLC in which
Prometheus will purchase up to 49.9% of the Company's common stock at $14 per
share.
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