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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 1)
ARV Assisted Living, Inc.
(Name of Company)
Common Stock, No Par Value
(Title of Class of Securities)
00204C107
(CUSIP Number)
Lorenzo Lorenzotti
Prometheus Assisted Living LLC
Lazard Freres Real Estate Investors L.L.C.
30 Rockefeller Plaza, 63rd Floor
New York, NY 10020
(212) 632-6000
with a copy to:
Kevin Grehan, Esq.
Cravath, Swaine & Moore
825 Eighth Avenue
New York, NY 10019
(212) 474-1490
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(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
September 30, 1997
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule
13G to report the acquisition which is the subject of this
Schedule 13D, and is filing this schedule because of Rule
13d-1(b)(3) or (4), check the following box [ ].
Note: six copies of this statement, including all exhibits,
should be filed with the Commission. See Rule 13d-1(a) for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a
reporting person's initial filing on this form with respect to
the subject class of securities, and for any subsequent amendment
containing information which would alter disclosures provided in
a prior cover page.
The information required on the remainder of this cover page
shall not be deemed to be "filed" for the purpose of Section 18
of the Securities Exchange Act of 1934 ("Act") or otherwise
subject to the liabilities of that section of the Act but shall
be subject to all other provisions of the Act (however, see the
Notes).
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Page 1 of 11
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SCHEDULE 13D
CUSIP No. 00204C107 Page 2 of 11 Pages
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1 NAME OF REPORTING PERSON
SS OR IRS IDENTIFICATION NO OF ABOVE PERSON
Prometheus Assisted Living LLC
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*(a)[ ]
(b) x
3 SEC USE ONLY
4 SOURCE OF FUNDS*
AF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(E) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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NUMBER OF 7 SOLE VOTING POWER
SHARES 9,653,325
BENEFICIALLY
OWNED BY EACH 8 SHARED VOTING POWER
REPORTING -0-
PERSON WITH
9 SOLE DISPOSITIVE POWER
9,653,325
10 SHARED DISPOSITIVE POWER
-0-
- ------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
9,653,325 shares of Common Stock*
*Assuming consummation of the purchase of all shares of
Common Stock to be purchased pursuant to the Stock Purchase
Agreement attached as an exhibit hereto.
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES [ ]
CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 49.98%,
based upon number of shares of Common Stock outstanding on
March 31, 1997 and assuming consummation of the purchase of
all shares of Common Stock to be purchased pursuant to the
Stock Purchase Agreement attached as an exhibit hereto.
14 TYPE OF REPORTING PERSON*
OO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 2 of 11
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SCHEDULE 13D
CUSIP No. 00204C107 Page 3 of 11 Pages
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1 NAME OF REPORTING PERSON
SS OR IRS IDENTIFICATION NO OF ABOVE PERSON
Lazard Freres Real Estate Investors L.L.C.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)[ ]
(b) x
3 SEC USE ONLY
4 SOURCE OF FUNDS*
WC, BK
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(E) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
New York
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NUMBER OF 7 SOLE VOTING POWER
SHARES 9,653,325
BENEFICIALLY
OWNED BY EACH 8 SHARED VOTING POWER
REPORTING -0-
PERSON WITH
9 SOLE DISPOSITIVE POWER
9,653,325
10 SHARED DISPOSITIVE POWER
-0-
- ---------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
9,653,325 shares of Common Stock*
*Assuming consummation of the purchase of all shares of
Common Stock to be purchased pursuant to the Stock Purchase
Agreement attached as an exhibit hereto.
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN [ ]
SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
49.98%, based upon number of shares of Common Stock outstanding on
March 31, 1997 and assuming consummation of the purchase of
all shares of Common Stock to be purchased pursuant to the
Stock Purchase Agreement attached as an exhibit hereto.
14 TYPE OF REPORTING PERSON*
OO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 3 of 11
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This Amendment No. 1 to Schedule 13D is filed by
Prometheus Assisted Living LLC, a Delaware limited liability
company ("Prometheus"), and by Lazard Freres Real Estate
Investors L.L.C., a New York limited liability company ("LFREI").
Capitalized terms used herein but not defined have the meanings
assigned to such terms in the Schedule 13D dated as of July 14,
1997, filed by Prometheus and LFREI (the "Initial Schedule 13D").
As previously reported in the Initial Schedule 13D,
pursuant to the Stock Purchase Agreement among Prometheus, LFREI
and ARV Assisted Living Inc. (the "Company"), subject to the
terms and conditions thereof, Prometheus has agreed to purchase
up to 9,653,325 shares of Common Stock of the Company. This
amendment relates solely to the acquisition of substantially all
of the stock of Kapson Senior Quarters Corp. ("Kapson") by an
affiliate of LFREI (the "Kapson Investment"). The Initial
Schedule 13D is amended as follows:
Item 4. Purpose of Transaction
The reference in the sixth paragraph of Item 4 to the
date "December 31, 1997" is hereby deleted and the date "February
15, 1998" is inserted in lieu thereof. The reference in the sixth
paragraph of Item 4 to the date "January 31, 1998" is hereby
deleted and the date "March 15, 1998" is inserted in lieu
thereof.
Item 6. Contracts, Arrangements, Understandings or
Relationships with Respect to Securities of the
Company
The fifth paragraph of Item 6 is hereby deleted in its
entirety and the following is replaced in lieu thereof:
Under the terms of the Stockholders Agreement,
Prometheus, LFREI and certain of their affiliates shall be
restricted from owning any equity interest in any public or
private company engaged primarily in the assisted living business
in the United States without the consent of 75% of the directors
of the Company, excluding those nominated by Prometheus. On
September 30, 1997, the Board of Directors of the Company
unanimously consented to allow LFREI to proceed with the Kapson
Investment. LFREI expects that the Kapson Investment, if
consummated, will result in a strategic alliance between the
Company and Kapson in which the Company will, among other things,
manage, lease and/or purchase certain of Kapson's existing and
future facilities.
Page 4 of 11
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Under the terms of a letter agreement dated September
30, 1997 (the "Letter Agreement"), LFREI has agreed that if it
consummates the Kapson Investment and the Company obtains
Stockholder Approval, then:
(i) Kapson will be prohibited from developing or
acquiring any new facilities (other than those in its pipeline at
the time of the closing of the Kapson Investment) without the
written consent of a majority of the independent non-LFREI
affiliated or appointed members of the Company's Board of
Directors, which consent may be withheld at the sole discretion
of those directors;
(ii) the Company will have the first right to negotiate
management, lease and/or purchase arrangements on any new
developments or acquisitions by Kapson;
(iii) LFREI will seek in good faith to negotiate with
the Company for leasing or management agreements of all existing
or currently-planned facilities of Kapson;
(iv) LFREI will not enter into or permit Kapson to enter
into any leasing or management arrangements on Kapson's existing
facilities other than with the Company or a Kapson affiliate;
(v) LFREI will grant to the Company or the Company's
shareholders, at the Company's option, the right to acquire from
LFREI shares representing up to 19.9% of the stock of Kapson at
the pro rata amount of LFREI's investment in Kapson for a period
of 30 days after the later of the completion of the Kapson
Investment and the Second Closing; and
(vi) LFREI will explore a joint venture arrangement
between the Company and Kapson which would combine the corporate
management of the Company and Kapson in a separate management
company jointly owned by Kapson and the Company to achieve
economies of scale.
LFREI represented to the Company in the Letter Agreement that,
upon completion of the Kapson Investment, it will have the
necessary authority to cause Kapson to enter into all of the
arrangements described above. All transactions between the
Company and Kapson after consummation of the Kapson Investment
will require approval from the directors of both companies who
are not affiliated with LFREI. All references to the Letter
Agreement are qualified in their entirety by the full text of
such agreement, a copy of which is attached as an Exhibit hereto.
Page 5 of 11
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Item 7. Material to be Filed as Exhibits
The following paragraph is hereby inserted as the last
paragraph in Item 7:
Exhibit 8: Letter from LFREI to the Board of
Directors of the Company dated September
30, 1997, relating to the Kapson
Investment.
After reasonable inquiry and to the best of my knowledge
and belief, I certify that the information set forth in this
statement is true, complete and correct.
PROMETHEUS ASSISTED LIVING LLC
by Lazard Freres Real Estate
Investors L.L.C., as sole member,
by /s/ Murry N. Gunty
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Name: Murry N. Gunty
Title: Vice President
LAZARD FRERES REAL ESTATE INVESTORS L.L.C.
by /s/ Murry N. Gunty
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Name: Murry N. Gunty
Title: Vice President
Page 6 of 11
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Exhibit A
[Letterhead of]
LAZARD FRERES REAL ESTATE
INVESTORS, L.L.C.
September 30, 1997
The Board of Directors
ARV Assisted Living, Inc.
245 Fischer Avenue D-1
Costa Mesa, CA 92626
Gentlemen:
Lazard Freres Real Estate Investors, L.L.C. ("LFREI") is
a party to a Stockholders Agreement (the "Stockholders
Agreement") with ARV Assisted Living, Inc. (the "Company") dated
as of July 14, 1997, pursuant to which, among other matters,
LFREI agreed not to own any equity interest in any public or
private company, the principal business of which is the
ownership, management, operation and development of assisted
living facilities (the "Non-Compete Covenant"), unless 75% of the
members of the Board of Directors of the Company (other than the
Investor Nominees (as such term is defined in the Stockholder
Agreement)), have consented to such ownership, (the "Required
Board Approval").
As you know, LFREI is considering making an investment
in Kapson Senior Quarters, Corp. (the "Kapson Investment"). The
purpose of this letter is to request a waiver from the Non-
Compete Covenant specified in Section 5.1 of the Stockholders
Agreement with respect to the potential Kapson transaction. It is
our intention and we acknowledge your reliance on this intention
in granting the waiver contemplated hereby, to cause Kapson to
enter into the following arrangement.
As consideration for the agreement by the Board of
Directors to waive the Non-Compete Covenant with respect to the
proposed Kapson Investment, effective as of obtaining the
Required Board Approval, in the form attached hereto as Exhibit
A, and the receipt by the Company of the required shareholder
approval to increase LFREI's investment in the Company up to
49.9%, in the event LFREI consummates the Kapson transaction,
LFREI agrees to the following (each of which shall terminate at
(i) the time of a Termination Event (as defined in the
Stockholder's Agreement) or (ii) the time LFREI and its
affiliates collectively own less than 10% of the stock of
Kapson):
Page 7 of 11
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1. Consent Rights: After the closing of the Kapson
Investment, LFREI will not permit Kapson to and will cause Kapson
to enter into an agreement with ARV under which Kapson will agree
not to, enter into any new developments or acquisitions (other
than those in its pipeline at the closing of the Kapson
Investment as disclosed in a schedule to be delivered at the
time) without the written consent of a majority of the
independent non-LFREI affiliated or appointed members of the ARV
Board of Directors, which consent may be withheld at the sole
discretion of those directors.
2. Right of First Offer: Without limiting the foregoing,
ARV will have a first right to negotiate management, lease and/or
purchase arrangements on terms commercially reasonable to both
parties on any new developments or acquisitions by Kapson, each
right to be exercised by ARV before Kapson enters into binding
site contracts.
3. Existing Facilities and Developments: LFREI will seek
in good faith to negotiate with ARV for, leasing or management
agreements, on commercially reasonable and customary terms, of
all existing or planned facilities of Kapson including those in
the above-described "pipeline" (the "Existing Asset Option").
LFREI agrees it will not enter into or permit Kapson or any of
their respective affiliates to enter into leasing or management
arrangements on the existing facilities (excluding sale
leasebacks, so long as such sale leasebacks would permit ARV to
sublease or manage such facilities) other than with ARV or
controlled affiliates of Kapson.
ARV will have the option to sell development assets to
Kapson at fair market value with the right to leaseback the
assets on terms as described herein providing fair compensation
to both parties.
4. Option: LFREI will grant to ARV (or to its
shareholders, the selection to be made at ARV's option provided
mutual agreement of ARV and LFREI that such purchase by ARV
directly will not adversely affect Kapson's tax and accounting
status) the right to acquire from LFREI shares representing up to
19.9% of the stock of Kapson at the pro rata amount of LFREI's
all-in cost (defined as LFREI's total equity investment in Kapson
at the close of the Kapson Investment including reasonable
capital carrying costs relating to the Kapson Investment) for a
period of 30 days after the later of the completion of the Kapson
Investment or second closing of the LFREI Investment in ARV as
defined in the Stock Purchase Agreement dated July 14, 1997,
between LFREI and ARV (and, if ARV elects to have its
shareholders exercise this option, 30 days after a registration
statement is declared effective with respect to the option). The
term of this option will not extend beyond the timing described
in this paragraph despite LFREI's ongoing ownership of Kapson.
Page 8 of 11
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5. Joint Venture: LFREI will explore a joint
arrangement, on commercially reasonable terms, between the
Company of Kapson which would house top corporate management of
both firms to achieve economies of scale. The management company
would be jointly owned by the Company and Kapson. Development
personnel and activities would in all likelihood remain at
Kapson. Operating personnel and home health care would in all
likelihood remain at ARV. Savings resulting from this alliance
will be shared by the two companies. LFREI will also explore
having Kapson acquire ARV's development projects.
6. Press Release:The Company and LFREI will have the
right to review and comment on all press releases, regarding the
foregoing arrangements for a period from the date hereof. No such
press releases regarding the foregoing arrangements shall be made
without the written consent of the Company and LFREI.
7. Public Disclosures: The Company will have the right
to review and comment on all public disclosures (e.g., proxy
material, 10-K) regarding the foregoing arrangements for a period
from the date hereof through six months following the close of
the Kapson Investment. No such statement in the public
disclosures regarding the foregoing arrangements, shall be made
without the written consent of the Company, such consent not to
be unreasonably withheld or delayed.
8. Shareholder Vote: Section 5.2 of the Stockholders
Agreement and Sections 2.8, 5.1(c), 9.1, and 9.3(b) of the Stock
Purchase Agreement to which LFREI and the Company are parties,
dated as of July 14, 1997, are hereby amended to substitute the
date of February 15, 1998, for the date of December 31, 1997, as
the day on or prior to which a meeting at which the stockholders
of the Company are asked to vote upon the transactions
contemplated therein shall have duly occurred. Further, Section
9.3(b) of the Stock Purchase Agreement is amended to substitute
the date of March 15, 1998, for the date of January 31, 1998, as
the date by which the Second Closing (as defined therein) shall
have occurred.
LFREI hereby represents that, upon completion of the
Kapson Investment, it shall have the authority to cause Kapson to
enter into all of the foregoing arrangements. With respect to the
foregoing arrangements, it is agreed that all negotiations,
determinations, consents and elections by ARV shall be made by a
majority of the Non-Investor Nominee (as defined in the
Stockholder's Agreement) directors of ARV. It is specifically
agreed that any such determination shall not be subject to the
provisions of the Stockholder's Agreement or any other agreement
between LFREI and ARV regarding the Executive Committee of the
Company or the supermajority voting requirements of the Board of
Directors or other similar rights.
Page 9 of 11
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LFREI believes strongly that a strong alignment of
interests between LFREI, Kapson, and ARV and the synergies that
could be created by a strategic alliance between these two
industry players, will significantly benefit all shareholders of
ARV and Kapson, including LFREI as their largest shareholder.
Very truly yours,
LAZARD FRERES REAL ESTATE
INVESTORS, L.L.C.
By: /s/ Robert P. Freeman
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Name: Robert P. Freeman
Title: President
Page 10 of 11
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Exhibit A
Form of Consent
The undersigned, constituting 75% of the Board of
Directors of ARV Assisted Living, Inc., hereby consent to the
LFREI investment in Kapson, as described in the attached letter
and subject to the terms and conditions set forth therein:
/s/Gary Davidson /s/David Collins
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Gary Davidson David Collins
/s/Bruce Andrews /s/John Rydzewski
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Bruce Andrews John Rydzewski
/s/Maurice DeWald /s/James Peters
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Maurice DeWald James Peters
/s/John Booty
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John Booty
September 30, 1997
Page 11 of 11
