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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 21, 1998
ARV ASSISTED LIVING, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 0-26980 33-0160968
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
245 Fischer Avenue, D-1
Costa Mesa, CA 92626
(Address of Principal Executive Offices and Zip Code)
(Registrant's telephone number, including area code): (714) 751-7400
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ITEM 5. OTHER EVENTS
TERMINATION EVENT
At a special meeting held on October 21, 1998 (the "Special Meeting"), the Board
of Directors (the "Board") of ARV Assisted Living, Inc. ("ARV"), declared that a
"Termination Event" had occurred on October 12, 1998, under the Amended and
Restated Stockholders Agreement (the "Stockholders Agreement"), dated October
29, 1997, among ARV, Prometheus Assisted Living LLC ("Prometheus"), and Lazard
Freres Real Estate Investors L.L.C. ("LFREI," and together with Prometheus, the
"Lazard Parties"). Prometheus is a controlled affiliate of LFREI, and with its
affiliates is ARV's largest stockholder.
Under the Stockholders Agreement, a "Termination Event" is defined as the date
on which either (i) the Lazard Parties no longer beneficially own a number of
shares of ARV Common Stock equal to at least 5% of the outstanding ARV Common
Stock or (ii) the Lazard Parties no longer beneficially own ARV Common Stock
having an aggregate market value of at least $25,000,000. Based on reports filed
by the Lazard Parties with the Securities and Exchange Commission, the Lazard
Parties beneficially own 7,595,069 shares of ARV Common Stock. On October 12,
1998, the closing price of ARV's Common Stock on the American Stock Exchange was
$2.75 per share, resulting in an aggregate market value for the Lazard Parties'
shares of $20,886,440, which is below the $25,000,000 threshold for a
Termination Event.
As a result of the Termination Event, the Lazard Parties no longer have certain
rights under the Stockholders Agreement, including (i) the right to designate
three nominees to the Board if the Board is a single class, and one designee per
class if the Board is divided into three classes and (ii) a participation right
to purchase or subscribe up to that number of additional shares of capital stock
issued or sold by ARV which represents the same proportion of the total number
of shares of capital stock to be issued or sold by ARV as is represented by the
number of shares of ARV Common Stock beneficially owned by the Lazard Parties
prior to such sale or issuance relative to the number of outstanding shares of
ARV Common Stock, on an adjusted fully diluted basis, prior to such sale or
issuance (but in no event more than 35.8% of the total number of shares of
capital stock to be issued or sold by ARV at all subsequent offerings).
The Termination Event also caused the termination of the requirement that the
number of directors on the Board shall not exceed nine at any time.
Effective on January 11, 1999, ninety days after the Termination Event, the
Standstill Period under the Stockholders Agreement will terminate, causing the
termination of the Lazard Parties' standstill obligations, including the
obligations not to (i) act in concert with any other person or "Group" (as such
term is used in Section 13(d)(3) of the Securities Exchange Act of 1934 (the
"1934 Act")) by becoming a member of a "13D Group" (defined as any group of
persons acquiring, holding, voting or disposing of voting securities which would
be required under Section 13(d) of the 1934 Act and the rules and regulations
thereunder (as in effect, and based on legal interpretations thereof existing,
on the date of the Stockholders Agreement) to file a statement on Schedule 13D
with the Securities and Exchange Commission as a "person" within
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the meaning of Section 13(d)(3) of the 1934 Act if such group beneficially owned
voting securities representing more than 5% of any class of voting securities
then outstanding), other than any 13D Group comprised exclusively of the Lazard
Parties and one or more of their Affiliates; (ii) purchase or otherwise acquire
shares of ARV Common Stock as a result of which, after giving effect to such
purchase or acquisition, the Lazard Parties and their controlled affiliates will
beneficially own in the aggregate more than 49.9% of the outstanding shares of
ARV Common Stock on an adjusted fully diluted basis; (iii) solicit, encourage or
propose to effect or negotiate any merger, consolidation, other business
combination, liquidation, sale of ARV or all or substantially all of ARV's
assets or any other change of control of ARV or similar extraordinary
transaction, subject to certain limited exceptions; (iv) solicit, initiate,
encourage or participate in any "solicitation" of "proxies" or become a
"participant" in any "election contest" (as such terms are defined or used in
Regulation 14A under the 1934 Act, disregarding clause (iv) of Rule 14a-1(l)(2)
and including an exempt solicitation pursuant to Rule 14a-2(b)(1)) or call, or
in any way encourage or participate in a call for, a special meeting of
stockholders of ARV, or request, or take action to obtain or retain, any list of
holders of any securities of ARV, or initiate or propose any stockholder
proposal or participate in or encourage the making of, or solicit stockholders
of ARV for the approval of, one or more stockholder proposals; (v) seek
representation on the Board or a change in the composition or size of the Board
(except pursuant to the Lazard Parties' above-referenced right to designate
board nominees, which right terminated due to the Termination Event); (vi) enter
into or permit Kapson Senior Quarters Corp. to enter into sale/leaseback or
other financing arrangements of the type contemplated by the letter agreement
dated as of September 30, 1997, as amended and restated as of October 29, 1997,
between the Lazard Parties and ARV, with any company other than ARV the
principal business of which is the ownership, management, operation and
development of assisted living facilities in the United States, unless such
company enters into a written standstill agreement with ARV containing
provisions substantially similar to the standstill provisions of the
Stockholders Agreement; (vii) request ARV or any of its directors, officers,
employees or agents to amend or waive any of the foregoing standstill provisions
or seek to challenge the legality or effect thereof; or (viii) assist, advise,
encourage or act in concert with any person with respect to, or seek to do, any
of the foregoing.
Effective on January 11, 1999, the termination of the Standstill Period also
will relieve the Lazard Parties from certain of their other obligations under
the Stockholders Agreement, including their obligation to vote all shares of ARV
Common Stock owned by them that represent aggregate ownership in excess of 35.8%
of the outstanding shares of ARV Common Stock, in one of the following two
manners, at their option: (x) in accordance with the recommendation of the
Board, or (y) proportionally in accordance with the votes of the other holders
of ARV Common Stock; and to vote all shares of ARV Common Stock held by them in
favor of the election of all directors nominated by the nominating committee, if
any, or the Board.
In pending litigation filed by the Lazard Parties against ARV, the Lazard
Parties are asserting that the Standstill Period has already terminated due to
an "Early Standstill Termination Event" under the Stockholders Agreement. An
Early Standstill Termination Event, which is alleged in the Lazard Parties'
lawsuit, is not the same as a Termination Event, which is the subject of this
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report. ARV's position is that an Early Standstill Termination Event has not
occurred, but that a termination of the Standstill Period will occur on January
11, 1999, ninety days after the Termination Event.
AMENDMENT OF RIGHTS AGREEMENT
At the Special Meeting, the Board approved and adopted a First Amendment to
Rights Agreement (the "Rights Agreement Amendment") dated October 21, 1998,
between ARV and ChaseMellon Shareholder Services, L.L.C. ("Chase"), amending the
Rights Agreement dated May 14, 1998, between ARV and Chase (the "Rights
Agreement"). The Rights Agreement Amendment amends the Rights Agreement by
providing that the Lazard Parties become an Acquiring Person, thereby triggering
the stockholders' rights under the Rights Agreement, at such time as they become
the beneficial owner of 50% or more of ARV's Common Stock. Prior to the Rights
Agreement Amendment, the 50% limitation applied to the Lazard Parties only until
the termination of the Standstill Period. The Rights Agreement Amendment also
contains technical amendments to remove references to the term "Continuing
Director," in response to a recent Delaware court case not involving ARV that
put into question the validity of certain types of rights agreement provisions
using the "Continuing Director" concept.
BYLAW AMENDMENT
At the Special Meeting, the Board also approved an amendment to ARV's Bylaws to
remove the right of stockholders owning a majority of ARV's voting stock to call
a special meeting of stockholders (the "Bylaw Amendment"). The Bylaw Amendment
provides that a special meeting of stockholders may now be called by the
President or Chief Executive Officer and shall be called by the President, Chief
Executive Officer or the Secretary at the written request of a majority of the
Board of Directors.
APPOINTMENT OF DOUGLAS PASQUALE TO THE BOARD OF DIRECTORS
At the Special Meeting, the Board also adopted a resolution increasing the
number of directors from nine to ten and appointing ARV's President/Chief
Operating Officer, Douglas M. Pasquale, to serve as a Class A director until the
2001 annual meeting of ARV's stockholders.
INCORPORATION BY REFERENCE
This report contains summary descriptions of certain documents, including the
Stockholders Agreement, the Rights Agreement, the Rights Agreement Amendment and
the Bylaw Amendment. These descriptions are not intended to be complete.
Reference is made to the full text of these documents, which are attached as
exhibits to this report or as exhibits to other filings made by ARV with the
Securities and Exchange Commission and are incorporated herein by this
reference.
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ITEM 7. EXHIBITS
Reference is made to the Exhibit Index annexed hereto and made a part
hereof.
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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.
ARV ASSISTED LIVING, INC.
Date: October 23, 1998 By: /s/ Sheila M. Muldoon
-----------------------------
Name: Sheila M. Muldoon
Title: Senior Vice President and
General Counsel
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EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
3.1 Amendment to the Registrant's Bylaws, effective as of
October 21, 1998.
4.1 First Amendment to Rights Agreement dated October 21, 1998, by
and between ARV Assisted Living, Inc., and ChaseMellon
Shareholder Services, L.L.C.
99.1 Press Release issued by the Registrant dated October 21, 1998.
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EXHIBIT 3.1
BYLAW AMENDMENT
Section 2.6 of the Bylaws of ARV Assisted Living, Inc., a
Delaware corporation, hereby is amended and restated in its entirety to
read in full as follows:
"Section 2.6 Special Meetings. Special meetings of the
stockholders, for any purpose, or purposes, unless otherwise
prescribed by statute or by the Certificate of Incorporation, may
be called by the President or Chief Executive Officer and shall
be called by the President, Chief Executive Officer or the
Secretary at the request in writing of a majority of the Board of
Directors. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the
notice."
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EXHIBIT 4.1
FIRST AMENDMENT TO RIGHTS AGREEMENT
THIS FIRST AMENDMENT TO RIGHTS AGREEMENT (this "Amendment'), dated as of
October 21, 1998, is made by and between ARV ASSISTED LIVING, INC., a Delaware
corporation (the "Company"), and CHASEMELLON SHAREHOLDER SERVICES, L.L.C. (the
"Rights Agent").
RECITALS
A. WHEREAS, the Company and the Rights Agent are parties to that certain
Rights Agreement dated as of May 14, 1998 (the "Rights Agreement"); and
B. WHEREAS, pursuant to Section 26 of the Rights Agreement, the Company
and the Rights Agent desire to amend the Rights Agreement as set forth below;
NOW, THEREFORE, the Rights Agreement is hereby amended as follows:
1. Amendment of Section 1.1. Section 1.1 of the Rights Agreement is
hereby amended and restated to read in its entirety as follows:
"1.1 "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates and Associates
(as such terms are hereinafter defined) of such Person, shall be the Beneficial
Owner (as such term is hereinafter defined) of 10% or more of the Common Shares
of the Company then outstanding but shall not include (i) an Exempt Person or
(ii) any Approved Holder (as defined below), unless and until such time as such
Approved Holder shall become the Beneficial Owner of 50% or more of the Common
Shares of the Company then outstanding; provided, however, that no Person
(including but not limited to the Approved Holder) shall be deemed to
Beneficially Own any Common Shares held by any other person that is a party to
that certain Stockholders' Voting Agreement dated October 29, 1997 by and among
Prometheus Assisted Living LLC ("Prometheus"), Lazard Freres Real Estate
Investors L.L.C. ("LFREI") and certain stockholders of the Company. "Approved
Holder" shall mean LFREI and Prometheus, together with all of their Controlled
Affiliates (as such term is defined in that certain Amended and Restated
Stockholders Agreement dated as of October 29, 1997 by and among Prometheus,
LFREI and the Company). Notwithstanding the foregoing, no Person shall become an
"Acquiring Person" as the result of an acquisition of Common Shares by the
Company which, by reducing the number of shares outstanding, increases the
proportionate number of shares beneficially owned by such Person to 10% (or, in
the case of the Approved Holder, 50%) or more of the Common Shares of the
Company then outstanding; provided, however, that if a Person shall become the
Beneficial Owner of 10% (or, in the case of the Approved Holder, 50%) or more of
the Common Shares of the Company then outstanding solely by reason of share
purchases by the Company and shall, after such share purchases by the Company,
become the Beneficial Owner of any additional Common Shares of the Company, then
such Person shall be deemed to be an "Acquiring Person." Notwithstanding the
foregoing, if the Board of Directors of the Company determines in good faith
that a Person who would otherwise be an "Acquiring Person," as defined pursuant
to
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the foregoing provisions of this Section 1.1, has become such inadvertently,
and without any intention of changing or influencing control of the Company, and
such Person divests as promptly as practicable a sufficient number of Common
Shares so that such Person would no longer be an Acquiring Person, as defined
pursuant to the foregoing provisions of this Section 1.1, then such Person shall
not be deemed to be or have become an "Acquiring Person" for any purposes of
this Agreement (so long as such Person does not become an Acquiring Person after
such divestiture)."
2. Deletion of Section 1.7. Section 1.7 of the Rights Agreement hereby
is deleted in its entirety.
3. Amendment of Section 11.4.1. Section 11.4.1 of the Rights Agreement
hereby is amended by restating the last sentence of Section 11.4.1 to read as
follows:
"If the Security is not publicly held or not so listed or traded,
"current per share market price" shall mean the fair value per share as
determined in good faith by the Board of Directors of the Company."
4. Amendment of Section 11.4.2. Section 11.4.2 of the Rights Agreement
hereby is amended by restating the third sentence of Section 11.4.2 to read as
follows:
"If neither the Common Shares nor the Preferred Shares is publicly held
or so listed or traded, "current per share market price" of the Preferred Shares
shall mean the fair value per share as determined in good faith by the Board of
Directors of the Company."
5. Amendment to Section 22. Section 22 of the Rights Agreement hereby is
amended by inserting the word "and" between the end of clause (i) and the
beginning of clause (ii) of the proviso in Section 22, and by deleting clause
(iii) of such proviso.
6. Amendment to Section 26. Section 26 of the Rights Agreement hereby is
amended by deleting the parenthetical phrase in clause (ii) of the second
sentence of Section 26.
7. Effectiveness. This Amendment shall be deemed effective as of October
21, 1998 as if executed by both parties on such date. Except as amended hereby,
the Rights Agreement shall remain in full force and effect and shall be
otherwise unaffected hereby.
8. Miscellaneous. This Amendment shall be deemed to be a contract made
under the laws of the State of Delaware and for all purposes shall be governed
by and construed in accordance with the laws of such state applicable to
contracts to be made and performed entirely within such state, without giving
effect to the choice of law provisions thereof. This Amendment may be executed
in any number of counterparts, each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument. If any term, provision, covenant or restriction
of this Amendment is held by a court of competent jurisdiction or other
authority to be invalid, illegal, or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Amendment shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
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IN WITNESS WHEREOF, the parties hereto have caused this First Amendment
to Rights Agreement to be duly executed as of the date first above written.
ARV ASSISTED LIVING, INC.
By: /s/ Howard G. Phanstiel
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Howard G. Phanstiel
Its: Chairman of the Board and
Chief Executive Officer
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
By: /s/ Ronald Lug
----------------------------
Name: Ronald Lug
----------------------------
Its: Vice President
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EXHIBIT 99.1
FOR IMMEDIATE RELEASE
OCTOBER 21, 1998
FOR MORE INFORMATION: [ARV LOGO]
SUZANNE C. SHIRLEY
V.P.--INVESTOR AND PUBLIC RELATIONS
(714) 751-7400
ARV ASSISTED LIVING ANNOUNCES TERMINATION EVENT UNDER
STOCKHOLDERS AGREEMENT AND OTHER ACTIONS
COSTA MESA, CALIFORNIA, OCTOBER 21, 1998 - ARV Assisted Living, Inc. [AMEX: SRS]
announced today that the Board of Directors has determined that certain rights
and obligations have terminated under its Amended and Restated Stockholders
Agreement with Lazard Freres Real Estate Investors L.L.C., which through its
affiliates is the Company's largest stockholder. Under the Stockholders
Agreement, a termination event is deemed to occur on the date on which Lazard no
longer beneficially owns ARV Common Stock having a market value of at least
$25,000,000. On October 12, 1998, the closing price of ARV's common stock on the
American Stock Exchange was $2.75 per share, resulting in an aggregate market
value for Lazard's shares of less than $25,000,000.
As a consequence of a termination event under the Stockholders Agreement, Lazard
no longer has the right to designate nominees to ARV's Board of Directors or to
participate in future equity offerings by ARV and, effective as of January 11,
1999, will no longer be subject to certain standstill provisions which prohibit
Lazard from acquiring 50% or more of ARV's common stock, or from soliciting
mergers or similar transactions involving ARV or otherwise seeking control of
ARV. In pending litigation with ARV, Lazard has taken the position that such
standstill provisions have already terminated, which, if successful, would
result in an earlier termination of the standstill provisions.
In part due to the termination event under the Stockholders Agreement, the Board
of Directors today took actions designed to protect stockholders in the event of
an unsolicited takeover bid by anyone, including Lazard. ARV believes these
actions are appropriate in recognition of the different relationship that now
exists between ARV and Lazard than existed at the outset of the relationship.
Specifically, Lazard is now a direct competitor of ARV by virtue of its recent
acquisitions of Kapson Senior Quarters Corp. and Atria Communities, Inc. The
Board of Directors has amended its stockholder rights agreement to provide that
the acquisition by Lazard of 50% or more of ARV's common stock is an event that
triggers the distribution of rights under that agreement. ARV also has amended
its Bylaws to remove the right of stockholders owning a majority of ARV common
stock to call a special meeting of ARV's stockholders.
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The Board of Directors today also increased the number of directors from nine to
ten and appointed ARV's President/Chief Operating Officer, Douglas M. Pasquale,
to serve as a Class A director until the 2001 annual meeting of ARV's
stockholders. This carries out the anticipated course of action previously
disclosed to stockholders. Howard Phanstiel, ARV's Chairman and Chief Executive
Officer, stated "We are pleased to welcome Doug Pasquale to the ARV Board. Since
he joined the company this past June, the Board has been impressed with the
instrumental role Doug is playing in restructuring the operations management
team and laying the foundation for enhanced financial performance by our
communities."
Commenting on the amendment to the stockholder rights plan, Phanstiel added,
"The rights plan as amended is designed to treat all ARV stockholders fairly and
to encourage anyone seeking to acquire the company to negotiate with ARV's Board
prior to attempting a takeover. The actions taken by the Board today guard
against open market accumulations and other tactics to gain control of the
company without all stockholders receiving fair value."
Founded in 1980, ARV is one of the largest providers of assisted living services
in the nation, currently operating 62 communities containing approximately 7,700
units in 11 states. In addition, the company has 9 properties in various stages
of development. The company's apartment division operates 2,300 units that are
under contract or in negotiations for sale.
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