================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a)
(AMENDMENT NO. 10)
ARV ASSISTED LIVING, INC.
-------------------------
(Name of Issuer)
COMMON STOCK, PAR VALUE $0.01 PER SHARE 00204C107
- --------------------------------------------------------------------------------
(Title of class of securities) (CUSIP number)
<TABLE>
<S> <C>
MARJORIE L. REIFENBERG, ESQ. ROBERT L. MESSINEO, ESQ.
LAZARD FRERES REAL ESTATE INVESTORS L.L.C. WEIL, GOTSHAL & MANGES LLP
30 ROCKEFELLER PLAZA 767 FIFTH AVENUE
NEW YORK, NEW YORK 10020 NEW YORK, NEW YORK 10153
(212) 632-6000 (212) 310-8000
- -----------------------------------------------------------------------------------------------
(Name, address and telephone number of person authorized to receive notices and communications)
</TABLE>
APRIL 24, 2000
- --------------------------------------------------------------------------------
(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 that is the subject of this Schedule 13D, and is filing this
schedule because of Rules 13d-1(e), 13d-1(f) or 13d-1(g), check the following
box [_].
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-7 (b) for other
parties to whom copies are 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).
Continued on following pages
Page 1 of 24 pages
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NY2:\878362\04\$TQY04!.DOC\58120.0003
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- -------------------------------------------------
CUSIP NO. 00204C107 13D Page 2
- ----------------------------------------------------------------- -------------------------------------------------
- ----------------- ----------------------------------------------- ----------------------------------------------------------------
<S> <C>
1 NAME OF REPORTING PERSON: Prometheus Assisted Living LLC
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY):
- ----------------- ----------------------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (A) [_]
(B) [X]
- ----------------- ----------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- ----------------- -------------------------- -------------------------------------------------------------------------------------
4 SOURCE OF FUNDS: OO
- ----------------- ----------------------------------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e): [_]
- ----------------- -------------------------------------------------------------- -------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware
- --------------------------- ------ --------------------------------------------- -------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER: - 0 -
SHARES
------ --------------------------------------------- -------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER: 7,595,069 shares of Common Stock
OWNED BY
------ --------------------------------------------- -------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER: - 0 -
REPORTING
------ --------------------------------------------- -------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER: 7,595,069 shares of Common Stock
- ----------------- ----------------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY REPORTING PERSON: 7,595,069 shares of Common Stock
- ----------------- ----------------------------------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES: [X]
- ----------------- ----------------------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 43.50%
- ----------------- ----------------------------------------------- ----------------------------------------------------------------
14 TYPE OF REPORTING PERSON: OO
- ----------------- ----------------------------------------------- ----------------------------------------------------------------
SEE INSTRUCTIONS BEFORE FILLING OUT!
2
<PAGE>
- ----------------------------------------------------------------- -------------------------------------------------
CUSIP NO. 00204C107 13D Page 3
- ----------------------------------------------------------------- -------------------------------------------------
- ----------------- ----------------------------------------------- ----------------------------------------------------------------
1 NAME OF REPORTING PERSON: LF Strategic Realty Investors II L.P.
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY):
- ----------------- ----------------------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (A) [_]
(B) [X]
- ----------------- ----------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- ----------------- -------------------------- -------------------------------------------------------------------------------------
4 SOURCE OF FUNDS: OO,
BK
- ----------------- ----------------------------------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e): [_]
- ----------------- -------------------------------------------------------------- -------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware
- ------------------------- -------- --------------------------------------------- -------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER: - 0 -
SHARES
-------- --------------------------------------------- -------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER: 7,970,069 shares of Common Stock
OWNED BY
-------- --------------------------------------------- -------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER: - 0 -
REPORTING
-------- --------------------------------------------- -------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER: 7,970,069 shares of Common Stock
- ----------------- ----------------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY REPORTING PERSON: 7,970,069 shares of Common Stock
- ----------------- ----------------------------------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES: [_]
- ----------------- ----------------------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 44.69%
- ----------------- ----------------------------------------------- ----------------------------------------------------------------
14 TYPE OF REPORTING PERSON: PN
- ----------------- ----------------------------------------------- ----------------------------------------------------------------
SEE INSTRUCTIONS BEFORE FILLING OUT!
3
<PAGE>
- ----------------------------------------------------------------- -------------------------------------------------
CUSIP NO. 00204C107 13D Page 4
- ----------------------------------------------------------------- -------------------------------------------------
- ----------------- ----------------------------------------------- ----------------------------------------------------------------
1 NAME OF REPORTING PERSON: LFSRI II Alternative Partnership L.P.
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY):
- ----------------- ----------------------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (A) [_]
(B) [X]
- ----------------- ----------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- ----------------- -------------------------- -------------------------------------------------------------------------------------
4 SOURCE OF FUNDS: OO, BK
- ----------------- ----------------------------------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e): [_]
- ----------------- -------------------------------------------------------------- -------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware
- --------------------------- ------ --------------------------------------------- -------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER: - 0 -
SHARES
------ --------------------------------------------- -------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER: 7,595,069 shares of Common Stock
OWNED BY
------ --------------------------------------------- -------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER: - 0 -
REPORTING
------ --------------------------------------------- -------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER: 7,595,069 shares of Common Stock
- ----------------- ----------------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY REPORTING PERSON: 7,595,069 shares of Common Stock
- ----------------- ----------------------------------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES: [_]
- ----------------- ----------------------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 43.50%
- ----------------- ----------------------------------------------- ----------------------------------------------------------------
14 TYPE OF REPORTING PERSON: PN
- ----------------- ----------------------------------------------- ----------------------------------------------------------------
SEE INSTRUCTIONS BEFORE FILLING OUT!
4
<PAGE>
- ----------------------------------------------------------------- -------------------------------------------------
CUSIP NO. 00204C107 13D Page 5
- ----------------------------------------------------------------- -------------------------------------------------
- ----------------- ----------------------------------------------- ----------------------------------------------------------------
1 NAME OF REPORTING PERSON: LFSRI II - CADIM Alternative Partnership L.P.
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY):
- ----------------- ----------------------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (A) [_]
(B) [X]
- ----------------- ----------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- ----------------- -------------------------- -------------------------------------------------------------------------------------
4 SOURCE OF FUNDS: OO,
BK
- ----------------- ----------------------------------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e): [_]
- ----------------- ----------------------------------------------------------------- ----------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware
- ------------------------------- -------- ------------------------------------------ ----------------------------------------------
NUMBER OF 7 SOLE VOTING POWER: - 0 -
SHARES
-------- ------------------------------------------ ----------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER: 7,595,069 shares of Common Stock
OWNED BY
-------- ------------------------------------------ ----------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER: - 0 -
REPORTING
-------- ------------------------------------------ ----------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER: 7,595,069 shares of Common Stock
- ----------------- ----------------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY REPORTING PERSON: 7,595,069 shares of Common Stock
- ----------------- ----------------------------------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES: [_]
- ----------------- ----------------------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 43.50%
- ----------------- ----------------------------------------------- ----------------------------------------------------------------
14 TYPE OF REPORTING PERSON: PN
- ----------------- ----------------------------------------------- ----------------------------------------------------------------
SEE INSTRUCTIONS BEFORE FILLING OUT!
5
<PAGE>
- ----------------------------------------------------------------- -------------------------------------------------
CUSIP NO. 00204C107 13D Page 6
- ----------------------------------------------------------------- -------------------------------------------------
- ----------------- ----------------------------------------------- ----------------------------------------------------------------
1 NAME OF REPORTING PERSON: Lazard Freres Real Estate Investors L.L.C.
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY):
- ----------------- ----------------------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (A) [_]
(B) [X]
- ----------------- ----------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- ----------------- -------------------------- -------------------------------------------------------------------------------------
4 SOURCE OF FUNDS: OO,
BK
- ----------------- ----------------------------------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e): [_]
- ----------------- -------------------------------------------------------------- -------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION: New York
- ------------------------------- ------ ----------------------------------------- -------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER: - 0 -
SHARES
------ ----------------------------------------- -------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER: 7,970,096 shares of Common Stock
OWNED BY
------ ----------------------------------------- -------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER: - 0 -
REPORTING
------ ----------------------------------------- -------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER: 7,970,096 shares of Common Stock
- ----------------- ----------------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY REPORTING PERSON: 7,970,096 shares of Common Stock
- ----------------- ----------------------------------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES: [_]
- ----------------- ----------------------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 44.69%
- ----------------- ----------------------------------------------- ----------------------------------------------------------------
14 TYPE OF REPORTING PERSON: OO
- ----------------- ----------------------------------------------- ----------------------------------------------------------------
SEE INSTRUCTIONS BEFORE FILLING OUT!
6
<PAGE>
- ----------------------------------------------------------------- -------------------------------------------------
CUSIP NO. 00204C107 13D Page 7
- ----------------------------------------------------------------- -------------------------------------------------
- ----------------- ----------------------------------------------- ----------------------------------------------------------------
1 NAME OF REPORTING PERSON: Lazard Freres & Co. LLC
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY):
- ----------------- ----------------------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (A) [_]
(B) [X]
- ----------------- ----------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- ----------------- -------------------------- -------------------------------------------------------------------------------------
4 SOURCE OF FUNDS: OO,
BK
- ----------------- ----------------------------------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e): [_]
- ----------------- -------------------------------------------------------------- -------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION: New York
- ------------------------------- ------ ----------------------------------------- -------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER: - 0 -
SHARES
------ ----------------------------------------- -------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER: 7,970,096 shares of Common Stock
OWNED BY
------ ----------------------------------------- -------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER: - 0 -
REPORTING
------ ----------------------------------------- -------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER: 7,970,096 shares of Common Stock
- ----------------- ----------------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY REPORTING PERSON: 7,970,096 shares of Common Stock
- ----------------- ----------------------------------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES: [_]
- ----------------- ----------------------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 44.69%
- ----------------- ----------------------------------------------- ----------------------------------------------------------------
14 TYPE OF REPORTING PERSON: OO
- ----------------- ----------------------------------------------- ----------------------------------------------------------------
SEE INSTRUCTIONS BEFORE FILLING OUT!
7
<PAGE>
- ----------------------------------------------------------------- -------------------------------------------------
CUSIP NO. 00204C107 13D Page 8
- ----------------------------------------------------------------- -------------------------------------------------
- ----------------- ----------------------------------------------- ----------------------------------------------------------------
1 NAME OF REPORTING PERSON: LFSRI II Assisted Living LLC
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY):
- ----------------- ----------------------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (A) [_]
(B) [X]
- ----------------- ----------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- ----------------- -------------------------- -------------------------------------------------------------------------------------
4 SOURCE OF FUNDS: OO
- ----------------- ----------------------------------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e): [_]
- ----------------- -------------------------------------------------------------- -------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION: New York
- ------------------------------- ------ ----------------------------------------- -------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER: - 0 -
SHARES
------ ----------------------------------------- -------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER: 375,000 shares of Common Stock
OWNED BY
------ ----------------------------------------- -------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER: - 0 -
REPORTING
------ ----------------------------------------- -------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER: 375,000 shares of Common Stock
- ----------------- ----------------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY REPORTING PERSON: 375,000 shares of Common Stock
- ----------------- ----------------------------------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES: [_]
- ----------------- ----------------------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 2.1%
- ----------------- ----------------------------------------------- ----------------------------------------------------------------
14 TYPE OF REPORTING PERSON: OO
- ----------------- ----------------------------------------------- ----------------------------------------------------------------
SEE INSTRUCTIONS BEFORE FILLING OUT!
</TABLE>
8
<PAGE>
This Amendment No. 10 to Schedule 13D (the "Amendment") is
filed by Prometheus Assisted Living LLC, a Delaware limited liability company
("Prometheus"), LF Strategic Realty Investors II L.P., a Delaware limited
partnership ("LFSRI"), LFSRI II Alternative Partnership L.P., a Delaware limited
partnership ("LFSRI II AP"), LFSRI II-CADIM Alternative Partnership L.P., a
Delaware limited partnersip ("LFSRI CADIM"), Lazard Freres Real Estate Investors
L.L.C., a New York limited liability company ("LFREI"), Lazard Freres & Co. LLC,
a New York limited liability company ("Lazard") and LFSRI II Assisted Living
LLC, a Delaware limited liability company ("LFSRI II AL", and together with
Prometheus, LFSRI, LFSRI II AP, LFSRI CADIM , LFREI and Lazard, the "Reporting
Persons"). Capitalized terms used herein but not defined shall have the meanings
ascribed thereto in the Schedule 13D, as amended, originally filed by Prometheus
and LFREI on July 23, 1997 (as amended, the "Initial Schedule 13D"). The Initial
Schedule 13D is hereby amended as follows:
Item 2. Identity and Background.
-----------------------
(a), (b), (c) and (f). LFSRI II AL joins the other
Reporting Persons in filing this Statement. The principal business office of
LFSRI II AL is 30 Rockefeller Plaza, New York, New York 10020. LFSRI II AL's
activities consist principally of making the term loans to the Company and
holding the Warrant issued by the Company described in this Amendment. The
managing member of LFSRI II AL is LFSRI. The other members of LFSRI II AL are
LFSRI II AP and LFSRI CADIM. The general partner of each of LFSRI, LFSRI II AP
and LFSRI CADIM is LFREI.
The information set forth in Amendment No. 9 to the Initial
Schedule 13D regarding Lazard and persons who may be deemed to be in control of
Lazard hereby is amended and supplemented as follows: Lazard, a New York limited
liability company, is the managing member of LFREI. The name, business address,
principal occupation or employment and citizenship of each of the executive
officers and directors of Lazard are set forth on Schedule 1 attached hereto and
incorporated by reference herein. Lazard is wholly-owned by Lazard LLC, a
Delaware limited liability company ("LLLC") and therefore LLLC may be viewed as
controlling Lazard. LLLC is a holding company. The Lazard Board of LLLC and the
Executive Committee of Lazard Strategic Coordination Company LLC ("Lazard
Strategic"), a Delaware limited liability company which is wholly-owned by LLLC,
control LLLC. Lazard Strategic manages LLLC. The name, business address,
principal occupation or employment and citizenship of the members of the Lazard
Board of LLLC and the Executive Committee of Lazard Strategic are set forth on
Schedules 2 and 3, respectively, attached hereto and are incorporated by
reference herein. The principal business office of LLLC is 3711 Kennett Pike,
Suite 120, P.O. Box 4649, Greenville, DE 19807-4649 and the principal business
office of Lazard Strategic is c/o Corporation Trust, 1209 Orange Street,
Wilmington, DE 19806. Lazard, on behalf of LLLC and Lazard Strategic, disclaims
any beneficial ownership such entities may be deemed to have of any of the
shares of Common Stock reported in this statement.
(d) and (e). During the last five years, none of LFSRI II
AL, LLLC, Lazard Strategic or, to the best knowledge of the Reporting Persons,
any individual listed on Schedules 1, 2 or 3 of this Amendment or Schedule 2 of
Amendment No. 9 to the Initial Schedule 13D has been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) nor has any
such person been a party to any civil proceeding of a judicial or administrative
body of competent jurisdiction, and is or was, as a result of such proceeding,
subject to a judgment, decree or final order enjoining future violations or, or
9
<PAGE>
prohibiting or mandating activities subject to, federal or state securities
laws, or finding any violation with respect to such laws.
Item 4. Purpose of Transaction.
----------------------
On April 24, 2000, LFSRI II AL and the Company entered into
a Term Loan Agreement (the "Loan Agreement"). Pursuant to the Loan Agreement,
LFSRI II AL agreed to make available to the Company, on the terms and subject to
the conditions contained in the Loan Agreement, term loans in an aggregate
principal amount not to exceed $10,000,000, subject to possible reduction as
provided in the Loan Agreement. In the Loan Agreement, the Company represented
and warranted to LFSRI II AL that the proceeds of the term loans would be used
by the Company solely (i) to finance existing indebtedness of the Company and
its subsidiaries, and for the payment of related transaction costs, fees and
expenses and (ii) for working capital and general corporate purposes.
In connection with the execution and delivery of the Loan
Agreement, the Company executed and delivered to LFSRI II AL a warrant, dated
April 24, 2000 (the "Warrant"), entitling LFSRI II AL to purchase, subject to
the terms and conditions set forth therein, up to 750,000 shares of Common Stock
at a per share exercise price of $3, subject to adjustment as set forth in the
Warrant. The Warrant provides that in the event that Company does not borrow an
aggregate of $10,000,000 under the Loan Agreement, the number of shares of
Common Stock for which the Warrant will be exercisable will, at any time, be
equal to (x) 75,000 shares of Common Stock, as such number may be adjusted
pursuant to Section 4 of the Warrant (such adjustment in such Section 4 to be
calculated assuming that the number of shares of Common Stock for which the
Warrant is exercisable on the Closing Date set forth in the Loan Agreement is
75,000 shares) multiplied by (y) the aggregate amount of borrowings made under
the Loan Agreement at such time divided by $1,000,000.
Item 5. Interest in Securities of the Issuer.
------------------------------------
(a) As of April 27, 2000, Prometheus beneficially owned
7,595,069 shares of Common Stock, such ownership representing 43.50% of the
issued and outstanding Common Stock based upon the Company's representation and
warranty in the Warrant that as of April 24, 2000, there are 17,459,689 shares
of Common Stock issued and outstanding. As of such date, LFSRI II AL
beneficially owned 375,000 shares of Common Stock (or 2.1% of the issued and
outstanding shares, including the shares that presently are subject to purchase
under the Warrant) by reason of its ownership rights in, and the exercisability
of, the Warrant. The other Reporting Persons have no ownership interest in the
shares of Common Stock beyond their respective direct and indirect interests in
Prometheus and LFSRI II AL.
(b) By reason of their status as managing members of
Prometheus, LFSRI, LFSRI II AP and LFSRI CADIM are reported as each sharing with
Prometheus the power to vote or to direct the vote and dispose or direct the
disposition of the shares of Common Stock beneficially owned by Prometheus. By
reason of LFREI's control of each of the managing members and Lazard's control
of LFREI, LFREI and Lazard also are reported as sharing the power to vote or to
direct the vote and dispose or direct the disposition of such shares. By reason
of its status as managing member of LFSRI II AL, LFSRI is reported as sharing
with LFSRI II AL the power to vote or to direct the vote and dispose or direct
the disposition of the shares beneficially owned by LFSRI II AL. By reason of
LFREI's control of LFSRI and Lazard's control of LFREI, LFREI and Lazard also
are reported as sharing the power to vote or to direct the vote and dispose or
direct the disposition of such shares. Notwithstanding the foregoing, Lazard
10
<PAGE>
continues to disclaim any beneficial ownership of any of the shares of Common
Stock reported in this Amendment.
(c) Neither the Reporting Persons nor, to the knowledge of
the Reporting Persons, any of the other persons named in Item 2 in the Initial
Schedule 13D, have acquired or disposed of any shares of Common Stock since the
filing of the last amendment to the Initial Schedule 13D, other than the receipt
of the Warrant reported herein.
(d) - (e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer.
-------------------------------------------------------------
See Item 4 for a description of the Warrant executed and
delivered by the Company in favor of LFSRI II AL and the rights of LFSRI II AL
to acquire shares of Common Stock from the Company upon exercise of the Warrant.
Pursuant to the terms of the Warrant, LFSRI II AL may
request the Company to effect the registration under the Securities Act of 1933,
as amended, of either (i) 350,000 or more shares of Common Stock purchased upon
exercise of the Warrant ("Warrant Stock") or (ii) Warrant Stock with an
anticipated aggregate offering price of at least $1,000,000. The Company is not
required to effect more than one such registration of any Warrant Stock in any
12-month period. The Company also granted to LFSRI II AL certain incidental or
"piggyback" registration rights pursuant to the terms of the Warrant.
Item 7. Material to be Filed as Exhibits.
--------------------------------
Exhibit 1 Warrant, dated April 24, 2000, to purchase shares of Common
Stock of the Company.
Exhibit 2 Joint Filing Agreement by and among the Reporting Persons,
dated April 24, 2000.
11
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge
and belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated: April 28, 2000
PROMETHEUS ASSISTED LIVING LLC
By LF Strategic Realty Investors II L.P.,
its managing member,
by Lazard Freres Real Estate
Investors L.L.C.,
its general partner,
by /s/John A Moore
-----------------------
Name: John A. Moore
Title: Principal & Chief
Financial Officer
LF STRATEGIC REALTY INVESTORS II L.P.
By Lazard Freres Real Estate Investors
L.L.C., its general partner,
by /s/John A. Moore
-------------------------
Name: John A. Moore
Title: Principal & Chief
Financial Officer
LFSRI II ALTERNATIVE PARTNERSHIP L.P.
By Lazard Freres Real Estate Investors
L.L.C., its general partner,
by /s/John A. Moore
------------------------
Name: John A. Moore
Title: Principal & Chief
Financial Officer
12
<PAGE>
LFSRI II-CADIM ALTERNATIVE PARTNERSHIP L.P.
By Lazard Freres Real Estate Investors
L.L.C., its general partner,
by /s/John A. Moore
--------------------------
Name: John A. Moore
Title: Principal & Chief
Financial Officer
LAZARD FRERES REAL ESTATE
INVESTORS L.L.C.
by /s/John A. Moore
--------------------------
Name: John A. Moore
Title: Principal & Chief
Financial Officer
LAZARD FRERES & CO. LLC
by /s/Melvin L. Heineman
---------------------------
Name: Melvin L. Heineman
Title: Managing Director
LFSRI II ASSISTED LIVING LLC
By LF Strategic Realty Investors II L.P.,
its managing member,
by Lazard Freres Real Estate
Investors L.L.C.
its general partner,
by /s/John A. Moore
--------------------------
Name: John A. Moore
Title: Principal & Chief
Financial Officer
13
<PAGE>
SCHEDULE 1
Set forth below are the names of each of the executive
officers and directors of Lazard Freres & Co. LLC. Except as otherwise
indicated, the principal occupation of each such person is managing director of
Lazard Freres & Co. LLC, the business address of each such person is 30
Rockefeller Plaza, New York, New York 10020 and each person is a citizen of the
United States.
<TABLE>
<CAPTION>
Business Address and
Principal Occupation
Name (if other than as indicated above) Citizenship
- ---- ---------------------------------- -----------
<S> <C> <C>
Michel A. David-Weill Chairman and Chief Executive of Lazard LLC France
John C. Adams Lazard Freres & Co. LLC
200 West Madison
Suite 2200
Chicago, IL 60606
Eileen D. Alexanderson
William R. Araskog
Robert A. Baer, Jr.
Scott P. Barasch
F. Harlan Batrus
Gerardo Braggiotti Lazard Freres & Cie. Italy
121 Boulevard Haussmann
75382 Paris Cedex 08 France
David Braunschvig
Charles L. Carroll
Allan M. Chapin
Norman Eig
Richard P. Emerson Lazard Freres & Co. LLC
Four Embarcadero Center
Suite 650
San Francisco, CA 94111
14
<PAGE>
Business Address and
Principal Occupation
Name (if other than as indicated above) Citizenship
- ---- ---------------------------------- -----------
Eli H. Fink
Albert H. Garner
James S. Gold
Steven J. Golub
Robert L. Goodman
Herbert W. Gullquist
Pehr G. Gyllenhammer Lazard Brothers & Co., Limited United Kingdom
21 Moorfields
London EC2P 2HT
United Kingdom
Thomas R. Haack
Paul J. Haigney Lazard Freres & Co. LLC
Four Embarcadero Center
Suite 650
San Francisco, CA 94111
Eric S. Hanson
Yasushi Hatakeyama Japan
Melvin L. Heineman
Scott D. Hoffman
Robert E. Hougie United Kingdom
Kenneth M. Jacobs
Vernon E. Jordan, Jr.
James L. Kempner
Robert C. Larson
15
<PAGE>
Business Address and
Principal Occupation
Name (if other than as indicated above) Citizenship
- ---- ---------------------------------- -----------
William R. Loomis, Jr. Deputy Chief Executive and
Managing Director of
Lazard Freres & Co. LLC
Matthew J. Lustig
Thomas E. Lynch
Gerald B. Mazzari
Mark T. McMaster
Michael G. Medzigian
Richard W. Moore, Jr.
Robert P. Morgenthau
Daniel T. Motulsky
Steven J. Niemczyk
James A. Paduano
Russell E. Planitzer
John R. Reinsberg
L. Gregory Rice
Barry W. Ridings
Luis E. Rinaldini United Kingdom
Michael S. Rome
Stephen H. Sands
Frank A. Savage
Patrick Sayer France
Gary S. Shedlin
16
<PAGE>
Business Address and
Principal Occupation
Name (if other than as indicated above) Citizenship
- ---- ---------------------------------- -----------
David L. Tashjian
J. Mikesell Thomas Lazard Freres & Co. LLC
200 West Madison
Suite 2200
Chicago, IL 60606
Michael P. Triguboff Lazard Asset Management Australia
Pacific Co.
Level 39
Gateway
1 Macquarie Place
Sydney NSW 2000
Australia
Ali E. Wambold
Michael A. Weinstock
Antonio F. Weiss
Kenneth C. Weiss
Alexander E. Zagoreos
</TABLE>
17
<PAGE>
SCHEDULE 2
Lazard Board of Lazard LLC
Set forth below are the members of the Lazard Board of
Lazard LLC, their business address, principal occupation and citizenship:
<TABLE>
<CAPTION>
Principal Occupation
Name and Business Address Citizenship
- ---- -------------------- -----------
<S> <C> <C>
Michel A. David-Weill Chairman and Chief Executive of France
Lazard LLC
Lazard Freres & Co. LLC
30 Rockefeller Plaza
New York, NY 10020, USA
Antoine Bernheim Investor France
Chairman of Assicurazioni Generali S.p.A.
Lazard Freres & Cie.
121 Boulevard Haussmann
75382 Paris Cedex 08 France
Francois Voss Managing Director of Lazard Freres & Cie.France
Lazard Freres & Cie.
121 Boulevard Haussmann
75382 Paris Cedex 08 France
Didier Pfeiffer President du Conseil de Surveillance France
Fonds de Garantie des Assurances
de Personnes
30-32 rue de Taitbout
75311 Paris Cedex 09 France
Alain Merieux President Directeur General (CEO) France
BioMerieux S.A. and BioMerieux Alliance
69280 Marcy L'Etoile
France
Jean Guyot Investor France
Lazard Freres & Cie.
121 Boulevard Haussmann
75382 Paris Cedex 08France
18
<PAGE>
Principal Occupation
Name and Business Address Citizenship
- ---- -------------------- -----------
Bruno M. Roger Managing Director of Lazard Freres & Cie.France
Lazard Freres & Cie.
121 Boulevard Haussmann
75382 Paris Cedex 08 France
William R. Loomis, Jr. Deputy Chief Executive and USA
Managing Director of
Lazard Freres & Co. LLC
Lazard Freres & Co. LLC
30 Rockefeller Plaza
New York, NY 10020
J. David Verey Chairman, Chief Executive, Managing United Kingdom
Director and Executive Director of
Lazard Brothers & Co., Limited
21 Moorfields
London EC2P 2HT
United Kingdom
Gerardo Braggiotti Managing Director of Lazard Freres Italy
& Cie. and Lazard Freres & Co. LLC
Lazard Freres & Cie.
121 Boulevard Haussmann
75382 Paris Cedex 08 France
</TABLE>
19
<PAGE>
SCHEDULE 3
Executive Committee of Lazard Strategic Coordination Company LLC
Set forth below are the members of the Executive Committee
of Lazard Strategic Coordination Company LLC, their business address, principal
occupation and citizenship:
<TABLE>
<CAPTION>
Principal Occupation
Name and Business Address Citizenship
- ---- -------------------- -----------
<S> <C> <C>
Michel A. David-Weill Chairman and Chief Executive of France
Lazard LLC
Lazard Freres & Co. LLC
30 Rockefeller Plaza
New York, NY 10020, USA
Gerardo Braggiotti Managing Director of Lazard Freres Italy
& Cie. and Lazard Freres & Co. LLC
Lazard Freres & Cie.
121 Boulevard Haussmann
75382 Paris Cedex 08 France
Norman Eig Managing Director USA
of Lazard Freres & Co. LLC
Lazard Freres & Co. LLC
30 Rockefeller Plaza
New York, NY 10020
Kenneth M. Jacobs Managing Director USA
of Lazard Freres & Co. LLC
Lazard Freres & Co. LLC
30 Rockefeller Plaza
New York, NY 10020
William R. Loomis, Jr. Deputy Chief Executive and USA
Managing Director of
Lazard Freres & Co. LLC
Lazard Freres & Co. LLC
30 Rockefeller Plaza
New York, NY 10020
Bruno M. Roger Managing Director of Lazard Freres & Cie. France
Lazard Freres & Cie.
121 Boulevard Haussmann
75382 Paris Cedex 08 France
20
<PAGE>
Principal Occupation
Name and Business Address Citizenship
- ---- -------------------- -----------
J. David Verey Chairman, Chief Executive, Managing United
Director and Executive Director of Kingdom
Lazard Brothers & Co., Limited
21 Moorfields
London EC2P 2HT
United Kingdom
</TABLE>
21
<PAGE>
EXHIBIT INDEX
Exhibit 1 Warrant, dated April 24, 2000, to purchase shares of Common
Stock of the Company.
Exhibit 2 Joint Filing Agreement by and among the Reporting Persons,
dated April 24, 2000.
22
WARRANT
TO PURCHASE COMMON STOCK OF
ARV ASSISTED LIVING, INC.
No. of Shares of Common Stock: 750,000
NY2:\893267\16\J58Z16!.DOC\99980.0025
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
SECTION PAGE
<S> <C>
1. DEFINITIONS.........................................................................................................2
2. EXERCISE OF WARRANT.................................................................................................5
2.1. Manner of Exercise........................................................................................5
2.2. Payment of Taxes..........................................................................................7
2.3. Fractional Shares.........................................................................................7
2.4. Continued Validity........................................................................................7
2.5. Payment in Lieu of Shares.................................................................................7
3. TRANSFER, DIVISION AND COMBINATION..................................................................................9
3.1. Transfer..................................................................................................9
3.2. Division and Combination..................................................................................9
3.3. Expenses..................................................................................................9
3.4. Maintenance of Books......................................................................................9
4. ADJUSTMENTS.........................................................................................................9
4.1. Stock Dividends, Subdivisions and Combinations............................................................9
4.2. Certain Other Distributions..............................................................................10
4.3. Issuance of Additional Shares of Common Stock............................................................11
4.4. Issuance of Warrants or Other Rights.....................................................................12
4.5. Issuance of Convertible Securities.......................................................................13
4.6. Superseding Adjustment...................................................................................13
4.7. Other Provisions Applicable to Adjustments under this Section............................................14
4.8. Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets.........................16
4.9. Other Action Affecting Common Stock......................................................................17
4.10. Certain Limitations......................................................................................17
5. NOTICES TO WARRANT HOLDERS.........................................................................................17
5.1. Notice of Adjustments....................................................................................17
5.2. Notice of Corporate Action...............................................................................18
6. NO IMPAIRMENT......................................................................................................18
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY.........19
i
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
SECTION PAGE
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS.................................................................19
9. RESTRICTIONS ON TRANSFERABILITY....................................................................................19
9.1. Restrictive Legend.......................................................................................20
9.2. Notice of Proposed Transfers; Requests for Registration..................................................20
9.3. Required Registration....................................................................................21
9.4. Incidental Registration..................................................................................21
9.5. Registration Procedures..................................................................................22
9.6. Expenses.................................................................................................24
9.7. Indemnification and Contribution.........................................................................24
9.8. 25
9.9. Termination of Restrictions..............................................................................25
9.10. Listing on Securities Exchange...........................................................................26
9.11. Certain Limitations on Registration Rights...............................................................26
9.12. Selection of Managing Underwriters.......................................................................26
10. SUPPLYING INFORMATION..............................................................................................26
11. LOSS OR MUTILATION.................................................................................................26
12. OFFICE OF COMPANY..................................................................................................27
13. Filings............................................................................................................27
14. limitation of liability............................................................................................27
15. MISCELLANEOUS......................................................................................................27
15.1. Nonwaiver and Expenses...................................................................................27
15.2. Notice Generally.........................................................................................27
15.3. No Stockholder Rights....................................................................................28
15.4. Indemnification..........................................................................................28
15.5. Remedies.................................................................................................29
15.6. Successors and Assigns...................................................................................29
15.7. Amendment................................................................................................29
15.8. Severability.............................................................................................29
15.9. Headings.................................................................................................29
15.10. Governing Law............................................................................................29
ii
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
SECTION PAGE
EXHIBIT A SUBSCRIPTION FORM...................................................................................................31
EXHIBIT B ASSIGNMENT FORM.....................................................................................................32
</TABLE>
iii
<PAGE>
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED IN
VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF
THIS WARRANT.
No. of Shares of Common Stock: 750,000
WARRANT
To Purchase Common Stock of
ARV ASSISTED LIVING, INC.
THIS IS TO CERTIFY THAT LFSRI II Assisted Living LLC, or
registered assigns, is entitled, at any time prior to the Expiration Date (as
hereinafter defined), to purchase from ARV ASSISTED LIVING, INC., a Delaware
corporation ("Company"), 750,000 shares (or such lesser number of shares as
determined pursuant to Section 2.1) of Common Stock (as hereinafter defined and
subject to adjustment as provided herein), in whole or in part, including
fractional parts, at a purchase price of $3.00 per share, all on the terms and
conditions and pursuant to the provisions hereinafter set forth.
1. DEFINITIONS
As used in this Warrant, the following terms have the
respective meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares
of Common Stock issued by Company after the Closing Date, other than Warrant
Stock.
"Affiliate" has the meaning ascribed thereto in Rule 12b-2
promulgated under the Exchange Act, and as in effect on the date hereof.
"Business Day" shall mean any day that is not a Saturday or
Sunday or a day on which banks are required or permitted to be closed in the
State of New York or in the State of California.
"Closing Date" shall have the meaning set forth in the Loan
Agreement.
"Commission" shall mean the Securities and Exchange
Commission or any other federal agency then administering the Securities Act and
other federal securities laws.
"Common Stock" shall mean (except where the context
otherwise indicates) the common stock, $.01 par value, of Company as constituted
on the Closing Date, and any capital stock into which such common stock may
thereafter be changed, and shall also include (i) capital stock of Company of
2
<PAGE>
any other class (regardless of how denominated) issued to the holders of shares
of common stock upon any reclassification thereof which is also not preferred as
to dividends or assets over any other class of stock of Company and which is not
subject to redemption and (ii) shares of common stock of any successor or
acquiring corporation (as defined in Section 4.8) received by or distributed to
the holders of common stock of Company in the circumstances contemplated by
Section 4.8.
"Convertible Securities" shall mean evidences of
indebtedness, shares of stock or other securities which are convertible into or
exchangeable, with or without payment of additional consideration in cash or
property, for Additional Shares of Common Stock, either immediately or upon the
occurrence of a specified date or a specified event.
"Current Market Price" shall mean, in respect of any share
of Common Stock on any date herein specified, the average of the daily market
prices for 30 consecutive Business Days commencing 45 days before such date. The
daily market price for each such Business Day shall be (i) the last sale price
on such day on the principal stock exchange or NASDAQ Stock Market ("NASDAQ") on
which such Common Stock is then listed or admitted to trading, (ii) if no sale
takes place on such day on any such exchange or NASDAQ, the average of the last
reported closing bid and asked prices on such day as officially quoted on any
such exchange or NASDAQ, (iii) if the Common Stock is not then listed or
admitted to trading on any stock exchange or NASDAQ, the average of the last
reported closing bid and asked prices on such day in the over-the-counter
market, as furnished by the National Association of Securities Dealers Automatic
Quotation System or the National Quotation Bureau, Inc., (iv) if neither such
corporation at the time is engaged in the business of reporting such prices, as
furnished by any similar firm then engaged in such business, or (v) if there is
no such firm, as furnished by any member of the NASD selected mutually by the
Majority Holders and Company or, if they cannot agree upon such selection, as
selected by two such members of the NASD, one of which shall be selected by the
Majority Holders and one of which shall be selected by Company.
"Current Warrant Price" shall mean, in respect of a share
of Common Stock at any date herein specified, the price at which a share of
Common Stock may be purchased pursuant to this Warrant on such date.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, or any similar federal statute, and the rules and regulations
of the Commission thereunder, all as the same shall be in effect from time to
time.
"Exercise Period" shall mean the period during which this
Warrant is exercisable pursuant to Section 2.1.
"Expiration Date" shall mean April 24, 2005.
3
<PAGE>
"Fully Diluted Outstanding" shall mean, when used with
reference to Common Stock, at any date as of which the number of shares thereof
is to be determined, all shares of Common Stock Outstanding at such date and all
shares of Common Stock issuable in respect of this Warrant, and other options or
warrants to purchase, or securities convertible into, shares of Common Stock
outstanding on such date which would be deemed outstanding in accordance with
GAAP for purposes of determining book value or net income per share.
"GAAP" shall mean generally accepted accounting principles
in the United States of America as from time to time in effect.
"Holder" shall mean the Person in whose name the Warrant
set forth herein is registered on the books of Company maintained for such
purpose.
"Loan Agreement" shall mean the Term Loan Agreement dated
as of April 24, 2000 by and between Company and LFSRI II Assisted Living LLC, or
any successor agreement between such parties.
"Majority Holders" shall mean the holders of Warrants
exercisable for in excess of 50% of the aggregate number of shares of Common
Stock then purchasable upon exercise of all Warrants, whether or not then
exercisable.
"NASD" shall mean the National Association of Securities
Dealers, Inc., or any successor corporation thereto.
"Notes" shall have the meaning set forth in Section 2.1.
"Other Property" shall have the meaning set forth in
Section 4.8.
"Outstanding" shall mean, when used with reference to
Common Stock, at any date as of which the number of shares thereof is to be
determined, all issued shares of Common Stock, except shares then owned or held
by or for the account of Company or any subsidiary thereof, and shall include
all shares issuable in respect of outstanding scrip or any certificates
representing fractional interests in shares of Common Stock.
"Permitted Issuances" shall mean (i) the issuance of stock
options or other securities or rights pursuant to a stock option, stock
purchase, equity incentive, or similar plan or related agreement approved by
Company's Board of Directors or a committee thereof, (ii) the issuance of stock
options or other securities or rights to a director, officer, employee or
consultant of Company as approved by Company's Board of Directors or a committee
thereof, (iii) the issuance of securities upon the exercise of any stock options
or other securities or rights referred to in clause (i) or clause (ii), (iv) the
issuance of Common Stock in exchange for all or part of the principal amount of
any of Company's 6 3/4% Convertible Subordinated Notes Due 2006 (the
"Convertible Notes"), and (v) the issuance of securities upon the conversion of
all or part of the Convertible Notes.
"Person" shall mean any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
4
<PAGE>
entity or government (whether federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality, division, agency,
body or department thereof).
"Restricted Common Stock" shall mean shares of Common Stock
which are, or which upon their issuance on the exercise of this Warrant would
be, evidenced by a certificate bearing the restrictive legend set forth in
Section 9.1(a).
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Settlement Agreement" shall mean that certain Settlement
Agreement, dated as of September 29, 1999, among the Company, Prometheus
Assisted Living LLC, Lazard Freres Real Estate Investors L.L.C., LF Strategic
Realty Investors II L.P., LFSRI II Alternative Partnership L.P., LFSRI II-CADIM
Alternative Partnership L.P., Atria Communities, Inc., and Kapson Senior
Quarters Corp.
"Transfer" shall mean any disposition of any Warrant or
Warrant Stock or of any interest in either thereof, which would constitute a
sale thereof within the meaning of the Securities Act.
"Transfer Notice" shall have the meaning set forth in
Section 9.2.
"Warrants" shall mean this Warrant and all warrants issued
upon transfer, division or combination of, or in substitution for, any thereof.
All Warrants shall at all times be identical as to terms and conditions and
date, except as to the number of shares of Common Stock for which they may be
exercised.
"Warrant Price" shall mean an amount equal to (i) the
number of shares of Common Stock being purchased upon exercise of this Warrant
pursuant to Section 2.1, multiplied by (ii) the Current Warrant Price as of the
date of such exercise.
"Warrant Stock" shall mean the shares of Common Stock
issuable to the Holder upon the exercise of the Warrant.
2. EXERCISE OF WARRANT
2.1. Manner of Exercise. From and after the Closing Date
and until 5:00 P.M., New York time, on the Expiration Date, Holder may exercise
this Warrant, on any Business Day, for all or any part of the number of shares
of Common Stock purchasable hereunder at the time of such exercise. In the event
that Company does not borrow an aggregate of $10,000,000 under the Loan
Agreement, the number of shares of Common Stock for which this Warrant shall be
exercisable will, at any time, be equal to (x) 75,000 shares of Common Stock, as
such number may be adjusted pursuant to Section 4 (such adjustment in Section 4
to be calculated assuming that the number of shares of Common Stock for which
this Warrant is exercisable on the Closing Date is 75,000 shares) multiplied by
5
<PAGE>
(y) the aggregate amount of borrowings made under the Loan Agreement at such
time divided by $1,000,000.
In order to exercise this Warrant, in whole or in part,
Holder shall deliver to Company at its principal office at 245 Fischer Avenue,
Suite D-1, Costa Mesa, California 92626 or at the office or agency designated by
Company pursuant to Section 12, (i) a written notice of Holder's election to
exercise this Warrant, which notice shall specify the number of shares of Common
Stock to be purchased, (ii) payment of the Warrant Price and (iii) this Warrant.
Such notice shall be substantially in the form of the subscription form
appearing at the end of this Warrant as Exhibit A, duly executed by Holder or
its agent or attorney. Upon receipt thereof, Company shall, as promptly as
practicable, and in any event within five (5) Business Days thereafter, execute
or cause to be executed and deliver or cause to be delivered to Holder a
certificate or certificates representing the aggregate number of full shares of
Common Stock issuable upon such exercise, together with cash in lieu of any
fraction of a share, as hereinafter provided. The stock certificate or
certificates so delivered shall be, to the extent possible, in such denomination
or denominations as such Holder shall request in the notice and shall be
registered in the name of Holder or, subject to Section 9, such other name as
shall be designated in the notice. This Warrant shall be deemed to have been
exercised and such certificate or certificates shall be deemed to have been
issued, and Holder or, subject to Section 9, any other Person so designated to
be named therein shall be deemed to have become a holder of record of such
shares for all purposes, as of the date the notice, together with the cash or
check or checks and this Warrant, is received by Company as described above and
all taxes required to be paid by Holder, if any, pursuant to Section 2.2 prior
to the issuance of such shares have been paid. If this Warrant shall have been
exercised in part, Company shall, at the time of delivery of the certificate or
certificates representing Warrant Stock, deliver to Holder a new Warrant
evidencing the rights of Holder to purchase the unpurchased shares of Common
Stock called for by this Warrant, which new Warrant shall in all other respects
be identical with this Warrant, or, at the request of Holder, appropriate
notation may be made on this Warrant and the same returned to Holder.
Notwithstanding any provision herein to the contrary, Company shall not be
required to register shares in the name of any Person who acquired this Warrant
(or part hereof) or any Warrant Stock otherwise than in accordance with this
Warrant.
Payment of the Warrant Price shall be made at the option of
the Holder by (i) certified or official bank check, (ii) by the surrender of one
or more of the notes (collectively, the "Notes") issued by Company and
evidencing the loans made pursuant to the Loan Agreement, (iii) by the Holder's
surrender to Company of that number of shares of Common Stock having an
aggregate Current Market Price equal to the Current Warrant Price for Shares of
Common Stock then being purchased, (iv) a written notice to Company that Holder
is exercising the Warrant (or a portion thereof) by authorizing Company to
withhold from issuance a number of shares of Common Stock issuable upon such
exercise of the Warrant which when multiplied by the Current Market Price of the
Common Stock is equal to the Warrant Price (and such withheld shares of Common
Stock shall no longer be issuable under this Warrant), or (v) any combination
thereof, duly endorsed by or accompanied by appropriate instruments of transfer
duly executed by Holder or by Holder's attorney duly authorized in writing. For
the purposes of making payment of the Warrant Price, the Notes shall have a
6
<PAGE>
value equal to 100% of the principal amount thereof plus accrued and unpaid
interest thereon to the date of surrender in respect of payment of the Warrant
Price. If a Holder surrenders Notes having an aggregate value which exceeds the
aggregate Warrant Price, Company shall, at its option, pay the Holder an amount
in cash equal to all or part of such excess (if any) over the Warrant Price
and/or issue a new Note in the principal amount equal to that portion of such
surrendered principal amount not applied to the Warrant Price or paid in cash to
the Holder. If the Holder surrenders the Notes, the Holder shall specify the
portion of the value of each such Note surrendered to be applied toward the
Warrant Price. Notwithstanding any provision of the Loan Agreement, no payment
or issuance of a Note pursuant to this Section 2.1 or any other provision of
this Warrant shall constitute a prepayment requiring Company to pay a prepayment
premium.
2.2. Payment of Taxes. All shares of Common Stock issued
upon the exercise of this Warrant against payment of the Warrant Price pursuant
to the terms hereof shall be validly issued, fully paid and nonassessable and
without any preemptive rights. Company shall pay all expenses in connection
with, and all taxes and other governmental charges (other than those on or
measured by the income of Holder) that may be imposed with respect to, the issue
or delivery thereof. Company shall not be required, however, to pay any tax or
other charge imposed in connection with any transfer involved in the issue of
any certificate for shares of Common Stock issuable upon exercise of this
Warrant in any name other than that of Holder, and in such case Company shall
not be required to issue or deliver any stock certificate until such tax or
other charge has been paid or it has been established to the satisfaction of
Company that no such tax or other charge is due.
2.3. Fractional Shares. Company shall not be required to
issue a fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share which the Holder of one or more Warrants would otherwise be
entitled to purchase upon such exercise, Company shall pay a cash adjustment in
respect of such fraction in an amount equal to the same fraction of (x) the
Current Market Price per share of Common Stock on the date of exercise, if there
is a public market for the Common Stock, or (y) the fair market value per share
of Common Stock on the date of exercise as determined by the Board of Directors
of Company, if there is no public market for the Common Stock.
2.4. Continued Validity. A holder of shares of Common Stock
issued upon the exercise of this Warrant, in whole or in part (other than a
holder who acquires such shares after the same have been publicly sold pursuant
to a registration statement under the Securities Act or sold pursuant to Rule
144 thereunder), shall continue to be entitled with respect to such shares to
all rights to which it would have been entitled as Holder under Sections 9, 10
and 14 of this Warrant.
2.5. Payment in Lieu of Shares.
(a) As used in this Section 2.5: (i) "Triggering
Percentage" means, at any time, the lowest percentage of Aggregate Beneficial
Ownership that would result in (A) a "Trigger Event" as defined in the Rights
Agreement dated as of May 14, 1998 between Company and ChaseMellon Shareholder
Services, L.L.C. as amended and in effect on the date hereof (the "Rights
7
<PAGE>
Agreement") or (B) any "Change of Control" (or similar term) as defined in the
Loan Agreement, the indenture for the Convertible Notes, or any lease, credit,
employment or other agreement to which Company or a subsidiary of Company is a
party as of the date of this Agreement, the occurrence of which would require
Company or a subsidiary of Company to make any payment to any other Person or
otherwise materially and adversely affect Company or a subsidiary of Company,
(ii) "Adjustment Number" means, at any time, a number of shares of Common Stock
which, if subtracted from the number of shares of Common Stock for which this
Warrant, but for the provisions of this Section 2.5, otherwise would be
exercisable at such time, would cause the Aggregate Beneficial Ownership to be
an amount equal to the Triggering Percentage at such time, minus one-tenth of
one percent (.10%), and (iii) "Aggregate Beneficial Ownership" means the
aggregate beneficial ownership of shares of Common Stock by Holder and all
Affiliates and Associates (as such terms are defined in the Rights Agreement).
(b) Notwithstanding any other provision of this Agreement,
if at any time the Aggregate Beneficial Ownership, but for the provisions of
this Section 2.5, would otherwise equal or exceed the Triggering Percentage,
then (i) the number of shares of Common Stock for which this Warrant is
exercisable shall be a number equal to (A) the number of shares of Common Stock
for which this Warrant, but for the provisions of this Section 2.5, would
otherwise then be exercisable minus (B) the Adjustment Number at such time and
(ii) in addition, Holder shall have a right (the "Cash Right"), which may be
exercised in whole or in part, to receive immediately available funds from
Company in an amount equal to the Adjustment Number at such time (or such
portion of such number exercised by Holder) multiplied by the closing price of
Common Stock on the date of such exercise, which right may otherwise be
exercised upon the same terms and conditions, and shall be subject to the same
Section 4 adjustments, as the right to exercise this Warrant to purchase shares
of Common Stock.
(c) If, at any time after an adjustment pursuant to this
Section 2.5 in the number of shares of Common Stock for which this Warrant is
exercisable, the Aggregate Beneficial Ownership becomes less than the Triggering
Percentage minus one-tenth of one percent (.10%), then the adjustment and the
Cash Right pursuant to this Section 2.5 shall be recalculated based on the
Adjustment Number at such time effective immediately after such time.
(d) Any adjustment made pursuant to this Section 2.5 to the
number of shares of Common Stock or Cash Right for which this Warrant may be
exercised shall be effective immediately prior to the occurrence that would have
caused the Holder's Aggregate Beneficial Ownership to equal or exceed the
Triggering Percentage.
8
<PAGE>
3. TRANSFER, DIVISION AND COMBINATION
3.1. Transfer. Subject to compliance with Section 9,
transfer of this Warrant and all rights hereunder, in whole or in part, shall be
registered on the books of Company to be maintained for such purpose, upon
surrender of this Warrant at the principal office of Company referred to in
Section 2.1 or the office or agency designated by Company pursuant to Section
12, together with a written assignment of this Warrant substantially in the form
of Exhibit B hereto duly executed by Holder or its agent or attorney together
with funds sufficient to pay any transfer taxes payable upon the making of such
transfer. Upon such surrender and, if required, such payment, Company shall,
subject to Section 9, execute and deliver a new Warrant or Warrants in the name
of the assignee or assignees and in the denomination specified in such
instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and this Warrant shall
promptly be cancelled. A Warrant, if properly assigned in compliance with
Section 9, may be exercised by a new Holder for the purchase of shares of Common
Stock without having a new Warrant issued.
3.2. Division and Combination. Subject to Section 9, this
Warrant may be divided or combined with other Warrants upon presentation hereof
at the aforesaid office or agency of Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by Holder or its agent or attorney. Subject to compliance with Section
3.1 and with Section 9, as to any transfer which may be involved in such
division or combination, Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
3.3. Expenses. Company shall prepare, issue and deliver at
its own expense (other than transfer taxes) the new Warrant or Warrants under
this Section 3.
3.4. Maintenance of Books. Company agrees to maintain, at
its aforesaid office or agency, books for the registration and the registration
of transfer of the Warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant
is exercisable, or the price at which such shares may be purchased upon exercise
of this Warrant, shall be subject to adjustment from time to time as set forth
in this Section 4. Company shall promptly, but in any event within 3 Business
Days, after the happening of any event described below which requires an
adjustment pursuant to this Section 4 give each Holder notice of such event.
4.1. Stock Dividends, Subdivisions and Combinations. If at
any time Company shall:
(a) take a record of the holders of its Common Stock for
the purpose of entitling them to receive a dividend payable in, or other
distribution of, Additional Shares of Common Stock,
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(b) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock,
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (ii) the Current Warrant Price
shall be adjusted to equal (A) the Current Warrant Price multiplied by the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the adjustment divided by (B) the number of shares for
which this Warrant is exercisable immediately after such adjustment.
4.2. Certain Other Distributions. If at any time Company
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive any dividend or other distribution of:
(a) cash,
(b) any evidences of its indebtedness, any shares of its
stock or any other securities or property of any nature whatsoever (other than
cash, Convertible Securities or Additional Shares of Common Stock), or
(c) any warrants or other rights to subscribe for or
purchase any evidences of its indebtedness, any shares of its stock or any other
securities or property of any nature whatsoever (other than cash, Convertible
Securities or Additional Shares of Common Stock),
then (i) the number of shares of Common Stock for which this Warrant is
exercisable shall be adjusted to equal the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such adjustment
multiplied by a fraction (A) the numerator of which shall be the Current Market
Price per share of Common Stock at the date of taking such record and (B) the
denominator of which shall be such Current Market Price per share of Common
Stock minus the amount allocable to one share of Common Stock of any such cash
so distributable and of the fair value (as determined in good faith by the Board
of Directors of Company and supported by an opinion from an investment banking
firm of recognized national standing acceptable to the Majority Holders) of any
and all such evidences of indebtedness, shares of stock, other securities or
property or warrants or other subscription or purchase rights so distributable,
and (ii) the Current Warrant Price shall be adjusted to equal (A) the Current
Warrant Price multiplied by the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to the adjustment divided by (B) the
number of shares for which this Warrant is exercisable immediately after such
adjustment. A reclassification of the Common Stock (other than a change in par
value, or from par value to no par value or from no par value to par value) into
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shares of Common Stock and shares of any other class of stock shall be deemed a
distribution by Company to the holders of its Common Stock of such shares of
such other class of stock within the meaning of this Section 4.2 and, if the
outstanding shares of Common Stock shall be changed into a larger or smaller
number of shares of Common Stock as a part of such reclassification, such change
shall be deemed a subdivision or combination, as the case may be, of the
outstanding shares of Common Stock within the meaning of Section 4.1.
4.3. Issuance of Additional Shares of Common Stock. (a) If
at any time Company shall (except as hereinafter provided) issue or sell any
Additional Shares of Common Stock, other than Permitted Issuances, in exchange
for consideration in an amount per Additional Share of Common Stock less than
the Current Warrant Price at the time the Additional Shares of Common Stock are
issued, then (i) the Current Warrant Price as to the number of shares for which
this Warrant is exercisable prior to such adjustment shall be reduced to a price
determined by dividing (A) an amount equal to the sum of (x) the number of
shares of Common Stock Outstanding immediately prior to such issue or sale
multiplied by the then existing Current Warrant Price, plus (y) the
consideration, if any, received by Company upon such issue or sale, by (B) the
total number of shares of Common Stock Outstanding immediately after such issue
or sale; and (ii) the number of shares of Common Stock for which this Warrant is
exercisable shall be adjusted to equal the product obtained by multiplying the
Current Warrant Price in effect immediately prior to such issue or sale by the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such issue or sale and dividing the product thereof by the
Current Warrant Price resulting from the adjustment made pursuant to clause (i)
above.
(b) If at any time Company shall (except as hereinafter
provided) at any time issue or sell any Additional Shares of Common Stock, other
than Permitted Issuances, for consideration in an amount per Additional Share of
Common Stock less than the Current Market Price, then (i) the number of shares
of Common Stock for which this Warrant is exercisable shall be adjusted to equal
the product obtained by multiplying the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such issue or sale by a
fraction (A) the numerator of which shall be the number of shares of Common
Stock Outstanding immediately after such issue or sale, and (B) the denominator
of which shall be the number of shares of Common Stock Outstanding immediately
prior to such issue or sale plus the number of shares which the aggregate
offering price of the total number of such Additional Shares of Common Stock
would purchase at the then Current Market Price; and (ii) the Current Warrant
Price as to the number of shares for which this Warrant is exercisable prior to
such adjustment shall be adjusted by multiplying such Current Warrant Price by a
fraction (X) the numerator of which shall be the number of shares for which this
Warrant is exercisable immediately prior to such issue or sale; and (Y) the
denominator of which shall be the number of shares of Common Stock purchasable
immediately after such issue or sale.
(c) If at any time Company (except as hereinafter provided)
shall issue or sell any Additional Shares of Common Stock, other than Permitted
Issuances, in exchange for consideration in an amount per Additional Share of
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Common Stock which is less than the Current Warrant Price and Current Market
Price (as defined above) at the time the Additional Shares of Common Stock are
issued, the adjustment required under Section 4.3 shall be made in accordance
with the formula in paragraph (a) or (b) above which results in the lower
Current Warrant Price following such adjustment. The provisions of paragraphs
(a) and (b) of Section 4.3 shall not apply to any issuance of Additional Shares
of Common Stock for which an adjustment is provided under Section 4.1 or 4.2. No
adjustment of the number of shares of Common Stock for which this Warrant shall
be exercisable shall be made under paragraph (a) or (b) of Section 4.3 upon the
issuance of any Additional Shares of Common Stock which are issued pursuant to
the exercise of any warrants or other subscription or purchase rights or
pursuant to the exercise of any conversion or exchange rights in any Convertible
Securities, if any such adjustment shall previously have been made upon the
issuance of such warrants or other rights or upon the issuance of such
Convertible Securities (or upon the issuance of any warrant or other rights
therefor) pursuant to Section 4.4 or Section 4.5.
(d) If any Additional Shares of Common Stock, other than
Permitted Issuances, are issued or sold in exchange for consideration in an
amount per Additional Share of Common Stock equal to or greater than the Current
Warrant Price and the Current Market Price at the time the Additional Shares are
issued, then (i) the number of shares of Common Stock for which this Warrant is
exercisable shall be adjusted to equal the product obtained by multiplying the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such adjustment by a fraction (A) the numerator of which
shall be the number of shares of Common Stock Outstanding immediately after the
issuance of such Additional Shares of Common Stock, and (B) the denominator of
which shall be the number of shares of Common Stock Outstanding immediately
prior to the issuance of such Additional Shares of Common Stock; and (ii) the
Current Warrant Price as to the number of shares of Common Stock for which this
Warrant is exercisable prior to such adjustment shall not change but the Current
Warrant Price for each of the incremental number of shares of Common Stock for
which this Warrant becomes exercisable after such adjustment shall be equal to
the fair value of such consideration per Additional Share of Common Stock.
4.4. Issuance of Warrants or Other Rights. If at any time
Company shall take a record of the holders of its Common Stock for the purpose
of entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which Company is the surviving
corporation) issue or sell, any warrants or other rights to subscribe for or
purchase any Additional Shares of Common Stock or any Convertible Securities,
whether or not the rights to exchange or convert thereunder are immediately
exercisable, and the price per share for which Common Stock is issuable upon the
exercise of such warrants or other rights or upon conversion or exchange of such
Convertible Securities shall be less than the Current Warrant Price or the
Current Market Price in effect immediately prior to the time of such issue or
sale, then the number of shares for which this Warrant is exercisable and the
Current Warrant Price shall be adjusted as provided in Section 4.3 on the basis
that the maximum number of Additional Shares of Common Stock issuable pursuant
to all such warrants or other rights or necessary to effect the conversion or
exchange of all such Convertible Securities shall be deemed to have been issued
and outstanding and Company shall be deemed to have received all of the
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consideration payable therefor, if any, as of the date of the issuance of such
warrants or other rights. No further adjustments of the number of shares of
Common Stock for which this Warrant is exercisable or the Current Warrant Price
shall be made upon the actual issue of such Common Stock or of such Convertible
Securities upon exercise of such warrants or other rights or upon the actual
issue of such Common Stock upon such conversion or exchange of such Convertible
Securities.
4.5. Issuance of Convertible Securities. If at any time
Company shall take a record of the holders of its Common Stock for the purpose
of entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which Company is the surviving
corporation) issue or sell, any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, and the
price per share for which Common Stock is issuable upon such conversion or
exchange shall be less than the Current Warrant Price or Current Market Price in
effect immediately prior to the time of such issue or sale, then the number of
Shares for which this Warrant is exercisable and the Current Warrant Price shall
be adjusted as provided in Section 4.3 on the basis that the maximum number of
Additional Shares of Common Stock necessary to effect the conversion or exchange
of all such Convertible Securities shall be deemed to have been issued and
outstanding and Company shall have received all of the consideration payable
therefor, if any, as of the date of issuance of such Convertible Securities. No
adjustment of the number of Shares for which this Warrant is exercisable and the
Current Warrant Price shall be made under this Section 4.5 upon the issuance of
any Convertible Securities which are issued pursuant to the exercise of any
warrants or other subscription or purchase rights therefor, if any such
adjustment shall previously have been made upon the issuance of such warrants or
other rights pursuant to Section 4.4. No further adjustments of the number of
shares of Common Stock for which this Warrant is exercisable or the Current
Warrant Price shall be made upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities and, if any issue or sale
of such Convertible Securities is made upon exercise of any warrant or other
right to subscribe for or to purchase any such Convertible Securities for which
adjustments of the number of shares of Common Stock for which this Warrant is
exercisable and the Current Warrant Price have been or are to be made pursuant
to other provisions of this Section 4, no further adjustments of the number of
shares of Common Stock for which this Warrant is exercisable or the Current
Warrant Price shall be made by reason of such issue or sale.
4.6. Superseding Adjustment. If, at any time after any
adjustment of the number of shares of Common Stock for which this Warrant is
exercisable and the Current Warrant Price shall have been made pursuant to
Section 4.4 or Section 4.5 as the result of any issuance of warrants, rights or
Convertible Securities,
(a) such warrants or rights, or the right of conversion or
exchange in such other Convertible Securities, shall expire, and all or a
portion of such warrants or rights, or the right of conversion or exchange with
respect to all or a portion of such other Convertible Securities, as the case
may be, shall not have been exercised, or
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(b) the consideration per share for which shares of Common
Stock are issuable pursuant to such warrants or rights, or the terms of such
other Convertible Securities, shall be increased solely by virtue of provisions
therein contained for an automatic increase in such consideration per share upon
the occurrence of a specified date or event,
then for each outstanding Warrant such previous adjustment shall be rescinded
and annulled and the Additional Shares of Common Stock which were deemed to have
been issued by virtue of the computation made in connection with the adjustment
so rescinded and annulled shall no longer be deemed to have been issued by
virtue of such computation. Thereupon, a recomputation shall be made of the
effect of such rights or options or other Convertible Securities on the basis of
(i) treating the number of Additional Shares of
Common Stock or other property, if any, theretofore
actually issued or issuable pursuant to the previous
exercise of any such warrants or rights or any such
right of conversion or exchange, as having been
issued on the date or dates of any such exercise and
for the consideration actually received and
receivable therefor, and
(ii) treating any such warrants or rights or any such
other Convertible Securities which then remain
outstanding as having been granted or issued
immediately after the time of such increase of the
consideration per share for which shares of Common
Stock or other property are issuable under such
warrants or rights or other Convertible Securities;
whereupon a new adjustment of the number of shares of Common Stock for which
this Warrant is exercisable and the Current Warrant Price shall be made, which
new adjustment shall supersede the previous adjustment so rescinded and
annulled.
4.7. Other Provisions Applicable to Adjustments under this
Section. The following provisions shall be applicable to the making of
adjustments of the number of shares of Common Stock for which this Warrant is
exercisable and the Current Warrant Price provided for in this Section 4:
(a) Computation of Consideration. To the extent that any
Additional Shares of Common Stock or any Convertible Securities or any warrants
or other rights to subscribe for or purchase any Additional Shares of Common
Stock or any Convertible Securities shall be issued for cash consideration, the
consideration received by Company therefor shall be the amount of the cash
received by Company therefor, or, if such Additional Shares of Common Stock or
Convertible Securities are offered by Company for subscription, the subscription
price, or, if such Additional Shares of Common Stock or Convertible Securities
are sold to underwriters or dealers for public offering without a subscription
offering, the initial public offering price (in any such case subtracting any
amounts paid or receivable for accrued interest or accrued dividends and any
compensation, discounts or expenses paid or incurred by Company for and in the
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underwriting of, or otherwise in connection with, the issuance thereof). To the
extent that such issuance shall be for a consideration other than cash, then,
except as herein otherwise expressly provided, the amount of such consideration
shall be deemed to be the fair value of such consideration at the time of such
issuance as determined in good faith by the Board of Directors of Company. In
case any Additional Shares of Common Stock or any Convertible Securities or any
warrants or other rights to subscribe for or purchase such Additional Shares of
Common Stock or Convertible Securities shall be issued in connection with any
merger in which Company issues any securities, the amount of consideration
therefor shall be deemed to be the fair value, as determined in good faith by
the Board of Directors of Company, of such portion of the assets and business of
the nonsurviving corporation as such Board in good faith shall determine to be
attributable to such Additional Shares of Common Stock, Convertible Securities,
warrants or other rights, as the case may be. The consideration for any
Additional Shares of Common Stock issuable pursuant to any warrants or other
rights to subscribe for or purchase the same shall be the consideration received
by Company for issuing such warrants or other rights plus the additional
consideration payable to Company upon exercise of such warrants or other rights.
The consideration for any Additional Shares of Common Stock issuable pursuant to
the terms of any Convertible Securities shall be the consideration received by
Company for issuing warrants or other rights to subscribe for or purchase such
Convertible Securities, plus the consideration paid or payable to Company in
respect of the subscription for or purchase of such Convertible Securities, plus
the additional consideration, if any, payable to Company upon the exercise of
the right of conversion or exchange in such Convertible Securities. In case of
the issuance at any time of any Additional Shares of Common Stock or Convertible
Securities in payment or satisfaction of any dividends upon any class of stock
other than Common Stock, Company shall be deemed to have received for such
Additional Shares of Common Stock or Convertible Securities a consideration
equal to the amount of such dividend so paid or satisfied.
(b) When Adjustments to Be Made. The adjustments required
by this Section 4 shall be made whenever and as often as any specified event
requiring an adjustment shall occur, except that any adjustment of the number of
shares of Common Stock for which this Warrant is exercisable that would
otherwise be required may be postponed (except in the case of a subdivision or
combination of shares of Common Stock, as provided for in Section 4.1) up to,
but not beyond the date of exercise if such adjustment either by itself or with
other adjustments not previously made adds or subtracts less than 1% of the
shares of Common Stock for which this Warrant is exercisable immediately prior
to the making of such adjustment. Any adjustment representing a change of less
than such minimum amount (except as aforesaid) which is postponed shall be
carried forward and made as soon as such adjustment, together with other
adjustments required by this Section 4 and not previously made, would result in
a minimum adjustment of at least 1% or in any event, on the date of exercise.
For the purpose of any adjustment, any specified event shall be deemed to have
occurred at the close of business on the date of its occurrence.
(c) Fractional Interests. In computing adjustments under
this Section 4, fractional interests in Common Stock shall be taken into account
to the nearest 1/10th of a share.
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(d) When Adjustment Not Required. If Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
(e) Escrow of Warrant Stock. If Holder exercises this
Warrant after any property becomes distributable pursuant to this Section 4 by
reason of the taking of any record of the holders of Common Stock but prior to
the occurrence of the event for which such record is taken, any Additional
Shares of Common Stock issuable upon exercise of this Warrant shall be held in
escrow, upon payment of the Current Warrant Price, for Holder by Company to be
issued to Holder upon and to the extent that the event actually takes place.
Notwithstanding any other provision to the contrary herein, if the event for
which such record was taken fails to occur or is rescinded, then such escrowed
shares shall be cancelled by Company.
(f) Challenge to Good Faith Determination. Whenever the
Board of Directors of Company shall be required to make a determination in good
faith of the fair value of any item under this Section 4, such determination may
be challenged in good faith by the Majority Holders, and any dispute shall be
resolved by an investment banking firm of recognized national standing selected
by Company and acceptable to the Majority Holders.
4.8. Reorganization, Reclassification, Merger,
Consolidation or Disposition of Assets. In case Company shall reorganize its
capital, reclassify its capital stock, consolidate or merge with or into another
corporation (where Company is not the surviving corporation or where there is a
change in or distribution with respect to the Common Stock of Company), or sell,
transfer or otherwise dispose of all or substantially all its property, assets
or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, any cash, shares of stock or other securities or property of any nature
whatsoever including warrants or other subscription or purchase rights or any
shares of common stock of the successor or acquiring corporation (collectively,
"Other Property"), are to be received by or distributed to the holders of Common
Stock of Company, then each Holder shall have the right thereafter to receive,
upon exercise of such Warrant, the number of shares of common stock of the
successor or acquiring corporation or of Company, if it is the surviving
corporation, and Other Property receivable upon or as a result of such
reorganization, reclassification, merger, consolidation or disposition of assets
by a holder of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than Company) shall expressly assume the due
and punctual observance and performance of each and every covenant and condition
of this Warrant to be performed and observed by Company and all the obligations
and liabilities hereunder, subject to such modifications as may be deemed
appropriate (as determined by resolution of the Board of Directors of Company)
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in order to provide for adjustments of shares of Common Stock for which this
Warrant is exercisable which shall be as nearly equivalent as practicable to the
adjustments provided for in this Section 4. For purposes of this Section 4.8,
"common stock of the successor or acquiring corporation" shall include stock of
such corporation of any class which is not preferred as to dividends or assets
over any other class of stock of such corporation and which is not subject to
redemption and shall also include any evidences of indebtedness, shares of stock
or other securities which are convertible into or exchangeable for any such
stock, either immediately or upon the arrival of a specified date or the
happening of a specified event and any warrants or other rights to subscribe for
or purchase any such stock. The foregoing provisions of this Section 4.8 shall
similarly apply to successive reorganizations, reclassifications, mergers,
consolidations or disposition of assets.
4.9. Other Action Affecting Common Stock. In case at any
time or from time to time Company shall take any action in respect of its Common
Stock, other than any action described in this Section 4, then, unless such
action will not have a materially adverse effect upon the rights of the Holders,
the number of shares of Common Stock or other stock for which this Warrant is
exercisable and/or the purchase price thereof shall be adjusted in such manner
as may be equitable in the circumstances.
4.10. Certain Limitations. Notwithstanding anything herein
to the contrary, Company agrees not to enter into any transaction which, by
reason of any adjustment hereunder, would cause the Current Warrant Price to be
less than the par value per share of Common Stock.
5. NOTICES TO WARRANT HOLDERS
5.1. Notice of Adjustments. Whenever the number of shares
of Common Stock for which this Warrant is exercisable, or whenever the price at
which a share of such Common Stock may be purchased upon exercise of the
Warrants, shall be adjusted pursuant to Section 4, Company shall forthwith
prepare a certificate to be executed by the chief financial officer of Company
setting forth, in reasonable detail, the event requiring the adjustment and the
method by which such adjustment was calculated (including a description of the
basis on which the Board of Directors of Company determined the fair value of
any evidences of indebtedness, shares of stock, other securities or property or
warrants or other subscription or purchase rights referred to in Section 4.2 or
4.7(a)), specifying the number of shares of Common Stock for which this Warrant
is exercisable and (if such adjustment was made pursuant to Section 4.8 or 4.9)
describing the number and kind of any other shares of stock or Other Property
for which this Warrant is exercisable, and any change in the purchase price or
prices thereof, after giving effect to such adjustment or change. Company shall
promptly cause a signed copy of such certificate to be delivered to each Holder
in accordance with Section 15.2. Company shall keep at its office or agency
designated pursuant to Section 12 copies of all such certificates and cause the
same to be available for inspection at said office during normal business hours
by any Holder or any prospective purchaser of a Warrant designated by a Holder
thereof.
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5.2. Notice of Corporate Action. If at any time
(a) Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or other
distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property, or to receive any other right, or
(b) there shall be any capital reorganization of Company,
any reclassification or recapitalization of the capital stock of Company or any
consolidation or merger of Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of
Company to, another corporation, or
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of Company;
then, in any one or more of such cases, Company shall give to Holder (i) at
least 30 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, and (ii) in the case of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, at least 30 days' prior written notice of the date when the same shall take
place. Such notice in accordance with the foregoing clause also shall specify
(i) the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, the date on which the holders of Common Stock
shall be entitled to any such dividend, distribution or right, and the amount
and character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up. Each such written notice shall be sufficiently given if addressed to Holder
at the last address of Holder appearing on the books of Company and delivered in
accordance with Section 15.2.
6. NO IMPAIRMENT
Company shall not by any action, including, without
limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of Holder against impairment. Without limiting the generality of the
foregoing, Company will (a) not increase the par value of any shares of Common
Stock receivable upon the exercise of this Warrant above the amount payable
therefor upon such exercise immediately prior to such increase in par value, (b)
take all such action as may be necessary or appropriate in order that Company
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may validly and legally issue fully paid and nonassessable shares of Common
Stock upon the exercise of this Warrant, and (c) use its best efforts to obtain
all such authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be necessary to enable Company to perform its
obligations under this Warrant.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK;
REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL
AUTHORITY
From and after the Closing Date, Company shall at all times
reserve and keep available for issuance upon the exercise of Warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants. Company
represents and warrants that, as of the Closing Date, the Company has 17,459,689
shares of Common Stock issued and outstanding and 100,000,000 shares of Common
Stock authorized and available for issuance.
Before taking any action which would cause an adjustment
reducing the Current Warrant Price below the then par value, if any, of the
shares of Common Stock issuable upon exercise of the Warrants, Company shall
take any corporate action which may be necessary in order that Company may
validly and legally issue fully paid and non-assessable shares of such Common
Stock at such adjusted Current Warrant Price.
Before taking any action which would result in an
adjustment in the number of shares of Common Stock for which this Warrant is
exercisable or in the Current Warrant Price, Company shall obtain all such
authorizations or exemptions thereof, or consents thereto, as may be necessary
from any public regulatory body or bodies having jurisdiction thereof.
If any shares of Common Stock required to be reserved for
issuance upon exercise of Warrants require registration or qualification with
any governmental authority or other governmental approval or filing under any
federal or state law (otherwise than as provided in Section 9) before such
shares may be so issued, Company will in good faith and as expeditiously as
possible and at its expense endeavor to cause such shares to be duly registered.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by
Company to the holders of its Common Stock with respect to which any provision
of Section 4 refers to the taking of a record of such holders, Company will in
each such case take such a record and will take such record as of the close of
business on a Business Day. Company will not at any time, except upon
dissolution, liquidation or winding up of Company, close its stock transfer
books or Warrant transfer books so as to result in preventing or delaying the
exercise or transfer of any Warrant.
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9. RESTRICTIONS ON TRANSFERABILITY
The Warrants and the Warrant Stock may be transferred,
hypothecated or assigned, as collateral or otherwise, upon satisfaction of the
conditions specified in this Section 9, which conditions are intended to ensure
compliance with the provisions of the Securities Act with respect to the
Transfer of any Warrant or any Warrant Stock. Holder, by acceptance of this
Warrant, agrees to be bound by the provisions of this Section 9.
9.1. Restrictive Legend. (a) Except as otherwise provided
in this Section 9, each certificate for Warrant Stock initially issued upon the
exercise of this Warrant, and each certificate for Warrant Stock issued to any
subsequent transferee of any such certificate, shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"The shares represented by this certificate have
not been registered under the Securities Act of 1933, as
amended, and are subject to the conditions specified in a
certain Warrant dated April 24, 2000, originally issued by
ARV Assisted Living, Inc. No transfer of the shares
represented by this certificate shall be valid or effective
until such conditions have been fulfilled. A copy of the
form of said Warrant is on file with the Secretary of ARV
Assisted Living, Inc. The holder of this certificate, by
acceptance of this certificate, agrees to be bound by the
provisions of such Warrant."
(b) Except as otherwise provided in this Section 9, each
Warrant shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"This Warrant and the securities represented
hereby have not been registered under the Securities Act of
1933, as amended, and may not be transferred in violation
of such Act, the rules and regulations thereunder or the
provisions of this Warrant."
9.2. Notice of Proposed Transfers; Requests for
Registration. Prior to or promptly following any Transfer of any Warrants or any
shares of Restricted Common Stock, the holder of such Warrants or Restricted
Common Stock shall give written notice (a "Transfer Notice") to Company of such
Transfer. Each certificate, if any, evidencing such shares of Restricted Common
Stock issued upon such Transfer shall bear the restrictive legend set forth in
Section 9.1(a), and each Warrant issued upon such Transfer shall bear the
restrictive legend set forth in Section 9.1(b), unless in the opinion of counsel
to such holder which is reasonably acceptable to Company such legend is not
required in order to ensure compliance with the Securities Act.
The holders of Warrants and Warrant Stock shall have the
right to request registration of such Warrant Stock pursuant to Sections 9.3 and
9.4.
20
<PAGE>
9.3. Required Registration. After receipt of a written
notice from one or more holders of Warrants and/or Warrant Stock requesting that
Company effect the registration under the Securities Act of either (i) 350,000
or more shares of Warrant Stock or (ii) Warrant Stock with an anticipated
aggregate offering price of at least $1,000,000 and specifying the intended
method or methods of disposition thereof, Company shall promptly notify all
holders of Warrants and Warrant Stock in writing of the receipt of such request.
Thereupon, each such holder, in lieu of exercising its rights under Section 9.4,
may elect (by written notice sent to Company within ten Business Days from the
date of such holder's receipt of the aforementioned Company's notice) to have
its shares of Warrant Stock included in such registration thereof pursuant to
this Section 9.3. Thereupon, Company shall then, as expeditiously as is
possible, use its best efforts to effect the registration under the Securities
Act of all shares of Warrant Stock which Company has been so requested to
register by such holders for sale, all to the extent required to permit the
disposition (in accordance with the intended method or methods thereof, as
aforesaid) of the Warrant Stock so registered; provided, however, that Company
shall not be required to effect more than one registration of any Warrant Stock
pursuant to this Section 9.3 in any 12-month period.
9.4. Incidental Registration. If Company at any time
proposes to file on its behalf and/or on behalf of any of its security holders
(the "demanding security holders") a Registration Statement under the Securities
Act on any form (other than a Registration Statement on Form S-4 or S-8 or any
successor form for securities to be offered in a transaction of the type
referred to in Rule 145 under the Securities Act or to employees of Company
pursuant to any employee benefit plan, respectively) for the general
registration of securities to be sold for cash with respect to its Common Stock
or any other class of equity security (as defined in Section 3(a)(11) of the
Exchange Act) of Company, it will give written notice to all holders of Warrants
or Warrant Stock at least 60 days before the initial filing with the Commission
of such Registration Statement, which notice shall set forth the intended method
of disposition of the securities proposed to be registered by Company. The
notice shall offer to include in such filing the aggregate number of shares of
Warrant Stock, and the number of shares of Common Stock for which this Warrant
is exercisable, as such holders may request.
Each holder of any such Warrants or any such Warrant Stock
desiring to have Warrant Stock registered under this Section 9.4 shall advise
Company in writing within 30 days after the date of receipt of such offer from
Company, setting forth the amount of such Warrant Stock for which registration
is requested. Company shall thereupon include in such filing the number of
shares of Warrant Stock for which registration is so requested, subject to the
next sentence, and shall use its best efforts to effect registration under the
Securities Act of such shares. If the managing underwriter of a proposed public
offering shall advise Company in writing that, in its opinion, the distribution
of the Warrant Stock requested to be included in the registration concurrently
with the securities being registered by Company or such demanding security
holder would materially and adversely affect the distribution of such securities
by Company or such demanding security holder, then all selling security holders
(other than any demanding security holder who initially requested such
registration) shall reduce the amount of securities each intended to distribute
21
<PAGE>
through such offering on a pro rata basis. Except as otherwise provided in
Section 9.6, all expenses of such registration shall be borne by Company.
9.5. Registration Procedures. If Company is required by the
provisions of this Section 9 to use its best efforts to effect the registration
of any of its securities under the Securities Act, Company will, as
expeditiously as possible:
(a) prepare and file with the Commission a Registration
Statement with respect to such securities and use its best efforts to cause such
Registration Statement to become and remain effective for a period of time
required for the disposition of such securities by the holders thereof;
(b) prepare and file with the Commission such amendments
and supplements to such Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such Registration Statement
effective and to comply with the provisions of the Securities Act with respect
to the sale or other disposition of all securities covered by such Registration
Statement until the earlier of such time as all of such securities have been
disposed of in a public offering;
(c) furnish to such selling security holders such number of
copies of a summary prospectus or other prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and such
other documents, as such selling security holders may reasonably request;
(d) notify such selling security holders at any time when a
summary prospectus or other prospectus including a preliminary prospectus, is
required to be delivered under the Securities Act, of the happening of any event
as a result of which such prospectus included in such Registration Statement
contains an untrue statement of a material fact or omits any fact necessary to
make the statements therein not misleading, and, at the request of such selling
security holders, Company shall prepare a supplement or amendment to such
prospectus so that, such prospectus shall not contain an untrue statement of a
material fact or omit to state any fact necessary to make the statements therein
not misleading;
(e) use its best efforts to register or qualify the
securities covered by such Registration Statement under such other securities or
blue sky laws of such jurisdictions within the United States and Puerto Rico as
each holder of such securities shall request (provided, however, that Company
shall not be obligated to qualify as a foreign corporation to do business under
the laws of any jurisdiction in which it is not then qualified or to file any
general consent to service or process), and do such other reasonable acts and
things as may be required of it to enable such holder to consummate the
disposition in such jurisdiction of the securities covered by such Registration
Statement;
(f) furnish, at the request of any holder requesting
registration of Warrant Stock pursuant to Section 9.3, on the date that such
shares of Warrant Stock are delivered to the underwriters for sale pursuant to
22
<PAGE>
such registration or, if such Warrant Stock is not being sold through
underwriters, on the date that the Registration Statement with respect to such
shares of Warrant Stock becomes effective, (1) an opinion, dated such date, of
the independent counsel representing Company for the purposes of such
registration, addressed to the underwriters, if any, and if such Warrant Stock
is not being sold through underwriters, then to the holders making such request,
in customary form and covering matters of the type customarily covered in such
legal opinions; and (2) a comfort letter dated such date, from the independent
certified public accountants of Company, addressed to the underwriters, if any,
and if such Warrant Stock is not being sold through underwriters, then to the
holder making such request and, if such accountants refuse to deliver such
letter to such holder, then to Company in a customary form and covering matters
of the type customarily covered by such comfort letters as the underwriters or
such holders shall reasonably request. Such opinion of counsel shall
additionally cover such other legal matters with respect to the registration in
respect of which such opinion is being given as such holders holding a majority
of the Warrant Stock being so registered may reasonably request. Such letter
from the independent certified public accountants shall additionally cover such
other financial matters (including information as to the period ending not more
than five Business Days prior to the date of such letter) with respect to the
registration in respect of which such letter is being given as the holders
holding a majority of the Warrant Stock being so registered may reasonably
request;
(g) enter into customary agreements (including an
underwriting agreement in customary form) and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of such
securities; and
(h) make available for inspection by such selling security
holders, any underwriter participating in any disposition pursuant to such
Registration Statement and any attorney, accountant or other agent retained by
any such selling security holder or underwriter, all financial and other
records, pertinent corporate documents and properties of Company, and cause
Company's officers, directors, employees and independent accountants to supply
all information reasonably requested by any such Selling Security holder,
underwriter, attorney, accountant or agent in connection with such Registration
Statement;
(i) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, but not later than 18
months after the effective date of the Registration Statement, an earnings
statement covering the period of at least 12 months beginning with the first
full month after the effective date of such Registration Statement, which
earnings statements shall satisfy the provisions of Section 11(a) of the
Securities Act.
It shall be a condition precedent to the obligation of
Company to take any action pursuant to this Section 9 in respect of the
securities which are to be registered at the request of any holder of Warrants
or Warrant Stock that such holder shall furnish to Company such information
regarding the securities held by such holder and the intended method of
23
<PAGE>
disposition thereof as Company shall reasonably request and as shall be required
in connection with the action taken by Company.
9.6. Expenses. All expenses incurred in complying with
Section 9, including, without limitation, all registration and filing fees
(including all expenses incident to filing with the NASD), printing expenses,
fees and disbursements of counsel for Company, the reasonable fees and expenses
of one counsel for the selling security holders (selected by those holding a
majority of the shares being registered), expenses of any special audits
incident to or required by any such registration and expenses of complying with
the securities or blue sky laws of any jurisdictions pursuant to Section 9.5(d),
shall be paid by Company, except that Company shall not be liable for any fees,
discounts or commissions to any underwriter or any fees or disbursements of
counsel for any underwriter in respect of the securities sold by such holder of
Warrant Stock.
9.7. Indemnification and Contribution. (a) In the event of
any registration of any of the Warrant Stock under the Securities Act pursuant
to this Section 9, Company shall indemnify and hold harmless the holder of such
Warrant Stock, such holder's directors and officers, and each other Person
(including each underwriter) who participated in the offering of such Warrant
Stock and each other Person, if any, who controls such holder or such
participating Person within the meaning of the Securities Act, against any
losses, claims, damages or liabilities, joint or several, to which such holder
or any such director or officer or participating Person or controlling Person
may become subject under the Securities Act or any other statute or at common
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon (i) any alleged untrue statement
of any material fact contained, on the effective date thereof, in any
Registration Statement under which such securities were registered under the
Securities Act, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, or (ii) any alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and shall reimburse such holder or such
director, officer or participating Person or controlling Person for any legal or
any other expenses reasonably incurred by such holder or such director, officer
or participating Person or controlling Person in connection with investigating
or defending any such loss, claim, damage, liability or action; provided,
however, that Company shall not be liable in any such case to the extent that
any such loss, claim, damage or liability arises out of or is based upon any
alleged untrue statement or alleged omission made in such Registration
Statement, preliminary prospectus, prospectus or amendment or supplement in
reliance upon and in conformity with written information furnished to Company by
such holder specifically for use therein or (in the case of any registration
pursuant to Section 9.3) so furnished for such purposes by any underwriter. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such holder or such director, officer or participating
Person or controlling Person, and shall survive the transfer of such securities
by such holder.
(b) Each holder of any Warrant Stock, by acceptance
thereof, agrees to indemnify and hold harmless Company, its directors and
officers and each other Person, if any, who controls Company within the meaning
of the Securities Act against any losses, claims, damages or liabilities, joint
24
<PAGE>
or several, to which Company or any such director or officer or any such Person
may become subject under the Securities Act or any other statute or at common
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon information in writing provided
to Company by such holder of such Warrant Stock specifically for use in the
following documents and contained, on the effective date thereof, in any
Registration Statement under which securities were registered under the
Securities Act at the request of such holder, any preliminary prospectus or
final prospectus contained therein, or any amendment or supplement thereto, but
in no event, in an amount exceeding the net proceeds received by such holder in
the offering.
(c) If the indemnification provided for in this Section 9
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with any
investigation or proceeding. The liability of any holder of Warrant Stock
hereunder shall not exceed the net proceeds received by it in the offering.
9.8. The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 9.7(c) were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
9.9. Termination of Restrictions. Notwithstanding the
foregoing provisions of Section 9, the restrictions imposed by this Section upon
the transferability of the Warrants, the Warrant Stock and the Restricted Common
Stock (or Common Stock issuable upon the exercise of the Warrants) and the
legend requirements of Section 9.1 shall terminate as to any particular Warrant
or share of Warrant Stock or Restricted Common Stock (or Common Stock issuable
upon the exercise of the Warrants) (i) when and so long as such security shall
have been effectively registered under the Securities Act and disposed of
pursuant thereto, (ii) when such security is disposed of pursuant to Rule 144
25
<PAGE>
under the Securities Act, or (iii) when Company shall have received an opinion
of counsel reasonably satisfactory to it that such shares may be transferred
without registration thereof under the Securities Act. Whenever the restrictions
imposed by this Section shall terminate as to any share of Restricted Common
Stock, as hereinabove provided, the holder thereof shall be entitled to receive
from Company, at Company's expense, a new certificate representing such Common
Stock not bearing the restrictive legend set forth in Section 9.1(a).
9.10. Listing on Securities Exchange. So long as any shares
of Common Stock are listed on any securities exchanges, Company shall increase
the number of shares listed on such securities exchanges to cover all shares of
Common Stock issued or, to the extent permissible under the applicable
securities exchange rules, issuable upon the exercise of this Warrant.
9.11. Certain Limitations on Registration Rights.
Notwithstanding the other provisions of Section 9, Company shall not be
obligated to register the Warrant Stock of any holder if, in the written opinion
of counsel to Company reasonably satisfactory to the holder and its counsel (or,
if the holder has engaged an investment banking firm, to such investment banking
firm and its counsel), the sale or other disposition of such holder's Warrant
Stock, in the manner proposed by such holder (or by such investment banking
firm), may be effected without registering such Warrant Stock under the
Securities Act.
9.12. Selection of Managing Underwriters. The managing
underwriter or underwriters for any offering of Warrant Stock to be registered
pursuant to Section 9.3 shall be selected by the holders of a majority of the
shares being so registered (other than any shares being registered pursuant to
Section 9.4) and shall be reasonably acceptable to Company.
10. SUPPLYING INFORMATION
Company shall cooperate with each Holder of a Warrant and
each holder of Restricted Common Stock in supplying such information as may be
reasonably necessary for such holder to complete and file any information
reporting forms presently or hereafter required by the Commission as a condition
to the availability of an exemption from the Securities Act for the sale of any
Warrant or Restricted Common Stock.
11. LOSS OR MUTILATION
Upon receipt by Company from any Holder of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Warrant and indemnity reasonably satisfactory
to it (it being understood that the written agreement of such Holder shall be
sufficient indemnity), and in case of mutilation upon surrender and cancellation
hereof, Company will execute and deliver in lieu hereof a new Warrant of like
tenor to such Holder; provided, in the case of mutilation, no indemnity shall be
required if this Warrant in identifiable form is surrendered to Company for
cancellation.
26
<PAGE>
12. OFFICE OF COMPANY
As long as any of the Warrants remain outstanding, Company
shall maintain an office or agency (which may be the principal executive offices
of Company) where the Warrants may be presented for exercise, registration of
transfer, division or combination as provided in this Warrant.
13. Filings
Company will file on or before the required date all
regular or periodic reports (pursuant to the Exchange Act) with the Commission
and will deliver to Holder promptly upon their becoming available one copy of
each report, notice or proxy statement sent by Company to its stockholders
generally, and of each regular or periodic report (pursuant to the Exchange Act)
and any Registration Statement, prospectus or written communication (other than
transmittal letters) (pursuant to the Securities Act), filed by Company with (i)
the Commission or (ii) any securities exchange on which shares of Common Stock
are listed.
14. limitation of liability
No provision hereof, in the absence of affirmative action
by Holder to purchase shares of Common Stock, and no enumeration herein of the
rights or privileges of Holder hereof, shall give rise to any liability of such
Holder for the purchase price of any Common Stock or as a stockholder of
Company, whether such liability is asserted by Company or by creditors of
Company.
15. MISCELLANEOUS
15.1. Nonwaiver and Expenses. No course of dealing or any
delay or failure to exercise any right hereunder on the part of a party hereto
shall operate as a waiver of such right or otherwise prejudice that party's
rights, powers or remedies. If a party hereto fails to make, when due, any
payments provided for hereunder, or fails to comply with any other provision of
this Warrant, that party shall pay to the other party such amounts as shall be
sufficient to cover any costs and expenses including, but not limited to,
reasonable attorneys' fees, including those of appellate proceedings, incurred
by such other party in collecting any amounts due pursuant hereto or in
otherwise enforcing any of its rights, powers or remedies hereunder.
15.2. Notice Generally. Any notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder to be
made pursuant to the provisions of this Warrant shall be sufficiently given or
made if in writing and either delivered in person with receipt acknowledged or
sent by registered or certified mail, return receipt requested, postage prepaid,
or by telecopy and confirmed by telecopy answerback, addressed as follows:
(a) If to any Holder or holder of Warrant Stock, at its
last known address appearing on the books of Company maintained for such
purpose.
27
<PAGE>
(b) If to Company at
ARV Assisted Living, Inc.
245 Fischer Avenue, Suite D-1
Costa Mesa, California 92626
Attention: President
Telecopy Number: (714) 708-3537
With a copy to:
O'Melveny & Myers LLP
610 Newport Center Drive, 17th Floor
Newport Beach, CA 92660
Attention Gary J. Singer, Esq.
Telecopy Number: (949) 823-6994
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, telecopied and confirmed by telecopy
answerback, or three (3) Business Days after the same shall have been deposited
in the United States mail. Failure or delay in delivering copies of any notice,
demand, request, approval, declaration, delivery or other communication to the
person designated above to receive a copy shall in no way adversely affect the
effectiveness of such notice, demand, request, approval, declaration, delivery
or other communication.
15.3. No Stockholder Rights. Prior to the effective
exercise of this Warrant in accordance with the provisions hereof, Holder shall
not be entitled to any rights of a stockholder with respect to any shares of
Warrant Stock, including (without limitation) the right to vote such shares or
to receive dividends or other distributions thereon.
15.4. Indemnification. Company agrees to indemnify and hold
harmless Holder from and against any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, attorneys' fees, expenses
and disbursements of any kind which may be imposed upon, incurred by or asserted
against Holder in any manner relating to or arising out of the issuance of this
Warrant to Holder (but not relating to or arising out of any exercise of any
Warrant); provided, however, that Company will not be liable hereunder to the
extent that any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, attorneys' fees, expenses or disbursements (i)
arise solely out of Holder's violation of any state or federal securities laws,
(ii) arise out of any matter for which Company has expressly retained the right
to pursue such matter against the Holder pursuant to Section 5.01(c) of the
Settlement Agreement or (iii) are found in a final non-appealable judgment by a
court to have resulted from Holder's gross negligence, bad faith or willful
misconduct in its capacity as a stockholder or warrantholder of Company.
28
<PAGE>
15.5. Remedies. Each party hereto, in addition to being
entitled to exercise all rights granted by law, including recovery of damages,
will be entitled to specific performance of its rights under Section 9 of this
Warrant. Each party agrees that monetary damages would not be adequate
compensation for any loss incurred by the other party by reason of a breach by
it of the provisions of Section 9 of this Warrant and hereby agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate.
15.6. Successors and Assigns. Subject to the provisions of
Sections 3.1 and 9, this Warrant and the rights evidenced hereby shall inure to
the benefit of and be binding upon the successors of Company and the successors
and assigns of Holder. The provisions of this Warrant are intended to be for the
benefit of all Holders from time to time of this Warrant and, with respect to
Section 9 hereof, holders of Warrant Stock, and shall be enforceable by any such
Holder or holder of Warrant Stock.
15.7. Amendment. This Warrant and all other Warrants may be
modified or amended or the provisions hereof waived with the written consent of
Company and the Majority Holders, provided that no such Warrant may be modified
or amended to reduce the number of shares of Common Stock for which such Warrant
is exercisable or to increase the price at which such shares may be purchased
upon exercise of such Warrant (before giving effect to any adjustment as
provided therein) without the prior written consent of the Holder thereof.
15.8. Severability. Wherever possible, each provision of
this Warrant shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Warrant shall be prohibited
by or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Warrant.
15.9. Headings. The headings used in this Warrant are for
the convenience of reference only and shall not, for any purpose, be deemed a
part of this Warrant.
15.10. Governing Law. This Warrant shall be governed by the
laws of the State of New York, without regard to the provisions thereof relating
to conflict of laws.
29
<PAGE>
IN WITNESS WHEREOF, Company has caused this Warrant to be
duly executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.
Dated: April 24, 2000
ARV Assisted Living, Inc.
By: Abdo Khoun
----------------------------------
Name: Abdo Khoun
Title: Senior Vice President and
Secretary
Attest:
By: /s/ Bernard Wheeler-Medley
------------------------------
Name: Bernard Wheeler-Medley
Title: Asistant Secretary
30
<PAGE>
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant
irrevocably exercises this Warrant for the purchase of ______ Shares of Common
Stock of ARV Assisted Living, Inc. and herewith makes payment therefor, all at
the price and on the terms and conditions specified in this Warrant and requests
that certificates for the shares of Common Stock hereby purchased (and any
securities or other property issuable upon such exercise) be issued in the name
of and delivered to _____________ whose address is _________________ and, if
such shares of Common Stock shall not include all of the shares of Common Stock
issuable as provided in this Warrant, that a new Warrant of like tenor and date
for the balance of the shares of Common Stock issuable hereunder be delivered to
the undersigned.
-------------------------------
(Name of Registered Owner)
-------------------------------
(Signature of Registered Owner)
-------------------------------
(Street Address)
-------------------------------
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this
Warrant hereby sells, assigns and transfers unto the Assignee named below all of
the rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
Name and Address of Assignee No. of Shares of
- ---------------------------- ----------------
Common Stock
------------
and does hereby irrevocably constitute and appoint __________________________
attorney-in-fact to register such transfer on the books of ARV Assisted Living,
Inc. maintained for the purpose, with full power of substitution in the
premises.
Dated:__________________ Print Name:
-----------------------
Signature:
-----------------------
Witness:
-----------------------
NOTICE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
Exhibit 2
JOINT FILING AGREEMENT
In accordance with Rule 13d-1(k)(1) promulgated under the
Securities Exchange Act of 1934, am amended, the undersigned hereby agree to the
joint filing with all other Reporting Persons (as such term is defined in the
Schedule 13D referred to below) on behalf of each of them of a statement on
Schedule 13D (including amendments thereto) with respect to the shares of Common
Stock, par value $0.01 per share, of ARV Assisted Living, Inc., a Delaware
corporation, and that this Agreement may be included as an Exhibit to such joint
filing. This Agreement may be executed in any number of counterparts, all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned hereby execute this
Agreement as of the 28th day of April, 2000.
PROMETHEUS ASSISTED LIVING LLC
By LF Strategic Realty Investors II L.P.,
its managing member,
by Lazard Freres Real Estate
Investors L.L.C.,
its general partner,
by /s/John A Moore
-----------------------
Name: John A. Moore
Title: Principal & Chief
Financial Officer
LF STRATEGIC REALTY INVESTORS II L.P.
By Lazard Freres Real Estate Investors
L.L.C., its general partner,
by /s/John A. Moore
-------------------------
Name: John A. Moore
Title: Principal & Chief
Financial Officer
<PAGE>
LFSRI II ALTERNATIVE PARTNERSHIP L.P.
By Lazard Freres Real Estate Investors
L.L.C., its general partner,
by /s/John A. Moore
------------------------
Name: John A. Moore
Title: Principal & Chief
Financial Officer
LFSRI II-CADIM ALTERNATIVE PARTNERSHIP L.P.
By Lazard Freres Real Estate Investors
L.L.C., its general partner,
by /s/John A. Moore
--------------------------
Name: John A. Moore
Title: Principal & Chief
Financial Officer
LAZARD FRERES REAL ESTATE
INVESTORS L.L.C.
by /s/John A. Moore
--------------------------
Name: John A. Moore
Title: Principal & Chief
Financial Officer
LAZARD FRERES & CO. LLC
by /s/Melvin L. Heineman
---------------------------
Name: Melvin L. Heineman
Title: Managing Director
<PAGE>
LFSRI II ASSISTED LIVING LLC
By LF Strategic Realty Investors II L.P.,
its managing member,
by Lazard Freres Real Estate
Investors L.L.C.
its general partner,
by /s/John A. Moore
--------------------------
Name: John A. Moore
Title: Principal & Chief
Financial Officer
