EXECUTION COPY
STOCKHOLDERS AGREEMENT
Stockholders Agreement (this "Agreement"), dated as of September 30,
1997, between Prometheus Senior Quarters LLC, a Delaware limited liability
company or an affiliate thereof ("Investor"), and Xxxxx Xxxxxx, Xxxxx X. Xxxxxx
and Xxxx X. Xxxxxx (each a "Stockholder" and, collectively, the "Stockholders")
WHEREAS, each Stockholder owns (both beneficially and of record) the
number of shares of Common Stock ("Common Stock") of Kapson Senior Quarters
Corp., a Delaware Corporation (the "Company") specified in Exhibit A hereto (the
"Shares");
WHEREAS, concurrently herewith, Investor and a wholly owned
subsidiary of Investor ("Sub") are entering into an agreement and plan of merger
with the Company, dated as of September 30, 1997 (the "Merger Agreement"),
pursuant to which Sub will merger with and into the Company (the "Merger"); and
WHEREAS, as a condition to the willingness of Investor to enter into
the Merger Agreement, Investor has required that the Stockholders agree, and in
order to induce Investor to enter into the Merger Agreement, the Stockholders
have agreed, among other things, (i) to grant Investor the option to purchase
the Shares, (ii) to appoint Investor as Stockholders' proxy to vote the Shares,
and (iii) with respect to certain questions put to stockholders of the Company
for a vote, to vote the Shares, in each case, in accordance with the terms and
conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein and other good and valuable consideration, the
adequacy of which is hereby acknowledged, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Stock Option.
1.1 Grant of Stock Option. The Stockholders hereby grant to Investor
an irrevocable option (the "Stock Option") to purchase all, but not less than
all of the Shares at such time as Investor may exercise the Stock Option at a
per share purchase price equal to $16.00 per share of Common Stock.
1.2 Exercise of Stock Option. (a) The Stock Option may be exercised
by Investor at any time prior to the termination of this Agreement prior to the
earlier to occur (the "Expiration Date") of (i) one year after the date hereof,
(ii) if the Merger Agreement is terminated by Investor, or the Investor provides
written or oral notice to the Company that it elects not to close the
transactions contemplated by the Merger Agreement, as a result of the failure of
any of the conditions specified in Section 9.3 and at the time of such
termination or notice there shall not exist any Alternative Proposal (as such
term is defined in the Merger Agreement) at $15.00 or more per share of Common
Stock for 75% or more of the outstanding Common Stock of the Company, the
termination of the Merger Agreement and (iii) if the Merger Agreement is
terminated by Investor, or the Investor provides written or oral notice to the
Company that it elects not to close the transactions contemplated by the Merger
Agreements, as a result of the failure of any of the conditions specified in
Section 9.3 and at the time of such termination or notice there shall exist any
Alternative Proposal at $15.00 or more per share of Common Stock for 75% or more
of the outstanding Common Stock of the Company, the sixth monthly
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anniversary of the termination of the Merger Agreement; provided, however, that
if a tender offer shall be commenced by any party or entity other than investor
and its affiliates with respect to the Common Stock, then, notwithstanding any
provision of this Agreement, the Stockholders may tender all or any of the
Shares into the tender offer on or before the time 48 hours before the
expiration of the offer. The Stockholders shall give prompt notice to Investors
of any such tender by Stockholders, and each of the Stockholders agree to give
notice of revocation of the tender promptly after actual receipt by such
Stockholders of an irrevocable Exercise Notice from Investor; provided however,
that if the Investor provides an Exercise Notice as contemplated by clause (a)
above, the Investor shall not be obligated to purchase the shares at the
applicable Stock Option Closing if the Merger Agreement has not been terminated
in accordance with its terms and if the applicable Tender Offer is withdrawn
without being consummated prior to the applicable Stock Option Closing.
(b) In the event Investor wishes to exercise the Stock Option,
Investor shall send a written notice (an "Exercise Notice") to the Stockholders
specifying the date, which shall be a Business Day not more than ten days, 30
days in the case of an Exercise Notice delivered as contemplated by clause (a)
above, after the date of the Exercise Notice and a place for the closing of such
purchase (a "Stock Option Closing").
(c) Upon receipt of an Exercise Notice, the Stockholders shall
be jointly and severally obligated to deliver to Investor a certificate or
certificates representing the number of Shares specified in such Exercise
Notice, in accordance with the terms of this Agreement, on the date specified in
such Exercise Notice. The date specified in such Exercise Notice may be as early
as two Business Days after the date of such Exercise Notice.
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(d) For the purposes of this Agreement, the term "Business
Day" shall mean a day on which banks are not required or authorized to be closed
in the City of New York.
1.3 Condition to Delivery of the Shares. The obligation of
Stockholders to deliver the Shares upon any exercise of a Stock Option is
subject to the following condition: There shall be no preliminary or permanent
injunction or other order by any court of competent jurisdiction restricting,
preventing or prohibiting such exercise of such Stock Option or the delivery of
the Shares subject to such Stock Option in respect of such exercise.
1.4 Stock Option Closing. At the Stock Option Closing, the
Stockholders will deliver to Investor a certificate or certificates evidencing
all of the Shares, each such certificate being duly endorsed in blank and
accompanied by such stock powers and such other documents as may be necessary in
Investor's judgment to transfer record ownership of the Shares into Investor's
name on the stock transfer books of the Company and Investor will purchase the
delivered Shares at a purchase price equal to $16.00 per share of Common Stock.
All payments made by Investor to Stockholders pursuant to this Section 1.4 shall
be made by wire transfer of immediately available funds to an account designated
by the Stockholders or by certified bank check payable to the Stockholders, in
an amount equal to the sum of the product of (a) $16.00 and (b) the total number
of shares of Common Stock delivered at the Stock Option Closing.
1.5 Adjustments Upon Changes in Capitalization. In the event of any
change in the number of issued and outstanding shares of Common Stock by reason
of any stock dividend, subdivision, merger, recapitalization, combination,
conversion or exchange of shares, or any other change in the corporate or
capital structure of the Company (including, without limitation, the declaration
or payment of an extraordinary dividend of cash or securities) which
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would have the effect of diluting or otherwise adversely affecting Investor's
rights and privileges under this Agreement, the number and kind of the Shares
and the consideration payable in respect of the Shares shall be appropriately
and equitably adjusted to restore to Investor its rights and privileges under
this Agreement. Without limiting the scope of the foregoing, in any such event,
at the option of Investor, the Stock Option shall represent the right to
purchase, in addition to the number and kind of Shares which Investor would be
entitled to purchase pursuant to the immediately preceding sentence, whatever
securities, cash or other property the Shares subject to the Stock Option shall
have been converted into or otherwise exchanged for, together with any
securities, cash or other property which shall have been distributed with
respect to such Shares.
2. Representations and Warranties of the Stockholders. The
Stockholders hereby jointly and severally represent and warrant to Investor as
follows:
2.1 Title to the Shares. Each of the Stockholders is the owner (both
beneficially and of record) of the number of shares of Common Stock specified
opposite such Stockholder's name on Exhibit A hereto and the Stockholders do not
have any other rights of any nature to acquire any additional shares of Common
Stock or any other shares of capital stock of the Company. Each of the
Stockholders owns that number of shares of Common Stock specified opposite such
Stockholder's name on Exhibit A hereto free and clear of all security interests,
liens, claims, pledges, options, rights of first refusal, agreements,
limitations on Stockholder's voting rights, charges and other encumbrances of
any nature whatsoever, and, except as provided in this Agreement, no Stockholder
has appointed or granted any proxy, which appointment or grant is still
effective, with respect to any of the Shares. Upon the exercise of the Stock
Option and the delivery to Investor by the Stockholders of a certificate or
certificates evidencing the
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Shares, Investor will receive good, valid and marketable title to the Shares,
free and clear of all security interests, liens, claims, pledges, options,
rights of first refusal, agreements, limitations on Investor's voting rights,
charges and other encumbrances of any nature whatsoever.
2.2 Authority Relative to This Agreement. Each Stockholder has all
necessary power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by each
Stockholder and, assuming the due authorization, execution and delivery by
Investor, constitutes a legal, valid and binding obligation of each Stockholder,
enforceable against each Stockholder in accordance with its terms.
2.3 No Conflict. The execution and delivery of this Agreement by
each Stockholder does not, and the performance of this Agreement each
Stockholder will not, conflict with, violate or result in any breach of or
constitute a default under (or an event which with notice or lapse of time or
both would become a default under) any agreement, judgment, injunction, order,
law, regulation or arrangement to which any Stockholder is a party or is bound,
except in each case to the extent any such breach or default, whether taken
singly or in the aggregate, would not have a material adverse effect on the
ability of the Stockholders to vote the Shares, perform their respective
obligations hereunder, and consummate the transactions contemplated hereby.
2.4 Brokers. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
the Stockholders.
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3. Representations and Warranties of Investor. Investor hereby
represents and warrants to the Stockholders as follows:
3.1 Authority Relative to This Agreement. Investor has all necessary
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by Investor and the consummation by
Investor of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of Investor. This
Agreement has been duly and validly executed and delivered by Investor and,
assuming the due authorization, execution and delivery by the Stockholders,
constitutes a legal, valid and binding obligation of Investor, enforceable
against Investor in accordance with its terms.
3.2 Investment Intent. Investor hereby represents that any
securities it purchases pursuant to this Agreement are being purchased for its
own account for investment and not with a view to, or for sale in connection
with, any public distribution thereof.
4. Covenants of Stockholder.
4.1 No Disposition or Encumbrance of Shares; No Conversion of
Shares; Acquisition of Additional Shares; No Exercise of Warrants. (a) Each
Stockholder hereby covenants and agrees that, except as contemplated by this
Agreement, each Stockholder shall not, and shall not offer or agree to, sell,
transfer, tender, assign, hypothecate or otherwise dispose of, or create or
permit to exist any security interest, lien, claim, pledge, option, right of
first refusal, agreement, limitation on such Stockholder's voting rights, charge
or other encumbrance of any
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nature whatsoever with respect to the Shares now owned or that may hereafter be
acquired by such Stockholder.
(b) Each Stockholder hereby covenants and agrees that any
additional shares of capital stock of the Company acquired by each Stockholder
after the date hereof shall be subject to this Agreement and shall, for all
purposes of this Agreement, be deemed to be "Shares".
4.2 No Solicitation of Transactions. Each Stockholder shall not,
directly or indirectly, through any agent or representative or otherwise,
solicit, initiate or encourage the submission of any proposal or offer from any
individual, corporation, partnership, limited partnership, syndicate, person
(including, without limitation, a "person" as defined in section 13(d)(3) of the
Securities Exchange Act of 1934, as amended), trust, association or entity or
government, political subdivision, agency or instrumentality of a government
(collectively, other than Investor, a "Person") relating to (i) any acquisition
or purchase of all or any of the Shares or (ii) any acquisition or purchase of
all or (other than in the ordinary course of business) any portion of the assets
of, or any equity interest in, the Company or any business combination, whether
by merger, consolidation, or otherwise, with the Company or participate in any
negotiations regarding, or furnish to any Person any information with respect
to, or otherwise cooperate in any way with, or assist or participate in or
facilitate or encourage, any effort or attempt by any Person to do or seek any
of the foregoing. Each Stockholder hereby represents that neither it nor its
agents or representatives is now engaged in any discussions or negotiations with
any Person with respect to any of the foregoing.
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4.3 Compliance of Stockholder with This Agreement. Each Stockholder
shall take all actions and forbear from all actions, in each case, necessary in
order that (a) all of such Stockholder's representations and warranties
hereunder are true and correct and (b) such Stockholder fulfills all of its
obligations hereunder.
5. Voting Agreement; Proxy of Stockholder.
5.1 Voting Agreement. Each Stockholder hereby agrees that, during
the time this Agreement is in effect, at any meeting of the stockholders of the
Company, however called, and in any action by written consent of the
stockholders of the Company, each Stockholder shall, to the extent applicable,
(a) vote (or execute a consent in respect of) all of the Shares in favor of the
Merger, the Merger Agreement (as amended from time to time) and any of the
transactions contemplated by the Merger Agreement; (b) vote (or execute a
consent in respect of) the Shares against any action or agreement involving a
sale of the Shares, merger, or sale of substantially all of the assets of the
Company that would result in a breach in any material respect of any obligation
of the Company under the Merger Agreement; and (c) vote (or execute a consent in
respect of) the Shares against any action or agreement that would reasonably be
expected to impede, interfere with, delay or attempt to discourage the Merger.
5.2 Irrevocable Proxy. Each Stockholder agrees that, in the event
such Stockholder shall fail to comply with the provisions of Section 5.1 hereof
as determined by Investor in its sole discretion, such failure shall result,
without any further action by such Stockholder, in the irrevocable appointment
of Investor as the attorney and proxy of such Stockholder pursuant to the
provisions of Delaware General Corporation Law, with full power of substitution,
to vote, and otherwise act (by written consent or otherwise) with respect to all
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shares of Common Stock, including the Shares owned by such Stockholder, that
such Stockholder is entitled to vote at any meeting of stockholders of the
Company (whether annual or special and whether or not an adjourned or postponed
meeting) or consent in lieu of any such meeting or otherwise, on the matters and
in the manner specified in Section 5.1 hereof. THIS PROXY AND POWER OF ATTORNEY
IS IRREVOCABLE AND COUPLED WITH AN INTEREST. Each Stockholder hereby revokes,
effective upon the execution and delivery of the Merger Agreement by the parties
thereto, all other proxies and powers of attorney with respect to the Shares
that such Stockholder may have heretofore appointed or granted, and no
subsequent proxy or power of attorney (except in furtherance of such
Stockholder's obligations under Section 5.1 hereof) shall be given or written
consent executed (and if given or executed, shall not be effective) by such
Stockholder with respect thereto so long as this Agreement remains in effect.
6. Termination. This Agreement shall terminate on the date (the
"Termination Date") that is the earliest of (i) the date upon which the Merger
is consummated, (ii) one year after the date hereof, (iii) the Expiration Date,
or (iv) a breach by Investor and/or Sub of its obligations to fund and close the
Merger.
7. Election. Each Shareholder agrees that it will elect, at a
minimum, to retain shares in the Surviving Corporation (as such term is defined
in the Merger Agreement) with respect to that number of shares equal to 9.740%
of the shares owned by him.
8. Miscellaneous.
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8.1 Expenses. Except as otherwise provided herein, all costs and
expenses incurred in connection with the transactions contemplated by this
Agreement shall be paid by the party incurring such expenses.
8.2 Further Assurances. Each Stockholder and Investor shall execute
and deliver all such further documents and instruments and take all such further
action as may be necessary in order to consummate the transactions contemplated
hereby.
8.3 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
8.4 Entire Agreement. This Agreement constitutes the entire
agreement between Investor and the Stockholders with respect to the subject
matter hereof and supersedes all prior agreements and understandings, both
written and oral, between Investor and the Stockholders with respect to the
subject matter hereof.
8.5 Assignment. This Agreement shall not be assigned by operation of
law or otherwise, except that Investor may assign all or any of its rights and
obligations hereunder to any affiliate of Investor, provided that no such
assignment shall relieve Investor of its obligations hereunder if such assignee
does not perform such obligations.
8.6 Parties in Interest. This Agreement shall be binding upon, inure
solely to the benefit of, and be enforceable by, the parties hereto and their
successors and permitted assigns. Nothing in this Agreement, express or implied,
is intended to or shall confer upon any
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other person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.
8.7 Amendment; Waiver. This Agreement may not be amended except by
an instrument in writing signed by the parties hereto. Any party hereto may (a)
extend the time for the performance of any obligation or other act of any other
party hereto, (b) waive any inaccuracy in the representations and warranties
contained herein or in any document delivered pursuant hereto and (c) waive
compliance with any agreement or condition contained herein. Any such extension
or waiver shall be valid if set forth in an instrument in writing signed by the
party or parties to be bound thereby.
8.8 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
this Agreement is not affected in any manner materially adverse to any party.
Upon such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in a mutually acceptable manner in order that the terms of
this Agreement remain as originally contemplated to the fullest extent possible.
8.9 Notices. Except as otherwise provided herein, all notices,
requests, claims, demands and other communications hereunder shall be in writing
and shall be given (and shall be deemed to have been duly given upon receipt) by
delivery in person, by cable, facsimile transmission, telegram or telex or by
registered or certified mail (postage prepaid, return receipt
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requested) to the respective parties at the following addresses (or at such
other address for a party as shall be specified in a notice given in accordance
with this Section 8.9):
if to Investor:
Prometheus Senior Quarters LLC
c/o Lazard Freres Real Estate Investors L.L.C.
00 Xxxxxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx and Xxxxx X. Xxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
with a copy to:
Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxxxx X. Mechanic, Esq.
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
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if to the Stockholders:
Xxxxx Xxxxxx
Kapson Senior Quarters Corp.
000 Xxxxxxxx Xxxx Xxxx.
Xxxxxxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
with a copy to:
Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
8.10 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware applicable to
contracts executed in and to be performed in Delaware without regard to any
principles of choice of law or conflicts of law of such State. All actions and
proceedings arising out of or relating to this Agreement shall be heard and
determined in any state or federal court sitting in Delaware.
8.11 Headings. The descriptive headings contained in this Agreement
are included for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
8.12 Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed and delivered as of the date first written above.
By: /s/ Xxxxx Xxxxxx
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Xxxxx Xxxxxx
By: /s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx
By: /s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx
PROMETHEUS SENIOR QUARTERS LLC
By: LAZARD FRERES REAL ESTATE INVESTORS
L.L.C.
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------
Xxxxxx X. Xxxxxxx
President
Lazard Freres Real Estate Investors LLC ("LFRE") hereby irrevocably,
unconditionally and completely guarantees and ensures the full and timely
payment and performance of all of Investor's and Sub's obligations and
liabilities under this Agreement and any agreements, documents or instruments
executed or to be executed by either of them in connection herewith. The
obligations and liabilities under this guaranty constitute primary obligations
and liabilities of LFRE and shall not be affected by the absence of an action to
enforce obligations of, or any proceedings first against, Investor or Sub, any
defense, offset, claim, or any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of LFRE as a surety or
guarantor. LFRE represents and warrants that it is the sole member of Investor.
LAZARD FRERES REAL ESTATE
INVESTORS LLC
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: President
