|
|
Following expiration of the go-shop period, the Board is permitted to change its recommendation with respect to the merger in response to a superior proposal and, upon payment of a $2.1 million termination fee,
the Company is permitted to terminate the merger and enter into an agreement with respect to a superior proposal.
See the sections of this proxy statement titled “The Merger—Background of the Merger,” “The Merger Agreement—Go-Shop and No Solicitation” and “—Board Recommendation Change.”
The merger agreement may be terminated at any time prior to the effective time of the merger in the following circumstances:
|
|
|
●
|
by mutual written consent of Parent and the Company at any time prior to the effective time of the merger; |
| |
|
|
●
|
|
| |
|
| |
●
|
the merger is not consummated on or before February 28, 2022 (referred to as the “end date”), but no party will be permitted to terminate the merger agreement on this basis if such
party’s breach of the merger agreement has been the primary cause of, or primarily resulted in, the closing to not have occurred on or before the end date (referred to as the “end date termination”), subject to extension under certain
circumstances; |
| |
|
|
| |
●
|
there is any law enacted after the date of the merger agreement and remaining in effect that makes the merger illegal or that prohibits the consummation of the merger, or any court of
competent jurisdiction or other governmental entity issues a final and nonappealable order or takes any other action, in either case permanently restraining, enjoining, or otherwise prohibiting the merger. No party will be permitted to
terminate the merger agreement on this basis if such party’s breach of the merger agreement has been the primary cause of, or primarily resulted in, any such order or action;
|
| |
|
|
| |
●
|
if, upon a vote at a duly held meeting to obtain the requisite approval of the Company’s stockholders, the Company’s stockholders fail to adopt the merger agreement (referred to as a
“stockholder vote termination”); or |
| |
|
|
| |
●
|
if, prior to the closing, any governmental entity shall make a claim against the Company for a payment in excess of $100,000 that is alleged to be due solely as a result of the
closing of the transactions contemplated by the merger agreement; and |
| |
|
|
| ● |
by Parent if:
|
| |
|
|
| |
●
|
the Board changes its recommendation that the stockholders vote in favor of the adoption of the merger agreement (referred to as a “recommendation change termination”);
|
| |
|
|
| |
●
|
the Company breaches or fails to perform any of its representations, warranties or covenants contained in the merger agreement, which breach or failure to perform (i) would give rise
to the failure of any of the closing conditions and (ii) cannot be or has not been cured within 20 business days (or, if earlier, the end date) after the giving of written notice to the Company of such breach (as long as Parent is not then
in breach of any representation, warranty or covenant contained in the merger agreement that would give rise to a Parent breach termination, as defined below) (referred to as a “Company breach termination”); or
|
| |
|
|
| |
●
|
Parent concurrently pays to the Company the Parent termination fee (as defined below); provided, however, that Parent shall not be entitled to terminate the merger agreement if, as of
the date such notice is given by Parent, either Parent or merger subsidiary is in material breach of its obligations under the merger agreement; and |
| |
|
|
| ● |
|
| |
|
|
| |
●
|
prior to the adoption of the merger agreement by the Company’s stockholders, the Company receives an acquisition proposal and determines to terminate the merger agreement in order to
accept such acquisition proposal, in which case the Company must prior to or concurrently with such termination pay to Parent the termination fee (as defined below) (referred to as a “acquisition proposal termination”);
|
|
|
●
|
Parent breaches or fails to perform any of its representations, warranties or covenants contained in the merger agreement, which breach or failure to perform (i) would give rise to the
failure of any of the closing conditions and (ii) cannot be or has not been cured within 20 business days (or, if earlier, the end date) after the giving of written notice to Parent of such breach (as long as the Company is not then in breach
of any representation, warranty or covenant in the merger agreement that would give rise to a Company breach termination) (referred to as a “Parent breach termination”); or |
|
| |
|
|
|
| |
●
|
there is no existing right of Parent or merger subsidiary to terminate the merger agreement in accordance with terms thereof, and if (i) the conditions to the obligations of the parties
have been and continue to be satisfied or waived in accordance with the merger agreement; (ii) Parent and merger subsidiary fail to consummate the merger on the date on which Parent is required to consummate the merger; (iii) the Company has
notified Parent in writing that it is ready, willing and able to consummate the closing and intends to terminate the merger agreement; and (iv) Parent and merger subsidiary fail to consummate the closing within five business days following
the delivery of such written notice by the Company (referred to as a “Parent closing breach”). |
|
| |
Termination Fees
The Company will be required to pay Parent a termination fee (which is referred to as the “termination fee”) of $2,105,578 if (i) Parent terminates the merger agreement pursuant to the
recommendation change termination; (ii) the Company terminates the merger agreement pursuant to the acquisition proposal termination; (iii) either party terminates the merger agreement pursuant to the stockholder vote termination or the
Company terminates the merger agreement pursuant to the end date termination, in each case if at the time of such termination Parent had the right to terminate the merger agreement pursuant to the recommendation change termination; or (iv)
an acquisition proposal has been made to the Company or to the Board or has otherwise been publicly announced (which proposal has not been withdrawn at the time of the event giving rise to the relevant termination right) and thereafter (A)
the merger agreement is terminated pursuant to the end date termination, the stockholder vote termination or the Company breach termination and (B) within 12 months of such termination the Company or any of its subsidiaries enters into an
acquisition agreement with respect to any acquisition proposal relating to 50% of the Company’s securities or assets, or any such acquisition proposal is consummated, subject to certain limitations.
Parent will be required to pay the Company a termination fee (which is referred to as the “Parent termination fee”) of $4,211,157 in the event that the merger agreement is terminated in the
following circumstances: |
|
| |
●
|
|
| |
●
|
|
| |
●
|
by Parent upon prior written notice to Company accompanied by concurrent full payment of the Parent termination fee.
|
| |
|
|
|
|
If the merger agreement is terminated under circumstances requiring the payment of the termination fee or the Parent termination fee and if such fee is paid, then the relevant
termination fee will be the non-terminating party’s sole and exclusive remedy. See the section of this proxy statement titled “The Merger Agreement—Termination Fees.”
Pursuant to Section 262 of the DGCL, Diversicare stockholders who do not vote in favor of adoption of the merger agreement, who continuously hold their shares of common stock through
the effective time of the merger and who otherwise comply with the applicable requirements of Section 262 of the DGCL have the right to seek appraisal of the fair value of their shares of common stock, as determined by the Delaware
Court of Chancery, if the merger is completed. The “fair value” of shares of common stock as determined by the Delaware Court of Chancery could be greater than, the same as, or less than the per share merger consideration that
stockholders would otherwise be entitled to receive under the terms of the merger agreement if they did not seek appraisal of their shares of common stock.
The right to seek appraisal will be lost if a Diversicare stockholder votes “ FOR” the merger proposal. However, abstaining or voting against
adoption of the merger agreement is not in itself sufficient to perfect appraisal rights because additional actions must also be taken to perfect such rights. To exercise appraisal rights, Diversicare stockholders who wish to exercise
the right to seek an appraisal of their shares must so advise the Company by submitting a written demand for appraisal to the Company prior to the taking of the vote on the merger proposal at the special meeting, and must otherwise
follow the applicable procedures and requirements prescribed by Section 262 of the DGCL. A person having a beneficial interest in shares of common stock held of record in the name of another person, such as bank, broker or other
nominee, must act promptly to cause the record holder to follow the steps required by Section 262 of the DGCL and in a timely manner to perfect appraisal rights. In view of the complexity of Section 262 of the DGCL, Diversicare
stockholders that may wish to pursue appraisal rights are urged to consult their legal and financial advisors. See the section of this proxy statement titled “Appraisal Rights.”
|
|
|
|
Material U.S. Federal Income Tax Considerations
The receipt of cash by a holder of common stock who is a U.S. holder (as defined below in the section of this proxy statement titled “ The Merger—Material
U.S. Federal Income Tax Considerations”) in exchange for shares of common stock pursuant to the merger will generally be a taxable transaction for U.S. federal income tax purposes and may also be a taxable transaction under
applicable state, local or foreign income or other tax laws. Generally, for U.S. federal income tax purposes, if you are a U.S. holder, you will recognize gain or loss equal to the difference, if any, between the amount of cash you
receive (or are deemed to receive) in the merger and your adjusted tax basis in the shares of common stock converted into cash in the merger. If you are a holder of common stock who is a non-U.S. holder (as defined below in the section of
this proxy statement title “ The Merger—Material U.S. Federal Income Tax Considerations”), the merger will generally not be a taxable transaction to you under U.S. federal income tax laws unless you
have certain connections to the United States, or the Company is, or was during the relevant period, a U.S. real property holding corporation. Further, the merger may be a taxable transaction to you under non-U.S. tax laws, and you are
encouraged to seek tax advice regarding such matters. Because individual circumstances may differ, we urge you to consult your own tax advisor to determine the particular tax effects to you. You are urged to read the section of this proxy
statement titled “ The Merger—Material U.S. Federal Income Tax Considerations” for a more complete discussion of the material U.S. federal income tax consequences of the merger. Notice and Filings in connection with the Merger
Federal and state laws and regulations may require that Diversicare provide notice to, or otherwise submit change of information applications to, applicable healthcare and other
governmental entities after the merger has been consummated. Diversicare must comply with such state laws and regulations and submit such notices and/or applications within the applicable required periods after the merger.
Current Price of Common Stock
The closing sale price of common stock on the OTC Markets on October 12, 2021, the most recent practicable date before the filing of this proxy statement, was $9.85. You are encouraged to
obtain current market quotations for common stock in connection with voting your shares of common stock.
You can find more information about the Company in the periodic reports and other information we file with the SEC. The information is available at the website maintained by the SEC at www.sec.gov. See the section of this proxy statement titled “Where You Can Find Additional Information.”Additionally, if you have any questions concerning the merger, the special meeting or accompanying proxy statement, would like additional copies of the accompanying proxy statement or
need help voting your shares of common stock, please contact our proxy solicitor:
Georgeson LLC
1290 Avenue of the Americas, 9th Floor
Stockholders, Banks and Brokers may call toll free: ( 888) 566-8006
|
|
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
The following questions and answers are intended to briefly address some commonly asked questions regarding the special meeting and the merger. These questions and answers may not
address all questions that may be important to you as a holder of common stock. You should read the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to in this proxy
statement.
Why am I receiving this proxy statement?
On
August 26, 2021,
the Company entered into the merger agreement with Parent and the merger subsidiary. Pursuant to the merger agreement, the merger subsidiary will be merged with and into the
Company, with
the Company surviving the merger as a wholly owned subsidiary of Parent.
You are receiving this proxy statement in connection with the solicitation of proxies by the Board in favor of the proposal to adopt the merger agreement and the other matters to be voted on at the
special meeting described below under “—What proposals will be considered at the special meeting?”
As a holder of common stock, what will I receive in the merger?
Each share of common stock that is outstanding immediately prior to the effective time of the merger (other than shares held by
the Company as treasury stock, owned by Parent or the merger subsidiary
or as to which the holders thereof have properly and validly exercised their statutory rights of appraisal in accordance with Section 262 of the DGCL) will be automatically converted into the right to receive the merger consideration of $10.10 per
share in cash, without interest and less any applicable withholding taxes.
The exchange of shares of common stock for cash pursuant to the merger will generally be a taxable transaction for U.S. federal income tax purposes. Please see the section of this proxy statement
titled “The Merger—Material U.S. Federal Income Tax Considerations” for a more detailed description of the U.S. federal income tax consequences of the merger. You are urged to consult your own tax advisor for
a full understanding of how the merger will affect you for federal, state, local and/or non-U.S. tax purposes.
How does the merger consideration compare to the recent trading price of common stock?
The merger consideration of $10.10 per share represents a premium of approximately 256% over
the Company’s closing stock price on
August 19, 2021 (the last trading day prior to announcement of the
acquisition proposal) and a premium of approximately 210% to the 90-day volume weighted average trading price of $3.26 per share. On
October 12, 2021, the most recent practicable date before the filing of this proxy statement, the closing price of
the common stock was $9.85
per share.
What will happen to outstanding equity awards in the merger?
At the effective time, by virtue of the merger and without any action on the part of the holders, (i) each Option issued under the Incentive Plan, whether or not vested, immediately prior to the
effective time of the merger will be cancelled and, in consideration thereof, the holder of such Option will receive the Option Consideration, (ii) each Restricted Stock Award issued under the Incentive Plan, whether or not vested, immediately prior
to the effective time of the merger will be cancelled and, in consideration thereof, the holder of such restricted common stock will receive the Restricted Stock Award Consideration, (iii) each outstanding RSU issued under the Incentive Plan, whether
or not vested, immediately prior to the effective time of the merger will be cancelled and, in consideration thereof, the holder of such RSU will receive the RSU Consideration, and (iv) each Stock Appreciation Right that is outstanding and
unexercised immediately prior to the effective time of the merger will be cancelled and, in consideration thereof, the holder of such Stock Appreciation Right will receive the Stock Appreciation Right Consideration.
In addition, and for the avoidance of doubt, any Option or Stock Appreciation Right with an exercise price equal to or greater than the merger consideration will be cancelled for no consideration at
the effective time
When and where is the special meeting of our stockholders?
We intend to hold the special meeting in person. However, we are continuing to actively monitor potential issues related to the ongoing coronavirus (COVID-19) pandemic, and we are sensitive to the public health and
travel concerns our stockholders may have and the protocols that federal, state, and local governments may impose. In the event it is not possible or advisable to hold the special meeting in person, we will announce alternative arrangements for the
special meeting as promptly as practicable, which may include holding the special meeting solely by means of remote or virtual communication. Please monitor the
“Investors” section of our
website at
www.DVCR.com for updated information. If you are
planning to attend the special meeting, please check the
website one week prior to the meeting date.
Who is entitled to vote at the special meeting?
Only holders of record of common stock as of the close of business on
October 5, 2021, the record date for the special meeting, referred to as the
“record date,” are entitled to vote the shares of
common stock they held as of the record date at the special meeting. As of the close of business on the record date, there were
6,949,104 shares of common stock
outstanding and entitled to vote. On each of the proposals presented at the special meeting, each holder of common stock is entitled to one vote for each share of common stock held by such stockholder on the record date.
May I attend and vote at the special meeting?
If you are a stockholder of record, you may also attend the special meeting and vote your shares at the special meeting. If you are a beneficial owner of shares of common stock held in “street name,”
you may instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee. If you are a beneficial owner of shares of common stock held in
“street name,” you may contact the bank, broker or other institution where you hold your account if you have questions about attending the special meeting. If you attend and vote at the special meeting, your vote will revoke any proxy that you have
previously submitted.
Please note that even if you plan to attend the special meeting, we recommend that you vote using the enclosed proxy card in advance, to ensure that your shares will be represented.
What proposals will be considered at the special meeting?
At the special meeting, holders of common stock will be asked to consider and vote on the following proposals:
|
●
|
a proposal to adopt the merger agreement, referred to as the “merger proposal”;
|
|
●
|
a proposal to approve, on an advisory, non-binding basis, the specified compensation that may become payable to the Company’s named executive officers in connection with the merger, referred to as the
“advisory, non-binding compensation proposal”; and |
|
●
|
a proposal to adjourn or postpone the special meeting, referred to as the “adjournment proposal.”
|
In accordance with
the Company’s
Bylaws, as amended from time to time, referred to as the
“bylaws,” the only business that will be transacted at the special meeting are the merger proposal, the
advisory, non-binding compensation proposal and the adjournment proposal, as stated in the accompanying notice of the special meeting.
What constitutes a quorum for purposes of the special meeting?
The presence at the special meeting in person, by means of remote communication in a manner, if any, authorized by the Board in its sole discretion, or represented by proxy, of the holders of a
majority in voting power of the shares of common stock issued and outstanding and entitled to vote at the meeting will constitute a quorum for the transaction of business at the special meeting. The inspector of election appointed for the special
meeting will determine whether a quorum is present. The inspector of election will treat abstentions as present for purposes of determining the presence of a quorum.
If a quorum is not present, the only business that can be transacted at the special meeting is the adjournment or postponement of the meeting to another date or time.
What vote of our stockholders is required to approve each of the proposals?
The approval of the merger proposal requires the affirmative vote of stockholders holding a majority of the outstanding shares of common stock entitled to vote thereon as of the close of business on
the record date. Accordingly, shares deemed not in attendance at the special meeting, whether due to a record holder’s failure to vote or a “street name” holder’s failure to provide voting instructions to such holder’s bank, broker or other nominee
or failure to vote at the special meeting, abstentions and broker non-votes will have the same effect as a vote “AGAINST” the merger proposal.
The approval of the advisory, non-binding compensation proposal and the adjournment proposal each require the affirmative vote of the holders of a majority in voting power of the shares of common
stock which are present in person or by proxy and entitled to vote thereon. Accordingly, shares deemed not in attendance at the special meeting, whether due to a record holder’s failure to vote at the special meeting or a “street name” holder’s
failure to provide any voting instructions to such holder’s bank, broker or other nominee, and broker non-votes will have no effect on the outcome of the advisory, non-binding compensation proposal or the adjournment proposal. Abstentions will have
the same effect as a vote “AGAINST” the advisory, non-binding compensation proposal and the adjournment proposal.
What is a “broker non-vote”?
If a beneficial owner of shares of common stock held in “street name” by a bank, broker or other nominee does not provide the organization that holds its shares with specific voting instructions,
then, under applicable rules, the organization that holds its shares may generally vote on “discretionary” matters but cannot vote on “non-discretionary” matters. If the organization that holds the beneficial owner’s shares does not receive
instructions from such stockholder on how to vote its shares on any “non-discretionary” proposal to be voted on at the special meeting, that bank, broker or other nominee will inform the inspector of election at the special meeting that it does not
have authority to vote on any such proposal at the special meeting with respect to such shares, and, furthermore, such shares will not be deemed to be in attendance at the meeting. This is generally referred to as a “broker non-vote.” However, if the
bank, broker or other nominee receives instructions from such stockholder on how to vote its shares as to at least one proposal but not all of the proposals, or at least one proposal is a “discretionary” matter, the shares will be voted as instructed
on the proposal as to which voting instructions have been given or on such “discretionary” proposal but will not be voted on the other, uninstructed proposal(s).
How does the Board recommend that I vote?
The Board recommends a vote “FOR” the merger proposal, “FOR” the advisory, non-binding compensation proposal and “FOR” the adjournment proposal.
For a discussion of the factors that the Board considered in determining to recommend that
the Company’s stockholders adopt and approve of the merger agreement, please see the section of this proxy
statement titled “
The Merger— Recommendation of the Board;
Reasons for the Merger.” In addition, in considering the recommendation of the Board with respect to the
merger agreement, you should be aware that certain of
the Company’s directors and executive officers have interests that may be different from, or in addition to, the interests of
the Company’s stockholders generally. Please see the section of this
proxy statement titled
“The Merger—Interests of the Company’s Directors and Executive Officers in the Merger.”How do
the Company’s directors and executive officers intend to vote?
Concurrently with the execution of the merger agreement, Parent entered into the voting agreement, as further described in the section titled
“Agreements Related to
the Merger—Voting Agreement,” with
the Company’s directors as of the date of the merger agreement. Under the voting agreement, such directors have agreed to vote or cause to be voted, all of the shares of common stock beneficially owned by
them in favor of the stockholder proposals submitted at the special meeting. As of
August 26, 2021, the directors of
the Company collectively held in the aggregate approximately 2,319,559 shares of common stock, or approximately 33.2% of the
outstanding shares of common stock at such time. As of the record date, the directors of
the Company collectively held in the aggregate approximately
2,319,559 shares
of common stock, or approximately 33.2% of the outstanding shares of common stock at such time.
Why am I being asked to cast an advisory, non-binding vote to approve the compensation that may be paid or may become payable to
the Company’s named executive officers in connection with the merger?
The SEC, in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, adopted rules that require
the Company to seek an advisory (non-binding) vote with respect to
certain payments that may be made to
the Company’s named executive officers in connection with the merger.
What will happen if the Company’s stockholders do not approve the advisory, non-binding compensation proposal?
The vote on the advisory, non-binding compensation proposal is a vote separate and apart from the vote to adopt the merger agreement. Because the vote on the advisory, non-binding compensation
proposal is advisory only, it will not be binding on
the Company, the Board, Parent or the surviving corporation. Accordingly, because
the Company is contractually obligated to pay the compensation, if the merger agreement is adopted by the holders
of common stock and the merger is completed, the compensation will be payable, subject only to the conditions applicable thereto, regardless of the outcome of the advisory, non-binding vote.
What happens if I sell my shares of common stock before the special meeting?
The record date for the special meeting is earlier than the date of the special meeting. If you sell or transfer your shares of common stock after the record date, but before the special meeting, you
will retain your right to vote such shares at the special meeting. However, the right to receive the merger consideration will pass to the person to whom you transferred your shares. In order to receive the merger consideration in connection with the
merger, you must hold your shares of common stock through the effective time of the merger.
How do I cast my vote if I am a stockholder of record?
If your shares are registered directly in your name with our transfer agent, Computershare Trust Company, you are considered, with respect to those shares, to be the
“stockholder of record.” In this
case, this proxy statement and your proxy card have been sent directly to you by
the Company. If you are a stockholder of record as of the record date, you may vote such shares via the Internet during the special meeting or by submitting your proxy
via the Internet, by telephone or by completing, signing and returning the enclosed proxy card by mail in the prepaid reply envelope. For more detailed instructions on how to vote using one of these methods, please see the section of this proxy
statement titled
“The Special Meeting—Voting Procedures.”If you are a holder of record of shares of common stock and you submit a proxy card or voting instructions but do not direct how to vote on each item, the persons named as proxies will vote your
shares in favor of each of the merger proposal, the advisory, non-binding compensation proposal and the adjournment proposal.
How do I cast my vote if my shares of common stock are held in “street name” by my bank, broker or other nominee?
If your shares are held through a bank, broker or other nominee, you are considered the “beneficial owner” of shares of common stock held in “street name.” In that case, this proxy statement has been
forwarded to you by your bank, broker or other nominee who is considered, with respect to those shares, to be the stockholder of record.
If you are a beneficial owner of shares of common stock held in “street name,” you may follow the instructions from your bank, broker or other nominee in order to vote such shares. Your bank, broker
or other nominee will vote your shares only if you provide instructions on how to vote by properly completing the voting instruction form sent to you by your bank, broker or other nominee with this proxy statement. Without providing those
instructions, your shares will not be voted by your bank, broker or other nominee, which will have the same effect as a vote “AGAINST” the merger proposal.
If you are a beneficial owner of shares of common stock held in “street name,” you may also attend the special meeting and vote your shares at the special meeting. For more detailed instructions on
how to vote at the special meeting, please see the section of this proxy statement titled “The Special Meeting—Voting Procedures.”
What will happen if I abstain from voting or fail to vote on any of the proposals?
If you abstain from voting, fail to cast your vote during the special meeting or by proxy or fail to give voting instructions to your broker, it will have the same effect as a vote “AGAINST” the merger proposal, the advisory, non-binding compensation proposal, and the adjournment proposal.
If you properly submit a proxy card prior to the special meeting, but do not indicate how to vote your shares, your shares will be voted “FOR” the approval of
the merger, “FOR” the advisory, non-binding compensation proposal, and “FOR” the proposal to approve any adjournments of the special meeting, if necessary or appropriate,
for the purpose of soliciting additional proxies.
Can I change my vote after I have delivered my proxy or my voting instructions?
Yes. If you are a stockholder with shares of common stock registered in your name, unless you have executed the voting agreement, you may revoke your proxy at any time prior to the time it is voted
by filing with the Corporate Secretary of
the Company an instrument revoking the proxy (by submitting a new proxy bearing a later date, by using the telephone or Internet proxy submission procedures described under “
The
Special Meeting—Voting Procedures”) or by attending the special meeting and voting by ballot. Merely attending the special meeting will not, by itself, revoke a proxy. Please note, however, that only your last-dated proxy or your vote by
ballot will count. If you want to revoke your proxy by sending a new proxy card or an instrument revoking the proxy to
the Company, you should ensure that you send your new proxy card or instrument revoking the proxy in sufficient time for it to be
received by
the Company prior to the special meeting. If you are a beneficial owner of shares of common stock held in
“street name,” you may contact your bank, broker or other nominee to change your vote, or by attending the special meeting and
voting your shares during the special meeting.
What should I do if I receive more than one set of voting materials?
You may receive more than one set of voting materials, including multiple copies of this proxy statement or multiple proxy or voting instruction cards. For example, if you hold your shares of common
stock in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares of common stock. If you are a holder of common stock of record and your shares of common stock are
registered in more than one name, you will receive more than one proxy card. Please submit each proxy and voting instruction card that you receive to ensure that all your shares of common stock are voted.
If I hold my shares of common stock in certificated form, should I send in my stock certificates now?
No. Promptly after the effective time of the merger, each holder of a certificate representing shares of common stock that have been converted into the right to receive the merger consideration will
be sent a letter of transmittal describing the procedure for surrendering his, her or its shares in exchange for the merger consideration. If you hold your shares in certificated form, you will receive your cash payment after the paying agent
receives your stock certificates and any other documents requested in the instructions. You should not return your stock certificates with the enclosed proxy card, and you should not forward your stock certificates to the paying agent without a
letter of transmittal. If you hold shares of common stock in uncertificated, book-entry form, you will not be required to deliver a stock certificate, and you will receive your cash payment after the payment agent receives an “agent’s message” and
any other documents requested in the instructions.
Where can I find the voting results of the special meeting?
The Company intends to publish final voting results in a Current Report on Form 8-K to be filed with the SEC following the special meeting. All reports that
the Company files with the SEC are
publicly available when filed. For more information, please see the section of this proxy statement titled
“Where You Can Find Additional Information.”
Am I entitled to rights of appraisal under the DGCL?
If the merger is completed, holders of common stock who do not vote in favor of the adoption of the merger agreement and who properly demand appraisal of their shares and perfect their appraisal
rights will be entitled seek appraisal of their shares in connection with the merger under Section 262 of the DGCL. This means that holders of shares of common stock are entitled to have their shares appraised by the Delaware Court of Chancery and to
receive payment in cash of the “fair value” of their shares of common stock, exclusive of any elements of value arising from the accomplishment or expectation of the merger, together with interest on the amount determined to be fair value, if any, as
determined by the court (or, in certain circumstances described below, on the difference between the amount determined to be the fair value and the amount paid to each stockholder entitled to appraisal prior to the entry of judgment in the appraisal
proceeding). Holders of common stock who wish to seek appraisal of their shares are in any case encouraged to seek the advice of legal counsel with respect to the exercise of appraisal rights due to the complexity of the appraisal process. The
requirements under Section 262 of the DGCL for exercising appraisal rights are described in additional detail in this proxy statement, and Section 262 of the DGCL regarding appraisal rights is reproduced in Annex C to this proxy statement. Failure to
comply with the provisions of Section 262 of the DGCL in a timely and proper manner may result in the loss of appraisal rights. See the section of this proxy statement titled “Appraisal Rights.”
When is the merger expected to be completed?
We are working toward completing the merger as promptly as possible, but as of the date of this proxy statement we cannot accurately estimate the closing date of the merger because the merger is
subject to the satisfaction (or, to the extent permitted by applicable law, waiver) of the conditions to Parent, the merger subsidiary and
the Company’s respective obligations to consummate the merger, some of which are not within the parties’
control. However, we currently expect the merger to close in the fourth quarter of 2021.
If the merger is consummated, the merger subsidiary will be merged with and into
the Company, the separate corporate existence of the merger subsidiary will thereupon cease, and
the Company will
continue to exist following the merger as a wholly owned subsidiary of Parent. Following such consummation of the merger, shares of common stock will no longer be traded on the OTC Markets, and the registration of shares of common stock under the
Exchange Act will be terminated.
What happens if the merger is not completed?
If the merger proposal is not approved by
the Company’s stockholders, or if the merger is not completed for any other reason, the holders of common stock will not receive any payment for their shares
of common stock in connection with the merger. Instead,
the Company will remain an independent public company and stockholders will continue to own their shares of common stock. The common stock will continue to be registered under the Exchange Act
and traded on the OTC Markets. Depending on the circumstances, if the merger is not completed,
the Company may be obligated to pay to Parent a termination fee or Parent may be obligated to pay to
the Company a termination fee. For more information,
please see the section of this proxy statement titled
“The Merger Agreement—Termination Fees.”What is householding and how does it affect me?
The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements and annual reports with respect to two or more
stockholders sharing the same address by delivering a single proxy statement and annual report addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and
cost savings for companies.
Who can help answer my questions?
If you need assistance in completing your proxy card or have questions regarding the special meeting, please contact
the Company’s proxy solicitor:
Georgeson LLC
1290 Avenue of the Americas, 9th Floor
Stockholders, Banks and Brokers may call toll free: (
888) 566-8006
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement, and the
documents incorporated by reference in this proxy statement, contains
“forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of
1995.
The Company generally identifies forward-looking statements by terminology such as
“may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,”
“potential” or
“continue” or the negative of these terms or other similar words.
These statements are only predictions.
The Company has based these forward-looking statements largely on its then-current expectations and projections about future events and financial trends as well
as the beliefs and assumptions of management. Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond
the Company’s control.
The Company’s actual results could
differ materially from those stated or implied in forward-looking statements due to a number of factors, including but not limited to:
|
● |
the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement, including in circumstances which would require the Company to pay the termination fee or other expenses; |
|
● |
the failure of the parties to satisfy conditions to completion of the merger, including the failure of our stockholders to adopt the merger agreement;
|
|
● |
the risk that regulatory approvals are delayed or are subject to terms and conditions that are not anticipated;
|
|
● |
the effect of the announcement or pendency of the transactions contemplated by the merger agreement on the Company’s ability to retain and hire key personnel, its ability to maintain relationships with its customers, suppliers and others
with whom it does business, or its operating results and business generally; |
|
● |
risks related to diverting management’s attention from the Company’s ongoing business operations; |
|
● |
the outcome of any legal proceedings that may be instituted against the Company, Parent or others following announcement of the merger agreement and transactions contemplated therein; |
|
● |
changes in domestic and global economic, political and market conditions;
|
|
● |
risks that the Company’s stock price may decline significantly if the merger is not completed; and |
|
● |
the response of Company stockholders to the proposed merger.
|
Other factors that may cause actual results to differ materially include those set forth in
the Company’s most recent Annual Report on Form 10-K filed with the SEC on
March 11, 2021, and subsequent
reports filed with the SEC, as well as other documents that may be filed by
the Company from time to time with the SEC. See the section of this proxy statement titled
“Where You Can Find Additional Information.”
These forward-looking statements reflect
the Company’s expectations as of the date of this proxy statement.
The Company undertakes no obligation to update the information provided herein. These forward-looking statements should not be relied upon as
representing our views as of any date subsequent to the date hereof.
Diversicare Healthcare Services, Inc.
Diversicare is a premier provider of long-term care services with 61 nursing centers and 7,250 skilled nursing beds. Diversicare operates in eight states, primarily in the Southeast, Midwest, and
Southwest United States.
We were incorporated in 1994 as a Delaware corporation. Our shares of common stock are quoted on the OTC Markets under the symbol “DVCR.” Our principal executive office is located at:
Diversicare Healthcare Services, Inc.
1621 Galleria Boulevard
Additional information about Diversicare is contained in its public filings, certain of which are
incorporated by reference herein. See the sections of this proxy statement titled “
Where You Can Find Additional Information” and “
The Parties—Diversicare Healthcare Services, Inc.”
DAC Acquisition LLC is a privately held Delaware limited liability company of which
Ephram Lahasky serves as the Manager. Mr. Lahasky, who has owned and operated Ambulance and Ambulette services
since 1990, has significant affiliations with in excess of 100 owned and/or leased skilled nursing and similar centers in over 20 states. MED Healthcare, an entity utilized by Mr. Lahasky and his associates for certain acquisitions of their interests
in healthcare facilities, is a guarantor of Parent’s obligations with respect to the merger. See the section of this proxy statement titled “
Agreements Related to the Merger—Guaranty.”
Upon completion of the merger, Diversicare will be a direct wholly owned subsidiary of Parent.
DAC Acquisition LLC
c/o MED Healthcare Partners LLC
600 Broadway
DVCR Acquisition Corporation
The merger subsidiary is a wholly owned subsidiary of Parent and was formed by Parent solely for the purpose of engaging in the transactions contemplated by the merger agreement and has not engaged
in any business activities other than in connection with the transactions contemplated by the merger agreement. Upon completion of the merger, the merger subsidiary will cease to exist.
DVCR Acquisition Corporation
c/o MED Healthcare Partners LLC
600 Broadway
We are furnishing this proxy statement to the holders of common stock as part of the solicitation of proxies by the Board for use at the special meeting and at any adjournments or
postponements thereof.
The special meeting will be held at
the Company’s offices at 1621 Galleria Boulevard,
Brentwood,
Tennessee 37027 at
9:00 a.m.,
Central Time, on
November 18, 2021, where you, or your proxy, will be able to attend the special meeting and vote. The special meeting will begin promptly at
9:00 a.m., Central Time.
We intend to hold the special meeting in person. However, we are actively monitoring potential issues related to the ongoing COVID-19 pandemic, and we are sensitive to the public health and travel
concerns our stockholders may have and the protocols that federal, state, and local governments may impose. In the event it is not possible or advisable to hold the special meeting in person, we will announce alternative arrangements for the special
meeting as promptly as practicable, which may include holding the special meeting solely by means of remote or virtual communication. Please monitor the
“Investors” section of our
website at
www.DVCR.com for updated information. If you are planning
to attend the special meeting, please check the
website one week prior to the meeting date.
A list of stockholders entitled to vote at the special meeting will be available for examination by any stockholder for any purpose germane to the special meeting beginning ten days prior to the
special meeting, and ending on the date of the special meeting, upon request to
the Company’s Investor Relations department at (
615) 771-7575, subject to the satisfactory verification of stockholder status. Such list will also be available at the
special meeting.
Purpose
of the Special Meeting
At the special meeting, holders of common stock will be asked to consider and vote on the following proposals:
|
● |
the merger proposal (see the section of this proxy statement titled “The Merger Agreement”);
|
|
● |
the advisory, non-binding compensation proposal (see the section of this proxy statement titled “ The Merger—Interests of the Company’s Directors and Executive Officers in the Merger”); and |
|
● |
the adjournment proposal (see the section of this proxy statement titled “Proposal 3: Adjournment Proposal”).
|
A copy of the merger agreement is attached as Annex A to this proxy statement.
Recommendation
of the Board
After careful consideration, the Board unanimously: (i) approved and declared advisable the merger agreement and the merger, (ii) determined that the merger is in the best interests of
the Company
and its stockholders, (iii) directed that the merger agreement be submitted to the stockholders of
the Company for adoption and (iv) recommended that
the Company’s stockholders vote in favor of the adoption of the merger agreement.
Accordingly, the Board recommends a vote “FOR” the merger proposal. The Board also recommends a vote “FOR” the advisory, non-binding compensation proposal and “FOR” the adjournment proposal. For a discussion of the
material factors that the Board considered in determining to recommend the adoption of the merger agreement, please see the section of this proxy statement titled “
The Merger—Recommendation of the Board;
Reasons for the Merger.”
Record
Date and Stockholders Entitled to Vote
Only holders of common stock of record as of the close of business on
October 5, 2021, the record date for the special meeting (referred to as the
“record date”), are entitled receive notice of and
to vote the shares of common stock they held on the record date at the special meeting. As of the close of business on the record date, 6,949,104 shares of common stock were eligible to vote at the special meeting. On each of the proposals presented
at the special meeting, each holder of common stock is entitled to one vote for each share of common stock held by such stockholder on the record date. The adoption of the merger agreement by the holders of common stock requires the affirmative vote
of stockholders holding a majority of the outstanding shares of common stock entitled to vote thereon as of the close of business on the record date.
Under the
bylaws, the holders of a majority in voting power of the shares of common stock issued and outstanding and entitled to vote at the meeting, present or represented by proxy, shall constitute
a quorum at any meeting of stockholders. If less than a quorum is present at a meeting, then either (i) the chairperson of the meeting or (ii) a majority in voting power of the stockholders entitled to vote at the meeting, present or represented by
proxy, shall have power to adjourn the meeting from time to time. The inspector of election appointed for the special meeting will determine whether a quorum is present. The inspector of election will treat abstentions as present for purposes of
determining the presence of a quorum.
If a beneficial owner of shares held in “street name” by a bank, broker or other nominee does not provide the organization that holds its shares with specific voting instructions, then, under
applicable rules, the organization that holds its shares may generally vote on “discretionary” matters but cannot vote on “non-discretionary” matters. If the organization that holds the beneficial owner’s shares does not receive instructions from
such stockholder on how to vote its shares on any proposal to be voted on at the special meeting, that bank, broker or other nominee will inform the inspector of election at the special meeting that it does not have authority to vote on any proposal
at the special meeting with respect to such shares, and, furthermore, such shares will not be deemed to be in attendance at the meeting. This is generally referred to as a “broker non-vote.” However, if the bank, broker or other nominee receives
instructions from such stockholder on how to vote its shares as to at least one proposal but not all of the proposals, the shares will be voted as instructed on any proposal which voting instructions have been given but will not be voted on the
other, uninstructed proposal(s).
If a quorum is not present, the only business that can be transacted at the special meeting is the adjournment or postponement of the meeting to another date or time.
Adoption of the Merger Proposal
The approval of the merger proposal requires the affirmative vote of stockholders holding a majority of the outstanding shares of common stock entitled to vote thereon as of the close of business on
the record date. Accordingly, shares deemed not in attendance at the special meeting, whether due to a record holder’s failure to vote or a “street name” holder’s failure to provide any voting instructions to such holder’s bank, broker or other
nominee or failure to vote at the special meeting, abstentions and broker non-votes will have the same effect as a vote “AGAINST” the merger proposal.
Under the merger agreement, stockholder approval of the merger proposal is a condition to the consummation of the merger.
Approval of the Advisory, Non-binding Compensation Proposal
The approval of the advisory, non-binding compensation proposal requires the affirmative vote of the holders of a majority in voting power of the shares of common stock which are present in person or
by proxy and entitled to vote thereon. Accordingly, shares deemed not in attendance at the special meeting, whether due to a record holder’s failure to vote or a “street name” holder’s failure to provide any voting instructions to such holder’s bank,
broker or other nominee or failure to vote at the special meeting, and broker non-votes will have no effect on the outcome of the advisory, non-binding compensation proposal. Abstentions will have the same effect as a vote “AGAINST” the advisory, non-binding compensation proposal.
The vote on the advisory, non-binding compensation proposal is a vote separate and apart from the vote to adopt the merger agreement. Because the vote on the advisory, non-binding compensation
proposal is advisory only, it will not be binding on
the Company, the Board, Parent or the surviving corporation. Accordingly, because
the Company is contractually obligated to pay the compensation, if the merger agreement is adopted by the holders
of common stock and the merger is completed, the compensation will be payable, subject only to the conditions applicable thereto, regardless of the outcome of the advisory, non-binding vote.
Approval of the Adjournment Proposal
The approval of the adjournment proposal requires the affirmative vote of the holders of a majority in voting power of the shares of common stock which are present in person or by proxy and entitled
to vote thereon. Accordingly, shares deemed not in attendance at the special meeting, whether due to a record holder’s failure to vote or a “street name” holder’s failure to provide any voting instructions to such holder’s bank, broker or other
nominee or failure to vote at the special meeting, and broker non-votes will have no effect on the outcome of the adjournment proposal. Abstentions will have the same effect as a vote “AGAINST” the adjournment
proposal.
The vote on the adjournment proposal is a vote separate and apart from the vote to adopt the merger agreement.
The Company will not call a vote on this proposal if the merger proposal is approved at
the special meeting.
Tabulation of Votes; Results
The Company will retain an independent party to receive and tabulate the proxies and ballots, and to serve as the inspector of election to certify the results of the special meeting.
Whether or not you plan to attend the special meeting and regardless of the number of shares of common stock you own, your careful consideration of, and vote on, the merger agreement is important and
we encourage you to vote promptly.
To ensure that your shares of common stock are voted at the special meeting, we recommend that you promptly submit your proxy, even if you plan to attend the special meeting, using one of the
following methods:
|
● |
through the Internet by logging onto the website specified on your proxy card and following the prompts using the control number located on the proxy card; |
|
● |
by calling using the toll-free telephone number listed on your proxy card; or
|
|
● |
by completing, signing, dating and returning your proxy card in the postage-paid return envelope provided.
|
If you vote via the Internet or by telephone, please do not return a signed proxy card.
If you are a beneficial owner of shares of common stock held in “street name,” you may instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction
form that you will receive from your bank, broker or other nominee. If you are a beneficial owner of shares of common stock held in “street name,” you may contact the bank, broker or other institution where you hold your account if you have questions
about obtaining your control number and attending the special meeting.
Please note that even if you plan to attend the special meeting,
the Company recommends that you vote using either the Internet, toll-free telephone or the enclosed proxy card in advance, to ensure
that your shares will be represented. If you wish to vote at the special meeting, you can participate in and vote at the special meeting.
Brokerage firms and other intermediaries holding shares of common stock in “street name” for their customers are generally required to vote such shares in the manner directed by their customers. In
the absence of timely directions, your broker will have discretion to vote your shares on “discretionary” matters. Your broker will not have discretion to vote on “non-discretionary” matters, absent direction from you.
You may revoke your proxy or change your vote at any time before the closing of the polls at the special meeting. If you are a stockholder of record at the record date, you can revoke your proxy or
change your vote by:
|
● |
attending and voting at the special meeting (or, if the special meeting is adjourned or postponed, attending the adjourned or postponed meeting), which automatically will cancel any proxy previously given, although your attendance at the
special meeting will not in and of itself constitute a revocation of a proxy; or
|
|
● |
if you voted by telephone or via the Internet, voting again by the same means prior to 11:59 p.m., Central Time on November 17, 2021 (your latest telephone or Internet vote, as applicable, will be counted and all earlier votes will be
disregarded). |
If you are a beneficial owner of shares of common stock held in “street name,” you may contact your bank, broker or other nominee to change your vote.
The Board is soliciting proxies for the special meeting from its stockholders.
The Company will bear the cost of soliciting proxies, including the expense of preparing, printing and distributing this
proxy statement. In addition to soliciting proxies by mail, telephone or electronic means, we may request banks, brokers and other nominees to solicit their customers who have common stock registered in their names and will, upon request, reimburse
them for the reasonable, out-of-pocket costs of forwarding proxy materials in accordance with customary practice. We may also use the services of our directors, officers and other employees to solicit proxies, personally, by telephone or by
electronic means, without additional compensation. In addition,
the Company has retained Georgeson LLC (referred to as
“Georgeson”) to solicit stockholder proxies. As compensation for its services, we have agreed to pay Georgeson a cash fee equal to
$12,500 plus additional fees incurred. We have also agreed to reimburse Georgeson for certain reasonable expenses and to indemnify Georgeson against certain losses, damages and expenses.
The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements and annual reports with respect to two or more
stockholders sharing the same address by delivering a single proxy statement and annual report addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and
cost savings for companies.
A number of brokers with account holders who are stockholders of
the Company will be
“householding” the Company’s proxy materials. A single set of
the Company’s proxy materials will be delivered to
multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that they will be
“householding” communications to your address,
“householding”
will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in
“householding” and would prefer to receive a separate set of the proxy materials, please notify your broker or
direct a written request to the Corporate Secretary at 1621 Galleria Boulevard,
Brentwood,
Tennessee 37027.
The Company undertakes to deliver promptly, upon any such oral or written request, a separate copy of the proxy materials to a stockholder at
a shared address to which a single copy of these documents was delivered. Stockholders who currently receive multiple copies of the proxy materials at their address and would like to request
“householding” of their communications should contact their
broker, bank or other nominee, or contact
the Company at the above address or phone number.
The special meeting may be adjourned or postponed from time to time to another hour, date or place. Under the
bylaws, notice need not be given of any such adjournment of less than 30 days if the time
and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned special meeting,
the Company may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 30
days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present and vote at
such adjourned meeting will be given to each stockholder of record entitled to receive notice of or to vote at the meeting. All proxies will be voted in the same manner as they would have been voted at the original convening of the special meeting,
except for any proxies that have been validly revoked or withdrawn prior to the time such proxies are voted at the reconvened meeting.
Concurrently with the execution of the merger agreement, Parent entered into the voting agreement, as further described in the section titled
“Agreements Related to
the Merger—Voting Agreement,” with
the Company’s directors as of the date of the merger agreement. Under the voting agreement, such directors have agreed to vote or cause to be voted all of the shares of common stock beneficially owned by
them in favor of the stockholder proposals submitted at the special meeting. As of the record date, the directors of
the Company collectively held in the aggregate approximately
2,319,559
shares of common stock, or approximately 33.2% of the outstanding shares of common stock at such time.
Certain of
the Company’s directors and executive officers have interests in the merger that may be different from, or in addition to, those of
the Company’s stockholders generally. For more
information, please see the section of this proxy statement titled
“The Merger—Interests of the Company’s Directors and Executive Officers in the Merger.”Assistance
; Proxy Solicitor
If you need assistance in completing your proxy card or have questions regarding the special meeting, please contact
the Company’s proxy solicitor:
Georgeson LLC
1290 Avenue of the Americas, 9th Floor
Stockholders, Banks and Brokers may call toll free: (
888) 566-8006
PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT
As discussed elsewhere in this proxy statement, at the special meeting holders of common stock will consider and vote on the merger proposal.
The merger cannot be
completed without the adoption of the merger agreement by the Company’s stockholders. You are urged to carefully read this proxy statement in its entirety for more detailed information concerning the merger agreement and the merger,
including the information set forth under the sections of this proxy statement titled “
The Merger” and
“The Merger Agreement.” A copy of the merger agreement is
attached as Annex A to this proxy statement. You are urged to read the merger agreement carefully and in its entirety.
The approval of the merger proposal requires the affirmative vote of the holders of a majority of the outstanding shares common stock. Accordingly, shares deemed not in attendance at the special
meeting, whether due to a record holder’s failure to vote or a “street name” holder’s failure to provide any voting instructions to such holder’s bank, broker or other nominee or failure to vote at the special meeting, abstentions and broker
non-votes will have the same effect as a vote “AGAINST” the merger proposal.
The Board recommends a vote “FOR” the approval of the merger proposal.
PROPOSAL 2: ADVISORY VOTE ON MERGER-RELATED COMPENSATION
In accordance with Section 14A of the Exchange Act and the applicable SEC rules issued thereunder,
the Company is providing holders of common stock with the opportunity to cast a vote on the
advisory, non-binding compensation proposal. As required by those rules,
the Company is asking holders of common stock to vote on the adoption of the following resolution:
“RESOLVED, that the compensation that may be paid or become payable to
the Company’s named executive officers in connection with the merger, as disclosed in the table titled
“Potential Payments to Named Executive Officers,” including the associated narrative discussion, and the agreements or understandings pursuant to which such compensation may be paid or become payable, is hereby APPROVED.”
The vote on executive compensation payable in connection with the merger is a vote separate and apart from the merger proposal. Because the vote is advisory in nature only, it will not be binding on
the Company or the Board. Accordingly, because
the Company is contractually obligated to pay the compensation, such compensation will be paid or become payable, subject only to the conditions applicable thereto, if the merger is consummated and
regardless of the outcome of the advisory vote.
The approval of the advisory, non-binding compensation proposal requires the affirmative vote of the holders of a majority in voting power of the shares of common stock which are present in person or
by proxy and entitled to vote thereon. Broker non-votes will not count as votes cast on the advisory, non-binding compensation proposal. Accordingly, shares deemed not in attendance at the special meeting, whether due to a record holder’s failure to
vote or a “street name” holder’s failure to provide any voting instructions to such holder’s bank, broker or other nominee or failure to vote at the special meeting, and broker non-votes will have no effect on the outcome of the advisory, non-binding
compensation proposal. Abstentions will have the same effect as a vote “AGAINST” the advisory, non-binding compensation proposal.
The Board recommends a vote “FOR” the approval of the advisory, non-binding compensation proposal.
PROPOSAL 3: ADJOURNMENT PROPOSAL
As discussed elsewhere in this proxy statement, at the special meeting holders of common stock will consider and vote, if necessary or appropriate as determined by
the Company, on the adjournment
proposal.
The Company is asking you to authorize the holder of any proxy solicited by the Board to vote in favor of any adjournment or postponement of the special meeting, if necessary or appropriate as
determined by
the Company, to solicit additional proxies if there are not sufficient votes to approve the merger proposal at the time of the special meeting.
The approval of the adjournment proposal requires the affirmative vote of the holders of a majority in voting power of the shares of common stock which are present in person or by proxy and entitled
to vote thereon. Broker non-votes will not count as votes cast on the adjournment proposal. Accordingly, shares deemed not in attendance at the special meeting, whether due to a record holder’s failure to vote or a “street name” holder’s failure to
provide any voting instructions to such holder’s bank, broker or other nominee or failure to vote at the special meeting, and broker non-votes will have no effect on the outcome of the adjournment proposal. Abstentions will have the same effect as a
vote “AGAINST” the adjournment proposal.
The vote on the adjournment proposal is a vote separate and apart from the merger proposal.
The Company will not call a vote on this proposal if the merger proposal is approved at the special
meeting.
The Board recommends a vote “FOR” the approval of the adjournment proposal.
The following paragraphs summarize the key meetings and events that led to the signing of the merger agreement.
The Company held many conversations with numerous parties, both by
telephone and in-person, about a potential transaction. The paragraphs below cover only the key events leading up to the merger agreement and do not purport to catalogue every conversation among the board, officers or other representatives of the
Company and other parties.
The Board and management continually evaluate
the Company’s business and financial plans and prospects. As part of this evaluation, the Board and management have also periodically considered
strategic alternatives, and have occasionally received and responded to unsolicited overtures from parties interested in engaging in a strategic transaction with
the Company.
The Company’s ability to pursue strategic alternatives was significantly
hampered by a previously disclosed federal false claims investigation beginning in 2013 and finally resolved through a settlement agreement and corporate integrity agreement with the U.S. Department of Justice in February of 2020.
The Company received the initial overture about a possible transaction from an affiliate of Parent in the spring of 2019 (various affiliates of Parent controlled by Ephram Lashasky are referred to
herein as
“MED Healthcare”). An affiliate of Mr. Lahasky
previously filed a report with the SEC on
January 16, 2019 on Schedule 13G reporting ownership of shares constituting 5.57% of
the Company’s common stock. On
May 23, 2019, MED Healthcare sent a
letter to
the Company. The Board reviewed the letter, considering various factors relevant to
the Company and state of the industry and market conditions, and most significantly the status of the unresolved federal false claims investigation. After
this review,
the Company responded that the Board did not feel that further discussions were likely to be fruitful or in the best interest of
the Company. Following this communication, MED Healthcare withdrew its prior letter on
August 15, 2019.
At its
February 5, 2021 meeting, the Board engaged in an extended discussion regarding the state of
the Company and its strategic plans. As part of the discussion, Mr. McKnight reviewed with the
Board census issues, unpredictable reimbursement and regulatory issues due to the new presidential administration, unknown liability from COVID-19 illnesses and deaths, the ongoing impact and issues surrounding
the Company’s obligations under the
settlement agreement and corporate integrity agreement with the U.S. Department of Justice, the relative costs of being a public company of
the Company’s size, and other matters. During this discussion the contents of communications received from
stockholders regarding these matters were taken into account. At the conclusion of this discussion the Board determined that while
the Company was not for sale, given market conditions, the condition of
the Company, future prospects for the industry,
and recent inbound interest, that it would be prudent to further explore strategic alternatives available to
the Company. These could include a corporate reorganization, restructuring, refinancing, investment or merger transaction. The Board
directed management to further explore these matters, including the advisability of the retention of outside advisors, and report back.
Following the
February 5, 2021 Board meeting and through April of 2021, Company management, with the assistance of outside legal counsel, engaged in discussions with outside financial advisors
regarding market conditions,
the Company, and related matters. During this period of time management had informal discussion with various parties to gauge their potential strategic interest in
the Company. These discussions resulted in the execution
of non-disclosure and standstill agreements with two parties, as described below.
In April of 2021,
the Company, through legal counsel, reached out to MED Healthcare and inquired whether MED Healthcare would have interest in discussing a potential strategic transaction. Following
this outreach, on
May 17, 2021,
the Company and MED Healthcare entered into a nondisclosure agreement.
On
May 20, 2021, representatives of MED Healthcare traveled to Nashville to meet with Mr. McKnight. Representatives of Bass, Berry & Sims PLC (referred to herein as
“Bass Berry”) attended the
meeting, with MED Healthcare’s counsel Krieger & Prager attending telephonically. At this meeting MED Healthcare affirmed its interest in acquiring
the Company but did not indicate a price. Mr. McKnight also declined to state a price at which the
Company would consider a transaction. The parties discussed in general terms how
the Company might fit with MED Healthcare’s existing nursing home business, and agreed that
the Company would provide additional diligence information as requested by
MED Healthcare. Mr. McKnight provided diligence materials to MED Healthcare and discussed these materials with MED Healthcare throughout the process.
From
May 20, 2021 to
June 2, 2021,
the Company provided diligence materials requested by MED Healthcare. On
June 2, 2021, MED Healthcare sent Mr. McKnight an indication of interest in acquiring the
Company at a price of $10.10 per share. This price represented a premium of approximately 206% over the closing price of
the Company’s stock on the day before the indication of interest was made. This letter was accompanied by documentation showing
Mr. Lahasky’s significant financial liquidity.
On
June 3, 2021, the Board met to discuss this indication of interest, with management and representatives of Bass Berry present. Mr. McKnight shared a copy of the letter, noting it was subject to
diligence contingencies, and asked the Board for guidance on a proper response. Board members expressed that while
the Company was not for sale at this time, the expression of interest from MED Healthcare was at a level that the Board believed should
be further evaluated. The Board expressed its desire to retain a financial advisor to assist the Board in further evaluating the indication of interest and any other strategic alternatives reasonably available to
the Company. Representatives of Bass
Berry advised the Board on its fiduciary duties in connection with these matters, noting that if the Board did decide to engage in a change of control transaction, directors would have a fiduciary duty to obtain the highest value reasonably
attainable for shareholders. Representatives of Bass Berry then discussed with the Board the possibility of forming a special committee, noting that a special committee can be helpful when individual directors are interested in the transaction or
when the size or interest level of a Board makes it difficult for the full Board to monitor a process. After discussion, the Board concluded that none of its members had conflicts of interest at this time and that the small size of the Board and its
high level of engagement made a special committee unnecessary at this time. The Board agreed to revisit the advisability of appointing a special committee as the process evolved. Finally, the Board authorized Mr. McKnight to begin discussions with
financial advisors (with any engagement to be approved by the Board) and to continue discussions with MED Healthcare, and to report on any further engagement from Party A.
From
June 3, 2021 to
June 16, 2021, Mr. McKnight and representatives of Bass Berry engaged in numerous discussions with MED Healthcare representatives, including Krieger & Prager, with respect to
how any potential transaction might be structured and the progress of MED Healthcare’s diligence.
During the same period, Mr. McKnight and representatives of Bass Berry reached out to several financial advisory firms, including firms with which
the Company had prior discussions, to explore their
interest in representing
the Company.
On
June 17, 2021, the Board met again. Mr. McKnight described his interactions with potential advisory firms and recommended that
the Company engage BCA. The Board discussed BCA’s experience,
qualifications, familiarity with
the Company and its industry, pricing offered, and perceived capacity to take on a transaction of this size. After this discussion the Board unanimously approved a resolution to approve the engagement of BCA on the
terms set forth in the draft engagement letter provided to the Board (which had been reviewed and negotiated with representatives of Bass Berry). Representatives of BCA then joined the meeting and presented to the Board an initial plan for evaluating
MED Healthcare’s indication of interest and the value of
the Company. Board members discussed the advantages and disadvantages of conducting a broader strategic process at this time versus engaging exclusively with MED Healthcare, but no final
decision was made on this matter. In response to a director question, Mr. McKnight confirmed there had been no discussions of the terms on which MED Healthcare might employ the current management team if it did acquire
the Company, although there had
been an expression by Mr. Lahasky of interest in having such discussions at a future date. At the conclusion of the meeting the Board authorized management and counsel to continue discussions with MED Healthcare regarding a potential transaction and
to begin preparation of a form of merger agreement.
From
June 17, 2021 until
June 29, 2021,
the Company continued to respond to diligence requests from MED Healthcare while Bass Berry prepared a draft merger agreement. Though MED Healthcare had stated
that its offer was not subject to a financing contingency,
the Company and its advisors considered that obtaining committed debt financing would increase the certainty of his offer. To that end, Bass Berry worked with MED Healthcare to provide
information to its financing source that would enable it to provide a debt financing commitment.
On
June 29, 2021, Mr. McKnight provided an email update to the Board on the status of
the Company’s interactions with MED Healthcare and BCA.
From
July 1, 2021 through
July 6, 2021, Bass Berry conducted discussions with Krieger & Prager around the material terms of any merger agreement that could be entered into between the parties,
including indemnity for representations and warranties, voting support agreements from
the Company’s major shareholders,
the Company’s ability to seek acquisition proposals from third parties after the execution of the merger agreement, and the
termination fees that could be payable by each side. During a call on July 6, Krieger & Prager stressed to Bass Berry the concerns of Mr. Lahasky about unlimited liability and indicated he would require his obligations under any merger agreement
to be liquidated damages at a fixed dollar amount.
On
July 8, 2021 Mr. Lahasky received an indication of interest from his debt financing source which was subsequently shared with
the Company and its representatives. Over the next several days the
parties discussed the terms of this indication of interest, and
the Company continued to provide information to the financing source at the request of MED Healthcare.
On
July 19, 2021, Bass Berry sent a draft merger agreement to Krieger & Prager. Among the provisions contained in this draft were (i) an ability of
the Company to terminate the merger agreement
and have its liability limited to a fixed termination fee in certain circumstances, including in order to accept a superior proposal, (ii) no ability of Parent to terminate the merger agreement and have its liability limited to a fixed termination
fee, (iii) specific performance rights, (iv) a requirement for the obligations of Parent to be guaranteed by a credit-worthy affiliate with significant assets, and (v) a go-shop provision allowing
the Company to actively solicit potential alternative
superior proposals for 40 days following the execution of the merger agreement.
On
July 23, 2021, Bass Berry, Krieger & Prager, Mr. Lahasky and Mr. McKnight held a call to discuss this draft. The primary issues raised by Mr. Lahasky concerned the termination fee payable by
the Company in the draft merger agreement, and the lack of a termination fee to limit Mr. Lahasky’s liability as a guarantor in the current draft.
On
July 26, 2021, the Board met to receive an update on interactions with Mr. Lahasky, with Bass Berry and BCA present. Mr. McKnight described the diligence provided to Mr. Lahasky and the indication
of interest from his debt financing source. Bass Berry summarized the issues Krieger & Prager had raised with respect to the merger agreement, including their objection to the termination fee provisions. BCA and Bass Berry gave the Board their
views on prevailing termination fees. After this discussion, the Board expressed support for a Company termination fee of 3% of equity value, reduced to 1.5% for terminations related to deals with
“Excluded Parties” identified during the go-shop
period provided for in the merger agreement combined with a termination fee for Mr. Lahasky of 6%, reduced to 3% during the go-shop period. The Board then discussed with management other companies that had approached
the Company to discuss a
strategic transaction or whom
the Company might approach. The Board considered the pros and cons of further engagement with each of these parties in consultation with its legal and financial advisors, including (i) the chances of a better offer from
another party (ii) the risk of discouraging Mr. Lahasky’s interest in the process if he perceived that other parties were involved, and (iii) that the $10.10 per share offered by Mr. Lahasky would set a floor for other bids during the go-shop period,
while the bids in a pre-announcement process were more likely to be influenced by
the Company’s much lower current stock price. At the conclusion of this discussion the Board determined to defer reaching out at this time to other parties in order to
see if the terms of a proposed transaction with MED Healthcare could be finalized and announced in a timely manner.
From
July 26, 2021 until
July 29, 2021 Krieger & Prager and Bass Berry had several calls in which they exchanged views on the termination fee provisions in the draft agreement, in which Bass
Berry advocated the termination fee provisions supported by the Board. Mr. McKnight and Mr. Lahasky also had separate calls on these topics. On a call held on
July 29, 2021 Krieger & Prager and Bass Berry were joined by Mr. McKnight and Mr.
Lahasky. During this call Bass Berry asserted that the Board would be unable to negotiate further on the amount of termination fees until all of MED Healthcare’s positions on the draft merger agreement were clear. Mr. Lahasky and Krieger &
Prager agreed to provide a revised draft of the merger agreement.
On
August 3, 2021, Bass Berry sent to Krieger & Prager a proposed insert to the draft merger agreement limiting Parent’s liability to a fixed termination fee under certain limited circumstances,
to document positions Krieger & Prager had conveyed in a telephone conversation.
On
August 5, 2021, the Board held its normal quarterly meeting and devoted significant time to discussing the possibility of a strategic transaction. BCA presented to the Board their preliminary
financial analysis of the $10.10 per share price in the indication of interest received from Mr. Lahasky, concluding that their initial view was that $10.10 per share represented a premium of 248.3% over the closing price of
the Company’s stock on
the prior day. BCA also described to the Board the process for conducting the go-shop under the terms of the draft merger agreement. Given the prospect of identifying a better offer through the go-shop and the attractiveness of the MED Healthcare
offer, the Board did not consider it advisable to push MED Healthcare to increase its offer.
On
August 6, 2021, Krieger & Prager sent comments to the merger agreement (reserving comment on the termination provisions) to Bass Berry which proposed, among other things, specific closing
conditions relating to the performance of owned company facilities, more fulsome representations and warranties regarding real estate and healthcare matters, a 30-day go-shop period and increased periods for MED Healthcare to exercise its matching
rights on a superior proposal, and an irrevocable proxy in favor of the transaction from each director.
On
August 9, 2021, Krieger & Prager, Bass Berry, Mr. Lahasky and Mr. McKnight held a conference call to discuss Krieger & Prager’s comments to the draft merger agreement, including additional
comments sent by Krieger & Prager immediately prior to the call. The discussion focused on how
the Company could accommodate Krieger & Prager’s requests while preserving an acceptable certainty of closing for
the Company and the Board’s
ability to accept a superior offer in accordance with its fiduciary duties.
On
August 12, 2021, Mr. Lahasky sent Mr. McKnight a debt commitment letter from his financing source. While MED Healthcare reiterated that its offer was not subject to a financing contingency, the
Board believed that a commitment letter increased the certainty of consummating a transaction.
On the evening of
August 12, 2021, Mr. McKnight sent to the Board an update on the transaction, including Krieger & Prager’s comments to the merger agreement and a memorandum from Bass Berry to
the Board analyzing those comments.
On
August 13, 2021, Bass Berry sent Krieger & Prager a revised merger agreement and draft disclosure schedule. The revised merger agreement narrowed the closing conditions relating to the
performance of owned company facilities and representations and warranties regarding real estate and healthcare matters, and proposed a 35-day go-shop period. This communication was accompanied by a proposed form of guarantee that contemplated a
personal guarantee by Mr. Lahasky of all of Parent’s obligations under the merger agreement, as well as proposed form of voting support agreement that would be executed by
the Company’s directors instead of the irrevocable proxy proposed by MED
Healthcare.
On
August 16, 2021, Krieger & Prager sent Bass Berry comments to the merger agreement (reserving comment on the termination provisions).
On
August 17, 2021, Krieger & Prager and Bass Berry held multiple calls and exchanged multiple emails regarding the terms of the merger agreement, particularly the termination provisions.
On
August 18, 2021, Krieger & Prager, Bass Berry, Mr. Lahasky and Mr. McKnight held a conference call to discuss the merger agreement, in which Mr. Lahasky and Krieger & Prager insisted on
single fixed dollar amounts for termination fees equal to approximately 3% of equity value for
the Company and approximately 6% of equity value for MED Healthcare, respectively. During this conversation Mr. Lahasky stated that he could not accept
unlimited liability as a guarantor for obligations under the merger agreement. Bass Berry and Mr. McKnight affirmed that only the Board would make a decision on termination fee amounts, and would do so only after understanding all of MED Healthcare’s
positions on the merger agreement.
Later on
August 18, 2021, the Board met to discuss the status of negotiations. The meeting occurred just before a revised draft of the merger agreement was received from Krieger & Prager. Bass
Berry reviewed with the Board the material issues being negotiated between the parties At the conclusion of this meeting the Board directed Bass Berry and management to continue negotiations with MED Healthcare.
On the evening of
August 18, 2021, Krieger & Prager sent a revised merger agreement to Bass Berry including comments to the termination provisions. This draft asserted strict closing conditions
that
the Company would have to meet, narrower circumstances in which
the Company could terminate the merger agreement to accept a superior proposal, and significant limits on
the Company’s right of specific performance. This draft also contained
termination fees equal to approximately 3% of equity value for
the Company and approximately 6% of equity value for MED Healthcare. The draft merger agreement included a proposal for guarantees by Mr. Lahasky and MED Healthcare Partners with
significant limits on the liability of each of these guarantors.
On
August 19, 2021, Bass Berry sent a revised merger agreement and form of guarantee intended to finally settle the substantive issues between the parties other than amount of the termination fees.
The draft merger agreement allowed MED Healthcare to terminate the merger agreement at any time that it was not in material breach by concurrently paying a termination fee. In exchange for this concession, the drafts made changes to the closing
conditions for owned facilities that increased closing certainty for
the Company, preserved
the Company’s rights to accept a superior proposal under market circumstances, required Mr. Lahasky and Med Healthcare Partners to fully guarantee the
obligations of Parent, and preserved
the Company’s specific performance rights prior to the termination of the merger agreement. On a subsequent call, Bass Berry indicated that
the Company was unlikely to make substantive concessions on these
positions. Additional negotiation of more minor points continued throughout the afternoon. Krieger & Prager then informed Bass Berry that Mr. Lahasky’s final position on the fixed dollar amounts of the termination fees which were agreed as being
approximately 3% of the then-anticipated equity value for
the Company and approximately 6% of the then-anticipated equity value for MED Healthcare.
On the evening of
August 19, 2021, the Board met to consider the status of the transaction. After a full briefing from management, Bass Berry and BCA regarding the terms of the merger agreement (as
described in the prior paragraph) and an extensive discussion, the Board unanimously approved a resolution directing management to proceed with negotiating the merger agreement on the terms presented.
On the morning of
August 20, 2021, Mr. Lahasky updated his Schedule 13 filing to account for the offer letter and
the Company filed a Form 8-K acknowledging the letter and disclosing its engagement
of a financial advisor to evaluate the offer.
On
August 20, 2021, Mr. McKnight met with Bass Berry and BCA to continue planning for the go-shop period. During this meeting it was decided that BCA would affirmatively reach out to Party A and two
operators in
the Company’s industry that could be potential strategic acquirers and that Mr. McKnight would refer any other parties who contacted him expressing interest in a strategic transaction to BCA.
From August 20 through
August 26, 2021, Bass Berry finalized the merger agreement and the disclosure schedules according to the direction of the Board. During this period Mr. Lahasky and Mr. McKnight
separately discussed the merger agreement and plans for a Form 8-K and
press release in the event that the merger agreement was signed.
On
August 26, 2021, the Board met to consider the final draft of the merger agreement. Bass Berry reviewed the terms of the merger agreement and reviewed the Board’s fiduciary duties in connection
with the proposed transaction. The Board discussed the reasons for the merger and the risks and uncertainties posed by the transaction. The Board then asked BCA to deliver its updated financial analysis and its fairness opinion. BCA presented its
detailed financial analysis of the transaction and then delivered its opinion to the Board (verbally and in a written opinion dated
August 26, 2021) that, based upon and subject to the matters described in its fairness opinion, the merger
consideration to be received by the holders of
the Company’s common stock, other than Parent or its affiliates, pursuant to the merger agreement was fair, from a financial point of view, to such holders of
the Company’s common stock.
After further deliberations, the Board resolved by a unanimous vote that the merger agreement and the other transactions contemplated thereby, including the merger, were approved and declared
advisable, fair to, and in the best interests of
the Company and its stockholders, and the form, terms, provisions, and conditions of the merger agreement and the exhibits and attachments thereto were adopted and approved, and the consummation of the
merger was approved. The Board recommended, subject to the ability of
the Company to make a change in recommendation pursuant to and in accordance with the merger agreement, that the stockholders of
the Company vote in favor of the adoption of the
merger agreement.
Following the execution of the merger agreement, and pursuant to the go-shop provision set forth in the merger agreement, BCA, acting on behalf of
the Company, commenced the
go-shop process by soliciting alternative acquisition proposals. The go-shop period expired at 11:59 p.m. (Eastern Standard Time) on
September 30, 2021. During the go-shop period, BCA contacted 63 prospective buyers that
the Company and BCA believed
could have an interest in reviewing the opportunity and had the financial ability to pursue a potential strategic transaction with
the Company. Of the 63 prospective buyers contacted, 13 parties entered into confidentiality agreements with the
Company and were provided access to certain non-public information relating to
the Company. Approximately six of the parties submitted follow-up due diligence requests and communicated with BCA regarding analyses of a proposed transaction. One of the
parties contacted during the go-shop process, Party B, submitted a written acquisition proposal to
the Company prior to the expiration of the go-shop period. Party B’s offer indicated that it would be prepared to pay $11.11 per share of common stock
in a transaction structured in a similar manner to the transaction contemplated by the merger agreement. Party B’s offer was accompanied by the draft merger agreement. Party B’s acquisition proposal contained several terms that were concerning to
the Company, including changes to the termination fees and the requirement for an additional diligence period of no longer than 30 days prior to the signing of the draft merger agreement. Following consultation with its legal and financial advisors
the Board determined in good faith that Party B’s acquisition proposal was not a superior proposal because of the required diligence period and certain other terms contained in the draft merger agreement, but was reasonably likely to result in a
superior proposal. The Board resolved to continue to negotiate with, and provide diligence information and access to, Party B as an excluded party under the terms of the merger agreement.
The Company will supplement this proxy statement to describe
any material developments with respect to Party B.
Recommendation of the Board; Reasons for the Merger
Recommendation of the Board
In evaluating the merger agreement, the merger and the other transactions contemplated by the merger agreement, the Board consulted with Company management and its financial advisors, and with its
outside legal counsel regarding its fiduciary duties, the terms and conditions of the merger agreement and other related matters.
The Board unanimously (i) approved and declared advisable the merger agreement and the merger, (ii) determined that the merger is in the best interests of
the Company and its
stockholders, (iii) directed that the merger agreement be submitted to the stockholders of
the Company for adoption and (iv) recommended that
the Company’s stockholders vote FOR the adoption of the merger agreement.
The resolutions above were duly and unanimously adopted by the Board, at a meeting duly called and held at which all directors of
the Company were present. At such meeting, the Board also duly and
unanimously adopted resolutions rendering the limitations on business combinations contained in Section 203 of the DGCL inapplicable to the merger, the merger agreement, the other agreements contemplated by the merger agreement and the transactions
contemplated thereby, and electing that the merger and the other transactions contemplated by the merger agreement not be subject to any
“moratorium,” “control share,” “fair price” or other form of anti-takeover laws and regulations of any
jurisdiction that may purport to be applicable to the merger and the other transactions contemplated by the merger agreement.
None of the foregoing resolutions by the Board has been rescinded, modified or withdrawn in any way.
Reasons for the Merger
In the course of reaching its recommendation described above, the Board considered a number of positive factors relating to the merger agreement and the merger, each of which the Board believed
supported its decision, including the following:
|
●
|
Prospects of the Company as an Independent Company. The Board evaluated the Company’s long-term business plan and the related execution risks and uncertainties (including the risk factors set
forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020), and weighed the prospects of achieving long-term value for its stockholders through execution of the Company’s long-term business plan against the
near-term value to stockholders, which the Board determined could be realized through the merger at a significant premium over the recent market price of the common stock.
|
| |
|
|
●
|
Unpredictability of Future Operating Environment. The Board assessed, after discussions with the Company’s management and advisors, the risks of remaining an independent company and pursuing the
Company’s long-term business plan, including risks relating to uncertain recovery of census from the COVID-19 pandemic, increased regulatory pressure from the current administration, expected cuts to Medicare reimbursement and other risks
and uncertainties relating to the healthcare regulatory environment, the ability to maintain census in aging facilities in rural areas, the economy and the industry generally.
|
| |
|
|
●
|
The Company’s Operating and Financial Condition. The Board considered its knowledge and familiarity with the Company’s business, including its current and historical financial condition and
results of operations, competitive position, properties and assets, access to and cost of capital, as well as the Company’s business strategy and prospects, in light of the current and prospective economic environment.
|
| |
|
|
●
|
Merger Consideration. The Board considered that the Company’s stockholders will be entitled to receive merger consideration of $10.10 per share in cash upon the closing of the merger, providing
the Company’s stockholders with certainty of value and liquidity upon consummation of the merger. The Board also considered the current and historical market prices of the Company common stock, including the fact that $10.10 per share in
cash represented a premium of (i) approximately 256% over $2.84, the closing price on the last trading day prior to the announcement of the acquisition proposal, (ii) approximately 210% over the volume weighted average price per share over
the preceding 90-day period; and (iii) approximately 135% over $4.29, the highest price per share of the common stock during the prior 52 weeks.
|
| |
|
|
●
|
Greater Certainty of Value. The Board considered that the merger consideration payable per share is a fixed all cash amount, thereby providing the Company’s stockholders with immediate certainty
of value and liquidity for their shares upon the closing of the merger, while eliminating the uncertainty of long-term business and execution risk to stockholders, especially when viewed in light of a number of factors, including the recent
increased volatility in equity markets, particularly with respect to comparable companies, and the even greater volatility in the Company’s stock. In addition, the Company’s equity value is small for a public company and its shares are
thinly traded, which means that any future improvements in earnings may not translate into a higher share price. Also, because the Company is small, the costs of being a public company constitute a larger percentage of earnings than is the
case for larger public companies.
|
|
●
|
Receipt of Fairness Opinion from its Financial Advisor Regarding the Merger; Advisors. The Board considered the financial analyses presented
by BCA to the Board and the oral opinion of BCA rendered to the Board, subsequently confirmed by the delivery of a written opinion of BCA, dated August 26, 2021, to the Board, that, as of such date and based upon and subject to the factors
and assumptions set forth in its written opinion, the merger consideration to be paid to the holders of the Company’s common stock in the proposed merger was fair, from a financial point of view, to such holders, all as more fully described
below in the section of this proxy statement under the heading “—Opinion of Diversicare’s Financial Advisor.” The full text of the written opinion of BCA, dated August 26, 2021, which sets forth the
assumptions made, matters considered and limits on the review undertaken, is attached as Annex B to this proxy statement. In addition, the fact that the Company’s legal and financial advisors were involved throughout the process and
negotiations and updated the Board directly and regularly provided the Board with additional perspectives on the negotiations in addition to those of management.
|
| |
|
|
●
|
Go-Shop; Ability to Withdraw or Change Recommendation
|
| |
o
|
The merger agreement provided the Company with a 35-day go-shop period during which the Company actively solicited inquiries and proposals that may have reasonably been expected to
lead to an “acquisition proposal” (as defined in “ The Merger Agreement—Go-Shop and No Solicitation”), which provided an opportunity for the Board to determine if any such offers would result in a
“superior proposal” (as defined in “ The Merger Agreement—Go-Shop and No Solicitation”); |
| |
|
|
| |
o
|
After expiration of the go-shop period, the merger agreement provides the Board with the ability, under certain specified circumstances, and subject to our obligations under the
merger agreement, to make a “change in recommendation” (as defined in “The Merger Agreement—Board Recommendation Change”) and to terminate the merger agreement in order to enter into an agreement
with respect to a superior proposal;
|
| |
|
|
| |
o
|
The Board has the ability under the merger agreement to withdraw or modify its recommendation in favor of the merger under certain circumstances, including its ability to terminate
the merger agreement in connection with a superior proposal, subject to payment of a termination fee of approximately $2.1 million.
|
| |
|
|
| |
o
|
The termination fee payable by the Company under the merger agreement was viewed, after consultation with the Board’s legal and financial advisors, as reasonable and not likely to
preclude another party from making a competing acquisition proposal; |
| |
|
|
|
●
|
Opportunity for the Company Stockholders to Vote. The Board also considered the fact that the merger would be subject to the approval of the
Company’s stockholders, and the Company’s stockholders would be free to evaluate the merger and vote for or against the adoption of the merger agreement at the special meeting.
|
| |
|
|
●
|
Opportunity for Appraisal of Shares. The Board also considered the fact that the Company’s stockholders who do not vote in favor of the
adoption of the merger and are entitled to demand and validly demand appraisal of the fair value of their shares will have the right to such appraisal under Delaware law. Please see the section of this proxy statement titled “Appraisal Rights.”
|
In the course of reaching its recommendation, the Board also considered certain risks and potentially adverse factors relating to the merger agreement and the merger, including:
|
●
|
the risks related to the announcement and pendency of the merger, including the potential impact on the Company’s employees and its relationships with existing and prospective
customers, vendors and business partners; |
| |
|
|
●
|
the need to provide notice, or otherwise submit change of information applications, to applicable healthcare and other governmental entities after the merger has been consummated;
|
| |
|
|
●
|
that the Company stockholders will have no ongoing equity participation in the Company following the merger, and that such stockholders will therefore cease to participate in the
Company’s future earnings or growth, if any, or to benefit from increases, if any, in the value of the Company common stock following the merger; |
| |
|
|
●
|
the provisions of the merger agreement that restrict the Company’s ability to solicit or participate in discussions or negotiations regarding alternative acquisition proposals after
September 30, 2021, which is the end of the go-shop period, subject to certain exceptions, and that restrict the Company from entering into alternative acquisition agreements; |
| |
|
|
●
|
the possibility that the merger is not completed in a timely manner or at all for any reason, as well as the risks and costs to the Company if the merger is not completed or if there
is uncertainty about the likelihood, timing or effects of completion of the merger, including uncertainty about the effect of the merger on the Company’s employees, existing and prospective customers, suppliers, partners and other third
parties, which could impair the Company’s ability to attract, retain and motivate key personnel and could cause third parties to seek to terminate, change or not enter into business relationships with the Company, as well as the risk of
diverting management and employee attention from ongoing business operations as a result of the merger, and the effect on the trading price of the Company common stock if the merger agreement is terminated or the merger is not completed for
any reason; |
| |
|
|
●
|
the merger agreement’s customary restrictions on the conduct of the Company’s business before completion of the merger, generally requiring the Company to conduct its business in the
ordinary course of business consistent with past practice and prohibiting the Company from taking specified actions, which could delay or prevent the Company from undertaking certain business opportunities that arise pending completion of
the merger. Please see the section of this proxy statement titled “ The Merger Agreement—Covenants Regarding Interim Operations of the Company Pending the Effective Time”; |
| |
|
|
●
|
the possibility that the Company could be required under the terms of the merger agreement to pay a termination fee of approximately $2.1 million under certain circumstances (see the
section of this proxy statement titled “ The Merger Agreement—Termination Fees”), and that such termination fee could discourage other potential bidders from making a competing bid to acquire the
Company; |
| |
|
|
●
|
the potential risk of losing the opportunity to enter into the merger agreement with Parent in the event the Company continued trying to obtain any additional offers at higher prices; |
| |
|
|
●
|
the significant costs involved in connection with entering into the merger agreement and completing the merger (some of which are payable whether or not the merger is consummated),
including in connection with any litigation that may result from the announcement or pendency of the merger;
|
| |
|
|
●
|
that the receipt of cash by the Company stockholders in exchange for their shares of common stock pursuant to the merger generally will be a taxable transaction to the Company’s
stockholders for tax purposes. Please see the section of this proxy statement titled “ The Merger—Material U.S. Federal Income Tax Considerations”; and |
| |
|
|
●
|
that some of the Company’s directors and executive officers have interests that may be different from, or in addition to, the interests of the Company stockholders generally. Please
see the section of this proxy statement titled “The Merger—Interests of the Company’s Directors and Executive Officers in the Merger.” |
The foregoing discussion of the information and factors considered by the Board includes the material factors considered by the Board but is not intended to be exhaustive and does not necessarily
include all of the factors considered by the Board. In view of the complexity and variety of factors considered in connection with its evaluation of the merger agreement and the merger, the Board did not find it practicable to, and did not, quantify
or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation. Rather, in considering the information and factors described above, individual members of the Board each applied his or her own
business judgment to the process and may have given different weights to different factors. The above factors are not presented in any order of priority. The explanation of the factors and reasoning set forth above contain forward-looking statements
that should be read in conjunction with the section of this proxy statement titled “Cautionary Statement Regarding Forward-Looking Statements.”
Opinion of Diversicare’s Financial Advisor
BCA is acting as financial advisor to
the Company in connection with the merger. At the meeting at which the Board voted to approve the proposed transaction, BCA rendered to the Board its oral
opinion, which was subsequently confirmed by delivery of a written opinion, to the effect that, as of
August 26, 2021 and based upon and subject to the factors and assumptions set forth in such written opinion, the $10.10 in cash per share of common
stock to be paid to the holders of the shares of common stock pursuant to the merger agreement was fair from a financial point of view to such stockholders (other than Parent).
The full text of the written opinion of BCA, dated
August 26, 2021, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection
with the opinion, is attached as Appendix B. BCA provided advisory services and its opinion for the information and assistance of the Board in connection with its consideration of the merger. The BCA opinion is not a recommendation as to how any
holder of the shares of common stock should vote with respect to the merger or any other matter.
In connection with rendering the opinion described above and performing its related financial analysis, BCA reviewed, among other things:
|
•
|
Certain financial statements and other business and financial information concerning and prepared by the Company; |
|
|
|
|
•
|
Certain publicly available business, financial and other information regarding the Company, including information set forth in its annual reports to stockholders and annual reports on Form 10-K for the fiscal years ended December 31,
2018, 2019 and 2020 and interim quarterly reports on Form 10-Q; |
|
|
|
|
•
|
Certain information, including financial forecasts and adjustments to the financial forecasts, concerning the business, earnings, cash flow, assets, liabilities and prospects of the Company, prepared and furnished to BCA by the
Company, and other information and data relating to the Company provided by management of the Company; |
|
|
|
|
•
|
|
| |
|
| • |
The reported price and trading activity for the Company’s shares; and |
| |
|
| • |
A draft, dated August 25, 2021, of the merger agreement. |
BCA conducted such other financial studies, analyses, and investigations, and considered such other information, including economic and market conditions, that it deemed appropriate. BCA also held discussions with
members of the senior management of
the Company regarding its assessment of the past and current business operations, financial condition and future prospects of
the Company and reviewed the reported price and trading activity for the shares of
common stock. As described below, BCA compared certain financial and stock market information for
the Company with similar information for certain other companies, the securities of which are publicly traded, reviewed the financial terms of
certain recent business combinations in the skilled nursing and senior housing industry and in other industries, and performed such other studies and analysis, and considered such other factors, as BCA deemed appropriate.
In connection with its review, BCA, with the Board’s consent, assumed and relied on the accuracy and completeness of all information supplied or otherwise made available to BCA, discussed with, or
reviewed by or for BCA, or accessed by BCA from publicly available sources. With the Board’s consent, BCA did not independently verify any of such information or undertake an independent evaluation or appraisal of any of the assets or liabilities
(contingent or otherwise) of
the Company, nor was BCA furnished with any such evaluation or appraisal, nor did BCA evaluate the solvency or fair value of
the Company. In addition, BCA did not assume any obligation to conduct any physical inspection
of
the Company’s properties or facilities. With respect to
the Company forecast financial information furnished to or discussed with BCA by
the Company’s senior management, BCA assumed and relied upon, at the Board’s direction, that such information
had been reasonably prepared on bases reflecting the best currently available estimates and judgment of
the Company’s management as to the expected future financial performance of
the Company. BCA’s opinion is based upon economic, monetary, market
and other conditions as in effect on, and the information made available to BCA as of,
August 26, 2021. Accordingly, although subsequent developments could conceivably affect BCA’s opinion, BCA did not assume any obligation to update, revise or
reaffirm its opinion.
BCA’s opinion does not address the underlying business decision of
the Company to engage in the merger, the relative merits of the merger as compared to any strategic alternatives, which might be
available to
the Company or its stockholders, or the other terms of the merger agreement except for the fairness of the purchase price per share of common stock as expressly set forth in the opinion. BCA’s opinion addresses only the fairness from a
financial point of view to the holders of common stock (other than Parent), as of
August 26, 2021, of the $10.10 in cash per share to be paid to such holders pursuant to the merger agreement, and BCA did not express any views on any other terms of
the merger.
In rendering its opinion, BCA assumed that (i) the final, executed form of the definitive documentation will not differ in any material respect from the draft merger agreement reviewed by BCA, (ii) the
stockholders and
the Company will comply with all the material terms of the merger agreement, (iii) the merger will be consummated in accordance with the terms of the merger agreement without any adverse waiver or amendment of any material term or
condition thereof, and (iv) all governmental, regulatory or other consents and approvals necessary for the consummation of the merger will be obtained without a material adverse effect on the contemplated benefits of the merger.
Summary of Material Financial Analysis
The following is a summary of the material financial analysis delivered by BCA to the Board in connection with rendering the opinion described above. However, the summary does not purport to be a complete description
of the financial analysis performed by BCA, nor does the order of analysis described represent relative importance or weight given to those analysis by BCA. Some of the summaries of the financial analysis include information presented in tabular
format. The tables must be read together with the full text of each summary and are alone not a complete description of BCA’s financial analysis. Except as otherwise noted, the following quantitative information, to the extent that it is based on
market data, is based on market data as it existed on or before
August 25, 2021, the last completed trading day before the date of BCA’s opinion and is not necessarily indicative of current market conditions.
In arriving at its opinion, BCA did not attribute any particular weight to any single analysis performed or factor reviewed, but rather made qualitative judgements as to the significance and relevance of each analysis
and factor relative to all other analyses performed and factors reviewed in the context of the circumstances of the merger. Accordingly, BCA believes that its analyses must be considered as a whole, as considering any portion of such analyses and
factors, without considering all analyses and factors as a whole, could create a misleading or incomplete view of the process underlying the BCA opinion. No company, business or transaction considered in BCA’s analyses and reviews is identical to
the Company or the merger, and an evaluation of the results of those analyses and reviews is not entirely formulaic. Rather, the analyses and review involve complex considerations and judgments concerning financial and operating characteristics,
differences and other factors that could affect the acquisition, public trading, or other values of the companies, businesses, or transactions considered in BCA’s analyses and review. As discussed with the Board, such characteristics, differences
and factors included the relative scale, growth rates, dividend rates, financing costs, and regulatory experiences of the companies that were analyzed.
Historical Diversicare Stock Trading Analysis and Multiple Analysis. BCA reviewed the historical trading prices for the shares of common stock for the one-year period ended
August 19, 2021, the last trading day before the announcement of the acquisition proposal. In addition, BCA analyzed the consideration to be paid to holders of shares of common stock pursuant to the merger agreement in relation to (i) the closing
price per share on
August 19, 2021, (ii) the high and low closing price per share for the 52-week period ended
August 19, 2021, and (iii) the volume-weighted average price (referred to as
“VWAP”) per share for the preceding 14-, 30-, 90-, and
365-calendar day periods ended
August 19, 2021.
This analysis indicated that the price per share of common stock to be paid to Company stockholders pursuant to the merger agreement represented:
|
•
|
a premium of 255.6% based on the closing price per share of $2.84 on August 19, 2021; |
| |
|
|
•
|
a premium of 135.4% based on the highest closing price per share of $4.29 for the 52-week period ended August 19, 2021; and |
| |
|
|
•
|
a premium of 531.3% based on the lowest closing price per share of $1.60 for the 52-week period ended August 19, 2021. |
Further, this analysis indicated that the price per share of common stock to be paid to Company stockholders pursuant to the merger agreement represented the following premia based on the VWAP per
share for preceding calendar day periods ended
August 19, 2021;
|
•
|
a premium of 242.4% based on the 14-day VWAP per share of $2.95;
|
| |
|
|
•
|
a premium of 229.0% based on the 30-day VWAP per share of $3.07;
|
| |
|
|
•
|
a premium of 213.7% based on the 90-day VWAP per share of $3.22; and
|
| |
|
|
•
|
a premium of 237.8% based on the 365-day VWAP per share of $2.99.
|
BCA calculated the implied merger equity value of
the Company by multiplying the $10.10 per share of merger consideration to be paid pursuant to the merger agreement by the total shares of fully diluted common stock
outstanding as of
June 30, 2021, as provided by senior management of
the Company. BCA then calculated the implied merger enterprise value (referred to as
“EV”) by adding to the implied merger equity value,
the Company’s short-term and long-term
debt net of deferred income related to pandemic relief funds (referred to as
“total debt”), minus
the Company’s unrestricted cash, each balance as of
June 30, 2021 and as provided by management of
the Company. BCA also calculated the implied merger
adjusted enterprise value (referred to as
“AEV”) by adding to the implied merger EV,
the Company’s operating lease liabilities at
June 30, 2021 as provided by management of
the Company.
Using that valuation information and financial and operating results provided by senior management of
the Company, BCA compared:
|
•
|
Implied merger AEV to Company owned and leased beds, resulting in a value of $52,702 per bed;
|
| |
|
|
•
|
Implied merger AEV to Company revenue over the last twelve months ended June 30, 2021 (referred to as “June LTM”), resulting in a multiple of 0.8x; |
| |
|
|
•
|
Implied merger EV to Company June LTM earnings measured before interest, expense, taxes, depreciation, and amortization expense (referred to as “EBITDA”), resulting in a multiple of 4.7x; and
|
| |
|
|
•
|
Implied merger AEV to Company June LTM EBITDA measured before operating lease expense (referred to as “EBITDAR”), resulting in a multiple of 5.2x.
|
Premia Analysis. BCA reviewed and analyzed, using publicly available information, the acquisition premia for acquisition transactions announced from
July 1, 2018 to
July 31,
2021. BCA sampled transactions with targets that were public companies based in the United States, acquirers that were based in the United States, and where the disclosed enterprise values for the transactions were between $25 million and
$200 million. This analysis excluded transactions for companies that were REITs, closed-end funds, and/or were insolvent. Among the sampled transactions, BCA calculated the median, mean, 25th percentile and 75th percentile premias of the price
paid in the transactions relative to the targets’ last undisturbed closing stock price prior to announcement of the transactions. The table below compares the premia derived from this analysis to the corresponding premia in the merger using a price
of $10.10 per share.
|
|
|
Closing
|
|
Volume-Weighted Average Price
|
|
|
|
|
|
|
Price
|
|
Over Trailing |
|
52 Week |
|
|
Premia / Discounts Compared to:
|
|
1 Day
Prior
|
|
|
14 Days
|
|
|
1 Month
|
|
|
3 Months
|
|
|
12 Months
|
|
|
High
|
|
|
Low
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaffected stock price
|
|
$
|
2.84
|
|
|
$
|
2.95
|
|
|
$
|
3.07
|
|
|
$
|
3.22
|
|
|
$
|
2.99
|
|
|
$
|
4.29
|
|
|
$
|
1.60
|
|
|
Merger price: $10.10
|
|
|
255.6
|
%
|
|
|
242.4
|
%
|
|
|
229.0
|
%
|
|
|
213.7
|
%
|
|
|
237.8
|
%
|
|
|
135.4
|
%
|
|
|
531.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale Transaction Data Set
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Median
|
|
|
34.4
|
%
|
|
|
26.3
|
%
|
|
|
21.7
|
%
|
|
|
21.1
|
%
|
|
|
12.9
|
%
|
|
|
4.0
|
%
|
|
|
69.8
|
%
|
|
Mean
|
|
|
50.6
|
%
|
|
|
43.1
|
%
|
|
|
38.1
|
%
|
|
|
36.3
|
%
|
|
|
26.3
|
%
|
|
|
3.8
|
%
|
|
|
113.5
|
%
|
|
75th percentile
|
|
|
56.6
|
%
|
|
|
63.6
|
%
|
|
|
58.5
|
%
|
|
|
59.9
|
%
|
|
|
46.7
|
%
|
|
|
23.4
|
%
|
|
|
129.8
|
%
|
|
25th percentile
|
|
|
12.7
|
%
|
|
|
2.9
|
%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
-1.6
|
%
|
|
|
-17.0
|
%
|
|
|
37.2
|
%
|
Illustrative Discounted Cash Flow Analysis. Using
the Company forecasts, BCA performed an illustrative discounted cash flow analysis on
the Company. Using discount rates ranging
from 7.5% to 8.5%, reflecting estimates of
the Company’s weighted average cost of capital (referred to as
“WACC”), BCA discounted to present value as of
June 30, 2021 (i) estimates of unlevered free cash flow for
the Company for the second half of
2021 through 2030 as derived from
the Company’s forecasts and (ii) a range of illustrative terminal values for
the Company, which were calculated by applying a Company perpetuity growth rate of 2.5%. The terminal value calculation implied exit
terminal year multiples ranging from 6.3x to 7.6x to a terminal year estimate of EBITDA of
the Company, as derived from
the Company forecasts. BCA derived the WACC range by application of the Capital Asset Pricing Model, which requires certain
company-specific inputs, including
the Company’s target capital structure weightings, the cost of long-term debt and future applicable marginal cash tax rate and a beta for
the Company, as well as certain financial metrics for the United States
financial markets generally.
BCA derived ranges of illustrative enterprise values for
the Company by adding the ranges of unlevered free cash flow present values and illustrative present terminal values it derived above. BCA then subtracted the
Company’s
June 30, 2021 total debt, net of unrestricted cash, of $49.0 million, as provided by the management of
the Company, from the range of illustrative enterprise values to derive a range of illustrative equity values for
the Company. BCA then
divided the range of illustrative equity values by the
June 30, 2021 number of fully diluted outstanding shares of common stock using the treasury stock method, as provided by
the Company’s management, to derive an illustrative present value range
of stock prices per share of common stock from $4.91 to $7.42.
Selected Transactions Analysis. BCA analyzed certain information relating to the selected transactions listed in the table below announced since 2007 involving target companies
in the skilled nursing and senior housing industry. None of the target companies in the selected transactions reviewed is identical to
the Company, and none of the selected transactions reviewed was identical to the proposed merger. However, the
transactions selected were chosen because the targets were publicly traded companies with operations and businesses that, for purposes of BCA’s analysis, may be considered similar to
the Company.
For each of the selected transactions, BCA calculated EV and AEV. BCA compared EV to EBITDA, AEV to the owned and leased beds of the target, AEV to revenue, and AEV to EBITDAR for each selected transaction to the
valuation multiples of
the Company in the merger using a price of $10.10 per share. In each case BCA used publicly available target company financial information for the trailing twelve-months immediately preceding the applicable selected
transaction. The following table presents the results of this analysis:
|
Date Announced
|
Target
|
Acquiror
|
AEV / Beds
|
AEV / Revenue
|
AEV / EBITDAR
|
EV / EBITDA
|
|
August 2021
|
Diversicare
|
DAC Acquisition
|
52,702
|
0.8x
|
5.2x
|
4.7x
|
|
December 2017
|
Kindred Healthcare
|
Humana
|
nm
|
1.0x
|
8.6x
|
9.0x
|
|
February 2014
|
Emeritus Corporation
|
Brookdale Senior Living
|
148,216
|
3.3x
|
12.7x
|
14.9x
|
|
February 2013
|
Assisted Living Concepts
|
TPG Capital
|
58,361
|
2.4x
|
14.1x
|
16.8x
|
|
June 2012
|
Sun Healthcare
|
Genesis Healthcare
|
68,281
|
0.8x
|
6.6x
|
3.5x
|
|
July 2007
|
ManorCare Inc.
|
The Carlyle Group
|
144,110
|
1.6x
|
13.4x
|
13.2x
|
|
January 2007
|
Genesis Healthcare
|
Formation Capital and JER Partners
|
69,986
|
1.0x
|
9.9x
|
10.1x
|
Selected Publicly Traded Companies Analysis. BCA analyzed certain information relating to the selected group of publicly traded companies in the skilled
nursing and senior housing industry:
|
•
|
National HealthCare Corporation
|
|
|
|
|
•
|
The Ensign Group
|
|
•
|
Extendicare
|
|
|
|
|
•
|
Capital Senior Living
|
| |
|
| • |
Brookdale Senior Living |
| |
|
| • |
Five Star Senior Living |
None of the selected companies reviewed is identical to
the Company. However, the companies selected were chosen because they are publicly traded companies with operations and businesses that, for
purposes of BCA’s analysis, may be considered similar to
the Company.
Using stock price information as of
August 25, 2021, BCA calculated AEV to the owned and leased beds, AEV to revenue, AEV to EBITDAR, and EV to EBITDA for each of the selected companies. BCA
compared the valuation multiples of the publicly traded companies to the valuation multiples of
the Company in the merger using a price of $10.10 per share. In each case BCA used publicly available financial information for the trailing
twelve-months immediately preceding the applicable selected transactions. The following table presents the results of this analysis:
|
Company
|
AEV / Beds
|
AEV / Revenue
|
AEV / EBITDAR
|
EV / EBITDA
|
|
Diversicare merger valuation
|
52,702
|
0.8x
|
5.2x
|
4.7x
|
|
National HealthCare Corporation
|
103,128
|
1.0x
|
7.0x
|
8.1x
|
|
The Ensign Group
|
215,916
|
2.2x
|
12.6x
|
14.5x
|
|
Extendicare
|
63,682
|
1.0x
|
7.5x
|
7.8x
|
|
Capital Senior Living
|
104,654
|
2.9x
|
21.3x
|
29.1x
|
|
Brookdale Senior Living
|
118,344
|
2.0x
|
21.8x
|
52.2x
|
|
Five Star Senior Living
|
32,314
|
0.1x
|
5.9x
|
6.2x
|
General. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the
analysis or of the summary set forth above, without considering the analysis as a whole, could create an incomplete view of the processes underlying BCA’s opinion. The foregoing summary does not purport to be a complete description of the analysis
performed by BCA in connection with the fairness opinion and is qualified in its entirety by reference to the written opinion of BCA attached as Appendix B to this proxy statement. No selected company or selected transaction used in the above
analysis as a comparison is directly comparable to
the Company or the merger. In arriving at its fairness determination, BCA considered the results of all of its analysis and did
not attribute any particular
weight to any factor or analysis considered by it. Rather, BCA made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analysis.
BCA prepared these analyses for purposes of BCA providing its opinion to the Board as to the fairness from a financial point of view of the $10.10 in cash per share of common stock to be paid to the holders of shares
of common stock (other than Parent) pursuant to the merger agreement. BCA’s opinion to the Board was one of many factors taken into consideration by the Board in making its determination to approve the merger agreement. These analyses do not
purport to be appraisals, nor do they necessarily reflect the prices at which businesses or securities actually may be sold. All forecasts and future results were based on forecasts as derived by
the Company’s management. Analyses based upon
forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. Because these analyses are inherently subject to uncertainty, being based upon
numerous factors or events beyond the control of the parties or their respective advisors, none of
the Company, BCA or any other person assumes responsibility if future results are materially different from those forecasts.
The merger consideration was determined through arm’s length negotiations between
the Company and Parent and was approved by the Board. BCA provided advice to
the Company during these negotiations. BCA did not,
however, recommend any specific amount of consideration to
the Company or the Board or that any specific amount of consideration constituted the only appropriate consideration for the merger.
In the normal course, BCA does not purchase, sell, hold or vote positions, investments in securities, loans or other financial instruments of
the Company, Parent or their respective affiliates.
Other than BCA’s role as financial advisor to
the Company in connection with the merger, during the two-year period ended
August 26, 2021, BCA has not been engaged by
the Company, Parent or their respective affiliates to provide financial advisory
or other services for which BCA has received compensation. BCA may provide financial advisory or other services to
the Company, Parent or their respective affiliates in the future, for which BCA may receive compensation.
The Board selected BCA as its financial advisor because it is an investment banking firm that has experience in transactions similar to the merger and experience with companies similar to the
Company. Pursuant to a letter agreement dated
June 15, 2021,
the Company engaged BCA to act as its financial advisor in connection with the merger. The engagement letter between
the Company and BCA provides for a transaction fee of approximately
$1.75 million, $250,000 of which became payable at the delivery of the fairness opinion to the Board, and the remainder of which is contingent upon consummation of the merger. In addition,
the Company has agreed to reimburse certain of BCA expenses
arising, and indemnify BCA against certain liabilities that may arise, out of its engagement by
the Company.
Certain Financial Projections by the Management of Diversicare
In light of the foregoing factors and the uncertainties inherent in the forecast,
the Company’s stockholders are cautioned not to place undue reliance on such financial
projections.
The Company’s senior management prepares projections of
the Company’s expected financial performance as part of its ongoing management of the business. As a matter of course, these projections are
not publicly disclosed due to the inherent unpredictability of the underlying assumptions and estimates. However,
the Company is including certain unaudited prospective financial information, which BCA refers to as the
“Company forecasts,” in this
proxy statement in order to provide stockholders access to a summary of certain nonpublic unaudited prospective financial information.
In connection with the Board’s review of
the Company’s strategic alternatives, including the consideration and evaluation of a potential transaction with Parent,
the Company’s senior management
prepared and provided to BCA
the Company forecasts. At the direction of the Board, BCA used and relied upon
the Company forecasts in connection with its financial analyses for purposes of its opinion, as summarized in the section entitled “
The Merger—Opinion of Diversicare’s Financial Advisor—Summary of Material Financial Analysis” of this proxy statement. For these reasons,
the Company has elected to summarize
the Company forecasts in this proxy
statement.
The Company forecasts were not prepared with a view toward public disclosure and reflect subjective judgment in many respects and, therefore, are susceptible to multiple interpretations and
frequent revisions based on actual results and business developments.
The Company’s internal financial forecasts, such as
the Company forecasts, and the assumptions upon which
the Company forecasts were based, are subjective in many respects and thus subject to
interpretation. Although presented with numerical specificity,
the Company forecasts are forward-looking statements and are based upon a variety of estimates and numerous assumptions made by
the Company’s senior management with respect to, among
other matters, industry performance, general business, economic, market and financial conditions and other matters, including the factors described under the section entitled
“Cautionary Statement Regarding
Forward-Looking Statements” in this proxy statement and other risk factors described in
the Company’s filings with the SEC, many of which are difficult to predict, are inherently uncertain, are beyond
the Company’s control, are subject to
significant economic and competitive uncertainties and may not reflect current prospects for
the Company’s business, changes in general business, economic, market and financial conditions and other matters, transactions or events that have occurred
or that may occur and that were not anticipated when
the Company forecasts were prepared. In addition, since
the Company forecasts cover multiple years, such information by its nature becomes less reliable with each successive year. As a result,
there can be no assurance that the estimates and assumptions made in preparing
the Company forecasts will prove accurate, that the projected results will be realized or that actual results will not be significantly higher or lower than projected.
In addition,
the Company forecasts do not take into account the transactions contemplated by the merger agreement, including the merger, that might also cause actual results to differ materially.
The Company’s stockholders are urged to review the
Company’s filings with the SEC for a description of
the Company’s actual reported results of operations and financial condition.
The Company forecasts are not intended to comply with, and include financial metrics that were not prepared in accordance with, United States generally accepted accounting principles (referred to
as
“GAAP”), the published guidelines of the SEC regarding financial projections and the use of non-GAAP measures or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial
projections and forecasts. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by
the Company may not be
comparable to similarly titled measures used by other companies. Financial measures included in projections provided to a financial advisor and a board of directors in connection with a business combination transaction, such as
the Company
forecasts, are excluded from the definition of
“non-GAAP financial measures” under the rules of the SEC, and therefore such projections are not subject to SEC rules regarding disclosures of non-GAAP financial measures, which would otherwise require
a reconciliation of a non-GAAP financial measure to a GAAP financial measure. Accordingly, we have not provided a reconciliation of the financial measures included in
the Company forecasts to the relevant GAAP financial measures. Neither BDO USA,
LLC (
“BDO”),
the Company’s independent registered public accounting firm, nor any other independent registered public accounting firm has examined, compiled or performed any procedures with respect to
the Company forecasts, and, accordingly,
neither BDO nor any other public accounting firm expresses an opinion or any other form of assurance with respect to
the Company forecasts.
No one has made or makes any representation regarding the information included in
the Company forecasts. Stockholders and other readers of this proxy statement are cautioned not to rely unduly, if
at all, on
the Company forecasts. Some or all of the assumptions that have been made regarding, among other things, the timing of certain occurrences or effects, may have changed since the date
the Company forecasts were prepared.
The Company has
not updated or otherwise revised, and does not intend to update or otherwise revise,
the Company forecasts to reflect circumstances existing after the date when prepared or to reflect the occurrence or non-occurrence of events after the date when
prepared, even if any or all of the assumptions on which
the Company forecasts were based are shown to be inaccurate. Subject to the foregoing qualifications, set forth below is a summary of
the Company forecasts.
|
Company Forecasts
|
|
Years Ending December 31,
|
|
|
(dollars in millions)
|
|
|
2021
|
E
|
|
|
2022
|
E
|
|
|
2023
|
E
|
|
|
2024
|
E
|
|
|
2025
|
E
|
|
Total revenue
|
|
$
|
483.5
|
|
|
$
|
472.5
|
|
|
$
|
478.2
|
|
|
$
|
484.8
|
|
|
$
|
489.6
|
|
|
EBITDAR
|
|
|
72.3
|
|
|
|
70.4
|
|
|
|
69.2
|
|
|
|
70.8
|
|
|
|
71.5
|
|
|
EBITDA
|
|
|
19.0
|
|
|
|
16.9
|
|
|
|
15.8
|
|
|
|
17.2
|
|
|
|
17.9
|
|
|
Normalized net income
|
|
|
2.6
|
|
|
|
7.0
|
|
|
|
2.5
|
|
|
|
2.8
|
|
|
|
2.3
|
|
|
Unlevered free cash flow (1)
|
|
|
3.5
|
|
|
|
5.1
|
|
|
|
3.9
|
|
|
|
2.6
|
|
|
|
4.4
|
|
|
Total ending beds
|
|
|
7,250
|
|
|
|
7,250
|
|
|
|
7,250
|
|
|
|
7,250
|
|
|
|
7,250
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company Forecasts
|
|
Years Ended December 31,
|
|
|
(dollars in millions)
|
|
|
2026
|
E
|
|
|
2027
|
E
|
|
|
2028
|
E
|
|
|
2029
|
E
|
|
|
2030
|
E
|
|
Total revenue
|
|
$
|
494.4
|
|
|
$
|
499.4
|
|
|
$
|
504.3
|
|
|
$
|
509.3
|
|
|
$
|
514.4
|
|
|
EBITDAR
|
|
|
72.2
|
|
|
|
72.9
|
|
|
|
73.6
|
|
|
|
74.4
|
|
|
|
75.1
|
|
|
EBITDA
|
|
|
18.5
|
|
|
|
15.0
|
|
|
|
15.7
|
|
|
|
16.4
|
|
|
|
16.6
|
|
|
Normalized net income
|
|
|
2.0
|
|
|
|
2.4
|
|
|
|
1.8
|
|
|
|
1.2
|
|
|
|
0.7
|
|
|
Unlevered free cash flow (1)
|
|
|
7.1
|
|
|
|
7.7
|
|
|
|
7.1
|
|
|
|
6.2
|
|
|
|
6.2
|
|
|
Total ending beds
|
|
|
7,250
|
|
|
|
7,250
|
|
|
|
7,250
|
|
|
|
7,250
|
|
|
|
7,250
|
|
|
(1)
|
Unlevered free cash flow equals earnings before interest and tax reduced for the tax impact at 25% (“tax effected EBIT”). Tax effected EBIT is then increased for depreciation and amortization, non-cash lease
expense reconciliation, professional liability expense reconciliation, stock compensation expense, WOTC tax credits, and reduced for settlement payments, capital expenditures, and changes in non-cash/debt working capital.
|
Certain Effects of the Merger
If the merger proposal is approved and the other conditions to the closing of the merger are either satisfied or waived, the merger subsidiary will be merged with and into
the Company upon the terms
set forth in the merger agreement. As the surviving corporation in the merger,
the Company will continue to exist following the merger as a wholly owned subsidiary of Parent.
Following the merger, all of the common stock will be beneficially owned by Parent and none of
the Company’s current stockholders will, by virtue of the merger, have any direct ownership interest in,
or be a stockholder of,
the Company, the surviving corporation or Parent. As a result,
the Company’s current stockholders will no longer have the potential to benefit from any increase in the value, nor will they bear the risk of any decrease in the
value, of common stock. Following the merger, Parent will have the potential to benefit from any increase in
the Company’s value and also will bear the risk of any decrease in
the Company’s value.
At the effective time of the merger, and without any action by any stockholder, each share of common stock that is outstanding immediately prior to the effective time of the merger (other than shares
held by
the Company as treasury stock, owned by Parent or the merger subsidiary or as to which the holders thereof have properly and validly exercised their statutory rights of appraisal in accordance with Section 262 of the DGCL) will be entitled to
receive the merger consideration. Please see the section of this proxy statement titled
“The Merger Agreement—Consideration to be Received in the Merger.”At the effective time of the merger, by virtue of the merger and without any action on the part of the holders, (i) each outstanding Option issued under the Incentive Plan, whether or not vested,
immediately prior to the effective time of the merger will be cancelled and, in consideration thereof, the holder of such Option will receive the Option Consideration, (ii) each outstanding RSU issued under the Incentive Plan, whether or not vested,
immediately prior to the effective time of the merger will be cancelled and, in consideration thereof, the holder of such RSU will receive the RSU Consideration, (iii) each outstanding Restricted Stock Award issued under the Incentive Plan, whether
or not vested, immediately prior to the effective time of the merger will be cancelled and, in consideration thereof, the holder of such Restricted Stock Award will receive the Restricted Stock Award Consideration, and (iv) each Stock Appreciation
Right that is outstanding and unexercised immediately prior to the effective time of the merger and has an exercise price per share of common stock that is less than the merger consideration will be cancelled and converted in to the right to receive
the Stock Appreciation Right Consideration.
In addition, and for the avoidance of doubt, any Option or Stock Appreciation Right with an exercise price equal to or greater than the merger consideration will be cancelled for no consideration at
the effective time.
The common stock is currently registered under the Exchange Act and is quoted and traded on the OTC Markets under the ticker symbol
“DVCR.” Following the consummation of the merger, shares of common
stock will no longer be quoted on the OTC Markets. In addition, the registration of shares of common stock under the Exchange Act will be terminated and
the Company will no longer be required to file periodic and other reports with the SEC with
respect to the common stock. Termination of registration of the common stock under the Exchange Act will reduce the information required to be furnished by
the Company to
the Company’s stockholders and the SEC, and will make provisions of the
Exchange Act, such as the requirement to file annual and quarterly reports pursuant to Section 13(a) or 15(d) of the Exchange Act, the short-swing trading provisions of Section 16(b) of the Exchange Act and the requirement to furnish a proxy
statement in connection with stockholders’ meetings pursuant to Section 14(a) of the Exchange Act, no longer applicable to
the Company.
If the merger proposal is not approved by
the Company’s stockholders, or if the merger is not completed for any other reason,
the Company’s stockholders will not receive any payment for their shares
of common stock in connection with the merger. Instead,
the Company will remain an independent public company, the common stock will continue to be quoted and traded on the OTC Markets, the common stock will continue to be registered under the
Exchange Act and
the Company’s stockholders will continue to own their shares of the common stock and will continue to be subject to the same general risks and opportunities as they currently are with respect to ownership of common stock. Depending
on the circumstances, if the merger agreement is terminated,
the Company may be obligated to pay to Parent a termination fee or Parent may be obligated to pay to
the Company a termination fee. Please see the section of this proxy statement titled
“The Merger Agreement—Termination Fees.”If the merger is not completed, there is no assurance as to the effect of these risks and opportunities on the future value of your shares of common stock, including the risk that the market price of
common stock may decline to the extent that the current market price of
the Company’s stock reflects a market assumption that the merger will be completed. If the merger is not completed, there is no assurance that any other transaction acceptable to
the Company will be offered or that the business, operations, financial condition, earnings or prospects of
the Company will not be adversely affected. Pursuant to the merger agreement, under certain circumstances including payment of a termination
fee to Parent,
the Company is permitted to terminate the merger agreement in order to enter into an alternative transaction. Please see the section of this proxy statement titled
“The Merger Agreement—Termination.”Financing
and Parent Equityholder Approval
Consummation of the merger is not conditioned upon Parent obtaining financing and does not require approval by Parent’s equityholders. Parent and merger subsidiary have represented in the merger
agreement that they will have sufficient funds to consummate the merger.
Interests
of
the Company’s Directors and Executive Officers in the Merger
Details of the beneficial ownership of common stock by
the Company’s directors and executive officers are set out in the section of this proxy statement titled “
Security
Ownership of Certain Beneficial Owners and Management.” In addition to their interests in the merger as stockholders,
the Company’s directors and executive officers have interests in the merger that may be different from, or in addition
to, the interests of
the Company’s stockholders generally. In considering the proposals to be voted on at the special meeting, you should be aware of these interests. The members of the Board were aware of and considered these interests in making
the determination to approve the merger agreement and deem the merger agreement, the merger and the other transactions contemplated by the merger agreement to be advisable, fair to and in the best interests of
the Company and its stockholders,
and in recommending that the holders of common stock vote for the adoption of the merger agreement. These interests include:
|
● |
the Company’s directors and executive officers hold RSUs, Options and Restricted Stock Awards that will be afforded the treatment described below in “— Treatment of Equity and Equity-Based Awards”;
|
|
● |
the Company’s executive officers are party to executive agreements with the Company that provide for severance in the case of a qualifying termination of employment following a change in control, which will include the consummation of
the merger; and
|
|
● |
the Company’s directors and executive officers are entitled to continued indemnification and insurance coverage following the merger under the merger agreement. Please see the section below titled “— Director
and Officer Indemnification” and the section of this proxy statement titled “The Merger Agreement—Indemnification of Directors and Officers and Insurance.”
|
Certain Assumptions
Except as otherwise specifically noted, for purposes of quantifying the potential payments and benefits described in this section, the following assumptions were used:
|
● |
the relevant price per share of the common stock is $10.10;
|
|
● |
each executive officer’s employment is terminated by the Company without “cause” or by the executive officer for “good reason” (as such terms are defined in such officer’s employment agreement), in each case, immediately following the
effective time of the merger; |
|
● |
each executive officer holds the outstanding equity awards that were held by each executive officer as of September 30, 2021, the latest practicable date before the filing of this proxy statement; and |
|
● |
the amounts set forth in the tables below regarding executive officer compensation are based on compensation levels as of September 30, 2021. |
Treatment of Equity and Equity-Based Awards
For additional information regarding beneficial ownership of common stock by each of
the Company’s directors and executive officers and beneficial ownership of common stock by all of such directors
and executive officers as a group, please see the section of this proxy statement titled
“Security Ownership of Certain Beneficial Owners and Management.” Each of
the Company’s directors and executive officers
will be entitled to receive, for each share of common stock he or she holds as of immediately prior to the effective time of the merger, the same merger consideration in cash in the same manner as other holders of common stock.
At the effective time of the merger, by virtue of the merger and without any action on the part of the holders, (i) each outstanding Option issued under the Incentive Plan, whether or not vested,
immediately prior to the effective time of the merger will be cancelled and, in consideration thereof, the holder of such Option will receive the Option Consideration, (ii) each outstanding RSU issued under the Incentive Plan, whether or not vested,
immediately prior to the effective time of the merger will be cancelled and, in consideration thereof, the holder of such RSU will receive the RSU Consideration , and (iii) each outstanding Restricted Stock Award issued under the Incentive Plan,
whether or not vested, immediately prior to the effective time of the merger will be cancelled and, in consideration thereof, the holder of such Restricted Stock Award will receive the Restricted Stock Award Consideration.
In addition, and for the avoidance of doubt, any Option or Stock Appreciation Right with an exercise price equal to or greater than the merger consideration will be cancelled for no consideration at
the effective time.
The table below shows the number of shares underlying outstanding unvested RSUs estimated to be held by
the Company’s executive officers as of
September 30, 2021, the latest practicable date before
the filing of this proxy statement, and the RSU Consideration they can expect to receive for the RSUs, assuming, for assumed RSUs, continued employment through both (1) the merger closing date and (2) the earliest of any remaining vesting dates or an
earlier qualifying termination. None of
the Company’s directors held any RSUs as of
September 30, 2021.
Cash Payments to Executive Officers in Respect of RSUs
|
Executive Officer
|
|
No. of RSUs
|
|
|
Consideration ($)(1)
|
|
|
|
|
|
26,697.89
|
|
|
|
269,649
|
|
|
Rebecca B. Bodie
|
|
|
7,479.22
|
|
|
|
75,540
|
|
|
Kerry D. Massey
|
|
|
16,764.14
|
|
|
|
169,318
|
|
______________
|
(1) |
The value of RSUs shown in the table is based on the $10.10 per share merger consideration and the number of RSUs unvested as of September 30, 2021. |
The table below shows the number of shares underlying outstanding Options estimated to be held by
the Company’s directors as of
September 30, 2021, the latest practicable date before the filing of
this proxy statement, and the Option Consideration they can expect to receive for the Options, assuming continued service through the merger closing date. None of
the Company’s executive officers held any Options as of
September 30, 2021.
Cash Payments to Directors in Respect of Options
|
Director
|
|
No. of Options
|
|
|
Consideration ($)(1)
|
|
|
|
|
|
15,000
|
|
|
|
29,400
|
|
|
Ben R. Leedle, Jr.(2)
|
|
|
15,000
|
|
|
|
29,400
|
|
|
Robert A. McCabe, Jr. (3)
|
|
|
15,000
|
|
|
|
0
|
|
______________
|
(1) |
The value of Options shown in the table is based on the $10.10 per share merger consideration minus the exercise price of the Options times the number of Options outstanding as of September 30, 2021, the latest practicable date before the
filing of this proxy statement. |
|
(2) |
Ms. Morgan and Mr. Leedle currently hold one outstanding option to acquire 15,000 shares of common stock with an exercise price of $8.14 per share.
|
|
(3) |
Mr. McCabe currently holds one outstanding option to acquire 15,000 shares of common stock with an exercise price of $10.21 per share. Mr. McCabe’s Option will be cancelled for no consideration in connection with the merger.
|
The table below shows the number of outstanding Restricted Stock Awards held by
the Company’s directors and executive officers as of
September 30, 2021, the latest practicable date before the filing
of this proxy statement, and the Restricted Stock Award Consideration they can expect to receive for the Restricted Stock Awards, assuming continued employment or service through the merger closing date or an earlier qualifying termination.
Cash Payments to Executive Officers and Directors in Respect of Restricted Stock Awards
|
Executive Officer
|
|
No. of Restricted Stock Awards
|
|
|
Consideration ($)(1)
|
|
|
|
|
|
63,334
|
|
|
|
639,673
|
|
| |
|
|
|
|
|
|
|
|
|
Rebecca B. Bodie
|
|
|
30,000
|
|
|
|
303,000
|
|
| |
|
|
|
|
|
|
|
|
|
Kerry D. Massey
|
|
|
30,001
|
|
|
|
303,010
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
4,112
|
|
|
|
41.531
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
4,001
|
|
|
|
40,410
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
4,112
|
|
|
|
41.531
|
|
| |
|
|
|
|
|
|
|
|
|
Robert A. McCabe, Jr.
|
|
|
4,001
|
|
|
|
40,410
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
4,001
|
|
|
|
40,410
|
|
| |
|
|
|
|
|
|
|
|
|
Ben R. Leedle, Jr.
|
|
|
4,001
|
|
|
|
40,410
|
|
______________
|
(1) |
The value of Restricted Stock Awards shown in the table is based on the $10.10 per share merger consideration and the number of Restricted Stock Awards unvested as of September 30, 2021. |
Severance Entitlements
Each of
the Company’s executive officers is a party to an executive agreement effective prior to the execution of the merger agreement (each referred to as an
“executive
agreement”) that provides for certain severance payments to be payable in the event of a termination of the executive officer’s employment by
the Company without
“cause” (as specified in such executive’s employment agreement) or in the event that the
Company changes the executive’s compensation opportunities, working conditions or responsibilities in a way adverse to the executive such that it is deemed a
“constructive discharge” (as specified in such executive’s employment agreement). The
Company also provides severance payments and benefits if the executive should resign or be terminated without cause within six months after a change in control, which includes the merger. This protection permits an executive to evaluate a potential
change in control without concern for his or her own situation or the need to seek employment elsewhere.
Effective
August 13, 2012,
the Company entered into an employment agreement with Mr. McKnight to serve as Chief Financial Officer. The employment agreement with Mr. McKnight had
an initial term until
March 31, 2013, and renews automatically for one-year periods unless 30 days’ notice is given by either
the Company or Mr. McKnight. The agreement with Mr. McKnight provides for a base salary of $225,000 per year, subject to
change by the compensation committee. On
September 20, 2018,
the Company entered into an amendment to Mr. McKnight’s employment agreement to name him Chief Executive Officer. The amended employment agreement provides Mr. McKnight with a base salary
of $450,000 and has a term through
March 31, 2019 and is automatically extend for one (1) year periods, unless either party gives notice thirty days in advance. The amended employment agreement may be terminated by
the Company without cause at any
time and by Mr. McKnight as a result of constructive discharge or a change in control. In the event of a termination by
the Company without cause, at the election of Mr. McKnight upon a constructive discharge or upon
the Company giving notice of its
intent not to renew his employment agreement, Mr. McKnight is entitled to receive a lump sum severance payment in an amount equal to 100% of his annual base salary plus a lump sum cash payment equal to the economic value of the provisions of eighteen
months of the group hospitalization, health, dental care and life insurance benefits provided. In the event of change in control, the amended agreement provides that if Mr. McKnight’s employment is terminated in certain circumstances as defined in
the amended agreement,
the Company will pay Mr. McKnight severance in the amount of 200% of the sum of (i) his annual base salary and (ii) the average of the three most recent annual incentive awards. In addition,
the Company will pay a lump sum cash
payment equal to the economic value of the provisions of twenty-four months of the group hospitalization, health, dental care and life insurance benefits provided. In addition, the amended agreement provides that upon any termination, Mr. McKnight
will provide general operational and relationship consulting services to
the Company as an independent contractor for a period of six months following the date of termination in exchange for payment of $10,000 per month.
All Other Executives
Effective
March 2, 2020,
the Company entered into an employment agreement with Ms. Bodie to serve as Chief Operating Officer. The employment agreement with Ms. Bodie had an
initial term until
September 30, 2020, and renews automatically for one-year periods unless 30 days’ notice is given by either party. The agreement with Ms. Bodie provides for a base salary of $300,000 per year, subject to change by the compensation
committee.
Effective
September 4, 2018,
the Company entered into an employment agreement with Mr. Massey to serve as Chief Financial Officer. The employment agreement with Mr. Massey has an initial term until
March 31, 2019, and renews automatically for one-year periods unless 30 days’ notice is given by either party. The agreement with Mr. Massey provides for a base salary of $275,000 per year, subject to change by the compensation committee.
Both Ms. Bodie’s and Mr. Massey’s agreements are similar to Mr. McKnight’s employment agreement summarized above, except that upon a termination by
the Company without cause, at the election of the
employee upon a constructive discharge, upon a change in control or upon
the Company giving notice of its intent not to renew the employment agreement, Ms. Bodie and Mr. Massey are entitled to receive a lump sum severance payment in an amount equal
to twelve months of their monthly base salary as in effect at the time of such termination or resignation and the economic value of the provision of the benefits and perquisites as in effect at the date of termination of employment for twelve months.
The table below sets forth estimated aggregate severance payments and benefits each executive officer would be entitled to receive assuming each executive officer experiences a qualifying termination
as of immediately following the completion of the merger.
|
Executive Officer
|
|
Severance ($)(1)
|
|
|
|
|
|
2,222,573
|
(2)
|
|
Rebecca B. Bodie
|
|
|
602,642
|
|
|
Kerry D. Massey
|
|
|
550,384
|
|
______________
|
(1) |
These amounts are based on each executive officer’s base salary in effect as of September 30, 2021, annual bonuses accrued for the 2021 fiscal year as of September 30, 2021and monthly benefits continuation amounts. These amounts do not
include the value of equity awards that would be accelerated in the event of a qualifying termination. |
|
(2) |
This amount includes $60,000 in consulting fees that Mr. McKnight is entitled to receive under his employment agreement for providing operational and relationship consulting services for a period of six months following his termination.
|
Continuing Employee Benefits
The merger agreement provides that, from and after the closing of the merger and until the eighteen month anniversary thereof (referred to as the
“continuation period”), Parent will, or will cause
the surviving corporation to, provide employees of
the Company and
the Company’s
subsidiaries who continue employment with the surviving corporation or one of its affiliates following the closing (referred to as
“continuing employees”) with (i) (A)
base salary or base hourly wage rate (as applicable) and (B) cash incentive compensation opportunity (including bonuses and commissions), in each case in an amount at least equal to the level that was provided to each such continuing employee
immediately prior to the closing of the merger (in each case, to the extent such compensation was disclosed in the disclosure schedules delivered by
the Company to Parent concurrently with the entry into the merger agreement) and (ii) other employee
benefits that are at least as favorable in the aggregate to those provided to each such continuing employee as of immediately prior to the closing of the merger.
New Management Arrangements
As of the date of the merger agreement and the date of this proxy statement, none of
the Company, Parent or the merger subsidiary has had any discussions regarding the terms of or has entered into
any employment agreements with
the Company’s executive officers in connection with the merger. Following the date of this proxy statement, however, certain executive officers of
the Company may have discussions, or may enter into agreements with,
Parent or the merger subsidiary or their respective affiliates regarding employment with, or the right to purchase or participate in the equity of, the surviving corporation or one or more of its affiliates.
Director and Officer Indemnification
Pursuant to the terms of the merger agreement, members of the Board and executive officers of
the Company will be entitled to certain ongoing indemnification and coverage under directors’ and
officers’ liability insurance policies following the merger. For a more detailed description of the provisions of the merger agreement relating to director and officer indemnification, please see the section of this proxy statement titled
“The Merger Agreement—Indemnification of Directors and Officers and Insurance.”Quantification of Payments and Benefits
In accordance with Item 402(t) of Regulation S-K, the table below sets forth for each of
the Company’s named executive officers the estimated amount of compensation based on or otherwise related to
the merger and that will or may become payable to the named executive officer (i) solely as a result of the completion of the merger (i.e., on a
“single-trigger” basis) or (ii) conditioned on a qualifying termination of employment following or in
connection with the merger (i.e., on a
“double-trigger” basis). The holders of common stock are being asked to approve, on a non-binding, advisory basis, such compensation for the named executive officers. Because the vote to approve such
compensation is advisory only, it will not be binding on
the Company, Parent or the merger subsidiary. Accordingly, if the proposal to adopt the merger agreement is approved by the holders of common stock and the merger is completed, the compensation
will be payable regardless of the outcome of the vote to approve such compensation, subject only to the conditions applicable thereto, which are described in the footnotes to the table below and above under “—
Interests
of the Company’s Directors and Executive Officers in the Merger.”
The potential payments in the table below are based on the following assumptions:
|
● |
the relevant price per share of common stock is $10.10;
|
|
● |
the effective time of the merger is September 30, 2021, which is the assumed date of the effectiveness of the merger solely for purposes of this compensation disclosure; |
|
● |
each named executive officer’s employment is subject to a qualifying termination immediately following the effective time of the merger, which is assumed, for purposes of this compensation disclosure, to be September 30, 2021; |
|
● |
each named executive officer holds the outstanding equity awards that were held by each named executive officer as of September 30, 2021, the latest practicable date before the filing of this proxy statement; and |
|
● |
the amounts set forth in the tables below regarding named executive officer compensation are based on compensation levels as of September 30, 2021. |
The amounts shown are estimates of amounts that would be payable to the named executive officers based on multiple assumptions that may or may not actually occur, including the assumptions described
above. Some of the assumptions are based on information not currently available and, as a result, the actual amounts received by a named executive officer may differ materially from the amounts shown in the following table.
The following table and footnotes describe the benefits each named executive officer is eligible to receive in connection with the completion of the merger.
Potential Payments to Named Executive Officers
|
Named Executive Officer(1)(2)
|
|
Cash ($)
|
|
Equity(3) ($)
|
|
Perquisites/
Benefits(4) ($)
|
|
Total ($)
|
|
|
|
|
|
|
|
|
|
|
|
Single Trigger
|
|
—
|
|
909,322
|
|
—
|
|
909,322
|
|
Double Trigger
|
|
2,135,973(5)
|
|
909,322
|
|
86,600
|
|
3,131,895
|
|
Rebecca B. Bodie
|
|
|
|
|
|
|
|
|
|
Single Trigger
|
|
—
|
|
378,540
|
|
—
|
|
378,540
|
|
Double Trigger
|
|
559,342
|
|
378,540
|
|
43,300
|
|
981,182
|
|
Kerry D. Massey
|
|
|
|
|
|
|
|
|
|
Single Trigger
|
|
—
|
|
472,328
|
|
—
|
|
472,328
|
|
Double Trigger
|
|
524,384
|
|
472,328
|
|
26,000
|
|
1,022,712
|
______________
|
(1) |
The payments listed as “double-trigger” are payable in the event of a qualifying termination of employment during the period beginning 90 days before the effective time of the merger and ending six months after the effective time of the
merger. All payments listed as “single-trigger” are payable in connection with the transaction regardless of whether any other event occurs.
|
|
(2) |
Single-trigger payments represent the vesting of unvested equity awards. Double-trigger payments include cash severance payable based on salary and bonus amounts, as well as benefits/perquisites. For further information on each named
executive officer’s severance entitlements, see “—Severance Entitlements,” above.
|
The following table quantifies the base salary, bonus and consulting service components of the severance reported in the “Cash” column above.
|
Name
|
|
Base Salary
Severance ($)
|
|
Bonus Component of
Severance ($)
|
|
Consulting Fees ($)
|
|
|
|
1,000,000
|
|
1,075,973
|
|
60,000
|
|
Rebecca B. Bodie
|
|
320,000
|
|
239,342
|
|
—
|
|
Kerry D. Massey
|
|
300,000
|
|
224,384
|
|
—
|
______________
|
(3) |
Single-trigger payments represent the amounts payable with respect to Options, which will be cancelled in exchange for lump sum cash payments in accordance with the terms of the merger agreement. For illustrative purposes, amounts payable
with respect to Options are also included in the double-trigger payments. For further information on the treatment of options, see “—Treatment of Equity and Equity-Based Awards” above.
|
|
(4) |
Consists of payment of Company-paid COBRA continuation health insurance, disability insurance and EIRP amounts for 12 months following termination (with respect to Ms. Bodie and Mr. Massey) and 24 months following termination (with respect
to Mr. McKnight). The value is based upon the type of insurance coverage the Company carried for each named executive officer as of September 30, 2021 and is valued at the premiums in effect on such date. |
Material U.S. Federal Income Tax
Considerations
The following discussion summarizes certain material U.S. federal income tax considerations applicable to holders of common stock who receive cash in exchange for shares of common stock pursuant to
the merger. This discussion is for general informational purposes only and does not purport to be a complete analysis of all potential tax consequences of the merger. This discussion is based upon the provisions of the Code, the U.S. Treasury
Regulations promulgated thereunder and judicial decisions and administrative rulings, all as in effect as of the date of this proxy statement and all of which are subject to change or varying interpretation, possibly with retroactive effect. Any such
change or differing interpretation could affect the accuracy of the statements set forth herein. The U.S. federal income tax laws are complex and subject to varying interpretation. We have not sought, and do not intend to seek, any ruling from the
Internal Revenue Service (referred to as the “IRS”) regarding any of the tax issues discussed herein. There can be no assurance that the IRS will not challenge one or more of the tax consequences of the merger described herein.
This discussion assumes that holders of common stock hold their shares as
“capital assets” within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion
does not address all aspects of U.S. federal income taxation that may be relevant to a particular holder of common stock in light of such holder’s individual circumstances, nor does it address U.S. state or local taxes, non-U.S. taxes, estate or gift
taxes, alternative minimum or similar taxes or the rules regarding qualified small business stock within the meaning of Section 1202 of the Code. This discussion also does not address tax considerations that may be relevant to holders of common stock
subject to special treatment under the U.S. federal income tax laws, such as, for example, financial institutions, brokers or dealers in securities or currencies, real estate investment trusts, regulated investment companies, partnerships or other
entities or arrangements classified as partnerships for U.S. federal income tax purposes or other pass-through entities and their partners or members, S corporations, tax-exempt organizations, governmental organizations, retirement or other
tax-deferred accounts, insurance companies, traders in securities who elect mark-to-market method of accounting, controlled foreign corporations, passive foreign investment companies, corporations that accumulate earnings to avoid U.S. federal income
tax, U.S. expatriates and former citizens or long-term residents of the United States, holders who acquired their common stock through the exercise of Options or otherwise as compensation, holders who hold their common stock as part of a hedge,
straddle, constructive sale or conversion transaction, U.S. holders (as defined below) whose functional currency is not the U.S. dollar, except to the extent set forth below under
“—Application of Section 304,”
persons who own (directly, indirectly or constructively) an equity interest in Parent or the surviving corporation, holders who exercise appraisal rights in connection with the merger under the DGCL, and holders who own or have owned (directly,
indirectly or constructively) 5% or more of
the Company’s common stock (by vote or value).
If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds common stock, the tax treatment of a partner in such partnership generally will depend on the status of
the partner and activities of the partner and the partnership. If you are an entity or arrangement treated as a partnership for U.S. federal income tax purposes holding common stock or as an owner of such entity or arrangement holding common stock,
you are urged to consult your own tax advisor regarding the U.S. federal income tax consequences of the merger relevant to you.
This discussion is for informational purposes only and is not tax advice. Holders of common stock are urged to consult their tax advisors with respect to the U.S. federal income
tax consequences of the merger to them in light of their particular circumstances, as well as any tax consequences of the merger arising under the U.S. federal tax laws other than those pertaining to income tax, including estate or gift tax laws, or
under any state, local or non-U.S. tax laws or under any applicable income tax treaty.
For purposes of this discussion, the term “U.S. holder” means a beneficial owner of common stock that, for U.S. federal income tax purposes, is:
|
● |
an individual who is a citizen or resident of the United States;
|
|
● |
a domestic corporation;
|
|
● |
a trust if (1) its administration is subject to the primary supervision of a court within the United States and one or more U.S. persons as described in Section 7701(a)(30) of the Code have the authority to control all substantial
decisions of the trust or (2) it has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a United States person (within the meaning of the Code); or
|
|
● |
an estate, the income of which is subject to U.S. federal income tax regardless of its source.
|
For purposes of this discussion, a “non-U.S. holder” means a beneficial owner of common stock that is, for U.S. federal income tax purposes, an individual, a corporation, a trust or an estate that is
not a U.S. holder.
Application of Section 304
If one or more persons in the aggregate, control (as defined below) both
the Company and Parent before the merger, then Section 304 of the Code may apply to treat the receipt of the merger
consideration by a holder that owns (actually or constructively) Parent stock as a distribution by Parent in redemption of Parent stock deemed issued in exchange for such holder’s Company common stock. Such distribution will be treated as dividend
income if none of the tests under Section 302(b) of the Code apply to such holder and only to the extent of Parent and
the Company’s aggregate earnings and profits.
“Control,” for this purpose, generally means actual and constructive ownership of
more than 50% of the outstanding stock, by vote or by value, aggregating shares of stock held by all holders of shares of stock of
the Company and of shares of stock of Parent, regardless of whether such holders are related.
To the knowledge of
the Company and Parent, it is not the case that one or more persons control
the Company and Parent for purposes of Section 304 of the Code. The discussion below accordingly
assumes that Section 304 of the Code does not apply to the merger. Because
the Company and Parent do not have sufficient information to definitely determine that Section 304 of the Code will not apply to the merger, however, and, if it applies, the
U.S. federal income tax consequences will depend on each holder’s particular circumstances, holders of shares of Company common stock that are also holders of shares of stock of Parent are urged to consult their tax advisors regarding the application
of Sections 304 and 302 of the Code, including whether it may be desirable to sell their shares of Company common stock before the merger.
The receipt of cash in exchange for shares of common stock pursuant to the merger will generally be a taxable transaction for U.S. federal income tax purposes.
Subject to the discussion above under “—Application of Section 304,” a U.S. holder generally will recognize gain or loss for U.S. federal income tax purposes
equal to the difference, if any, between the amount of cash received pursuant to the merger (determined before the deduction of any applicable withholding taxes) and such U.S. holder’s adjusted tax basis in the shares exchanged for cash pursuant to
the merger. A U.S. holder’s adjusted tax basis in a share of common stock will generally be equal to the amount the U.S. holder paid for such share. Such gain or loss generally will be capital gain or loss, and will be long-term capital gain or loss
if the U.S. holder’s holding period for such shares exceeds one year as of the date of the closing. Long-term capital gains for certain non-corporate U.S. holders, including individuals, are generally eligible for a reduced rate of federal income
taxation. Short-term capital gains are taxed at ordinary income rates. The deductibility of capital losses is subject to limitations. Gain or loss must be calculated separately for each block of common stock (i.e., common stock acquired at the same
time and at the same price in a single transaction). U.S. holders who own separate blocks of common stock should consult their own tax advisors with respect to these rules.
Non-corporate U.S. holders that are individuals, estates or trusts and whose income exceeds certain thresholds generally are subject to a Medicare tax at a rate of 3.8% on all or a portion of their
“net investment income,” which generally will include net gain realized on the exchange of shares of common stock for cash pursuant to the merger. A U.S. holder that is an individual, estate or trust should consult its tax advisors regarding the
applicability of this Medicare tax to any gain realized on the exchange of shares of common stock for cash pursuant to the merger.
A U.S. holder may, unless an exception applies, be subject to information reporting and backup withholding (currently at a rate of 24%) with respect to the cash received pursuant to the merger,
unless such U.S. holder provides its correct taxpayer identification number (referred to as the “TIN”) on IRS Form W-9 (or if appropriate, a substitute or successor form) and certifies under penalties of perjury that such TIN is correct and that such
U.S. holder is not subject to backup withholding. Backup withholding is not an additional tax. Rather, any amounts withheld under the backup withholding rules may be refunded or credited against a U.S. holder’s U.S. federal income tax liability, if
any; provided that such U.S. holder furnishes the required information to the IRS in a timely manner and other requirements are satisfied.
Subject to the discussion above under “—Application of Section 304,” any gain recognized on the receipt of cash pursuant to the merger by a non-U.S. holder
generally will not be subject to U.S. federal income tax unless:
|
• |
the gain is effectively connected with the conduct of a U.S. trade or business of such non-U.S. holder (and, if required by an applicable income tax treaty, is also attributable to a permanent establishment or, in the case of an
individual, a fixed base in the United States maintained by such non-U.S. holder), in which case the non-U.S. holder generally will be subject to tax on such gain in the same manner as a U.S. holder and, if the non-U.S. holder is a foreign
corporation, such corporation may be subject to branch profits tax at the rate of 30% (or such lower rate as may be specified by an applicable income tax treaty) on after-tax profits effectively connected with a U.S. trade or business to
the extent that such after-tax profits are not reinvested and maintained in the business;
|
|
• |
the non-U.S. holder is a nonresident alien individual who is present in the United States for 183 days or more in the taxable year of the merger and certain other conditions are met, in which case the non-U.S. holder generally will be
subject to a 30% tax (or tax at such lower rate as may be specified under an applicable income tax treaty) on the non-U.S. holder’s net gain realized in the merger, which may be offset by certain U.S. source capital losses of the non-U.S.
holder, if any (even though the individual is not considered a resident of the United States), provided that such non-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses; or
|
|
• |
the Company is or has been a “United States real property holding corporation” for U.S. federal income tax purposes at any time during the shorter of (i) the five-year period ending on the date of the merger and (ii) the non-U.S.
holder’s holding period in the common stock, and, at any time during such period, the non-U.S. holder owned (directly, indirectly or constructively) more than 5% of the outstanding common stock. Generally, a corporation is a U.S. real
property holding corporation only if the fair market value of its U.S. real property interests equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in
a trade or business. Although there can be no assurances in this regard, the Company does not believe that it is or was a “United States real property holding corporation” for U.S. federal income tax purposes during the applicable five-year
period.
|
A non-U.S. holder will be subject to information reporting and, in certain circumstances, backup withholding (currently at a rate of 24%) with respect to the cash received by such non-U.S. holder
pursuant to the merger, unless such non-U.S. holder provides the paying agent with an applicable and properly executed IRS Form W-8 certifying under penalties of perjury the holder’s non-U.S. status (and the payor or applicable withholding agent does
not have actual knowledge or reason to know that the non-U.S. holder is a U.S. person as defined under the Code) or otherwise establishes an exemption. Copies of information returns that are filed with the IRS may be made available under an
applicable tax treaty or information exchange agreement to the tax authorities of the country in which the non-U.S. holder resides or is established. Backup withholding is not an additional tax. Rather, any amounts withheld under the backup
withholding rules may be refunded or credited against a non-U.S. holder’s U.S. federal income tax liability, if any, provided that the non-U.S. holder furnishes the required information to the IRS in a timely manner and other applicable requirements
are satisfied. Non-U.S. holders should consult their tax advisors regarding the application of the information reporting and backup withholding rules to them.
Notice and Filings in connection with the Merger
Federal and state laws and regulations may require that
the Company provide notice to, or otherwise submit change of information applications to, applicable healthcare and
other governmental entities after the merger has been consummated.
The Company must comply with such state laws and regulations and submit such notices and/or applications within the applicable required periods after the merger.
Delisting and Deregistration of the Common Stock
If the merger is completed, the shares of common stock will no longer be quoted or traded on the OTC Markets and deregistered under the Exchange Act, and shares of common stock will no longer be
publicly traded.
The following is a summary of the material provisions of the merger agreement, a copy of which is attached as Annex A to this proxy statement and is incorporated into this proxy statement by
reference. We urge you to carefully read this entire proxy statement, including the annexes and the other documents to which we have referred you. You should also review the section titled “Where You Can Find
Additional Information.”
The merger agreement has been included for your convenience to provide you with information regarding its terms, and we recommend that you read it in its entirety. The merger agreement is a
contractual document that establishes and governs the legal relations between
the Company, Parent and the merger subsidiary, and allocates risks among the parties, with respect to the merger, the other agreements contemplated by the merger agreement,
and the transactions contemplated by the merger agreement.
The representations and warranties of
the Company, Parent and the merger subsidiary contained in the merger agreement have been made solely for the benefit of the parties to the merger agreement. In
addition, such representations and warranties (a) have been made only for purposes of the merger agreement and have been qualified by certain documents filed with, or furnished to, the SEC by
the Company prior to the date of the merger agreement, (b)
are subject to important qualifications, limitations and supplemental information agreed to by
the Company, Parent and the merger subsidiary in connection with negotiating the terms of the merger agreement, (c) are subject to materiality
qualifications contained in the merger agreement which may differ from what may be viewed as material by investors, (d) were made only as of the date of the merger agreement or such other date as is specified in the merger agreement and (e) have been
included in the merger agreement for the purpose of allocating risk between
the Company, on the one hand, and Parent and the merger subsidiary, on the other hand, rather than establishing matters as facts. Accordingly, the merger agreement is
included with this proxy statement only to provide investors with information regarding the terms of the merger agreement and not to provide investors with any other factual information regarding
the Company or Parent or their respective
subsidiaries
or businesses. Investors should not rely on the representations and warranties or any descriptions thereof as characterization of the actual state of facts or condition of
the Company or Parent or their respective
subsidiaries or businesses.
Moreover, information concerning the subject matter of the representations and warranties may change after the date of the merger agreement, which subsequent information may or may not be fully reflected in
the Company’s public disclosures.
The representations and warranties in the merger agreement and the description of them in this proxy statement should not be read alone but instead should be read in conjunction with the other
information contained in the reports, statements and filings
the Company publicly files with the SEC. Such information can be found elsewhere in this proxy statement and in the public filings
the Company makes with the SEC, as described in the
section titled
“Where You Can Find Additional Information.”
Upon the terms and subject to the conditions of the merger agreement and in accordance with the DGCL, at the effective time of the merger, the merger subsidiary will merge with and into
the Company,
the separate corporate existence of the merger subsidiary will thereupon cease and
the Company will continue as the surviving corporation of the merger as a wholly owned subsidiary of Parent.
Closing
and Effective Time of the Merger
The closing of the merger will take place at 8:00 a.m., local time, as soon as practicable, but no later than second business day, after the satisfaction or waiver (to the extent permitted by law) of
all of the conditions described in the section below titled
“—Conditions to the Merger,” or at such other place or time or on such other date as Parent and
the Company may mutually agree in writing.
The merger will become effective at the time a certificate of merger is filed with the Secretary of State of the State of Delaware or at such later time stated in the certificate of merger and agreed
to by the parties. The time that the merger becomes effective is referred to as the “effective time” of the merger.
Certificate
of Incorporation and
Bylaws; Directors and Officers
Under the merger agreement, the directors of the merger subsidiary immediately prior to the effective time of the merger will be the directors of the surviving corporation immediately after the
effective time of the merger. The officers of
the Company immediately prior to the effective time of the merger become the officers of the surviving corporation immediately after the effective time of the merger.
Consideration
to be Received in the Merger
At the effective time of the merger, each share of common stock that is outstanding immediately prior to the effective time of the merger (other than shares held by
the Company as treasury stock,
owned by Parent or the merger subsidiary or as to which the holders thereof have properly and validly exercised their statutory rights of appraisal in accordance with Section 262 of the DGCL) will be automatically converted into the right to receive
the merger consideration.
Treatment
of Company Stock Awards
At the effective time, by virtue of the merger and without any action on the part of the holders, (i) each outstanding Option issued under the Incentive Plan, whether or not vested, immediately prior
to the effective time of the merger will be cancelled and, in consideration thereof, the holder of such Option will receive the Option Consideration, (ii) each outstanding RSU issued under the Incentive Plan, whether or not vested, immediately prior
to the effective time of the merger will be cancelled and, in consideration thereof, the holder of such RSU will receive the RSU Consideration, (iii) each outstanding Restricted Stock Award issued under the Incentive Plan, whether or not vested,
immediately prior to the effective time of the merger will be cancelled and, in consideration thereof, the holder of such Restricted Stock Award will receive the Restricted Stock Award Consideration, and (iv) each Stock Appreciation Right that is
outstanding and unexercised immediately prior to the effective time of the merger and has an exercise price per share of common stock that is less than the merger consideration will be cancelled and converted in to the right to receive the Stock
Appreciation Right Consideration.
The Option Consideration, RSU Consideration, Restricted Stock Award Consideration and the Stock Appreciation Right Consideration will each be paid as soon as reasonably practicable after the closing
date or the first regular payroll date of the surviving corporation or Parent, or an affiliate thereof, as applicable, that is at least 10 business days following the closing date.
In addition, and for the avoidance of doubt, any Option or Stock Appreciation Right with an exercise price equal to or greater than the merger consideration will be cancelled for no consideration at
the effective time.
Procedure
for Receiving Merger Consideration
Prior to the effective time of the merger, Parent will appoint a nationally recognized financial institution, referred to as
“paying agent” (or such other institution mutually acceptable to Parent and
the Company) to act as paying agent for the payment of merger consideration upon surrender of certificated and uncertificated shares of common stock. Parent will, on the closing date of the merger, provide the paying agent all the cash necessary to
pay for the shares of common stock converted into the right to receive cash pursuant to the merger agreement (which is referred to as the
“exchange fund”).
Within two (2) business days after the effective time of the merger, Parent will cause the paying agent to mail to each holder of record of common stock a letter of transmittal, a notice advising such
holder of the effectiveness of the merger, and instructions for use in effecting the surrender of holder’s certificates or book entry shares in exchange for payment of the merger consideration. Upon surrender to the paying agent of each such
certificates or book entry shares, together with a properly executed letter of transmittal and such other documents as may reasonably be required by the paying agent or pursuant to such instructions, the holder will as promptly as practicable receive
the amount of cash to which such holder is entitled. In the event of a transfer of ownership of common stock that is not registered in the transfer records of
the Company, payment may be made to a person other than the person in whose name the
certificate or book entry share so surrendered is registered, subject to endorsement of such certificate and the same being in proper form for transfer, and in which case the person requesting such payment is required to pay any transfer or other
taxes required by reason of the payment to a person other than the registered holder of such certificate or establish to the satisfaction of Parent that such tax has been paid or is not applicable. Until surrendered or transferred, each certificate
shall be deemed at any time after the effective time of the merger to represent only the right to receive, upon such surrender, the merger consideration. No interest will be paid or accrue on any cash payable upon surrender of any certificate or book
entry.
You should not send in your common stock certificates until you receive a letter of transmittal with instructions from the paying agent. Do not send common stock certificates with your proxy card.Following the effective time of the merger, each holder of common stock will cease to have any rights with respect to such common stock, except for the right to receive the merger consideration or, in
the case of stockholders who have properly and validly exercised their statutory rights of appraisal in accordance with Section 262 of the DGCL, such rights as are provided by Section 262 of the DGCL.
In the event any certificate representing common stock has been lost, stolen or destroyed, the person claiming such certificate to be lost, stolen or destroyed is required to make an affidavit of that
fact and, if required by Parent or the paying agent, must post a bond in customary amount and upon such terms as may be required by Parent or the paying agent as indemnity against any claim that may be made against it or the surviving corporation
with respect to such certificate. Upon satisfaction of the foregoing, the paying agent will issue in exchange for such lost, stolen or destroyed certificate the merger consideration, without any interest thereon.
Pursuant to the merger agreement, the paying agent, Parent, the surviving corporation and any other applicable withholding agent may deduct and withhold from any cash amounts payable under the merger
agreement any amounts as are required to be deducted or withheld pursuant to applicable tax laws.
Representations
and Warranties
In the merger agreement,
the Company, Parent and the merger subsidiary made a number of representations and warranties to each other. The parties’ reciprocal representations and warranties relate to,
among other things:
|
● |
due organization, valid existence, good standing, qualification to do business and power and authority to enter into the merger agreement and consummate the transactions contemplated thereby;
|
|
● |
required governmental filings, consent and approval of governmental entities in connection with the merger agreement and the merger;
|
|
● |
the absence of any violation of or conflict with such party’s organizational documents, applicable laws or material contracts as a result of entering into the merger agreement and consummating the merger; |
|
● |
the accuracy of the information supplied by such party for inclusion or incorporation by reference into this proxy statement;
|
|
● |
certain legal proceedings and government or court orders; and
|
|
● |
the absence of undisclosed broker’s, finder’s, financial advisor’s or other similar fees or commissions in connection with the transactions contemplated by the merger agreement.
|
In addition to the foregoing, the merger agreement contains representations and warranties made by
the Company to Parent and the merger subsidiary, including regarding:
|
● |
the due incorporation or organization, good standing, power and authority and qualifications of the Company’s subsidiaries; |
|
● |
the authority of the Company to execute and deliver the agreements contemplated by the merger agreement, approval of the merger agreement by the Board and recommendation that the stockholders vote to adopt the merger agreement; |
|
● |
the accuracy and sufficiency of certain reports and financial statements required to be filed with the SEC;
|
|
● |
the absence of certain changes or events;
|
|
● |
the absence of a Company material adverse effect (as defined below)
|
|
● |
intellectual property matters;
|
|
● |
IT systems and data privacy;
|
|
● |
compliance with applicable laws, including certain healthcare laws and anti-corruption laws;
|
|
● |
the possession and validity of permits necessary for the conduct of the Company’s businesses; |
|
● |
employee compensation and benefits matters;
|
|
● |
labor and employment matters;
|
|
● |
the stockholder approvals required to consummate the merger;
|
|
● |
the receipt of BCA’s opinion; and
|
|
● |
the inapplicability of anti-takeover provisions to the merger agreement, the other agreements contemplated by the merger agreement and the transactions contemplated thereby.
|
In addition, the merger agreement contains representations and warranties made by Parent and the merger subsidiary to
the Company, including regarding:
| |
●
|
sufficiency of funds held by Parent and the merger subsidiary to satisfy their obligations under the merger agreement;
|
| |
|
|
| |
●
|
Parent not being an “interested stockholder” of the Company; |
| |
|
|
| |
●
|
the guaranties by MED Healthcare and Ephram Lahasky relating to the obligations of Parent and the merger subsidiary under the merger agreement; and |
| |
|
|
| |
●
|
the merger subsidiary’s capitalization, capital structure and activities.
|
Significant portions of the representations and warranties of
the Company are qualified as to
“materiality,” a
“Company material adverse effect” or the
“knowledge” of
the Company, and certain portions
of the representations and warranties of Parent and the merger subsidiary are qualified as to
“materiality,” a
“Parent material adverse effect” or the
“knowledge” of the Parent or the merger subsidiary, as applicable.
Under the merger agreement, a
“Company material adverse effect” means, with respect to
the Company and each of its
subsidiaries, any effect, change, event, occurrence, circumstance, condition, state
of facts or development that, individually or when taken together with any other effect, change, event, occurrence, circumstance, condition, state of facts or development, is or would reasonably be expected to be materially adverse to the business,
operations, assets, liabilities, financial condition or results of operations of
the Company and its
subsidiaries taken as a whole. The following events, to the extent arising after the date of the merger agreement, will not be taken into account in
determining whether there is a Company material adverse effect:
|
● |
changes in the Company’s stock price or trading volume, in and of themselves (but not, in each case, the underlying cause of such change, unless such underlying cause would otherwise be excepted from this definition); |
|
● |
any failure by the Company to meet, or changes to, published revenue, earnings or other financial projections (whether internal or external), or any failure by the Company to meet any internal budgets, plans or forecasts of revenue,
earnings or other financial projections, in each case in and of itself (but not, in each case, the underlying cause of such failure, unless such underlying cause would otherwise be excepted from this definition); |
|
● |
general business, economic or political conditions in the United States or any other country or region in the world, or changes therein*;
|
|
● |
conditions in the financial, credit, banking, capital or currency markets in the United States or any other country or region in the world, or changes therein, including (1) changes in interest rates in the United States or any other
country and changes in exchange rates for the currencies of any countries and (2) any suspension of trading in securities, other than securities of the Company (whether equity, debt, derivative or hybrid securities) generally on any
securities exchange or over-the-counter market operating in the United States or any other country or region in the world*; |
|
● |
acts of hostilities, war, sabotage or terrorism (including any outbreak, escalation or general worsening of any such acts of hostilities, war, sabotage or terrorism) in the United States or any other country or region in the world*;
|
|
● |
earthquakes, hurricanes, tsunamis, tornadoes, floods, mudslides, wildfires or other natural or man-made disasters or acts of God or weather conditions in the United States or any other country or region in the world, or any escalation of
the foregoing*;
|
|
● |
any epidemic, pandemic or other similar outbreak (including continuation or escalation of the COVID-19 pandemic) in the United States or any country or region in the world where the Company and its subsidiaries have material operations,
or any escalation of the foregoing*; |
|
● |
the execution or announcement of the merger agreement or the pendency or consummation of the merger, including their impact on the relationships, contractual or otherwise, of the Company and its subsidiaries with employees, customers,
contractors, lenders, suppliers, vendors or partners, or the identity of Parent or any of its Affiliates as the acquirer of the Company (except that this clause does not apply with respect to any representation or warranty in the merger
agreement which addresses the consequences of the execution and delivery of the merger agreement or the consummation of the merger, or the performance of obligations pursuant to the merger agreement); |
|
● |
any action taken by the Company at the written request of Parent or with Parent’s written consent that is not expressly required to be taken by the terms of the merger agreement; |
|
● |
any action expressly required to be taken by the Company by the terms of the merger agreement and that are necessary for purposes of consummating the merger; |
|
● |
changes or proposed changes in GAAP or other accounting standards or principles (or the enforcement or interpretation thereof)*; and
|
|
● |
any legal proceeding involving the Company, the Board, any of its committees or any of the Company’s directors or officers, relating to the merger or the merger agreement, or disclosures of a party relating to such transactions
( “transaction litigation”), which does not enjoin or otherwise restrain the transactions contemplated by the merger agreement. |
In the cases above that are marked with an asterisk, such effect, change, event, occurrence, circumstance, condition, state of facts or development may be taken into account in determining if there is
a Company material adverse effect, to the extent that
the Company and its
subsidiaries are disproportionally affected relative to other similarly situated companies in the industry in which
the Company and its
subsidiaries operate.
Under the merger agreement, a “Parent material adverse effect” means any effect, change, event, occurrence, circumstance, condition, state of facts or development that, individually or when taken
together with all other effect, change, event, occurrence, circumstance, condition, state of facts or development, does or would reasonably be expected to prevent or materially impair or materially delay the consummation of the merger by Parent prior
to the end date.
The representations and warranties of
the Company, Parent and the merger subsidiary will expire upon the effective time of the merger.
Covenants
Regarding Interim Operations of
the Company Pending the Effective Time
From the date of the merger agreement through the earlier of the effective time of the merger or the date of termination of the merger agreement,
the Company and its
subsidiaries are required to
conduct their business in the ordinary course consistent with past practice.
In addition, during such period,
the Company and its
subsidiaries are not permitted to take a number of specified material actions, except for certain specified actions previously disclosed to Parent
or except with the prior written consent of Parent, as expressly required by the merger agreement or in certain cases as required to comply with laws, orders or directives of governmental entities in connection with or in response to the COVID-19
pandemic. The material actions that
the Company and its
subsidiaries are not so permitted to take include the following:
|
● |
amend their organizational documents (whether by merger, consolidation or otherwise);
|
|
● |
declare, set aside or pay dividends on, or make any other distributions in respect of, or enter into any agreement with respect to the voting of securities or equity-based awards, other than (i) dividends and distributions by a direct or
indirect wholly owned subsidiary of the Company to its equity holders and (ii) distributions directly resulting from the vesting or exercise of equity-based awards; |
|
● |
split, combine or reclassify any capital stock;
|
|
● |
issue or authorize the issuance of any securities;
|
|
● |
purchase, redeem or otherwise acquire any securities of the Company or its subsidiaries, except for acquisitions of shares of common stock in satisfaction of the applicable exercise price or withholding taxes with respect to any
equity-based awards; |
|
● |
issue, deliver, sell, grant, pledge, transfer, subject to any lien or obligation or dispose of any securities, other than the issuance of shares of common stock upon the exercise or settlement of any equity-based awards;
|
|
● |
amend any term of any securities of the Company or its subsidiaries or of any award under any employee benefit plan; |
|
● |
adopt a plan or agreement of, or resolutions providing for or authorizing, complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization;
|
|
● |
materially increase the salary, wages, benefits, bonuses or other compensation payable to any employee or non-employee service provider, except for material increases in cash compensation in the ordinary course of business consistent
with past practice or, except as required by applicable law, adopt, enter into, terminate or amend in any material respect any collective bargaining agreement or benefit plan, except with respect to any amendment or new agreement in which
the Company enters as part of the Company’s ordinary course contract renewal process; |
|
● |
acquire any business, assets or capital stock of any person or division thereof, other than supplies or inventory in the ordinary course of business consistent with past practice;
|
|
● |
sell, lease, license, pledge, transfer, assign, abandon, allow to lapse or expire, fail to maintain, covenant not to assert, subject to any lien or obligation or otherwise dispose of any patents, trademarks, copyrights, trade secrets,
rights of publicity and privacy or other intellectual property rights, or other assets or properties except (i) in the ordinary course of business pursuant to existing contracts, (ii) non-exclusive licenses that are merely incidental to the
transaction contemplated by a contract entered into in the ordinary course of business consistent with past practice, (iii) sales of inventory or used equipment in the ordinary course of business consistent with past practice, (iv)
permitted liens incurred in the ordinary course of business consistent with past practice; |
|
● |
except with respect to certain trademark registrations no longer material to the Company or its subsidiaries, extend, amend, waive, cancel or modify any rights in intellectual property in a manner that is adverse to the Company or its
subsidiaries; |
|
● |
fail to diligently prosecute any intellectual property application or registration or licensed rights to intellectual property for which the Company or its subsidiaries controls the prosecution thereof, subject to certain limited
exceptions applicable to immaterial items; |
|
● |
divulge, furnish or make accessible any intellectual property that constitutes trade secrets, other than in the ordinary course of business consistent with past practice, to any third party that is subject to an enforceable written
agreement to maintain the confidentiality of such trade secrets;
|
|
● |
enter into, amend in any material respect or voluntarily terminate any material contract, except for elections not to renew any material contract by its terms and renewals of existing contracts on substantially similar (or more favorable
to the Company) terms made in the ordinary course of business consistent with past practice; |
|
● |
fail to keep in full force and effect all material insurance policies maintained by the Company or its subsidiaries, other than such policies that expire by their terms (in which event the Company or its subsidiary must use commercially
reasonable efforts to renew, replace or extend such policies) or changes to such policies made in the ordinary course consistent with past practice; |
|
● |
change any of the accounting methods used by the Company, except for such changes that are required by GAAP or Regulation S-X promulgated under the Exchange Act, in each case as agreed to by its independent public accountants; |
|
● |
except for ordinary course draws on the Company’s existing credit facility, create, incur, assume, suffer to exist or otherwise become liable with respect to any indebtedness (as defined in the merger agreement) for borrowed money or
guarantees thereof, or issue or sell any debt securities or options, warrants, calls or other rights to acquire any debt securities of the Company or its subsidiaries, except in respect of indebtedness owing by any wholly owned subsidiary
of the Company to the Company or another wholly owned subsidiary of the Company; |
|
● |
assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person (other than the Company or its subsidiaries); |
|
● |
enter into any amendment or other modification to the material terms of any material indebtedness for borrowed money of the Company or its subsidiaries; |
|
● |
incur any capital expenditures (or any obligations or liabilities in respect thereof) in excess of $300,000 individually or $2,000,000 in the aggregate per calendar quarter;
|
|
● |
settle, or offer or propose to settle, (i) any dispute, claim or legal proceeding (except with respect to matters in which the amount in controversy is less than $500,000, and for which commercial insurance is not available), (ii) any
legal proceeding by any stockholder of the Company or other dispute against the Company or any of its officers or directors and its stockholders or (iii) any transaction litigation; |
|
● |
change or rescind any material tax election, change any annual tax accounting period, change any material method of tax accounting, amend any material tax returns except to the extent otherwise required by law, extend the statute of
limitations with respect to any income or other material tax return (other than pursuant to extensions of time to file such tax returns obtained in the ordinary course of business), enter into any closing agreement with respect to a
material tax, settle or compromise any material tax claim, or surrender any right to claim a material tax refund;
|
|
● |
effect any extraordinary transactions that are inconsistent with past custom and practice or that could result in tax liability to Parent, the Company or any of its subsidiaries or any of their respective affiliates in a taxable period
(or portion thereof) beginning after the consummation of the merger in excess of tax liability associated with the conduct of its business in the ordinary course consistent with past practice; |
|
● |
voluntarily terminate any payor agreement to which any Acquired Company is a party representing revenue to the Company for 2021 in excess of $1,000,000; and |
|
● |
authorize, commit or agree to take any of the foregoing actions.
|
Go-Shop
and No Solicitation
Pursuant to the terms of the merger agreement, during the period beginning on
August 26, 2021 and expiring at 11:59 p.m. (Eastern Standard Time) on
September 30, 2021 (referred to as the
“go-shop
period”),
the Company and its officers, directors, employees, investment bankers, attorneys, accountants, consultants, agents, and other advisors or representatives had the right to, directly or indirectly, (A) initiate, solicit and encourage
acquisition proposals; and (B) enter into and maintain discussions or negotiations with respect to potential acquisition proposals or otherwise cooperate with or assist or participate in, or provide information with respect to, or facilitate, any
such inquiries, proposals, discussion or negotiations.
Following the go-shop period, and except with respect to any third party from whom
the Company or any of its representatives has received a bona fide written acquisition proposal after the execution
of the merger agreement and prior to the end of the go-shop period that the Board determines in good faith constitutes or is reasonably likely to result in a superior proposal (referred to as an
“excluded party”),
the Company will not, and is
required to cause its
subsidiaries and its and their officers, directors and employees, and other representatives and advisors not to, directly or indirectly:
|
● |
solicit, initiate, propose, knowingly encourage or knowingly take any action designed to facilitate the submission or announcement of any acquisition proposal (as defined below) or inquiry, indication of interest or request for
information thereof (referred to as an “acquisition inquiry”);
|
|
● |
furnish any information regarding the Company and its subsidiaries or afford access to their business, properties, assets, books or records to any third party in connection with, for the purpose of encouraging, or in response to, an
acquisition proposal or acquisition inquiry; |
|
● |
engage in, continue or otherwise participate in any discussions or negotiations with any person with respect to, or otherwise cooperate with, any acquisition proposal or acquisition inquiry; or
|
|
● |
amend or grant any waiver or release under any standstill or similar agreement with respect to any class of securities of the Company or any of its subsidiaries or Company Subsidiary Securities, except that if the Board determines in
good faith, after consultation with its outside legal counsel, that the failure to amend or grant any waiver or release under any such standstill or similar agreement would reasonably be expected to be inconsistent with the directors’
fiduciary duties under the DGCL, the Company may then take such action to the extent necessary to permit a third party to make, on a confidential basis to the Board, an acquisition proposal, conditioned upon such third party agreeing to
disclosure of such acquisition proposal to Parent. |
Additionally, following the go-shop period and except with respect to any excluded party,
the Company must, and is required to cause each of its
subsidiaries and its and their directors, employees,
investment bankers, attorneys, accountants, consultants, agents, and other advisors or representatives to, immediately cease and cause to be terminated any existing solicitation of, or discussions or negotiations with, any third party relating to any
acquisition proposal or acquisition inquiry, and use its commercially reasonable efforts to cause any such third party or its representatives in possession of confidential information furnished to such person by or on behalf of
the Company to return
or destroy all such information as promptly as practicable.
The Company must also promptly terminate all physical and electronic
“data room” or similar access previously granted to any such persons.
However, prior to the adoption of the merger agreement by
the Company’s stockholders, including during the go-shop period,
the Company and its officers, directors, employees, investment bankers,
attorneys, accountants, consultants, agents, and other advisors or representatives may engage in discussions or negotiations and provide information in response to an unsolicited bona fide written acquisition proposal received after the date of
merger agreement that did not arise from or in connection with a breach of
the Company’s non-solicitation covenants described above, if the Board (or a committee thereof) determines in good faith, after consultation with
the Company’s outside legal
counsel and an independent financial advisor of nationally recognized reputation (specifically including BCA), that such acquisition proposal either constitutes a superior proposal (as defined below) or would reasonably be expected to lead to a
superior proposal.
As used in the merger agreement, the term “acquisition proposal” means any bona fide indication of interest, proposal or offer from any person or group contemplating or otherwise relating to or
reasonably expected to lead to:
|
● |
the acquisition of 20% or more of any class of the equity interests in the Company (by vote or by value) by a third party; |
|
● |
any merger, consolidation, business combination, reorganization, share exchange, sale of assets, recapitalization, equity investment, joint venture, liquidation, dissolution or other transaction that would result in any third party
acquiring assets (including capital stock of or interest in any subsidiary of the Company) representing, directly or indirectly, 20% or more of the net revenues, net income or assets of the Company and its subsidiaries taken as a whole; |
|
● |
the acquisition (whether by merger, consolidation, equity investment, share exchange, joint venture or otherwise) by any third party, directly or indirectly, of any class of equity interest in any entity that holds assets representing,
directly or indirectly, 20% or more of the net revenues, net income or assets of the Company and its subsidiaries, taken as a whole; |
|
● |
any tender offer or exchange offer, as such terms are defined under the Exchange Act, that, if consummated, would result in any third party beneficially owning 20% or more of the outstanding shares of common stock and any other voting
securities of the Company (or instruments convertible to or exchangeable for 20% or more of such outstanding shares or securities); |
|
● |
any merger, consolidation, share exchange, business combination, joint venture, recapitalization, reorganization or other similar transaction involving the Company pursuant to which the stockholders of the Company immediately preceding
such transaction hold less than 80% of the equity interests in the surviving or resulting entity of such transaction; or |
|
● |
any combination of the foregoing.
|
Also used in the merger agreement, the term
“superior proposal” means any bona fide, written acquisition proposal (with all of the references to
“20%” included in the definition of acquisition proposal being
replaced with references to
“50%”) made after the date of the merger agreement, that the Board (or a committee thereof) determines in good faith, after consultation with the an independent financial advisor of nationally recognized reputation
(including BCA) and outside legal counsel, and taking into consideration all of the terms and conditions and all legal, financial, regulatory and other aspects of such acquisition proposal (including any break-up fees, expense reimbursement
provisions, conditions to consummation and the time likely to be required to consummate such acquisition proposal), any financing, stockholder or regulatory approvals required in connection with such acquisition proposal, and the identity of the
person or group making the acquisition proposal: (i) would result in a transaction that is more favorable to the holders of common stock than the merger (taking into account any revisions to the merger agreement made in writing by Parent as
permitted pursuant to certain renegotiation and matching rights provided in the merger agreement) and (ii) is reasonably likely to be consummated on the terms proposed without undue delay relative to the merger.
Board Recommendation Change
Except as provided below, neither the Board nor any committee thereof may (1) make a
“change in recommendation” (as defined below) or (2) cause or permit
the Company to enter into an alternative
acquisition agreement, or otherwise resolve or agree to do so. The term
“change in recommendation” means any of the following actions:
|
● |
withholding, withdrawing, modifying, amending or qualifying, in a manner adverse to Parent and the merger subsidiary, the Board’s recommendation that the Company’s stockholders vote in favor of the adoption of the merger agreement; |
|
● |
approving, recommending or declaring advisable any acquisition proposal;
|
|
● |
failing to include in this proxy statement the Board recommendation that the Company’s stockholders vote in favor of the adoption of the merger agreement; |
|
● |
failing to recommend against any acquisition proposal that is a tender offer or exchange offer (it being understood and agreed that the Board make take no position with respect to any such tender offer or exchange offer) subject to
Regulation 14D under the Exchange Act within ten (10) business days after the commencement of such tender or exchange offer or, if earlier, prior to the special meeting;
|
|
● |
approving or recommending, or publicly declaring advisable or publicly proposing to approve or recommend, or publicly proposing to enter into any letter of intent, memorandum of understanding, agreement in principle or contract relating
to an acquisition proposal; |
|
● |
publicly proposing or publicly announcing an intention to take any of the foregoing actions.
|
However, at any time before the Company’s stockholders adopt the merger agreement, the Board may make a change in recommendation in response to an unsolicited bona fide written acquisition proposal or cause
the Company to enter into an alternative acquisition agreement concerning an acquisition proposal, but only if each of the following conditions is satisfied: |
|
●
|
such acquisition proposal did not result from a breach of the Company’s non-solicitation covenants described above; |
|
● |
the Board, or a committee thereof, determines in good faith (i) after consultation with the Company’s outside legal counsel and an independent financial advisor of nationally recognized reputation (including BCA), that such acquisition
proposal constitutes a superior proposal and (ii) after consultation with the Company’s outside legal counsel, that in light of such acquisition proposal, a failure to make a change in recommendation or to cause the Company to enter into
such alternative acquisition agreement would reasonably be expected to be inconsistent with the Board’s fiduciary obligations to the Company’s stockholders under the DGCL; |
|
● |
the Company delivers to Parent a written notice (referred to as the “superior proposal notice”) stating that the Board intends to take such action and including the identity of the person making the acquisition proposal and the
material terms thereof (including copies of all material documents relating to the alternative acquisition agreement, including a copy of the proposed alternative acquisition agreement);
|
|
● |
during the five business day periods following the date of Parent’s receipt of notice of such superior proposal (or in the case of a change to the financial terms or any other material terms of such proposal, within three business
days), the Company makes its officers, directors, employees, investment bankers, attorneys, accountants, consultants, agents, and other advisors or representatives reasonably available for the purpose of engaging in negotiations with
Parent, and the Company and such other persons must negotiate in good faith with Parent (to the extent Parent desires to negotiate) regarding a possible amendment of the merger agreement or a possible alternative transaction so that the
acquisition proposal that is the subject of the superior proposal notice ceases to be a superior proposal; |
|
● |
at the end of the periods described in the bullet immediately above, the Board, or a committee thereof, determines in good faith, after taking into account any amendments to the merger agreement or a possible alternative transaction
that Parent has proposed in writing, that (i) after consultation with the Company’s outside legal counsel and an independent financial advisor of nationally recognized reputation (including BCA), such acquisition proposal continues to
constitute a superior proposal and (ii) after consultation with the Company’s outside legal counsel, the failure to make a change in recommendation or enter into such alternative acquisition agreement would reasonably be expected to be
inconsistent with the Board’s fiduciary obligations to the Company’s stockholders under the DGCL; and |
|
● |
if the Company enters into an alternative acquisition agreement concerning such superior proposal, the Company terminates the merger agreement and pays the termination fee described below. |
Additionally, at any time before the Company’s stockholders adopt the merger agreement, the Board may make a change in recommendation if each of the following conditions is satisfied: |
|
● |
there occurs a “change in circumstances,” defined as any change in circumstances occurring after the date of the merger agreement and materially affecting the Company that was not known to the Board as of or prior to the date of
the merger agreement and becomes known to the Board after the date of the merger agreement and prior to the date of the special meeting (as it may be adjourned or postponed in accordance with the merger agreement); |
|
● |
the Board (or a committee thereof) determines in good faith, after consultation with its outside legal counsel and an independent financial advisor of nationally recognized reputation, that, in light of such change in
circumstances, a failure to effect a change in recommendation would reasonably be expected to be inconsistent with the Board’s fiduciary obligations to the Company’s stockholders under the DGCL; |
|
● |
such change in recommendation is not effected prior to the fifth business day (such time period being referred to as “CIC notice period”) after Parent receives written notice from the Company with a reasonably detailed description
of such change in circumstances and confirming that the Board intends to effect such change in recommendation; |
|
● |
during the CIC notice period, if requested by Parent, the Company makes its representatives reasonably available for the purpose of engaging in negotiations with Parent, and the Company and such representatives negotiate in good
faith with Parent (to the extent Parent desires to negotiate) to amend the merger agreement or enter into an alternative transaction; and |
|
● |
at the end of the CIC notice period, the Board (or a committee thereof) determines in good faith, after consultation with its outside legal counsel and an independent financial advisor of nationally recognized reputation (including
BCA), after taking into account any amendments to the merger agreement that Parent proposes in writing to make as a result of the negotiations during the CIC notice period, that, in light of such change in circumstances, a failure to
effect a change in recommendation would reasonably be expected to be inconsistent with the Board’s fiduciary obligations to the Company’s stockholders under the DGCL. |
The merger agreement also requires that
the Company promptly (within 24 hours) notify Parent in writing of any acquisition proposal or any acquisition inquiry (except for acquisition proposals
received prior to the expiration of the go-shop period or from an excluded party), the identity of the person making the acquisition proposal or acquisition inquiry and the material terms of the acquisition proposal or acquisition inquiry. The
Company also must keep Parent informed on a current basis (within 24 hours) of the status and material terms of any such proposals or inquiries (including any material change to the terms of such acquisition proposal or acquisition inquiry) and the
status of any such discussions or negotiations, including any change in its intentions as previously notified.
Reasonable
Best Efforts; Antitrust Filings
Parent, the merger subsidiary and
the Company have each agreed to (i) use reasonable best efforts to make and effect any registrations, filings and submissions required to be made or effected by it or
otherwise advisable pursuant to the HSR Act, other applicable antitrust laws, the Exchange Act and other applicable laws, with respect to the merger; (ii) use commercially reasonable efforts to obtain all consents and approvals required from third
parties in connection with the transactions contemplated by the merger agreement; and (iii) use reasonable best efforts to cause to be taken, on a timely basis, all other actions necessary or appropriate for the purpose of consummating and
effectuating the transactions contemplated by the merger agreement.
The Company is not required to pay, prior to the effective time, any fee, penalty or other consideration to any person for any consent or approval required for the consummation of
any of the transactions contemplated by the merger agreement.
In addition, Parent and Company have each agreed to (i) promptly provide all information requested by any governmental entity in connection with the merger or the transactions contemplated by the
merger agreement and (ii) use reasonable best efforts to promptly take all actions and steps necessary to obtain and secure the expiration or termination of any applicable waiting periods under the HSR Act or other applicable antitrust laws and
obtain any clearance or approval required to be obtained from the FTC, the DOJ, any state attorney general, any foreign competition authority or any other governmental entity in connection with the transactions contemplated by the merger agreement.
Proxy
Statement; Special Meeting
The Company has agreed to promptly after the later of (i) the 10-day waiting period under Rule 14a-6(a) under the Exchange Act and (ii) the date on which the SEC confirms that it has no further
comments on this proxy statement (such later date, referred to as the
“clearance date”), cause the definitive version of this proxy statement to be mailed to
the Company’s stockholders and, if necessary, after the definitive proxy statement is so
mailed, promptly circulate amended or supplemental proxy materials and, if required in connection therewith, resolicit proxies in connection with the merger.
The Company must notify Parent promptly upon receipt of any comments from the SEC or its staff or any other governmental entities and of any request by the SEC or its staff or any other governmental
entities for amendments or supplements to this proxy statement and is required to supply Parent with copies of all correspondence between it or any of its officers, directors, employees, investment bankers, attorneys, accountants, consultants,
agents, and other advisors or representatives, and the SEC, or its staff or any other governmental entities with respect to this proxy statement.
The Company also agreed not to postpone or adjourn the special meeting except: (i) with the prior written consent of Parent; (ii) if at any time following the dissemination of this proxy statement,
either
the Company or Parent reasonably determines in good faith that the merger proposal is unlikely to be approved at the special meeting, including due to an absence of quorum, in which case each of
the Company and Parent have the right to require
an adjournment or postponement of the special meeting for the purpose of soliciting additional votes in favor of the merger agreement, which adjournment or postponement pursuant must not delay the special meeting by more than seven days from the
prior-scheduled date or to a date on or after the fifth business day preceding the end date; or (iii) if the Board or any authorized committee thereof determines in good faith (after consultation with outside legal counsel) that the failure to
adjourn, postpone or delay the special meeting would be reasonably likely not to allow sufficient time under applicable laws for the distribution of any required or appropriate supplement or amendment to this proxy statement, in which case the
Company will be permitted to postpone or adjourn the special meeting by no more than two occasions and no such adjournment or postponement must delay the special meeting by more than seven days from the prior-scheduled date or to a date on or after
the fifth business day preceding the end date.
Unless the Board or any committee thereof has effected a change in recommendation in compliance with the merger agreement as discussed above, the Board must recommend to holders of common stock that
they vote in favor of the merger proposal so that
the Company may obtain stockholder approval for the adoption of the merger agreement, and
the Company is required to use commercially reasonable efforts to solicit and obtain such stockholder approval
(including by soliciting proxies from
the Company’s stockholders) and to take all other action necessary or advisable to secure such stockholder approval.
The Company is required to (i) keep Parent reasonably informed with respect to proxy solicitation results and provide detailed periodic updates concerning proxy solicitation results on a timely basis
and (ii) give written notice to Parent one day prior to the special meeting, and on the day of, but prior to the special meeting, indicating whether as of such date sufficient proxies have been obtained for approving the merger proposal.
Unless the merger agreement is terminated, (i)
the Company is not permitted to submit to the vote of its stockholders any acquisition proposal and (ii) the obligation of
the Company to duly call, give
notice of, convene and hold the special meeting and mail this proxy statement (and any amendment or supplement thereto that may be required by law) to
the Company’s stockholders will not be affected by any change in recommendation.
Indemnification of Directors and Officers and Insurance
Under the merger agreement, until the sixth anniversary of the effective time of the merger, Parent has agreed to cause the surviving corporation to indemnify and hold harmless each current or former
director, officer or employee of
the Company or its
subsidiaries who has previously entered into an indemnification agreement with
the Company (who are each referred to as an
“indemnified party”) in respect of acts or omissions occurring at or prior
to the effective time, to the fullest extent permitted by the DGCL or any other applicable law or as provided under the organizational documents of
the Company and its
subsidiaries in effect on the date of the merger agreement.
From the effective time of the merger until its sixth anniversary, Parent has also agreed to cause the surviving corporation to maintain officers’ and directors’ liability insurance (which is referred
to as
“D&O insurance”) with respect to claims arising from acts, errors or omissions that occurred at or prior to the effective time of the merger, including in respect of the transactions contemplated by the merger agreement, covering each such
person currently covered by
the Company’s D&O insurance policies on terms with respect to coverage (from an insurance carrier with the same or better credit rating as
the Company’s current insurance carrier) and amount no less favorable in the
aggregate than those of such policies in effect on the date of the merger agreement. Neither Parent nor
the Company will be obligated to pay an aggregate amount for such insurance policies in excess of 300% of the amount per annum
the Company paid in
its last full fiscal year prior to the date of the merger agreement (referred to as the
“current premium”) and if such aggregate amount for such insurance policies would at any time exceed 300% of the current premium, then the surviving corporation
will cause to be maintained policies of insurance that, in the surviving corporation’s good faith judgment, provide the maximum coverage available at an aggregate amount for such insurance policies equal to 300% of the current premium. The
requirement to obtain such D&O insurance will be satisfied if
the Company obtains, and
the Company is required to use commercially reasonable efforts to obtain, prior to the effective time, prepaid
“tail” or
“runoff” policies with coverage for an
aggregate period of six years with respect to claims arising from acts, errors or omissions that occurred at or prior to the effective time, including in respect of the transactions contemplated by the merger agreement.
Employee
Benefits Matters
The merger agreement provides that, from the effective time of the merger until the 18 month anniversary thereof, Parent will, or will cause the surviving corporation to, provide to each employee of
the Company and its
subsidiaries who continues employment with the surviving corporation or one of its affiliates following the effective time (each, a
“continuing employee”) with (i) (A) base salary or base hourly wage rate (as applicable) and (B)
cash incentive compensation opportunities (including bonuses and commissions), in each case in an amount at least equal to the level that was provided to each such continuing employee immediately prior to the closing date of the merger (in each case,
to the extent such compensation was disclosed in the disclosure schedules delivered by
the Company to Parent concurrently with the entry into the merger agreement), and (ii) other employee benefits that are at least as favorable in the aggregate to
those provided to each such continuing employee as of immediately prior to the effective time.
In addition, Parent must ensure that, as of the effective time, each continuing employee receives full credit for purposes of eligibility to participate, vesting, rate of vacation accrual,
paid-time-off and severance benefits, for service with
the Company or its
subsidiaries (or predecessor employers to the extent
the Company provides such past service credit) under the comparable employee benefit plans, programs and policies of Parent
or the surviving corporation, as applicable, in which such continuing employees become participants (other than any retiree welfare benefit plans or defined benefit pension plans), except to the extent that its application would result in a
duplication of benefits. Parent is also required to (i) credit to continuing employees the amount of vacation time and paid-time-off that such employees had accrued under any applicable employee benefit plan as of the effective time and (ii) provide
each continuing employee with credit for any co-payments and deductibles paid prior to the effective time (to the same extent such credit was given under any analogous Company benefit plan prior to the effective time) in satisfying any applicable
deductible requirements.
For the calendar year in which the merger is consummated, Parent is required to use commercially reasonable efforts to cause each benefit plan maintained by Parent or the surviving corporation that is
an “employee welfare benefit plan” as defined in Section 3(1) of ERISA (each, a “Parent welfare plan”) in which any continuing employee is or becomes eligible to participate to (i) waive all limitations as to pre-existing conditions, waiting periods,
required physical examinations and exclusions with respect to participation and coverage requirements applicable under such Parent welfare plan for such continuing employees and their eligible dependents to the same extent that such pre-existing
conditions, waiting periods, required physical examinations and exclusions would not have applied or would have been waived under the corresponding Company benefit plan in which such continuing employee was a participant immediately prior to his or
her commencement of participation in such Parent welfare plan; and (ii) provide each continuing employee and their eligible dependents with credit for any co-payments and deductibles paid in the calendar year that, and prior to the date that, such
continuing employee commences participation in such Parent welfare plan in satisfying any applicable co-payment or deductible requirements under such Parent welfare plan for the applicable calendar year, to the extent that such expenses were
recognized for such purposes under the comparable Company benefit plan.
Parent has agreed to cause the surviving corporation to assume and honor in accordance with their terms all obligations of
the Company under all deferred compensation plans, agreements and
arrangements, severance and separation pay plans, agreements and arrangements, and all written employment, severance, retention, incentive, change in control and termination agreements (including any change in control provisions therein) applicable
to employees of
the Company and its
subsidiaries and in effect immediately prior to the effective time.
The merger agreement contains additional agreements between
the Company, on the one hand, and Parent and the merger subsidiary, on the other hand, relating to, among other things:
|
●
|
Parent and the merger subsidiary’s access to Company information;
|
|
●
|
notification of certain significant matters;
|
|
●
|
consultations regarding public statements and disclosure;
|
|
●
|
actions necessary to cause the merger subsidiary to perform its obligations under the merger agreement;
|
|
●
|
actions necessary to exempt the merger from reporting requirements under Rule 16b-3 of the Exchange Act;
|
|
●
|
actions necessary to exempt the merger from antitakeover statutes that become applicable to the transaction contemplated by the merger agreement;
|
|
●
|
filing of tax returns and other tax matters; and
|
|
●
|
litigation relating to the transactions contemplated by the merger agreement.
|
The obligations of
the Company, Parent and the merger subsidiary to consummate the merger are subject to the satisfaction or waiver (to the extent such waiver is permitted by applicable law) of
various conditions on or prior to the effective time of the merger, including the following:
|
●
|
adoption of the merger agreement by the Company’s stockholders; |
|
●
|
the absence of any legal or regulatory restraints enjoining or otherwise prohibiting, or purporting to restrain or otherwise enjoin, the consummation of the merger; and
|
|
●
|
expiration or early termination of any applicable waiting period under the HSR Act.
|
Parent and the merger subsidiary’s obligations to consummate the merger are subject to the satisfaction or waiver (to the extent such waiver is permitted by applicable law) of the following additional
conditions:
|
●
|
the representations and warranties made by the Company being true and correct in all respects (if the same are qualified by materiality or Company material adverse effect) or in all material respects (if the
same are not so qualified), in each case as of the date of the merger agreement and the date on which the closing occurs as if made on and as of such date, except for such failures to be true and correct that would not have a Company
material adverse effect; |
|
●
|
the Company’s performance and compliance in all material respects with all of the covenants, obligations and agreements required to be performed or complied with by the Company in accordance with the merger
agreement;
|
|
●
|
the absence of a Company material adverse effect having occurred after the date of the merger agreement that is continuing as of the time of such consummation;
|
|
●
|
receipt by Parent and the merger subsidiary of a certificate signed by the chief executive officer of the Company certifying to the satisfaction of the three conditions mentioned immediately above; |
|
●
|
the aggregate census of the Company’s owned healthcare facilities on the second business day prior to the closing shall be no lower than 850; and |
|
●
|
no healthcare facility owned by the Company shall be out of compliance with any healthcare laws or regulations. |
The Company’s obligations to consummate the merger are subject to the satisfaction or waiver of the following additional conditions:
|
●
|
the representations and warranties made by Parent and the merger subsidiary being true and correct in all respects (if the same are qualified by materiality or Parent material adverse effect) or in all
material respects (if the same are not so qualified), in each case as of the date of the merger agreement and the date on which the closing occurs as if made on and as of such date, except for such failures to be true and correct that would
not have a Parent material adverse effect;
|
|
●
|
Parent’s and the merger subsidiary’s performance and compliance in all material respects with all covenants and obligations required to be performed or complied with by Parent and the merger subsidiary in
accordance with the merger agreement; and
|
|
●
|
receipt by the Company of a certificate signed by a senior executive officer of Parent certifying to the satisfaction of the three conditions mentioned immediately above. |
The merger agreement does not contain any financing-related closing condition.
The Company, Parent and the merger subsidiary can provide no assurance that all of the conditions precedent to the merger will be satisfied or waived by the party permitted to do so.
The merger agreement may be terminated at any time prior to the effective time of the merger in the following circumstances:
|
o
|
the merger is not consummated on or before February 28, 2022 (the “end date”), but no party will be permitted to terminate the merger agreement on this basis if such party’s breach of the merger agreement has
been the primary cause of, or primarily resulted in, the closing to not have occurred on or before the end date (referred to as the “end date termination”), subject to extension under certain circumstances; |
|
o
|
there is any law enacted after the date of the merger agreement and remaining in effect that makes the merger illegal or that prohibits the consummation of the merger, or any court of competent jurisdiction or
other governmental entity issues a final and nonappealable order or takes any other action, in either case permanently restraining, enjoining, or otherwise prohibiting the merger. No party will be permitted to terminate the merger agreement
on this basis if such party’s breach of the merger agreement has been the primary cause of, or primarily resulted in, any such order or action;
|
|
o
|
upon a vote at a duly held meeting to obtain the requisite approval of the Company’s stockholders, the Company’s stockholders fail to adopt the merger agreement, taking into account any adjournment or
postponement thereof (referred to as a “stockholder vote termination”); |
|
o
|
prior to the closing, any governmental entity shall make a claim against the Company for a payment in excess of $100,000 that is alleged to be due solely as a result of the closing of the transactions
contemplated by the merger agreement; and |
|
o
|
at any time prior to the receipt of the requisite stockholder approval for the adoption of the merger agreement, the Board effects a change in recommendation (referred to as a “recommendation change
termination”);
|
|
o
|
the Company breaches or fails to perform any of its representations, warranties or covenants contained in the merger agreement, which breach or failure to perform (i) would give rise to the failure of any of
the closing conditions and (ii) cannot be or has not been cured within 20 business days (or, if earlier, the end date) after the giving of written notice to the Company of such breach (as long as Parent is not then in breach of any
representation, warranty or covenant contained in the merger agreement that would give rise to a Parent breach termination, as defined below) (referred to as a “Company breach termination”); or
|
|
o
|
Parent concurrently pays to the Company the parent termination fee (as defined below); provided, however, that Parent shall not be entitled to terminate the merger agreement if, as of the date such notice is
given by Parent, either Parent or merger subsidiary is in material breach of its obligations under the merger agreement; and |
|
o
|
prior to the adoption of the merger agreement by the Company’s stockholders, the Company receives an acquisition proposal and determines to terminate the merger agreement in order to accept such acquisition
proposal, in which case the Company must prior to or concurrently with such termination pay to Parent the termination fee (as defined below) (referred to as an “acquisition proposal termination”); or |
|
o
|
Parent breaches or fails to perform any of its representations, warranties or covenants contained in the merger agreement, which breach or failure to perform (i) would give rise to the failure of any of the
closing conditions and (ii) cannot be or has not been cured within 20 business days (or, if earlier, the end date) after the giving of written notice to Parent of such breach (as long as the Company is not then in breach of any
representation, warranty or covenant in the merger agreement that would give rise to a Company breach termination) (referred to as a “Parent breach termination”); or |
|
o
|
there is no existing right of Parent or merger subsidiary to terminate the merger agreement in accordance with terms thereof, and if (i) the conditions to the obligations of the parties have been and continue
to be satisfied or waived in accordance with the merger agreement; (ii) Parent and merger subsidiary fail to consummate the merger on the date on which Parent is required to consummate the merger; (iii) the Company has notified Parent in
writing that it is ready, willing and able to consummate the closing and intends to terminate the merger agreement; and (iv) Parent and merger subsidiary fail to consummate the closing within five business days following the delivery of
such written notice by the Company (referred to as a “Parent closing breach”); |
If the merger agreement is terminated by Parent or
the Company, the merger agreement will terminate, be of no further force or effect without liability or obligation of any party (or any officers,
directors, employees, investment bankers, attorneys, accountants, consultants, agents, and other advisors or representatives of such party), except for the provisions relating to payment of the termination fee (as discussed below), Parent’s
confidentiality obligations and certain other general or miscellaneous provisions of the merger agreement, each of which will survive such termination in accordance with their respective terms.
Termination of the merger agreement will not relieve any party from any liabilities or damages arising out of such party’s fraud (as determined by a court of competent jurisdiction after any appeals
have been exhausted) or such party’s knowing and intentional material breach of the merger agreement, in each case which material breach is a proximate cause of, or is a consequence of, an act or failure to act by such party with the knowledge that
the taking of such act or failure to take such act would, or would reasonably be expected to, proximately cause a breach of the merger agreement (referred to as a “willful breach”).
The Company will be required to pay to Parent the termination fee of $2,105,578 if the merger agreement is terminated in the following circumstances, at the times specified below:
|
●
|
If Parent terminates the merger agreement pursuant to the recommendation change termination, in which case the termination fee must be paid within two business days of such termination;
|
|
●
|
If the Company terminates the merger agreement pursuant to an acquisition proposal termination, in which case the termination fee must be paid concurrently with such termination, and as a condition to the
effectiveness of such termination; |
|
●
|
If either party terminates the merger agreement pursuant to the stockholder vote termination or the Company terminates the merger agreement pursuant to the end date termination, in each case if at the time of
such termination Parent had the right to terminate the merger agreement pursuant to the recommendation change termination, in which case the termination fee must be paid concurrently with such termination; or |
|
●
|
If an acquisition proposal has been made to the Company or to the Board or has otherwise been publicly announced (which proposal has not been withdrawn at the time of the event giving rise to the relevant
termination right) and thereafter (i) the merger agreement is terminated pursuant to the end date termination, the stockholder vote termination or the Company breach termination and (ii) within 12 months of such termination the Company or
any of its subsidiaries enters into an acquisition agreement with respect to any acquisition proposal (solely for purposes of this provision, all references to 15% in the definition of “acquisition proposal” are instead deemed references to
50%), subject to certain limitations. In this case, the termination fee must be paid immediately prior to or concurrently with the events described in clause (ii) in the immediately preceding sentence. |
Parent will be required to pay
the Company a termination fee (which is referred to as the
“Parent termination fee”) of $4,211,157 in the event that the merger agreement is terminated in the following
circumstances:
|
●
|
by Parent upon prior written notice to Company accompanied by concurrent full payment of the Parent termination fee.
|
In the event that either
the Company or Parent fails to pay the termination fee or Parent termination fee, as applicable, when due, the terminating party is required to pay to the other party (or its
designee) (i) interest on such unpaid termination fee, commencing on the date that the termination fee or Parent termination fee, as the case may be, became due, at a rate equal to the
“prime rate” as published in The Wall Street Journal, Eastern
Edition, in effect on the date such payment was required to be made through the date of actual payment (calculated daily on the basis of a year of 365 days and the actual number of days elapsed, without compounding) and (ii) all of the
non-terminating party’s costs and expenses (including reasonable attorneys’ fees, costs and expenses) in connection with any legal proceeding commenced by such party to recover any portion of the amounts due relating to the payment of the termination
fee or Parent termination fee and which legal proceeding results in a judgment against
the Company or Parent, as applicable.
The parties have agreed that, if the merger agreement is terminated in circumstances requiring the payment of the termination fee or the Parent termination fee and if such fee is paid to Parent or the
Company, as the case may be, then the receipt of such fee will be the non-terminating party’s sole and exclusive remedy and that neither the non-terminating party nor any of its respective affiliates or any other person will be entitled to bring or
maintain any legal proceeding against the terminating party or any of its affiliates for damages or any equitable relief arising out of or in connection with the merger agreement or any transactions contemplated by the merger agreement or any matters
forming the basis for such termination.
The merger agreement may be amended, modified, supplemented or waived prior to the effective time by the parties at any time by an instrument in writing signed by the parties to the merger agreement,
or in the case of a waiver, signed by each party against whom the waiver is to be effective except that, following the adoption of the merger agreement by
the Company’s stockholders, the merger agreement may not be amended in any manner which by law
requires further approval by
the Company’s stockholders without further approval by such stockholders.
The failure of any party to the merger agreement to assert any of its rights under the merger agreement or otherwise will not constitute a waiver of such rights.
The parties to the merger agreement agreed that they will be entitled to an injunction, specific performance and other equitable relief to prevent breaches of the merger agreement and to enforce
specifically the terms and provisions of the merger agreement, in addition to any other remedy to which they are entitled at law or in equity.
The merger agreement is governed by and construed in accordance with the laws of the State of Delaware.
AGREEMENTS RELATED TO THE MERGER
Concurrently with the execution of the merger agreement, Parent entered into the voting agreement with
the Company’s directors as of the date of the merger agreement, who are:
Chad A. McCurdy, Ben R.
Leedle, Jr.,
James R. McKnight, Jr.,
Leslie K. Morgan,
Richard M. Brame,
Robert Z. Hensley, and Robert A. McCabe, Jr. As of the record date, these directors of
the Company collectively held in the aggregate approximately 2,319,559 shares of common
stock, or approximately 33.2% of the outstanding shares of common stock at such time.
The voting agreement provides that, among other things, each of the stockholders party thereto will appear or cause his or her shares of common stock to be counted as present at any meeting of the stockholders of the
Company and to vote or cause to be voted, all of the shares of common stock beneficially owned by such stockholder (including by written consent if applicable): (i) in favor of adoption and approval of the merger agreement and all other transactions
contemplated by the merger agreement as to which stockholders of
the Company are called upon to vote or consent in favor of any matter necessary for consummation of the merger and the other transactions contemplated by the merger agreement; (ii)
against any action or agreement that would reasonably be expected to result in a breach in any material respect of any covenant, representation or warranty or any other obligation or agreement of
the Company or any of its
subsidiaries or affiliates
under the merger agreement or that would reasonably be expected to result in any of the conditions to
the Company’s or any of its
subsidiaries or affiliates’ obligations under the merger agreement not being fulfilled; and (iii) against (A) any
acquisition proposal, (B) any agreement, transaction or other matter that is intended to, or would reasonably be expected to, impede, interfere with, delay, postpone, discourage or materially and adversely affect the consummation of the merger and
all other transactions contemplated by the merger agreement, (C) any reorganization, recapitalization, dissolution or liquidation of
the Company or any of its
subsidiaries, (D) any change in the majority of the Board and (E) any material change in
the capitalization of
the Company or
the Company’s corporate structure.
No stockholder party to the voting agreement shall directly or indirectly, (i) sell, assign, transfer, tender, or otherwise dispose of or otherwise permit the sale, assignment, transfer, tender or
disposition of any shares of common stock, (ii) deposit any shares of common stock into a voting trust or enter into a voting agreement or similar arrangement with respect to such shares or grant any proxy or
power of attorney with respect thereto,
(iii) enter into any
contract, option, commitment or other arrangement or understanding with respect to the direct or indirect sale, transfer, assignment or other disposition of any shares of common stock, or (iv) take any action that would make any
representation or warranty of such stockholder contained therein untrue or incorrect or have the effect of preventing or disabling such stockholder from performing such stockholder’s obligations under the voting agreement, in each case subject to
limited exceptions.
The voting agreement will automatically terminate and become void and of no further force or effect on the earlier to occur of (i) the consummation of the merger, (ii) the termination of the merger
agreement in accordance with its terms, (iii) such date and time as (a) any amendment or change to the merger agreement is effected without the stockholders’ consent that (A) decreases the merger consideration, (B) changes the form of consideration
payable under the merger agreement, (C) imposes any additional material restrictions on or additional conditions on the payment of the merger consideration or (D) imposes any additional material restrictions or obligations on stockholders, or (b) any
amendment or change to the merger agreement is effected without the stockholders’ consent that materially and adversely affects the stockholders, (iv) upon mutual written agreement of the parties to the voting agreement to terminate such agreement,
(v) the conclusion of the special meeting and the stockholders to the voting agreement have voted their share of common stock as specified in the voting agreement, or (vi) a change in the Board’s recommendation regarding the merger.
A copy of the voting agreement is attached as Annex D to the proxy statement. We encourage you to read the proxy statement, the accompanying annexes and any
documents incorporated by reference in the
proxy statement carefully and in their entirety.
Concurrently with the execution of the merger agreement, each of MED Healthcare and
Ephram Lahasky guaranteed to
the Company (a) the due, punctual and complete payment, observance, performance and
discharge of (i) Parent’s obligation to make the payments under the terms of the merger agreement, (ii) the payment of any losses incurred by
the Company as a result of any breach by Parent of its pre-closing obligations, agreements, representations
or warranties under the merger agreement and (iii) the payment to
the Company of its reasonable costs and expenses (including reasonable attorney’s fees) incurred in connection with enforcing its rights under the merger agreement or the guaranty; and
(b) the performance and discharge of all other obligations and covenants of Parent pursuant to the merger agreement; provided that if Parent becomes obligated to pay the Parent termination fee, such guaranty will be limited to Parent’s obligations to
pay such fee in accordance with the terms of the merger agreement. The guaranties will terminate as of the earliest to occur of (x) immediately following the occurrence of the closing of the merger, which termination shall be automatic, without any
further action by either guarantor or
the Company; and (y) the time at which either guarantor has indefeasibly paid in full and performed all of the obligations under the guaranty.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company is authorized to issue 20,000,000 shares of common stock and 1,000,000 shares of preferred stock. As of the record date, there were 6,949,104 shares of common stock outstanding and no
shares of preferred stock outstanding. The following table shows, as of
October 5, 2021 the amount of common stock beneficially owned (unless otherwise indicated) by (a) each director; (b) each of the named executive officers; (c) all of the
Company’s directors and executive officers as a group; and (d) each shareholder known by
the Company to be the beneficial owners of more than 5% of the outstanding shares of common stock. Based on information furnished by the owners and except as
otherwise noted,
the Company believes that the beneficial owners of the shares listed below, have, or share with a spouse, voting and investment power with respect to the shares. The address for all of the persons listed below is 1621 Galleria
Boulevard,
Brentwood,
Tennessee 37027, except as otherwise listed in the table below.
| |
|
Common Stock Beneficially Owned
|
|
|
Name
|
|
Number (1)
|
|
|
Percent (2)
|
|
|
|
|
|
1,284,857
|
|
|
|
18.5
|
%
|
|
Osmium Partners, LLC (4)
300 Drakes Landing Road, Suite 172
|
|
|
500,344
|
|
|
|
7.2
|
%
|
|
Central Funding, LLC (5)
700 Chappell Road
|
|
|
725,000
|
|
|
|
10.4
|
%
|
|
John F. McMullan and Camden Real Estate Company (6)
1175 Peachtree Street, Suite 350
|
|
|
372,565
|
|
|
|
5.4
|
%
|
|
|
|
|
578,486
|
|
|
|
8.3
|
%
|
|
CI Investments Inc.(8)
2 Queen Street East
Twentieth Floor
Toronto, Ontario, Canada
M5C 3G7
|
|
|
373,952
|
|
|
|
5.4
|
%
|
|
MCS Plan (9)
600 Broadway
|
|
|
363,017
|
|
|
|
5.2
|
%
|
|
|
|
|
298,423
|
|
|
|
4.3
|
%
|
|
|
|
|
55,531
|
|
|
|
*
|
|
|
|
|
|
50,995
|
|
|
|
*
|
|
|
Kerry D. Massey (13)
|
|
|
42,792
|
|
|
|
*
|
|
|
Rebecca B. Bodie (14)
|
|
|
35,295
|
|
|
|
*
|
|
|
Robert A. McCabe, Jr. (15)
|
|
|
28,219
|
|
|
|
*
|
|
|
Ben R. Leedle, Jr. (16)
|
|
|
23,048
|
|
|
|
*
|
|
| |
|
|
|
|
|
|
|
|
|
All directors and executive officers as a group (9 persons) (17)
|
|
|
2,397,646
|
|
|
|
34.3
|
%
|
______________
|
(1) |
Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to community property laws, where applicable.
|
|
(2) |
The percentages shown are based on 6,949,104 shares of common stock outstanding plus, as to each individual and group listed, the number of shares of common stock deemed to be owned by such holder pursuant to Rule 13d-3 under the Exchange
Act, assuming exercise of options or SOSARs held by such holder that are exercisable within 60 days of October 5, 2021. |
|
(3) |
Mr. McCurdy’s shares include 15,000 shares owned by dependent children, 7,500 owned by his spouse and 1,017,600 owned by Marlin Capital Partners, LLC of which Mr. McCurdy is the Managing Partner. Includes 4,112 shares of restricted stock.
|
|
(4) |
Based solely on a Form 4 filed by Osmium Partners, LLC on September 8, 2021. Includes 270,166 shares owned by Osmium Capital, LP, 141,625 shares owned by Osmium Capital II, LP, and 88,553 shares owned by Osmium Spartan, LP. |
|
(5) |
Based solely on a Schedule 13G/A filed by Central Funding, LLC and Steven F. White on October 30, 2019. |
|
(6) |
Based solely on Schedule 13D filed by John F. McMullan and Camden Real Estate Company on September 21, 2021. Includes 324,699 shares owned by John F. McMullan and 47,866 shares owned by Camden Real Estate Company; all of which were
included in the September 21, 2021, 13D as part of a group. |
|
(7) |
Ms. Morgan’s shares include 555,438 owned by a partnership controlled by Ms. Morgan. Includes 15,000 shares purchasable upon exercise of options and SOSARs, and 4,001 shares of restricted stock.
|
|
(8) |
Based solely on a Schedule 13G filed by CI Investments Inc. on February 4, 2021. |
|
(10) |
Includes 63,334 shares of restricted stock. Ownership does not include 26,698 restricted share units purchased in March 2020 and 2021 in lieu of cash bonuses. Restricted share units will be converted to shares and delivered in March 2022
and 2023, respectively.
|
|
(11) |
Mr. Brame’s shares include 2,450 shares owned by his spouse. Includes 4,001 shares of restricted stock. Also includes 250 shares held in a trust for the benefit of his grandson, of which Mr. Brame disclaims beneficial ownership.
|
|
(12) |
Includes 4,112 shares of restricted stock.
|
|
(13) |
Includes 30,001 shares of restricted stock. Ownership does not include 16,764 restricted share units purchased in March 2020 and 2021 in lieu of cash bonus. Restricted share units will be converted to shares and delivered in March 2022 and
2023, respectively.
|
|
(14) |
Includes 30,000 shares of restricted stock. Ownership does not include 7,479 restricted share units purchased in March 2021 in lieu of cash bonus. Restricted share units will be converted to shares and delivered in March 2023.
|
|
(15) |
Includes 15,000 shares purchasable upon exercise of options and SOSARs, and 4,001 shares of restricted stock.
|
|
(16) |
Includes 15,000 shares purchasable upon exercise of options and SOSARs, and 4,001 shares of restricted stock.
|
|
(17) |
Includes 45,000 shares purchasable upon exercise of options and SOSARs, and 147,563 shares of restricted stock.
|
General
Under the DGCL, you have the right to demand appraisal and to receive payment in cash for the fair value of your shares of common stock as determined by the Delaware Court of Chancery, together with
interest, if any, as determined by the Court, in lieu of the consideration you would otherwise be entitled to pursuant to the merger agreement, subject to the requirements and limitations set forth in Section 262 of the DGCL described herein. These
rights are known as appraisal rights. Stockholders electing to exercise appraisal rights must comply with the provisions of Section 262 of the DGCL in order to perfect such rights. Strict compliance with the statutory procedures is required to
perfect appraisal rights under Delaware law.
This section is intended as a brief summary of the material provisions of Delaware law pertaining to appraisal rights. The following discussion, however, is not a complete summary of the law
pertaining to appraisal rights under the DGCL and is qualified in its entirety by the full text of Section 262 of the DGCL that is attached as Annex C to this proxy statement and
incorporated by reference herein. All references in Section 262 of the
DGCL to
“stockholder” are to the record holder of the shares of common stock of
the Company unless otherwise indicated. The following discussion does not constitute any legal or other advice, nor does it constitute a recommendation as to whether or
not a Company stockholder should exercise its right to seek appraisal under Section 262 of the DGCL.
Subject to certain exceptions specified in Section 262 of the DGCL and summarized below, holders of shares of common stock who: (1) submit a written demand for appraisal of such stockholder’s shares
to
the Company prior to the vote on the adoption of the merger agreement; (2) do not vote in favor of the adoption of the merger agreement; (3) continuously are the record holders of such shares through the effective time; and (4) otherwise comply
with the applicable procedures and requirements set forth in Section 262 of the DGCL will be entitled to have their shares appraised by the Delaware Court of Chancery and receive payment in cash of the
“fair value” of such shares (as determined by
the Delaware Court of Chancery, exclusive of any element of value arising from the accomplishment or expectation of the merger) as of the completion of the merger instead of the merger consideration. Any such Company stockholder awarded
“fair value”
for the holder’s shares by the court would receive payment of that fair value in cash, together with interest, if any, in lieu of the right to receive the merger consideration. It is possible that any such
“fair value” as determined by the Delaware
Court of Chancery may be more or less than, or the same as, that which Company stockholders will receive pursuant to the merger agreement.
Section 262 of the DGCL requires that stockholders as of the record date for notice of the special meeting to vote on the adoption of the merger agreement for whom appraisal rights are available be
notified not less than 20 days before the special meeting. A copy of Section 262 of the DGCL must be included with such notice.
This proxy statement constitutes our notice to the Company’s stockholders of the
availability of appraisal rights in connection with the merger in compliance with the requirements of Section 262 of the DGCL and a copy of the applicable statutory provisions is attached as Annex C to this proxy statement.Stockholders who wish to exercise appraisal rights or who wish to preserve the right to do so should review the following summary and Annex C carefully. Failure to comply with the
procedures of Section 262 of the DGCL in a timely and proper manner will result in the loss of appraisal rights. In addition, the Delaware Court of Chancery will dismiss appraisal proceedings in respect of
the Company unless certain stock ownership
conditions are satisfied by
the Company stockholders seeking appraisal. Because of the complexity of the procedures for exercising the right to seek appraisal, stockholders who wish to exercise appraisal rights are urged to consult with their own
legal and financial advisors in connection with compliance under Section 262 of the DGCL. A Company stockholder who loses his, her or its appraisal rights will be entitled to receive the per share price pursuant to the merger agreement without
interest.
How to Exercise and Perfect Your Appraisal Rights
If you are a Company stockholder and wish to exercise the right to seek an appraisal of your shares of common stock, you must satisfy each of the following conditions:
You must deliver to
the Company a written demand for appraisal before the vote on the merger agreement at the special meeting. This written demand for appraisal must be in addition to and separate
from any proxy or vote abstaining from or voting against the adoption and approval of the merger agreement and the merger. Voting against or failing to vote for the adoption and approval of the merger agreement and the merger by itself does not
constitute a demand for appraisal within the meaning of Section 262 of the DGCL. The demand must reasonably inform us of the identity of the stockholder and the intention of the stockholder to demand appraisal of his, her or its shares. A
stockholder’s failure to make a written demand for appraisal before the vote with respect to the merger is taken will constitute a waiver of appraisal rights;
You must not vote in favor of, or consent in writing to, the adoption of the merger agreement. A vote in favor of the adoption and approval of the merger agreement and merger, by proxy submitted by
mail, over the Internet or by telephone, will constitute a waiver of your appraisal rights in respect of the shares so voted and will nullify any
previously filed written demands for appraisal. A proxy which does not contain voting instructions will,
unless revoked, be voted in favor of the adoption and approval of the merger agreement and the merger. Therefore, a stockholder who submits a proxy and who wishes to exercise appraisal rights must instruct the proxy to vote against the adoption of
the merger agreement and the merger or abstain from voting on the adoption of the merger agreement and the merger;
You must continuously hold your shares of common stock from the date of making the demand through the effective time of the merger. You will lose your appraisal rights if you transfer the shares
before the effective time of the merger;
Any stockholder who has complied with the requirements of Section 262 of the DGCL (or any person who is the beneficial owner of shares of common stock held either in a voting trust or by a nominee on
behalf of such person and for which such record holder has complied with such requirements) or
the Company must file a petition in the Delaware Court of Chancery requesting a determination of the fair value of the shares within 120 days after the
effective time of the merger.
The Company is under no obligation to file any petition and has no present intention of doing so; and
You must otherwise comply with the applicable procedures and requirements set forth in Section 262 of the DGCL.
If you fail to comply with any of these conditions and the merger is completed, you will be entitled to receive the merger consideration, but you will have no appraisal rights with respect to your
shares of common stock.
Voting during the special meeting or by proxy, against, abstaining from voting on or failing to vote on the adoption of the merger agreement will not constitute a written demand for appraisal as
required by Section 262 of the DGCL. The written demand for appraisal is in addition to and separate from any proxy or vote. However, you must not vote your shares during the special meeting or by proxy in favor of the adoption of the merger
agreement in order to exercise your appraisal rights with respect to such shares.
Who May Exercise Appraisal Rights
Only a holder of record of shares of common stock issued and outstanding immediately prior to the effective time of the merger may assert appraisal rights for the shares of common stock registered in
that holder’s name. A demand for appraisal must be executed by or on behalf of the stockholder of record. The demand should set forth, fully and correctly, the stockholder’s name as it appears on the stock certificates (or in the stock ledger). The
demand must reasonably inform
the Company of the identity of the stockholder and that the stockholder intends to demand appraisal of his, her or its common stock. Beneficial owners who do not also hold their shares of common stock of record may not
directly make appraisal demands to
the Company. The beneficial owner must, in such cases, have the holder of record, such as a bank, broker or other nominee, submit the required demand in respect of those shares of common stock of record. A holder of
record, such as a bank, broker or other nominee, who holds shares of common stock as a nominee or intermediary for others, may exercise his, her or its right of appraisal with respect to the shares of common stock held for one or more beneficial
owners, while not exercising this right for other beneficial owners. In that case, the written demand should state the number of shares of common stock as to which appraisal is sought. Where no number of shares of common stock is expressly mentioned,
the demand will be presumed to cover all shares of common stock held in the name of the holder of record.
If you hold your shares in bank or brokerage accounts or other nominee forms, and you wish to exercise appraisal rights, you are urged to consult with your bank, broker or nominee
to determine the appropriate procedures for the bank, brokerage firm or other nominee to make a demand for appraisal of those shares. If you have a beneficial interest in shares held of record in the name of another person, such as a nominee or
intermediary, you must act promptly to cause the holder of record to follow properly and in a timely manner the steps necessary to perfect your appraisal rights. If you hold your shares through a bank or brokerage who in turn holds the shares through
a central securities depository nominee, such as the Depository Trust Company, a demand for appraisal of such shares must be made by or on behalf of the depository nominee and must identify the depository nominee as the holder of record.
If you own shares of common stock jointly with one or more other persons, as in a joint tenancy or tenancy in common, demand for appraisal must be executed by or for you and all other joint owners.
An authorized agent, including an agent for two or more joint owners, may execute the demand for appraisal for a stockholder of record; however, the agent must identify the holder or holders of record and expressly disclose the fact that, in
exercising the demand, such person is acting as agent for the holder or holders of record. If you hold shares of common stock through a nominee or intermediary who in turn holds the shares through a central securities depository nominee such as the
Depository Trust Company, a demand for appraisal of such shares must be made by or on behalf of the depository nominee and must identify the depository nominee as holder of record.
If you elect to exercise appraisal rights under Section 262 of the DGCL, you should mail or deliver a written demand to:
Diversicare Healthcare Services, Inc.
1621 Galleria Boulevard
Attention: Investor Relations
Surviving Corporation’s Actions After Completion of the Merger
If the merger is consummated, the surviving corporation will give written notice of the effective time of the merger within ten days after the effective time of the merger to Company stockholders who
did not vote in favor of the adoption of the merger agreement and who made a written demand for appraisal in accordance with Section 262 of the DGCL. At any time within 60 days after the effective time of the merger, any Company stockholder that made
a demand for appraisal but did not commence an appraisal proceeding or join in such a proceeding as a named party will have the right to withdraw the demand and to accept the per share price in accordance with the merger agreement for his, her or its
shares of common stock, but after such 60-day period a demand for appraisal may be withdrawn only with the written approval of the surviving corporation. In addition, no appraisal proceeding in the Delaware Court of Chancery will be dismissed as to
any stockholder without the approval of the Delaware Court of Chancery, which approval may be conditioned on the terms the Delaware Court of Chancery deems just. However, this provision will not affect the right of any Company stockholder that has
made an appraisal demand but who has not commenced an appraisal proceeding or joined such proceeding as a named party to withdraw such stockholder’s demand for appraisal and to accept the terms and the merger consideration offered in the merger
within 60 days after the effective time of the merger. Within 120 days after the effective time of the merger, but not thereafter, either a record holder or a beneficial owner of common stock, provided such person has complied with the requirements
of Section 262 of the DGCL and is otherwise entitled to appraisal rights, or the surviving corporation may commence an appraisal proceeding by filing a petition in the Delaware Court of Chancery, with a copy served on the surviving corporation in the
case of a petition filed by a stockholder or beneficial owner, demanding an appraisal of the value of the shares of common stock held by all stockholders who have properly demanded appraisal. The surviving corporation is under no obligation to file
an appraisal petition and has no present intention of doing so. If you desire to have your shares appraised, you should initiate any petitions necessary for the perfection of your appraisal rights within the time periods and in the manner prescribed
in Section 262 of the DGCL.
Within 120 days after the effective time of the merger, any stockholder or beneficial owner who has complied with the provisions of Section 262 of the DGCL will be entitled to receive from the
surviving corporation, upon written request, a statement setting forth the aggregate number of shares of common stock not voted in favor of the adoption of the merger agreement and with respect to which
the Company has received demands for appraisal,
and the aggregate number of holders of those shares. The surviving corporation must mail this statement to you within the later of (1) ten days after receipt by the surviving corporation of the request therefor or (2) ten days after expiration of the
period for delivery of demands for appraisal. If you are the beneficial owner of shares of stock of common stock held in a voting trust or by a nominee or intermediary on your behalf you may, in your own name, file an appraisal petition or request
from the surviving corporation the statement described in this paragraph.
If a petition for appraisal is duly filed by you or another holder of record or beneficial owner of common stock who has properly exercised his, her or its appraisal rights in accordance with the
provisions of Section 262 of the DGCL, and a copy of the petition is delivered to the surviving corporation, the surviving corporation will then be obligated, within 20 days after receiving service of a copy of the petition, to provide the Delaware
Court of Chancery with a duly verified list containing the names and addresses of all holders who have demanded an appraisal of their shares and with whom agreements as to the value of their shares have not been reached by the surviving corporation.
The Delaware Court of Chancery will then determine which stockholders are entitled to appraisal rights and may require the stockholders demanding appraisal who hold certificated shares to submit their stock certificates to the Register in Chancery
for notation thereon of the pendency of the appraisal proceedings, and the Delaware Court of Chancery may dismiss the proceedings as to any stockholder who fails to comply with such direction. The Delaware Court of Chancery will also dismiss
proceedings as to all Company stockholders if neither of the ownership thresholds described above is met. Where proceedings are not dismissed or the demand for appraisal is not successfully withdrawn, the appraisal proceeding will be conducted as to
the shares of common stock owned by stockholders entitled to an appraisal, in accordance with the rules of the Delaware Court of Chancery, including any rules specifically governing appraisal proceedings. The Delaware Court of Chancery will
thereafter determine the fair value of the shares of common stock at the effective time of the merger held by all Company stockholders who have properly perfected appraisal rights, exclusive of any element of value arising from the accomplishment or
expectation of the merger, together with interest, if any. Unless the Delaware Court of Chancery in its discretion determines otherwise for good cause shown, interest from the effective time of the merger through the date of payment of the judgment
will be compounded quarterly and will accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective time of the merger and the date of payment of the judgment.
However, the surviving corporation has the right, at any point prior to the Delaware Court of Chancery’s entry of judgment in the proceedings, to make a voluntary cash payment to each stockholder entitled to appraisal. If the surviving corporation
makes a voluntary cash payment pursuant to subsection (h) of Section 262 of the DGCL, interest will accrue thereafter only on the sum of (i) the difference, if any, between the amount paid by the surviving corporation in such voluntary cash payment
and the fair value of the shares as determined by the Delaware Court of Chancery and (ii) interest accrued on the amount of the voluntary cash payment before such payment was made, unless such interest was paid at the time the voluntary cash payment
is made. When the value is determined, the Delaware Court of Chancery will direct the payment of such value, less any amounts already paid in a voluntary cash payment, with interest thereon, if any, to
the Company stockholders entitled to receive the
same, forthwith in the case of uncertificated stockholders or upon surrender by certificated stockholders of their stock certificates to the surviving corporation.
In determining the fair value, the Delaware Court of Chancery is required to take into account all relevant factors. In Weinberger v. UOP, Inc., the Delaware Supreme Court discussed the factors that
could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be
considered and that “[f]air price obviously requires consideration of all relevant factors involving the value of a company.”
The Delaware Supreme Court has stated that, in making this determination of fair value, the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise
and any other factors which were known, or which could be ascertained as of the date of the merger which throw any light on future prospects of the merged corporation. Section 262 of the DGCL provides that fair value is to be “exclusive of any
element of value arising from the accomplishment or expectation of the merger.” In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a “narrow exclusion [that] does not encompass known elements of value,”
but that rather applies only to the speculative elements of value arising from the accomplishment or expectation of the merger. In Weinberger, the Delaware Supreme Court construed Section 262 of the DGCL to mean that “elements of future value,
including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered.”
You should be aware that the fair value of your shares of common stock as determined under Section 262 of the DGCL could be more than, the same as, or less than the value that you are entitled to
receive under the terms of the merger agreement and that an opinion of an investment banking firm as to the fairness from a financial point of view of the consideration payable in a merger is not an opinion as to, and does not in any manner address,
fair value under Section 262 of the DGCL.
Moreover, neither
the Company nor Parent anticipates offering more than the per share price to any stockholder exercising appraisal rights and reserves the right to make a voluntary cash payment
pursuant to subsection (h) of Section 262 of the DGCL and to assert, in any appraisal proceeding, that, for purposes of Section 262, the
“fair value” of a share of common stock is less than the per share price. No representation is made as to the
outcome of the appraisal of fair value as determined by the Delaware Court of Chancery.
If no party files a petition for appraisal within 120 days after the effective time or if neither of the ownership thresholds above has been satisfied in respect of such shares, then all Company
stockholders will lose the right to an appraisal and will instead receive the per share price described in the merger agreement, without interest thereon, less any withholding taxes.
The Delaware Court of Chancery may determine the costs of the appraisal proceeding and may allocate those costs to the parties as the Delaware Court of Chancery determines to be equitable under the
circumstances. Each Company stockholder party to the appraisal proceeding is responsible for its own attorneys’ fees and expert witnesses’ fees and expenses, although, upon application of a stockholder, the Delaware Court of Chancery may order all or
a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts, to be charged pro rata against the value of all shares
of common stock entitled to appraisal.
If you have duly demanded an appraisal in compliance with Section 262 of the DGCL you may not, on or after the effective time of the merger, vote the shares subject to the demand for any purpose or
receive any dividends or other distributions on those shares, except dividends or other distributions payable to holders of record of common stock as of a record date prior to the effective time of the merger.
If you have not commenced an appraisal proceeding or joined such a proceeding as a named party you may withdraw a demand for appraisal and accept the per share merger consideration by delivering a
written withdrawal of the demand for appraisal and an acceptance of the merger to the surviving corporation, except that any attempt to withdraw made more than 60 days after the effective time of the merger will require written approval of the
surviving corporation, and no appraisal proceeding in the Delaware Court of Chancery will be dismissed as to any stockholder without the approval of the Delaware Court of Chancery. Such approval may be conditioned on the terms the Delaware Court of
Chancery deems just. However, this provision will not affect the right of any Company stockholder that has made an appraisal demand but who has not commenced an appraisal proceeding or joined such proceeding as a named party to withdraw such
stockholder’s demand for appraisal and to accept the terms and the merger consideration offered in the merger within 60 days after the effective time of the merger. If you fail to perfect, successfully withdraw your demand for appraisal, or lose the
appraisal right, your shares of common stock will be converted into the right to receive the per share price, without interest thereon, less any withholding taxes.
Failure to follow the steps required by Section 262 of the DGCL for perfecting appraisal rights may result in the loss of your appraisal rights. In that event, you will be entitled to receive the per
share price for your shares of common stock in accordance with the merger agreement without interest. In view of the complexity of the provisions of Section 262 of the DGCL, if you are a Company stockholder and are considering exercising your
appraisal rights under the DGCL, you are urged to consult your own legal and financial advisor.
The process of demanding and exercising appraisal rights requires compliance with the prerequisites of Section 262 of the DGCL. If you wish to exercise your appraisal rights, you
are urged to consult with your own legal and financial advisors in connection with compliance under Section 262 of the DGCL. To the extent there are any inconsistencies between the foregoing summary and Section 262 of the DGCL, the DGCL will govern.
As permitted under the Exchange Act, in those instances where we are mailing a printed copy of this proxy statement, only one copy of this proxy statement is being delivered to stockholders that
reside at the same address and share the same last name, unless such stockholders have notified
the Company of their desire to receive multiple copies of this proxy statement. This practice, known as
“householding,” is designed to reduce duplicate
mailings and save significant printing and postage costs as well as natural resources.
The Company will promptly deliver, upon oral or written request, a separate copy of this proxy statement to any stockholder residing at an address to which only one copy was mailed. Requests for
additional copies should be sent by written request to Diversicare Healthcare Services, Inc., 1621 Galleria Boulevard,
Brentwood,
Tennessee 37027, Attention: Investor Relations, or via telephone to (
615) 771-7575. Stockholders residing at the same
address and currently receiving multiple copies of this proxy statement may send a written request to the address above to request that only a single copy of a proxy statement be mailed in the future.
If the merger is consummated, we will have no public stockholders and there will be no public participation in any future meetings of our stockholders. However, if the merger is not consummated, our
stockholders will continue to be entitled to attend and participate in meetings of our stockholders.
If a stockholder wishes to present a proposal pursuant to Rule 14a-8 promulgated under the Exchange Act for consideration at an annual meeting of stockholders, the proposal must be received at the
Company’s principal executive offices not less than 120 calendar days before the date of
the Company’s proxy statement released to stockholders in connection with the previous year’s annual meeting. However, if the date of the annual meeting has been
changed by more than 30 days from the date of the previous year’s annual meeting, then the deadline is a reasonable time before
the Company begins to print and send its proxy materials. While the Board will consider stockholder proposals, we reserve
the right to omit from the proxy statement stockholder proposals that we are not required to include under the Exchange Act, including Rule 14a-8.
If a stockholder wishes to propose a nomination of persons for election to the Board or present a proposal at an annual meeting but does not wish to have the proposal considered for inclusion in our
proxy statement and proxy card, our
bylaws establish an advance notice procedure for such nominations and proposals. Stockholders at an annual meeting may only consider proposals or nominations specified in the notice of meeting or brought before the
meeting by or at the direction of the Board or by a stockholder of record on the record date for the meeting, who is entitled to vote at the meeting and who has delivered timely notice in proper form to our corporate secretary of the stockholder’s
intention to bring such business before the meeting.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the Exchange Act. We file reports, proxy statements and other information with the SEC. The SEC maintains an internet site that contains
our reports, proxy and information statements and other information at www.sec.gov.
The Company will make available a copy of the documents we file with the SEC on the
“Investors” section of our
website at
www.dvcr.com as soon as reasonably practicable after filing these materials
with the SEC. The information provided on our
website is not part of this proxy statement, and therefore is not
incorporated by reference. Copies of any of these documents, excluding any exhibits to those documents, unless the exhibit is
specifically
incorporated by reference into this proxy statement, may be obtained free of charge either on our
website or by contacting Diversicare Healthcare Services, Inc., 1621 Galleria Boulevard,
Brentwood,
Tennessee 37027, Attention: Investor
Relations.
The SEC allows us to
“incorporate by reference” information into this proxy statement, which means that we can disclose important information to you by referring to other documents filed separately
with the SEC. The
information incorporated by reference is deemed to be part of this proxy statement, except for any information superseded by information in this proxy statement or
incorporated by reference subsequent to the date of this proxy
statement. This proxy statement incorporates by reference the documents set forth below that we have
previously filed with the SEC. We also
incorporate by reference into this proxy statement additional documents that
the Company may file with the SEC
under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, from the date of this proxy statement until the date of the special meeting; provided, however, that we are not incorporating by reference any additional documents or information furnished
and not filed with the SEC. These documents contain important information about us and our financial condition and are
incorporated by reference into this proxy statement.
The following Company filings with the SEC are
incorporated by reference (in each case excluding any information furnished and not filed):
|
• |
the description of our common stock contained the Registration Statement on Form 8-A filed with the SEC on March 29, 1995, including any amendments or reports filed for the purpose of updating such description. |
Statements contained in this proxy statement regarding the contents of any
contract or other document, are not necessarily complete and each such statement is qualified in its entirety by reference
to that
contract or other document filed as an exhibit with the SEC.
The information contained in this proxy statement speaks only as of the date indicated on the cover of this proxy statement unless the information specifically indicates that another date applies.
We have not authorized anyone to give you any information or to make any representation about the proposed merger or
the Company that is different from or adds to the information
contained in this proxy statement or in the documents we have publicly filed with the SEC. Therefore, if anyone does give you any different or additional information, you should not rely on it.
BY AND AMONG
DAC ACQUISITION LLC,
DVCR ACQUISITION CORPORATION
AND
DIVERSICARE HEALTHCARE SERVICES, INC.
THIS AGREEMENT AND PLAN OF MERGER (this “
Agreement”) is made and entered into as of
August 26,
2021, by and among
DAC ACQUISITION LLC, a Delaware limited liability company (“
Parent”),
DVCR ACQUISITION CORPORATION, a
Delaware corporation and a wholly owned Subsidiary of Parent (“
Merger Sub”), and
DIVERSICARE HEALTHCARE SERVICES, INC., a Delaware corporation (the “
Company”).
RECITALS
A.
The Company’s outstanding capital stock consists of shares of
common stock, par value $0.01 per share (“
Company Common Stock”).
B.
Upon the terms and conditions set forth herein and in
accordance with the General Corporation Law of the State of Delaware (the “
DGCL”), Merger Sub will be merged with and into
the Company (the “
Merger”) with
the Company as
the surviving corporation of the Merger (the “
Surviving Corporation”), whereby each share (except as otherwise provided herein) of Company Common Stock not owned directly by Parent, Merger Sub or
the Company
will be converted into the right to receive the Merger Consideration (as defined below), net to the seller in cash, without interest, subject to any withholding of Taxes required by applicable Law (as defined below), upon the terms and subject to the
conditions of this Agreement.
C.
The Board of Directors of
the Company (the “
Company Board”) has (i) approved and declared advisable this Agreement and the Merger, (ii) determined that the Merger is in the best interests of
the Company and its stockholders, (iii) directed that this
Agreement be submitted to the stockholders of
the Company for adoption and (iv) recommended that
the Company’s stockholders vote in favor of the adoption of this Agreement.
D.
The Manager of Parent has, on the terms and subject to the
conditions set forth herein, (i) determined that the Transactions (as defined below) are in the best interests of Parent, and (ii) authorized and approved the execution, delivery and performance of this Agreement by Parent.
E.
The Board of Directors of Merger Sub has (i) approved and
declared advisable this Agreement and the Merger, (ii) determined that the Merger is in the best interests of Merger Sub and its stockholder, (iii) directed that this Agreement be submitted to the stockholder of Merger Sub for adoption and (iv)
recommended that Merger Sub’s stockholder vote in favor of the adoption of this Agreement.
F.
As a material inducement to, and as a condition to,
the Company
entering into this Agreement, concurrently with the execution of this Agreement, Mordy Lahasky and MED Healthcare Partners LLC (the “
Guarantors”) have entered into guarantees, dated as of the date hereof,
guaranteeing Parent’s and Merger Sub’s obligations under this Agreement, subject to the terms and conditions contained therein (the
“Parent Guarantee”).
G.
As a material inducement to, and as a condition to, Parent and
Merger Sub entering into this Agreement, concurrently with the execution of this Agreement, Parent is entering into a voting agreement (the “
Voting Agreement”) with
Chad A. McCurdy,
Ben R. Leedle Jr., James R.
McKnight, Jr.,
Leslie K. Morgan,
Richard M. Brame,
Robert Z. Hensley and
Robert A. McCabe Jr.AGREEMENT
The parties to this Agreement, intending to be legally bound, agree as follows:
(a) As used herein, the following terms have the following meanings:
“
Acquisition Inquiry” means an inquiry, indication of interest or request for information (other than an inquiry, indication of interest
or request for information made or submitted by or on behalf of Parent or any of its
Subsidiaries) that could reasonably be expected to lead to an Acquisition Proposal.
“
Acquisition Proposal” means any bona fide indication of interest, proposal or offer from any Third Party relating to or reasonably
expected to lead to (i) the acquisition of 20% or more of any class of the equity interests in
the Company (by vote or by value) by any Third Party, (ii) any merger, consolidation, business combination, reorganization, share exchange, sale of assets,
recapitalization, equity investment, joint venture, liquidation, dissolution or other transaction that would result in any Third Party acquiring assets (including capital stock of or interest in any Subsidiary of
the Company) representing, directly
or indirectly, 20% or more of the net revenues, net income or assets of the Acquired Companies, taken as a whole, (iii) the acquisition (whether by merger, consolidation, equity investment, share exchange, joint venture or otherwise) by any Third
Party, directly or indirectly, of any class of equity interest in any Entity that holds assets representing, directly or indirectly, 20% or more of the net revenues, net income or assets of the Acquired Companies, taken as a whole, (iv) any tender
offer or exchange offer, as such terms are defined under the Exchange Act, that, if consummated, would result in any Third Party beneficially owning 20% or more of the outstanding shares of Company Common Stock and any other voting securities of the
Company (or instruments convertible to or exchangeable for 20% or more of such outstanding shares or securities), (v) any merger, consolidation, share exchange, business combination, joint venture, recapitalization, reorganization or other similar
transaction involving
the Company pursuant to which the stockholders of
the Company immediately preceding such transaction hold less than 80% of the equity interests in the surviving or resulting Entity of such transaction or (vi) any combination of
the foregoing.
“ADA” means the Americans with Disabilities Act.
“ADEA” means the Age Discrimination in Employment Act.
“
Affiliate” of any Person means another Person that directly or indirectly, through one or more intermediaries, controls, is controlled
by, or is under common control with, such first Person. For purposes of the immediately preceding sentence, the term
“control” (including, with correlative meanings, the terms
“controlling,” “controlled by” and
“under common control with”) as used
with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by
Contract or otherwise.
“Anti-Corruption Laws” means all applicable anti-bribery and anti-corruption Laws, including the Foreign Corrupt Practices Act of 1977 (15
U.S.C. §§ 78dd-1 et seq.), UK Bribery Act 2010, and Laws enacted by member states and signatories implementing the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.
“Antitrust Law” means any antitrust, unfair competition, merger or acquisition notification, or merger or acquisition control Law in any
applicable jurisdictions, whether federal, state, local or foreign.
“Appraisal Shares” means any shares of Company Common Stock outstanding immediately prior to the Effective Time that are held by a holder
who did not vote in favor of the adoption of this Agreement or the Merger (or consent thereto in writing) and is entitled to demand and properly demands appraisal of such shares pursuant to, and who complies in all respects with, Section 262 of the
DGCL.
“Business Day” means any day other than a Saturday, Sunday or a day on which banking institutions in New York, New York are authorized or
obligated by Law or executive Order to be closed.
“Business Data” means data or information, and databases of data or information, in any format, in the possession, custody, or control of
any Acquired Company or Processed in the conduct of the business of the Acquired Companies or necessary for the conduct of the business of any Acquired Company, including all financial data related to the business of the Acquired Companies, and
Personal Data contained in any databases that are Processed in or necessary for the conduct of the business of any Acquired Company.
“Census” means the number of beds of the Owned Healthcare Facilities occupied by Verified Residents.
“Code” means the Internal Revenue Code of 1986.
“Company Benefit Plan” means each “employee benefit plan,” as defined in Section 3(3) of ERISA, and each other stock bonus, stock
purchase, stock option, restricted stock, stock appreciation right or other equity or equity-based, deferred-compensation, employment, consulting, retirement, welfare-benefit, bonus, incentive, commission, change in control, retention, separation,
severance, paid time off, or fringe benefit plan which, in each case, is sponsored, maintained or contributed by the Acquired Companies or with respect to which any Acquired Company has any material Liability.
“Company Compensatory Award” means each Company Option, Company Restricted Stock Award, Company RSU Award and Company Stock Appreciation
Right.
“
Company Disclosure Schedule” means
the Company Disclosure Schedule dated the date hereof and delivered by
the Company to Parent prior to
or simultaneously with the execution of this Agreement.
“Company Equity Incentive Plan” means the Diversicare Healthcare Services, Inc. 2010 Long-Term Incentive Plan, as in effect as of the date
hereof, including any amendments.
“Company Intellectual Property” means all Intellectual Property owned or purported to be owned by any of the Acquired Companies (including
any Company Marks and Company Copyrights).
“
Company Material Adverse Effect” means, with respect to each of the Acquired Companies, any Effect that, individually or when taken
together with all other Effects, is, or would reasonably be expected to be, materially adverse to the business, operations, assets, liabilities, financial condition, or results of operations of the Acquired Companies taken as a whole; provided that,
in no event shall any of the following arising after the date of this Agreement, alone or in combination, or any Effect to the extent any of the foregoing results from any of the following arising after the date of this Agreement, be taken into
account in determining whether there shall have occurred a Company Material Adverse Effect: (A) changes in
the Company’s stock price or trading volume, in and of themselves (but not, in each case, the underlying cause of such change, unless such
underlying cause would otherwise be excepted from this definition); (B) any failure by
the Company to meet, or changes to, published revenue, earnings or other financial projections (whether internal or external), or any failure by
the Company to
meet any internal budgets, plans or forecasts of revenue, earnings or other financial projections, in each case in and of itself (but not, in each case, the underlying cause of such failure, unless such underlying cause would otherwise be excepted
from this definition); (C) general business, economic or political conditions in the United States or any other country or region in the world, or changes therein; (D) conditions in the financial, credit, banking, capital or currency markets in the
United States or any other country or region in the world, or changes therein, including (1) changes in interest rates in the United States or any other country and changes in exchange rates for the currencies of any countries and (2) any suspension
of trading in securities, other than Company Securities (whether equity, debt, derivative or hybrid securities) generally on any securities exchange or over-the-counter market operating in the United States or any other country or region in the
world; (E) changes in general conditions in an industry in which the Acquired Companies operate; (F) acts of hostilities, war, sabotage or terrorism (including any outbreak, escalation or general worsening of any such acts of hostilities, war,
sabotage or terrorism) in the United States or any other country or region in the world; (G) earthquakes, hurricanes, tsunamis, tornadoes, floods, mudslides, wild fires or other natural or man-made disasters or acts of God or weather conditions in
the United States or any other country or region in the world, or any escalation of the foregoing; (H) any epidemic, pandemic or other similar outbreak (including continuation or escalation of the COVID‑19 pandemic) in the United States or any
country or region in the world where the Acquired Companies have material operations, or any escalation of the foregoing; (I) the execution or announcement of this Agreement or the pendency or consummation of the Transactions, including the impact
thereof on the relationships, contractual or otherwise, of the Acquired Companies with employees, customers, contractors, lenders, suppliers, vendors or partners, or the identity of Parent or any of its Affiliates as the acquirer of
the Company (it
being understood and agreed that this clause (I) shall not apply with respect to any representation or warranty the purpose of which is to address the consequences of the execution and delivery of this Agreement or the consummation of the
Transactions, or the performance of obligations hereunder or thereunder); (J) (1) any action taken by
the Company at the written request of Parent or with Parent’s written consent that is not expressly required to be taken by the terms of this
Agreement or (2) any action expressly required to be taken by
the Company by the terms of this Agreement and that are necessary for purposes of consummating the Merger; (K) changes in Law; (L) changes or proposed changes in GAAP or other accounting
standards or principles (or the enforcement or interpretation thereof); and (M) any Transaction Litigation which does not enjoin or otherwise restrain the Transaction; provided that, in each of the foregoing clauses (C), (D), (E), (F), (G), (H), (K)
and (L), such Effects referred to therein may be taken into account to the extent that the Acquired Companies are disproportionally affected relative to other similarly situated companies in the industry in which the Acquired Companies operate.
“
Company Option” means each outstanding option to purchase shares of Company Common Stock under
the Company Equity Incentive Plan.
“
Company Restricted Stock Awards” means the outstanding restricted stock of
the Company issued under
the Company Equity Incentive Plan.
“
Company RSU Awards” means the outstanding restricted stock units of
the Company issued under
the Company Equity Incentive Plan.
“Company Software” means all Software owned or purported to be owned by (and not licensed to) any of the Acquired Companies.
“
Company Stock Appreciation Rights” means the outstanding stock appreciation rights of
the company issued under
the Company Equity
Incentive Plan.
“
Confidentiality Agreement” means that certain Confidentiality and Non-Disclosure Agreement, effective as of
May 17, 2021, by and between
MED Healthcare Partners LLC and
the Company.
“
Contract” means any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, bond, mortgage,
indenture,
debenture, note, option, warrant, warranty, purchase order, license, permit, franchise, sublicense, insurance policy, benefit plan or legally binding commitment or undertaking of any nature.
“Copyrights” means, collectively, copyrights in both published and unpublished works (including without limitation copyright rights in all
compilations, databases and computer programs, Software, manuals and other documentation and all derivatives, translations, adaptations and combinations of the above) and registrations, applications for registration, and renewals of any of the
foregoing.
“
Credit Facilities” means, collectively, the credit facilities established under that certain (i) Fourth Amended and Restated Revolving
Loan and Security Agreement dated as of
October 14, 2020, by and among the certain of the
Subsidiaries, as Borrowers,
the Company, as Guarantor, and CIBC Bank USA, f/k/a The Private Bank and Trust Company, as Administrative Agent and Joint Lead
Arranger, CIT Bank N.A., as Collateral Agent and Joint Lead Arranger, and the other financial institutions party thereto as lenders; (ii) Third Amended and Restated Term Loan and Security Agreement dated as of
October 14, 2020, by and among certain
of the
Subsidiaries, as Borrowers,
the Company, as Guarantor, and CIBC Bank USA, f/k/a The Private Bank and Trust Company, as Administrative Agent and Joint Lead Arranger, CIT Bank N.A., as Collateral Agent and Joint Lead Arranger, and the other
financial institutions party thereto as lenders; and (iii) Amended and Restated Revolving Loan and Security Agreement dated as of
October 14, 2020, by and among the certain of the
Subsidiaries, as Borrowers,
the Company, as Guarantor, and CIBC Bank
USA, f/k/a The Private Bank and Trust Company, as Administrative Agent and Joint Lead Arranger, CIT Bank N.A., as Collateral Agent and Joint Lead Arranger, and the other financial institutions party thereto as lenders; and each as further amended,
restated, amended and restated, supplemented or otherwise modified from time to time.
“Effect” means any effect, change, event, occurrence, circumstance, condition, state of facts or development.
“Entity” means any corporation (including any non-profit corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any company limited by shares, limited liability company or joint stock company), firm, society or other enterprise, association or organization or entity (including any Governmental
Entity).
“Environmental Claims” means any and all Legal Proceedings, Orders or Liens by any Governmental Entity or other Person alleging
Liabilities arising out of, based on or related to (i) the presence, release or threatened release of, or exposure to, any Hazardous Materials at any location or (ii) violation of any Environmental Law.
“Environmental Law” means all Law concerning pollution or protection of the environment, including any such Law relating to the
manufacture, handling, transport, use, treatment, storage, disposal or release of or exposure of any Person to any Hazardous Materials.
“Environmental Permits” means all permits required to be obtained under applicable Environmental Law.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.
“
ERISA Affiliate” means any Entity, trade or business that is, or at any applicable time was, a member of a group described in Section
414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes
the Company or any other Acquired Company.
“ESPP” means the Diversicare Healthcare Services, Inc. 2008 Employee Stock Purchase Plan for Key Personnel, as amended.
“Exchange Act” means the Securities Exchange Act of 1934.
“
Excluded Party” means any Third Party from whom
the Company or any of its Representatives has received a bona fide written Acquisition
Proposal after the execution of this Agreement and prior to the end of the Go Shop Period that
the Company Board (or a duly authorized committee thereof) determines in good faith constitutes or is reasonably likely to result in a Superior Proposal;
provided that any Third Party shall immediately and irrevocably cease to be an Excluded Party (and the provisions of this Agreement applicable to Excluded Parties shall cease to apply with respect to such Person) if the Acquisition Proposal submitted
by such Third Party is withdrawn or terminated (it being understood that a modification of an Acquisition Proposal submitted by such Third Party shall not, in and of itself, be deemed to be a withdrawal or termination of an Acquisition Proposal
submitted by such Third Party).
“FLSA” means the Fair Labor Standards Act.
“FMLA” means the Family and Medical Leave Act.
“GAAP” means United States generally accepted accounting principles.
“Governmental Entity” means any international, supranational, or any domestic or foreign federal, territorial, state or local governmental
authority of any nature (including any government and any governmental agency, instrumentality, tribunal or commission, or any subdivision, department or branch of any of the foregoing) or body exercising or entitled to exercise any administrative,
executive, judicial, legislative, police, regulatory or taxing authority or power of any nature.
“Hazardous Materials” means all hazardous, toxic, explosive or radioactive chemicals, substances, wastes, contaminants or pollutants,
including petroleum or petroleum distillates, asbestos, polychlorinated biphenyls, radon gas, per- and polyfluoroalkyl substances, and all other chemicals, substances, wastes, contaminants or pollutants of any nature regulated, listed, defined or for
which Liability or standards of conduct (including remediation) may be imposed pursuant to any Environmental Law.
“Healthcare Facility” means any post-acute/skilled nursing facility, memory care/assisted living facility, home health facility, hospice
facility or other senior living or health care facility owned, leased, subleased, managed or operated by the Acquired Companies.
“Healthcare Laws” means all applicable Laws relating to the provision, administration and/or payment for healthcare services, including,
to the extent applicable (i) Title DVIII of the Social Security Act, 42 U.S.C. §§ 1395-1395lll (the Medicare statute); (ii) Title XIX of the Social Security Act, 42 U.S.C. §§ 1396-1396w-5 (the Medicaid Statute) and state Medicaid Laws; (iii) the
Federal Health Care Program Anti-Kickback Statute, 42 U.S.C. §§ 1320a-7b(b); (iv) the Federal False Claims Act, 31 U.S.C. §§ 3729-3733 (the “False Claims Act”); (v) the Program Fraud Civil Remedies Act, 31 U.S.C. §§ 3801-3812; (vi) the Federal Civil
Monetary Penalties Law, 42, U.S.C. §§ 1320a-7a and 1320a-7b; (vii) state anti-kickback, fee-splitting, self-referral and corporate practice of medicine laws; (viii) HIPAA; and (ix) licensure, permit or authorization laws relating to the provision or
administration of, or payment for, healthcare products or services.
“HIPAA” means the Health Insurance Portability and Accountability Act of 1996 (Pub. L. No. 104-191), as amended by the Health Information
Technology for Economic and Clinical Health Act (Pub. L. No. 111-5) and their implementing regulations set forth at 45 CFR Parts 160 – 164.
“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and the rules and regulations promulgated thereunder.
“
Indebtedness” means, as of any time, without duplication, (i) indebtedness for borrowed money or indebtedness issued in substitution or
exchange for borrowed money (including in respect of outstanding principal, accrued and unpaid interest, reimbursement, indemnities, prepayment premiums, breakage costs, expense reimbursements, penalties and other fees, charges, payments and expenses
related to such obligations), (ii) indebtedness evidenced by any note, bond, debenture or other debt security, (iii) any capitalized lease obligations, (iv) any obligations under interest rate swap, currency swap, forward currency or interest rate
Contracts or other interest rate or currency hedging arrangements, (v) all outstanding reimbursement obligations in respect of drawn letters of credit (but for the avoidance of doubt excluding any obligations in respect of undrawn letters of credit),
(vi) all obligations owed for all or any part of the deferred purchase price of property, including any earn-out obligations, purchase price adjustments and profit sharing arrangements from purchase and sale agreements, (vii) obligations under any
settlement, compromise or other stipulation with respect to any claim, dispute or Legal Proceeding, and (viii) all obligations of the type referred to in the clauses (i) through (vii) of this definition of
“Indebtedness” of any Person (other than any
Acquired Company) the payment of which any Acquired Company is responsible or liable, directly or indirectly, as obligor, guarantor, surety or otherwise, including any guarantee of such obligations. For the avoidance of doubt,
“Indebtedness” shall
not include any item that would otherwise constitute
“Indebtedness” that is (A) an obligation between an Acquired Company and any other Acquired Company, (B) an operating lease obligation, (C) a performance bond, banker acceptances or similar
obligations, (D) an undrawn letter of credit or (E) any deferred revenue.
“Independent Financial Advisor” means an independent financial advisor of nationally recognized reputation (it being understood that, for
purposes of this definition, BCA shall be deemed to be an independent financial advisor of nationally recognized reputation).
“Intellectual Property” means any and all of the following, and all rights in same, as they exist in any jurisdiction throughout the
world: (i) Patents; (ii) Marks; (iii) Copyrights; (iv) Trade Secrets; (v) rights of publicity and privacy; and (vi) any and all other intellectual property rights or proprietary rights recognized by applicable Law.
“IRS” means the United States Internal Revenue Service.
“
Knowledge”, whether or not capitalized, or any similar expression: (i) with respect to
the Company, means the actual knowledge of the Jay
McKnight, Chief Executive Officer, Rebecca B. Bodie, Chief Operating Officer, and Kerry Massey, Chief Financial Officer, in each case, after reasonable inquiry of those employees directly reporting to such Person; and (ii) with respect to Parent,
means the actual knowledge of
Ephram Lahasky and Eran Ratner.
“Law” means any federal, state, local, international, supranational or foreign statute, law, regulation, requirement, interpretation,
permit, license, approval, authorization, decision, directive, decree, rule, ruling, Order, ordinance, code or rule of common law of any Governmental Entity, including any judicial or administrative interpretation thereof.
“
Legal Proceeding” means any lawsuit, court action, other court proceeding, action, litigation, summons, subpoena, hearing, originating
application to a tribunal, arbitration or other similar proceeding of any nature, civil, criminal, regulatory, administrative or otherwise, whether in equity or at law, in
contract, in tort or otherwise.
“
Liabilities” means any and all debts, liabilities and obligations of any nature whatsoever, whether accrued or fixed, absolute or
contingent, matured or unmatured or determined or determinable, including those arising under any Law, those arising under any
Contract or undertaking and those arising as a result of any act or omission.
“Lien” means any mortgage, pledge, deed of trust, security interest, encumbrance, option, pre-emption right, lien, right of way, easement,
encroachment, servitude, buy/sell agreement, charge or other similar restriction (other than, in the case of a security, any restriction on the transfer of such security arising solely under applicable securities Laws).
“made available to Parent” means, when used with respect to any information, document or material, that the same was: (i) publicly
available on the SEC EDGAR database; or (ii) delivered to Parent or Parent’s Representatives via electronic mail or in hard copy form in the foregoing clause (i) at least two (2) Business Days prior to the date hereof.
“Marks” means, collectively, registered and unregistered trademarks, service marks, trade names, trade dress, corporate names, logos,
packaging design, slogans, Internet domain names, URLs, rights to social media accounts, rights to social media handles and tags (to the extent proprietary), and other indicia of source, origin or quality, together with all goodwill associated with
any of the foregoing, and registrations and applications for registration of any of the foregoing.
“
Most Recent Balance Sheet” means the balance sheet of
the Company as of
December 31, 2020 and the footnotes thereto set forth in the
Company 10-K.
“
Open Source Software” means any Software that is subject to any license that is approved by the Open Source Initiative and listed at
http://www.opensource.org/licenses, the GNU General Public License (GPL), the Lesser GNU Public License (LGPL), or any
“copyleft” license or any other license that requires as a condition of use, modification or distribution of such Software that
such Software or other Software, combined or distributed with it, be: (i) disclosed or distributed in source code form; (ii) licensed for the purpose of making derivative works; (iii) redistributable at no charge; or (iv) licensed subject to a patent
non-assert or royalty-free patent license.
“Order” means any writ, judgment, injunction, consent, order, decree, stipulation, award or executive order of or by any Governmental
Entity.
“
Organizational Documents” means, with respect to any Entity, (i) if such Entity is a corporation, such Entity’s certificate or articles
of incorporation,
by-laws and similar organizational documents (including any certificate of designation), as amended and in effect on the date hereof, (ii) if such Entity is a limited liability company, such Entity’s certificate or articles of
formation and operating agreement, and (iii) if such Entity is another type of business organization, such Entity’s similar organizational and governing documents.
“Out-of-Compliance” means any of the following: (i) any skilled nursing facility or similar type of license issued to an Owned Healthcare
Facility that has been terminated or revoked; (ii) the decertification of any Owned Healthcare Facility or the Acquired Company that operates such Owned Healthcare Facility from participation under any Government Payment Program in which such Owned
Healthcare Facility or Acquired Company currently participates; (iii) any denial of payment for new admissions or other admissions ban is imposed by a Governmental Entity with respect to any Owned Healthcare Facility that extends for a period of
three months from the original date; (iv) the issuance by a Governmental Entity of a level “IJ” or higher survey deficiency against any Owned Healthcare Facility and which jeopardy finding has not been lifted by such Governmental Entity; (v) if in
excess of two Owned Healthcare Facilities are identified as candidates for election to the Special Focus Facility Program maintained by the Centers for Medicare & Medicaid Services (the “Special Focus Facility
Program”); and (vi) any Owned Healthcare Facility is added as a Special Focus Facility to the Special Focus Facility Program.
“
Owned Healthcare Facilities” means the Healthcare Facilities identified on Section 1.1 of
the Company Disclosure Schedule.
“Patents” means, collectively, patents, patent applications of any kind, patent rights, reissuances, continuations, continuations-in-part,
revisions, divisions, extensions, and reexaminations thereof.
“Parent Material Adverse Effect” means, with respect to Parent, any Effect that, individually or when taken together with all other
Effects, does, or would reasonably be expected to, prevent or materially impair or materially delay the consummation of the Merger by Parent prior to the End Date.
“Permit” means each grant, license, franchise, permit, easement, variance, exception, exemption, waiver, consent, certificate,
registration, accreditation, approval, authorization, concession, decree, confirmation, qualification or other similar authorization of any Governmental Entity.
“Permitted Liens” means (i) mechanic’s, materialmen’s, carriers’, repairers’, bankers’ and other similar Liens arising or incurred in the
ordinary course of business securing obligations as to which there is no default and which are not yet due and payable or for amounts that are being contested in good faith and for which appropriate reserves have been established in accordance with
GAAP, (ii) Liens for Taxes, assessments or other governmental charges not yet due and payable as of the Closing Date or which are being contested in good faith, (iii) encumbrances and restrictions on real property (including easements, covenants,
rights of way and similar restrictions of record) that do not materially interfere with the Acquired Companies’ present uses or occupancy of such real property and are not incurred in connection with the borrowing of money, (iv) Liens filed pursuant
to the Credit Facilities, (v) zoning, building codes and other land use Laws regulating the use or occupancy of real property or the activities conducted thereon which are imposed by any Governmental Entity having jurisdiction over such real property
and which are not violated by the current use or occupancy of such real property or the operation of the businesses of the Acquired Companies, (vi) matters that would be disclosed by an accurate survey or inspection of the real property that do not
materially interfere with the Acquired Companies’ present uses or occupancy of such real property, (vii) any Liens arising out of retention of title provisions in a supplier’s or vendor’s standard conditions of supply in respect of goods acquired in
the ordinary course of business or other unpaid vendor’s or supplier’s Liens arising in the ordinary course of business, and (viii) Liens in favor of lessors or landlords pursuant to any Lease of Leased Real Property.
“Person” means any individual, corporation, partnership (general or limited), limited liability company, limited liability partnership,
trust, joint venture, joint stock company, syndicate, association, Entity, unincorporated organization or government, or any political subdivision, agency or instrumentality thereof.
“Personal Data” means data or information that alone or in combination with other data or information allows the identification of a
natural Person, including name, address, telephone number, electronic mail address or other contact information, financial or credit information, social security number, IP address, device identifier, bank account number and credit card number.
“
Privacy and Information Security Requirements” means all (i) applicable Laws relating to information privacy and security, (ii) all
applicable and binding Laws concerning the security of any Acquired Company’s products, services and Systems, (iii) all
Contracts to which any Acquired Company is a party or is otherwise bound that relate to Processing Personal Data or protecting the
security or privacy of information or Systems, and (iv) posted policies of any Acquired Company relating to Personal Data or the privacy and the security of any Acquired Company’s products, services, Systems and Business Data.
“Process”, “Processed” or “Processing” means any operation
or set of operations that is performed upon Personal Data or other Business Data, whether or not by automatic means and whether electronically or in any other form or medium, such as collection, recording, organization, storage, adaptation or
alteration, retrieval, consultation, use, disclosure by transmission, dissemination or otherwise making available, alignment or combination, blocking, erasure or destruction.
“
Projections” means, collectively, any projections, business plan information, estimates, forecasts, budgets, pro-forma financial
information or other statements communicated (orally or in writing) to or made available to Parent, Merger Sub or their respective Affiliates or Representatives of future revenues, profitability, expenses or expenditures, future results of operations
(or any component thereof), future cash flows or future financial component (or any component thereof) of
the Company.
“Representatives” means, with respect to a Person, such Person’s officers, directors, employees, investment bankers, attorneys,
accountants, consultants, agents, and other advisors or representatives.
“Sarbanes-Oxley Act” means the Sarbanes-Oxley Act of 2002.
“SEC” means the United States Securities and Exchange Commission.
“Securities Act” means the Securities Act of 1933.
“Software” means any computer program, operating system, application, mobile device application, firmware or software code of any nature,
including all executable or object code, tools, and source code, application programming interfaces and libraries and any derivations, updates, enhancements and customization of any of the foregoing, whether in machine-readable form, programming
language and whether stored, encoded, recorded or written on disk, tape, film, memory device, paper or other media of any nature.
“Specified Open Source Software” means any Open Source Software that is subject to any license that requires that, if any Software or
related product that incorporates or embeds such licensed Software is licensed, conveyed, distributed or made available to Third Parties, the proprietary source code of such Software or related product must be licensed or made available to Third
Parties at no charge.
“Subsidiary” of any Person means any corporation, partnership, limited liability company, joint venture or other legal Entity of which
such Person (either directly or through or together with another Subsidiary of such Person) owns more than 50% of the voting stock or value.
“
Superior Proposal” means a
bona fide, written Acquisition Proposal (with all of the references
to
“20%” included in the definition of Acquisition Proposal being replaced with references to
“50%”) made after the date hereof, that
the Company Board (or a committee thereof) determines in good faith, after consultation with
the Company’s
Independent Financial Advisor and outside legal counsel, and taking into consideration all of the terms and conditions and all legal, financial, regulatory and other aspects of such Acquisition Proposal (including any break-up fees, expense
reimbursement provisions, conditions to consummation and the time likely to be required to consummate such Acquisition Proposal), any financing, stockholder or regulatory approvals required in connection with such Acquisition Proposal, and the
identity of the Person or group making the Acquisition Proposal: (i) would result in a transaction that is more favorable to the holders of Company Common Stock than the Transactions (taking into account any revisions to this Agreement made in
writing by Parent prior to the time of determination pursuant to Section 5.2(c)) and (ii) is reasonably likely to be consummated on the terms proposed without undue delay relative to the Transactions.
“Systems” means those information technology assets, computer systems, devices, mobile devices, equipment, hardware, servers, Software,
networks, telecommunications systems and related infrastructure and facilities, that are both in the possession of and used or held for use by any Acquired Company.
“Tax” means any and all federal, state, local or foreign taxes, levies, imposts, duties or other like assessments, charges or fees
(including estimated taxes, charges and fees), including income, franchise, profits, gross receipts, minimum, base-erosion anti-abuse, digital services, diverted profits, transfer, excise, property, sales, use, value-added, goods and services, ad
valorem, premium, license, capital, wage, employment, payroll, withholding, social security, severance, occupation, import, custom, stamp, alternative, add-on minimum, environmental and other governmental taxes, including any interest, penalties and
additions to tax with respect thereto.
“Tax Return” means any return, report or similar written statement required to be filed with a taxing authority with respect to any Tax
(including any attached schedules), including any information return, claim for refund, amended return or declaration of estimated Taxes.
“
Tax Sharing Agreement” means any Tax allocation, apportionment, sharing, or indemnification agreement or arrangement, other than any
agreement that is pursuant to a commercial
Contract entered into in the ordinary course of business the primary purpose of which does not relate to Taxes.
“Taxing Authority” means any Governmental Entity responsible for the collection, administration, assessment or regulation of Taxes.
“Termination Fee” means $2,105,578 in all circumstances.
“
Third Party” means any Person or group (as defined in Section 13(d)(3) of the Exchange Act) other than
the Company, Parent, Merger Sub or
any Affiliates thereof.
“Third Party Service Provider” means a Third Party that provides outsourcing or other data or IT-related services for any Acquired
Company, including any Third Party that any Acquired Company engages to Process Personal Data on its behalf or to develop Software on its behalf.
“Trade Secrets” means, collectively, trade secrets, confidential information, proprietary information and other information (including
customer and supplier lists, customer and supplier records, pricing and cost information, reports, software development methodologies, technical information, proprietary business information, process technology, plans, drawings, blueprints, know-how,
inventions and invention disclosures (whether or not patented or patentable and whether or not reduced to practice), ideas, research in progress, algorithms, data, databases, data collections, designs, processes, formulae, drawings, schematics,
blueprints, flow charts, models, strategies, prototypes, techniques, source code, source code documentation, testing procedures, testing results and business, financial, sales and marketing plans), in each case to the extent the foregoing constitute
trade secrets under applicable trade secret Law.
“
Transaction Litigation” means any Legal Proceeding (including any class action or derivative litigation) asserted, threatened in writing
or commenced by, on behalf of or in the name of, against or otherwise involving
the Company,
the Company Board, any committee thereof or any of
the Company’s directors or officers, in each case to the extent relating directly or indirectly to this
Agreement, the Merger or any of the Transactions or disclosures of a party relating to the Transactions (including any such Legal Proceeding based on allegations that
the Company’s entry into this Agreement or the terms and conditions of this
Agreement or any of the Transactions constituted a breach of the fiduciary duties of any member of
the Company Board or any officer of
the Company).
“Transactions” means the transactions contemplated by this Agreement, including the Merger.
“
Verified Residents” means, to the Knowledge of
the Company, residents of the Owned Healthcare Facilities (x) with third-party payor
insurance sources, (y) who are eligible to participate in Medicare or Medicaid or (z) appear to have the financial means to pay the out-of-pocket costs of occupancy at such Owned Healthcare Facility.
“WARN Act” means the United States Worker Adjustment and Retraining Notification Act of 1988, or any analogous applicable foreign, state
or local Laws.
“Willful Breach” means a party’s knowing and intentional material breach of any of its representations or warranties as set forth in this
Agreement, or such party’s knowing and intentional material breach of any of its covenants or other agreements set forth in this Agreement, in each case which material breach is a proximate cause of, or is a consequence of, an act or failure to act
by such party with the knowledge that the taking of such act or failure to take such act would, or would reasonably be expected to, proximately cause a breach of this Agreement.
(b)
Each of the following terms is defined in the Section set forth opposite such term:
| |
Term
|
Section
|
| |
Agreement
|
Preamble
|
| |
Alternative Acquisition Agreement
|
5.2(b)
|
| |
Bankruptcy and Equity Exception
|
3.8(b)
|
| |
Book Entry Share
|
2.5(a)(i)
|
| |
Cancelled Shares
|
2.5(a)(ii)
|
| |
Capitalization Date
|
3.3(a)
|
| |
Change in Circumstances
|
5.2(d)(i)
|
| |
Change in Recommendation
|
5.2(b)(iv)
|
| |
CIC Notice Period
|
5.2(d)(iii)
|
| |
Clearance Date
|
5.3(a)
|
| |
Closing
|
2.3
|
| |
Closing Date
|
2.3
|
| |
Company
|
Preamble
|
| |
Company Board
|
Recitals
|
| |
Company Board Recommendation
|
3.16
|
| |
Company Confidential Information
|
3.6(l)
|
| |
Company Common Stock
|
Recitals
|
| |
Company Copyrights
|
3.6(a)
|
| |
Company Marks
|
3.6(a)
|
| |
Company Option Consideration
|
2.7(a)
|
| |
Company Restricted Stock Award Consideration
|
2.7(c)
|
| |
Company RSU Award Consideration
|
2.7(b)
|
| |
Company SEC Documents
|
3.4(a)
|
| |
Company Securities
|
3.3(d)
|
| |
Company Stock Appreciation Right Consideration
|
2.7(d)
|
| |
Company Stock Certificate
|
2.5(a)(i)
|
| |
Company Stockholder Approval
|
3.16
|
| |
Company Subsidiary Securities
|
3.3(d)
|
| |
Continuing Employee
|
5.7(a)
|
| |
Current Premium
|
5.8(a)
|
| |
Delaware Courts
|
8.5
|
| |
DGCL
|
Recitals
|
| |
Effective Time
|
2.3
|
| |
End Date
|
7.1(b)
|
| |
Exchange Fund
|
2.6(a)
|
| |
Go Shop Period
|
5.2(a)
|
| |
Government Payment Programs
|
3.21(b)
|
| |
Guarantors
|
Recitals
|
| |
Indemnified Party
|
3.8(a)(xii)
|
| |
Lease
|
3.7(b)
|
| |
Lease Documents
|
3.7(b)
|
| |
Leased Real Property
|
3.7(b)
|
| |
|
3.8(b)
|
| |
Merger
|
Recitals
|
| |
Merger Consideration
|
2.5(a)(i)
|
| |
Merger Sub
|
Preamble
|
| |
Misuse
|
3.6(r)
|
| |
Notice Period
|
5.2(c)(iv)
|
| |
Owned Real Property
|
3.7(c)
|
| |
Parent
|
Preamble
|
| |
Parent Guarantee
|
Recitals
|
| |
Parent Termination Fee
|
7.3 (c)
|
| |
Parent Welfare Plan
|
5.7(c)
|
| |
Paying Agent
|
2.6(a)
|
| |
Proxy Statement
|
5.3(a)
|
| |
Real Property
|
3.7(c)
|
| |
Special Focus Facility Program
|
1.1
|
| |
Stockholders Meeting
|
5.3(c)
|
| |
Superior Proposal Notice
|
5.2(c)(iii)
|
| |
Surviving Corporation
|
Recitals
|
| |
Voting Agreement
|
Recitals
|
