Item 1.01. Entry into a Material Definitive Agreement.
Merger Agreement
On August 26, 2021, Diversicare Healthcare Services, Inc., a Delaware
corporation (the "Company"), DAC Acquisition LLC, a Delaware limited liability
company ("Parent"), and DVCR Acquisition Corporation, a Delaware corporation and
a wholly owned subsidiary of Parent ("Merger Sub"), entered into an Agreement
and Plan of Merger (the "Merger Agreement"), pursuant to which Merger Sub will
be merged with and into the Company (the "Merger"), with the Company surviving
the Merger as a wholly owned subsidiary of Parent. Capitalized terms not defined
herein shall have the meanings ascribed to them in the Merger Agreement.
The Board of Directors of the Company (the "Company Board"), has 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 and the
transactions contemplated thereby.
Subject to the terms and conditions set forth in the Merger Agreement, at the
effective time of the Merger (the "Effective Time"), each share of Company
common stock, par value $0.01 per share (the "Company Common Stock"), issued and
outstanding immediately prior to the Effective Time (other than (i) shares of
Company Common Stock held by the Company as treasury stock or owned by Parent or
Merger Sub and (ii) shares of Company Common Stock held by stockholders who have
properly and validly exercised their statutory rights of appraisal in respect of
such shares) will be automatically converted into the right to receive cash in
an amount equal to $10.10 per share, net of applicable withholding taxes and
without interest thereon (the "Merger Consideration").
At the Effective Time, by virtue of the Merger and without any action on the
part of the holders, (i) each outstanding option to purchase shares of Company
Common Stock (each, a "Company Option") issued under the Diversicare Healthcare
Services, Inc. 2010 Long-Term Incentive Plan, (the "Incentive Plan"), whether or
not vested, will be cancelled and, in consideration thereof, the holder of such
Company Option will receive an amount (such amount, the "Company Option
Consideration") in cash equal to, net of applicable tax withholding, the product
of (x) the excess, if any, of the Merger Consideration over the exercise price
per share of Company Common Stock underlying such Company Option, multiplied by
(y) the total number of shares of Company Common Stock subject to such Company
Option; (ii) each outstanding restricted stock unit of the Company (each, a
"Company RSU Award") issued under the Incentive Plan, whether or not vested,
will be cancelled and, in consideration thereof, the holder of such Company RSU
Award shall receive an amount (such amount, the "Company RSU Award
Consideration") in cash equal to, net of applicable tax withholding, the Merger
Consideration in respect of each share of Company Common Stock subject to such
Company RSU Award; (iii) each outstanding share of restricted stock (each a
"Company Restricted Stock Award") issued under the Incentive Plan, whether or
not vested, will be cancelled and, in consideration thereof, the holder of such
Company Restricted Stock Award shall receive an amount (such amount, the
"Company Restricted Stock Award Consideration") in cash equal to, net of
applicable tax withholding, the Merger Consideration in respect of each share of
Company Common Stock subject to such Company Restricted Stock Award; and (iv)
each outstanding stock appreciation right (each, a "Company Stock Appreciation
Right") issued under the Incentive Plan, and has an exercise price per share of
Company Common Stock that is less than the Merger Consideration, will be
cancelled and, in consideration thereof, the holder of such Company Stock
Appreciation Right will receive an amount (such amount, the "Company Stock
Appreciation Right Consideration") in cash equal to, net of applicable tax
withholding, the product of (x) the excess, if any, of the Merger Consideration
over the exercise price per share of Company Common Stock underlying such
Company Stock Appreciation Right, multiplied by (y) the total number of shares
of Company Common Stock subject to such Company Stock Appreciation Right. For
the avoidance of doubt, any Company Option or Company Stock Appreciation Right
with an exercise price equal to or greater than the Merger Consideration shall
be canceled for no consideration.
The completion of the Merger is subject to the satisfaction or waiver of certain
customary conditions, including, among others: (i) the adoption of the Merger
Agreement by the Company's stockholders (the "Company Stockholder Approval");
(ii) the absence of any temporary restraining order, preliminary or permanent
injunction or other order preventing the consummation of the Merger issued by
any Governmental Entity of competent jurisdiction; (iii) termination or
expiration of any waiting periods applicable to the consummation of the Merger
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended;
(iv) the representations and warranties of the parties being true and correct
subject to certain materiality qualifications and all covenants of the parties
having been complied with in all material respects; and (v) the absence of a
Company Material Adverse Effect on the Company. The Merger is not subject to any
approval by the stockholders of Parent and Parent's obligations under the Merger
Agreement are guaranteed by Ephram Lahasky and MED Healthcare Partners LLC.
Parent may terminate the
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Merger Agreement upon payment of a termination fee of $4.2 million (the "Parent
Termination Fee"). The Merger Agreement further provides that upon termination
of the Merger Agreement by the Company or Parent upon specified conditions, the
Company will be required to pay Parent a termination fee of $2.1 million.
The Merger Agreement contains representations and warranties customary for
transactions of this type. The Company has agreed to various customary covenants
and agreements, including, among others, (i) to conduct its and its
subsidiaries' businesses in the ordinary course between the execution of the
Merger Agreement and the Effective Time; (ii) not to engage in certain kinds of
transactions during this period; and (iii) to call a special meeting of the
Company's stockholders to adopt the Merger Agreement and obtain Company
Stockholder Approval (the "Stockholders Meeting").
The Merger Agreement prohibits the Company and its subsidiaries and
representatives from soliciting, providing information or entering into
discussions concerning proposals relating to alternative business combination
transactions, subject to certain limited exceptions. However, during the period
from August 26, 2021 and continuing until 11:59 p.m. (EST) on September 30, 2021
(the "Go-Shop Period"), the Company is permitted to solicit, or initiate any
acquisition proposal and engage in, enter into, continue or otherwise
participate in any discussions or negotiations with respect to any acquisition
proposal. At the end of the Go-Shop Period, the Company will cease such
activities, and will be subject to customary "no-shop" restrictions on its
ability to solicit third party proposals relating to alternative transactions or
to provide information to and engage in discussions with a third party (other
than any Excluded Party, as described below) in relation to an alternative
transaction, subject to certain customary exceptions to permit the Company Board
to comply with its fiduciary duties. However, the Company may continue to engage
in the foregoing activities with any third party that made an acquisition
proposal prior to the end of the Go-Shop Period that the Company Board has
determined in good faith, is or could reasonably be expected to result in a
superior proposal as defined in the Merger Agreement (each, an "Excluded
Party"), but only for so long as such third party is an Excluded Party.
The Merger Agreement contains certain termination rights for the Company and
Parent, including, among others, (i) by mutual agreement of the Company and
Parent to terminate, (ii) by either party if the Effective Time has not occurred
on or before February 28, 2022 (the "End Date"), (iii) by either party if any
law or order that makes the Merger illegal or that prohibits the consummation of
the Merger has become final and nonappealable, or any demand by a Governmental
Entity for the payment of a material amount of money solely due to the Merger,
(iv) by either party if the Company Stockholder Approval is not obtained after a
final vote of the Company's stockholders has been taken at the Stockholders
Meeting, (v) by Parent if the Company Board changes its recommendation with
respect to the Merger to the Company's stockholders, (vi) by the Company, prior
to obtaining the Company Stockholder Approval, in order to accept a Superior
Proposal (as defined below), (vii) by Parent if the Company has breached or
failed to perform any of its representations and warranties, covenants or
obligations under the Merger Agreement such that a closing condition would be
incapable of being satisfied by the End Date (viii) by the Company if Parent has
breached or failed to perform any of its representations and warranties,
covenants or obligations under the Merger Agreement such that a closing
condition would be incapable of being satisfied by the End Date and (ix) by
. . .
Item 7.01. Other Events
On August 27, 2021, the Company issued a press release announcing its entry into
the Merger Agreement. A copy of the press release is attached hereto
as Exhibit 99.1 and incorporated herein by reference.
Pursuant to the rules and regulations of the U.S. Securities and Exchange
Commission (the "SEC"), the information in this Item 7.01 disclosure, including
Exhibit 99.1 and information set forth therein, is deemed to have been furnished
and shall not be deemed to be "filed" for purposes of Section 18 of the Exchange
Act, or otherwise subject to the liabilities of that section. Such information
shall not be incorporated by reference into any filing of the Company, whether
made before or after the date hereof, regardless of any general incorporation
language in such filing.
Additional Information and Where to Find It
This communication relates to the proposed Merger involving the Company and may
be deemed to be solicitation material in respect of the proposed Merger. In
connection with the proposed Merger, the Company will file relevant materials
with the SEC, including a proxy statement on Schedule 14A (the "Proxy
Statement"). This communication is not a substitute for the Proxy Statement or
for any other document that the Company may file with the SEC or send to the
Company's stockholders in connection with the proposed Merger. BEFORE MAKING ANY
VOTING DECISION, INVESTORS AND SECURITY HOLDERS OF THE COMPANY ARE URGED TO READ
THE PROXY STATEMENT AND OTHER DOCUMENTS
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(INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) FILED WITH THE SEC CAREFULLY
AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION ABOUT THE COMPANY, THE PROPOSED MERGER AND RELATED
MATTERS. The proposed Merger will be submitted to the Company's stockholders for
their consideration. Investors and security holders will be able to obtain free
copies of the Proxy Statement (when available) and other documents filed by the
Company with the SEC through the website maintained by the SEC at www.sec.gov.
Copies of the documents filed by the Company with the SEC will also be available
free of charge on the Company's website at www.DVCR.com or by contacting the
Company at Diversicare Healthcare Services, Inc., 1621 Galleria Boulevard,
Brentwood, Tennessee 37027, Attention: Investor Relations.
Participants in the Solicitation
The Company and its directors and certain of its executive officers and
employees may be deemed to be participants in the solicitation of proxies from
the Company's stockholders with respect to the proposed Merger under the
rules of the SEC. Information about the directors and executive officers of the
Company and their ownership of shares of the Company Common Stock is set forth
in its Annual Report on Form 10-K for the year ended December 31, 2020, which
was filed with the SEC on March 11, 2021, its proxy statement for its 2021
annual meeting of stockholders, which was filed with the SEC on April 26, 2021,
and in subsequent documents filed or to be filed with the SEC, including
the Proxy Statement. Additional information regarding the persons who may be
deemed participants in the proxy solicitations and a description of their direct
and indirect interests in the Merger, by security holdings or otherwise, will
also be included in the Proxy Statement and other relevant materials to be filed
with the SEC when they become available. You may obtain free copies of these
documents as described above.
Forward Looking Statements
This communication 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: (i) risks associated with the Company's
ability to obtain the stockholder approval or regulatory approval required to
consummate the proposed Merger and the timing of the closing of the proposed
Merger, including the risks that a condition to closing would not be satisfied
within the expected timeframe or at all or that the closing of the proposed
Merger will not occur; (ii) the risk that stockholder litigation in connection
with the proposed transaction may affect the timing or occurrence of the
proposed transaction or result in significant costs of defense, indemnification
and liability; (iii) the occurrence of any event, change or other circumstance
or condition that could give rise to the termination of the Merger Agreement;
(iv) unanticipated difficulties or expenditures relating to the proposed Merger,
the response of business partners and competitors to the announcement of the
proposed Merger, and/or potential difficulties in employee retention as a result
of the announcement and pendency of the proposed Merger; (v) risks related to
disruption of management's attention from the Company's ongoing business
operations due to the transaction; (vi) the response of Company stockholders to
the Merger Agreement; and (vi) those risks detailed in the Company's most recent
Annual Report on Form 10-K 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.
Accordingly, you should not rely upon forward-looking statements as predictions
of future events. The Company cannot assure you that the events and
circumstances reflected in the forward-looking statements will be achieved or
occur, and actual results could differ materially from those projected in the
forward-looking statements. The forward-looking statements made in this
communication relate only to events as of the date on which the statements are
made. Except as required by applicable law or regulation, the Company undertakes
no obligation to update any forward-looking statement to reflect events or
circumstances after the date on which the statement is made or to reflect the
occurrence of unanticipated events.
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Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Number Exhibit
2.1 Agreement and Plan of Merger by and among DAC Acquisition LLC, DVCR
Acquisition Corporation and Diversicare Healthcare Services, Inc. dated August
26, 2021
10.1 Voting and Support Agreement dated August 26, 2021
99.1 Press release dated August 27, 2021
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document).
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DIVERSICARE HEALTHCARE SERVICES, INC. 
