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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 6, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ALTERNATIVE LIVING SERVICES, INC.
(Exact name of Registrant as specified in its charter)
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DELAWARE 39-1771281
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
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450 NORTH SUNNYSLOPE ROAD, SUITE 300
BROOKFIELD, WISCONSIN 53005
(414) 789-9565
(Address and telephone number of Registrant's principal executive offices)
WILLIAM F. LASKY, CHIEF EXECUTIVE OFFICER
ALTERNATIVE LIVING SERVICES, INC.
450 NORTH SUNNYSLOPE ROAD, SUITE 300
BROOKFIELD, WISCONSIN 53005
(414) 789-9565
(Name, address and telephone number of agent for service)
Copies of all communications, including all communications sent to the agent for
service, should be sent to:
ALAN C. LEET, ESQ.
ROGERS & HARDIN LLP
2700 INTERNATIONAL TOWER, PEACHTREE CENTER
229 PEACHTREE STREET, N.E.
ATLANTA, GEORGIA 30303
(404) 522-4700
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after this Registration Statement becomes effective, depending on market
conditions.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE(1) FEE(2)
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Common Stock, par value $0.01 per
share, Debt Securities Issuable in
Series and Preferred Stock issuable
in Series(3)......................... (4) (4) $325,000,000 $98,485
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(1) In no event will aggregate maximum offering price of all securities offered
pursuant to this Registration Statement exceed $325,000,000, or if any debt
securities are issued with original discount, such greater amount as shall
result in an aggregate offering price of $325,000,000. Any securities
registered hereunder may be sold separately or as units with other
securities registered hereunder.
(2) Determined pursuant to Rule 457(o) under the Securities Act of 1933, as
amended.
(3) There is also being registered hereunder an indeterminate number of shares
of Common Stock as may be issued upon conversion of the Debt Securities or
Preferred Stock registered hereby.
(4) Not applicable pursuant to General Instruction II.D of Form S-3 under the
Securities Act of 1933, as amended.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED NOVEMBER 6, 1997
PRELIMINARY PROSPECTUS
ALTERNATIVE LIVING SERVICES, INC.
Alternative Living Services, Inc., a Delaware corporation (the "Company"),
may offer from time to time, in one or more series, its debt securities (the
"Debt Securities"), shares of its preferred stock, $.01 par value per share (the
"Preferred Stock"), and shares of its common stock, $.01 par value per share
(the "Common Stock"). The Debt Securities, Preferred Stock and Common Stock are
collectively referred to herein as the "Securities". The Securities will have an
aggregate offering price of up to $325,000,000 and will be offered on terms to
be determined at the time of the offering.
In the case of Debt Securities, the specific title, the aggregate principal
amount, the ranking, the purchase price, the maturity, the rate and time of
payment of any interest, any redemption or sinking fund provisions, any
conversion provisions and any other specific term of the Debt Securities will be
set forth in an accompanying supplement to this Prospectus (the "Prospectus
Supplement"). In the case of Preferred Stock, the specific number of shares,
designation, stated value per share, liquidation preference per share, issuance
price, dividend rate (or method of calculation), dividend payment dates, any
redemption or sinking fund provisions, any conversion rights and other specific
terms of the series of Preferred Stock will be set forth in an accompanying
Prospectus Supplement. In the case of Common Stock, the specific number of
shares and issuance price per share will be set forth in an accompanying
Prospectus Supplement. The Prospectus Supplement will also disclose whether the
Securities will be listed on a national securities exchange and, if they are not
to be listed, the possible effects thereof on their marketability.
The Securities may be sold: (i) directly by the Company; (ii) through
underwriting syndicates represented by one or more managing underwriters, or
through one or more underwriters without a syndicate; and (iii) through agents
designated from time to time. The names of any underwriters or agents of the
Company involved in the sale of the Securities in respect of which this
Prospectus is being delivered and any applicable commissions or discounts will
be set forth in an accompanying Prospectus Supplement. See "Plan of
Distribution". The net proceeds to the Company from such sale will be set forth
in the Prospectus Supplement.
The Company's Common Stock is traded on the American Stock Exchange (the
"AMEX") under the symbol "ALI". On November 5, 1997, the closing sale price of
the Common Stock on the AMEX was $24 7/8 per share.
SEE "RISK FACTORS" COMMENCING ON PAGE 4 FOR CERTAIN INFORMATION THAT SHOULD
BE CONSIDERED BY PROSPECTIVE INVESTORS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF SECURITIES UNLESS
ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
THE DATE OF THIS PROSPECTUS IS NOVEMBER , 1997.
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AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company may be inspected and
copied at the public reference facilities of the Commission located at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at the New York Regional
Office of the Commission, Seven World Trade Center, Suite 1300, New York, New
York 10048, and at the Chicago Regional Office of the Commission, Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material can also be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
Such reports and other information may also be inspected at the offices of the
American Stock Exchange, 86 Trinity Place, New York, New York 10006. The
Commission also maintains a World Wide Web Site that contains reports, proxy and
information statements and other information regarding registrants, including
the Company, that file electronically with the Commission, at
http://www.sec.gov.
The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the Securities offered hereby. The
Prospectus and any accompanying Prospectus Supplement do not contain all of the
information included in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information with respect to the Company and the Securities, reference is
hereby made to the Registration Statement including the exhibits and schedules
thereto. Statements contained in this Prospectus and any accompanying Prospectus
Supplement concerning the provisions or contents of any contract, agreement or
any other document referred to herein or therein are not necessarily complete.
With respect to each such contract, agreement or document filed as an exhibit to
the Registration Statement, reference is made to such exhibit for a more
complete description of the matters involved, and each such statement shall be
deemed qualified in its entirety by such reference to the copy of the applicable
document filed with the Commission. The Registration Statement, including the
exhibits and schedules thereto, may be inspected without charge at the
Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. and
copies of it or any part thereof may be obtained from such office, upon payment
of the fees prescribed by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission, are incorporated herein by reference: (i) the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996, as amended by
Amendment No. 1 on Form 10-K/A filed with the Commission on May 12, 1997; (ii)
the Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1997; (iii) the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997; (iv) the Company's Current Report on Form 8-K dated December 31,
1996, filed with the Commission on January 15, 1997, as amended by Amendment No.
1 on Form 8-K/A filed with the Commission on March 17, 1997; (v) the Company's
Current Report on Form 8-K dated May 14, 1997, filed with the Commission on May
27, 1997; (vi) the Company's Current Report on Form 8-K dated July 30, 1997,
filed with the Commission on August 14, 1997; (vii) the Company's Current Report
on Form 8-K dated September 23, 1997, filed with the Commission on October 10,
1997, as amended by Amendment No. 1 on Form 8-K/A filed with the Commission on
November 6, 1997; and (viii) the description of the Company's Capital Stock
contained in the Company's Registration Statement on Form 8-A, filed with the
Commission on July 30, 1996. In addition, each document filed by the Company
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date of this Prospectus and prior to termination of the offering of
Securities offered hereby shall be deemed to be incorporated by reference into
this Prospectus and to be a part hereof from the date such document is filed
with the Commission.
Any statement contained herein, or in any document, all or a portion of
which is incorporated or deemed to be incorporated by reference herein, shall be
deemed to be modified or superseded for purposes of the
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Registration Statement and this Prospectus to the extent that a statement
contained herein, or in any subsequently filed document that also is or is
deemed to be incorporated by reference herein, modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute part of the Registration
Statement or this Prospectus. All information appearing in this Prospectus is
qualified in its entirety by the information and financial statements (including
notes thereto) appearing in the documents incorporated herein by reference. This
Prospectus incorporates documents by reference which are not presented herein or
delivered herewith. These documents (other than exhibits to such documents which
are not specifically incorporated by reference into such documents) are
available without charge, upon written or oral request by any person to whom
this Prospectus has been delivered, from Thomas E. Komula, Senior Vice
President, 450 N. Sunnyslope Road, Suite 300, Brookfield, Wisconsin 53005,
telephone (414) 789-9565.
FORWARD LOOKING STATEMENTS
The matters discussed in this Prospectus under "Risk Factors," in addition
to certain statements contained elsewhere in this Prospectus or in the Company's
filings under the Exchange Act, are "Forward-Looking Statements" within the
meaning of the Private Securities Litigation Reform Act of 1995 and are thus
prospective. Such forward-looking statements are subject to risks, uncertainties
and other factors which could cause actual future results or trends to differ
materially from future results or trends expressed or implied by such
forward-looking statements. The most significant of such risks, uncertainties
and other factors are discussed in this Prospectus under "Risk Factors" and
prospective investors are urged to carefully consider such factors. Updated
information will be periodically provided by the Company as required by the
Securities Act and the Exchange Act. The Company, however, undertakes no
obligation to publicly release the results of any revisions to such
forward-looking statements which may be made to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
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RISK FACTORS
An investment in the Securities offered hereby involves various risks.
Prospective investors are urged to carefully consider each of the following
risks, in conjunction with the other information contained in this Prospectus
and in the accompanying Prospectus Supplement, before purchasing any Securities
of the Company.
HISTORY OF OPERATING LOSSES
The Company has experienced significant operating losses and net losses in
each year since inception, primarily as a result of its development,
construction and residence lease-up activities as well as the incurrence of
certain expenses to establish corporate infrastructure to support future planned
growth. For the years ended December 31, 1994, 1995 and 1996, the Company
incurred operating losses of $390,000, $1.0 million and $4.1 million,
respectively, and net losses of $643,000, $1.7 million and $7.8 million,
respectively. For the six months ended June 30, 1997, the Company incurred an
operating loss and net loss of $1.9 million and $764,000, respectively. On a pro
forma basis giving effect to the Sterling Merger (as hereinafter defined) as if
it had occurred as of January 1, 1994, the Company would have incurred operating
losses of $5.7 million and $3.2 million and net losses of $8.8 million and $1.1
million for the year ended December 31, 1996 and for the six months ended June
30, 1997, respectively.
Newly opened assisted living residences typically operate at a loss during
the first six to 12 months of operation, primarily due to the incurrence of
certain fixed and variable expenses in advance of the achievement of targeted
rent and service fee revenues from the lease-up of such residences. As of
November 1, 1997, of the Company's 219 residences, 90 had been open for 12
months or less. In addition, the development and construction of assisted living
residences requires the commitment of substantial capital over a typical six- to
12-month construction period, the consequence of which may be an adverse impact
on the Company's liquidity. As of November 1, 1997, the Company had 99
residences under construction and an additional 74 residences under development.
In the case of acquired residences, resident turnover and increased marketing
expenditures which may be required to reposition such residences, together with
the possible disruption of operations resulting from the implementation of
renovations, may adversely impact the financial performance of such residences
for a period of time after their acquisition. In addition, occupancy levels and
the rates which the Company may be able to charge for its services may be
adversely affected in competitive market circumstances which would negatively
impact the operating results of affected residences. Accordingly, there can be
no assurance that the Company will not experience unforeseen expenses,
difficulties, complications and delays which could result in greater than
anticipated operating losses or otherwise materially adversely affect the
Company's financial condition and results of operations. See "-- Development and
Construction Risks" and "-- Competition."
SUBSTANTIAL DEBT AND OPERATING LEASE PAYMENT OBLIGATIONS
The Company had lease expense of $6.1 million and $7.0 million for the year
ended December 31, 1996 and the six months ended June 30, 1997, respectively. On
a pro forma basis giving effect to the Sterling Merger as if it had occurred as
of January 1, 1994, the Company's total indebtedness as of June 30, 1997 would
have been $179 million, and its net interest expense and lease expense would
have been $3.2 million and $9.0 million, respectively, for the year ended
December 31, 1996 and $600,000 and $11.4 million, respectively, for the six
months ended June 30, 1997. Debt and annual operating lease payment obligations
will continue to increase significantly as the Company pursues its growth
strategy. In addition, the Company anticipates that future development of
residences may be financed with construction loans and, therefore, there is a
risk that, upon completion of construction, permanent financing for newly
developed residences may not be available or may be available only on terms that
are unfavorable or unacceptable to the Company.
There can be no assurance that the Company will generate sufficient cash
flow to meet its obligations. Any payment or other default with respect to such
obligations could cause the lender to foreclose upon the residences securing the
indebtedness or, in the case of an operating lease, to terminate the lease, with
a consequent loss of income and asset value to the Company. Moreover, because of
cross-default and cross-
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collateralization provisions in certain mortgages and debt instruments of the
Company and in most of its leases, a default by the Company on one of its
payment obligations could result in acceleration of other obligations and
adversely affect a significant number of its other residences. See "-- Need for
Additional Financing; Risk of Rising Interest Rates."
INTEGRATION OF OPERATIONS FOLLOWING THE STERLING MERGER
The merger of the Company with Sterling House Corporation ("Sterling"),
which was consummated on October 23, 1997 (the "Sterling Merger"), involves the
integration of two companies that have previously operated independently. Among
the factors considered by the Board of Directors of the Company in connection
with its approval of the Sterling Merger were the opportunities for operating
efficiencies that may result from the Sterling Merger. While the Company would
expect to achieve certain operating efficiencies as a result of the Sterling
Merger, no assurance can be given that difficulties will not be encountered in
integrating the operations of the Company and Sterling or that the benefits
expected from such integration will be realized. In addition, management of the
Company expects to devote significant attention to efforts to integrate the
operations of the two companies, which effort may affect such management's
ability to manage ongoing operations and expansion efforts. Any delays or
unexpected costs incurred in connection with such integration could have a
material adverse effect on the business, results of operations or financial
condition of the Company.
ABILITY TO CONTINUE GROWTH; ABILITY TO MANAGE RAPID EXPANSION AND BUSINESS
DIVERSIFICATION
The Company has and expects to continue to pursue an aggressive expansion
strategy focused on developing, constructing and acquiring assisted living
residences. The Company is currently managing significant construction and
development activity. Accordingly, the Company's prospects are directly affected
by its ability to develop, construct and, to a lesser extent, acquire additional
residences. The Company's ability to continue to grow will depend in large part
on its ability to identify suitable and affordable development and acquisition
opportunities and successfully pursue such opportunities, identify and obtain
necessary financing commitments and effectively operate its assisted living
residences. There can be no assurance, however, that the Company will be
successful in developing, constructing or acquiring any additional residences or
that it will be able to continue to achieve or exceed its historical growth
rate.
The Company's rapid expansion places significant demands on the Company's
management and operating personnel. The Company's ability to manage its recent
and future growth effectively will require it to continue to improve its
operational, financial and management information systems and to continue to
attract, retain, train, motivate and manage key employees. If the Company is
unable to manage its growth effectively, its business, operating results and
financial condition will be adversely affected.
Management of the Company intends to review and, in appropriate
circumstances, pursue opportunities for development and expansion of new
products and services, such as home health care, rehabilitation and pharmacy
services. Efforts to achieve such business diversification, however, are subject
to certain risks, including management's relative unfamiliarity with such
businesses, additional uncertainties related to government regulation and
possible difficulties in integrating new products or businesses.
DEVELOPMENT AND CONSTRUCTION RISKS
The Company's growth strategy is dependent, in part, on its ability to
develop and construct a significant number of additional residences. As of
November 1, 1997, the Company had 99 residences under construction and 74
residences under development. Development projects generally are subject to
various risks, including zoning, permitting, health care licensing and
construction delays, that may result in construction cost overruns and longer
development periods and, accordingly, higher than anticipated start-up losses.
Project management is subject to a number of contingencies over which the
Company will have little or no control and which might adversely affect project
costs and completion time. Such contingencies include shortages of, or the
inability to obtain, labor or materials, the inability of the general contractor
or subcontractors to perform under their contracts, strikes, adverse weather
conditions and changes in applicable laws or regulations or in the method of
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applying such laws and regulations. In addition, the Company's construction
management subsidiary serves as general contractor on many of the Company's
residences in construction and development, and, accordingly, in these instances
the Company may not have the same contractual recourse for construction delays
and defects as would generally be available were a third party general
contractor engaged to construct these residences. As a result of these various
factors, there can be no assurance that the Company will not experience
construction delays, that it will be successful in developing and constructing
currently planned or additional residences or that any developed residence will
be economically successful. If the Company's planned development is delayed, the
Company's business, operating results and financial condition could be adversely
affected.
RISKS ASSOCIATED WITH ACQUISITIONS
The Company has acquired residences in the past and intends to continue to
seek acquisition opportunities in the future. However, no assurances can be
given that the Company will be successful in identifying any future acquisition
opportunities or completing any identified acquisitions. The acquisition of
residences involves a number of risks. Existing residences available for
acquisition frequently serve or target different market segments than those
presently served by the Company. It may be necessary in such cases to reposition
and renovate acquired residences or turn over the existing resident population
to achieve a resident acuity and income profile which is consistent with the
Company's current operations. In addition, the Company may also determine that
staff and operating management personnel changes are necessary to successfully
integrate such residences into the Company's existing operations. No assurances
can be made that management will be successful in repositioning any acquired
residences or in effecting any necessary operational or structural changes and
improvements on a timely basis. Any failure by the Company to make necessary
operational or structural changes or to successfully reposition acquired
residences may adversely impact the Company's business, operating results and
financial condition. In undertaking acquisitions of residences, the Company also
may be adversely impacted by unforeseen liabilities attributable to the prior
operators of such residences, against whom the Company may have little or no
recourse.
NEED FOR ADDITIONAL FINANCING; RISK OF RISING INTEREST RATES
To achieve its growth strategy, the Company will need to obtain sufficient
financing to fund its continued development, construction and acquisition
activities. Accordingly, the Company's future growth will depend on its ability
to obtain additional financing on acceptable terms. The Company has executed
non-binding letters of intent with four health care REITs for financing
commitments aggregating approximately $574 million (of which $281 million has
been utilized in sale/leaseback and mortgages financing transactions through
November 1, 1997) and with a mortgage lender for construction and long- term
mortgage financing aggregating $100 million (none of which has been used as of
November 1, 1997). The Company's management believes financing available
pursuant to these arrangements, and pursuant to other sources of financing, will
be sufficient to fund its development and acquisition programs for at least the
next 12 months. The Company will from time to time seek additional funding
through public or private financing, including equity or debt financing. If
additional funds are raised by issuing equity securities, the Company's
stockholders may experience dilution. In addition, the Company will require
significant financial resources to meet its operating and working capital needs,
including contractual obligations to purchase the equity interest of joint
venture portions in residences owned in joint ventures. See "-- Joint Ventures
and Related Mandatory Purchase Obligations." There can be no assurance that any
newly constructed residences will achieve a stabilized occupancy rate and attain
a resident mix that meet the Company's expectations or generate sufficient
positive cash flow to cover operating and financing costs associated with such
residences. There can be no assurance that the Company will be successful in
securing additional financing or that adequate funding will be available and, if
available, will be on terms that are acceptable to the Company. A lack of funds
may require the Company to delay or eliminate all or some of its development
projects and acquisition plans. In addition, the Company may require additional
financing to enable it to acquire additional residences, to respond to changing
economic conditions, to expand the Company's development program or to account
for changes in assumptions related to its development program.
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Approximately $34 million, or 20%, of the Company's total indebtedness as
of November 1, 1997 was subject to floating interest rates. Although a majority
of the debt and lease payment obligations of the Company are not subject to
floating interest rates, indebtedness that the Company may incur in the future
may bear interest at a floating rate. In addition, future fixed rate
indebtedness and lease obligations will be based on interest rates prevailing at
the time such arrangements are obtained. Therefore, increases in prevailing
interest rates could increase the Company's interest or lease payment
obligations and could have an adverse effect on the Company's business,
financial condition and results of operations.
RESIDENCE MANAGEMENT, STAFFING AND LABOR COSTS
The Company competes with other providers of long-term care with respect to
attracting and retaining qualified and skilled personnel. The Company will be
dependent upon its ability to attract and retain management personnel
responsible for the day-to-day operations of each of the Company's residences.
Any inability of the Company to attract or retain qualified residence management
personnel could have a material adverse effect on the Company's financial
condition or results of operations. In addition, a possible shortage of nurses
or trained personnel may require the Company to enhance its wage and benefits
package in order to compete in the hiring and retention of such personnel. The
Company will also be dependent upon the available labor pool of semi-skilled and
unskilled employees in each of the markets in which it operates. No assurance
can be given that the Company's labor costs will not increase, or that, if they
do increase, they can be matched by corresponding increases in rates charged to
residents. Any significant failure by the Company to attract and retain
qualified management and staff personnel, to control its labor costs or to pass
on any increased labor costs to residents through rate increases would have a
material adverse effect on the Company's business, operating results and
financial condition.
COMPETITION
The long-term care industry is highly competitive and, given the relatively
low barriers to entry and continuing health care cost containment pressures, the
Company expects that the assisted living segment of such industry will become
increasingly competitive in the future. The Company competes with other
companies providing assisted living services as well as numerous other companies
providing similar service and care alternatives, such as home health care
agencies, congregate care facilities, retirement communities and skilled nursing
facilities. While the Company believes there is a need for additional assisted
living residences in the markets where the Company is constructing and
developing residences, the Company expects that, as assisted living residences
receive increased market awareness and the number of states which include
assisted living services in their Medicaid programs increases, competition will
increase from new market entrants, many of whom may have substantially greater
financial resources than the Company. No assurance can be given that increased
competition will not adversely affect the Company's ability to attract or retain
residents or maintain its existing rate structures. Moreover, in implementing
its growth strategy, the Company expects to face competition for development and
acquisition opportunities from local developers and regional and national
assisted living companies. Some of the Company's present and potential
competitors have, or may have access to, greater financial resources than those
of the Company. Consequently, there can be no assurance that the Company will
not encounter increased competition in the future which could limit its ability
to attract and retain residents, to maintain or increase resident service fees
or to expand its business and could have a material adverse effect on the
Company's financial condition, results of operations and prospects.
Management of the Company is not able to predict the effect that the health
care industry trend towards managed care will have on the assisted living
marketplace. Managed care, an arrangement whereby service and care providers
agree to sell specifically defined services to one or more public or private
payors (frequently not the end user or resident) subject to a predefined system
in an effort to achieve more efficiency with respect to utilization and cost, is
not currently a significant factor in the assisted living marketplace. However,
managed care plans sponsored by insurance companies or HMOs may in the future be
a factor in the assisted living marketplace. There can be no assurance that the
Company will not encounter increased competition or be subject to other
competitive pressures that could affect its business, results of operation or
financial condition as a result of managed care.
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JOINT VENTURES AND RELATED MANDATORY PURCHASE OBLIGATIONS
The Company has entered into several joint ventures with regional real
estate development partners and others for the construction, development and
ownership of assisted living residences in targeted geographic areas. As of
November 1, 1997, 53 of the Company's operating residences were jointly owned,
directly or indirectly, with venture partners. Of the 173 of the Company
residences which were either under construction or development as of November 1,
1997, a significant portion of such residences are being or will be constructed
or developed under joint venture agreements. There can be no assurance that
these joint venture development partners will be successful in identifying sites
for future residences, securing necessary permits and licenses for the
construction of new residences and supervising the construction of new
residences on time and within budget. In addition, the Company has agreed not to
own or operate competing assisted living residences during specified contractual
periods within specified geographic areas adjacent to residences developed
through certain of its joint ventures. While the Company typically receives a
fee for managing residences developed through joint ventures, it shares with its
joint venture partners any profits or losses realized from the operation or sale
of such residences. The Company is obligated under its joint venture
arrangements to purchase the equity interests of its joint venture partners upon
the election of such joint venture partners at a price based on either a formula
price or the appraised value of the residence owned by the applicable joint
venture. These purchase rights generally become exercisable during the first six
months to two years following the opening of the residence owned by such joint
venture. As a result of these provisions, the Company might become obligated to
acquire additional interests in residences developed through joint ventures on
terms or at times that would otherwise not be acceptable to the Company,
including times during which the Company may not have adequate liquidity to fund
such acquisitions.
GOVERNMENT REGULATION
Health care is an area of extensive and frequent regulatory change. The
assisted living industry is relatively new, and, accordingly, the manner and
extent to which it is regulated at the Federal and state levels is evolving.
Changes in the laws or new interpretations of existing laws may have a
significant impact on the Company's methods and costs of doing business. The
Company is, and will be, subject to varying degrees of regulation and licensing
by health or social service agencies and other regulatory authorities in the
various states and localities where they operate or intend to operate.
The Company and its activities are subject to zoning, health and other
state and local government regulations. Zoning variances or use permits are
often required for construction. Severely restrictive regulations could impair
the ability of the Company to open additional residences at desired locations or
could result in costly delays. Several of the Company's residences have been
financed by revenue bonds. In order to continue to qualify for favorable tax
treatment of the interest payable on certain of these bonds, the financed
residences must comply with certain federal income tax requirements, principally
pertaining to the maximum income level of a specified portion of the residents.
Failure to satisfy these requirements constitutes an event of default under the
bonds, thereby accelerating their maturity.
The Company's success will depend in part upon its ability to satisfy
applicable regulations and requirements and to procure and maintain required
licenses in rapidly changing regulatory environments. Any failure to satisfy
applicable regulations or to procure or maintain a required license could have a
material adverse effect on the Company's financial condition, results of
operations and prospects. The Company's operations could also be adversely
affected by, among other things, regulatory developments such as revisions in
building code requirements for assisted living residences, mandatory increases
in the scope and quality of care to be offered to residents and revisions in
licensing and certification standards. There can be no assurance that Federal,
state or local laws or regulations will not be imposed or expanded which
adversely impact the Company's business, financial condition, results of
operations or prospects. The Company's residence operations are also subject to
health and other state and local government regulations.
The Company has sold franchises for its Sterling House model and may sell
on a limited basis franchises for such model in the future. The sale of
franchises is regulated by the Federal Trade Commission and by certain state
agencies located in jurisdictions other than those states where the Company
currently conducts
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franchise operations. Principally, these regulations require that certain
written disclosures be made prior to the sale of a franchise. In addition, some
states have relationship laws which prescribe the basis for terminating a
franchisee's rights and regulate both the franchisor's and its franchisees'
post-termination rights and obligations. There can be no assurance that changes
in such regulations will not have an adverse impact upon the ability of the
combined company to continue its franchising activities.
The Company intends to review and, in appropriate circumstances, pursue
opportunities for development and expansion into new products and services.
These new products and services may include home health care, rehabilitation and
pharmacy services. The Federal and state regulation of such additional products
and services may be more evolved and extensive than that related to the
Company's assisted living operations. The Company has not in the past engaged in
significant activities outside of its core assisted living business. Should the
Company expand into new products and services, the Company will be subject to
additional Federal, state and local laws and regulations. Non-compliance with
such regulations could have a material adverse effect on the Company's business,
financial condition, results of operations or prospects.
LIABILITY AND INSURANCE
The provision of personal and health care services entails an inherent risk
of liability. In recent years, participants in the long-term care industry have
become subject to an increasing number of lawsuits alleging malpractice or
related legal theories, many of which involve large claims and result in the
incurrence of significant defense costs. In addition, compared to more
institutional long-term care facilities, assisted living residences (especially
dementia care residences) of the type operated by the Company offer residents a
greater degree of independence in their daily lives. This increased level of
independence, however, may subject the resident and the Company to certain risks
that would be reduced in more institutionalized settings. The Company currently
maintains liability insurance intended to cover such claims which it believes is
adequate based on the nature of the risks, historical experience and industry
standards. There can be no assurance, however, that claims in excess of such
insurance or claims not covered by insurance, such as claims for punitive
damages, will not arise. A successful claim against the Company not covered by,
or in excess of, its insurance could have a material adverse effect upon the
Company's financial condition and results of operations. Claims against the
Company, regardless of their merit or eventual outcome, may also have a material
adverse effect upon the Company's ability to attract or retain residents or
expand its business and may require management to devote substantial time to
matters unrelated to day-to-day operations. In addition, insurance policies must
be renewed annually. There can be no assurance that the Company will be able to
obtain liability insurance in the future or that, if such insurance is
available, it will be available on acceptable economic terms.
DEPENDENCE ON ATTRACTING SENIORS WITH SUFFICIENT RESOURCES TO PAY
The Company currently relies, and for the foreseeable future, the Company
expects to rely, primarily on the ability of its residents to pay for services
from their own and their families' financial resources. Generally, only elderly
adults with income or assets meeting or exceeding the comparable median in the
region where assisted living residences of the Company are located can afford
the fees for such residences. Inflation or other circumstances which adversely
affect the ability of residents and potential residents to pay for assisted
living services could have an adverse effect on the Company. In the event that
the Company encounters difficulty in attracting seniors with adequate resources
to pay for the Company's services, the Company would be adversely affected.
ENVIRONMENTAL LIABILITY RISKS ASSOCIATED WITH REAL PROPERTY
Under various Federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real estate may be
required to investigate and clean up hazardous or toxic substances or petroleum
product releases at such property, and may be held liable to a governmental
entity or to third parties for property damage and for investigation and clean
up costs incurred by such parties in connection with the contamination. Such
laws typically impose clean up responsibility and liability without regard to
whether the owner knew of or caused the presence of contaminants, and liability
under such laws has
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been interpreted to be joint and several unless the harm is divisible and there
is a reasonable basis for allocation or responsibility. The costs of
investigation, remediation or removal of such substances may be substantial, and
the presence of such substances, or the failure to properly remediate such
property, may adversely affect the owner's ability to sell or lease such
property or to borrow using such property as collateral. In addition, some
environmental laws create a lien on the contaminated site in favor of the
government for damages and costs it incurs in connection with the contamination.
Persons who arrange for the disposal or treatment of hazardous or toxic
substances also may be liable for the costs of removal or remediation of such
substances at the disposal or treatment facility, whether or not such facility
is owned or operated by such person. Finally, the owner of a site may be subject
to common law claims by third parties based on damages and costs resulting from
environmental contamination emanating from a site.
With the exception of four Sterling House residences operated by the
Company or its predecessors since prior to 1995, the Company has conducted
environmental assessments of all of its operating residences and has conducted,
or is in the process of conducting, environmental assessments of all of its
undeveloped sites and sites currently under construction. These assessments have
not revealed, and the Company is not otherwise aware of, any environmental
liability that it believes would have a material adverse effect on the Company's
business, assets or results of operations. There can be no assurance, however,
that environmental assessments would detect all environmental contamination
which may give rise to material environmental liabilities. The Company believes
that its respective residences are in compliance in all material respects with
all applicable environmental laws. The Company has not been notified by any
governmental authority, or is otherwise aware, of any material non-compliance,
liability or claim relating to hazardous or toxic substances or petroleum
products in connection with any of the residences its currently operates.
ANTI-TAKEOVER PROVISIONS
The Company's Restated Certificate of Incorporation, as amended (the
"Certificate"), authorizes the issuance of 5,000,000 shares of Preferred Stock
and 30,000,000 shares of Common Stock. Giving effect to the reservation of
shares issuable upon conversion of the Company's outstanding $35,000,000
principal amount of 6.75% Convertible Subordinated Debentures due 2006 and the
Company's outstanding $50,000,000 principal amount of 7% Convertible
Subordinated Debentures due 2004 (collectively, the "Debentures") and exercise
of stock options previously granted or available to be granted under the
Company's stock option plans, the Company will have 5,415,369 shares of
authorized but unissued Common Stock. Subject to the rules of the American Stock
Exchange ("AMEX") upon which the Common Stock is listed, the Board of Directors
of the Company has the power to issue any or all of these additional shares
without stockholder approval, and the preferred shares can be issued with such
rights, preferences and limitations as may be determined by the Company's Board.
The rights of the holders of Common Stock will be subject to, and may be
adversely affected by, the rights of any holders of Preferred Stock that may be
issued in the future. The Company presently has no commitments or contracts to
issue any additional shares of Common Stock (other than pursuant to the exercise
of outstanding stock options or the conversion of the Debentures) or any shares
of Preferred Stock. Authorized and unissued Preferred Stock and Common Stock,
while providing desirable flexibility in connection with possible acquisitions
and other corporate purposes, could delay, discourage, hinder or preclude an
unsolicited acquisition of the Company, could make it less likely that
stockholders receive a premium for their shares as a result of any such attempt
and could adversely affect the market price of and the voting and other rights
of the holders of outstanding shares of Common Stock. As a Delaware corporation,
the Company is subject to Section 203 of the Delaware General Corporation Law
(the "DGCL") which, in general, prevents an "interested stockholder" (defined
generally as a person owing 15% or more of the corporation's outstanding voting
stock) from engaging in a "business combination" (as defined in Section 203) for
three years following the date such person became an interested stockholder
unless certain conditions are satisfied.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of Common Stock in the public market could
adversely affect prevailing market prices of the Common Stock.
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<PAGE> 12
In connection with the Sterling Merger, the Company issued 5,549,760 shares
of Common Stock to holders of the common stock of Sterling. Up to 46% of such
shares are available for sale by the holders thereof pursuant to Rule 145
adopted by the Commission under the Securities Act upon the publication by the
Company of financial results covering at least 30 days of post-Sterling Merger
combined operations, and the remainder of such shares are available for
immediate resale by the holders thereof.
Approximately 51.1% of the outstanding shares of Common Stock was offered
and sold in reliance upon exemptions from registration under the Securities Act
and, accordingly, such shares are "restricted shares" for purposes of Rule 144
adopted under the Securities Act ("Restricted Shares"). The substantial majority
of the Restricted Shares are currently either freely tradeable without
restriction or limitation under the Securities Act or may be sold in the public
market pursuant to Rule 144 promulgated under the Securities Act, subject to the
volume and resale restrictions of such rule.
Holders of the Debentures have the right to convert the Debentures into
Common Stock at a conversion price of either $20.25 or $20.38 per share
(depending upon which debenture they hold) at any time after the registration
statements which have been or will be filed by the Company with respect thereto
are declared effective by the Commission. If holders elect to convert all of the
outstanding Debentures into shares of Common Stock, the Company would issue an
additional 4,186,353 shares of Common Stock.
POSSIBLE PRICE VOLATILITY OF THE SECURITIES
The market price of the Securities offered hereby could be subject to
significant fluctuations in response to various factors and events, including
the liquidity of the market for the Securities offered hereby, variations in the
Company's operating results, and new statutes or regulations or changes in the
interpretation of existing statutes or regulations affecting the health care
industry generally or the assisted living industry in particular. In addition,
the stock market in recent years has experienced broad price and volume
fluctuations that often have been unrelated to the operating performance of
particular companies. These market fluctuations also may adversely affect the
market price of the Securities.
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THE COMPANY
Alternative Living Services, Inc. is a national assisted living company
operating 219 residences with an aggregate capacity to accommodate approximately
9,200 residents as of November 1, 1997. Of these residences, the Company owns
48, leases 101, holds majority interests in 34 (22 of which are owned and 12 of
which are leased), holds minority interests in 20 (11 of which are owned and
nine of which are leased) and manages 16. The Company provides a full range of
assisted living services in its residences for the frail elderly and
free-standing specialty care residences for individuals with Alzheimer's disease
and other dementias. The Company and its predecessor have operated assisted
living residences since 1981, and specialty dementia care residences since 1985.
The Company provides a broad continuum of personal care (such as assistance
with bathing, toileting, dressing, eating and ambulation), support services
(such as housekeeping, laundry and transportation) and health care (such as
medication administration and health monitoring) to its residents. In addition,
the Company offers a wide range of specialized services, including behavior
management and environmental adaptation programs, to residents who suffer from
Alzheimer's disease and other dementias. All of these services are provided on a
24-hour basis in "home-like" settings which emphasize privacy, individual choice
and independence. The Company operates five distinct assisted living product
lines (Clare Bridge, Wynwood, Crossings, Sterling House and WovenHearts), each
serving a particular segment of the private pay elderly population. Each
assisted living product line is designed to permit residents to age in place by
meeting their personal and health care needs across a range of pricing options.
Since 1993, the Company has experienced significant growth through its
aggressive development program and several strategic acquisitions. In October
1997, the Company completed the merger with Sterling, which, at the time,
operated 104 residences with an aggregate capacity of 3,892 residents. As a
result of the Sterling Merger, the Company added significant depth to its
experienced management team, acquired a fifth product line in the Sterling House
residence model and significantly expanded its presence in the Mid West and
Southeast. In 1996, the Company acquired New Crossings International
Corporation, an assisted living company which operated 15 residences with a
capacity of approximately 1,420 residents throughout the Western United States,
and Heartland Retirement Services, Inc., an assisted living company which
operated 20 WovenHearts residences throughout Wisconsin. As a result of these
transactions, the Company expanded into several new geographic markets and
broadened its assisted living product lines through the addition of the
Crossings apartment style residence model and the WovenHearts residence model
designed to serve frail elderly individuals in moderate income markets and
smaller communities. The Company has also significantly expanded its operations
through the development of free-standing residences. Through November 1, 1997,
the Company has developed 203 residences with an aggregate capacity to
accommodate approximately 8,700 residents. The Company intends to continue its
development strategy and, at November 1, 1997, is constructing 99 residences and
is developing an additional 74 residences. Of these residences, 110 to 130 are
expected to open during 1998.
The Company's executive offices are located at 450 North Sunnyslope Road,
Suite 300, Brookfield, Wisconsin 53005, and its telephone number is (414)
789-9565.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
----------------------------------------------- -----------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges(1).................. -- -- -- -- -- -- --
</TABLE>
- ---------------
(1) No preferred stock was outstanding during the periods presented; therefore,
the ratio of earnings to combined fixed charges and preferred stock
dividends has not been presented. Earnings consist of earnings from
continuing operations excluding unusual charges or extraordinary items, plus
fixed charges, reduced by the amount of unamortized interest capitalized.
Fixed charges consist of interest on debt,
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including amortization of debt issuance costs, and a portion of rent expense
estimated by management to be the interest component of such rentals.
Earnings were not sufficient to cover fixed charges as follows: for the
years ended December 31, 1992, 1993, 1994, 1995 and 1996, $130,000,
$180,000, $643,000, $1,808,000 and $7,326,000, respectively; and for the six
months ended June 30, 1996 and 1997, $3,600,000 and $1,940,000,
respectively.
USE OF PROCEEDS
Unless otherwise specified in the Prospectus Supplement which accompanies
this Prospectus, the net proceeds from the sale of the Securities offered from
time to time hereby will be used for the repayment of outstanding amounts under
the Company's temporary construction financing arrangements, to fund the
development of additional assisted living and dementia residences and for
general corporate purposes.
DILUTION
To the extent the Company offers Common Stock, information with respect to
dilution will be set forth in an accompanying Prospectus Supplement.
DESCRIPTION OF THE COMPANY'S CAPITAL STOCK
The summary of the terms of the capital stock of the Company set forth
below does not purport to be complete and is subject to and qualified in its
entirety by reference to the Certificate, and the Company's Restated Bylaws, as
amended (the "Bylaws"), copies of which have been filed as exhibits to the
Registration Statement of which this Prospectus is a part. See "Available
Information".
GENERAL
The Certificate authorizes 30,000,000 shares of Common Stock, par value
$.01 per share, and 5,000,000 shares of Preferred Stock, par value $.01 per
share. As of November 1, 1997, the Company had 18,575,524 shares of Common Stock
issued and outstanding and no outstanding shares of Preferred Stock.
COMMON STOCK
Each holder of Common Stock is entitled to one vote for each share owned of
record on all matters voted upon by stockholders, and a majority vote is
required for all action to be taken by stockholders. Cumulative voting of shares
is prohibited. Accordingly, the holders of a majority of the voting power of the
shares voting for the election of directors can elect all of the directors if
they choose to do so. The Common Stock bears no preemptive rights, and is not
subject to redemption, sinking fund or conversion provisions. The shares of
Common Stock offered hereby will be, when issued and paid for, fully paid and
non-assessable.
Holders of Common Stock are entitled to receive dividends if, as and when
declared by the Company's Board of Directors out of funds legally available
therefor, subject to the dividend and liquidation rights of any preferred stock
that may be issued (and subject to any dividend restriction contained in any
credit facility which the Company may enter into in the future) and distributed
pro rata in accordance with the number of shares of Common Stock held by each
stockholder.
The Common Stock is listed on the American Stock Exchange. The transfer
agent and registrar for the Common Stock is American Stock Transfer & Trust
Company.
PREFERRED STOCK
The following description of the terms of the Preferred Stock sets forth
certain general terms and provisions of the Preferred Stock to which any
Prospectus Supplement may relate. Certain other terms of any series of the
Preferred Stock offered by any Prospectus Supplement will be described in such
Prospectus Supplement. The description of certain provisions of the Preferred
Stock set forth below and in any Prospectus
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<PAGE> 15
Supplement does not purport to be complete and is subject to and qualified in
its entirety by reference to the Certificate and the Board of Directors'
resolution relating to each series of the Preferred Stock which will be filed
with the Commission and incorporated by reference to the Registration Statement
of which this Prospectus is a part at or prior to the time of the issuance of
such series of Preferred Stock.
Under the Certificate, the Board of Directors of the Company is authorized
to establish and issue, from time to time, up to 5,000,000 shares of Preferred
Stock, in one or more series, with such dividend rights, dividend rate,
conversion rights, voting rights, rights and terms of redemption (including
sinking fund provisions), the redemption price or prices, and the liquidation
preference as shall be stated in the resolution providing for the issue of a
series of such stock, adopted, at any time or from time to time, by the Board of
Directors of the Company.
The Preferred Stock shall have the dividend, liquidation, redemption and
voting rights set forth below unless otherwise provided in a Prospectus
Supplement relating to a particular series of the Preferred Stock. Reference is
made to the Prospectus Supplement relating to the particular series of the
Preferred Stock offered thereby for specific terms, including: (i) the
designation and stated value per share of such Preferred Stock and the number of
shares offered; (ii) the amount of liquidation preference per share; (iii) the
initial public offering price at which such Preferred Stock will be issued; (iv)
the dividend rate (or method of calculation), the dates on which dividends shall
be payable and the dates from which dividends shall commence to cumulate, if
any; (v) any redemption or sinking fund provisions; (vi) any conversion rights;
and (vii) any additional voting, dividend, liquidation, redemption, sinking fund
and other rights, preferences, privileges, limitations and restrictions.
The Preferred Stock will, when issued, be fully paid and nonassessable and
will have no preemptive rights. Unless otherwise stated in a Prospectus
Supplement relating to a particular series of the Preferred Stock, each series
of the Preferred Stock will rank on a parity as to dividends and distributions
of assets with each other series of the Preferred Stock. The rights of the
holders of each series of the Preferred Stock will be subordinate to those of
the Company's general creditors.
Dividend Rights. Unless otherwise stated in a Prospectus Supplement
relating to a particular series of the Preferred Stock, holders of shares of the
Preferred Stock of each series will be entitled to receive, when, as and if
declared by the Board of Directors of the Company, out of funds of the Company
legally available therefor, cash dividends on such dates and at such rates as
will be set forth in, or as are determined by the method described in the
Prospectus Supplement relating to such series of the Preferred Stock. Such rate
may be fixed or variable or both. Each such dividend will be payable to the
holders of record as they appear on the stock books of the Company on such
record dates, fixed by the Board of Directors of the Company, as specified in
the Prospectus Supplement relating to such series of Preferred Stock.
Such dividends may be cumulative or noncumulative, as provided in the
Prospectus Supplement relating to such series of Preferred Stock. If the Board
of Directors of the Company fails to declare a dividend payable on a dividend
payment date on any series of Preferred Stock for which dividends are
noncumulative, then the holders of such series of Preferred Stock will have no
right to receive a dividend in respect of the dividend period ending on such
dividend payment date, and the Company shall have no obligation to pay the
dividend accrued for such period, whether or not dividends on such series are
declared payable on any future dividend payment dates. Dividends on the shares
of each series of Preferred Stock for which dividends are cumulative will accrue
from the date on which the Company initially issues shares of such series.
Unless otherwise stated in a Prospectus Supplement relating to a particular
series of the Preferred Stock, so long as the shares of any series of the
Preferred Stock shall be outstanding, unless (i) full dividends (including if
such Preferred Stock is cumulative, dividends for prior dividend periods) shall
have been paid or declared and set apart for payment on all outstanding shares
of the Preferred Stock of such series and all other classes and series of
Preferred Stock (other than Junior Stock, as defined below) and (ii) the Company
is not in default or in arrears with respect to the mandatory or optional
redemption or mandatory repurchase or other mandatory retirement of, or with
respect to any sinking or other analogous fund for, any shares of Preferred
Stock of such series or any shares of any other Preferred Stock of any class or
series (other than Junior Stock), the Company may not declare any dividends on
any shares of Common Stock or any other stock of the
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<PAGE> 16
Company ranking as to dividends or distributions of assets junior to such series
of Preferred Stock (the Common Stock and any such other stock being herein
referred to as "Junior Stock"), or make any payment on account of, or set apart
money for, the purchase, redemption or other retirement of, or for a sinking or
other analogous fund for, any shares of Junior Stock or make any distribution in
respect thereof, whether in cash or property or in obligations or stock of the
Company, other than Junior Stock which is neither convertible into, nor
exchangeable or exercisable for, any securities of the Company other than Junior
Stock.
Liquidation Preference. In the event of any liquidation, dissolution or
winding up of the Company, voluntary or involuntary, the holders of each series
of the Preferred Stock will be entitled to receive out of the assets of the
Company available for distribution to stockholders, before any distribution of
assets or payment is made to the holders of Common Stock or any other shares of
stock of the Company ranking junior as to such distribution or payment to such
series of Preferred Stock, the amount set forth in the Prospectus Supplement
relating to such series of the Preferred Stock. Upon any voluntary or
involuntary liquidation, dissolution or winding up of the Company, the Preferred
Stock of such series and such other shares of Preferred Stock will share ratably
in any such distribution of assets of the Company in proportion to the full
respective preferential amounts to which they are entitled. After payment to the
holders of the Preferred Stock of each series of the full preferential amounts
of the liquidating distribution to which they are entitled, the holders of each
such series of the Preferred Stock will be entitled to no further participation
in any distribution of assets by the Company.
If such payment shall have been made in full to all holders of shares of
Preferred Stock, the remaining assets of the Company shall be distributed among
the holders of any other classes of stock ranking junior to the Preferred Stock
upon liquidation, dissolution or winding up, according to their respective
rights and preferences and in each case according to their respective number of
shares. For such purposes, the consolidation or merger of the Company with or
into any other corporation, or the sale, lease or conveyance of all or
substantially all of the property or business of the Company, shall not be
deemed to constitute a liquidation, dissolution or winding up of the Company.
Redemption. A series of the Preferred Stock may be redeemable, in whole or
from time to time in part, at the option of the Company, and may be subject to
mandatory redemption pursuant to a sinking fund or otherwise, in each case upon
terms, at the times and at the redemption prices set forth in the Prospectus
Supplement relating to such series. Shares of the Preferred Stock redeemed by
the Company will be restored to the status of authorized but unissued shares of
Preferred Stock of the Company.
In the event that fewer than all of the outstanding shares of a series of
the Preferred Stock are to be redeemed, whether by mandatory or optional
redemption, the number of shares to be redeemed will be determined by lot or pro
rata (subject to rounding to avoid fractional shares) as may be determined by
the Company or by any other method as may be determined by the Company in its
sole discretion to be equitable. From and after the redemption date (unless the
Company defaults in the payment of the redemption price plus accumulated and
unpaid dividends, if any), dividends shall cease to accumulate on the shares of
the Preferred Stock called for redemption and all rights of the holders thereof
(except the right to receive the redemption price plus accumulated and unpaid
dividends, if any) shall cease.
So long as any dividends on shares of any series of the Preferred Stock or
any other series of Preferred Stock of the Company ranking on a parity as to
dividends and distributions of assets with such series of the Preferred Stock
are in arrears, no shares of any such series of the Preferred Stock or such
other series of Preferred Stock of the Company will be redeemed (whether by
mandatory or optional redemption) unless all such shares are simultaneously
redeemed, and the Company will not purchase or otherwise acquire any such
shares; provided, however, that the foregoing will not prevent the purchase or
acquisition of such shares of Preferred Stock of such series or of shares of
such other series of Preferred Stock pursuant to a purchase or exchange offer
made on the same terms to holders of all outstanding shares of Preferred Stock
of such series and, unless the full cumulative dividends on all outstanding
shares of any cumulative Preferred Stock of such series and any other stock of
the Company ranking on a parity with such series as to dividends and upon
liquidation shall have been paid or contemporaneously are declared and paid for
all past dividend periods, the Company shall not purchase or otherwise acquire
directly or indirectly any shares of Preferred Stock of such
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<PAGE> 17
series (except by conversion into or exchange for stock of the Company ranking
junior to the Preferred Stock of such series as to dividends and upon
liquidation).
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of shares of Preferred
Stock to be redeemed at the address shown on the stock transfer books of the
Company. After the redemption date, dividends will cease to accrue on the shares
of Preferred Stock called for redemption and all rights of the holders of such
shares will terminate, except the right to receive the redemption price without
interest.
Conversion Rights. The terms, if any, on which shares of Preferred Stock
of any series may be exchanged for or converted (mandatorily or otherwise) into
shares of Common Stock or another series of Preferred Stock will be set forth in
the Prospectus Supplement relating thereto.
Voting Rights. Except as indicated below or in a Prospectus Supplement
relating to a particular series of the Preferred Stock, or except as required by
applicable law, the holders of the Preferred Stock will not be entitled to vote
for any purpose.
Unless otherwise stated in a Prospectus Supplement relating to a particular
series of the Preferred Stock, so long as any shares of Preferred Stock remain
outstanding, the Company shall not, without the consent or the affirmative vote
of the holders of a majority of the shares of each series of Preferred Stock
outstanding at the time given in person or by proxy, either in writing or at a
meeting (such series voting separately as a class) (i) authorize, create or
issue, or increase the authorized or issued amount of, any class or series of
stock ranking prior to such series of Preferred Stock with respect to payment of
dividends, or the distribution of assets on liquidation, dissolution or winding
up or reclassifying any authorized stock of the Company into any such shares, or
create, authorize or issue any obligation or security convertible into or
evidencing the right to purchase any such shares and (ii) to repeal, amend or
otherwise change any of the provisions applicable to the Preferred Stock of such
series in any manner which materially and adversely affects the powers,
preferences, voting power or other rights or privileges of such series of the
Preferred Stock or the holders thereof; provided, however, that any increase in
the amount of the authorized Preferred Stock or the creation or issuance of
other series of Preferred Stock, or any increase in the amount of authorized
shares of such series or of any other series of Preferred Stock, in each case
ranking on a parity with or junior to the Preferred Stock of such series, shall
not be deemed to materially and adversely affect such rights, preferences,
privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of the Preferred Stock shall have been
redeemed or called for redemption and sufficient funds shall have been deposited
in trust to effect such redemption.
Transfer Agent and Registrar. The transfer agent, dividend and redemption
price disbursement agent and registrar for shares of each series of the
Preferred Stock will be set forth in the Prospectus Supplement relating thereto.
RESTRICTIONS ON BUSINESS COMBINATIONS AND CORPORATE CONTROL
Section 203 of the DGCL prohibits certain transactions between a publicly
held Delaware corporation and an "interested stockholder," which is defined as a
person who, together with any affiliates and/or associates of such person,
beneficially owns, directly or indirectly, 15 percent or more of the outstanding
voting shares of a Delaware corporation. This provision prohibits certain
business combinations (defined broadly to include mergers, consolidations, sales
or other dispositions of assets having an aggregate value 10 percent or more of
the consolidated assets of the corporation, and certain transactions that would
increase the interested stockholder's proportionate share ownership in the
corporation) between an interested stockholder and a corporation for a period of
three years after the date the interested stockholder acquired its stock, unless
(i) the business combination or the transaction whereby the person became an
interested stockholder is approved by the corporation's board of directors prior
to the date of such transaction; (ii) the interested stockholder acquired at
least 85 percent of the voting stock of the corporation in the transaction in
which it became an interested stockholder; or (iii) the business combination is
approved by a majority of the board of
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<PAGE> 18
directors and by the affirmative vote of two-thirds of the outstanding voting
stock owned by disinterested stockholders at an annual or special meeting.
Limitations on Directors Liability. The Certificate limits the liability
of directors and officers to the Company or its stockholders to the fullest
extent permitted by the DGCL. The inclusion of this provision in the Certificate
may have the effect of reducing the likelihood of derivative litigation against
directors and may discourage or deter stockholders or management from bringing a
lawsuit against directors for breach of their duty of care, even though such an
action, if successful, might otherwise have benefited the Company and its
stockholders.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities are to be issued under an indenture (the "Indenture")
to be executed by the Company and a trustee to be selected (the "Trustee"), a
form of which has been filed as an exhibit to the Registration Statement of
which this Prospectus is a part. The following summaries of certain provisions
of the Indenture and the Debt Securities do not purport to be complete. These
summaries are qualified in their entirety by reference to all of the provisions
of the Indenture to which reference is hereby made for a full description of
such provisions, including the definitions therein of certain terms and other
information regarding the Debt Securities. Capitalized terms not otherwise
defined herein shall have the meaning ascribed to them in the Indenture.
Whenever particular sections or defined terms of the Indenture are referred to,
it is intended that such sections or defined terms shall be incorporated herein
by reference. Copies of the form of the Indenture are available for inspection
during normal business hours at the principal executive offices of the Company,
450 N. Sunnyslope Road, Suite 300, Brookfield, Wisconsin 53005.
GENERAL
The Indenture does not limit the aggregate principal amount of Debt
Securities that may be issued thereunder and provides that Debt Securities may
be issued from time to time in one or more series. The Prospectus Supplement
will describe certain terms of any Debt Securities offered thereby, including
(i) the title of such Debt Securities; (ii) any limit on the aggregate principal
amount of such Debt Securities and their purchase price; (iii) the date or dates
on which such Debt Securities will mature; (iv) the rate or rates per annum (or
manner in which interest is to be determined) at which such Debt Securities will
bear interest, if any, and the date from which such interest, if any, will
accrue; (v) the dates on which such interest, if any, on such Debt Securities
will be payable and the regular record dates for such interest payment dates;
(vi) any mandatory or optional sinking fund or analogous provisions; (vii)
additional provisions, if any, for the defeasance of such Debt Securities;
(viii) the date, if any, after which and the price or prices at which such Debt
Securities may, pursuant to any optional or mandatory redemption or repayment
provisions, be redeemed and the other detailed terms and provisions of any such
optional or mandatory redemption or repayment provisions; (ix) whether such Debt
Securities are to be issued in whole or in part in registered form represented
by one or more registered global securities (a "Registered Global Security")
and, if so, the identity of the depository for such Registered Global Security
or Debt Securities; (x) certain applicable United States federal income tax
consequences; (xi) any provisions relating to security for payments due under
such Debt Securities; (xii) any provisions relating to the conversion or
exchange of such Debt Securities into or for shares of Common Stock or Debt
Securities of another series; (xiii) any provisions relating to the ranking of
such Debt Securities in right of payment as compared to other obligations of the
Company; (xiv) the denominations in which such Debt Securities are authorized to
be issued; (xv) the place or places where principal of, premium, if any, and
interest, if any, on such Debt Securities will be payable; and (xvi) any other
specific term of such Debt Securities, including any additional events of
default or covenants provided for with respect to such Debt Securities, and any
terms that may be required by or advisable under applicable laws or regulations.
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<PAGE> 19
CONVERSION RIGHTS
The terms, if any, on which Debt Securities of any series may be exchanged
for or converted into shares of Common Stock or Debt Securities of another
series will be set forth in the Prospectus Supplement relating thereto.
The conversion price will be subject to adjustment under certain
conditions, including (i) the payment of dividends (and other distributions) in
shares of Common Stock on any class of capital stock of the Company; (ii)
subdivisions, combinations and reclassifications of the Common Stock; (iii) the
issuance to all or substantially all holders of Common Stock of rights or
warrants entitling them to subscribe for or purchase shares of Common Stock at a
price per share (or having a conversion price per share) less than the then
current market price; and (iv) distributions to all or substantially all holders
of shares of Common Stock of evidences of indebtedness or assets (including
securities, but excluding those rights, warrants, dividends and distributions
referred to above and dividends and distributions not prohibited under the terms
of the Indenture) of the Company, subject to the limitation that all adjustments
by reason of any of the foregoing would not be made until they result in a
cumulative change in the conversion price of at least 1%. No adjustments in the
conversion price of the Debt Securities will be made for regular quarterly or
other periodic or recurring cash dividends or distributions. In the event the
Company shall effect any capital reorganization or reclassification of its
shares of Common Stock or shall consolidate or merge with or into any trust or
corporation (other than a consolidation or merger in which the Company is the
surviving entity) or shall sell or transfer substantially all of its assets to
any other trust or corporation, the holders of the Debt Securities of any series
shall, if entitled to convert such Debt Securities at any time after such
transaction, receive upon conversion thereof, in lieu of each share of Common
Stock into which the Debt Securities of such series would have been convertible
prior to such transaction, the same kind and amount of stock and other
securities, cash or property as shall have been issuable or distributable in
connection with such transaction wit respect to each share of Common Stock.
A conversion price adjustment made according to the provisions of the Debt
Securities of any series (or the absence of provisions for such an adjustment)
might result in a constructive distribution to the holders of Debt Securities of
such series or holders of shares of Common Stock that would be subject to
taxation as a dividend. The Company may, at its option, make such reductions in
the conversion price, in addition to those set forth above, as the Board of
Directors of the Company deems advisable to avoid or diminish any income tax to
holders of shares of Common Stock resulting from any dividend or distribution of
shares of Common Stock (or rights to acquire shares of Common Stock) or from any
event treated as such for income tax purposes or for any other reason. The Board
of Directors will also have the power to resolve any ambiguity or correct any
error in the adjustments made pursuant to these provisions and its actions in so
doing shall be final and conclusive.
Fractional shares of Common Stock will not be issued upon conversion but,
in lieu thereof, the Company will pay a cash adjustment based upon market price.
The holders of Debt Securities of any series at the close of business on an
interest payment record date shall be entitled to receive the interest payable
on such Debt Securities on the corresponding interest payment date
notwithstanding the conversion thereof. However, Debt Securities surrendered for
conversion during the period from the close of business on any record date for
the payment of interest to the opening of business on the corresponding interest
payment date must be accompanied by payment of an amount equal to the interest
payable on such interest payment date. Holders of Debt Securities of any series
who convert Debt Securities of such series on an interest payment date will
receive the interest payable by the Company on such date and need not include
payment in the amount of such interest upon surrender of such Debt Securities
for conversion. Except as aforesaid, no payment or adjustment is to be made on
conversion for interest accrued on the Debt Securities of any series or for
dividends on shares of Common Stock.
OPTIONAL REDEMPTION
The Debt Securities of any series may be subject to redemption as permitted
or required by the terms of such Debt Securities on at least 30 days' prior
notice by mail. The Indenture does not contain any provision
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<PAGE> 20
requiring the Company to repurchase the Debt Securities of any series at the
option of the holders thereof in the event of a leveraged buyout,
recapitalization or similar restructuring of the Company, even though the
Company's creditworthiness and the market value of the Debt Securities may
decline significantly as a result of such transaction. The Indenture does not
protect holders of the Debt Securities of any series against any decline in
credit quality, whether resulting from any such transaction or from any other
cause. The Company may at any time buy Debt Securities of any series on the open
market.
SUBORDINATION
The indebtedness evidenced by the Debt Securities of any series may be
subordinated and junior in right of payment to the extent set forth in the
Indenture to the prior payment in full of amounts then due or thereafter created
on all Senior Indebtedness (as defined). The terms, if any, on which the Debt
Securities of any series may be subordinated and junior in right of payment to
the prior payment in full of amounts then due or thereafter created on all
Senior Indebtedness will be set forth in the Prospectus Supplement relating
thereto. No payment shall be made by the Company on account of principal of (or
premium, if any) or interest on the Debt Securities of any series or on account
of the purchase or other acquisition of Debt Securities of any series, if there
shall have occurred and be continuing a default with respect to any Senior
Indebtedness permitting the holders to accelerate the maturity thereof or with
respect to the payment of any Senior Indebtedness, and such default shall be the
subject of a judicial proceeding or the Company shall have received notice of
such default from any holder of Senior Indebtedness, unless and until such
default or event of default shall have been cured or waived or shall have ceased
to exist. By reason of these provisions, in the event of default on any Senior
Indebtedness, whether now outstanding or hereafter issued, payment of principal
of (and premium, if any) and interest on the Debt Securities of any series may
not be permitted to be made until such Senior Indebtedness is paid in full, or
the event of default on such Senior Indebtedness is cured or waived.
Upon any acceleration of the principal of the Debt Securities or any
distribution of assets of the Company upon any receivership, dissolution,
winding-up, liquidation, reorganization, or similar proceedings of the Company,
whether voluntary or involuntary, or in bankruptcy or insolvency, all amounts
due or to become due upon all Senior Indebtedness must be paid in full before
the holders of the Debt Securities of any series or the Trustee are entitled to
receive or retain any assets so distributed in respect of the Debt Securities.
By reason of this provision, in the event of insolvency, holders of the Debt
Securities of any series may recover less, ratably, than holders of Senior
Indebtedness.
"Senior Indebtedness" is defined to mean the principal, premium, if any,
unpaid interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company whether or
not a claim for post-filing interest is allowed in such proceedings), fees,
charges, expenses, reimbursement and indemnification obligations, and all other
amounts payable under or in respect of Indebtedness (as defined) of the Company
for money borrowed, whether any such Indebtedness exists as of the date of the
Indenture or is created, incurred, assumed or guaranteed after such date. There
is no limit on the amount of Senior Indebtedness that the Company may incur.
"Indebtedness" with respect to any Person is defined to mean:
(i) all indebtedness for money borrowed whether or not evidenced by a
promissory note, draft or similar instrument;
(ii) that portion of obligations with respect to leases that is
properly classified as a liability on a balance sheet in accordance with
generally accepted accounting principles;
(iii) notes payable and drafts accepted representing extensions of
credit;
(iv) any balance owed for all or any part of the deferred purchase
price or services which purchase price is due more than six months from the
date of incurrence of the obligation in respect thereof (except any such
balance that constitutes (a) a trade payable or an accrued liability
arising in the ordinary course of business or (b) a trade draft or note
payable issued in the ordinary course of business in connection
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<PAGE> 21
with the purchase of goods or services), if and to the extent such debt
would appear as a liability upon a balance sheet of such person prepared in
accordance with generally accepted accounting principles; and
(v) any deferral, amendment, renewal, extension, supplement or
refunding of any liability of the kind described in any of the preceding
clauses (i) through (iv);
provided, however, that, in computing the "Indebtedness" of any Person, there
shall be excluded any particular indebtedness if, upon or prior to the maturity
thereof, there shall have been deposited with a depositary in trust money (or
evidence of indebtedness if permitted by the instrument creating such
indebtedness) in the necessary amount to pay, redeem or satisfy such
indebtedness as it becomes due, and the amount so deposited shall not be
included in any computation of the assets of such Person.
DIVIDENDS, DISTRIBUTIONS AND ACQUISITIONS OF COMMON STOCK
The Company will not (i) declare or pay any dividend, or make any
distribution on its Common Stock to its stockholders (other than dividends or
distributions payable in Common Stock of the Company) or (ii) purchase, redeem,
or otherwise acquire or retire for value any of its Common Stock, or any
warrants, rights, or options to purchase or acquire any shares of its Common
Stock (other than the Debt Securities of any series or any other convertible
indebtedness of the Company that is neither secured nor subordinated to the Debt
Securities of any series), if at the time of such action an Event of Default has
occurred and is continuing or would exist immediately after such action. The
foregoing, however, will not prevent (i) the payment of any dividend within 60
days after the date of declaration when the payment would have complied with the
foregoing provision on the date of declaration; or (ii) the Company's retirement
of any of its Common Stock by exchange for, or out of the proceeds of the
substantially concurrent sale of, other Common Stock.
ADDITIONAL COVENANTS
Any additional covenants of the Company with respect to a series of the
Debt Securities will be set forth in the Prospectus Supplement relating thereto.
MODIFICATION OF THE INDENTURE
Under the Indenture, with certain exceptions, the rights and obligations of
the Company with respect to any series of Debt Securities and the rights of
Holders of such series may only be modified by the Company and the Trustee with
the consent of the Holders of at least a majority in principal amount of the
outstanding Debt Securities of such series. However, without the consent of each
Holder of any Debt Securities affected, an amendment, waiver or supplement may
not (i) reduce the principal of, or rate of interest on, any Debt Securities;
(ii) change the stated maturity date of the principal of, or any installment of
interest on, any Debt Securities; (iii) waive a default in the payment of the
principal amount of, or the interest on, or any premium payable on redemption
of, any Debt Securities; (iv) change the currency for payment of the principal
of, or premium or interest on, any Debt Securities; (v) impair the right to
institute suit for the enforcement of any such payment when due; (vi) adversely
affect any right to convert any Debt Securities; (vii) reduce the amount of
outstanding Debt Securities necessary to consent to an amendment, supplement or
waiver provided for in the Indenture; or (viii) modify any provisions of the
Indenture relating to the modification and amendment of the Indenture or waivers
of past defaults, except as otherwise specified.
EVENTS OF DEFAULT, NOTICE AND WAIVER
Except as otherwise set forth in the accompanying Prospectus Supplement,
the following is a summary of certain provisions of the Indenture relating to
Events of Default, notice and waiver.
The following are Events of Default under the Indenture with respect to any
series of Debt Securities: (i) default in the payment of interest on the Debt
Securities of such series when due and payable, which continues for 30 days;
(ii) default in the payment of principal of (and premium, if any) on the Debt
Securities when due and payable, at maturity, upon redemption or otherwise,
which continues for five Business Days;
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<PAGE> 22
(iii) failure to perform any other covenant of the Company contained in the
Indenture or the Debt Securities of such series which continues for 60 days
after written notice as provided in the Indenture; (iv) default under any bond,
debenture or other Indebtedness (as defined in the Indenture) of the Company or
any subsidiary if (a) either (x) such Event of Default results from the failure
to pay any such Indebtedness at maturity or (y) as a result of such Event of
Default, the maturity of such Indebtedness has been accelerated prior to its
expressed maturity and such acceleration shall not be rescinded or annulled or
the accelerated amount paid within 10 days after notice to the Company of such
acceleration, or such Indebtedness having been discharged, and (b) the principal
amount of such Indebtedness, together with the principal amount of any other
such Indebtedness in default for failure to pay principal or interest thereon,
or the maturity of which has been so accelerated, aggregates $10 million or
more; and (v) certain events of bankruptcy, insolvency or reorganization
relating to the Company.
If an Event of Default occurs and is continuing with respect to the Debt
Securities of any series, either the Trustee or the Holders of a majority in
aggregate principal amount of the outstanding Debt Securities of such series may
declare the Debt Securities due and payable immediately.
The Indenture provides that the Trustee will, within 90 days after the
occurrence of any Default or Event of Default with respect to the Debt
Securities of any series, give to the Holders of Debt Securities notice of all
uncured Defaults and Events of Default known to it, but the Trustee will be
protected in withholding such notice if it in good faith determines that the
withholding of such notice is in the interest of such Holders, except in the
case of a default in the payment of the principal of (or premium, if any) or
interest on any of the Debt Securities of such series.
The Indenture provides that the Holders of a majority in aggregate
principal amount of the Debt Securities of any series then outstanding may
direct the time, method and place of conducting any proceedings for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee with respect to the Debt Securities of such series. The right of a
Holder to institute a proceeding with respect to the Indenture is subject to
certain conditions precedent including notice and indemnity to the Trustee, but
the Holder has an absolute right to receipt of principal of (and premium, if
any) and interest on such Holder's Debt Securities on or after the respective
due dates expressed in the Debt Securities, and to institute suit for the
enforcement of any such payments.
The Holders of a majority in principal amount of the outstanding Debt
Securities of any series then outstanding may on behalf of the Holders of all
Debt Securities of such series waive certain past defaults, except a default in
payment of the principal of (or premium, if any) or interest on any Debt
Securities of such series or in respect of certain provisions of the Indenture
which cannot be modified or amended without the consent of the Holder of each
outstanding Debt Security of such series affected thereby.
The Company will be required to furnish to the Trustee annually a statement
of certain officers of the Company stating whether or not they know of any
Default or Events of Default and, if they have knowledge of a Default or Event
of Default, a description of the efforts to remedy the same.
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
The Indenture provides that the Company may merge or consolidate with, or
sell or convey all, or substantially all, of its assets to any other trust or
corporation, provided that (i) either the Company shall be the continuing
entity, or the successor entity (if other than the Company) shall be any entity
organized and existing under the laws of the United States or a state thereof or
the District of Columbia (although it may, in truth, be owned by a foreign
entity) and such entity shall expressly assume by supplemental indenture all of
the obligations of the Company under the Debt Securities of any series and the
Indenture; (ii) immediately after giving effect to such transactions, no Default
or Event of Default shall have occurred and be continuing; and (iii) the Company
shall have delivered to the Trustee an Officers' Certificate and opinion of
counsel, stating that the transaction and supplemental indenture comply with the
Indenture.
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GLOBAL SECURITIES
The Debt Securities may be issued in whole or in part in global form (the
"Global Securities"). The Global Securities will be deposited with a depository
(the "Depository"), or with a nominee for a Depository, identified in the
Prospectus Supplement. In such case, one or more Global Securities will be
issued in a denomination or aggregate denominations equal to the portion of the
aggregate principal amount of outstanding Debt Securities to be represented by
such Global Security or Securities. Unless and until it is exchanged in whole or
in part for Debt Securities in definitive form, a Global Security may not be
transferred except as a whole by the Depository for such Global Security to a
nominee of such Depository or by a nominee of such Depository to such Depository
or another nominee of such Depository or by such Depository or any such nominee
to a successor for such Depository or a nominee of such successor.
The specific material terms of the depository arrangement with respect to
any portion of a series of Debt Securities to be represented by a Global
Security will be described in the Prospectus Supplement. The Company anticipates
that the following provisions will apply to all depository arrangements.
So long as the Depository for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depository or such nominee as the
case may be, will be considered the sole owner or Holder of the Debt Securities
represented by such Global Security for all purposes under the Indenture;
provided, however, that for purposes of obtaining any consents or directions
required to be given by the Holders of the Debt Securities, the Company, the
Trustee and its agents will treat a person as the holder of such principal
amount of Debt Securities as specified in a written statement of the Depository.
Principal, premium, if any, and interest payments, if any, on Debt
Securities represented by a Global Security registered in the name of a
Depository or its nominee will be made directly to the owners of beneficial
interests of such Global Security, except as may be limited by the terms of the
resolution of the Board of Directors of the Company that authorizes such series
of Debt Securities.
The Company expects that the depository for any Debt Securities represented
by a Global Security, upon receipt of any payment of principal, premium, if any,
or interest will immediately credit participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such Global Security as shown on the records of such Depository. The
Company also expects that payments by participants will be governed by standing
instructions and customary practices, as is now the case with the securities
held for the accounts of customers registered in "street names," and will be the
responsibility of such participants.
If the Depository for any Debt Securities represented by a Global Security
is at any time unwilling or unable to continue as Depository and a successor
Depository is not appointed by the Company within 90 days, the Company will
issue each Debt Security in definitive form to the beneficial owners thereof in
exchange for such Global Security. In addition, the Company may at any time and
in its sole discretion determine not to have any of the Debt Securities of a
series represented by one or more Global Securities and, in such event, will
issue Debt Securities of such series in definitive form in exchange for all of
the Global Security or Securities representing such Debt Securities.
GOVERNING LAW
The Indenture and the Debt Securities will be governed by and construed in
accordance with the laws of the State of New York.
PLAN OF DISTRIBUTION
The Company may sell Securities in any of three ways; (i) directly to
investors; (ii) through underwriting syndicates represented by one or more
managing underwriters, or by one or more underwriters without a syndicate; or
(iii) through agents designated from time to time. The names of any underwriters
or agents of the Company involved in the sale of the Securities in respect of
which this Prospectus is being delivered and
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any applicable commissions or discounts will be set forth in the Prospectus
Supplement. The net proceeds to the Company from each such sale will also be set
forth in the Prospectus Supplement.
Agents and underwriters may be entitled under agreements entered into with
the Company to indemnification by the Company against certain civil liabilities,
including liabilities under the Securities Act, or to contribution with respect
to payments which the agents or underwriters may be required to make in respect
thereof. Agents and underwriters may engage in transactions with or perform
services for the Company in the ordinary course of business.
LEGAL MATTERS
The validity of the Securities offered hereby will be passed upon for the
Company by Rogers & Hardin LLP, Atlanta, Georgia.
EXPERTS
The (i) consolidated financial statements of Alternative Living Services,
Inc. and subsidiaries as of December 31, 1995 and 1996 and for the years ended
December 31, 1994, 1995 and 1996 have been included in the Company's Form 10-K
for the year ended December 31, 1996 and (ii) supplemental consolidated
financial statements of Alternative Living Services, Inc. and subsidiaries as of
December 31, 1995 and 1996 and for the years ended December 31, 1994, 1995 and
1996 have been included in the Form 8-K/A filed by the Company on November 6,
1997; and each such financial statements have been incorporated by reference in
the Prospectus in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, appearing therein upon the authority of said firm
as experts in accounting and auditing.
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======================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR ANY OTHER PERSON. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY, ANY OF THE
SECURITIES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS OR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR
IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
Forward Looking Statements............ 3
Risk Factors.......................... 4
The Company........................... 12
Ratio of Earnings to Fixed Charges.... 12
Use of Proceeds....................... 13
Dilution.............................. 13
Description of the Company's Capital
Stock............................... 13
Description of Debt Securities........ 17
Plan of Distribution.................. 22
Legal Matters......................... 23
Experts............................... 23
</TABLE>
======================================================
======================================================
ALTERNATIVE LIVING
SERVICES, INC.
SECURITIES
-------------------------
PROSPECTUS
-------------------------
NOVEMBER , 1997
======================================================
<PAGE> 26
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses to be paid in connection with
the issuance and distribution of the securities being registered hereby, other
than underwriting discounts and commissions, and all such expenses will be borne
by the Registrant. All amounts are estimates except for the SEC registration
fee. It is estimated that the Registrant will incur the following expenses in
connection with the offering of the securities being registered.
<TABLE>
<S> <C>
SEC Registration Fee........................................ $98,485.00
AMEX Filing Fee............................................. *
Accounting Fees and Expenses................................ *
Blue Sky Fees and Expenses.................................. *
Legal Fees and Expenses..................................... *
Printing and Mailing Expenses............................... *
Transfer Agent Fees and Expenses............................ *
Miscellaneous Expenses...................................... *
----------
Total*............................................ $ *
==========
</TABLE>
- ---------------
* To be supplied by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102 of the Delaware General Corporation Law ("DGCL") allows a
corporation to eliminate or limit the personal liability of directors of a
corporation to the corporation or to any of its stockholders for monetary
damages for a breach of fiduciary duty as a director, except (i) for breach of
the director's duty of loyalty, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) for
certain unlawful dividends and stock repurchases, or (iv) for any transaction
from which the director derived an improper personal benefit.
Section 145 of the DGCL provides that in the case of any action other than
one by or in the right of the corporation, a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
in such capacity on behalf of another corporation or enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful.
Section 145 of the DGCL provides that in the case of an action by or in the
right of a corporation to procure a judgment in its favor, a corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any action or suit by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation in such capacity on behalf of another corporation
or enterprise, against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted under standards similar to those set forth in the
proceeding paragraph, except that no indemnification may be made in respect of
any action or claim as to which such person shall have been adjudged to be
liable to the corporation unless a court determines that such person is fairly
and reasonably entitled to indemnification.
Articles VIII and IX of the Company's Restated Certificate of
Incorporation, as amended, provides for indemnification of directors, officers
and employees to the fullest extent permissible under the DGCL.
II-1
<PAGE> 27
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <C> <S>
1.1 -- Form of Underwriting Agreement.*
3.1 -- Restated Certificate of Incorporation of the Registrant
(incorporated herein by reference to Exhibit 3.1 to the
Registrant's Registration Statement on Form S-1,
Registration No. 333-04595, filed with Commission on July
30, 1996 (the "Form S-1")).
3.2 -- Certificate of Merger, dated May 24, 1996 (incorporated
herein by reference to Exhibit 3.1 to the Registrant's
Registration Statement on Form S-3, Registration No. 333-
37737, filed with the Commission on October 14, 1997 (the
"Form S-3")).
3.3 -- Certificate of Amendment to the Restated Certificate of
Incorporation, dated August 1, 1996 (incorporated herein by
reference to Exhibit 3.2 to the Form S-3).
3.4 -- Restated Bylaws of the Registrant.
4.1 -- Form of Common Stock Certificate (incorporated by reference
to Exhibit 4.2 to the Form S-1).
4.2 -- Indenture dated as of May 21, 1996 by and between
Alternative Living Services, Inc. and IBJ Schroder Bank &
Trust Company, as Trustee (incorporated by reference to
Exhibit 4.1 to the Registrant's Current Report on Form 8-K
(No. 1-11999) filed on May 27, 1997).
4.3 -- Form of Registration Rights Agreement dated as of May 21,
1997 by and between Alternative Living Services, Inc. and
the purchasers of the 7% Convertible Subordinated Debentures
due 2004 (incorporated by reference to Exhibit 99.2 to the
Registrant's Current Report on Form 8-K (No. 1-11999) filed
on May 27, 1997).
4.4 -- Form of Indenture with respect to the Debt Securities that
are, among other things, the subject of this Registration
Statement.*
4.5 -- See Articles Four, Six, Seven, Eight, Nine, Ten and Eleven
of the Registrant's Restated Certificate of Incorporation
(incorporated herein by reference to Exhibit 3.1 to the Form
S-1) and the Certificate of Amendment to the Restated
Certificate of Incorporation (incorporated by reference to
Exhibit 3.2 to the Form S-3).
4.6 -- See Articles 2, 3, 5, 7 and 8 of the Registrant's Restated
Bylaws (filed herewith as Exhibit 3.4).
4.7 -- Indenture dated as of May 23, 1996 by and between Sterling
House Corporation ("Sterling") and Fleet National Bank, as
Trustee (incorporated by reference to Exhibit 4.11 to
Sterling's Registration Statement on Form S-3 (Registration
No. 333-15329 filed on November 1, 1996 (the "Sterling
S-3")).
4.8 -- Form of Registration Rights Agreement dated as of May 17,
1996 by and between Sterling and the initial purchasers of
the 6.75% Convertible Subordinated Debentures due 2006
(incorporated by reference to Exhibit 4.9 to the Sterling
S-3).
4.9 -- First Supplemental Indenture dated as of October 23, 1997
among the Registrant, Sterling and State Street Bank and
Trust Company, as successor Trustee (filed herewith as
Exhibit 4.9).
5.1 -- Opinion of Rogers & Hardin LLP.*
12.1 -- Computation of ratios of earnings to fixed charges.*
23.1 -- Consent of Rogers & Hardin LLP (included in Exhibit 5.1).*
23.2 -- Consent of KPMG Peat Marwick LLP.
23.3 -- Consent of KPMG Peat Marwick LLP.
24.1 -- Power of Attorney. See signature pages to the original
filing of this Registration Statement.
25.1 -- Statement of Eligibility and Qualification of Trustee under
the Trust Indenture Act of 1939 on Form T-1.*
</TABLE>
- ---------------
* To be filed by amendment.
II-2
<PAGE> 28
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information required
to be included in the post-effective amendment by those paragraphs is contained
in periodic reports filed by the registrant pursuant to Section 13 or Section
15(d) of the Securities Exchange Act of 1934 that are incorporated by reference
in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered herein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
II-3
<PAGE> 29
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 30
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Brookfield, State of Wisconsin, on this 6th day of
November, 1997.
ALTERNATIVE LIVING SERVICES, INC.
By: /s/ WILLIAM F. LASKY
------------------------------------
William F. Lasky
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and as of the dates indicated:
Each person whose signature appears below authorizes William F. Lasky,
Timothy J. Buchanan and Thomas E. Komula, and each of them, to file one or more
amendments (including post-effective amendments) to the Registration Statement,
with all exhibits thereto, which amendments may make such changes as any of such
persons deems appropriate, and each person, individually and in each capacity
stated below, hereby appoints each of such persons as attorney-in-fact and
agent, with full power of resubstitution and substitution, to execute in his
name and on his behalf any such amendments to the Registration Statement, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<C> <S> <C>
/s/ WILLIAM F. LASKY Chief Executive Officer and November 6, 1997
- ----------------------------------------------------- Director (Principal
William F. Lasky Executive Officer)
/s/ TIMOTHY J. BUCHANAN President and Director November 6, 1997
- -----------------------------------------------------
Timothy J. Buchanan
/s/ THOMAS E. KOMULA Senior Vice President, November 6, 1997
- ----------------------------------------------------- Treasurer, Chief Financial
Thomas E. Komula Officer and Secretary
(Principal Financial
Officer)
/s/ JOHN D. PETERSON Vice President and Controller November 6, 1997
- ----------------------------------------------------- (Principal Accounting
John D. Peterson Officer)
/s/ WILLIAM G. PETTY, JR. Chairman of the Board and November 6, 1997
- ----------------------------------------------------- Director
William G. Petty, Jr.
/s/ RICHARD W. BOEHLKE Vice Chairman of the Board November 6, 1997
- ----------------------------------------------------- and Director
Richard W. Boehlke
/s/ GENE E. BURLESON Director November 6, 1997
- -----------------------------------------------------
Gene E. Burleson
Director
- -----------------------------------------------------
D. Ray Cook, M.D.
</TABLE>
II-5
<PAGE> 31
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<C> <S> <C>
Director
- -----------------------------------------------------
Robert Haveman
Director
- -----------------------------------------------------
Ronald G. Kenny
Director
- -----------------------------------------------------
Jerry L. Tubergen
/s/ STEVEN L. VICK Director November 6, 1997
- -----------------------------------------------------
Steven L. Vick
</TABLE>
II-6
<PAGE> 32
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION OF EXHIBIT NUMBER
- ------- ---------------------- ------
<C> <C> <S> <C>
1.1 -- Form of Underwriting Agreement.*............................
3.1 -- Restated Certificate of Incorporation of the Registrant
(incorporated herein by reference to Exhibit 3.1 to the
Registrant's Registration Statement on Form S-1,
Registration No. 333-04595, filed with Commission on July
30, 1996 (the "Form S-1"))..................................
3.2 -- Certificate of Merger, dated May 24, 1996 (incorporated
herein by reference to Exhibit 3.1 to the Registrant's
Registration Statement on Form S-3, Registration No.
333-37737, filed with the Commission on October 14, 1997
(the "Form S-3"))...........................................
3.3 -- Certificate of Amendment to the Restated Certificate of
Incorporation, dated August 1, 1996 (incorporated herein by
reference to Exhibit 3.2 to the Form S-3)...................
3.4 -- Restated Bylaws of the Registrant...........................
4.1 -- Form of Common Stock Certificate (incorporated by reference
to Exhibit 4.2 to the Form S-1).............................
4.2 -- Indenture dated as of May 21, 1996 by and between
Alternative Living Services, Inc. and IBJ Schroder Bank &
Trust Company, as Trustee (incorporated by reference to
Exhibit 4.1 to the Registrant's Current Report on Form 8-K
(No. 1-11999) filed on May 27, 1997)........................
4.3 -- Form of Registration Rights Agreement dated as of May 21,
1997 by and between Alternative Living Services, Inc. and
the purchasers of the 7% Convertible Subordinated Debentures
due 2004 (incorporated by reference to Exhibit 99.2 to the
Registrant's Current Report on Form 8-K (No. 1-11999) filed
on May 27, 1997)............................................
4.4 -- Form of Indenture with respect to the Debt Securities that
are, among other things, the subject of this Registration
Statement.*.................................................
4.5 -- See Articles Four, Six, Seven, Eight, Nine, Ten and Eleven
of the Registrant's Restated Certificate of Incorporation
(incorporated herein by reference to Exhibit 3.1 to the Form
S-1) and the Certificate of Amendment to the Restated
Certificate of Incorporation (incorporated by reference to
Exhibit 3.2 to the Form S-3)................................
4.6 -- See Articles 2, 3, 5, 7 and 8 of the Registrant's Restated
Bylaws (filed herewith as Exhibit 3.4)......................
4.7 -- Indenture dated as of May 23, 1996 by and between Sterling
House Corporation ("Sterling") and Fleet National Bank, as
Trustee (incorporated by reference to Exhibit 4.11 to
Sterling's Registration Statement on Form S-3 (Registration
No. 333-15329 filed on November 1, 1996 (the "Sterling
S-3"))......................................................
4.8 -- Form of Registration Rights Agreement dated as of May 17,
1996 by and between Sterling and the initial purchasers of
the 6.75% Convertible Subordinated Debentures due 2006
(incorporated by reference to Exhibit 4.9 to the Sterling
S-3)........................................................
4.9 -- First Supplemental Indenture dated as of October 23, 1997
among the Registrant, Sterling and State Street Bank and
Trust Company, as successor Trustee (filed herewith as
Exhibit 4.9)................................................
5.1 -- Opinion of Rogers & Hardin LLP.*............................
12.1 -- Computation of ratios of earnings to fixed charges.*........
23.1 -- Consent of Rogers & Hardin LLP (included in Exhibit
5.1).*......................................................
23.2 -- Consent of KPMG Peat Marwick LLP............................
23.3 -- Consent of KPMG Peat Marwick LLP............................
</TABLE>
<PAGE> 33
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION OF EXHIBIT NUMBER
- ------- ---------------------- ------
<C> <C> <S> <C>
24.1 -- Power of Attorney. See signature pages to the original
filing of this Registration Statement.......................
25.1 -- Statement of Eligibility and Qualification of Trustee under
the Trust Indenture Act of 1939 on Form T-1.*...............
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 3.4
RESTATED BYLAWS
OF
ALTERNATIVE LIVING SERVICES, INC.
A Delaware Corporation
(effective October 23, 1997)
ARTICLE 1
OFFICES
Section 1.1 Registered office. The registered office of the Corporation
in the State of Delaware shall be at 32 Loockerman Square, Suite L-100, Dover,
Delaware 19901. The name of the Corporation's registered agent at such address
shall be The Prentice-Hall Corporation System, Inc.
Section 1.2 Other offices. The Corporation may also have offices at
such other places, both within and without the State of Delaware, as the Board
of Directors (the "Board") may from time to time determine or the business of
the Corporation may require.
ARTICLE 2
MEETINGS OF STOCKHOLDERS
Section 2.1 Place and Time of Meetings. An annual meeting of the
stockholders shall be held for the purpose of electing directors and conducting
such other business as may properly come before the meeting. The date, time and
place of the annual meeting, either within or without the State of Delaware,
shall be determined by resolution of the Board of Directors. Special meetings of
stockholders for any other purpose may be held at such time and place, within or
without the State of Delaware, as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof. Special meetings of the
stockholders may be called by the Chief Executive Officer for any purpose and
shall be called by the Secretary if directed by the Board of Directors.
Section 2.2 Notice of Meetings. Except as otherwise required by law,
notice of each meeting of the stockholders, whether annual or special, shall be
given not less than ten (10) nor more than sixty (60) days before the date of
the meeting to each stockholder of record entitled to vote at such meeting by
delivering a written notice thereof to the stockholder personally, or by
depositing such notice in the United States mail, in a postage prepaid envelope,
directed to the stockholder at stockholder's post office address furnished by
stockholder to the Secretary of the Corporation for such purpose or, if
stockholder has not furnished to the Secretary stockholder's address for such
purpose, then at stockholder's post office address last known to the Secretary,
or by transmitting a notice thereof to stockholder at such address by telegraph,
cable or facsimile telecommunication. Notice shall be deemed given upon delivery
(if by hand)
<PAGE> 2
or upon deposit in the mail (if by mail) or upon stockholder's receipt (if by
telegraph, cable or facsimile).
Except as otherwise expressly required by law, no publication of any
notice of a meeting of the stockholders shall be required. Every notice of a
meeting of the stockholders shall state the place, date and hour of the meeting,
and, in the case of a special meeting, shall also state the purpose or purposes
for which the meeting is called. Notice of any meeting of stockholders shall not
be required to be given to any stockholder who waives such notice, and such
notice shall be deemed waived by any stockholder who attends such meeting in
person or by proxy, except by a stockholder who attends such meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
Section 2.3 Adjournments. Any meeting of stockholders, annual or
special, may adjourn from time to time to reconvene at the same or some other
place and notice need not be given of any such adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken,
unless such notice is otherwise expressly required by law or hereunder. At the
adjourned meeting, the Corporation may transact any business that 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, the notice of the adjourned meeting shall be given to each stockholder
of record entitled to vote at the adjourned meeting. At the adjourned meeting,
the Corporation may transact any business that might have been transacted at the
original meeting.
Section 2.4 List of Stockholders. The Secretary shall make, at least
ten (10) days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at such meeting, arranged in alphabetical order
and specifying the address and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting, either at a place within
the city where the meeting is to be held, which place shall be specified in the
notice of the meeting or, if not so specified, at the place where the meeting is
to be held. The list shall also be produced and kept at the place of the meeting
during the whole time thereof and may be inspected by any stockholder who is
present. Upon the willful neglect or refusal of the Directors to produce such a
list at any meeting for the election of Directors, they shall be ineligible for
election to any office at such meeting. The stock ledger shall be the only
evidence of which stockholders are entitled to examine the stock ledger, the
list required by this section or the books of the Corporation, or to vote in
person or by proxy at any meeting of stockholders.
Section 2.5 Quorum. Except as otherwise provided by law or the
Certificate of Incorporation, at each meeting of stockholders the presence in
person or by proxy of the holders of shares of stock having a majority of the
votes that could be cast by the holders of all outstanding shares of stock
entitled to vote at the meeting shall be necessary and sufficient to constitute
a quorum. If a quorum is not present, the holders of the shares present in
person or
2
<PAGE> 3
represented by proxy at the meeting, and entitled to vote thereat, shall have
the power to adjourn the meeting to another time and/or place by the affirmative
vote of the holders of a majority of such shares.
Section 2.6 Voting; Proxies.
(a) At each meeting of the stockholders, each
stockholder shall be entitled to vote in person or by proxy
each share or fractional share of the stock of the Corporation
having voting rights on the matter in question and held by the
stockholder and registered in the stockholder's name on the
books of the Corporation:
(i) on the date fixed pursuant to Section
7.5 of these Bylaws as the record date for the
determination of stockholders entitled to notice of
and to vote at such meeting; or
(ii) if no such record date is so fixed,
then (a) at the close of business on the day next
preceding the day on which notice of the meeting is
given or (b) if notice of the meeting is waived, at
the close of business on the day next preceding the
day on which the meeting is held.
(b) Unless otherwise provided in a shareholders,
agreement, persons holding stock of the Corporation in a
fiduciary capacity shall be entitled to vote such stock.
Persons whose stock is pledged shall be entitled to vote such
shares, unless in the pledgor's transfer on the books of the
Corporation he expressly empowered the pledgee to vote such
shares, in which case only the pledgee or the pledgee's proxy
may represent and vote such stock. Stock having voting power
standing of record in the names of two or more persons,
whether fiduciaries, members of a partnership, joint tenants
in common, tenants by entirety or otherwise, or with respect
to which two or more persons have the same fiduciary
relationship, shall be voted in accordance with the provisions
of the General Corporation Law of the State of Delaware.
(c) Unless otherwise provided in a shareholders
agreement, voting rights may be exercised by the stockholder
entitled thereto in person or by the stockholder's proxy
appointed by an instrument in writing, subscribed by such
stockholder or by his attorney thereunto authorized and
delivered to the secretary of the meeting; provided, however,
that no proxy shall be voted or acted upon after three years
from its date, unless that proxy shall provide for a longer
period. A duly executed proxy shall be irrevocable if it so
states and if, and only for so long as, it is coupled with an
interest sufficient in law to support an irrevocable power. A
stockholder who may have given a proxy prior to any meeting
shall not, solely by attending such meeting, revoke the same
unless he notifies the secretary of the meeting of his intent
to revoke the proxy, in writing, prior to the
3
<PAGE> 4
voting of the proxy. At any meeting of the stockholders at
which a quorum is present, all matters (except as otherwise
provided in the Certificate of Incorporation, in these Bylaws
or by law) shall be decided by the vote of a majority in
voting interest of the stockholders present in person or by
proxy and entitled to vote thereat and thereon. Voting at any
meeting of the stockholders on any question need not be by
ballot, unless so directed by the chairman of the meeting. On
a vote by ballot each ballot shall be signed by the
stockholder voting, or by his proxy, if there be such proxy,
and it shall state the number of shares voted.
Section 2.7 Conduct of Meetings. Meetings of stockholders shall be
presided over by the Chairman of the Board, if any, or in his or her absence by
the Chief Executive Officer, or in his or her absence by the President, or in
his or her absence by a Vice President, or in the absence of the foregoing
persons by a Chairman designated by the Board of Directors, or in the absence of
such designation by a Chairman chosen at the meeting by the stockholders
attending. The Corporation's Secretary shall act as secretary of the meeting,
but in his or her absence the Chairman of the meeting may appoint any person to
act as secretary of the meeting.
ARTICLE 3
BOARD OF DIRECTORS
Section 3.1 General Powers. The property, business and affairs of the
Corporation shall be managed by the Board.
Section 3.2 Number and Term of Office. The number of directors shall be
a minimum of four (4) and a maximum of ten (10). Directors need not be
stockholders of the Corporation. The exact number of directors shall be as
established by resolution of the Board in conformity with applicable laws. The
directors of the Corporation shall hold office until their successors shall have
been duly elected or appointed and shall qualify or until their resignation or
removal in the manner hereinafter provided.
Section 3.3 Election of Directors. The Board of Directors shall
initially consist of the persons named as directors by the incorporator, and
each director so elected shall hold office until the first annual meeting of the
stockholders or until a successor is elected and qualified. At the first annual
meeting of the stockholders and at each annual meeting thereafter, the
stockholders shall elect directors, each of whom shall hold office for a term of
one year or until a successor is elected and qualified.
Section 3.4 Resignations; Removal. Any director of the Corporation may
resign at any time by giving written notice to the Board or to the Secretary of
the Corporation. Any such resignation shall take effect at the time specified
therein or, if the time is not specified, immediately upon its receipt by the
Board or Secretary. Unless otherwise specified in the notice, the acceptance of
such resignation shall not be necessary to make it effective. Any
4
<PAGE> 5
director may be removed at any time, with or without cause, by the holders of a
majority of shares of stock of the Corporation then entitled to vote at an
election of directors, except as otherwise provided by statute.
Section 3.5 Vacancies. Any vacancy in the Board, whether because of
death, resignation, disqualification, an increase in the number of directors or
any other cause, may be filled by the remaining directors or by the shareholders
by a plurality of the votes cast at a meeting of stockholders. Each director so
chosen to fill a vacancy shall hold office until his successor shall have been
elected and shall qualify or until he shall resign or shall have been removed in
the manner provided herein. Notwithstanding the foregoing, until the
Corporation's 1999 annual meeting of stockholders, any vacancy (whether arising
because of death, resignation, disqualification, removal or any other cause) on
the Board arising among any individual newly elected to serve on the Board
pursuant to Section 5.17(a) of that certain Agreement and Plan of Merger by and
between the Corporation, Tango Merger Corporation and Sterling House Corporation
("Sterling") dated as of July 30, 1997, as amended as of September 2, 1997, or
any individual elected to fill a director position occupied by any such person
(collectively, the "Sterling Directors") shall be nominated on behalf of the
Board, filled or selected by a majority vote of the remaining Sterling Directors
and approved by the Board, which approval shall not be unreasonably withheld.
Section 3.6 Place of Meeting, Etc. The Board may hold any of its
meetings at such place or places within or without the State of Delaware as the
Board may from time to time by resolution designate or as shall be designated by
the person or persons calling the meeting or in the notice or a waiver of notice
of any such meeting.
Directors may participate in any regular or special meeting of the
Board by means of conference telephone or similar communications equipment
pursuant to which all persons participating in the meeting of the Board can hear
each other, and such participation shall constitute presence in person at such
meeting.
Section 3.7 Annual Meeting. The Board shall meet as soon as practicable
after each annual election of directors, and notice of such annual meeting shall
not be required.
Section 3.8 Regular Meetings. Regular meetings of the Board may be held
at such times as the Board shall from time to time by resolution determine. If
any day fixed for a regular meeting shall be a legal holiday at the place where
the meeting is to be held, then the meeting shall be held at the same hour and
place on the next succeeding business day not a legal holiday. Except as
required by law, notice of regular meetings need not be given.
Section 3.9 Special Meetings. Special meetings of the Board shall be
held whenever called by the Chief Executive Officer or a majority of the
authorized number of directors. Except as otherwise provided by law or by these
Bylaws, notice of the time and place of each such special meeting shall be
mailed to each director, addressed to him at his residence or usual place of
business, at least three (3) days before the day on which the meeting is to be
held, or
5
<PAGE> 6
shall be sent to him at such place by facsimile telecommunication, telegraph or
cable or be delivered personally not less than forty-eight (48) hours before the
time at which the meeting is to be held. Except where otherwise required by law
or by these Bylaws, notice of the purpose of a special meeting need not be
given. Notice of any meeting of the Board shall not be required to be given to
any director who is present at such meeting other than a director who attends
such meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened.
Section 3.10 Quorum and Manner of Acting. Except as otherwise provided
in these Bylaws or by law, the presence of a majority of the authorized number
of directors shall be required to constitute a quorum for the transaction of
business at any meeting of the Board, and all matters shall be decided at any
such meeting, a quorum being present, by the affirmative votes of a majority of
the directors present. If no quorum exists, a majority of directors present at
any meeting may adjourn the same from time to time until a quorum is present.
Notice of any adjourned meeting need not be given.
Section 3.11 Action by Consent. Any action required or permitted to be
taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if a written consent thereto is signed by all members of the
Board or of such committee, as the case may be, and such written consent is
filed with the minutes of the proceedings of the Board or committee.
Section 3.12 Compensation. The directors shall receive only such
compensation for their services as directors as may be allowed by resolution of
the Board. The Board may also provide that the Corporation shall reimburse each
director for any expense incurred on account of attendance at any meetings of
the Board or committees of the Board. Neither the payment of such compensation
nor the reimbursement of such expenses shall be construed to preclude any
director from serving the Corporation or its subsidiaries in any other capacity
and receiving compensation therefor.
Section 3.13 Committees. By resolution passed by a majority of the
whole Board, the Board may designate one or more committees, each committee to
consist of one or more of the directors of the Corporation. Any such committee,
to the extent provided in the Board's resolution and except as otherwise limited
by law, shall have and may exercise all the powers and authority of the Board in
the management of the business and affairs of the Corporation, and may authorize
the seal of the Corporation to be affixed to all papers requiring it. Any such
committee shall keep written minutes of its meetings and report the same to the
Board at the next regular meeting of the Board. In the absence or
disqualification of a member of a committee and that member's alternate, if the
Board appoints alternates, the member or members thereof present at any meeting
and not disqualified from voting (whether or not the member or members
constitute a quorum) may unanimously appoint another member of the Board to act
at the meeting in the place of any such absent or disqualified member.
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Section 3.14 Committee Rules. Each committee of the Board of Directors
may fix its own rules of procedure and shall hold its meetings as provided by
such rules, except as may otherwise be provided by resolution of the Board
designating such committee, but in all cases the presence of at least a majority
of the members of such committee shall be necessary to constitute a quorum.
Section 3.15 Executive Committee. The Corporation shall have an
executive committee (the "Executive Committee") comprised of three (3) members.
The members of the Executive Committee shall be the Corporation's Chairman,
Chief Executive Officer and President (provided, however, that if none of such
persons is a Sterling Director, the Board shall replace one of such persons with
a Sterling Director), and each such person shall serve as a member of such
committee for so long as he holds such office. The Chairman shall serve as the
Chairman of the Executive Committee. Notwithstanding Sections 3.13 and 3.14 of
Article 3, the presence of all the members of the Executive Committee shall be
required to constitute a quorum for the transaction of any business at any
meeting of the Executive Committee, and all matters shall be decided at any such
meeting by the affirmative vote of all the members of the Executive Committee
present.
The Executive Committee shall have authority (i) to (a) make an equity
investment or otherwise provide equity funding, (b) borrow funds, incur
indebtedness or guarantee indebtedness or (c) enter into sale/leaseback
transactions as a form of financing in connection with the development,
construction, acquisition, financing, refinancing or operation of any assisted
living, dementia care or related specialty care facility primarily for the
elderly (each a "Facility" and collectively "Facilities") provided that as to
any such transaction the aggregate equity investment to be made by the
Corporation and its subsidiaries together with the aggregate indebtedness to be
incurred by the Corporation and its subsidiaries shall not exceed $15,000,000 in
the aggregate (or, in the case of a sale/leaseback transaction, the value of the
Facility or Facilities sold and leased back shall not exceed $15,000,000 in the
aggregate) (all such transactions referred to as "Authorized Transactions");
(ii) in connection with and pursuant to any Authorized Transaction, to create,
convey and establish liens and collateral interests in the real and personal
property of and relating to such Facility or Facilities to collateralize
indebtedness incurred, including, without limitation, security deeds, mortgages,
deeds of trust, pledges, collateral assignments, security interests and title
retention arrangements and, with respect to sale/leaseback transactions, convey
title to and enter into lease agreements with respect to such Facility or
Facilities; (iii) to review and formulate recommendations on matters to be
submitted to the Board; (iv) to approve and manage the consolidation of the
operations of Sterling and its subsidiaries and the Corporation and its
subsidiaries as a result of consummation of the transactions contemplated by
that certain Agreement and Plan of Merger by and between the Corporation, Tango
Merger Corporation and Sterling dated as of July 30, 1997, as amended as of
September 2, 1997, including, but not limited to, the implementation of Section
5.6 thereof; (v) to consider and develop strategic business initiatives and
long-term planning proposals for the Corporation, including proposals to acquire
other assisted living companies or to engage in other strategic business
transactions, and to present and review such initiatives and proposals with the
Board; and (vi) to perform such other functions as shall be appropriate to the
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effective discharge of the duties and responsibilities assigned to the Executive
Committee by these Bylaws or from the Board from time to time.
The Executive Committee shall meet from time to time on call of the
Chairman of the Executive Committee or by two or more members of the Executive
Committee. Meetings of the Executive Committee may be held at such place or
places, within or without the State of Delaware, as the Executive Committee
shall determine or as may be specified or fixed in the notices or waivers of
notice of such meetings. The Executive Committee may fix its own rules of
procedure, including provision for notice of its meetings and shall keep a
record of its proceedings.
The members of the Executive Committee may participate in Executive
Committee proceedings by means of conference telephone or similar communications
equipment by means of which all persons participating in the proceeding can hear
each other, and such participation shall constitute presence in person at such
proceedings.
Any action of the Executive Committee may be taken by a written
instrument signed by all the members of the Executive Committee, and such action
shall be fully effective as if taken at a meeting of the Executive Committee.
Section 3.16 Presumption of Assent. A director of the Corporation who
is present at a meeting of the Board of Directors or any committee designated by
the Board at which action on any corporate matter is taken shall be deemed to
have assented to the action taken unless his dissent is entered in the minutes
of the meeting or unless he files his written dissent to such action with the
person acting as the Secretary of the meeting before the adjournment thereof or
forwards such dissent by registered mail to the Secretary of the Corporation
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to a director who voted in favor of such action.
ARTICLE 4
OFFICERS
Section 4.1 Number. The officers of the Corporation shall be chosen by
the Board and shall consist of a Chairman of the Board, a Chief Executive
Officer, a President, a Secretary, a Treasurer and such other officers and
assistant officers as may be deemed necessary or desirable by the Board of
Directors. Any number of offices may be held by the same person. In its
discretion, the Board of Directors may choose not to fill any office for any
period as it may deem advisable, except the offices of President and Secretary.
Section 4.2 Election; Term of Office; Qualifications. The officers of
the Corporation, except such officers as may be appointed in accordance with
Section 4.3, shall be elected annually by the Board at the first meeting thereof
held after the election of the Board. Each
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officer shall hold office until his successor has been duly chosen and qualifies
or until his resignation or removal in the manner hereinafter provided.
Section 4.3 Assistants, Agents and Employees, Etc. In addition to the
officers specified in Section 4.1, the Board may appoint such other assistants,
agents and employees as it may deem necessary or advisable, including one or
more Assistant Secretaries, and one or more Assistant Treasurers, each of whom
shall hold office for such period, have such authority and perform such duties
as the Board may from time to time determine. The Board may delegate to any
officer of the Corporation or any committee of the Board the power to appoint,
remove and prescribe the duties of any such assistants, agents or employees.
Section 4.4 Resignation; Removal. Any officer or agent may resign at
any time upon written notice to the Board or the Secretary of the Corporation.
Any officer or agent elected or appointed by the Board of Directors may be
removed by the Board of Directors whenever in its judgment the best interests of
the Corporation would be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed.
Section 4.5 Vacancies. A vacancy in any office caused by death,
resignation, removal, disqualification or otherwise, may be filled by the Board
for the unexpired portion of the term of that office by a majority vote of the
directors then in office.
Section 4.6 Chairman of the Board ("Chairman"). The Chairman, if one is
elected, shall preside at all meetings of the Board and stockholders; and shall
perform such other duties and have such other powers as the Board may from time
to time prescribe. In addition to the Chief Executive Officer and the President,
the Chairman shall have authority to execute bonds, mortgages and other
contracts (whether or not requiring a seal), except where required or permitted
by law to be otherwise signed and executed and except where the signing and
execution thereof are expressly delegated by the Board to some other officer or
agent of the Corporation.
Section 4.7 The Chief Executive Officer. The Chief Executive Officer
("CEO"), if one is elected, shall be the chief executive officer of the
Corporation; shall have general and active management of the business of the
Corporation; shall, in the absence of the Chairman, preside at meetings of the
Board and stockholders; and shall see that all orders and resolutions of the
Board are carried into effect. In addition to the Chairman and the President,
the CEO shall have authority to execute bonds, mortgages and other contracts
requiring a seal, under the seal of the Corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof are expressly delegated by the Board to some other
officer or agent of the Corporation.
Section 4.8 The President. The President, subject to the direction of
the CEO, if one is elected, shall have general and active management of the
business of the Corporation; shall, in the absence of the Chairman and the CEO,
preside at meetings of the Board and stockholders; and shall see that all orders
and resolutions of the Board and the CEO are carried into effect.
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In addition to the Chairman and the CEO, the President shall have authority to
execute bonds, mortgages and other contracts requiring a seal, under the seal of
the Corporation, except where required or permitted by law to be otherwise
signed and executed and except where the signing and execution thereof is
expressly delegated by the Board to some other officer or agent of the
Corporation.
Section 4.9 Chief Operating Officer. The Chief Operating Officer
("COO"), subject to the direction of the President, shall have general
management responsibility for the day-to-day business and operations of the
Corporation, and shall perform such other duties and exercise such other powers
as the Board, the CEO or the President may, from time to time, determine or
these Bylaws may prescribe.
Section 4.10 Vice President. The Vice President, or if there shall be
more than one, the vice presidents shall perform such other duties and have such
other powers as the Board, the CEO or the President may, from time to time,
determine or these bylaws may prescribe.
Section 4.11 Secretary and Assistant Secretaries. The Secretary shall
attend all meetings of the Board and all meetings of the stockholders; shall
record all the proceedings of the meetings of the stockholders and of the Board
in a book to be kept for that purpose; and shall perform like duties for the
Board's standing committees when required. The Secretary shall give, or cause to
be given, notice of all meetings of the stockholders and special meetings of the
Board; shall perform such other duties as may be prescribed by the Board, the
CEO or the President, under whose supervision he or she shall act; shall have
custody of the corporate seal of the Corporation; and shall have authority to
affix the same to any instrument requiring it and, when it is so affixed, may
attest it by his or her signature. The Board may give general authority to any
other officer to affix the seal of the Corporation and to attest the affixing by
his or her signature. The Assistant Secretary, or if there be more than one, the
assistant secretaries in the order determined by the Board, shall, in the
absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such other duties and have such other
powers as the Board may from time to time prescribe.
Section 4.12 Treasurer and Assistant Treasurer. The Treasurer shall
have the custody of the corporate funds and securities; shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
Corporation; shall deposit all monies and other valuable effects in the name and
to the credit of the Corporation as may be ordered by the Board taking proper
vouchers for such disbursements; and shall render to the CEO, the President and
the Board, at its regular meetings or when the Board so requires, an account of
the Corporation. If required by the Board, the Treasurer shall give the
Corporation a bond (which shall be renewed every six (6) years) in such sums and
with such surety or sureties as shall be satisfactory to the Board for the
faithful performance of the duties of the office of Treasurer and for the
restoration to the Corporation, in case of death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in the possession or under the control of the Treasurer belonging
to the Corporation. The Assistant Treasurer, or if there shall be more than one,
the assistant treasurers in the order determined by
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the Board, shall, in the absence or disability of the Treasurer, perform the
duties and exercise the powers of the Treasurer and shall perform such other
duties and have such other powers as the Board may from time to time prescribe.
Section 4.13 Compensation. The compensation of the officers of the
Corporation shall be fixed from time to time by the Board. None of such officers
shall be prevented from receiving such compensation by reason of the fact that
he or she is also a director of the Corporation. Nothing contained herein shall
preclude any officer from serving the Corporation, or any subsidiary
corporation, in any other capacity and receiving such compensation by reason of
the fact that he or she is also a director of the Corporation.
ARTICLE 5
INDEMNIFICATION
Section 5.1 Action, Etc. Other Than by or in the Right of the
Corporation. The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement or
conviction, or upon a plea of nolo contenders or its equivalent, shall not of
itself create a presumption that the person did not act in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Corporation, or, with respect to any criminal action or proceeding, that he
had reasonable cause to believe that his or her conduct was unlawful.
Section 5.2 Actions, Etc., by or in the Right of the Corporation. The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys, fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation; provided, however, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable for
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negligence or misconduct in the performance of his duty to the Corporation
unless and only to the extent that the Court of Chancery of the State of
Delaware or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses as the Court of Chancery of the State of Delaware or
such other court shall deem proper.
Section 5.3 Determination of Right of Indemnification. Any
indemnification under Section 5.1 or 5.2 (unless ordered by a court) shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances because he has met the applicable standard of
conduct set forth in Section 5.1 or 5.2. Such determination shall be made (i) by
the Board by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (ii) if such a quorum is not
obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion or (iii) by the
stockholders.
Section 5.4 Indemnification Against Expenses of Successful Party.
Notwithstanding the other provisions of this Article, to the extent that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in Section 5.1 or 5.2, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
Section 5.5 Right to Advancement of Expenses. Expenses (including
attorneys' fees) incurred by a director in defending any civil, criminal,
administrative or investigative action, suit or proceeding by reason of the fact
that he or she is or was a director, shall be paid by the Corporation in advance
of the final disposition of such action, suit or proceeding; provided, however,
that any such advancement of expenses shall be made only upon delivery to the
Corporation of an undertaking by or on behalf of such director to repay such
amount if it shall ultimately be determined that he or she is not entitled to be
indemnified for such expenses. Expenses (including attorneys' fees) incurred by
an officer in defending a civil, criminal, administrative, or investigative
action, suit or proceeding by reason of the fact that he or she is or was an
officer, employee or agent of the Corporation may be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding if and as
authorized by the Board in the specific case upon receipt of an undertaking by
or on behalf of the officer to repay such amount if it shall ultimately be
determined that he or she is not entitled to be indemnified by the Corporation
as authorized in this Article. Such expenses (including attorneys' fees)
incurred by other employees and agents may be so paid or advanced by the
Corporation if and as authorized by the Board in the specific case and upon such
terms and conditions as the Board deems appropriate.
Section 5.6 Other Rights and Remedies. The indemnification and
advancement of expenses provided by, or granted pursuant to, this Article shall
not be deemed exclusive of any
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other rights to which those seeking indemnification or advancement of expenses
may be entitled under any Bylaws, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person.
Section 5.7 Insurance. Upon resolution passed by the Board, the
Corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article.
Section 5.8 Constituent Corporations. For the purposes of this Article,
references to "the Corporation" include all constituent corporations absorbed in
a consolidation or merger as well as the resulting or surviving corporation, so
that any person who is or was a director, officer, employee or agent of such a
constituent corporation or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise shall stand in the same
position under the provisions of this Article with respect to the resulting or
surviving corporation as he would if he had served the resulting or surviving
corporation in the same capacity.
Section 5.9 Other Enterprises, Fines, and Serving at Corporation's
Request. For the purposes of this Article, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation that
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as used in this Article.
Section 5.10 Right of Indemnitee to Bring Suit or Proceeding. The
rights to indemnification and to the advancement of expenses conferred in this
Article 5 shall be contract rights and such rights shall continue as to an
indemnitee who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the indemnitee's heirs, executors and administrators.
Any repeal or modification of the provisions of this Article 5 shall be
prospective only and shall not adversely affect any right or protection
hereunder of any person with respect to any action, suit or proceeding arising
out of or relating to any act or omission occurring prior to the time of such
repeal or modification. If a claim under this Article 5 is not paid in full by
the Corporation within sixty (60) days after a written claim has been received
by the Corporation, except in the case of a claim for an advancement of expenses
by a director, in
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which case the applicable period shall be twenty (20) days, the indemnitee may
at any time thereafter bring a suit or other proceeding against the Corporation
to recover the unpaid amount of the claim. If successful in whole or in part in
any such suit or proceeding, or in a suit or proceeding brought by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the indemnitee shall be entitled to be paid also the expenses
(including attorneys' fees) of prosecuting or defending such suit or proceeding.
Neither the failure of the Corporation (including its Board of Directors,
independent legal counsel or its stockholders) to have made a determination
prior to the commencement of such suit or proceeding that indemnification of the
indemnitee is proper under the circumstances because the indemnitee has met the
applicable standard of conduct set forth in the General Corporation Law of the
State of Delaware, nor an actual determination by the Corporation (including its
Board of Directors, independent legal counsel, or its stockholders) that the
indemnitee has not met such applicable standard of conduct, shall create a
presumption that the indemnitee has not met the applicable standard of conduct
or, in the case of such a suit or proceeding brought by the indemnitee, be a
defense to such suit or proceeding. In any such suit or proceeding brought by
the indemnitee to enforce a right to indemnification or to an advancement of
expenses hereunder, or brought by the Corporation to recover the advancement of
expenses pursuant to the terms of an undertaking, the burden of proving that the
indemnitee is not entitled to be indemnified, or to such advancement of
expenses, under this Article 5 or otherwise, shall be on the Corporation.
ARTICLE 6
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
Section 6.1 Execution of Contracts. The Board, except as otherwise
provided in these Bylaws, may authorize any officer or officers, agent or
agents, to enter into any contract or execute any instrument in the name and on
behalf of the Corporation, and such authority may be general or confined to
specific instances. It may appoint, or authorize any officer or officers to
appoint, one or more transfer clerks or one or more transfer agents and one or
more registrars, and may require all certificates for stock to bear the
signature or signatures of any of them.
Section 6.2 Checks, Drafts, Etc. All checks, drafts or other orders for
payment of money, notes or other evidence of indebtedness, issued in the name of
or payable to the Corporation, shall be signed or endorsed by such person or
persons and in such manner as, from time to time, shall be determined by
resolution of the Board. Each such officer, assistant, agent or attorney shall
give such bond, if any, as the Board may require.
Section 6.3 Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board may select, or
as may be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power is
delegated by the Board. For the purpose of deposit and for the purpose of
collection for the account of the Corporation, the CEO, the President, any Vice
President or the Treasurer
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(or any other officer or officers, assistant or assistants, agent or agents, or
attorney or attorneys of the Corporation who shall from time to time be
determined by the Board) may endorse, assign and deliver checks, drafts and
other orders for the payment of money that are payable to the order of the
Corporation.
Section 6.4 General and Special Bank Accounts. The Board may from time
to time authorize the opening and keeping of general and special bank accounts
with such banks, trust companies or other depositories as the Board may select
or as may be selected by any officer or officers, assistant or assistants, agent
or agents, or attorney or attorneys of the Corporation to whom such power is
delegated by the Board. The Board may make such special rules and regulations
with respect to such bank accounts, not inconsistent with the provisions of
these Bylaws, as it may deem expedient.
ARTICLE 7
STOCK
Section 7.1 Certificates for Stock. Every owner of stock of the
Corporation shall be entitled to have a certificate or certificates, to be in
such form as the Board shall prescribe, certifying the number and class of
shares of the stock of the Corporation owned by him. The certificates
representing shares of such stock shall be numbered in the order in which they
are issued and shall be signed in the name of the Corporation by the CEO, the
President or a Vice President, and by the Secretary or an Assistant Secretary or
by the Treasurer or an Assistant Treasurer. Any or all of the signatures on the
certificates may be a facsimile. If any officer, transfer agent or registrar who
has signed, or whose facsimile signature has been placed upon, any such
certificate, has ceased to be such officer, transfer agent or registrar before
such certificate is issued, such certificate may nevertheless be issued by the
Corporation with the same effect as though the person who signed such
certificate, or whose facsimile signature was placed thereupon, were such
officer, transfer agent or registrar at the date of issue. A record shall be
kept of the respective names of the persons, firms or corporations owning the
stock represented by such certificates, the number and class of shares
represented by such certificates, respectively, and the respective dates
thereof, and in case of cancellation, the respective dates of cancellation.
Every certificate surrendered to the Corporation for exchange or transfer shall
be cancelled, and no new certificate or certificates shall be issued in exchange
for any existing certificate until such existing certificate shall have been so
cancelled, except as provided in Section 7.4.
Section 7.2 Transfers of Stock. Transfers of shares of stock of the
Corporation shall be made only on the books of the Corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary, or with a transfer clerk or a
transfer agent appointed as provided in Section 7.3, and upon surrender of the
certificate or certificates for such shares properly endorsed and the payment of
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all taxes thereon. The person in whose name shares of stock stand on the books
of the Corporation shall be deemed by the Corporation to be the owner thereof
for all purposes. Whenever any transfer of shares is made for collateral
security, and not absolutely, such fact shall be so expressed in the entry of
transfer if, when the certificate or certificates are presented to the
Corporation for transfer, both the transferor and the transferee request the
Corporation to do so.
Section 7.3 Regulations. The Board may make such rules and regulations
as it may deem expedient (if not inconsistent with these Bylaws) concerning the
issue, transfer and registration of certificates for shares of the stock of the
Corporation. It may appoint, or authorize any officer or officers to appoint,
one or more transfer clerks or one or more transfer agents and one or more
registrars, and may require all certificates for stock to bear the signature or
signatures of any of them.
Section 7.4 Lost, Stolen, Destroyed and Mutilated Certificates. In any
case of loss, theft, destruction or mutilation of any certificate of stock,
another may be issued in its place upon proof of such loss, theft, destruction
or mutilation and upon the giving of a bond of indemnity to the Corporation in
such form and in such sum as the Board may direct; provided, however, that a new
certificate may be issued without requiring any bond when, in the judgment of
the Board, it is proper to do so.
Section 7.5 Fixing Date for Determination of Stockholders of Record. In
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders (or any adjournment thereof) or to
express consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any other change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board may fix, in advance, a record date, which shall not be more than sixty
(60) nor less than ten (10) days before the date of such meeting, nor more than
sixty (60) days prior to any other action. If, in any case involving the
determination of stockholders for any purpose other than notice of or voting at
a meeting of stockholders or expressing consent to corporate action without a
meeting, the Board shall not fix such a record date, then the record date for
determining stockholders for such purpose shall be the close of business on the
day on which the Board adopts the resolution relating thereto. A determination
of stockholders entitled to notice of or to vote at a meeting of stockholders
shall apply to any adjournment of such meeting; provided, however, that the
Board may fix a new record date for the adjourned meeting.
16
<PAGE> 17
ARTICLE 8
MISCELLANEOUS
Section 8.1 Fiscal Year. The fiscal year of the Corporation shall be
determined by resolution of the Board.
Section 8.2 Seal. The Board shall provide a corporate seal, which shall
be in the form of a circle and shall bear the name of the Corporation and words
and figures showing that the Corporation was incorporated in the State of
Delaware and the year of incorporation.
Section 8.3 Waiver of Notices. Whenever notice is required to be given
by these Bylaws, by the Certificate of Incorporation or by law, the person
entitled to said notice may waive such notice in writing, either before or after
the time stated therein, and such waiver shall be deemed equivalent to notice.
Section 8.4 Amendments. Except as expressly provided herein, these
Bylaws, or any of them, may be amended, modified, repealed or adopted and new
Bylaws may be made (i) by the Board, acting at any meeting of the Board, or (ii)
by the stockholders, at any annual meeting of stockholders, without previous
notice, or at any special meeting of stockholders, provided that notice of such
proposed amendment, modification, repeal or adoption is given in the notice of
special meeting. Except as expressly provided herein, any Bylaws made or altered
by the stockholders may be altered or repealed by either the Board or the
stockholders. Notwithstanding anything in these Bylaws to the contrary, (i)
Section 3.5 hereof may only be amended, modified, repealed or replaced prior to
the Corporation's 1999 annual meeting of stockholders by (a) the Corporation's
stockholders, at any annual meeting of stockholders, without previous notice, or
any at any special meeting of stockholders, provided that notice of such
proposed action is given in the notice of special meeting or (b) the Board
provided that the proposed action is also approved by a majority of the Sterling
Directors, and (ii) Section 3.15 hereof and this Section 8.4 may only be
amended, modified, repealed or replaced prior to December 31, 2000 by (a) the
Corporation's stockholders, at any annual meeting of stockholders, without
previous notice, or at any special meeting of stockholders, provided that notice
of such proposed action is given in the notice of special meeting or (b) the
Board provided that the proposed action is also approved by a majority of the
Sterling Directors.
17
<PAGE> 1
EXHIBIT 4.9
FIRST SUPPLEMENTAL INDENTURE
DATED AS OF OCTOBER 23, 1997
AMONG
ALTERATIVE LIVING SERVICES, INC.,
STERLING HOUSE CORPORATION
AND
STATE STREET BANK AND TRUST COMPANY,
AS SUCCESSOR TRUSTEE
TO
INDENTURE
DATED AS OF MAY 23, 1996
BETWEEN
STERLING HOUSE CORPORATION
AND
FLEET NATIONAL BANK,
AS TRUSTEE
----------------------------------
6.75% CONVERTIBLE SUBORDINATED DEBENTURES
DUE 2006
----------------------------------
<PAGE> 2
FIRST SUPPLEMENTAL INDENTURE
FIRST SUPPLEMENTAL INDENTURE, dated as of October 23, 1997 (this
"Supplemental Indenture"), among Alternative Living Services, Inc., a Delaware
corporation ("ALS"), Sterling House Corporation, a Kansas corporation (the
"Company"), and State Street Bank and Trust Company, a Massachusetts trust
company, as successor to Fleet National Bank, as Trustee (the "Trustee"), to
that certain Indenture, dated as of May 23, 1996 (the "Indenture"), between the
Company and Fleet National Bank, as Trustee.
WHEREAS, the Company has heretofore executed and delivered to the
Trustee the Indenture providing for the issuance by the Company of up to
$35,000,000 in aggregate principal amount of 6.75% Convertible Subordinated
Debentures Due 2006 (the "Securities");
WHEREAS, contemporaneously with the delivery hereof Tango Merger
Corporation, a Kansas corporation and a wholly owned subsidiary of ALS ("Merger
Sub"), has been merged with and into the Company (the "Merger") pursuant to the
provisions of that certain Agreement and Plan of Merger, dated as of July 30,
1997, among ALS, Merger Sub and the Company, as amended as of September 2, 1997
(the "Merger Agreement"); and
WHEREAS, Section 10.10 of the Indenture requires that the merger of any
corporation with or into the Company shall be conditioned upon the execution and
delivery to the Trustee of a supplemental indenture which provides that the
holder of each Security then outstanding shall have the right thereafter, during
the period such Security shall be convertible as specified in Section 10.1 of
the Indenture, to convert such Security into the kind and amount of securities,
cash and other property receivable upon such merger by a holder of the number of
shares of common stock into which such Security might have been converted
immediately prior to such merger.
NOW, THEREFORE, this Supplemental Indenture witnesseth:
In order to comply with the requirements of the Indenture, ALS
covenants and agrees with the Trustee for the equal and proportionate benefit,
security and protection of the respective holders from time to time of the
Securities, as follows:
<PAGE> 3
ARTICLE ONE
Assumption and Substitution
Section 1.01. The Successor hereby represents and warrants to the
Trustee and to the holders of the Securities as follows:
(a) ALS is a corporation organized and existing under the laws
of Delaware.
(b) On the date hereof Merger Sub has been merged with and
into the Company, said merger hereinafter referred to as the "Merger."
(c) Immediately after giving effect to the Merger no Event of
Default and no event which, after notice or lapse of time, or both,
would become an Event of Default has happened and is continuing.
Section 1.02. In accordance with Section 10.10 of the Indenture and
Section 5.7(c) of the Merger Agreement, ALS hereby expressly assumes the due and
punctual payment of the principal of and premium, if any, and interest on all of
the Securities, according to their tenor, and the due and punctual performance
and observance of all of the terms, covenants and conditions of the Indenture to
be kept or performed by the Company.
Section 1.03. The Holder of each $1,000 in aggregate principal amount
of the Securities outstanding on the date hereof shall hereafter have the right
to convert such $1,000 in aggregate principal amount of the Securities only into
shares of common stock, par value $0.01 per share, of ALS ("ALS Common Stock"),
and cash in lieu of fractional shares of ALS Common Stock, which is the kind and
amount of stock, securities and other property receivable upon the Merger by a
holder of the number of shares of common stock into which such $1,000 in
aggregate principal amount of the Securities might have been converted
immediately prior to the Merger, subject to adjustments which shall be as nearly
equivalent as practicable to the adjustments provided for in Section 10.4 of the
Indenture. Accordingly, each Security will become convertible only into ALS
Common Stock at an initial conversion price equal to the quotient of the
conversion price in effect for the Securities immediately prior to the Merger
($22.42) divided by the Exchange Ratio (as defined in the Merger Agreement).
Accordingly, following the Merger the Securities will be convertible into shares
of ALS
-3-
<PAGE> 4
Common Stock at a conversion price of approximately $20.38 per share.
Section 1.04. Pursuant to Section 10.10 of the Indenture, ALS shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture with the same effect as if ALS had been named as
the Company therein.
Section 1.05. Securities authenticated and delivered on and after the
date hereof shall bear the following notation which may be stamped or
typewritten thereon:
"On October 23, 1997, pursuant to a definitive merger
agreement, Sterling House Corporation became a wholly owned subsidiary
of Alternative Living Services, Inc. ("ALS") which issued 1.1 shares of
its common stock, par value $0.01 per share ("ALS Common Stock"), in
exchange for each outstanding share of Sterling House Corporation
common stock, no par value, said merger hereinafter referred to as the
"Merger." ALS has assumed the due and punctual payment of the principal
of and premium, if any, and interest on this Security and the
performance of every covenant of the Indenture on the part of Sterling
House Corporation to be performed or observed. On and after October 23,
1997, each holder of $1,000 in aggregate principal amount of Securities
outstanding shall have the right to convert such $1,000 in aggregate
principal amount of the Securities only into shares of ALS Common
Stock, and cash in lieu of fractional shares of ALS Common Stock, which
is the kind and amount of stock, securities and other property
receivable upon the Merger by a holder of the number of shares of
common stock into which such $1,000 in aggregate principal amount of
the Securities might have been converted immediately prior to the
Merger, subject to adjustments which shall be as nearly equivalent as
practicable to the adjustments provided for in Section 10.4 of the
Indenture."
If ALS shall so determine, new Securities so modified as to conform to
the Indenture as hereby supplemented, in form satisfactory to the Trustee, may
at any time hereafter be prepared and executed by ALS and authenticated and
delivered by the Trustee in exchange for Securities then outstanding, and
-4-
<PAGE> 5
thereafter the notation herein provided shall no longer be required. Anything
herein or in the Indenture to the contrary notwithstanding, the failure to affix
the notation herein provided to any Security or to exchange any Security for a
new Security modified as herein provided shall not affect any of the rights of
the holder of such Security.
ARTICLE TWO
Miscellaneous
Section 2.01. The Trustee accepts the trusts in this Supplemental
Indenture declared and provided upon the terms and conditions set forth in the
Indenture. The Trustee shall not be responsible in any manner whatsoever for or
in respect of the validity or sufficiency of this Supplemental Indenture or the
due execution hereof by ALS or for or in respect of the recitals and statements
contained herein, all of which recitals and statements are made solely by ALS.
Section 2.02. Except as hereby expressly modified, the Indenture and
the Securities issued thereunder are in all respects ratified and confirmed and
all of the terms, conditions and provisions thereof shall remain in full force
and effect.
Section 2.03. The recitals contained herein shall be taken as the
statement of ALS and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Supplemental Indenture.
Section 2.04. This Supplemental Indenture shall be effective as of the
date and time of the effectiveness of the Merger.
Section 2.05. Unless otherwise defined herein, or unless the context
otherwise requires, the terms used herein shall have the respective meanings
assigned to them in the Indenture.
Section 2.06. The parties may sign multiple counterparts of this
Supplemental Indenture. Each signed counterpart shall be deemed an original, but
all of them together represent the same agreement.
Section 2.07. The laws of the State of New York shall govern this
Supplemental Indenture without regard to principles of conflicts of laws.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed, all as of the date first written above.
ALTERNATIVE LIVING SERVICES, INC.
By:/s/ THOMAS E. KOMULA
----------------------------------------
Name: Thomas E. Komula
Title: Senior Vice President
STERLING HOUSE CORPORATION
By:/s/ TIMOTHY J. BUCHANAN
----------------------------------------
Name: Timothy J. Buchanan
Title: Chairman of the Board and
Chief Executive Officer
STATE STREET BANK AND TRUST COMPANY,
as successor Trustee
By: /s/ MARY LEE STORRS
----------------------------------------
Name: Mary Lee Storrs
Title: Vice President
<PAGE> 1
EXHIBIT 23.2
The Board of Directors
Alternative Living Services, Inc.
We consent to the use of our report dated February 21, 1997, except for note 1,
which is as of November 3, 1997, incorporated herein by reference, relating to
the supplemental consolidated financial statements of Alternative Living
Services, Inc. and subsidiaries as of December 31, 1996 and 1995 and for each of
the years in the three-year period ended December 31, 1996, which report appears
in the Form 8-K/A of Alternative Living Services, Inc.
Our report dated February 21, 1997, except for note 1, which is as of November
3, 1997, contains an explanatory paragraph that states that the supplemental
consolidated financial statements give retroactive effect to the merger of
Alternative Living Services, Inc. and Sterling House Corporation on October 23,
1997, which has been accounted for as a pooling-of-interests as described in
note 1 to the supplemental consolidated financial statements. Generally accepted
accounting principles proscribe giving effect to a consummated business
combination accounted for by the pooling-of-interests method in financial
statements that do not include the date of consummation. These financial
statements do not extend through the date of consummation. However, they will
become the historical consolidated financial statements of Alternative Living
Services, Inc. and subsidiaries after financial statements covering the date of
consummation of the business combination are issued.
KPMG Peat Marwick LLP
Chicago, Illinois
November 5, 1997
<PAGE> 1
EXHIBIT 23.3
The Board of Directors
Alternative Living Services, Inc.:
We consent to the use of our report dated February 21, 1997, incorporated herein
by reference, with respect to the consolidated financial statements of
Alternative Living Services, Inc., and subsidiaries as of December 31, 1996 and
1995 and for each of the years in the three-year period ended December 31, 1996
which report is incorporated by reference in the December 31, 1996, annual
report on Form 10-K (as amended as of May 12, 1997) of Alternative Living
Services, Inc.
We consent to the reference included herein to our firm under the heading
"Experts".
KPMG Peat Marwick LLP
Chicago, Illinois
November 5, 1997
