<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-11999
ALTERNATIVE LIVING SERVICES, INC.
DELAWARE 39-1771281
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
450 N. SUNNYSLOPE ROAD
SUITE 300
BROOKFIELD, WI
53005
(Address of principal executive offices)
(Zip Code)
(414) 789-9565
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No
AS OF MAY 7, 1997 THERE WERE 12,996,496 SHARES OF THE REGISTRANT'S COMMON
STOCK, PAR VALUE $0.01, OUTSTANDING.
(Number of shares outstanding of each class of the issuer's classes of
common stock, as of the latest practical date.)
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ALTERNATIVE LIVING SERVICES, INC.
INDEX
Part I. Financial Information
Page No.
-------
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of
March 31, 1997 and December 31, 1996 ............................ 1
Condensed Consolidated Statements of Operations
for the Three Months Ended March 31, 1997 and 1996 .............. 2
Condensed Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 1997 and 1996 .............. 3
Notes to Condensed Consolidated Financial Statements ............ 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ............................. 5
Item 3. Quantitative and Qualitative Disclosures About
Market Risk ..................................................... 9
Part II. Other Information
Item 5. Other Information ............................................... 9
Item 6. Exhibits and Reports on Form 8-K ............................... 10
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PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
-------------- --------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents ........................... $ 7,726 $ 25,796
Residence receivables, net .......................... 1,435 1,614
Other current assets ................................ 4,521 4,989
-------------- --------------
Total current assets ............................ 13,682 32,399
-------------- --------------
Land ..................................................... 15,576 10,005
Buildings & improvements ................................. 57,599 54,343
Furniture, fixtures & equipment .......................... 8,337 7,204
Construction in progress ................................. 24,519 12,744
-------------- --------------
Total property, plant and equipment ............. 106,031 84,296
Less: accumulated depreciation .................. (5,022) (4,480)
-------------- --------------
Property, plant & equipment, net ................ 101,009 79,816
-------------- --------------
Long-term investments .................................... 1,165 1,171
Investments in and advances to unconsolidated affiliates . 1,482 1,649
Other assets ............................................. 11,127 11,501
-------------- --------------
Total assets .................................... $ 128,465 $ 126,536
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt .............. $ 589 $ 769
Short term notes payable ............................ 46 8,335
Accounts payable .................................... 2,529 1,985
Accrued expenses .................................... 7,742 8,130
-------------- --------------
Total current liabilities ....................... 10,906 19,219
-------------- --------------
Long-term debt, less current installments ................ 39,458 28,772
Deferred gain on sale .................................... 6,536 6,763
Minority interest ........................................ 6,250 5,888
Stockholders' equity:
Common stock and additional paid-in capital ......... 76,108 76,108
Accumulated deficit ................................. (10,793) (10,214)
-------------- --------------
Total stockholders' equity .......................... 65,315 65,894
-------------- --------------
Total liabilities and stockholders' equity ...... $ 128,465 $ 126,536
============== ==============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
1
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ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------------
1997 1996
-------- --------
<S> <C> <C>
Revenue:
Resident service fees ...................................... $15,878 $ 4,033
Other ...................................................... 130 292
-------- --------
Total operating revenue ................................ 16,008 4,325
-------- --------
Operating expenses:
Residence operations ....................................... 10,382 3,241
Lease expense .............................................. 3,269 488
General and administrative ................................. 2,474 1,583
Depreciation and amortization .............................. 1,049 365
-------- --------
Total operating expenses ............................... 17,174 5,677
-------- --------
Operating loss .................................................. (1,166) (1,352)
-------- --------
Other income (expense):
Interest expense, net ...................................... (225) (391)
Loss on sale of land ....................................... -- (21)
Equity in losses of unconsolidated affiliates .............. (88) (85)
Other expense .............................................. (3) --
Minority interest in losses of consolidated subsidiaries ... 903 45
-------- --------
Total other income (expense) net ....................... 587 (452)
-------- --------
Net loss ........................................................ $ (579) $(1,804)
======== ========
Net loss per share .............................................. $ (0.04) $ (0.22)
======== ========
Weighted average shares outstanding ............................. 12,996 8,060
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
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ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1997 1996
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss ............................................ $ (579) $ (1,804)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization ..................... 1,049 365
Minority interest in losses of consolidated
subsidiaries ..................................... (903) --
Equity in losses of unconsolidated affiliates ..... 88 --
Increase in net resident receivables .............. 179 (439)
Decrease in other current assets .................. 468 86
Decrease (increase) in accounts payable ........... 544 (516)
(Decrease) increase in accrued expenses ........... (387) 56
Changes in other assets and liabilities ........... (69) 1,048
---------- ----------
Net cash provided by (used in) operating activities .... 390 (1,204)
---------- ----------
Cash flows from investing activities:
Payments for property, plant and equipment and
project development costs .......................... (21,616) (2,407)
Changes in investments in and advances to
unconsolidated affiliates .......................... 167 (1,684)
Changes in long-term assets and liabilities ......... 6 15
Cash from acquisition ............................... -- 1,100
---------- ----------
Net cash used in investing activities .................. (21,443) (2,976)
---------- ----------
Cash flows from financing activities:
Repayment of short-term note payable ................ (8,289) --
Repayments of long-term debt ........................ -- (8,203)
Proceeds from issuance of long-term debt ............ 10,506 10,027
Contributions by minority partners .................. 766 --
Issuance of common stock and other capital
contribution ....................................... -- 249
Sale of property under lease ........................ -- 5,975
---------- ----------
Net cash provided by financing activities .............. 2,983 8,048
---------- ----------
Net (decrease) increase in cash and cash equivalents ... (18,070) 3,868
Cash and cash equivalents:
Beginning of period ................................. 25,796 2,948
---------- ----------
End of period ....................................... $ 7,726 $ 6,816
========== ==========
Supplemental disclosure of cash flow information:
Cash paid for interest, including amounts
capitalized ........................................ $ 872 $ 426
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF PRESENTATION
The condensed consolidated balance sheets as of March 31, 1997 and
December 31, 1996, the condensed consolidated statements of operations for the
three months ended March 31, 1997 and 1996 and the condensed consolidated
statements of cash flows for the three months ended March 31, 1997 and 1996
contained herein include the accounts of Alternative Living Services, Inc. (the
"Company") and its affiliates which are under the common financial control of
the Company. All significant intercompany accounts have been eliminated in
consolidation. In the opinion of management, all adjustments (consisting only
of normal recurring items) necessary for a fair presentation of such condensed
consolidated financial statements have been included. The results of
operations for the three months ended March 31, 1997, are not necessarily
indicative of the results to be expected for the full fiscal year.
The condensed consolidated financial statements do not include all
information and footnotes necessary for a complete presentation of financial
position, results of operations, and cash flows in conformity with generally
accepted accounting principles. The accompanying condensed consolidated
financial statements should be read in conjunction with the audited
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K, as amended, for the year ended December 31, 1996.
(2) SUBSEQUENT EVENTS
On April 28, 1997, to partially fund its acquisition activity, the
Company obtained a $15 million bridge loan from RDV Capital Management L.P., a
limited partnership affiliated with Jerry L. Tubergen, one of the Company's
directors. This loan is unsecured, bears interest at prime plus one percent
and is repayable in April 1998.
On May 1, 1997, the Company acquired an assisted living residence under
construction in Mesa, Arizona which is expected to have an aggregate capacity
of 61 residents. The acquisition represents an investment by the Company of
approximately $3.0 million in cash. This acquisition will be accounted for as
a purchase.
In May 1997, the Company completed a series of related transactions
resulting in the Company acquiring the operations of three recently
constructed, Wynwood-type assisted living residences located in upstate New
York with an aggregate capacity of 313 residents (the "New York Transaction").
The Company assumed operations of these residences effective as of March 31,
1997. The Company is leasing one of these residences pursuant to an operating
lease and acquired a 51% majority interest in the two other residences for an
investment by the Company of $12.3 million, of which $3 million was paid in
cash, $867,000 was paid in the form of an 11% promissory note payable over a
two year term and the remainder was debt assumed. As a result of
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this transaction, the Company's consolidated long-term debt increased by $17.1
million. The acquisition of the majority interest in these two residences will
be accounted for as a purchase.
The following unaudited pro forma condensed financial information reflects
the consolidated balance sheet as if the New York Transaction had been
consummated as of March 31, 1997. The unaudited pro forma condensed combined
financial information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements of the Company and the related notes.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, March 31,
1997 1997
---------- ----------
ASSETS Pro Forma
<S> <C> <C>
Current assets .................................... $ 13,682 $ 10,356
Property, plant and equipment, net ................ 101,009 125,506
Other assets ...................................... 13,774 13,774
---------- ----------
Total assets ................................. $ 128,465 $ 149,636
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities ............................... $ 10,906 $ 11,181
Long-term obligations, less current installments .. 39,458 56,602
Deferred gain on sale ............................. 6,536 6,536
Minority interest and other liabilities ........... 6,250 10,002
Stockholders' equity .............................. 65,315 65,315
---------- ----------
Total liabilities and stockholders' equity ... $ 128,465 $ 149,636
========== ==========
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
As of May 1, 1997 the Company operated 88 assisted living residences with
an aggregate capacity of 3,763 residents. Of these total residences, the
Company owns 39, leases 35, holds interest in seven and manages an additional
seven on behalf of third parties. In addition, the Company is currently
constructing or developing 84 residences, 40 to 50 of which are expected to
open during 1997.
The Company's rapid growth since 1993 has had a significant impact on the
Company's results of operations and accounts for most of the changes in results
between the first three months of 1997 and 1996. As of March 31, 1997 and
1996, the Company operated 83 and 42 residences with aggregate capacity of
3,622 and 1,070 residents, respectively. Since, its
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organization in December 1993, the Company has achieved significant growth in
operating revenue resulting from its aggressive development program and several
strategic acquisitions, but to date has not realized operating income or net
income. For the three months ended March 31, 1997, the Company generated
operating revenue of $16 million and incurred an operating loss of $1.2 million
and a net loss of $579,000. For the three months ended March 31, 1996, the
Company generated operating revenue of $4.3 million and incurred an operating
loss of $1.4 million and a net loss of $1.8 million.
The Company intends to continue to pursue its growth strategy by
developing and constructing additional assisted living residences and, as
appropriate opportunities arise, acquiring assisted living operations. 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 fees from the lease-up of such residences (referred to as lease-up
expenses). In addition, the development and construction of residences involve
the commitment of substantial capital over a typical six to twelve month
construction period, the consequence of which may be an adverse impact on the
Company's liquidity. In the case of acquired residences, residence turnover
and increased marketing, expenditures which may be required to reposition such
residences, together with the possible disruption of operations resulting from
required renovations, may adversely impact the financial performance of such
residences for a period of time after acquisition. As a result, the Company
anticipates that it will continue to incur additional operating and net losses
for at least a portion of 1997 as the operating expenses associated with
developing, renovating and operating residences and supporting the corporate
infrastructure necessary to manage the Company's growth strategy will be only
partially offset by operating profits generated by stabilized residences.
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
1996
Operating Revenue. Operating revenues for the three months ended March 31,
1997 were $16.0 million representing an increase of $11.7 million, or 270%,
from the $4.3 million for the comparable 1996 period. Substantially all of
this increase resulted from the acquisition of New Crossings International
Corporation ("Crossings") residences in May 1996 and new construction. The
Company operated 83 and 42 residences at the end of the three month periods
ended March 31, 1997 and 1996, respectively.
Residence Operations. Residence operating expenses for the three months
ended March 31, 1997 increased to $10.4 million from $3.2 million in the three
month period ended March 31, 1996 due to the increased number of residences
operated during the 1997 period. As a percentage of total operating revenue,
residence operating expenses decreased to 65% for the three months ended March
31, 1997 from 75% for the comparable period in 1996.
Lease Expense. Lease expense for the three months ended March 31, 1997
was $3.3 million, compared to $488,000 in the comparable period in 1996. Such
increase was primarily attributable to the acquisition of Crossings residences
in May 1996, 13 of which residences are financed by sale/leaseback
arrangements, and the sale/leaseback of twelve residences completed at
December 31, 1996.
6
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General and Administrative Expense. General and administrative expenses
for the three months ended March 31, 1997 were $2.5 million compared to $1.6
million for the comparable 1996 period representing a decline as a percentage
of operating revenue from 37% in 1996 to 15% in 1997. The increase in expenses
was primarily attributable to salaries, related payroll taxes and employee
benefits relating to additional corporate personnel retained to support the
Company's actual and anticipated growth. The Company expects that its general
and administrative expenses will continue to decrease as a percentage of
operating revenue as the Company grows and achieves certain economies of scale.
Depreciation and Amortization. Depreciation and amortization for the
three months ended March 31, 1997 was $1.0 million, representing an increase of
$684,000, or 187%, from $365,000 for the comparable period in 1996. This
increase resulted primarily from new residences that opened during 1996, offset
by the decrease in depreciation associated with the December 31, 1996
sale/leaseback of twelve residences.
Interest Expense, Net. Interest expense, net, for the three months ended
March 31, 1997 was $225,000 representing a decrease of $166,000, or 43%, from
$391,000 for the comparable period in 1996. Interest expense decreased as the
result of twelve residences financed under sale/leaseback arrangements as of
December 31, 1996 and capitalized interest on construction projects.
Minority Interest in Losses of Consolidated Subsidiaries. Minority
interest in losses of consolidated subsidiaries for the three months ended
March 31, 1997 was $903,000, representing an increase of $858,000 from $45,000
for the comparable period in 1996. The increase was primarily attributable to
the increase in the number of residences in lease-up that are owned by the
Company with joint venture partners.
LIQUIDITY AND CAPITAL RESOURCES
For the three months ended March 31, 1997 and 1996 cash flow from
operations was $390,000 and $(1.2) million, respectively.
During the three months ended March 31, 1997, the Company obtained
approximately $4.9 million of construction financing, $6.0 million of mortgage
financing, and repaid approximately $8.3 million of short-term notes payable.
The mortgage financing bears interest at 10.1% and is payable by December 31,
1997. In conjunction with the development of its residences, the Company used
approximately $22 million during such period. As a result, during this period,
the Company decreased its cash position by approximately $18 million from
December 31, 1996. At March 31, 1997, the Company had working capital of
approximately $2.8 million, compared to working capital of $3.2 million at
March 31, 1996.
Subsequent to March 31, 1997 the Company obtained bridge financing of $15
million to fund the New York Transaction and the purchase of a residence under
construction in Arizona as more fully described in Note 2 to the Condensed
Consolidated Financial Statements.
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To achieve its growth objectives, the Company will need to obtain
sufficient financing to fund its development, construction and acquisition
activities. The Company has plans to develop approximately $150 million of
residences in both 1997 and 1998. Historically, the Company has financed its
development program and acquisitions through a combination of various forms of
real estate financing (mortgage and sale/leaseback financing), capital
contributions from joint venture partners and the sale of Common Stock. The
Company has executed non-binding letters of intent with a health care REIT for
financing commitments aggregating approximately $250 million, $60 million of
which was utilized by the Company through May 9, 1997. The Company believes
that this financing, together with traditional mortgage financing that the
Company expects to be available and its existing joint venture development
partnerships currently in place, will be sufficient to fund its growth strategy
for the next 18 months. The Company will from time to time seek additional
funding through public or private financing, including equity or debt
financing. In addition, the Company will require sufficient financing
resources to meet its operating and working capital needs. 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.
In addition within the next 18 months, the Company will become subject to
purchase obligations with respect to equity interests held by joint venture
partners, at their election, in certain of the Company's residences. At such
times the Company may also elect to exercise its rights to purchase such
interests. Based on a number of assumptions, including assumptions as to the
number of residences to be developed with joint venture partners, the timing of
such development, the time at which such options will be exercised and the fair
market value of such residences at the date such purchases are exercised, the
Company estimates that it may require approximately $10 million to $13 million
to satisfy these purchase obligations.
FORWARD-LOOKING STATEMENTS
Any statements contained in this Form 10-Q which are not historical facts
are forward-looking statements that involve risks and uncertainties. The
Company cautions the reader that forward-looking statements, such as the future
impact of the Company's growth on profitability and liquidity and capital
resources may differ materially as a result of risks facing the Company. These
risks include, but are not limited to, the history of, and anticipated
operating losses, ability to continue growth, ability to manage rapid
expansion, development and construction risks, risks associated with
acquisitions, possible need for additional financing, risk of rising interest
rates and substantial debt and operating lease payment obligations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
8
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Not applicable.
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
UPSTATE NEW YORK ACQUISITION
In May 1997, the Company completed a series of transactions resulting in
the Company acquiring the operations of three recently constructed,
Wynwood-type assisted living residences located in upstate New York with an
aggregate capacity of 313 residents. The Company assumed operations of these
facilities effective as of March 31, 1997. The Company is leasing Liberty
Commons, a residence located in Manlius, New York, which has achieved
stabilized occupancy, for a term of 13 years with an option to extend the
lease for three additional periods of five years each. The Company has a market
option to purchase the Liberty residence at the end of the lease term.
The Company also acquired a 51% majority interest, with purchase options
for the remaining minority interest in The Commons at Kenmore and The Commons
at Niskayuna residences located in Kenmore and Niskayuna, New York,
respectively, each currently in the lease-up phase. The Company acquired the
majority interests in each of the Kenmore and Niskayuna residences in
consideration of an aggregate investment of $12.3 million, of which $3 million
was paid in cash, $867,000 is payable in the form of an 11% promissory note
payable over a two year term and the remainder was debt assumed. The minority
interest in the Kenmore and Niskayuna residences is held by affiliates of
Pioneer Development Company ("Pioneer"), the Company's joint venture partner in
the states of New York, Massachusetts, Connecticut and Rhode Island. Any
losses from the operation of the Kenmore and Niskayuna residences will be
disproportionately allocated to the holder of the minority interest to the
extent of its capital account. The Company has an option to acquire the
minority interest in each of these residences, and the holder of such minority
interest has the right to require the Company to purchase its interest in these
residences, subject to certain conditions, at a purchase price based upon the
appraised fair market value of such residences.
AMENDMENT TO JOINT VENTURE WITH PIONEER
In connection with its acquisition of the Liberty, Kenmore and Niskayuna
residences, the Company amended its existing joint venture relationship with
Pioneer, a Syracuse, New York-based commercial real estate development and
construction company, to develop, own and operate assisted living residences in
targeted market areas throughout New York, Massachusetts, Connecticut and Rhode
Island (the "ALS-Northeast Territory"). The amended joint venture arrangement
between ALS and Pioneer contemplates the joint development of residences in the
ALS-Northeast Territory through September 2001. Pioneer will provide
development and construction management services to the joint venture and ALS
will manage residences developed pursuant to the joint venture. During the
development term, ALS has agreed to develop residences in the ALS-Northeast
Territory on an exclusive basis with Pioneer, and Pioneer will have the right
to provide either 49% or 20% of the equity required for future
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residences developed by ALS in such territory. Any losses from the operation
of residences jointly owned by ALS and Pioneer will be disproportionately
allocated to Pioneer to the extent of its capital account. With respect to each
jointly developed residence, upon the first to occur of (i) such residence
achieving 75% occupancy or (ii) the second anniversary of the opening of such
residence, Pioneer shall have the right to require ALS to purchase Pioneer's
interest in the residence (put option) and the Company shall have an option to
acquire (call option) Pioneer's interest in such residence. The purchase price
payable upon exercise of the put and call options is based upon Pioneer's share
of the appraised fair market value of the residence at the time the option is
exercised.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.1 Bridge Loan Agreement dated April 28, 1997, between Alternative
Living Services, Inc. And RDV Capital Management L.P.
10.2 Promissory Note dated April 28, 1997, between Alternative Living
Services, Inc. And RDV Capital Management L.P.
11.1 Statement regarding Computation of Per Share Earnings
27.1 Financial Data Schedule
(b) Reports on Form 8-K: The Registrant filed the following
reports with the Securities and Exchange Commission on Form 8-K
during the quarter ended March 31, 1997:
The Company's Current Report on Form 8-K filed with the Securities
and Exchange Commission on January 14, 1997 reported, under Item 2,
a sale/leaseback financing transaction consummated on December 31,
1996 with a subsidiary of Meditrust, a health care real estate
investment trust (REIT), which Current Report was amended on March
17, 1997 to include certain pro forma information pursuant to Item
7 of Form 8-K.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALTERNATIVE LIVING SERVICES, INC.
Date: May 12, 1997 /s/ Thomas E. Komula
----------------------
Thomas E. Komula
Chief Financial Officer
(Principal Financial Officer)
11
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EXHIBIT 10.1 BRIDGE LOAN AGREEMENT
This Agreement, dated as of April 28, 1997, is entered into among
Alternative Living Services, Inc., a Delaware corporation ("Borrower"), and RDV
Capital Management L.P., a Delaware limited partnership ("Lender").
W I T N E S S E T H:
WHEREAS, Borrower has requested that Lender make a loan to Borrower in the
aggregate amount of $15,000,000.00; and
WHEREAS, Lender is willing to make the loan to Borrower on such terms and
subject to the conditions set forth below;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
In addition to the terms defined elsewhere in this Agreement, the
following terms shall have the meanings indicated for purposes of this
Agreement (such meanings to be equally applicable to both the singular and
plural forms of the terms defined).
"Agreement" shall mean this Loan Agreement.
"Borrower" shall mean Alternative Living Services, Inc., a Delaware
corporation.
"Business Day" shall mean a day on which national banks are open for the
transaction of business required for this Agreement in Grand Rapids, Michigan.
"Closing" shall mean the closing of Loan in accordance herewith.
"Closing Date" shall mean the date of this Agreement.
"Event of Default" shall mean any of the events specified in Section 7.1
hereof, provided that any requirement for notice or passage of time has been
satisfied.
"GAAP" shall mean generally accepted accounting principles, as in effect
from time to time, consistently applied.
"Lender" shall mean RDV Capital Management L.P., a Delaware limited
partnership.
"Loan" shall have the meaning set forth in Section 2.1 hereof.
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"Loan Documents" shall mean the Note and any other documents executed by
Borrower with or for the benefit of Lender in connection with this Agreement or
the Loan.
"Material Adverse Effect" shall mean any act, omission or undertaking
which would, singly or in the aggregate, have (or reasonably be expected to
have) a material adverse effect upon the business, assets, liabilities,
financial condition or results of operations of a Person and its Subsidiaries,
taken as a whole.
"Net Income" shall mean, as applied to any Person for any fiscal period,
the aggregate amount of net income (or net loss) of such Person, after taxes,
for such period as determined in accordance with GAAP.
"Person" shall mean an individual, corporation, limited liability company,
partnership, trust or unincorporated organization, or a government or any
agency or political subdivision thereof.
"Subsidiary" of any Person (the "Parent") shall mean any other Person of
which or in which the Parent owns, directly or indirectly, 50% or more of (i)
the combined voting power of all classes of stock having general voting power,
if it is a corporation, (ii) the capital interest or profits interest of such
Person, if it is a partnership, limited liability company, joint venture or
similar entity, or (iii) the beneficial interest of such Person, if it is a
trust, association or other incorporated organization.
"Taxes" shall mean, with respect to any Person, taxes, assessments or
other governmental charges or levies imposed upon such Person, its income or
any of its properties or assets.
"Unmatured Event of Default" shall mean any event or condition which, with
the lapse of time or giving of notice to Borrower contemplated hereby, would
constitute an Event of Default.
13
<PAGE> 3
ARTICLE II
COMMITMENT TO LEND, BORROWING PROCEDURES, ETC.
Section 2.1
The Loan
(a) Amount. Lender agrees, upon the terms and conditions hereinafter set
forth, to make a loan to Borrower in the principal amount of $15,000,000.00
(said loan being hereinafter referred to as the "Loan" and said amount, or any
portion thereof outstanding, the "Loan Amount").
(b) Promissory Note. The obligations of Borrower to repay the Loan shall
be evidenced by Borrower's promissory note in the form attached hereto as
Exhibit A, dated the Closing Date and payable to the order of Lender for the
principal sum of $15,000,000.00 with interest as therein provided (said
promissory note being referred to herein as the "Note").
(c) Payments. Unless payment of the Loan is accelerated upon occurrence
of an Event of Default pursuant to Section 7.2 hereof, the principal amount of
the Loan, together with all accrued and unpaid interest thereon, shall be due
and payable on the first anniversary of the Closing Date (such date, the
"Maturity Date") and interest shall be due and payable, at the rates set forth
below, monthly in arrears (through and including the date immediately preceding
the Maturity Date) on the 15th day of each calendar month commencing with May
1997, with a final interest payment due when the principal amount of the Loan
is paid in full.
(d) Interest Rate. The Loan shall bear interest, during the period from
and including the Closing Date to (but not including) the date the Loan is paid
in full, at the per annum rate set forth in the Note.
Section 2.2 Manner of Disbursement.
Prior to Closing, Borrower shall provide Lender with instructions as to
the bank account(s) to which the Loan Amount is to be disbursed at Closing. On
the Closing Date, the Lender shall disburse the Loan Amount by transferring the
Loan Amount by wire transfer pursuant to Borrower's instructions.
Section 2.3 Prepayment.
The principal amount of the Loan may be repaid or prepaid in full or in
part at any time prior to the Maturity Date, without premium or penalty.
Section 2.4 Manner of Payment.
(a) Each payment (including prepayments) by Borrower on account of the
principal or interest on the Loan shall be made on the dates specified for
payment under this Agreement to the Lender in lawful money of the United States
of America in immediately available funds. Any
14
<PAGE> 4
prepayment by Borrower shall set forth in writing whether the payment is a
prepayment of principal under the Loan.
(b) If any payment under this Agreement shall be specified to be made
upon a day which is not a Business Day, it shall be made on the next succeeding
day which is a Business Day, and such extension of time shall in such case be
included in computing interest, if any, in connection with such payment.
(c) If some or less than all amounts due from Borrower are received
by Lender, Lender shall distribute such amounts in the following order of
priority: (i) to the payment of all amounts then due and payable under this
Agreement other than interest or principal; (ii) to the payment of interest
then due and payable on the Loan; and (iii) to the repayment or prepayment of
the principal balance of the Loan.
Section 2.5 Basis of Calculation of Interest.
All interest payable hereunder shall be calculated on the basis of the
360/365 method, which computes a daily amount of interest for a hypothetical
year of 360 days, then multiplies such amount by the actual number of days
elapsed in an interest calculation period.
Section 2.6 Fees.
Borrower agrees to pay to RDV Corporation, a Michigan corporation
("RDVC"), two (2%) percent of the Loan Amount for arranging and administering
the loan on behalf of the Lender. Borrower and Lender acknowledge that Lender
may deduct on RDVC's behalf such fee from the Loan prior to disbursing the Loan
Amount on the Closing Date. Borrower also agrees to reimburse Lender for the
reasonable attorneys' fees and expenses of Lender's counsel, Hecht & Lentz,
incurred in connection with the making of the Loan.
Section 2.7 Maximum Interest Rate.
In no event shall the amount of interest due or payable hereunder
exceed the maximum rate of interest allowed by applicable law, and in the event
that any such payment is inadvertently paid by Borrower or inadvertently
received by Lender, then such excess sum shall be credited as a payment of
principal, unless Borrower shall notify Lender, in writing, that Borrower
elects to have such excess sum returned to it forthwith. It is the express
intent hereof that Borrower not pay, and that Lender not receive, directly or
indirectly, in any manner whatsoever, interest in excess of that which would
lawfully be paid by Borrower under applicable law.
15
<PAGE> 5
ARTICLE III
DELIVERIES AT CLOSING
The following deliveries shall be made at the Closing:
Section 3.1 The Note.
Borrower shall deliver to Lender the Note duly executed and
dated as of the Closing Date.
Section 3.2 Legal Opinion.
Rogers & Hardin, counsel to Borrower, shall deliver to Lender
an opinion, dated as of the Closing Date, in a form reasonably satisfactory to
Lender.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties.
Borrower hereby represents and warrants that:
(a) Organization; Power; Qualification. Borrower and its
Subsidiaries are corporations duly organized, validly existing and in good
standing under the laws of the states of their respective incorporation, have
the power and authority, corporate and otherwise, to own or lease and operate
their respective properties and to carry on their respective businesses as now
being and hereafter proposed to be conducted and are duly qualified and have
good standing as foreign corporations, and are authorized to do business, in
each jurisdiction in which the character of their respective properties or the
nature of their respective businesses requires such qualification or
authorization, and on which failure to so qualify would have a Material Adverse
Effect on Borrower.
(b) Execution and Enforceability. This Agreement has been
duly executed and delivered by Borrower, and is, and each of the Loan Documents
to which Borrower is a party is, a legal, valid and binding obligation of
Borrower, enforceable in accordance with its terms, subject, as to enforcement
of remedies, to the following qualifications: (i) an order of specific
performance and an injunction are discretionary remedies, and in particular,
may not be available where damages are considered an adequate remedy at law,
and (ii) may be limited by bankruptcy, insolvency, liquidation, reorganization,
reconstruction and other similar laws effecting enforcement of creditors'
rights generally (insofar as any such law relates to the bankruptcy, insolvency
or similar event of the Borrower).
(c) Authorization. Borrower is duly authorized to execute,
deliver and perform its respective obligations under this Agreement and the Loan
Documents. The execution,
16
<PAGE> 6
delivery and performance by Borrower of this Agreement and the Loan Documents
do not and will not require any consent or approval of any governmental agency
or authority.
(d) No Conflicts. The execution, delivery and performance by
the Borrower of this Agreement and the Loan Documents (i) do not and will not
conflict with: (A) any provision of law, (B) the certificate of incorporation
or bylaws of Borrower, (c) any material agreement binding upon Borrower, or (D)
any court or administrative order or decree applicable to Borrower, and (ii) do
not and will not require, or result in, the creation or imposition of any Lien
on any asset of Borrower.
(e) No Default. Borrower and its Subsidiaries are not in
default under any agreement or instrument to which they are a party or by which
any of their respective properties or assets is bound or affected, which
default would have a Material Adverse Effect on Borrower. No Event of Default
or Unmatured Event of Default has occurred and is continuing.
(f) Financial Statements. Borrower has furnished, or caused
to be furnished, to Lender the consolidated financial statements of Borrower as
of and for the periods ended December 31, 1996 which are correct and complete
in all material respects and present fairly in accordance with GAAP the
financial position and the results of the operations of Borrower and its
Subsidiaries. Except as disclosed in such financial statements, neither
Borrower nor any of its Subsidiaries have any material liabilities, contingent
or otherwise, and there are no material unrealized or anticipated losses by
Borrower or any of its Subsidiaries.
(g) No Adverse Change. Since December 31, 1996, there has
occurred no event which would have a Material Adverse Effect on Borrower.
(h) Litigation. No claims, litigation, arbitration
proceedings or governmental proceedings are pending or threatened against or
are affecting Borrower or its Subsidiaries, the results of which, if decided
adversely to Borrower or any of its Subsidiaries, would have a Material Adverse
Effect on Borrower.
(i) Taxes. All federal, state and local tax returns required
by law to be filed by Borrower have been properly prepared and filed, and all
taxes shown thereon to be due, including interest and penalties, have been
made, except for such taxes as are being contested by Borrower in good faith
and by appropriate proceedings.
ARTICLE V
AFFIRMATIVE COVENANTS
---------------------
From the date of this Agreement and thereafter until the Loan
Amount, and all interest thereon, is paid in full, and unless Lender shall
otherwise consent in writing:
17
<PAGE> 7
Section 5.1 Financial Statements and Other Reports.
Borrower shall furnish or cause to be furnished to Lender:
(a) Annual Audit Report. Within 90 days after each fiscal year of
Borrower, a copy of the annual audited consolidated financial statements of
Borrower prepared in conformity with GAAP and certified by KPMG Peat Marwick or
another independent certified public accountant who shall be reasonably
satisfactory to Lender;
(b) Quarterly Financial Statements. Within 45 days after each
quarter (except the last quarter) of each fiscal year of Borrower, a copy of the
unaudited consolidated financial statements of Borrower, prepared in the same
manner as the financial statements referred to in preceding clause (a) hereof
except that certain footnotes and other financial information may be omitted in
accordance with Borrower's current practices, and consisting of at least a
balance sheet as of the close of such quarter and statements of operations and
cashflows for such quarter and for the period from the beginning of such fiscal
year to the close of such quarter;
(c) Requested Information. Promptly from time to time, such other
reports or information regarding Borrower's financial condition as the Lender
may reasonably request.
Section 5.2 Notices.
Borrower shall notify the Lender in writing of any of the following
immediately upon learning of the occurrence thereof, describing the same and,
if applicable, the steps being taken with respect thereto:
(a) Default. The occurrence of an Event of Default or Unmatured
Event of Default;
(b) Litigation. The institution of any litigation, arbitration
proceeding or governmental proceeding which is reasonably expected to have a
Material Adverse Effect on the Borrower;
(c) Material Adverse Change. The occurrence of a material adverse
change in the business, operations or financial condition of Borrower; or
(d) Other Events. The occurrence of such other events as the
Lender may from time to time reasonably specify regarding the financial
condition of Borrower and its Subsidiaries, taken as a whole.
Section 5.3 Existence.
Borrower shall maintain and preserve its existence as a
corporation, and all rights, privileges, licenses, patents, patent rights,
copyrights, trademarks, tradenames, and other authority to the extent material
and necessary for the conduct of its business in the ordinary course as
conducted from time to time.
18
<PAGE> 8
Section 5.4 Nature of Business.
Borrower and its Subsidiaries shall engage in substantially the same
fields of business they are engaged in on the date hereof.
Section 5.5 Books, Records and Access.
Borrower shall maintain, and cause its Subsidiaries to maintain, complete
and accurate books and records in which full and correct entries in conformance
with GAAP shall be made of all dealings and transactions in relation to their
respective businesses and activities. Within 15 days after receiving written
notice from Lender, Borrower shall permit, and cause its Subsidiaries to
permit, reasonable access by the Lender to the books and records of Borrower
and its Subsidiaries during normal business hours and permit, and cause its
Subsidiaries to permit, the Lender to make reasonable copies of such books and
records.
Section 5.6 Insurance.
Borrower shall maintain, and cause its Subsidiaries to maintain, insurance
to such extent and against such hazards and liabilities as is commonly
maintained by companies similarly situated.
Section 5.7 Repair.
Borrower shall maintain, preserve and keep, and cause its Subsidiaries to
maintain, preserve and keep, their respective properties in good repair,
working order and condition, and from time to time make, and cause its
Subsidiaries to make, all necessary and proper repairs, renewals, replacements,
additions, betterments and improvements thereto so that at all times the
efficiency thereof shall be fully preserved and maintained except for where the
failure to comply with this Section 5.7, individually or in the aggregate, does
not have a Material Adverse Effect on Borrower.
Section 5.8 Taxes.
Borrower shall pay when due, all of its Taxes, unless and only to the
extent that Borrower is contesting such Taxes in good faith and by appropriate
proceedings and Borrower has set aside in its books such reserves or other
appropriate provisions therefor as may be required by GAAP.
Section 5.9 Compliance.
Borrower shall comply, and shall cause its Subsidiaries to comply, with
all statutes and governmental rules and regulations applicable to them, except
where the failure to comply with this Section 5.9, individually or in the
aggregate, does not have a Material Adverse Effect on the business, financial
condition, or operations of Borrower.
19
<PAGE> 9
ARTICLE VI
NEGATIVE COVENANTS
From the date of this Agreement and thereafter until the Loan Amount, and
all interest thereon, is paid in full, and unless Lender shall otherwise
consent in writing:
Section 6.1 Liquidation, Merger or Sale
Borrower shall not:
(a) liquidate or dissolve itself (or suffer any liquidation or
dissolution) or otherwise windup its affairs;
(b) sell, lease, abandon, transfer or otherwise dispose of all or
substantially all its assets;
(c) be party to any merger or consolidation, unless after giving
effect thereto, no Event of Default or Unmatured Event of Default has
occurred and is continuing and (i) it is the surviving entity thereto or (ii)
such merger is with a wholly-owned subsidiary of Borrower for the purpose of
reincorporating the Borrower in another state or (iii) the holders of the
voting capital stock of the Company prior to such merger or consolidation are
the holders of at least 51% of the voting power of the outstanding voting
capital stock of the surviving entity immediately following such transaction.
ARTICLE VII
EVENTS OF DEFAULT & REMEDIES
Section 7.1 Events of Default.
Each of the following shall constitute an Event of Default under
this Agreement:
(a) Non-payment. Borrower shall default in the payment when due
of any principal of, or interest on, the Loan, and such default shall
not be cured within three (3) Business Days following notice thereof from
Lender.
(b) Insolvency. Borrower becomes insolvent, or generally fails
to pay, or admits in writing its inability to pay, its debts as they
mature, or applies for, consents to, or acquiesces in, the appointment of a
trustee, receiver or other custodian for Borrower or for a substantial part of
the property of Borrower, or makes a general assignment for the benefit of
creditors; or, in the absence of such application, consent or acquiescence, a
trustee, receiver or other custodian is appointed for Borrower or for a
substantial part of the property of the Borrower and is not discharged within
sixty days; or any bankruptcy, reorganization, debt arrangement or other
proceeding under any bankruptcy or insolvency law, or any dissolution or
liquidation proceeding, is instituted by or against Borrower and, if instituted
against Borrower, is consented to or acquiesced in by Borrower or remains for
sixty days undismissed; or any warrant of
20
<PAGE> 10
attachment or similarly legal process is issued against any substantial
part of the property of Borrower which is not released within sixty days of
service.
(c) Representations and Warranties. Any representation or
warranty made under this Agreement or any statement in any certificate
given by Borrower hereunder shall be untrue, incorrect or misleading in any
material respect when made or given.
(d) Covenants. Borrower shall default in the performance or
observance of any covenant set forth in Article V or Article VI hereof and,
with respect to any covenant set forth in Section 5.1, 5.2, 5.5, 5.6, 5.7 or
5.8, such default shall not be cured within thirty (30) days following notice
thereof from Lender to Borrower.
(e) There is an event of default under the Loan Documents.
(f) Other Obligations. If, subject to any applicable grace period,
Borrower (i) fails to pay any indebtedness or other obligations, direct or
indirect, for borrowed money in an amount in excess of $250,000.00 (other than
as evidenced by this Agreement or the Note) owing by Borrower when due, whether
at maturity, by acceleration or otherwise, or (ii) fails to perform any term,
covenant or agreement on its part to be performed under any agreement or
instrument (other than this Agreement or under the Loan Documents) evidencing
or securing or relating to such indebtedness or other obligations, when
required to be performed, and if as the result of such failure the maturity
date of such indebtedness or other obligations has been accelerated.
(g) Judgments. If Borrower fails to satisfy or stay the execution
by appropriate proceedings of any judgment rendered against it or any
Subsidiary of Borrower in excess of $250,000.
Section 7.2 Remedies.
If an Event of Default shall have occurred and shall be
continuing, Lender shall have the right at its option, and in its
sole discretion, to declare all amounts outstanding under the Note and this
Agreement to be immediately due and payable (except that if an event described
in Section 7.1(b) occurs, all amounts outstanding under the Note and this
Agreement shall automatically become immediately due and payable). Lender
shall promptly advise Borrower, in writing, of any such declaration, but
failure to do so shall not impair the effect of such declaration. Lender shall
also be entitled to exercise any and all remedies available to it, at law or
equity.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Waiver and Amendments.
No failure or delay on the part of Lender in the exercise of
any power or right, and no course of dealing between Borrower and
Lender, shall operate as a waiver of such power or right, nor shall any single
or partial exercise of any power or right preclude other or further
21
<PAGE> 11
exercise thereof or the exercise of any other power or right. Remedies
provided for herein are cumulative and not exclusive of any remedies which may
be available to the Lender at law or in equity. No notice to or demand on the
Borrower required hereunder or under the Note shall in any event entitle
Borrower to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the right of Lender to any other or
further action and any circumstances without notice or demand. No amendment,
modification or waiver of, or consent with respect to, any provision of this
Agreement or the Notes shall in any event be effective unless the same shall be
in writing and signed and delivered by Lender. Any waiver of any provision of
this Agreement or the Note, and any consent to any departure by Borrower from
the terms of any provision of this Agreement or the Note, shall be effective
only in the specific instance and for the specific purpose for which given.
Section 8.2 Notices
All notices and other communications required or permitted under
this Agreement shall be in writing and, if mailed by prepaid
first-class mail, or certified mail, return receipt requested, shall be deemed
to have been received on the earlier of the date shown on the receipt or three
(3) Business Days after the post-mark date thereof and, if by telecopy, shall
be followed forthwith by letter and shall be deemed to have been received on
the next Business Day following dispatch and acknowledgment of receipt by the
recipient's telecopier machine. In addition, notices hereunder may be
delivered by hand in which event the notice shall be deemed effective when
delivered or by overnight courier, in which event the Notice shall be deemed
delivered the day after it is accepted by the courier for next day delivery.
All notices and other communications under this Agreement shall be given to the
parties hereto at the following addresses:
(i) If to Borrower:
Alternative Living Services, Inc.
450 N. Sunnyslope Road
Suite 300
Brookfield, Wisconsin 83005
Attn: President
and a copy to:
Rogers & Hardin
229 Peachtree Street, N.E.
2700 International Tower
Atlanta, Georgia 30303
Attn: Alan C. Leet, Esq.
22
<PAGE> 12
(ii) If to Lender:
RDV Capital Management L.P.
c/o RDV Corporation
500 Grand Bank Building
126 Ottawa Avenue, N.W.
Grand Rapids, Michigan 49503
Attn: Mr. Jerry L. Tubergen
With a copy to:
Hecht & Lentz
333 Bridgestreet, N.W.
Suite 330
Grand Rapids, Michigan 49504
Attn: David M. Hecht, Esq.
Any party hereto may change the address to which notices shall
be directed under this Section by giving written notice of such change to the
other parties.
Section 8.3 Severability.
Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction, shall as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
Section 8.4 Governing Law.
This Agreement shall be construed under and governed by the
laws of the state of Michigan, without giving effect to its principles
of conflicts of laws.
Section 8.5 Successors and Assigns.
This Agreement shall be binding upon Borrower and Lender and their
respective successors and assigns, and shall inure to the benefit of Borrower
and Lender and their successors and assigns. Neither Borrower nor Lender shall
assign its rights or duties hereunder without the consent of the other party.
Section 8.6 Headings.
Headings used in this Agreement are for convenience only and shall
not be used in connection with the interpretation of any provision
hereof.
23
<PAGE> 13
Section 8.7 Counterparts.
This Agreement may be executed in counterparts, each of which
shall be deemed to be an original, but both of which counterparts shall
together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by the undersigned thereunto duly authorized as of the
date first written above.
ALTERNATIVE LIVING SERVICES, INC.
By: /s/ THOMAS E. KOMULA
---------------------------------
Thomas E. Komula
Title: Vice President
RDV CAPITAL MANAGEMENT L.P., a
Delaware Limited Partnership
By: RDV Corporation, a Michigan corporation
Its: General Partner
By: /s/ JERRY L. TUBERGEN
---------------------------------
Jerry L. Tubergen
Title: President
24
<PAGE> 1
EXHIBIT 10.2 PROMISSORY NOTE
$15,000,000 April 28, 1997
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND HAS
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE ASSIGNED, SOLD, TRANSFERRED,
PLEDGED OR HYPOTHETICATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THIS NOTE UNDER THE SECURITIES ACT OF 1933 OR AN OPINION OF COUNSEL
SATISFACTORY TO THE MAKER THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT.
FOR VALUE RECEIVED, the undersigned, Alternative Living Services, Inc., a
Delaware corporation ("Borrower"), promises to pay to the order of RDV Capital
Management L.P., a Delaware limited partnership ("Lender") and, together with
any holder hereof ("Holder"), at 500 Grand Bank Building, 126 Ottawa Avenue,
N.W., Grand Rapids, Michigan 49503, (or at such other place as the Holder may
designate in writing to Borrower), the principal amount of Fifteen Million
($15,000,000) Dollars, plus interest as hereinafter provided.
All capitalized terms used herein shall have the meanings ascribed to such
terms in that certain Loan Agreement dated as of April 28, 1997 by and between
Borrower and Lender (the "Loan Agreement"), except to the extent that such
capitalized terms are otherwise defined or limited herein.
The principal amount of the Note, together with all accrued and unpaid
interest thereon, shall be paid in full on the first to occur of (i) the first
anniversary of the date hereof (such date, the "Maturity Date") or (ii) upon
the occurrence of an Event of Default.
Borrower may repay all or any portion of the principal amount of this Note
in full or in part at any time prior to the Maturity Date, without premium or
penalty, in the manner set forth in the Loan Agreement.
Borrower shall pay interest, at the rate set forth below (the "Applicable
Rate"), monthly in arrears (through and including the date immediately
preceding the payment date) on the 15th day of each calendar month, commencing
with May 15, 1997, with a final interest payment due when the principal amount
is paid in full. The principal amount shall bear interest during the period
from and including the date hereof to (but not including) the date the
principal amount is paid in full, at the per annum rate set forth below:
(i) from the Closing Date to the day
immediately before May 1, 1997, nine and
one-half percent (9.5%); and
(ii) from the first day of each calendar month
thereafter to the last day of such calendar
month,
25
<PAGE> 2
until all amounts hereunder are paid in
full, an interest rate equal to the
"prime rate," as quoted in the Money
Rates Section of the Wall Street
Journal, as of the Business Day
immediately preceding said first day
of such calendar month, plus one
percent (1%).
Interest shall be calculated on the basis of the 360/365 method, which
computes a daily amount of interest for a hypothetical year of 360 days, then
multiplies such amount by the actual number of days elapsed in an interest
calculation period. All past due amounts of principal of, and to the extent
permitted by applicable law, unpaid interest on, this Note from time to time
outstanding, shall bear interest at a rate equal to the greater of (i) the
Applicable Rate plus five percent (5%) or (ii) fifteen percent (15%) per annum.
In no event shall the amount of interest due or payable hereunder exceed
the maximum rate of interest allowed by applicable law, and in the event any
such payment is inadvertently paid by the undersigned or inadvertently received
by Holder, then such excess sum shall be credited as a payment of principal,
unless the undersigned shall notify Holder, in writing that the undersigned
elects to have such excess sum returned to it forthwith. It is the express
intent hereof that the undersigned not pay and that Holder not receive,
directly or indirectly, in any manner whatsoever, interest in excess of that
which may be lawfully paid by the undersigned under applicable law.
This Note is entitled to the benefits of the Loan Agreement which contains
provisions with respect to the acceleration of the maturity of this Note upon
the happening of certain stated events, and provisions for prepayment.
Should an Event of Default occur under the Loan Agreement, then, at any
time thereafter, Holder shall have the right and option, in its sole
discretion, to exercise any and all of the remedies provided and available to
it under the Loan Agreement.
All parties now or hereafter liable with respect to this Note, whether the
Borrower, any guarantor, endorser or any other Person, hereby expressly waive
presentation, demand of payment, protest, notice for demand of payment, protest
and notice of non-payment, or any other notice of any kind with respect
thereto.
No delay or failure on the part of Holder in the exercise of any right or
remedy hereunder, under the Loan Agreement, or at law or in equity, shall
operate as a waiver thereof, and no single or partial exercise by the Holder of
any right or remedy hereunder, under the Loan Agreement, or at law or in
equity, shall preclude or estop another or further exercise thereof or the
exercise of any other right or remedy.
Principal and interest on this Note shall be payable and paid in lawful
money of the United States of America.
26
<PAGE> 3
Time is of the essence of this contract and, in case this Note is
collected by law or through an attorney at law or under advice therefrom,
Borrower agrees to pay all costs of collection, including reasonable attorneys'
fees.
Holder shall be under no duty to exercise any or all of the rights and
remedies given by this Note or the Loan Agreement and no party to this
instrument shall be discharged from the obligations or undertakings hereunder
(a) should the Holder release or agree not to sue any Person against whom the
party has, to the knowledge of the Holder, a right to recourse, or (b) should
the Holder agree to suspend the right to enforce this Note or the Holder's
interest in any collateral pledged or any guaranty given to secure this Note
against such Person or other discharge such Person.
The provisions of this Note shall be construed and interpreted, and all
rights and obligations of the parties hereunder determined, in accordance with
the laws of the State of Michigan.
27
<PAGE> 4
IN WITNESS WHEREOF, Borrower has caused this Note to be executed, and
delivered in its corporate name, by and through its duly authorized officer, as
of the day and year first above written.
ALTERNATIVE LIVING SERVICES,
INC., a Delaware corporation
By: /S/ THOMAS E. KOMULA
------------------------------
Thomas E. Komula
Title: Vice President
28
<PAGE> 1
EXHIBIT 11.1 COMPUTATION OF NET LOSS PER SHARE
<TABLE>
<CAPTION>
Three Months
Ended
March 31, 1997
--------------
<S> <C>
Shares outstanding December 31, 1995 .............. 6,652,059
Weighted average shares for the Heartland
acquisition as of January 1, 1996
involving 261,424 shares ..................... 261,424
Weighted average shares for the ALS-Midwest
acquisition involving 172,563 shares in
May 1996 ...................................... 172,536
Weighted average shares for the Crossings
acquisition involving 2,007,049 shares
in May 1996 .................................... 2,007,049
Weighted average shares for the private
equity transactions occurring in May 1996
involving 430,281 shares ....................... 430,281
Weighted average shares for initial public
offering occurring in August 1996
involving 3,443,206 shares ..................... 3,443,206
Weighted average shares for exercise of
41,580 stock options on 12/30/96................ 41,580
Weighted average shares for redemption of
11,639 shares on 12/31/96....................... (11,639)
-----------
Total................................................ 12,996,496
===========
Net loss attributable to common shares .............. $ (579,000)
===========
Net loss per common and common equivalent shares .... $ (0.04)
===========
</TABLE>
29
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet and consolidated statements of operations of
Alternative Living Services, Inc., filed with the Company's Form 10-Q for the
period ended March 31, 1997 and is qualified in its entirety by reference to
such financial statements and related footnotes.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1997
<PERIOD-END> MAR-31-1997
<CASH> 7,726
<SECURITIES> 0
<RECEIVABLES> 1,435
<ALLOWANCES> 39
<INVENTORY> 376
<CURRENT-ASSETS> 13,682
<PP&E> 106,031
<DEPRECIATION> 5,022
<TOTAL-ASSETS> 128,465
<CURRENT-LIABILITIES> 10,906
<BONDS> 39,458
0
0
<COMMON> 76,108
<OTHER-SE> (10,793)
<TOTAL-LIABILITY-AND-EQUITY> 128,465
<SALES> 16,008
<TOTAL-REVENUES> 16,008
<CGS> 0
<TOTAL-COSTS> 17,174
<OTHER-EXPENSES> 3
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 447
<INCOME-PRETAX> (579)
<INCOME-TAX> 0
<INCOME-CONTINUING> (579)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (579)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
