<PAGE> 1
As filed with the Securities and Exchange Commission on October 14, 1997
Registration No. 333-________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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 incorporation or (IRS Employer Identification Number)
organization)
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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, PRESIDENT
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
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
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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============================================================================================================================
TITLE OF EACH CLASS OF AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED TO BE REGISTERED OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION FEE
SHARE(1) PRICE
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7.0% Debentures Due 2004(2) $50,000,000 100% $50,000,000 $15,152(3)
============================================================================================================================
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(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933, as amended.
(2) There are also being registered hereunder the number of shares of Common
Stock, $.01 par value per share, of Registrant (the "Conversion Shares")
issuable upon conversion of the Debentures being registered hereunder,
together with such additional indeterminate number of shares as may become
issuable upon conversion by means of adjustments in the conversion price.
(3) Pursuant to Rule 457(i), no registration fee is payable with respect to the
Conversion Shares since the Conversion Shares will be issued for no
separate consideration. Conversion Shares will be issued only upon the
conversion of the Debentures at the initial conversion price of $20.25,
subject to adjustment in certain cases, in principal amount of the
Debentures per share.
________________
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 OCTOBER 14, 1997
PROSPECTUS
ALTERNATIVE LIVING SERVICES, INC.
$50,000,000 7.0% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2004
(INTEREST PAYABLE JUNE 1 AND DECEMBER 1)
AND
2,469,136 SHARES COMMON STOCK, $.01 PAR VALUE PER SHARE,
ISSUABLE UPON CONVERSION THEREOF
_______________________________
This Prospectus relates to $50,000,000 aggregate principal amount of
Convertible Subordinated Debentures due 2004 (the "Debentures") of Alternative
Living Services, Inc., a Delaware corporation (the "Company" or "ALS"), issued
in a private placement on May 21, 1997 (the "Debenture Offering") and the
2,469,136 shares of the common stock, $.01 par value per share, of the Company
(the "Common Stock") that are issuable upon conversion of the Debentures,
subject to adjustment under certain circumstances. The Debentures and the
shares of Common Stock issued upon conversion of the Debentures may be offered
from time to time for the account of the holders of Debentures named herein
(the "Selling Securityholders"). The Company will not receive any proceeds from
this offering. See "Plan of Distribution."
The aggregate principal amount of Debentures that may be offered by
the Selling Securityholders pursuant to this Prospectus is $50,000,000.
Information concerning such Selling Securityholders may change from time to
time and will be set forth in Supplements to this Prospectus. Accordingly, the
aggregate principal amount of Debentures offered hereby may decrease. As of
the date of this Prospectus, the aggregate principal amount of Debentures
outstanding is $50,000,000.
The Debentures are convertible into Common Stock at any time after the
effectiveness of the registration statement of which this Prospectus is a part
and at or prior to maturity, unless previously redeemed, at a conversion price
of $20.25 per share, subject to adjustment under certain circumstances. Prior
to this offering, there has not been any public market for the Debentures,
although the Debentures have been eligible for trading in the Private
Offerings, Resales and Trading through Automated Linkages ("PORTAL") market.
The Common Stock is traded on the American Stock Exchange ("AMEX") under the
symbol "ALI." On October 9, 1997, the last reported sale price of the Common
Stock, as reported by AMEX, was $26 5/16 per share.
The Debentures are redeemable, in whole or in part, at the option of
the Company, for cash, at any time on or after July 15, 2000 on at least 30
days' notice at the redemption prices set forth herein plus accrued interest.
See "Description of Debentures."
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The Debentures are unsecured obligations of the Company and are
subordinated in right of payment to all existing and future Senior Indebtedness
(as defined) of the Company. The Indenture (as defined) does not restrict the
incurrence of Senior Indebtedness or other Indebtedness (as defined) by the
Company or any subsidiary. At June 30, 1997, the Company had approximately
$66.7 million of Senior Indebtedness.
SEE "RISK FACTORS" COMMENCING ON PAGE 10 OF THIS PROSPECTUS FOR A
DISCUSSION OF CERTAIN FACTORS RELEVANT TO AN INVESTMENT IN THE DEBENTURES AND
THE COMMON STOCK.
The Company has been advised by the Selling Securityholders that the
Selling Securityholders, acting as principals for their own account, directly,
through agents designated from time to time, or through dealers or underwriters
also to be designated, may sell all or a portion of the Debentures or shares of
Common Stock offered hereby from time to time on terms to be determined at the
time of sale. The aggregate proceeds to the Selling Securityholders from the
sale of Debentures and Common Stock offered by the Selling Securityholders
hereby will be the purchase price of such Debentures or Common Stock less any
commissions or discounts, if any. For information concerning indemnification
arrangements between the Company and the Selling Securityholders, see "Plan of
Distribution."
The Selling Securityholders and any broker-dealers, agents or
underwriters that participate with the Selling Securityholders in the
distribution of the Debentures or shares of Common Stock may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended
(the "Securities Act"), in which event any commissions received by such
broker-dealers, agents or underwriters and any profit on the resale of the
Debentures or shares of Common Stock purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
--------------------------
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.
------------------------
The date of this Prospectus is _______________, 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 United States Securities and Exchange Commission (the "Commission").
Such reports, proxy statements and other information filed by the Company may
be inspected 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, 500
West Madison Street, Suite 1400, Chicago, Illinois 60621. Copies of such
material can also be obtained at prescribed rates from the Public Reference
Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission maintains a World Wide Web site on the
Internet at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission.
The Company has filed with the Commission a Registration Statement on
Form S-3 (the "Registration Statement") under the Securities Act, with respect
to the registration of the Debentures and the Common Stock offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits thereto, certain portions of which have
been omitted as permitted by the rules and regulations of the Commission.
Statements contained in this Prospectus or in any document incorporated by
reference herein as to the contents of any contract or other documents referred
to herein or therein are not necessarily complete and, in each instance,
reference is made to the copy of such documents filed as an exhibit to the
Registration Statement or such other documents, which may be obtained from the
Commission as indicated above upon payment of the fees prescribed by the
Commission. Each such statement is qualified in its entirety by such
reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This Prospectus incorporates documents by reference which are not
presented herein or delivered herewith. Copies of such reports, proxy
statements and other information filed by the Company, other than exhibits to
such documents unless such exhibits are specifically incorporated herein by
reference, are available without charge upon written or oral request from the
Chief Financial Officer of the Company, 450 North Sunnyslope Road, Suite 300,
Brookfield, Wisconsin 53005, Telephone (414) 789-9565.
The following documents or portions thereof, filed by the Company with
the Commission under the Exchange Act or the Securities Act, are incorporated
herein by reference:
(a) The Company's Registration Statement on Form 8-A, declared
effective by the Commission on August 5, 1996;
(b) The Company's Annual Report on Form 10-K for the year ended
December 31, 1996, as amended;
(c) The Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1997 and June 30, 1997;
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(d) The Company's Current Report on Form 8-K, filed with the
Commission on May 30, 1997;
(e) The Company's Current Report on Form 8-K, filed with the
Commission on August 13, 1997;
(f) The Company's Current Report on Form 8-K, filed with the
Commission on October 10, 1997; and
(g) The Company's Proxy Statement dated June 17, 1997 related to
the Annual Meeting of Stockholders held on July 16, 1997.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date hereof shall be deemed to be
incorporated by reference in this Prospectus and to be a part of this
Prospectus from the date of filing thereof. Any statement contained in a
document incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or
is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statements so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
Except for the historical information contained herein, 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.
-------------------
Crossings(R) and WovenHearts(R) are registered service marks of the
Company and the Company claims service mark protection in the marks Wynwood(SM)
and Clare Bridge(SM). Sterling House(R) is a registered service mark of
Sterling House Corporation.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information appearing elsewhere in this Prospectus and in the
documents incorporated in this Prospectus by reference. Prospective investors
should carefully review the matters set forth under "Risk Factors" before
making a decision with respect to an investment in the Debentures or the
Common Stock.
THE COMPANY
Alternative Living Services, Inc. is a national assisted living
company operating 102 residences with an aggregate capacity of 4,542 residents
as of August 15, 1997. Of these residences, the Company owns 53, leases 40,
holds equity interests in and operates three and manages an additional six.
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 four distinct assisted
living product lines (Clare Bridge, Wynwood, Crossings 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.
The Company intends to continue to aggressively expand its operations
primarily through the development and construction of additional residences
and, to a lesser extent, through selective acquisitions. As of August 15,
1997, the Company has 43 residences under construction in 12 states and 44
residences under development (i.e., the site is under control and development
activities, such as site permitting, preparation of surveys and architectural
plans and negotiation of construction contracts, have commenced) in nine
states.
The Company's operating strategy is to achieve and sustain a strong
competitive position within its chosen markets as well as to continue to
enhance the performance of its operations. The Company believes that its
multiple product lines afford it a significant competitive advantage as they
enable the Company to offer an evolving continuum of care and services,
including specialty care services, and offer such care and services to the
frail elderly and individuals with Alzheimer's disease and other dementias
across a range of pricing options, thereby serving both the upper and moderate
income segments of the elderly population. The Company also seeks to enhance
its current operations by (i) maintaining and improving occupancy rates at its
residences; (ii) opportunistically increasing resident service fees; (iii)
providing increasingly higher levels of health care services to its residents
as they age in place; and (iv) improving operating efficiencies.
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.
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Unless the context otherwise requires, references in this Prospectus
to "ALS" shall mean Alternative Living Services, Inc., it predecessor entity
and its subsidiaries.
THE STERLING MERGER
On July 30, 1997, the Company entered into an Agreement and Plan of
Merger (as amended as of September 2, 1997, the "Sterling Merger Agreement")
with Sterling House Corporation, a Kansas corporation ("Sterling"), and Tango
Merger Corporation, a Kansas corporation and a wholly-owned subsidiary of the
Company ("Merger Sub"), which provides for the merger (the "Sterling Merger")
of Merger Sub with and into Sterling with Sterling continuing as the surviving
corporation and pursuant to which (i) each outstanding share of Sterling common
stock, no par value (the "Sterling Common Stock"), together with the associated
Series A Junior Participating Preferred Stock Purchase Right, will be converted
into the right to receive 1.1 shares (the "Exchange Ratio") of Common Stock,
(ii) ALS will assume all outstanding options under the Sterling House
Corporation 1995 Stock Option Plan, as amended, and all other outstanding
Sterling options (together, the "Sterling Options"), which Sterling Options
will be converted into options to acquire 1.1 shares of Common Stock for each
share of Sterling Common Stock underlying the Sterling Options (the "Merger
Options"), and (iii) the 6.75% Convertible Subordinated Debentures due 2006 of
Sterling (the "Sterling Debentures") will be assumed by ALS pursuant to a
supplemental indenture and will become convertible into a number of shares of
Common Stock equal to the product of the Exchange Ratio and the number of
shares of Sterling Common Stock issuable upon conversion of the Sterling
Debentures. Sterling is an assisted living company offering a wide range of
assisted living care and services to the frail elderly through the ownership,
operation, management and franchising of Sterling House assisted living
residences in Colorado, Florida, North Carolina, Ohio, Oklahoma and Texas. Due
to the fact that the Sterling Merger is still pending as of the commencement of
this offering, this Prospectus sets forth and incorporates by reference, in
addition to information and risk factors concerning the Company on a stand
alone basis, certain information and risk factors concerning the Company and
Sterling on a combined basis.
RISK FACTORS
See "Risk Factors" beginning on page 10 for a discussion of certain
factors which should be considered prospective investors in evaluating an
investment in the Debentures or the Common Stock.
USE OF PROCEEDS
The proceeds from the sale of the Debentures and shares of Common
Stock offered hereby are solely for the account of the Selling Securityholders.
Accordingly, the Company will receive none of the proceeds from sales thereof.
DESCRIPTION OF DEBENTURES
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The Debentures . . . . . . . . . . . . . . . . . . . . . $50,000,000 of 7% Convertible Subordinated
Debentures due 2004 issued under the Indenture dated
May 21, 1997 between the Company and IBJ Schroder
Bank & Trust Company, as trustee (the "Indenture").
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Interest Payment Dates . . . . . . . . . . . . . . . . . June 1 and December 1, commencing December 1, 1997.
Maturity Date . . . . . . . . . . . . . . . . . . . . . . June 1, 2004.
Conversion Rights . . . . . . . . . . . . . . . . . . . . The holders of the Debentures are entitled at any
time, subject to prior redemption or repurchase, to
convert the Debentures, or portions thereof (if the
portions are $1,000 or whole multiples thereof) into
shares of the Common Stock at the conversion price
of $20.25 per share (subject to certain
adjustments). See "Description of Debentures -
Conversion Rights."
Optional Redemption . . . . . . . . . . . . . . . . . . . The Debentures are not redeemable by the Company
prior to June 15, 2000. On or after June 15, 2000
the Debentures are redeemable on at least 30 days'
and not more than 60 days' prior notice at the
option of the Company, in whole or in part at any
time, at the redemption prices set forth herein, in
each case together with accrued interest. See
"Description of Debentures - Optional Redemption."
Consolidation, Merger, Sale or Conveyance. . . . . . . . . . The Indenture provides that the Company may not
merge or consolidate with, or sell or convey all, or
substantially all, of its assets to another person
unless such person is a company or a trust; such
person assumes by supplemental indenture all the
obligations of the Company under the Debentures and
the Indenture; and immediately after the transaction
no default or Event of Default shall exist. See
"Description of Debentures - Consolidation, Merger,
Sale or Conveyance," and "- Events of Default,
Notice and Waiver."
Subordination . . . . . . . . . . . . . . . . . . . . . . The payment of the principal of and premium, if any,
and interest on the Debentures is subordinated in
right of payment to the prior payment in full of
amounts then due on all existing and future Senior
Indebtedness (as defined herein). The Indenture
contains no limitations on the incurrence of
additional Senior Indebtedness or other indebtedness
by the Company. See "Description of Debentures -
Subordination of Debentures."
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Events of Default . . . . . . . . . . . . . . . . . . . . An Event of Default with respect to the Debentures
includes the occurrence of any of the following:
default for 30 days in payment of interest; default
in payment of principal at maturity, upon redemption
or otherwise, which continues for five business
days; acceleration of any indebtedness or money
borrowed of at least $5,000,000 principal amount if
such indebtedness is not paid or such acceleration
is not annulled within 10 days after notice to the
Company of such acceleration; failure by the Company
for 60 days after notice to it to comply in any
material respect with any of its other agreements in
the Indenture or the Debentures; and certain events
of bankruptcy or insolvency. If an Event of Default
occurs and is continuing, the Trustee or the holders
of at least a majority in principal amount of the
Debentures may declare all the Debentures to be due
and payable immediately. See "Description of
Debentures - Events of Default, Notice and Waiver."
Trading . . . . . . . . . . . . . . . . . . . . . . . . . . Prior to this offering, there has not been any
public market for the Debentures, although the
Debentures have been eligible for trading in the
Private Offerings, Resales and Trading through
Automated Linkages ("PORTAL") market.
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Description of Common Stock
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The Common Stock . . . . . . . . . . . . . . . . . . . . 2,469,136 shares of Common Stock are issuable upon
conversion of the Debentures. The Debentures are
convertible into Common Stock at a conversion price
of $20.25 per share, subject to adjustment under
certain circumstances. See "Description of Capital
Stock" and "Description of Debentures - Conversion
Rights."
Shares Outstanding . . . . . . . . . . . . . . . . . . . On October 1, 1997, there were 13,001,546 shares of
Common Stock outstanding. As of the date of this
Prospectus, none of the Debentures have been
converted into shares of Common Stock.
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Shares Outstanding if all
Debentures are Converted . . . . . . . . . . . . . . . . 15,470,682 shares of Common Stock would be
outstanding if all of the Debentures were converted
into shares of Common Stock.
Dividend Policy . . . . . . . . . . . . . . . . . . . . . The Company has never declared or paid a cash
dividend to stockholders. The Company's Board of
Directors presently intends to retain all earnings
to finance the expansion of the Company's operations
and does not expect to authorize cash dividends in
the foreseeable future. Any payment of cash
dividends in the future will depend upon the
Company's earnings, capital requirements and other
factors considered relevant by the Company's Board
of Directors. Certain of the Company's debt
agreements restrict the amount of dividends which
may be paid.
Trading . . . . . . . . . . . . . . . . . . . . . . . . . The Common Stock is traded on the American Stock
Exchange under the symbol "ALI".
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Ratio of Earnings to Fixed Charges
<TABLE>
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Six Months
Ended
Years Ended December 31, June 30,
--------------------------------------- ---------------
1992 1993 1994 1995 1996 1996 1997
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<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to
fixed charges(1) . . -- -- -- -- -- -- --
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_______________________
(1) Computed by dividing earnings by total fixed charges. 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, 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.
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RISK FACTORS
An investment in the Debentures or the Common Stock 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, before purchasing the Debentures or the Common
Stock in this offering.
HISTORY OF OPERATING LOSSES
The Company and Sterling each has experienced significant operating
losses and net losses in each year since inception, primarily as a result of
their 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 if
it had occurred as of January 1, 1994, the Company would have incurred
operating losses of $7.2 million and $3.2 million and net losses of $10.1
million and $1.6 million for the year ended December 31, 1996 and for the six
months ended June 30, 1997, respectively. For the years ended December 1994,
1995 and 1996, Sterling incurred operating losses of $398,000, $998,000 and
$1.7 million, respectively. For the six months ended June 30, 1997, Sterling
incurred an operating loss and a net loss of $1.2 million and $262,000,
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 August 15, 1997, of the Company's 102 residences, 35 had been open for 12
months or less. Similarly, as of August 15, 1997, of Sterling's 88 residences,
58 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 or Sterling's
liquidity. As of August 15, 1997, the Company and Sterling together had 70
residences under construction and an additional 91 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. As
a result, the Company may continue to incur additional operating losses in the
second half of 1997 as the operating expenses associated with developing,
renovating and operating residences and supporting the corporate infrastructure
necessary to manage their respective growth strategies will be only partially
offset by operating profits generated by stabilized 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."
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. Sterling had lease expense of $3.0
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<PAGE> 12
million and $4.4 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 $2.9 million and $14.0
million, respectively, for the year ended December 31, 1996 and $1.1 million
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 and Sterling pursue their 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-collateralization provisions in
certain mortgages and debt instruments of the Company and Sterling and in most
of their respective 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."
UNCERTAINTIES RELATED TO THE STERLING MERGER
Consummation of the Sterling Merger is subject to certain
contingencies, including approval by the stockholders of each of the Company
and Sterling at special meetings of stockholders scheduled on October 23, 1997.
If consummated, the Sterling Merger would involve 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 Agreement 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 combined 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. Both the Company and Sterling are 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
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<PAGE> 13
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. Although the Company expects to
retain and integrate within the combined company substantially all management
and other employees of Sterling if the Sterling Merger is consummated, 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.
Following the Sterling Merger, if consummated, 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
August 15, 1997, the Company and Sterling had 70 residences under construction
and 91 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 applying such laws and regulations. In addition, Sterling's
construction management subsidiary serves as general contractor on many of
Sterling's residences in construction and development, and, accordingly, in
these instances Sterling 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
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<PAGE> 14
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 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 a health care REIT for additional financing
commitments aggregating approximately $250.0 million (of which $71 million has
been utilized in sale/leaseback and mortgage financing transactions through
August 15, 1997) and with a mortgage lender for construction and long-term
mortgage financing aggregating $100 million (none of which has been used).
Sterling has executed non-binding letters of intent with four health care REITs
for financing commitments aggregating approximately $323.8 million (of which
$145.6 million has been utilized in sale/leaseback and mortgages financing
transactions through August 15, 1997). The Company's management believes
financing available pursuant to these arrangements, and pursuant to other
sources of project financing, will be sufficient to fund its development and
acquisition programs for at least the next 18 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. 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.
On a pro forma basis giving effect to the Sterling Merger as if it had
occurred on June 30, 1997, approximately $38 million, or 21%, of the Company's
total indebtedness as of June 30, 1997 would have been subject to floating
interest rates. Although a majority of the debt and lease payment obligations
of the Company and Sterling 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.
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<PAGE> 15
SUBORDINATION
The Debentures are expressly subordinated in right of payment to all
existing and future Senior Indebtedness of the Company. At June 30, 1997, the
Company's Senior Indebtedness aggregated approximately $66.7 million. Neither
the Indenture nor the Debentures limit the ability of the Company to incur
additional Senior Indebtedness or other indebtedness by the Company. If the
Sterling Merger is consummated, the Company will assume $35 million of the
Sterling Debentures which will be convertible into Common Stock of a conversion
price of $20.38 per share, subject to adjustments under certain circumstances.
The Indenture and the Debentures will not contain any financial covenants or
similar restrictions with respect to the Company and, therefore, the holders of
the Debentures will have no protection (other than rights upon Events of
Default as described under "Description of Debentures") from adverse changes in
the Company's financial condition. By reason of the subordination of the
Debentures, in the event of insolvency, bankruptcy, liquidation,
reorganization, dissolution or winding up of the business of the Company or
upon a default in payment with respect to any indebtedness of the Company or an
event of default with respect to such indebtedness resulting in the
acceleration thereof, the assets of the Company will be available to pay the
amounts due on the Debentures only after all Senior Indebtedness has been paid
in full.
RESIDENCE MANAGEMENT, STAFFING AND LABOR COSTS
The Company and Sterling compete with other providers of long-term care
with respect to attracting and retaining qualified and skilled personnel. The
combined 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 and Sterling are constructing or 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
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<PAGE> 16
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.
JOINT VENTURES AND RELATED MANDATORY PURCHASE OBLIGATIONS
The Company and Sterling have entered into several joint ventures with
regional real estate development partners for the construction, development and
ownership of assisted living residences in targeted geographic areas. As of
June 30, 1997, ten of the Company's operating residences and 21 of Sterling's
operating residences were jointly owned, directly or indirectly, with venture
partners. Of the 87 the Company residences and 74 Sterling residences which
were either under construction or development as of August 15, 1997, a
significant portion of such residences are being 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 most
of its joint ventures. While the Company and Sterling typically receive a fee
for managing residences developed through joint ventures, they share with their
respective joint venture partners any profits or losses realized from the
operation or sale of such residences. Each of the Company and Sterling 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.
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<PAGE> 17
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 and Sterling are, 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 sale of franchises is regulated by the Federal Trade Commission and
by certain state agencies located in jurisdictions other than those states
where Sterling currently conducts 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 and Sterling and their respective 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 the Company and Sterling 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.
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 and Sterling
offer residents a greater degree of independence in their daily lives. This
increased level of independence, however, may subject the resident and the
Company or Sterling to certain risks
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<PAGE> 18
that would be reduced in more institutionalized settings. The Company and
Sterling currently maintain liability insurance intended to cover such claims
which they believe 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, their 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 and Sterling currently rely, 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
or Sterling 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 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 residences operated by Sterling or
its predecessors since prior to 1995, each of the Company and Sterling 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,
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<PAGE> 19
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. Neither the Company nor Sterling has 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 ALS Certificate of Incorporation authorizes the issuance of
5,000,000 shares of preferred stock and 30,000,000 shares of Common Stock.
Assuming the consummation of, and giving effect to, the Sterling Merger and the
reservation of shares issuable upon conversion of the Sterling Debentures and
the Debentures and exercise of Sterling Options and options granted or
available to be granted under the ALS Amended and Restated 1995 Incentive
Compensation Plan, the Company will have 5,363,422 shares of authorized but
unissued Common Stock. Subject to the rules of the 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 Sterling Merger, outstanding stock
options or the Debentures) or any shares of preferred stock. Authorized and
unissued the Company 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.
In connection with the Sterling Merger, the Company would issue
5,549,760 shares of Common Stock to holders of the common stock of Sterling,
Sterling Options would become exercisable for 406,465 shares of Common Stock
and Sterling Debentures would be convertible into 1,717,217 shares of Common
Stock, based on shares of the common stock of Sterling, Sterling Options and
Sterling Debentures outstanding on September 19, 1997. Up to 46% of such shares
issued in connection with the Sterling Merger will be 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
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<PAGE> 20
days of post-Sterling Merger combined operations, and the remainder of such
shares will be available for immediate resale by the holders thereof after the
effective time of the Sterling Merger.
Approximately 51.1% of the outstanding shares of Common Stock were
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 ALS 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 $20.25 per share at any time after the
registration statement of which this Prospectus is a part is 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
2,469,136 shares of Common Stock.
Pursuant to the Sterling Merger Agreement, holders of the Sterling
Debentures will have the right following the Sterling Merger to convert such
debentures into shares of Common Stock at a conversion price of approximately
$20.38 per share. Pursuant to the Sterling Merger Agreement, the Company is
obligated to file with the Commission a registration statement with respect to
the Sterling Debentures promptly following the effective time of the Sterling
Merger. Upon effectiveness of such registration statement, holders of the
Sterling Debentures would have the right to convert such debentures into shares
of Common Stock. If holders would elect to convert all of the outstanding
Sterling Debentures into shares of Common Stock, the Company would issue an
additional 1,717,217 shares of Common Stock.
POSSIBLE VOLATILITY OF STOCK PRICE
After completion of this offering, the market price of the Common Stock
into which the Debentures will be convertible could be subject to significant
fluctuations in response to various factors and events, including the liquidity
of the market for the Common Stock, variations in the Company's operating
results, and new statutes or regulations or changes in the interpretation of
existing statutes or regulations affecting the assisted living industry. 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 Common Stock.
USE OF PROCEEDS
The proceeds from the sale of the Debentures and shares of Common Stock
offered hereby are solely for the account of the Selling Securityholders.
Accordingly, the Company will receive none of the proceeds from sales thereof.
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SELLING SECURITYHOLDERS
The Debentures being offered hereby were acquired by the Selling
Securityholders in connection with a private placement of the Debentures by the
Company on May 21, 1997 pursuant to Rule 144A, and Regulation D under the
Securities Act or in permitted resale transactions from the initial purchasers
of the Debentures (the "Initial Purchasers") or holders acquiring such
Debentures from prior holders thereof in further permitted resale transactions.
The following table sets forth information concerning the principal amount of
Debentures beneficially owned by such Selling Securityholders which may be
offered from time to time pursuant to this Prospectus. Other than as a result
of the ownership of Debentures or Common Stock, none of the Selling
Securityholders has had any material relationship with the Company within the
past three years, except as noted herein. The table has been prepared based
upon information furnished to the Company by the Trustee (as defined) for the
Debentures, by The Depository Trust Company (the "Depository"), and by or on
behalf of the Selling Securityholders.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT PRINCIPAL AMOUNT
OF DEBENTURES OF DEBENTURES PERCENT OF OUTSTANDING
NAME BENEFICIALLY OWNED THAT MAY BE SOLD DEBENTURE
----------------- ---------------------------- -------------------------- ----------------------------
<S> <C> <C> <C>
</TABLE>
Information concerning the Selling Securityholders may change from time
to time and will be set forth in Prospectus Supplements. As of the date of this
Prospectus, the aggregate principal amount of Debentures outstanding is
$50,000,000.
Because the Selling Securityholders may offer all or some of the
Debentures and shares of Common Stock issued upon conversion thereof pursuant
to the offering contemplated by this Prospectus, and because there are
currently no agreements, arrangements or understandings with respect to the
sale of any of the Debentures or shares of Common Stock that will be held by
the Selling Securityholders after completion of this offering, no estimate can
be given as to the principal amount of Debentures or shares of Common Stock
that will be held by the Selling Securityholders after completion of this
offering. See "Plan of Distribution."
PLAN OF DISTRIBUTION
The Company will not receive any of the proceeds from this offering.
The Company has been advised by the Selling Securityholders that the Selling
Securityholders may sell all or a portion of the Debentures and shares of
Common Stock offered hereby from time to time on terms to be determined at the
times of such sales. The Debentures and shares of Common Stock offered hereby
be sold from time to time by the Selling Securityholders or by pledgees,
donees, transferees or other successors in interest. Such sales may be made on
one or more exchanges or in the over-the-counter market, or otherwise at prices
and at terms then prevailing or at prices related to the then-current market
price, or in negotiated transactions. The Debentures and shares of Common Stock
offered hereby may be sold by one or more of the following: (a) a block trade
in which the broker or dealer so engaged will attempt to sell the Debentures
and shares of Common Stock offered hereby as agent but may position and resell
a portion
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<PAGE> 22
of the block as principal to facilitate the transaction; (b) purchases by a
broker or dealer as principal and resale by such broker or dealer for its
account pursuant to this Prospectus; and (c) ordinary brokerage transactions
and transactions in which the broker solicits purchasers. In effecting sales,
brokers or dealers engaged by the Selling Securityholders may arrange for other
brokers or dealers to participate. Brokers or dealers will receive commissions
or discounts from the Selling Securityholders in amounts to be negotiated
immediately prior to the sale. Such brokers or dealers and any other
participating brokers or dealers may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. To the extent
required, the aggregate principal amount of Debentures and number of shares of
Common Stock to be sold, the names of the Selling Securityholders, the purchase
price, the name of any such agent, dealer or underwriter and any applicable
commissions with respect to a particular offer will be set forth in an
accompanying Prospectus Supplement. The aggregate proceeds to the Selling
Securityholders from the sale of the Debentures and Common Stock offered by the
Selling Securityholders hereby will be the purchase price of such Debentures
and shares of Common Stock less any commissions. There is no assurance that the
Selling Securityholders will sell any or all of the Debentures and shares of
Common Stock offered hereby.
The Debentures and the shares of Common Stock issued upon conversion of
the Debentures may be sold from time to time in one or more transactions at
fixed offering prices, which may be changed, or at varying prices determined at
the time of sale or at negotiated prices. Such prices will be determined by the
holders of such securities or by agreement between such holders and
underwriters or dealers who may receive fees or commissions in connection
therewith.
The outstanding Common Stock is listed on the AMEX and the shares of
Common Stock issuable upon conversion of the Debentures has been approved for
listing thereon. The Company does not intend to apply for listing of the
Debentures on any national securities exchange or on Nasdaq. The Company does
not anticipate that an active market for the Debentures will develop.
In order to comply with the securities laws of certain states, if
applicable, the Debentures and shares of Common Stock offered hereby will be
sold in such jurisdictions only through registered or licensed brokers or
dealers. In addition, in certain states the Debentures and shares of Common
Stock offered hereby may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the
registration or qualification requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the Debentures and the shares of Common
Stock issued upon conversion of the Debentures may not simultaneously engage in
market making activities with respect to the Common Stock for a period of two
business days prior to the commencement of such distribution. In addition and
without limiting the foregoing, each Selling Securityholder will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including, without limitation, Rules 10b-6 and 10b-7, which
provisions may limit the timing of purchase and sales of shares of the Common
Stock by the Selling Securityholders.
The Debentures were originally sold to the Initial Purchasers on May
21, 1997 in a private placement at a purchase price of 100% of their principal
amount. Under certain circumstances, the Company agreed to indemnify and hold
the Initial Purchasers and certain subsequent holders of the Debentures
harmless against certain liabilities under the Securities Act that could arise
in connection with the sale of the Debentures by the Initial Purchasers or such
subsequent holders.
-21-
<PAGE> 23
The Company will pay all expenses incident to this offering and sale of
the Debentures and Common Stock to the public other than underwriting discounts
and selling commissions and fees.
The Company has filed the Registration Statement of which this
Prospectus is a part to satisfy its obligations under the Registration Rights
Agreement dated May 21, 1997 by and between the Company and the Initial
Purchasers (the "Registration Rights Agreement"). Pursuant to the Registration
Rights Agreement, the Company has also agreed to prepare and file such
amendments and supplements to the Registration Statement of which this
Prospectus is a part as may be necessary to keep the Registration Statement
effective until all the Debentures and the shares of Common Stock issuable upon
conversion thereof have been sold thereby or until the Debentures and the
shares of Common Stock issuable upon conversion thereof are no longer, by
reason of Rule 144(k) promulgated under the Securities Act or any other rule of
similar effect, required to be registered for the sale thereof by the holders
thereof. The Registration Rights Agreement entitles the Company to suspend
temporarily the right of holders of Registrable Securities to make dispositions
of the Debentures or the Common Stock pursuant to the Registration Statement to
the extent the Company's Board of Directors determines such suspension to be
necessary in light of the existence of any undisclosed acquisition, financing
activity or other material event the disclosure of which may reasonably be
expected to materially disadvantage the Company.
DESCRIPTION OF DEBENTURES
The Debentures were issued under an Indenture dated as of May 21, 1997
(the "Indenture"), executed by the Company and IBJ Schroder Bank & Trust
Company, as the trustee under the Indenture (the "Trustee"). The terms of the
Debentures include those stated in the Indenture and those made a part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended.
The following is a summary of certain provisions of the Indenture and
does not purport to be complete and is qualified in its entirety by reference
to the detailed provisions of the Indenture, including the definitions of
certain terms therein to which reference is hereby made, for a complete
statement of such provisions. Wherever particular provisions or sections of
the Indenture or terms defined therein are referred to herein, such provisions
or definitions are incorporated herein by reference.
GENERAL
The Debentures are unsecured general obligations of the Company,
subject to the rights of holders of Senior Indebtedness of the Company, and
will mature on June 1, 2004. The Debentures are limited to $50.0 million
aggregate principal amount and bear interest payable semiannually on June 1 and
December 1 of each year, commencing December 1, 1997, at the per annum rate of
7.0%. The first payment will be for the period from the date of delivery to
December 1, 1997. The Company will pay interest on the Debentures to the
persons who are registered holders of Debentures at the close of business on
the May 15 or November 15 preceding the interest payment date. Principal (and
premium, if any) and interest will be payable, the Debentures will be
convertible and exchangeable, and transfers thereof will be registerable, at
the office or agency of the Company maintained for such purposes, initially at
the offices of the Trustee. The Company may pay principal and interest by
check and may mail an interest check to a holder's registered address. Holders
must surrender Debentures to a Paying Agent to collect principal payments.
-22-
<PAGE> 24
Initially, the Trustee will act as Paying Agent, Registrar and
Conversion Agent. The Company may change any Paying Agent, Registrar,
Conversion Agent or co-registrar upon prior written notice to the Trustee and
may act in any such capacity itself.
DELIVERY AND FORM OF DEBENTURES
Those Debentures initially sold to qualified institutional buyers (as
defined in Rule 144A under the Securities Act) were issued in global form
represented by a single global Debenture (the "Rule 144A Global Security") and
were deposited on May 21, 1997 with the Depository and registered in the name
of Cede & Co., as nominee of the Depository. Those Debentures that were
initially sold to institutional accredited investors were initially issued in
fully registered form.
A holder may transfer or exchange Debentures in accordance with the
Indenture. No service charge will be made for any registration or transfer,
exchange or conversion of Debentures, except for any tax or other governmental
charges that may be imposed in connection therewith. The Registrar need not
transfer or exchange any Debentures selected for redemption. Also, in the
event of a partial redemption, it need not transfer or exchange any Debentures
for a period of 15 days before selecting Debentures to be redeemed. The
Indenture does not contain any provision requiring the Company to repurchase
the Debentures 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 credit worthiness and the market value of the Debentures may
decline significantly as a result of such transaction. The Indenture does not
protect holders of the Debentures against any decline in credit quality,
whether resulting from any such transaction or from any other cause. The
registered holder of a Debenture may be treated as its owner for all purposes.
CONVERSION RIGHTS
The holders of the Debentures are entitled at any time after the
effective date of the Registration Statement of which this Prospectus is a part
and prior to maturity, subject to prior redemption, to convert the Debentures
or portions thereof (which are $1,000 or multiples thereof) into shares of
Common Stock at the conversion price set forth in the Debenture (subject to
adjustments as described below). No payment or adjustment will be made for
accrued interest on a converted Debenture. If any Debenture not called for
redemption is converted between a record date for the payment of interest and
the next succeeding interest payment date, such Debenture must be accompanied
by funds equal to the interest payable to the registered holder on such
interest payment date on the principal amount so converted. The Company will
not issue fractional interests in shares of Common Stock upon conversion of the
Debentures and instead will deliver a check for the fractional share based upon
the market value of the Common Stock on the last trading date prior to the
conversion date. If the Debentures are called for redemption, conversion
rights will expire at the close of business on the redemption date, unless the
Company defaults in payment due upon such redemption.
The conversion price is subject to adjustments, as set forth in the
Indenture, in certain events, including the payment of dividends or
distributions on the Common Stock in shares of capital stock; subdivisions or
combinations of the Common Stock into a greater or smaller number of shares of
Common Stock; reclassification of the shares of Common Stock resulting in an
issuance of any shares of the Company's capital stock; distribution of rights
or warrants to all holders of Common Stock entitling them to purchase Common
Stock at less than the then current price at that time; and the distribution to
all holders of Common Stock of assets, excluding certain cash dividends and
distributions,
-23-
<PAGE> 25
or debt securities or any rights or warrants to purchase securities of the
Company; provided, however, that no adjustment will be required if holders of
the Debentures receive notice of and are allowed to participate in such
transactions. No adjustment will be required for rights to purchase Common
Stock pursuant to a Company plan for reinvestment of dividends or interest, or
for a change in the par value of the Common Stock. To the extent that
Debentures become convertible into cash, no adjustment will be required
thereafter as to cash. No adjustment in the conversion price need be made
unless such adjustment would require a change of at least 1.0% in the
conversion price; however, any adjustment that would otherwise be required to
be made shall be carried forward and taken into account in any subsequent
adjustment. The Company may voluntarily reduce the conversion price for a
period of time.
If the Company pays dividends on the Common Stock in shares of capital
stock or subdivides or combines the Common Stock or issues by reclassification
of its Common Stock any shares of its capital stock or merges with, or
transfers or leases substantially all of its assets to, another corporation or
trust, the holders of the Debentures then outstanding will be entitled
thereafter to convert such Debentures into the kind and amount of shares of
capital stock, other securities, cash or other assets which they would have
owned immediately after such event had such Debentures been converted before
the effective date of the transaction.
Any Debentures called for redemption, unless surrendered for conversion
on or before the close of business on the redemption date, are subject to being
purchased from the holder of such Debentures at the redemption price by one or
more investment banks or other purchasers who may agree with the Company to
purchase such Debentures and convert them into Common Stock of the Company.
SUBORDINATION OF DEBENTURES
The indebtedness evidenced by the Debentures is 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 on all Senior Indebtedness. No payment
shall be made by the Company on account of principal of (or premium if any) or
interest on the Debentures or on account of the purchase or other acquisition
of Debentures, 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 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 certain authorized persons, 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,
payments of principal of (and premium, if any) and interest on the Debentures
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 Debentures 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 Debentures or the Trustee are entitled to receive or retain
any assets so distributed in respect of the Debentures. By reason of this
provision, in the event of insolvency, holders of the Debentures may recover
less, ratably, than holders of Senior Indebtedness.
"Senior Indebtedness" is defined to mean the principal, premium, if
any, interest on and all other amounts payable under or in respect of
Indebtedness (as defined in the Indenture) of the Company (other
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<PAGE> 26
than Indebtedness owed to a subsidiary of the Company, Indebtedness of the
Company which is expressly pari passu with the Debentures or Indebtedness which
is expressly subordinated to the Debentures). There is no limit on the amount
of Senior Indebtedness that the Company may incur.
OPTIONAL REDEMPTION
The Debentures are subject to redemption, as a whole or in part, at any
time or from time to time commencing on or after June 15, 2000 at the option of
the Company on at least 30 days' and not more than 60 days' prior notice by
mail. The redemption prices (expressed as a percentage of principal amount)
are as follows for the 12-month period beginning on or after June 15 of the
following years:
<TABLE>
<CAPTION>
Redemption
Year Price
---- -----
<S> <C>
2000 . . . . . . . . . . . . . . . . . . . . 103%
2001 . . . . . . . . . . . . . . . . . . . . 102%
2002 . . . . . . . . . . . . . . . . . . . . 101%
2003 and thereafter . . . . . . . . . . . . . 100%
</TABLE>
MODIFICATION OF THE INDENTURE
Under the Indenture, with certain exceptions, the rights and
obligations of the Company with respect to the Debentures and the rights of
holders of the Debentures may only be modified by the Company and the Trustee
with the written consent of the holders of not less than 66-2/3% in principal
amount of the outstanding Debentures. However, without the consent of each
Holder of any Debenture affected, an amendment, waiver or supplement may not
(a) reduce the amount of Debentures whose holders may consent to an amendment;
(b) reduce the rate or change the time of payment of interest on any Debenture;
(c) reduce the principal of or change the fixed maturity of any Debenture; (d)
make any Debenture payable in money other than that stated in the Debenture;
(e) change the provisions of the Indenture regarding the right of the holders
of a majority of the Debenture to waive defaults under the Indenture or impair
the right of any holder of Debentures to institute suit for the enforcement of
any payment of principal and interest on the Debentures on and after their
respective due dates; or (f) make any change that adversely affects the right
to convert any Debenture.
EVENTS OF DEFAULT, NOTICE AND WAIVER
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 the Debentures: (i) default in the payment of interest on the Debentures
when due and payable which continues for 30 days; (ii) default in the payment
of principal of (and premium, if any) on the Debentures when due and payable,
at maturity, upon redemption or otherwise, which continues for five business
days; (iii) failure to perform any other covenant of the Company contained in
the Indenture or the Debentures which continues for 60 days after notice as
provided in the Indenture; (iv) acceleration of any indebtedness for money
borrowed (including obligations under leases required to be capitalized on the
balance sheet of the lessee under generally accepted accounting principles but
not including any indebtedness or obligation for which recourse is limited to
property purchased) in an aggregate principal amount in excess of $5.0 million,
-25-
<PAGE> 27
whether existing on the date of the execution of the Indenture or thereafter
created, if such indebtedness is not paid or such acceleration is not annulled
within ten days after notice to the Company of such acceleration; 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
Debentures, either the Trustee or the Holders of at least a majority in
principal amount of the Debentures may declare all of the Debentures to be due
and payable immediately.
The Company will not (i) declare or pay any dividends or make any
distribution to holders of its capital stock 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 Debentures or any other convertible indebtedness of the Company that
is neither secured nor subordinated to the Debentures), if at the time any of
the aforementioned Events of Default has occurred and is continuing or would
exist immediately after giving effect to such action.
The Trustee may require indemnity reasonably satisfactory to it before
it enforces the Indenture or the Debentures. Subject to certain limitations,
holders of a majority in principal amount of the Debentures may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
holders of the Debentures notice of any default (except a default in payment of
principal or interest) if it determines that withholding notice is in their
interests. The Company is required to file with the Trustee annually an
officer's statement as to the absence of defaults in fulfilling any of its
obligations under the Indenture.
No consent of the holders of the Debentures is required for the
Company to consolidate with or merge into or transfer or lease substantially
all of its assets to another corporation or trust which assumes the obligations
of the Company under the Indenture and Debentures or for any reorganization
within the meaning of Section 368(a)(1)(B) of the Internal Revenue Code; nor is
any such consent of holders of the Debentures required for any amendment of the
Indenture or the Debentures by the Company or the Trustee to cure any
ambiguity, defect or inconsistency, or to provide for uncertificated Debentures
in addition to certified Debentures, or to make any change that does not
adversely affect the right of a holder of a Debenture.
Subject to certain conditions, any person having a beneficial interest
in the Rule 144A Global Security may, upon request to the Trustee, exchange
such beneficial interest for Debentures in the form of certificated Debentures.
Upon any such issuance, the Trustee is required to register such certificated
Debentures in the name of, and cause the same to be delivered to, such person
or persons (nominee of any thereof). All such certificated Debentures will be
subject to the legend requirements set forth in the Indenture. In addition, if
(i) the Company notifies the Trustee in writing that the Depository is no
longer willing or able to act as a depository and the Company is unable to
locate a qualified successor within 90 days or (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of
Debentures in the form of certificated Debentures under the Indenture, then,
upon surrender by the Rule 144A Global Security Holder of its Rule 144A Global
Security, Debentures in certificated form will be issued to each person that
the Rule 144A Global Security Holder and the Depository identify as being the
beneficial owner of the related Debentures.
-26-
<PAGE> 28
Neither the Company nor the Trustee will be liable for any delay by
the Rule 144A Global Security Holder or the Depository in identifying the
beneficial owners of Debentures, and the Company and the Trustee may
conclusively rely on, and will be protected in relying on, instructions from
the Rule 144A Global Security Holder or the Depository for all purposes.
The Debentures may not be sold or otherwise transferred except in
accordance with the provisions set forth in the Indenture.
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
The Indenture provides that the Company may not merge or consolidate
with, or sell or convey all, or substantially all, of its assets to another
person unless such person is a company or a trust; such person assumes by
supplemental indenture all the obligations of the Company under the Debentures
and the Indenture; and immediately after the transaction no default or Event of
Default shall exist.
MARKETABILITY
The Debentures are a new issue of securities with no established
trading market. The Company does not intend to list the Debentures on Nasdaq or
on any national securities exchange. No assurance can be given as to the
liquidity of the trading market for the Debentures.
GOVERNING LAW
The Indenture and the Debentures are governed by and construed in
accordance with the laws of the State of New York.
LEGAL MATTERS
Certain legal matters relating to the validity of the Debentures and
the Common Stock offered hereby will be passed upon for the Company by Rogers &
Hardin LLP, Atlanta, Georgia.
EXPERTS
The 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 1996
Annual Report on Form 10-K and incorporated by reference in this 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.
-27-
<PAGE> 29
================================================================================
No dealer, salesperson or other person has been authorized to give any
information or to make any representations in connection with this Offering
other than those contained in this Prospectus, and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Company or by any Selling Securityholder. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, any of the
securities offered hereby 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 nor any sale made hereunder shall, under any circumstances, create
any implication that there has been no change in the affairs of the Company
since the date hereof or that the information contained herein is correct as of
any time subsequent to its date.
--------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Incorporation of Certain Documents by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Selling Securityholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Description of Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
================================================================================
[Logo to come]
$50,000,000
ALTERNATIVE LIVING SERVICES, INC.
7.0% Convertible Subordinate Debentures Due 2004
and
2,469,136
Common Stock, par value $.01 per share,
Issuable Upon Conversion Thereof
----------------
PROSPECTUS
----------------
October ___, 1997
================================================================================
<PAGE> 30
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 and the AMEX filing 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,152
AMEX Filing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,500
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
II-1
<PAGE> 31
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.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ---------- ----------------------
<S> <C>
2.1 Agreement and Plan of Merger, dated as of July 30, 1997 among Alternative Living Services, Inc., Tango
Merger Corporation and Sterling House Corporation, as amended as of September 2, 1997 (incorporated by
reference to Exhibit 2.1 to the Registrant's Registration Statement on Form S-4 (No. 333-34851) filed
on September 3, 1997).
3.1 Certificate of Merger dated May 24, 1996.
3.2 Certificate of Amendment to the Restated Certificate of Incorporation dated August 1, 1996.
4.1 See Articles Four, Six, Seven, Eight, Nine, Ten and Eleven of the Registrant's Restated Certificate of
Incorporation and the Certificate of Amendment to the Restated Certificate of Incorporation filed
herewith and Articles 2, 3, 5, 7 and 8 of the Registrant's Restated Bylaws (incorporated by reference
to Exhibits 3.1 and 3.2, respectively, to the Registrant's Registration Statement on Form S-1 (No. 333-
04595) filed on July 29, 1996).
4.2 Form of Common Stock Certificate (incorporated by reference to Exhibit 4.2 to the Registrant's
Registration Statement on Form S-1 (No. 333-04595) filed on July 29, 1996).
4.3 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).
4.4 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).
5.1 Opinion of Rogers & Hardin LLP.*
12.1 Statement regarding computation of earnings to fixed charges.*
</TABLE>
II-2
<PAGE> 32
<TABLE>
<S> <C>
23.1 Consent of Rogers & Hardin LLP (included in Exhibit 5.1).*
23.2 Consent of KPMG Peat Marwick LLP.
23.3 Consent of Ernst & Young LLP.
24.1 Power of Attorney.
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.
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.
II-3
<PAGE> 33
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.
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report, to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
II-4
<PAGE> 34
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 10th day of
October, 1997.
ALTERNATIVE LIVING SERVICES, INC.
By: /s/ William F. Lasky
-------------------------------------
William F. Lasky
President and Chief Executive Officer
In accordance with requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in their
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ William F. Lasky President, Chief Executive October 10, 1997
- ------------------------------------------- Officer and Director (Principal
William F. Lasky Executive Officer)
/s/ Thomas E. Komula Senior Vice President, Treasurer October 10, 1997
- ------------------------------------------- and Chief Financial Officer and
Thomas E. Komula Assistant Secretary (Principal
Financial Officer)
/s/ John D. Peterson Vice President and Controller October 10, 1997
- ------------------------------------------- (Principal Accounting Officer)
John D. Peterson
* Chairman of the Board and October 10, 1997
- ------------------------------------------- Director
William G. Petty, Jr.
Vice Chairman and Director
- -------------------------------------------
Richard W. Boehlke
* Director October 10, 1997
- -------------------------------------------
Gene E. Burleson
Director
- -------------------------------------------
Robert Haveman
* Director October 10, 1997
- -------------------------------------------
Ronald G. Kenny
Director
- -------------------------------------------
Jerry L. Tubergen
*By: /s/ Thomas E. Komula
--------------------------------------
Thomas E. Komula, as
Attorney-in-Fact
</TABLE>
<PAGE> 35
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit Page Number
- ---------- ---------------------- -----------
<S> <C> <C>
2.1 Agreement and Plan of Merger, dated as of July 30, 1997 among Alternative Living Services, Inc., Tango
Merger Corporation and Sterling House Corporation, as amended as of September 2, 1997 (incorporated by
reference to Exhibit 2.1 to the Registrant's Registration Statement on Form S-4 (No. 333-34851) filed
on September 3, 1997).
3.1 Certificate of Merger dated May 24, 1996.
3.2 Certificate of Amendment to the Restated Certificate of Incorporation dated August 1, 1996.
4.1 See Articles Four, Six, Seven, Eight, Nine, Ten and Eleven of the Registrant's Restated Certificate of
Incorporation and the Certificate of Amendment to the Restated Certificate of Incorporation filed
herewith and Articles 2, 3, 5, 7 and 8 of the Registrant's Restated Bylaws (incorporated by reference
to Exhibits 3.1 and 3.2, respectively, to the Registrant's Registration Statement on Form S-1 (No. 333-
04595) filed on July 29, 1996).
4.2 Form of Common Stock Certificate (incorporated by reference to Exhibit 4.2 to the Registrant's
Registration Statement on Form S-1 (No. 333-04595) filed on July 29, 1996).
4.3 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).
4.4 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).
5.1 Opinion of Rogers & Hardin LLP.*
12.1 Statement regarding computation 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 Ernst & Young LLP.
24.1 Power of Attorney.
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 3.1
CERTIFICATE OF MERGER
OF
NEW CROSSINGS INTERNATIONAL CORPORATION,
a Nevada Corporation,
WITH AND INTO
ALTERNATIVE LIVING SERVICES, INC.,
a Delaware Corporation,
(UNDER SECTION 252 OF THE
GENERAL CORPORATION LAW OF
THE STATE OF DELAWARE)
The undersigned William F. Lasky, being the President of
Alternative Living Services, Inc., a Delaware corporation, DOES HEREBY CERTIFY
as follows:
1. The constituent corporations in the merger (the
"Merger") are New Crossings International Corporation, a Nevada corporation,
and Alternative Living Services, Inc., a Delaware corporation.
2. An Agreement and Plan of Merger dated as of May 22,
1996 (the "Merger Agreement") has been approved, adopted, certified, executed
and acknowledged by each of the constituent corporations in accordance with
Section 252(c) of the General Corporation Law of Delaware and with Section
92A.190 of the Nevada General Corporation Law.
3. The name of the surviving corporation is Alternative
Living Services, Inc., a Delaware corporation.
4. The Restated Certificate of Incorporation of
Alternative Living Services, Inc. shall be the Restated Certificate of
Incorporation of the surviving corporation without change or amendment until
thereafter amended in accordance with the provisions thereof and applicable
law.
5. The executed Merger Agreement is on file at the
principal place of business of the surviving corporation at 450 N. Sunnyslope
Road, Suite 300, Brookfield, Wisconsin 53005.
1
<PAGE> 2
6. A copy of the Merger Agreement will be furnished by
the surviving corporation, on request and without cost, to any stockholder of
any constituent corporation.
7. The authorized capital stock of New Crossings
International Corporation is 45,000,000 shares, consisting of 40,000,000 shares
of common stock, par value $.001 per share, and 5,000,000 shares of preferred
stock, par value $.001 per share.
IN WITNESS WHEREOF, the undersigned has caused this
Certificate of Merger to be executed as of this 24th day of May, 1996.
ALTERNATIVE LIVING SERVICES, INC.,
a Delaware corporation
By:/s/ William F. Lasky
--------------------------------
William F. Lasky, President
2
<PAGE> 1
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT
OF THE
RESTATED CERTIFICATE OF INCORPORATION OF
ALTERNATIVE LIVING SERVICES, INC.
Alternative Living Services, Inc., a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a meeting the Board of Directors of said Corporation,
a resolution was duly adopted setting forth a proposed amendment to the
Restated Certificate of Incorporation of said Corporation, declaring said
amendment to be advisable and directing that such amendment be presented to the
stockholders of said Corporation for their consideration thereof. The
resolution setting forth the proposed amendment is as follows:
"RESOLVED, that the Restated Certificate of Incorporation of the
Corporation be amended by deleting ARTICLE ELEVEN of the Restated Certificate
of Incorporation in its entirety and substituting the following in lieu
thereof:
"ARTICLE ELEVEN
Any action required to be taken at any annual or special
meeting of stockholders of the Corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be
taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be signed
by the holders of the outstanding stock of the Corporation; provided,
however, that any action pursuant to such consent must be signed by
not less than all of the stockholders of the Corporation entitled to
vote thereon. Any action taken pursuant to such unanimous written
consent of the stockholders shall have the same force and effect as if
taken by the stockholders at a meeting thereof."
SECOND: That thereafter, by written consent in lieu of an annual
meeting of the stockholders of the Corporation pursuant to Section 228 of the
General Corporation Law of the State of Delaware, the stockholders adopted and
approved such resolution approving the amendment to the Restated Certificate of
Incorporation and written notice has been given as provided by said Section
228.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
<PAGE> 2
IN WITNESS WHEREOF, said Corporation has caused this Certificate to be
executed and acknowledged this 1st day of August, 1996.
ALTERNATIVE LIVING SERVICES, INC.
/s/ William F. Lasky
----------------------------------
William F. Lasky, President
<PAGE> 1
EXHIBIT 23.2
CONSENT OF KPMG PEAT MARWICK LLP
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 May 12, 1997) of Alternative Living Services,
Inc., and to the reference to our firm under the heading "Experts" in the
prospectus.
KPMG PEAT MARWICK LLP
Chicago, Illinois
October 9, 1997
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-3) and related Prospectus of Alternative Living Services, Inc. for the
registration of both $50,000,000 of its 7% convertible subordinated debentures
due 2004 and 2,469,136 shares of its common stock issuable upon conversion
thereof of our report dated February 10, 1997, with respect to the consolidated
financial statements of Sterling House Corporation included in the Joint Proxy
Statement of Alternative Living Services, Inc. that is made a part of the
Registration Statement and Prospectus of Alternative Living Services, Inc.
dated September 22, 1997.
ERNST & YOUNG LLP
Wichita, Kansas
October 9, 1997
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints William F. Lasky and Thomas E. Komula, and each of them, his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution for him and in his name, place and stead in any and all
capacities, to sign in his name and on his behalf the registration statement of
Alternative Living Services, Inc. on Form S-3, and any and all amendments
(including post- effective amendments) to such registration statement, and to
file the same with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent or his substitute, may lawfully do or
cause to be done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURE DATE
--------- ----
<S> <C>
- -----------------------------------
Richard W. Boehlke
/s/ Gene E. Burleson October 10, 1997
- -----------------------------------
Gene E. Burleson
- -----------------------------------
Robert Haveman
/s/ Ronald G. Kenny October 8, 1997
- -----------------------------------
Ronald G. Kenny
/s/ William F. Lasky October 10, 1997
- -----------------------------------
William F. Lasky
/s/ William G. Petty, Jr. October 8, 1997
- -----------------------------------
William G. Petty, Jr.
- -----------------------------------
Jerry L. Tubergen
</TABLE>
