<PAGE>
Filed Pursuant to Rule 424(b)(5)
File No. 333-53969
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JULY 8, 1998)
2,000,000 SHARES
COMMON STOCK
----------------
Brookdale is offering its common stock for sale. On November 12, 1998, the
last reported bid price of Brookdale's common stock (which is traded under the
symbol "BLCI" on the Nasdaq National Market) was $17.625 per share.
----------------
THIS INVESTMENT INVOLVES CERTAIN RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE S-
2.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS SUPPLEMENT OR THE
RELATED PROSPECTUS ARE TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
----------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
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<S> <C> <C>
Public Offering Price.................................... $16.5000 $33,000,000
Underwriting Discounts and Commissions................... $ 0.5775 $ 1,155,000
Proceeds to Brookdale (before expenses).................. $15.9225 $31,845,000
</TABLE>
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Friedman, Billings, Ramsey & Co., Inc. may purchase up to 300,000 additional
shares of common stock under certain circumstances. The underwriter expects
that the shares will be delivered through the facilities of The Depository
Trust Company against payment in New York, New York, on November 18, 1998.
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
November 13, 1998
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE RELATED PROSPECTUS. WE HAVE
AUTHORIZED NO ONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT MAKING
AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED. YOU
SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT OR THE
RELATED PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT
OF THESE DOCUMENTS.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
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PAGE
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<S> <C>
The Offering................................................................ S-1
Risk Factors................................................................ S-2
Use of Proceeds............................................................. S-7
Price Range of Common Stock................................................. S-7
Dividend Policy............................................................. S-7
Capitalization.............................................................. S-8
Underwriting................................................................ S-9
Legal Matters............................................................... S-9
PROSPECTUS
Available Information....................................................... 2
Information Incorporated By Reference....................................... 2
Special Note on Forward-Looking Statements.................................. 3
The Company................................................................. 3
Use of Proceeds............................................................. 3
Ratio of Earnings to Combined Fixed Charges................................. 4
Description of Capital Stock................................................ 4
Description of Debt Securities.............................................. 6
Description of Warrants..................................................... 9
Description of Global Securities............................................ 10
Plan of Distribution........................................................ 12
Certain Transactions........................................................ 13
Readiness for Year 2000..................................................... 15
Legal Matters............................................................... 15
Experts..................................................................... 16
</TABLE>
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Issuer.................... Brookdale Living Communities, Inc.
77 West Wacker Drive
Suite 4400
Chicago, Illinois 60601
(312) 977-3700
Common stock offered...... 2,000,000 shares
Common stock outstanding
after the offering (1)... 11,572,082 shares
Use of Proceeds........... Brookdale intends to use these proceeds from this
offering for general corporate purposes, including:
.Repayment of Brookdale's unsecured revolving credit
facility
.Additions to working capital
.Acquisitions
.Developments
.Capital expenditures
Nasdaq National Market
Symbol.................... BLCI
</TABLE>
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(1) Excludes (a) approximately 904,768 shares reserved for outstanding stock
options, (b) approximately 83,163 shares reserved for outstanding warrants
and (c) 300,000 shares issuable pursuant to the underwriter's over-
allotment option.
S-1
<PAGE>
RISK FACTORS
You should consider carefully the following risk factors before you decide to
buy the notes. You should also consider the other information contained in this
prospectus supplement and the other information set forth in the related
prospectus, in Brookdale's Reports on Forms 10-K, 10-Q and 8-K and in other
documents incorporated by reference.
FUTURE ACQUISITION AND LEASE RISKS; POTENTIAL DIFFICULTIES OF INTEGRATION
Brookdale currently plans to acquire or lease four to six additional senior
independent and assisted living facilities per year. While Brookdale actively
pursues acquisition opportunities, it has not entered into agreements for any
material acquisitions other than its contracts to acquire the Woodside Terrace
facility in Redwood City, California, and a facility located in the
northeastern United States. Brookdale may be unable to complete its
acquisitions at the currently expected rate, if at all. In connection with
certain acquisitions, Brookdale may need certain licenses and approvals.
Obtaining such licenses and approvals could delay the closing of an
acquisition.
The success of Brookdale's acquisition plans depends on several factors,
including
. Brookdale's ability to identify suitable acquisition opportunities
. competition for acquisitions
. the purchase price for acquisitions
. the financial performance of facilities after acquisition
. Brookdale's ability to effectively integrate the acquired facilities'
operations
In addition, Brookdale may be unable to successfully integrate the operations
of recently acquired or leased facilities with its own operations. If Brookdale
fails to achieve its acquisition plans or to operate acquired or leased
facilities and integrate them into its operations, such failure could
materially and adversely affect Brookdale's business, financial condition and
results of operations.
DEVELOPMENT AND CONSTRUCTION RISKS
In addition to acquisitions, Brookdale currently plans to begin development
of two to three new facilities per year. Each facility would contain
approximately 220 units and would be located in urban and suburban areas in
major metropolitan markets. Brookdale's ability to achieve its development
plans will depend on a variety of factors, many of which are beyond Brookdale's
control. Further, due to the time required for site selection, governmental
approvals, construction and rental, Brookdale expects that a facility will not
achieve a 95% occupancy rate (a "stabilized" rate) for approximately 26 months
from commencement of construction, if at all.
The successful development of additional facilities involves a number of
risks, including the possibility that
. Brookdale may be unable to locate suitable sites at acceptable prices
. Brookdale may be unable to obtain, or may experience delays in obtaining,
necessary zoning, land use, building, occupancy, licensing and other
required governmental permits and authorizations
. Brookdale may incur construction costs that exceed original estimates
. Brookdale may not complete construction projects on schedule
. Brookdale may experience competition in the search for suitable
development sites
If Brookdale suffers delays in its development program, such delays could
slow Brookdale's growth.
Brookdale relies, and will continue to rely, on third-party general
contractors to build its new facilities. Brookdale may experience difficulties
in working with general contractors and subcontractors, which could result in
increased construction costs and delays. Further, Brookdale has little control
over a number of contingencies affecting facility development that may
adversely affect project costs and completion time. Such
S-2
<PAGE>
adverse effects 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.
NEED FOR ADDITIONAL FINANCING
Brookdale needs significant additional financial resources to achieve its
acquisition and development plans and growth objectives. Brookdale estimates
the cost to acquire and develop the new facilities (targeted for acquisition or
development over the next two years) to be approximately $300.0 million to
$450.0 million in total (including mortgage debt financing and other incurred
or assumed debt). Such costs substantially exceed Brookdale's cash on hand,
availability under its existing credit facilities and the net proceeds of the
offering. Accordingly, Brookdale's future growth depends on its ability to
obtain significant additional financing on acceptable terms. Brookdale may be
unable to obtain such additional financing.
Brookdale occasionally will seek additional debt financing through a variety
of sources, which may include: (1) tax-exempt bonds, (2) conventional mortgage
financing and bank financing, (3) leases with third parties or (4) other
similar financing methods. If such debt financing is unavailable or is not
available on favorable terms, Brookdale may obtain financing through additional
debt or equity offerings. If additional funds are raised by issuing equity
securities, Brookdale's stockholders may experience dilution. Future financing,
whether debt or equity, may not be available when needed or on acceptable
terms. A lack of funds may require Brookdale to delay or eliminate all or some
of its development projects and acquisition plans. Such delay could have a
material adverse effect on Brookdale's growth plans.
ADVERSE CONSEQUENCES OF INDEBTEDNESS AND LEASE OBLIGATIONS; FLOATING RATE DEBT
As of the date of this prospectus supplement, after giving effect to this
offering and the application of the net proceeds from it as described in "Use
of Proceeds," Brookdale will be subject to mortgage and other indebtedness in
an aggregate principal amount of approximately $95.9 million. Brookdale is
currently party to various operating leases that require payments of
approximately $21.3 million in 1999 and that contain certain provisions for
rent increases beyond base rent.
Brookdale intends to finance its facilities through conventional mortgage
financing and bank financing, leases with third parties, tax-exempt bond
financing or other similar financing methods. Brookdale expects the amount of
indebtedness and lease payments to increase substantially as it pursues its
growth strategy. As a result, Brookdale will continue to be subject to risks
normally associated with significant financing leverage. As of the date of this
prospectus supplement, after giving effect to this offering and the application
of the net proceeds from it as described in "Use of Proceeds," approximately
$65.0 million in principal amount of Brookdale's indebtedness bore interest at
floating rates. In addition, indebtedness Brookdale may incur in the future,
including long-term, tax-exempt bond financing, if available, may bear interest
at floating rates. In such event, increases in prevailing interest rates could
significantly increase Brookdale's interest payment obligations. Brookdale may
be unable to generate sufficient cash flow from operations to cover interest,
principal and lease payments. Any payment or other default could cause the
lender to foreclose upon the facilities securing such indebtedness or, in the
case of a lease, could result in the termination of the lease, with a
consequent loss of income and asset value to Brookdale.
Brookdale financed the Heritage, Devonshire, Hawthorn Lakes and Edina Park
Plaza facilities with tax-exempt indebtedness. To maintain the tax-exempt
treatment of the interest paid on this indebtedness, the facilities must comply
with certain federal income tax requirements, principally pertaining to the
maximum income level of a specified portion of the facilities' residents
("Qualified Residents"). Failure to satisfy these requirements constitutes an
event of default under such indebtedness, thereby accelerating their maturity.
In certain cases, Brookdale's ability to increase prices to Qualified Residents
at such facilities (in response to higher operating costs or other factors)
could be limited if such increases would adversely affect Brookdale's ability
to attract and retain such Qualified Residents.
S-3
<PAGE>
DIFFICULTIES OF MANAGING RAPID GROWTH
Brookdale expects the number of facilities it owns or operates will
substantially increase as it pursues its development and acquisition strategy.
This planned growth will place significant demands on Brookdale's management
resources. To manage its growth effectively, Brookdale must continue to expand
its operational, financial and management information systems and continue to
attract, train, motivate, manage and retain key employees. Brookdale's failure
to manage its growth effectively could materially and adversely affect its
business, financial condition and results of operations.
DEPENDENCE ON SENIOR MANAGEMENT AND SKILLED PERSONNEL
Brookdale depends on the continued services of Mark J. Schulte, its President
and Chief Executive Officer. The loss of his services could materially and
adversely affect Brookdale's business, financial condition and results of
operations. Brookdale also depends on its ability to continue to attract and
retain management personnel who will be responsible for the day-to-day
operations of its facilities. Brookdale's inability to hire qualified
management personnel to operate its facilities could also materially and
adversely affect its business, financial condition and results of operations.
SIGNIFICANT INFLUENCE BY EXISTING STOCKHOLDERS AND MANAGEMENT
After giving effect to this offering, Brookdale's executive officers and
directors as a group beneficially would own approximately 35.0% of Brookdale's
outstanding common stock, which includes 4,044,350 shares of Brookdale's common
stock beneficially owned by PGI. Therefore, Brookdale's executive officers and
directors and PGI are in the position to significantly influence the election
of Brookdale's directors and its management and operations. Three of
Brookdale's seven directors are affiliates of PGI or employees of Brookdale.
Four of Brookdale's directors are independent directors who are neither
affiliates of PGI nor employees of Brookdale. PGI is party to a voting
agreement pursuant to which it agreed to vote all of its shares of Brookdale's
common stock at any meeting at which directors are elected in favor of the
election of independent directors so that after such election, if such persons
are elected, there will be at least four independent directors. The voting
agreement will continue in effect until the earlier of May 7, 2000 and the date
PGI first owns less than 10% of Brookdale's outstanding common stock.
COMPETITION
The long-term care industry is highly competitive. Brookdale believes that
the senior independent and assisted living segment, in particular, will become
even more competitive in the future. Brookdale will be competing with numerous
other companies providing similar services, such as: (1) home health care
agencies, (2) other senior and assisted living providers, (3) retirement
communities and (4) convalescent centers. In general, regulatory and other
barriers to entry in the senior and assisted living industry are insubstantial.
In pursuing its business and growth strategy, Brookdale expects to face
competition in its efforts to develop, acquire and lease facilities. Some of
Brookdale's present and potential competitors are significantly larger and
have, or may obtain, greater financial resources than those available to
Brookdale. Consequently, Brookdale may encounter increased competition. Such
competition could limit Brookdale's ability to attract residents or expand its
business or otherwise have a material adverse effect on its business, financial
condition and results of operations. Moreover, if the development of new senior
independent and assisted living facilities outpaces demand for those facilities
in certain markets, such markets may become saturated. Such an oversupply of
facilities could cause Brookdale to experience decreased occupancy rates,
depressed margins and lower operating results.
GOVERNMENTAL REGULATION
Brookdale's facilities are subject to federal, state and local regulation and
licensing by state and local health and social service agencies and other
regulatory authorities, which requirements vary from state to state.
S-4
<PAGE>
Some states subject senior independent and assisted living facilities to
periodic survey or inspection by governmental authorities. In certain states
where Brookdale operates, or may operate in the future, it may be unable to
provide certain higher levels of senior care services without obtaining the
appropriate licenses.
In addition, some states have adopted certificate of need or similar laws
applicable to assisted living and nursing facilities which generally require
that the appropriate state agency approve certain acquisitions or capital
expenditures and determine that a need exists for certain new unit or bed
additions or new services. Many states have placed a moratorium on granting
certificates of need or otherwise stated their intent not to grant approval for
such capital expenditures. If Brookdale requires certificates of need or other
similar approvals for expansion of its operations, its failure or inability to
obtain such approvals or possible delays in obtaining such approvals could
adversely affect such expansion.
Although Brookdale currently does not participate in the Medicare or Medicaid
programs, its affiliated hospitals and other health care providers do
participate in those programs. Furthermore, Brookdale may participate in the
Medicare program at the skilled nursing facility to be constructed at The
Devonshire facility. As of October 26, 1998, the Department of Social and
Health Services pays Brookdale for services it provides to 12 residents at The
Park Place facility in Spokane, Washington. The agency derives some portion of
such funds from the federal Medicaid program. Also, all of Brookdale's
residents are eligible for Medicare benefits. Therefore, certain aspects of
Brookdale's business are, and will be, subject to federal and state laws and
regulations which govern financial and other arrangements between and among
health care providers, suppliers and vendors. These laws prohibit certain
direct and indirect payments and fee-splitting arrangements designed to induce
or encourage the referral of patients to, or the recommendation of, a
particular provider or other entity or person for medical products and
services. These laws include, but are not limited to, the federal "anti-
kickback law" which prohibits, among other things, the offer, payment,
solicitation or receipt of any form of remuneration in return for the referral
of Medicare and Medicaid patients. The Office of the Inspector General of the
Department of Health and Human Services, the Department of Justice and other
federal agencies interpret these statutes liberally and enforce them
aggressively. Congress and state legislatures have proposed legislation that
would significantly expand the government's involvement in curtailing fraud and
abuse and increase the monetary penalties for violation of these provisions.
Violation of these laws can result in, among other things, loss of licensing,
civil and criminal penalties for individuals and entities and exclusion of
health care providers or suppliers from participation in the Medicare and/or
Medicaid programs.
In addition, although Brookdale is not a Medicare or Medicaid provider or
supplier, it is subject to these laws because (1) the state laws typically
apply regardless of whether Medicare or Medicaid payments are at issue, (2)
Brookdale currently plans to build and operate a skilled nursing facility at
The Devonshire facility and may establish licensed home health agencies which
are intended to participate in the Medicare program and (3) as required under
some state licensing laws, or for the convenience of its residents, some of
Brookdale's facilities maintain affiliations with hospitals and other health
care providers, including pharmacies, home health agencies and hospices,
through which the health care providers make their health care items or
services (some of which may be covered by Medicare or Medicaid) available to
facility residents. Such laws could be interpreted in a manner inconsistent
with Brookdale's practices.
Brookdale's success will depend in part upon its ability to satisfy
applicable regulations and requirements and to procure and maintain required
licenses as the regulatory environment for senior and assisted living
facilities evolves. Federal, state or local laws or regulatory procedures which
might adversely affect Brookdale may be imposed or expanded. Brookdale's
failure to comply with applicable regulatory requirements could have a material
adverse effect on its business, financial condition and results of operations.
ENVIRONMENTAL RISKS
Under various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real property may be
liable for the cost of removal or remediation of certain
S-5
<PAGE>
hazardous or toxic substances that could be located on, in or under such
property. Environmental laws and regulations often impose liability whether or
not the owner or operator knew of, or was responsible for, the presence of the
hazardous or toxic substances. In addition, Brookdale's facilities are subject
to laws relating to the disposal of biohazardous waste. The costs of any
required remediation or removal of these substances could be substantial. The
liability of an owner or operator as to any affected property is generally not
limited under such laws and regulations and could exceed the property's value
and the aggregate assets of the owner or operator. In connection with the
ownership or operation of its facilities, Brookdale could be liable for
remediation costs or fines. Consequently, the presence, with or without
Brookdale's knowledge, of hazardous or toxic substances at any property that
Brookdale owns or operates, or that Brookdale acquires or operates in the
future, could have a material adverse effect on Brookdale's business, financial
condition and results of operations.
LIABILITY AND INSURANCE
Brookdale provides services that subject it to significant liability risks.
In recent years, the senior and assisted living industry has experienced an
increase in the number of lawsuits alleging negligence and other legal
theories. Many of these lawsuits involve significant legal costs and
substantial claims. Brookdale has secured insurance policies in amounts and
with such coverage as it deems appropriate for its operations. However,
Brookdale may be unable to continue to obtain sufficient liability insurance
coverage in the future or such coverage may not be available on acceptable
terms. A successful claim in excess of Brookdale's coverage, or that
Brookdale's insurance does not cover, could have a material adverse effect on
Brookdale's business, financial condition and results of operations. Claims
against Brookdale, regardless of their merit or outcome, may involve
significant legal costs and require management to devote considerable time that
would otherwise be used to operate Brookdale.
DEPENDENCE ON ATTRACTING SENIORS WITH SUFFICIENT RESOURCES TO PAY
Brookdale currently relies, and 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 Brookdale's facilities are
located can afford the fees for such residences. Inflation or other
circumstances that adversely affect the ability of residents and potential
residents to pay for senior and independent assisted living services could
adversely affect Brookdale. Brookdale's inability to attract seniors with
adequate resources to pay for its services would adversely affect its business
operations and financial condition.
ANTI-TAKEOVER PROVISIONS
Brookdale's Restated Certificate of Incorporation and Amended and Restated
By-laws, as well as Delaware corporate law, contain provisions that could make
it more difficult for a third party to acquire, or discourage a third party
from attempting to acquire, control of Brookdale. Certain provisions impose
various procedural and other requirements, including advance notice and super-
majority voting provisions. Such provisions could make it more difficult for
stockholders to effect certain corporate actions. In addition, Brookdale's
Board of Directors is divided into three classes, each of which serves for a
staggered three-year term, which may make it more difficult for a third party
to gain control of the Board of Directors. As a Delaware corporation, Brookdale
is subject to Section 203 of the Delaware General Corporation Law, as amended,
which, in general, prevents an "interested stockholder" (defined generally as a
person owning 15% or more of a corporation's outstanding voting stock) from
engaging in a "business combination" (as defined therein) for three years
following the date such person becomes an interested stockholder unless certain
conditions are satisfied. Pursuant to a Board resolution adopted at the time of
Brookdale's formation, the Section 203 limits do not apply to any "business
combination" between Brookdale and PGI.
S-6
<PAGE>
USE OF PROCEEDS
The net proceeds to Brookdale from the sale of the shares of common stock are
approximately $31.6 million (or approximately $36.4 million assuming full
exercise of the underwriter's over-allotment option), after deducting the
underwriting discounts and commissions and estimated offering expenses payable
by Brookdale. Brookdale will use approximately $24.1 million of such net
proceeds to repay outstanding indebtedness under its unsecured revolving credit
facility with LaSalle National Bank (which, for the most part, bears interest
at the prime rate plus one-half percent per annum (8 3/4% as of October 15,
1998) and matures on April 26, 1999). Brookdale expects to use the balance of
such net proceeds for general corporate purposes, including funding future
acquisitions and developments of senior independent and assisted living
facilities and for working capital and general corporate purposes. Until
Brookdale uses such proceeds as described above, it intends to invest the net
proceeds in short-term, interest-bearing securities or certificates of deposit.
PRICE RANGE OF COMMON STOCK
Brookdale's common stock is quoted on the Nasdaq National Market under the
symbol "BLCI." The following table provides the range of high and low bid
prices for Brookdale's common stock, as reported by the Nasdaq National Market,
for the periods indicated:
<TABLE>
<CAPTION>
BID PRICE PER
SHARE
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HIGH LOW
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YEAR ENDED DECEMBER 31, 1997:
Second Quarter (1)........................................ $12.13 $11.50
Third Quarter............................................. 19.00 11.88
Fourth Quarter............................................ 20.00 16.50
YEAR ENDING DECEMBER 31, 1998:
First Quarter............................................. 24.25 16.50
Second Quarter............................................ 29.00 22.56
Third Quarter............................................. 25.44 16.75
Fourth Quarter (through November 12)...................... 21.25 13.00
</TABLE>
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(1) The common stock commenced trading on May 2, 1997.
On November 12, 1998, the closing bid price of Brookdale's common stock as
reported by the Nasdaq National Market was $17.625 per share. On that date,
Brookdale had approximately 850 holders of record of its common stock.
DIVIDEND POLICY
Brookdale has never declared or paid any cash dividends on its common stock
and currently plans to retain future earnings, if any, to finance the growth of
its business rather than to pay cash dividends. Payments of any cash dividends
in the future will depend on Brookdale's financial condition, results of
operations and capital requirements, as well as other factors deemed to be
relevant by Brookdale's Board of Directors.
S-7
<PAGE>
CAPITALIZATION
The following table sets forth, as of June 30, 1998, Brookdale's actual
capitalization and its pro forma capitalization, as adjusted to give effect to
Brookdale's receipt and application of the net proceeds of this offering (after
deducting the estimated underwriting discounts and commissions and offering
expenses payable by Brookdale) as discussed in "Use of Proceeds."
<TABLE>
<CAPTION>
AT JUNE 30, 1998
--------------------
PRO FORMA
ACTUAL AS ADJUSTED
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(IN THOUSANDS,
EXCEPT
SHARE AMOUNTS)
<S> <C> <C>
Cash and cash equivalents................................. $ 1,437 $ 24,787
======== ========
Unsecured line of credit (1).............................. 8,250 --
Other long-term debt...................................... 96,027 96,027
-------- --------
Total debt............................................ 104,277 96,027
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Stockholders' equity:
Preferred Stock, $0.01 par value, 20,000,000 shares
authorized; no shares issued or outstanding............ -- --
Common Stock, $0.01 par value, 75,000,000 shares
authorized; 9,559,582 shares issued and outstanding;
11,559,582 shares as adjusted (2)...................... 96 116
Additional paid-in-capital.............................. 63,241 94,821
Retained earnings....................................... 3,077 3,077
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Total stockholders' equity............................ 66,414 98,014
-------- --------
Total capitalization.................................. $170,691 $194,041
======== ========
</TABLE>
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(1) Brookdale intends to use approximately $24.1 million of the net proceeds of
this offering to repay borrowings outstanding under the line of credit as
of the date of this prospectus supplement.
(2) Does not include 904,768 shares of Brookdale's common stock subject to
outstanding options and 83,163 shares of Brookdale's common stock subject
to outstanding warrants as of the date of this prospectus supplement at a
weighted average exercise price of $16.14 per share.
S-8
<PAGE>
UNDERWRITING
Subject to the terms and conditions of an underwriting agreement (the
"Underwriting Agreement"), Brookdale has agreed to sell to Friedman, Billings,
Ramsey & Co., Inc. "FBR", and FBR has agreed to purchase 2,000,000 shares of
common stock. FBR is committed to purchase all of the shares offered hereby
(other than the shares covered by the over-allotment option described below) if
any are purchased.
FBR proposes initially to offer the shares directly to the public at the
public offering price set forth on the cover page of this prospectus supplement
and to certain dealers at such offering price less a concession not to exceed
$0.34 per share. After the offering, the public offering price may be changed.
Brookdale has granted to FBR an option exercisable during a 30-day period
after the date hereof to purchase, at the initial public offering price less
underwriting discounts and commissions, up to 300,000 additional shares of
common stock for the sole purpose of covering over-allotments, if any.
Brookdale has agreed to indemnify FBR against certain civil liabilities under
the Securities Act, or to contribute to payments FBR may be required to make in
respect thereof.
The following table shows the underwriting discounts and commissions
Brookdale will pay to FBR in connection with this offering. These amounts are
shown assuming both no exercise and full exercise of FBR's option to purchase
additional shares of common stock.
<TABLE>
<CAPTION>
NO
EXERCISE FULL EXERCISE
---------- -------------
<S> <C> <C>
Per share........................................ $ 0.5775 $ 0.5775
Total............................................ $1,155,000 $1,328,250
</TABLE>
FBR may engage in "passive market making transactions" in Brookdale's common
stock in accordance with Rule 103 of the SEC's Regulation M. In general, Rule
103 permits brokers to participate in the distribution of a security and make a
market in that security on the Nasdaq Stock Market at the same time, subject to
certain limits. A passive market maker generally may not bid for or purchase a
security subject to the rule at a price that exceeds a higher independent bid.
In addition, the net daily purchases made by any passive market maker generally
may not exceed 30% of its average daily trading volume in the security during a
specified prior period, or 200 shares, whichever is greater. A passive market
maker must identify passive market making bids as such on the Nasdaq electronic
inter-dealer reporting system. Passive market making by FBR may stabilize or
maintain the market price of Brookdale's common stock above independent market
levels. FBR is not required to engage in passive market making and may end
passive market making activities at any time.
In connection with this offering, FBR may engage in transactions in the over-
the-counter market or otherwise that stabilize, maintain or otherwise affect
the price of Brookdale's common stock. Specifically, FBR may over-allot the
offering, creating a short position. In addition, FBR may bid for and purchase
common stock in the open market to cover its short position or to stabilize the
price of the common stock. These activities could cause the price of the common
stock to be higher than it might be in the absence of such purchases. FBR is
not required to engage in these activities and may end any of these activities
at any time.
FBR has in the past provided investment banking services to Brookdale for
which it has received customary fees.
LEGAL MATTERS
As of the date of this prospectus supplement, Winston & Strawn, Chicago,
Illinois, will pass upon certain legal matters for Brookdale. In addition,
Hunton & Williams, Richmond, Virginia, will pass upon certain legal matters for
the underwriters. Wayne D. Boberg, a partner of Winston & Strawn, is a director
of Brookdale. As of the date of this prospectus supplement, Mr. Boberg
beneficially owns 2,500 shares of Brookdale's common stock and has options to
acquire an additional 5,000 shares of common stock.
S-9
<PAGE>
$200,000,000
BROOKDALE LIVING COMMUNITIES, INC.
COMMON STOCK, PREFERRED STOCK, DEBT SECURITIES
AND WARRANTS TO PURCHASE COMMON STOCK
----------------
Brookdale Living Communities, Inc., a Delaware corporation (the "Company"),
may from time to time offer (i) shares of Common Stock, $0.01 par value per
share ("Common Stock"), (ii) shares of Preferred Stock, $0.01 par value per
share ("Preferred Stock"), which may be convertible or nonconvertible, (iii)
debt securities ("Debt Securities"), which may be convertible or
nonconvertible senior debt securities ("Senior Debt Securities") or
subordinated (including junior subordinated) debt securities ("Subordinated
Debt Securities"), and which may be secured or unsecured, and (iv) warrants to
purchase Common Stock ("Warrants"), with an aggregate public offering price of
up to $200,000,000, on terms to be determined at the time or times of
offering. The Common Stock, Preferred Stock, Debt Securities and Warrants
(collectively referred to herein as the "Securities") may be offered,
separately or together, in separate classes or series, in amounts, at prices
and on terms to be set forth in one or more supplements to this Prospectus
(each, a "Prospectus Supplement").
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.
All specific terms of the offering and sale of the Securities in respect of
which this Prospectus is being delivered will be set forth in the applicable
Prospectus Supplement and will include, when applicable: (i) in the case of
Common Stock, the maximum aggregate number of shares offered and any public
offering price; (ii) in the case of Preferred Stock, the specific class,
series, title and stated value, any dividend, liquidation, redemption,
conversion, voting and other rights, any dividend payment dates, any sinking
fund provisions, the maximum aggregate number of shares offered and any public
offering price; (iii) in the case of Debt Securities, the specific title,
aggregate principal amount, denomination, form, maturity, interest rate and
time of payment, currency, ranking as Senior Debt Securities or Subordinated
Debt Securities, redemption, repayment or sinking fund provisions, terms for
conversion into Common Stock or Preferred Stock and any public offering price;
and (iv) in the case of Warrants, the duration, offering price, exercise price
and detachability features. If any Securities are offered together in the form
of units ("Units"), the specific terms of any such Units will be set forth in
the applicable Prospectus Supplement.
The applicable Prospectus Supplement will also contain information, when
applicable, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Securities
covered by that Prospectus Supplement.
The Securities may be offered directly, through agents designated from time
to time by the Company, or to or through underwriters or dealers. If any
agents or underwriters are involved in the sale of any of the Securities,
their names and any applicable purchase price, fee, commission or discount
arrangement between or among them will be set forth in or will be calculable
from the information set forth in the applicable Prospectus Supplement. No
Securities may be sold without delivery of the applicable Prospectus
Supplement describing the method and terms of the offering of those
Securities. See "Plan of Distribution" for possible indemnification
arrangements with underwriters, dealers and agents.
The Common Stock is traded on the Nasdaq National Market under the symbol
"BLCI."
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.
This Prospectus may not be used to consummate sales of the Securities
unless accompanied by a Prospectus Supplement.
The date of this Prospectus is July 8, 1998.
<PAGE>
AVAILABLE INFORMATION
The Company has filed a Registration Statement on Form S-3 under the
Securities Act of 1933, as amended (the "Securities Act"), with the Securities
and Exchange Commission (the "Commission") with respect to the Securities.
This Prospectus which constitutes part of the Registration Statement does not
contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and
regulations of the Commission. Statements contained herein concerning the
provisions of any documents 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, and each such statement shall be deemed
qualified in its entirety by such reference.
The Company is subject to the informational 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
Commission. Such reports, proxy statements and other information filed by the
Company with the Commission may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following Regional Offices of the
Commission: Northeast Regional Office, 7 World Trade Center, Suite 1300, New
York, New York 10048; and Midwest Regional Office, Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material
can also be obtained from the Public Reference Section of the Commission, at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Company is subject to the electronic filing requirements of the Commission.
Accordingly, pursuant to the rules and regulations of the Commission, certain
documents, including annual and quarterly reports and proxy statements, filed
by the Company with the Commission have been or will be filed electronically.
The Commission maintains a World Wide Web site that contains reports, proxy
and information statements and other information regarding registrants that
file electronically with the Commission at http://www.sec.gov. The Company's
Common Stock is listed on the Nasdaq National Market under the symbol BLCI,
and such reports, proxy statements and other information can also be inspected
at the offices of the Nasdaq National Market, 1735 K Street, N.W., Washington,
D.C. 20006. This Prospectus does not contain all the information set forth in
the Registration Statement and exhibits thereto which the Company has filed
with the Commission under the Securities Act.
INFORMATION INCORPORATED BY REFERENCE
The following documents, each of which has been filed with the Commission by
the Company, are incorporated, as of their respective dates, into this
Prospectus by reference:
(a) The Company's Annual Report on Form 10-K (File No. 0-22253) for the
fiscal year ended December 31, 1997, as filed with the Commission on March
31, 1998 under the Exchange Act;
(b) The Company's Quarterly Report on Form 10-Q (File No. 0-22253) for
the quarter ended March 31, 1998, as filed with the Commission on May 15,
1998;
(c) The Company's Current Reports on Form 8-K (File No. 0-22253) dated
December 17, 1997, March 6, 1998, March 31, 1998 and May 12, 1998, as filed
with the Commission on February 18, 1998, April 14, 1998, April 15, 1998
and May 26, 1998, respectively; and
(d) The description of the Company's Common Stock, par value $0.01 per
share, contained in Amendment No. 1 to the Company's Registration Statement
on Form 8-A, as filed with the Commission on April 17, 1997 under the
Exchange Act.
All documents subsequently filed with the Commission by the Company pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
termination of the offering of the Securities registered hereby shall be
deemed to be incorporated by reference into this Prospectus and to be a part
hereof from the respective dates of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent
2
<PAGE>
that a statement contained herein or in any other subsequently filed document
which is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy
of any and all of the information that has been incorporated by reference in
this Prospectus, excluding exhibits. Such requests should be directed to
Brookdale Living Communities, Inc., 77 West Wacker Drive, Suite 4400, Chicago,
Illinois 60601, Telephone: (312) 977-3700.
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
This Prospectus contains, any Prospectus Supplement will contain, and the
documents incorporated by reference herein contain or will contain certain
statements which constitute "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. When used in this
Prospectus or any Prospectus Supplement, the words "believes," "expects,"
"anticipates," "estimates" and similar words and expressions are generally
intended to identify forward-looking statements. Statements that describe the
Company's future strategic plans, goals or objectives are also forward-looking
statements. Readers of this Prospectus or any Prospectus Supplement are
cautioned (a) that any forward-looking statements, including those regarding
the intent, belief, or current expectations of the Company or management, are
not guarantees of future performance, results or events and involve risks and
uncertainties, such as quarterly fluctuations in operating results and
occupancy levels in markets in which the Company competes, the successful
integration of newly acquired and leased facilities with the operations of the
Company's other facilities, achievement of development timetables and/or
unanticipated changes in expenses or capital expenditures, and (b) that actual
results and events may differ materially from those in the forward-looking
statements as a result of various factors including, but not limited to (i)
general economic conditions in the markets in which the Company operates, (ii)
competitive pressures within the industry and/or the markets in which the
Company operates, (iii) the effect of future legislation or regulatory changes
on the Company's operations and (iv) other factors described in "Risk Factors"
contained in any Prospectus Supplement. The forward-looking statements
included in this Prospectus are made only as of the date of this Prospectus.
The Company undertakes no obligation to update such forward-looking statements
to reflect subsequent events or circumstances.
THE COMPANY
The Company provides senior independent and assisted living services to the
elderly through its facilities located in urban and suburban areas of major
metropolitan markets. The Company was incorporated in Delaware in September
1996 to continue and expand the business and operations of the senior
independent and assisted living division of The Prime Group, Inc. and certain
of its affiliates (collectively, "PGI"), which, since 1985, had been involved
in the development, construction, marketing and operation of senior
independent and assisted living facilities for the elderly. The Company's
principal executive offices are located at 77 West Wacker Drive, Suite 4400,
Chicago, Illinois 60601, and its telephone number is (312) 977-3700.
USE OF PROCEEDS
Unless otherwise indicated in an accompanying Prospectus Supplement, the net
proceeds to be received by the Company from the sale of the Securities will be
used for general corporate purposes, which may include funding capital
expenditures, acquisitions, developments, lease security deposits, reducing
short-term borrowings, and general working capital needs. Pending such uses,
the Company may temporarily invest the net proceeds in interest-bearing
securities.
3
<PAGE>
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
The following table sets forth the ratio of earnings to combined fixed
charges of the Company and its consolidated subsidiaries for the periods
indicated.
<TABLE>
<CAPTION>
THE PREDECESSOR PROPERTIES (1) THE COMPANY
- --------------------------------------------------- --------------------------------
YEAR ENDED DECEMBER
31, JANUARY 1, 1997 THREE MONTHS MAY 7, 1997 THREE MONTHS
- -------------------- TO ENDED TO ENDED
1993 1994 1995 1996 MAY 6, 1997 MARCH 31, 1997 DECEMBER 31, 1997 MARCH 31, 1998
- ---- ---- ---- ---- --------------- -------------- ----------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
-- -- -- 1.44 -- -- -- 1.34
</TABLE>
- --------
(1) As used herein, the Predecessor Properties refers to the former senior
independent and assisted living division of The Prime Group, Inc. and
certain of its affiliates, collectively the predecessor in interest to the
Company.
For purposes of calculating the ratio of earnings to fixed charges,
"earnings" include income before income taxes, extraordinary items and the
cumulative effects of changes in accounting principles and combined fixed
charges. "Combined fixed charges" consist of interest on all indebtedness and
that portion of rental expense that management believes to be representative
of interest. The Predecessor Properties' historical earnings were insufficient
to cover fixed charges by approximately $2.1 million, $3.4 million, $1.4
million, $0.3 million and $0.2 million for the years ended December 31, 1993,
1994, 1995, the period from January 1, 1997 to May 6, 1997 and the three
months ended March 31, 1997, respectively. The Company's historical earnings
were insufficient to cover fixed charges by approximately $0.1 million for the
period from May 7, 1997 to December 31, 1997.
DESCRIPTION OF CAPITAL STOCK
The Company's Restated Certificate of Incorporation (the "Certificate")
provides that the authorized capital stock of the Company consists of
75,000,000 shares of Common Stock and 20,000,000 shares of Preferred Stock,
par value $0.01 per share (the "Preferred Stock"). As of December 31, 1997,
9,475,000 shares of Common Stock were issued and outstanding, and no shares of
Preferred Stock were issued or outstanding.
COMMON STOCK
Each holder of Common Stock is entitled to one vote for each share on all
matters submitted to a vote of stockholders. The Certificate does not provide
for cumulative voting, and accordingly, the holders of a majority of the
shares of Common Stock entitled to vote in any election of directors may elect
all of the directors standing for election. The Certificate provides that
whenever there is paid, or declared and set aside for payment, to the holders
of the outstanding shares of any class of stock having preference over the
Common Stock as to the payment of dividends, the full amount of dividends and
of sinking fund or retirement fund or other retirement payments, if any, to
which such holders are entitled, then dividends may be paid on the Common
Stock out of any assets legally available therefor, but only when and as
declared by the Board of Directors. The Certificate also provides that in the
event of any liquidation, dissolution or winding up of the Company, after
there is paid to or set aside for the holders of any class of stock having
preference over the Common Stock the full amount to which such holders are
entitled and after payment or provision for payment of all debts and
liabilities of the Company, the holders of the Common Stock shall be entitled
to receive the remaining assets of the Company available for distribution, in
cash or in kind. The holders of Common Stock have no preemptive, subscription,
redemption or conversion rights. The rights, preferences and privileges of
holders of Common Stock will be subject to the rights of the holders of any
shares of any series of Preferred Stock that the Company may issue in the
future having preference over the Common Stock with respect to such matters.
PREFERRED STOCK
The following summary of the Preferred Stock does not purport to be complete
and is qualified in its entirety by reference to the Certificate or the
applicable Certificate of Designations of Preferred Stock, the form of which
will be filed as, or will be incorporated by reference as, an exhibit to the
Registration Statement of which this Prospectus is a part in connection with
the issuance of such series of Preferred Stock. The particular terms of any
series of Preferred Stock, whether convertible or nonconvertible, will be
described in the applicable Prospectus Supplement.
4
<PAGE>
The Certificate provides that the Board of Directors of the Company is
authorized to issue Preferred Stock in series and to fix and state the voting
powers, and such designations, preferences and relative participating,
optional or other special rights of the shares of each such series and the
qualifications, limitations and restrictions thereof. Such action may be taken
by the Board without stockholder approval. Under the Certificate, each share
of each series of Preferred Stock is to have the same relative rights as, and
be identical in all respects with, all other shares of the same series. While
providing flexibility in connection with possible financings, acquisitions and
other corporate purposes, the issuance of Preferred Stock, among other things,
could adversely affect the voting power of the holders of Common Stock and,
under certain circumstances, be used as a means of discouraging, delaying or
preventing a change in control of the Company.
REGISTRATION RIGHTS AGREEMENT
The Company has granted demand and incidental registration rights to The
Prime Group, Inc. and certain of its affiliates (collectively, "PGI") for the
registration of shares of Common Stock owned by PGI under the Securities Act.
Three demand registrations are permitted during the first five years following
the initial public offering of the Common Stock and one registration per year
each year thereafter until PGI owns less than 10% of the outstanding Common
Stock. The Company will pay the fees and expenses of the demand registrations
and the incidental registrations, while PGI will pay all underwriting
discounts and commissions. These registration rights are subject to certain
conditions and limitations, including the right of underwriters to limit the
number of shares owned by PGI included in such registration.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is LaSalle National
Bank, and the transfer agent and registrar for the Preferred Stock will be set
forth in the applicable Prospectus Supplement.
CERTAIN ANTI-TAKEOVER PROVISIONS
The Certificate and the Amended and Restated By-laws of the Company (the
"By-laws") contain, among other things, certain provisions described below
that may reduce the likelihood of a change in the Board of Directors or voting
control of the Company without the consent of the Board of Directors. These
provisions could have the effect of discouraging, delaying or preventing
tender offers or takeover attempts that some or a majority of the stockholders
might consider to be in the stockholders' best interest, including offers or
attempts that might result in payment of a premium over the market price for
the Common Stock.
Classification of Board of Directors. The Certificate and the By-laws divide
the Board of Directors into three classes, designated Class I, Class II and
Class III, respectively, each class to be as nearly equal in number as
possible. The terms of Class I, Class II and Class III directors will expire
at the 2001, 1999 and 2000 annual meetings of stockholders, respectively, and
in all cases directors elected will serve until their respective successors
are elected and qualified. At each annual meeting of stockholders, directors
will be elected to succeed those in the class whose terms then expire, each
elected director to serve for a term expiring at the third succeeding annual
meeting of stockholders after such director's election, and until the
director's successor is elected and qualified. Thus, only one class of the
directors stand for re-election each year, requiring at least two
stockholders' meetings at which director are elected to replace a majority of
the Board.
Filling of Board Vacancies; Removal. Any vacancy occurring in the Board of
Directors, including any vacancy created by an increase in the number of
directors, shall be filled for the unexpired term by the concurring vote of a
majority of the directors then in office, whether or not a quorum, and any
director so chosen shall hold office for the remainder of the full term of the
class in which the new directorship was created or the vacancy occurred and
until such director's successor shall have been elected and qualified.
Directors may only be removed with cause by the affirmative vote of the
holders of at least a majority of the outstanding shares of capital stock then
entitled to vote at an election of directors.
5
<PAGE>
Stockholder Action by Unanimous Written Consent. Any action required or
permitted to be taken by the stockholders must be effected at a duly called
annual or special meeting of the stockholders and may not be effected by any
consent in writing by the stockholders, unless such consent is unanimous.
Call of Special Meetings. Special meetings of stockholders may be called at
any time but only by the Board of Directors, the Chairman of the Board, the
Chief Executive Officer, the President or stockholders possessing at least 25%
of the voting power of the issued and outstanding stock entitled to vote
generally in the election of directors.
By-laws Amendments. The stockholders may amend the By-laws by the
affirmative vote of the holders of at least two-thirds of the outstanding
shares of stock of the Company entitled to vote thereon. Directors may also
amend the By-laws by a two-thirds vote of the directors then in office.
Certificate Amendments. Except as set forth in the Certificate or as
otherwise specifically required by law, no amendment of any provision of the
Certificate shall be made unless such amendment has been first proposed by the
Board of Directors upon the affirmative vote of at least two-thirds of the
directors then in office and thereafter approved by the affirmative vote of
the holders of at least a majority of the outstanding shares of stock of the
Company entitled to vote thereon; provided, however, if such amendment is to
the provisions in the Certificate relating to (i) amendments to the
Certificate, (ii) a decrease in the authorized number of shares of Preferred
Stock, (iii) the authority of the Board of Directors to issue Preferred Stock,
(iv) the number and classification of the Board of Directors of the Company,
(v) the limitation on directors' liability, (vi) amendments to the By-laws, or
(vii) stockholder meetings, such amendment must be approved by the affirmative
vote of the holders of at least two-thirds of the outstanding shares of stock
entitled to vote thereon.
Stockholder Nominations and Proposals. With certain exceptions, the By-laws
require that stockholders intending to present nominations for directors or
other business for consideration at a meeting of stockholders notify the
Company's Secretary by the later of 60 days before the date of the meeting and
15 days after the date notice of the meeting is mailed or public notice of the
meeting is given.
Certain Statutory Provisions. Section 203 of the Delaware General
Corporation Law, as amended (the "DGCL") provides, in general, that a
stockholder acquiring more than 15% of the outstanding voting shares of a
corporation subject to the statute (an "Interested Stockholder"), but less
than 85% of such shares, may not engage in certain "Business Combinations"
with the corporation for a period of three years subsequent to the date on
which the stockholder became an Interested Stockholder unless (i) before such
person became an Interested Stockholder, the corporation's board of directors
approved either the Business Combination or the transaction in which the
stockholder became an Interested Stockholder or (ii) the Business Combination
is approved by the corporation's board of directors and authorized by a vote
of at least two-thirds of the outstanding voting stock of the corporation not
owned by the Interested Stockholder.
Section 203 defines the term "Business Combination" to encompass a wide
variety of transactions with or caused by an Interested Stockholder in which
the Interested Stockholder receives or could receive a benefit on other than a
pro rata basis with other stockholders, including mergers, certain asset
sales, certain issuances of additional shares to the Interested Stockholder,
transactions with the corporation which increase the proportionate interest of
the Interested Stockholder or a transaction in which the Interested
Stockholder receives certain other benefits.
Pursuant to a Board resolution adopted at the time of formation of the
Company, the Section 203 limits do not apply to any "Business Combination"
between the Company and PGI.
DESCRIPTION OF DEBT SECURITIES
The following description of the Debt Securities sets forth certain general
terms and provisions of the Debt Securities to which any Prospectus Supplement
may relate ("Offered Debt Securities"). The particular terms of the Offered
Debt Securities and the extent to which such general provisions may apply will
be described in a Prospectus Supplement relating to such Offered Debt
Securities.
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<PAGE>
Unless otherwise specified in the applicable Prospectus Supplement, the Debt
Securities will constitute senior, senior subordinated or subordinated
(including, if applicable, junior subordinated) debt of the Company and will
be issued under a Senior Debt Indenture (the "Senior Debt Indenture") or a
Subordinated Debt Indenture (the "Subordinated Debt Indenture"), in each case
between the Company and a trustee to be named in the applicable Prospectus
Supplement (the "Trustee"). The Senior Debt Indenture and the Subordinated
Debt Indenture are sometimes referred to below individually as an "Indenture"
and collectively as the "Indentures." If and to the extent set forth in the
applicable Prospectus Supplement, the Debt Securities may be convertible into
Preferred or Common Stock of the Company or issued as part of Units of Debt
Securities and other Securities. If Debt Securities are to be issued as part
of Units of Debt Securities and other Securities or are to be issued in
exchange for Preferred Stock, the Prospectus Supplement will describe any
applicable material federal income tax consequences thereof.
The following summaries of certain provisions of the Indentures and the Debt
Securities do not purport to be complete. Except to the extent set forth in
the Prospectus Supplement with respect to a particular issue of Debt
Securities, the Indentures will be substantially identical, except for the
provisions relating to subordination, including the fact that Senior Debt
Securities will rank senior to the Subordinated Debt Securities.
GENERAL
The Indentures for the Debt Securities will not limit the amount of
additional indebtedness the Company or any of its subsidiaries may incur,
except as may be provided in the applicable Prospectus Supplement. The Debt
Securities will be senior or subordinated obligations of the Company, as set
forth in the accompanying Prospectus Supplement.
The applicable Prospectus Supplement will contain the following terms of and
information relating to any Debt Securities (to the extent such terms are
applicable to such Debt Securities and have not been otherwise disclosed): (a)
the specific title, aggregate principal amount, denomination and form; (b) the
date of maturity; (c) the interest rate or rates (or the method by which such
rate will be determined), if any; (d) the date from which interest will
accrue, the dates on which any such interest will be payable and the record
date for any interest payable on the interest payment date; (e) whether the
Debt Securities are convertible into Common Stock or Preferred Stock and the
terms of the security into which they are convertible (see "Description of
Capital Stock"), the conversion price, other terms related to conversion and
any anti-dilution protections; (f) if other than the corporate trust office of
the trustee for such Debt Securities, the place or places where the principal
of, premium, if any, and interest, if any, on the Debt Securities will be
payable; (g) the portion of the principal amount of Debt Securities of the
series payable upon certain declarations of acceleration or the method by
which such portion shall be determined; (h) the currency, currencies or
currency unit in which payments will be made, if other than U.S. dollars; (i)
whether the Debt Securities are senior or subordinated Debt Securities; (j)
any redemption, repayment or sinking fund provisions, including the period or
periods within which, the currency, currencies or currency units in which, and
the other terms and conditions upon which, Debt Securities may be redeemed;
(k) whether the Debt Securities will be sold as part of Units consisting of
Debt Securities and other Securities; (l) if the amount of payments of
principal of or any premium or interest on any Debt Securities of the series
may be determined with reference to an index, formula or other method, the
index, formula or other method by which such amounts shall be determined; (m)
whether and by what method the Debt Securities of the series (or certain
covenants under the related Indenture) may be defeased and discharged by the
Company; (n) whether the Debt Securities of the series shall be issued in
whole or in part as book-entry securities; (o) any applicable material federal
income tax consequences; and (p) any other material specific terms of the Debt
Securities, including any material additional events of default or covenants
provided for with respect to the Debt Securities and any material terms that
may be required by or advisable under applicable laws or regulations.
Debt Securities may bear interest at a fixed rate or a floating rate. Debt
Securities bearing no interest or interest at a rate that at the time of
issuance is below the prevailing market rate or as part of Units consisting of
Debt Securities and other Securities may be sold or deemed to be sold at a
discount below their stated principal
7
<PAGE>
amount. With respect to any Debt Securities as to which the Company has the
right to defer interest, the holders of such Debt Securities may be allocated
interest income for federal and state income tax purposes without receiving
equivalent, or any, interest payments. Any material federal income tax
considerations applicable to any such discounted Debt Securities or to certain
Debt Securities issued at par that are treated as having been issued at a
discount for federal income tax purposes will be described in the applicable
Prospectus Supplement.
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
Except as otherwise set forth in the applicable Prospectus Supplement, any
Subordinated Debt Securities will be subordinate and junior in right of
payment, to the extent and in the manner to be set forth in the Indenture, to
all "Senior Debt" of the Company. "Senior Debt" means, without duplication,
the principal, premium (if any) and unpaid interest on all present and future
(i) indebtedness of the Company for borrowed money, (ii) obligations of the
Company evidenced by bonds, debentures, notes or similar instruments, (iii)
indebtedness incurred, assumed or guaranteed by the Company in connection with
the acquisition by it or a subsidiary of any business, properties or assets
(except purchase-money indebtedness classified as accounts payable under
generally accepted accounting principles), (iv) obligations of the Company as
lessee under leases required to be capitalized on the balance sheet of the
lessee under generally accepted accounting principles, (v) reimbursement
obligations of the Company in respect of letters of credit relating to
indebtedness or other obligations of the Company that qualify as indebtedness
or obligations of the kind referred to in clauses (i) through (iv) above, and
(vi) obligations of the Company under direct or indirect guarantees in respect
of, and obligations (contingent or otherwise) to purchase or otherwise
acquire, or otherwise to assure a creditor against loss in respect of,
indebtedness or obligations of others of the kinds referred to in clauses (i)
through (v) above, in each case unless, in the instrument creating or
evidencing the indebtedness or obligation or pursuant to which the same is
outstanding, it is provided that such indebtedness or obligation is not
superior in right of payment to Senior Debt Securities.
CERTAIN COVENANTS OF THE COMPANY
The Prospectus Supplement will describe certain covenants of the Company
that will be set forth in the Indentures.
REDEMPTION
If and to the extent set forth in the applicable Prospectus Supplement, the
Company will have the right to redeem the Debt Securities, in whole or from
time to time in part, after the date and at the redemption prices set forth in
the applicable Prospectus Supplement.
EVENTS OF DEFAULT
An Event of Default with respect to the Debt Securities of any series will
be defined in the Indentures and set forth in the applicable Prospectus
Supplement.
DEFEASANCE OF DEBT SECURITIES
The Prospectus Supplement will state whether any defeasance provision will
apply to Debt Securities offered in connection therewith.
MODIFICATION OF THE INDENTURE AND WAIVER OF COVENANTS
Except as otherwise set forth in the applicable Prospectus Supplement, the
Indentures will contain provisions permitting the Company and the Trustee,
with the consent of the Holders of not less than a majority in principal
amount of outstanding Debt Securities of each series affected thereby, to
execute supplemental indentures adding any provisions to or changing or
eliminating any of the provisions of the Indentures or modifying the rights of
the Holders of outstanding Debt Securities of such series, except that no such
supplemental indenture may, without the consent of the Holder of each
outstanding Debt Security affected thereby, (a) change the Stated Maturity, or
reduce the principal amount, the premium, if any, thereon or the rate
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of payment of interest thereon, of any Debt Security of any series or (b)
effect certain other changes as set forth in the Indentures and described in
the applicable Prospectus Supplement. The Indentures will also permit the
Company to omit compliance with certain covenants in the Indentures with
respect to Debt Securities of any series upon waiver by the Holders of a
majority in principal amount of outstanding Debt Securities of such series.
CONSOLIDATION, MERGER AND SALE OF ASSETS
Except as otherwise set forth in the applicable Prospectus Supplement, the
Indentures will contain a provision permitting the Company, without the
consent of the Holders of any of the outstanding Debt Securities under the
Indenture, to consolidate with or merge into any other corporation or transfer
or lease its assets substantially as an entirety to any person provided that:
(i) the successor is a corporation organized under the laws of any domestic
jurisdiction; (ii) the successor corporation assumes the Company's obligations
on the Debt Securities and under the Indentures; (iii) after giving effect to
the transaction no Event of Default, and no event which, after notice or lapse
of time, would become an Event of Default, shall have happened and be
continuing; and (iv) certain other conditions are met.
CONCERNING THE TRUSTEE
The Trustee will be named in the Indentures and disclosed in the applicable
Prospectus Supplement.
GOVERNING LAW
Unless otherwise specified in the applicable Prospectus Supplement, the
Indenture for the Debt Securities and the Debt Securities will be governed by
New York law.
DESCRIPTION OF WARRANTS
Except as otherwise set forth in the applicable Prospectus Supplement, the
Warrants will be issued in fully registered form under a Warrant Agreement
between the Company and the Warrant Agent named in the applicable Prospectus
Supplement (the "Warrant Agent"). The statements in this Prospectus relating
to the Warrants and the Warrant Agreement are summaries and do not purport to
be complete.
Each Warrant will entitle the registered owner (the "Warrantholder") to
purchase one share of Common Stock, as set forth in the applicable Prospectus
Supplement, subject to the call provisions referred to below, from the time
the Warrants are separately transferable until the date set forth in the
accompanying Prospectus Supplement. The initial exercise price of the Warrants
and the date on which the Warrants become separately transferable will be set
forth in the applicable Prospectus Supplement.
The Warrants can be exercised by surrendering to the Warrant Agent a Warrant
certificate signed by the Warrantholder or his, her or its duly authorized
agent indicating the Warrantholder's election to exercise all or a portion of
the Warrants evidenced by the certificate. Surrendered Warrant certificates
must be accompanied by a written election to purchase such Warrants and
payment of the aggregate exercise price of the Warrants to be exercised (the
"Warrant Price"), which payment may be made in the form of wire transfer or a
cashier's check equal to the exercise price or, if and to the extent set forth
in the applicable Prospectus Supplement, the surrender of Debt Securities in
denominations at least equal to the aggregate Warrant Prices or, if
applicable, any combination of cash and such denominations of Debt Securities.
Certificates evidencing duly exercised Warrants shall be delivered by the
Warrant Agent to the transfer agent or trustee for the applicable Securities.
Upon receipt thereof, the Company will be obligated to deliver or cause to be
delivered, to or upon the written order of the exercising Warrantholders,
certificates representing the number of shares of Common Stock so purchased.
If fewer than all of the Warrants evidenced by any certificate are exercised,
the Warrant Agent will be obligated to deliver to the exercising Warrantholder
a new Warrant certificate representing the unexercised Warrants.
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To the extent set forth in the applicable Prospectus Supplement, the Warrant
Price and the number of shares of Common Stock purchasable upon the exercise
of each Warrant are subject to adjustment in certain events, including: (i)
the issuance of a stock dividend to holders of Common Stock or a combination
or subdivision of the Common Stock; (ii) the issuance of rights, warrants or
options or securities convertible into, or exchangeable for, the Common Stock,
that are distributed to all holders of the Company's outstanding Common Stock
entitling them to subscribe for or purchase such Common Stock; and (iii) any
distribution by the Company to the holders of its Common Stock of evidences of
indebtedness of the Company or of assets (excluding, if and to the extent set
forth in the applicable Prospectus Supplement, certain cash dividends or
distributions). To the extent set forth in the applicable Prospectus
Supplement, no adjustment in the number of shares of Common Stock purchasable
upon exercise of the Warrants or in the Warrant Price will be required until
cumulative adjustments require an adjustment of at least one percent thereof.
Notwithstanding the foregoing, unless the applicable Prospectus Supplement
states to the contrary, in case of any merger or consolidation or sale,
transfer, lease or conveyance of all or substantially all of the assets of the
Company and its subsidiaries, including a consolidation or merger in which the
Company is not the continuing corporation, the successor or assuming entity
shall succeed to and be substituted for the Company, with the same effect as
if it had been named in the Warrant Agreement and in the Warrant Certificates
as the Company. If the Company is the continuing corporation following any
consolidation or merger, the obligations of the Company under the Warrant
Agreement and in the Warrant Certificates shall continue and such Warrant
Agreement and Warrant Certificates shall remain in full force and effect.
Adjustments to the Warrant Price (and, possibly, adjustment to the number of
shares of Common Stock purchasable upon the exercise of each Warrant), or the
failure to make such adjustments, may in certain circumstances result in
distributions that could be taxable as dividends under the Internal Revenue
Code of 1986, as amended, to holders of the Warrants or to holders of shares
of Common Stock issued upon exercise thereof. The Company will reserve the
right (but will not be obligated) to make such adjustments to the Warrant
Price or in the number of shares of Common Stock purchasable upon the exercise
of each Warrant, in addition to those required in the foregoing provisions, as
it shall determine to be advisable in order that certain stock-related
distributions which may hereafter be made by the Company to its stockholders
after the date of the applicable Prospectus Supplement shall not be taxable to
them.
If all or any portion of the Warrants are callable at the option of the
Company, the call provisions, including the call price and the date through
which the Warrants may be exercised, will be set forth in the applicable
Prospectus Supplement. The applicable Prospectus Supplement will set forth
whether, upon expiration of the call option, the unexercised Warrants will
convert into shares of Common Stock, and, if such Warrants convert into shares
of Common Stock, the manner and rate of such conversion.
Holders of Warrants are not entitled, by virtue of being holders, to receive
dividends or to consent or to receive notice as stockholders in respect of any
meeting of stockholders for the election of directors of the Company or any
other matter, to vote at any such meeting or to exercise any rights whatsoever
as stockholders of the Company. The Warrant Agreement and the Warrant
certificates will provide that no director, officer, employee or shareholder
of the Company, as such, will have any liability under the Warrants or the
Warrant Agreement. The Warrant Agreement and the Warrant certificates will
also provide that each holder of the Warrants, by accepting the Warrants,
waives and releases all such liability.
Unless otherwise specified in the applicable Prospectus Supplement, the
Warrant Agreement and the Warrants will be governed by New York law.
DESCRIPTION OF GLOBAL SECURITIES
Unless otherwise specified in the applicable Prospectus Supplement,
Securities other than Common Stock will be issued in the form of one or more
book-entry certificates (collectively, with respect to each series or
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issue of Securities, the "Global Securities") registered in the name of a
depositary or a nominee of a depositary. Unless otherwise specified in the
applicable Prospectus Supplement, the Company expects the depositary will be
The Depository Trust Company ("DTC"). If Cede & Co. ("Cede") will act as DTC's
nominee, Cede is expected to be the initial registered holder of all
Securities that are issued in book-entry form. No person that acquires a
beneficial interest in such Securities will be entitled to receive a
certificate representing such person's interest in the Securities except as
set forth herein or in the applicable Prospectus Supplement. Unless and until
definitive Securities are issued under the limited circumstances described
below, all references to actions by holders of Securities issued in book-entry
form shall refer to actions taken by DTC upon instruction from its
Participants (as defined below), and all references herein to payments and
notices to holders shall refer to payments and notices to DTC or Cede, as the
registered holder of such Securities.
The Company expects that DTC will represent that it is a limited purpose
trust company organized under the New York Banking Law, a "banking
organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing company" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered pursuant to
Section 17A of the Securities Exchange Act of 1934, as amended, and that it
was created to hold securities for its participating organizations
("Participants") and to facilitate the clearance and settlement of securities
transactions among Participants through electronic book-entry, thereby
eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers, banks, trust companies and clearing
corporations, and may include certain other organizations. Indirect access to
the DTC system also is available to others such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly ("Indirect Participants").
Persons that are not Participants or Indirect Participants ("Holders") but
desire to purchase, sell or otherwise transfer ownership of, or other
interests in, Securities may do so only through Participants and Indirect
Participants. Under a book-entry format, Holders may experience some delay in
their receipt of payments, as such payments will be forwarded by the agent
designated by the Company to Cede, as nominee for DTC. DTC will forward such
payments to its Participants, which thereafter will forward them to Indirect
Participants or Holders. Holders will not be recognized by the applicable
registrar, transfer agent, Trustee or Warrant Agent as registered holders of
the Securities entitled to the benefits of the Certificate or the applicable
Indenture or Warrant Agreement. Beneficial owners that are not Participants
will be permitted to exercise their rights as such only indirectly through and
subject to the procedures of Participants and, if applicable, Indirect
Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations as currently in effect (the "Rules"), DTC will be required to
make book-entry transfers of Securities among Participants and to receive and
transmit payments to Participants. Participants and Indirect Participants with
which beneficial owners of Securities have accounts with respect to the
Securities similarly are required by the Rules to make book-entry transfers
and receive and transmit such payments on behalf of their respective account
holders.
Because DTC can act only on behalf of Participants, who in turn act only on
behalf of other Participants or Indirect Participants, and on behalf of
certain banks, trust companies and other persons approved by it, the ability
of a beneficial owner of Securities issued in book-entry form to pledge such
Securities to persons or entities that do not participate in the DTC system,
or to otherwise act with respect to such Securities, may be limited due to the
unavailability of physical certificates for such Securities.
The Company expects DTC will take any action permitted to be taken by a
registered holder of any Securities under the Certificate or the applicable
Indenture or Warrant Agreement only at the direction of one or more
Participants to whose accounts with DTC such Securities are credited.
Unless otherwise specified in the applicable Prospectus Supplement, a Global
Security will be exchangeable for the relevant definitive Securities
registered in the names of persons other than DTC or its nominee only if (i)
DTC notifies the Company that it is unwilling or unable to continue as
depository for such Global Security or if
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at any time DTC ceases to be a clearing agency registered under the Exchange
Act at a time when DTC is required to be so registered in order to act as such
depository and the Company does not appoint a successor within 90 days, (ii)
the Company executes and delivers to the applicable registrar, transfer agent,
Trustee and/or Warrant Agent an order complying with the requirements of the
Certificate or the applicable Indenture and/or Warrant Agreement that such
Global Security shall be so exchangeable or (iii) there has occurred and is
continuing a default in the payment of any amount due in respect of the
Securities or, in the case of Debt Securities, an Event of Default or an event
that, with the giving of notice or lapse of time, or both, would constitute an
Event of Default with respect to such Debt Securities. Any Global Security
that is exchangeable pursuant to the preceding sentence will be exchangeable
for Securities registered in such names as DTC directs.
Upon the occurrence of any event described in the immediately preceding
paragraph, DTC will be generally required to notify all Participants of the
availability through DTC of definitive Securities. Upon surrender by DTC of
the Global Security representing the Securities and delivery of instructions
for re-registration, the registrar, transfer agent, Trustee or Warrant Agent,
as the case may be, will reissue the Securities as definitive Securities, and
thereafter such persons will recognize the holders of such definitive
Securities as registered holders of Securities entitled to the benefits of the
Certificate or the applicable Indenture and/or Warrant Agreement.
Except as described above, a Global Security may not be transferred except
as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or another
nominee of DTC or to a successor depositary appointed by the Company. Except
as described above, DTC may not sell, assign, transfer or otherwise convey any
beneficial interest in a Global Security evidencing all or part of any
Securities unless such beneficial interest is in an amount equal to an
authorized denomination for such Securities.
None of the Company, the Trustees, any registrar and transfer agent or any
Warrant Agent, or any agent of any of them, will have any responsibility or
liability for any aspect of DTC's or any Participant's records relating to, or
for payments made on account of, beneficial interests in a Global Security, or
for maintaining, supervising or reviewing any records relating to such
beneficial interests.
PLAN OF DISTRIBUTION
The Company may sell the Securities to or through one or more underwriters
or dealers or may sell the Securities to investors directly or through agents.
Any such underwriter or agent involved in the offer and sale of the Securities
will be named in the applicable Prospectus Supplement. The Company may sell
Securities directly to investors on its own behalf in those jurisdictions
where it is authorized to do so.
Underwriters may offer and sell the Securities at a fixed price or prices,
which may be changed, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices. The
Company also may, from time to time, authorize dealers or agents to offer and
sell the Securities upon such terms and conditions as may be set forth in the
applicable Prospectus Supplement. In connection with the sale of the
Securities, underwriters may receive compensation from the Company in the form
of underwriting discounts or commissions and may also receive commissions from
purchasers of the Securities for whom they may act as agent. Underwriters may
sell the Securities to or through dealers, and such dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters or commissions from the purchasers for which they may act as
agents.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of the Securities, and any discounts or
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in the applicable Prospectus Supplement. Dealers and agents
participating in the distribution of the Securities may be deemed to be
underwriters, and any discounts and commissions received by them and any
profit realized by them on resale of the Securities may be deemed to be
underwriting discounts and commissions. Underwriters, dealers and agents may
be entitled, under agreements entered into with the Company, to
indemnification against and contribution toward certain civil liabilities,
including liabilities under the Securities Act.
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The Common Stock is listed on the Nasdaq National Market under the symbol
"BLCI." The Debt Securities, the Preferred Stock and the Warrants will be new
issues of securities with no established trading market. Any underwriters or
agents to or through which Securities are sold by the Company may make a
market in such Securities, but such underwriters or agents will not be
obligated to do so and any of them may discontinue any market making at any
time without notice. No assurance can be given as to the liquidity of or
trading market for any Debt Securities, Preferred Stock or Warrants.
CERTAIN TRANSACTIONS
FORMATION AGREEMENT
Upon the completion of the Company's initial public offering of Common Stock
in May 1997 (the "IPO"), the Company and PGI entered into the Formation
Agreement, pursuant to which PGI transferred to the Company all of the capital
stock of BLC Property, Inc., its interest in the Heritage and the Devonshire
facilities and the operations relating to its senior and assisted living
division. In return for such contribution, the Company issued 1,703,043 shares
of its Common Stock to PGI and assumed certain indebtedness in the aggregate
amount of $65.0 million. In addition, the Company paid PGI approximately $8.4
million to reimburse PGI for earnest monies previously paid by PGI in
connection with the acquisition of the Edina Park Plaza and Hawthorn Lakes
facilities, the Park Place facility, a third party's interests in the Heritage
and the Devonshire facilities and the proposed acquisitions of the development
sites located in Glen Ellyn, Illinois, Southfield, Michigan and Austin, Texas,
for certain costs and fees previously paid by PGI relating to the replacement
credit enhancement on the $65.0 of tax-exempt bonds relating to the Heritage
and the Devonshire facilities and for certain costs and expenses previously
paid by PGI relating to the issuance and distribution of Common Stock pursuant
to the IPO. In accordance with the Formation Agreement, Mark J. Schulte,
President and Chief Executive Officer of the Company, transferred all of his
interests in PGI's senior and assisted living division to the Company in
exchange for 296,957 shares of Common Stock from the Company. Except as
expressly set forth in the Formation Agreement with regard to title, liens,
claims and certain other items and PGI's representations that the Heritage,
Devonshire and Hallmark facilities had been operated in the ordinary course
since December 31, 1996, no party made any representation or warranty as to
the assets, businesses or liabilities transferred or assumed pursuant to such
agreement, as to any consents or approvals required in connection therewith,
as to the value thereof or as to freedom from counterclaim with respect to any
claim of any party. Except as expressly set forth in the Formation Agreement,
all assets were transferred on an "as is, where is" basis. In the Formation
Agreement, PGI covenanted that the partnerships owning the Heritage and the
Devonshire facilities had no less than $800,000 in the aggregate in
unrestricted cash, plus any cash balances in real estate tax and capital
reserve accounts, upon the completion of the IPO; however, any unrestricted
cash in excess of $800,000 then held by such partnerships was distributed to
PGI.
REGISTRATION RIGHTS AGREEMENT
Upon completion of the IPO, the Company granted demand and incidental
registration rights to PGI for the registration of shares of Common Stock
owned by PGI under the Securities Act. Three demand registrations are
permitted during the first five years following the initial public offering of
the Common Stock and one registration per year each year thereafter until PGI
owns less than 10% of the outstanding Common Stock. The Company will pay the
fees and expenses of the demand registrations and the incidental
registrations, while PGI will pay all underwriting discounts and commissions.
These registration rights are subject to certain conditions and limitations,
including the right of underwriters to limit the number of shares owned by PGI
included in such registration.
VOTING AGREEMENT
Upon completion of the IPO, PGI entered into a Voting Agreement pursuant to
which it agreed to vote all of its shares of Common Stock at any meeting at
which directors are elected in favor of the election of independent directors
so that after such election, if such persons are elected, there will be at
least four independent directors. The Voting Agreement will continue in effect
until the earlier of three years from the closing date of the IPO and the date
PGI first owns less than 10% of the outstanding Common Stock.
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NON-COMPETE AGREEMENT
Upon completion of the IPO, the Company, PGI and Michael W. Reschke entered
into a Non-Compete Agreement that will prevent PGI and Mr. Reschke from
developing, acquiring, owning, managing or operating senior and assisted
living facilities and semi-acute care facilities in the United States for a
period expiring on the earlier of (i) four years from the closing date of the
IPO and (ii) one year from the date of a merger of the Company or the sale of
all or substantially all of the stock or assets of the Company; however, PGI
is permitted to maintain its ownership interest in the Island on Lake Travis
facility. In addition, to the extent PGI or Mr. Reschke were to acquire a
group of properties that included facilities similar to those operated by the
Company, then the Company would have the right and opportunity to purchase
such similar facilities at a price equal to their fair market value. PGI and
Mr. Reschke will be allowed to provide debt or lease financing for properties
that are similar to the facilities owned or managed by the Company.
MANAGEMENT AGREEMENT
Upon completion of the IPO, the Company and PGI entered into a management
agreement for a term of two years with respect to the Island on Lake Travis
facility. The Company is paid a monthly fee of 5.0% of the gross revenues of
such facility for each month and reimbursement of expenses. The management
agreement may be terminated by PGI only for cause as set forth in the
management agreement during its initial term and upon 60 days' prior written
notice at any time after the expiration of the initial term. The Company may
terminate the management agreement at any time upon 60 days' advance notice.
OFFICE LEASE
On September 25, 1997, the Company entered into a five year lease (the
"Office Lease"), commencing October 1, 1997, for its corporate office with 77
West Wacker Limited Partnership (the "Landlord"), a partnership which is now
owned by Prime Group Realty Trust, the publicly-traded successor to PGI's
office and industrial divisions. The office space was approximately 13,500
square feet, located on the 48th floor of 77 West Wacker Drive in Chicago,
Illinois, 60601, with base rent of $18.50 per square foot escalating at $0.75
per square foot each anniversary of the commencement date. On October 2, 1997,
in connection with the signing of the lease, the Company received a $404,000
cash payment from the Landlord.
On March 17, 1998, the Company and the Landlord amended the Office Lease,
pursuant to which the Company and the Landlord agreed (i) to relocate the
Company's corporate office from the 48th floor to the 44th floor effective
April 24, 1998, (ii) to increase the space leased by the Company to
approximately 22,600 square feet and (iii) to extend the term of the Office
Lease until April 30, 2005. The base rent under the amended Office Lease
continues to be $18.50 per square foot, escalating $0.75 per square foot on
each May 1 of the term commencing May 1, 1999. In consideration for executing
the amendment of the Office Lease, the Company received a $452,000 cash
payment from the Landlord.
STOCK OPTION AND PURCHASE AGREEMENTS
Upon completion of the IPO, The Prime Group, Inc. entered into a stock
option agreement with Darryl W. Copeland, Jr. pursuant to which Mr. Copeland
received an option, subject to a one year vesting period, to purchase 100,000
shares of Common Stock from The Prime Group, Inc. at a purchase price of $0.01
per share. In the event the employment of Mr. Copeland is terminated by the
Company for any reason or in the event Mr. Copeland voluntarily terminates his
employment with the Company due to a "change of control" of the Company and a
material diminution of his duties and responsibilities or compensation prior
to the expiration of the vesting period, the option will immediately vest.
Upon completion of the IPO, Mr. Copeland also entered into an agreement with
PGI to purchase an additional 25,000 shares of Common Stock.
EXCHANGEABLE NOTE TRANSACTION
PGI has issued an exchangeable note having a principal amount of $20 million
and a five year term (the "Exchangeable Note") to an unaffiliated third party
(the "Noteholder"), the repayment of which is secured by
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the pledge by PGI of 1,370,00 shares of its Common Stock. Pursuant to the
terms of the Exchangeable Note, the Noteholder will have the right, commencing
on November 15, 1998 (the "Initial Exchange Date"), to exchange a portion of
the outstanding principal amount of the Exchangeable Note, plus the accrued
interest thereon, for shares of Common Stock of the Company held by PGI, at
the exchange rate specified therein. On and after the Initial Exchange Date,
the Noteholder will be entitled to exchange up to $5 million of the
outstanding principal under the Exchangeable Note, plus accrued interest
thereon, for shares of Common Stock of the Company held by PGI. Thereafter,
the Noteholder will be entitled to exchange up to a further $5 million of the
outstanding principal amount under the Exchangeable Note, plus accrued
interest thereon, on each of January 15, 1999, March 15, 1999 and May 15,
1999. Subject to certain exceptions, the number of shares of Common Stock
subject to exchange for a given amount of principal and accrued interest to be
exchanged pursuant to the terms of the Exchangeable Note will be equal to (x)
such amount of principal and accrued interest divided by (y) the product of
(A) 88% multiplied by (B) the average of the closing bid prices for the Common
Stock on the Nasdaq National Market on the seven trading days immediately
preceding the date of exchange.
OTHER TRANSACTIONS
Wayne D. Boberg, a director of the Company, is a partner of the law firm of
Winston & Strawn, which has provided, and continues to provide, legal services
to the Company. As of the date of this Registration Statement, Mr. Boberg
beneficially owns 2,500 shares of Common Stock and has options to acquire an
additional 5,000 shares of Common Stock.
Transactions between the Company and its officers, directors, principal
stockholders and their affiliates require the approval of a majority of the
disinterested members of the Board of Directors.
READINESS FOR YEAR 2000
The Company is in the process of planning the nature and extent of the work
required to make its systems and infrastructure Year 2000 compliant. Based on
a recent assessment, the Company will have to modify or replace significant
portions of its hardware and software so that its systems will function
properly with respect to the Year 2000 and beyond. The Company believes that
with modifications to existing software and conversions to new software
applications, in addition to hardware upgrades on certain mechanical systems,
the Year 2000 issue will not pose significant operational problems. However,
if such modifications and conversions are not made, or are not completed in a
timely manner, the Year 2000 issue could have a material impact on the
operations of the Company.
The Company continues to evaluate the Year 2000 issue and will utilize both
internal and external resources in order to reprogram, or replace, systems
that are not in compliance with the Year 2000. The Company anticipates
completing the project no later than March 31, 1999. The cost to complete the
project has not yet been determined.
The projected completion date is based on management's best estimates of the
time necessary to complete its evaluation and make any necessary modifications
and conversions, which estimates were derived utilizing numerous assumptions
of future events, including the ability of third parties to modify the
Company's systems on a timely basis. There can be no guarantee that the
project will be completed in a timely manner. Specific factors that might
delay completion of the project include, but are not limited to, the
availability of qualified personnel, the ability to locate and correct all
relevant computer codes, and similar uncertainties.
LEGAL MATTERS
The validity of the Common Stock, Preferred Stock, Debt Securities and
Warrants covered by this Prospectus will be passed upon for the Company by
Winston & Strawn, Chicago, Illinois. The validity of the Securities offered by
this Prospectus may be passed on for any underwriters or agents by counsel
named in the applicable Prospectus Supplement.
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EXPERTS
The consolidated financial statements of Brookdale Living Communities, Inc.
as of December 31, 1997 and for the period from May 7, 1997 through December
31, 1997, and the combined financial statements of the Predecessor Properties
as of December 31, 1996 and for the period from January 1, 1997 through May 6,
1997 and for each of the two years in the period ended December 31, 1996,
appearing in the Company's Annual Report (Form 10-K), have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
included herein and incorporated herein by reference. Such financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
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2,000,000 SHARES
COMMON STOCK
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PROSPECTUS SUPPLEMENT
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FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
NOVEMBER 13, 1998
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