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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 31, 1997
REGISTRATION NO. 333-______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
ASSISTED LIVING CONCEPTS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 93-1148702
(STATE OR OTHER JURISDICTION (IRS EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
9955 S.E. WASHINGTON
SUITE 201
PORTLAND, OREGON 97216
(503) 252-6233
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
RHONDA S. MARSH
VICE PRESIDENT, CONTROLLER AND
CHIEF ACCOUNTING OFFICER
9955 S.E. WASHINGTON
SUITE 201
PORTLAND, OREGON 97216
(503) 252-6233
(Name, address, including zip code, telephone number, including area code, of
agent for service)
COPIES TO:
Gary Olson, Esq.
Latham & Watkins
633 West Fifth Street - Suite 4000
Los Angeles, California 90071
(213) 485-1234
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after this Registration Statement becomes effective, depending on market
conditions.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Title of Each Proposed Maximum Proposed Maximum Amount of
Class of Securities Amount to be Offering Price Aggregate Offering Registration
to be Registered Registered Per Unit (1) Price Fee
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.01 per share............ 306,135 $17.63 $5,397,160.05 $1,592.16
=================================================================================================
</TABLE>
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(1) Estimated pursuant to Rule 457(c) of the Securities Act of 1933 solely for
purposes of calculation of the registration fee on the basis of $17.63, the
average of the high and low sales prices for the Common Stock on the
American Stock Exchange on December 26, 1997.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS SUBJECT TO COMPLETION, DATED DECEMBER 31, 1997
306,135 SHARES
ASSISTED LIVING CONCEPTS, INC.
COMMON STOCK
This Prospectus relates to an aggregate of 306,135 shares (the "Shares") of
common stock, par value $.01 per share ("Common Stock"), of Assisted Living
Concepts, Inc., a Nevada corporation (the "Company") being offered for sale from
time to time by the selling stockholders named in this Prospectus (the "Selling
Stockholders"). See "Plan of Distribution."
The Company will not receive any proceeds from this offering. The Company
has been advised by the Selling Stockholders that there are no underwriting
arrangements with respect to the sale of the Shares, that the Shares may be
offered hereby from time to time for the account of the Selling Stockholders in
transactions on the American Stock Exchange ("AMEX"), in negotiated transactions
or a combination of both at prices related to prevailing market prices, or at
negotiated prices. See "Selling Stockholders" and "Plan of Distribution." The
Company will pay the expenses in connection with the registration of the Shares
(other than any underwriting discounts and selling commissions, and fees and
expenses of counsel and other advisors, if any, to the Selling Stockholder)
estimated to be $27,000.
The Common Stock is traded on AMEX under the symbol "ALF." On December 26,
1997, the last reported sale price of the Common Stock, as reported by AMEX, was
$17.75 per share.
SEE "RISK FACTORS" COMMENCING ON PAGE 3 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN FACTORS RELEVANT TO AN INVESTMENT IN THE COMMON STOCK.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Shares may be offered for sale by the Selling Stockholders from time to
time in transactions effected on AMEX (or through the facilities of any national
securities exchange or U.S. inter-dealer quotation system of a registered
national securities association on which the Shares are then listed, admitted to
unlisted trading privileges or included for quotation), in privately negotiated
transactions, or in a combination of such methods of sale. Such methods of sale
may be conducted at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. The Selling
Stockholders may effect such transactions directly, or indirectly through
underwriters, broker-dealers or agents acting on their behalf, and in connection
with such sales, such broker-dealers or agents may receive compensation in the
form of commissions, concessions, allowances or discounts from the Selling
Stockholders and/or the purchasers of the Shares for whom they may act as agent
or to whom they sell Shares as principal or both (which commissions,
concessions, allowances or discounts might be in excess of customary amounts
thereof). See "Plan of Distribution."
The Selling Stockholders and any broker-dealers, agents or underwriters
that participate with the Selling Stockholders in the distribution of the Shares
may be deemed to be "underwriters" within the meaning of the Securities Act, in
which event any commissions received by such broker-dealers, agents or
underwriters and any profit on the resale of the Shares purchased by them may be
deemed to be underwriting commissions or discounts under the Securities Act.
THE DATE OF THIS PROSPECTUS IS DECEMBER , 1997
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company may be inspected and
copied at the public reference facilities of the Commission located at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at the New York Regional
Office of the Commission, Seven World Trade Center, Suite 1300, New York, New
York 10048, and at the Chicago Regional Office of the Commission, Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material can also be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
Such reports and other information may also be inspected at the offices of the
American Stock Exchange, 86 Trinity Place, New York, New York 10006. The
Commission also maintains a World Wide Web Site that contains reports, proxy and
information statements and other information regarding registrants, including
the Company, that file electronically with the Commission, at
http://www.sec.gov.
The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the registration of the Shares offered
hereby. This Prospectus does not contain all of the information set forth in
the Registration Statement and the exhibits thereto, certain portions of which
have been omitted as permitted by the rules and regulations of the Commission.
Statements contained in this Prospectus or in any document incorporated by
reference herein as to the contents of any contract or other documents referred
to herein or therein are not necessarily complete and, in each instance,
reference is made to the copy of such documents filed as an exhibit to the
Registration Statement or such other documents, which may be obtained from the
Commission as indicated above upon payment of the fees prescribed by the
Commission. Each such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission, are incorporated herein by reference: (i) the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996, (ii) the
Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997,
June 30, 1997 and September 30, 1997 and (iii) the Company's Current Reports on
form 8-K dated July 24, 1997, October 2, 1997, October 6, 1997 and October 21,
1997 and (iv) the description of the Company's Capital Stock contained in the
Company's Registration Statement on Form 8-A dated November 17, 1994. In
addition, each document filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to termination of the offering of Shares shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
date such document is filed with the Commission.
Any statement contained herein, or any document, all or a portion of which
is incorporated or deemed to be incorporated by reference herein, shall be
deemed to be modified or superseded for purposes of the Registration Statement
and this Prospectus to the extent that a statement contained herein, or in any
subsequently filed document that also is or is deemed to be incorporated by
reference herein, or in any subsequently filed document that also is or is
deemed to be incorporated by reference herein, modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute part of the Registration
Statement or this Prospectus. All information appearing in this Prospectus is
qualified in its entirety by the information and financial statements (including
notes thereto) appearing in the documents incorporated herein by reference.
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. These documents (other than exhibits to such
documents which are not specifically incorporated by reference into such
documents) are available without charge, upon written or oral request by any
person to whom this Prospectus has been delivered, from Stephen Gordon, Chief
Financial Officer, 9955 S.E. Washington, Suite 201, Portland, Oregon 97216.
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RISK FACTORS
In addition to the other information contained in this Prospectus,
prospective investors should consider carefully the following factors before
purchasing any of the Shares offered hereby. Certain information contained in
this Prospectus constitutes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), which can be identified by the use of forward-looking
terminology such as "may," "will," "expect," "anticipate," "estimate"
or "continue" or the negative thereof or other variations thereon or
comparable terminology. The following factors constitute cautionary statements
identifying important factors, including certain risks and uncertainties, with
respect to such forward-looking statements that could cause actual results to
differ materially from those reflected in such forward-looking statements.
ANTICIPATED OPERATING LOSSES OF NEW RESIDENCES
The Company anticipates that each residence will have an operating loss
(prior to depreciation, rent or interest, if any) of $20,000 during the first
three to four months of operation. To the extent the Company sells a residence
and leases it back or otherwise finances it, the aggregate loss may increase by
up to an additional $100,000. The Company currently plans to open 50 to 60
residences in 1997, of which 42 were opened during the first nine months of
1997. The Company estimates that the losses to be incurred during 1997 due to
start-up residences could range from $1.0 million to $3.2 million. The success
of the Company's future operations is directly tied to the expansion of its
operational base. There can be no assurance that the Company will not experience
unforeseen expenses, difficulties, complications and delays in connection with
the expansion of its operational base which could have a material adverse effect
on the Company's financial condition and results of operations.
In April 1997, in order to mitigate the impact of start-up losses
associated with the opening of newly constructed residences, the Company entered
into a joint venture agreement with a third party investor to operate certain
new assisted living residences owned and developed by the Company. Pursuant to
the joint venture agreement, the Company has acquired a 10% interest for
$200,000 and the joint venture partner has acquired a 90% interest for $2.0
million in the joint venture. The joint venture concurrently entered into a
non-cancelable management agreement with the Company pursuant to which the
Company will manage the properties operated by the joint venture for an amount
equal to the greater of 8% of gross revenues or $2,000 per month per property.
As of September 30,1997, eleven residences owned by the Company were being
operated by the joint venture. The revenues and expenses of the joint venture
are consolidated with those of the Company. In addition, the Company will
recognize 10% of the losses or profits, if any, of the joint venture, net of the
effect of management fees paid to the Company. The Company may seek to acquire
the joint venture partner's 90% interest in the future, but has no contractual
right to purchase such interest. While the use of such joint venture agreements
is intended to mitigate the impact on the Company of start-up losses associated
the opening of new residences or otherwise, the Company may, to the extent it
does not or is unable to acquire the partner's interest, forgo a portion of
future operating profits, if any, from the residences operated by the joint
venture. The Company expects it will, from time to time, enter into additional
partnering arrangements, which may be similar to the current structure, for some
of its future development projects. There can be no assurance that the Company
will be able to enter into any such future arrangements or, if entered into,
that such arrangements will achieve the desired results. Due to the completion
of the recent common stock and convertible subordinated debenture offerings and
the completion of the acquisitions of Carriage House and HCI, the Company
expects to retain ownership of a greater number of its assisted living
residences as well as to accelerate its development program.
Historically, the Company has relied extensively on sale/leaseback
financings from REITs to finance its development efforts. The Company also
expects to make additional investments in its management infrastructure to
further support its growth strategy. While the Company believes that the
resulting effects of the recently completed offerings, the increased focus on
asset ownership, its accelerated development program and anticipated additions
to its corporate infrastructure will negatively impact its earnings prospects
over the next 18 to 24 months, it believes that these measures will positively
affect its long-term prospects.
NO ASSURANCE AS TO ABILITY TO DEVELOP OR ACQUIRE ADDITIONAL ASSISTED LIVING
RESIDENCES
The Company's prospects for growth are directly affected by its ability to
develop and, to a lesser extent, acquire additional assisted living residences.
While the Company currently plans to open 60 to 70 residences in 1998,
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there can be no assurance that such residences will be completed. The success of
the Company's growth strategy will also depend upon, among other factors, the
Company's ability to obtain government licenses and approvals, the Company's
ability to obtain financing and the competitive environment for development and
acquisitions. The nature of such licenses and approvals and the timing and
likelihood of obtaining them vary widely from state to state, depending upon the
residence, or its operation, and the type of services to be provided. The
successful development of additional assisted living residences will involve a
number of risks, including the possibility that the Company may be unable to
locate suitable sites at acceptable prices or may be unable to obtain, or may
experience delays in obtaining, necessary zoning, land use, building, occupancy,
and other required governmental permits and authorizations. The Company is
dependent upon these permits and authorizations to construct and operate its
residences and any delay or inability to obtain such permits could adversely
affect the results of operations. The Company may also incur construction costs
that exceed original estimates, may not complete construction projects on
schedule and may experience competition in the search for suitable development
sites. The Company relies on third-party general contractors to construct its
new assisted living facilities. There can be no assurance that the Company will
not experience difficulties in working with general contractors and
subcontractors, which could result in increased construction costs and delays.
Further, facility development is subject to a number of contingencies over which
the Company will have little control and that may adversely affect project cost
and completion time, including 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. Accordingly, if the Company is unable to achieve its development
plans, its business, financial condition and results of operations could be
adversely affected. There can be no assurance that the Company will be
successful in developing or acquiring any particular residence, that the
Company's rapid expansion will not adversely affect its operations or that any
residence developed or acquired by the Company will be successful. The various
risks associated with the Company's development or acquisition of assisted
living residences and uncertainties regarding the profitability of such
operations could have a material adverse effect on the Company's financial
condition and results of operations.
NEED FOR ADDITIONAL FINANCING TO FUND FUTURE DEVELOPMENT AND ACQUISITIONS
To achieve its growth objectives, the Company will need to obtain
sufficient financial resources to fund its development, construction and
acquisition activities. The estimated cost to complete and fund start-up losses
for the new facilities that will be developed during the 15 months ended
December 31, 1998 is between $190.0 million and $240.0 million; accordingly, the
Company's future growth will depend on its ability to obtain additional
financing on acceptable terms. The Company will, from time to time, seek
additional funding through public and/or private financing sources, including
equity and/or debt financing. If additional funds are raised by issuing equity
securities, the Company's stockholders may experience dilution. There can be no
assurance that adequate funding will be available as needed or on terms
acceptable to the Company. A lack of available funds may require the Company to
delay or eliminate all or some of its development projects and acquisition
plans.
The Company's aggregate annual fixed debt and lease payment obligations as
of September 30, 1997 total approximately $19.7 million. These fixed payment
obligations will significantly increase as the Company pursues its development
plan. Failure to meet these obligations may results in the Company being in
default of its financing agreements and, as a consequence, the Company may lose
its ability to operate any individual residence or other residences which may be
cross-defaulted. There can be no assurance that the Company will generate
sufficient cash flow to meet its current or future obligations. The Company has
not historically covered its fixed charges with earnings. In addition, the
Company anticipates, there is a risk that, upon completion of construction,
permanent financing for newly developed residences may not be available or may
be available only on terms that are unfavorable or unacceptable to the Company.
GEOGRAPHIC CONCENTRATION; DEPENDENCE ON STATE MEDICAID WAIVER PROGRAMS
As of September 30, 1997, approximately 33.9% of the Company's properties
were located in the State of Texas, approximately 18.3% were located in the
State of Oregon, 14.7% were located in the State of Ohio and 11.0% were located
in the State of Washington; therefore, the Company is dependent on the economies
of Texas, Oregon, Ohio and Washington and, to a certain extent, on the continued
funding of state Medicaid waiver programs. During the three months and nine
months ended September 30, 1997 and years ended 1996 and 1995, direct payments
received from state Medicaid agencies accounted for approximately 11.1%, 11.1%,
13.8% and 21.4%, respectively of the Company's revenue while the tenant-paid
portion of Medicaid residents accounted for approximately 5.9%,
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6.0%, 7.6% and 9.6% respectively, of the Company's revenue during these periods.
The Company expects that State Medicaid reimbursement programs will constitute a
significant source of revenue for the Company. The Company intends to continue
developing and operating assisted living residences in other states. Adverse
changes in general economic factors affecting these states' respective health
care industries or in these states' laws and regulatory environment, including
Medicaid reimbursement rates, could have a material adverse effect on the
Company's financial condition and results of operations.
DEPENDENCE ON REIMBURSEMENT BY THIRD-PARTY PAYORS
A portion of the Company's revenues will be dependent upon reimbursement
from third-party payors, including state Medicaid programs and private insurers.
For the three months and nine months ended September 30, 1997, and the years
ended December 31, 1996 and 1995, the Company received, as a percentage of total
revenue, under Medicaid programs 11.1%, 11.1%, 13.8% and 21.4%, respectively.
Furthermore, there can be no assurance the Company's percentage of revenue
received from Medicaid programs will not increase. The revenues and
profitability of the Company will be affected by the continuing efforts of
governmental and private third-party payors to contain or reduce the costs of
health care by attempting to lower reimbursement rates, increasing case
management review of services and negotiating reduced contract pricing. In an
attempt to reduce the federal and certain state budget deficits, there have
been, and management expects that there will continue to be, a number of
proposals to limit Medicaid reimbursement in general. Adoption of any such
proposals at either the federal or the state level could have a material adverse
effect on the Company's business, financial condition, results of operations and
prospects.
GOVERNMENT REGULATION
Federal and state governments regulate various aspects of the
Company's business. The development and operation of assisted living facilities
and the provision of health care services are subject to federal, state and
local licensure, certification and inspection laws that regulate, among other
matters, the number of licensed beds, the provision of services, equipment,
staffing (including professional licensing), operating policies and procedures,
fire prevention measures, environmental matters, resident characteristics,
physical design and compliance with building and safety codes. Failure to
comply with these laws and regulations could result in the denial of
reimbursement, the imposition of fines, suspension or decertification from the
Medicare and Medicaid program and, in extreme cases, the revocation of a
facility's license or closure of a facility. There can be no assurance that
federal, state, or local governments will not impose additional restrictions on
the Company's activities that could materially adversely affect the Company.
State and local laws regulating the Company's operations vary significantly
from one jurisdiction to another. In certain states in which the Company is
currently developing assisted living facilities, a certificate of need ("CON")
or other similar approval may be required for the acquisition or construction of
new facilities, the expansion of the number of licensed units or beds or
services, or the opening of a home health care agency or hospice. The Company
could be adversely affected by the failure or inability to obtain such approval,
changes in the standards applicable for such approval and possible delays and
expenses associated with obtaining such approval.
The Company's completed acquisition of HCI on October 23, 1997 includes
HCI's home health care and hospice operations. In addition to federal and state
regulation of health care providers generally, home health care and hospice
operations are subject to federal and state laws covering the repackaging and
dispensing of drugs and regulating interstate motor-carrier transportation,
pharmacies, nursing services and certain types of home health agency and hospice
activities. Certain of HCI's employees are subject to state laws and
regulations governing the ethics and professional practice of, among others,
medicine, respiratory therapy, pharmacy and nursing. Home health care and
hospice operations are subject to periodic survey by governmental and private
accrediting entities to assure compliance with applicable state licensing,
Medicare and Medicaid certification and accreditation standards, as the case may
be. From time to time in the ordinary course of business, HCI, like other
health care companies, has received survey reports containing deficiencies for
alleged failure to comply with applicable requirements. HCI reviews such
reports and attempts to take appropriate corrective action. The failure to
effect such action or to obtain, renew or maintain any of the required
regulatory approvals, certifications or licenses could adversely affect HCI's
business, results of operations or financial condition and could prevent the
programs involved from offering products and services to patients.
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Federal and state fraud and abuse laws, such as "anti-kickback" laws and
"self-referral" laws, govern certain financial arrangements among health care
providers and others who may be in a position to refer or recommend patients to
such providers. Although the Company has established policies and procedures
that it believes are sufficient to ensure that its facilities will operate in
substantial compliance with applicable regulatory requirements, there can be no
assurance that such fraud and abuse laws will be interpreted in a manner
consistent with the practices of the Company.
PRICING PRESSURES
The health care services industry is currently experiencing market-driven
reforms from forces within and outside the industry that are exerting pressure
on health care and related companies to reduce health care costs. These market-
driven reforms are resulting in industry-wide consolidation that is expected to
increase the downward pressure on health care service providers' margins, as
larger buyer and supplier groups exert pricing pressure on health care
providers. The ultimate timing or effect of market-driven reforms cannot be
predicted. No assurance can be given that any such reforms will not have a
material adverse effect on the Company's business, results of operations,
financial condition and prospects.
HEALTH CARE REFORM
Health care and related services is an area of extensive and dynamic
regulatory change. Changes in the law, new interpretations of existing laws, or
changes in payment methodology, may have a dramatic effect on the definition of
permissible or impermissible activities, the relative costs associated with
doing business and the amount of reimbursement by both government and other
third-party payors and may be applied retroactively.
The Balanced Budget Act of 1997 signed by President Clinton on August 5,
1997 (the "Act"), enacted significant changes to the Medicare and Medicaid
programs designed to modernize payment and health care delivery systems while
achieving substantial budgetary savings. In seeking to limit Medicare
reimbursement for home health services, Congress has established a prospective
payment system to replace the current cost-based reimbursement system. The cost
based system reimburses providers for reasonable direct and indirect allowable
costs incurred in providing "routine services" (as defined by the program) as
well as capital costs and ancillary costs. Cost based reimbursement has been
subject to limits fixed for the particular geographic area served by a provider.
The prospective payment system will be implemented beginning in September 1999.
In addition to establishing new prospective payment systems, the Act eliminated
certain periodic interim payments advanced to home health agencies.
Under provisions of the Act, states will be provided additional flexibility
in managing their Medicaid programs while achieving in excess of $13 billion in
federal budgetary savings over five years. Among other things, the Act repealed
the Boren Amendment payment standard, which had required states to pay
"reasonable and adequate" payments to cover the costs of efficiently and
economically operated hospitals, nursing facilities and certain intermediate
care facilities. States, however, will be required to use a public notice and
comment process in determining rates for such facilities. States also will be
required to take into account during rate-setting procedures the situation of
facilities that serve a disproportionate number of low-income patients with
special needs. The Department of Health and Human Services is required to study
and report to Congress within four years concerning the effect of state rate-
setting methodologies on access to and the quality of services provided to
Medicaid beneficiaries.
The Act also provides the federal government with expanded enforcement
powers to combat waste, fraud and abuse in health care. In this regard,
provisions of the Act significantly expand the scope and coverage of civil
monetary penalties for violations of Medicare rules. Specific to home health
services, the Act established guidelines for the frequency and duration of home
health services; clarifying the definition of part-time or intermittent nursing
care in order to clarify the scope of the Medicare benefit and make it easier to
identify inappropriate services. The Act also requires home health agencies to
bill for services based on the location of service delivered rather than the
location of the agency, in an effort to limit high urban reimbursement rates for
care delivered in low-cost areas. In addition, to the reforms enacted and
considered by Congress from time to time, state legislatures periodically
consider various health care reform proposals. Congress and state legislatures
can be expected to continue to review and assess alternative health care
delivery systems and payment methodologies and public debate of these issues can
be expected to continue in the future. The ultimate timing or effect of
legislative efforts cannot be predicted and may
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impact the Company in different ways. There can be no assurances that either the
states or the federal government will not impose additional regulations upon the
activities of the Company or HCI which might adversely affect their businesses,
financial condition, results of operations and prospects.
HOME HEALTH MEDICARE CERTIFICATION MORATORIUM AND SPECIFIC PROGRAM REFORM
The general accounting office ("GAO") reported to Congress in July 1997,
that federal regulators are failing to adequately police home health agencies,
resulting in extensive and expensive problems in Medicare's home-health program.
In response to the GAO report, the federal government announced on September 15,
1997, that home health care providers will be targeted in a growing federal
crackdown. The announced federal compliance program will institute a three-step
process in an effort to prevent unscrupulous operators from becoming Medicare
providers and significantly increase the level of scrutiny to which existing
companies in the program are subjected. The first step in this program was to
institute an immediate moratorium on the admission of new home health care
agencies to Medicare. During the moratorium on new providers, HCFA will develop
strict new conditions of participation. HCFA also will double the number of
audits of home health agencies it performs each year and increase substantially
the number of claims reviewed.
Under the new home health regulations to be proposed, HCFA will require
periodic recertification of home health agencies to determine if they meet the
beefed-up conditions of participation. As part of the re-certification process,
agencies will have to submit an independent audit of their records and
practices. If the provider does not meet the strict new enrollment
requirements, they will not be renewed as providers in Medicare. In addition,
home health agencies will be required to post surety bonds of at least $50,000
before they can enroll or re-enroll in Medicare. A related rule will require
new agencies to have enough funds on hand to operate for the first three to six
months.
To the extent the Company expands into home health care, the regulations to
be proposed by HCFA may require the restructuring of the operations of home
health agencies to conform to the new Medicare conditions of participation
ultimately adopted. In addition, the Medicare moratorium on new home health
care agencies may require expansion to be achieved through acquisitions rather
than through the development of new agencies.
OPERATION RESTORE TRUST
Under Operation Restore Trust ("ORT"), a two year demonstration project,
the Office of the Inspector General of the U.S. Department of Health and Human
Services (the "OIG"), in cooperation with other federal and state agencies, has
focused on the activities of home health agencies, hospices, durable medical
equipment suppliers and nursing homes in certain states, including Texas, in
which HCI currently operates. Because of the success of ORT, the next phase of
ORT has been expanded to numerous other states and to additional health care
providers including ancillary nursing home services. The legislation adopted in
1996 expanding ORT also created a stable source of funding for fraud control
activities.
According to public reports, OIG audits of hospice programs have focused on
the hospice eligibility of long stay patients (those who are in a hospice
program for longer than 210 days). The ultimate disposition of an OIG review
and its possible impact on HCI cannot currently be predicted and there can be no
assurance that an OIG review will not have a material adverse effect on the
Company's business, results of operations or financial condition.
STAFFING AND LABOR COSTS
The Company will compete with other providers of long- term care with
respect to attracting and retaining qualified personnel. The Company will also
be dependent upon the available labor pool of low-wage employees. A shortage of
nurses and/or trained personnel may require the Company to enhance its wage and
benefits package in order to compete. No assurance can be given that the
Company's labor costs will not increase, or that, if they do increase, they can
be matched by corresponding increases in revenues.
7
<PAGE>
COMPETITION
The long-term care industry is highly competitive and the Company expects
that the assisted living business, in particular, will become more competitive
in the future. The Company will be competing with numerous other companies
providing similar long-term care alternatives, such as home health agencies,
life care at home, community-based service programs, retirement communities and
convalescent centers. The Company expects that as assisted living receives
increased attention and the number of states which include assisted living in
their Medicaid waiver programs increases, competition will grow from new market
entrants, including publicly and privately held companies focusing primarily on
assisted living. Nursing facilities that provide long-term care services are
also a source of competition to the Company. Moreover, in the implementation of
the Company's expansion program, the Company expects to face competition for
development and acquisitions of assisted living residences. Some of the
Company's present and potential competitors are significantly larger and have,
or may obtain, greater financial resources than those of the Company.
Consequently, there can be no assurance that the Company will not encounter
increased competition in the future which could limit its ability to attract
residents or expand its business and could have a material adverse effect on the
Company's financial condition, results of operations and prospects.
DIFFICULTIES OF MANAGING RAPID GROWTH
The Company expects that the number of residences which it owns, leases or
otherwise operates will increase substantially as it pursues its growth
strategy. This rapid growth will place significant demands on the Company's
management resources. The Company's ability to manage its growth effectively
will require it to continue to expand its operational, financial and management
information systems and to continue to attract, train, motivate, manage and
retain key employees. To the extent such growth is attributable to acquisitions
of existing facilities or businesses, the Company's success will depend partly
on its ability to integrate effectively such facilities and businesses into the
Company's management, information and operating systems. If the Company is
unable to manage its growth effectively, its business, financial condition and
results of operations could be adversely affected.
DEPENDENCE ON SENIOR MANAGEMENT AND SKILLED PERSONNEL
The Company depends, and will continue to depend, upon the services of Mr.
McBride, its Chief Executive Officer, Dr. Wilson, its Chief Operating Officer
and President, Connie Baldwin, its Director of Operations and Rhonda S. Marsh,
its Vice President, Controller and Chief Accounting Officer. The Company has
entered into an employment agreements with Mr. McBride and Dr. Wilson and has
obtained a $500,000 key employee insurance policy covering Dr. Wilson's life.
The Company is also dependent upon its ability to attract and retain management
personnel who will be responsible for the day-to-day operations of each
residence. The loss of the services of any or all of such officers or the
Company's inability to attract additional management personnel in the future
could have a material adverse effect on the Company's financial condition or
results of operations.
LIABILITY AND INSURANCE
The provision of health care services entails an inherent risk of
liability. In recent years, participants in the long-term care industry have
become subject to an increasing number of lawsuits alleging malpractice or
related legal theories, many of which involve large claims and significant
defense costs. The Company currently maintains liability insurance intended to
cover such claims and the Company believes that its insurance is in keeping with
industry standards. There can be no assurance, however, that claims in excess
of the Company's insurance coverage or claims not covered by the Company's
insurance coverage (e.g., claims for punitive damages) will not arise. A
successful claim against the Company not covered by, or in excess of, the
Company's insurance coverage could have a material adverse effect upon the
Company's financial condition and results of operations. Claims against the
Company regardless of their merit or eventual outcome, may also have a material
adverse effect upon the Company's ability to attract residents or expand its
business and could require management to devote time to matters unrelated to the
operation of the Company's business. In addition, the Company's insurance
policies must be renewed annually. There can be no assurance that the Company
will be able to obtain liability insurance coverage in the future or that, if
such coverage is available, it will be available on acceptable terms.
8
<PAGE>
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
held liable for the cost of removal or remediation of certain hazardous or toxic
substances, including, without limitation, asbestos-containing materials, that
could be located on, in or under such property. Such 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. The costs
of any required remediation or removal of these substances could be substantial
and the liability of an owner or operator as to any 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. The presence of these
substances or failure to remediate such substances properly may also adversely
affect the owner's ability to sell or rent the property, or to borrow using the
property as collateral. Under these laws and regulations, an owner, operator or
an entity that arranges for the disposal of hazardous or toxic substances, such
as asbestos-containing materials, at a disposal site may also be liable for the
costs of any required remediation or removal of the hazardous or toxic
substances at the disposal site. In connection with the ownership or operation
of its properties, the Company could be liable for these costs, as well as
certain other costs, including governmental fines and injuries to persons or
properties. As a result, the presence, with or without the Company's knowledge,
of hazardous or toxic substances at any property held or operated by the
Company, or acquired or operated by the Company in the future, could have an
adverse effect on the Company's business, financial condition and results of
operations. Environmental audits performed on the Company's properties have not
revealed any significant environmental liability that management believes would
have a material adverse effect on the Company's business, financial condition or
results of operations. No assurance can be given that existing environmental
audits with respect to any of the Company's properties reveal all environmental
liabilities.
POSSIBLE VOLATILITY OF STOCK PRICE
The market price of the Common Stock could be subject to significant
fluctuations in response to various factors and events, including the liquidity
of the market for the Common Stock, variations in the Company's operating
results, new statutes or regulations or changes in the interpretation of
existing statutes or regulations affecting the health care industry generally or
assisted living residence businesses in particular. In addition, the stock
market in recent years has experienced broad price and volume fluctuations that
often have been unrelated to the operating performance of particular companies.
These market fluctuations also may adversely affect the market price of the
Common Stock.
DIVIDEND POLICY
The Company has never declared or paid any dividends on its Common Stock.
The Company expects to retain any earnings to finance the operations and
expansion of the Company's business. Certain Trust Deed Notes, payable to the
State of Oregon Housing and Community Service Department restrict the payment of
cash dividends in certain circumstances and it is anticipated that the terms of
future debt financings may do so as well. Therefore, the payment of any cash
dividends on the Common Stock is unlikely in the foreseeable future.
9
<PAGE>
THE COMPANY
Assisted Living Concepts, Inc. ("ALC" or the "Company") operates, owns,
leases and develops free-standing assisted living residences, primarily in small
middle-market rural and suburban communities with a population typically ranging
from 10,000 to 40,000. Currently the Company has operations in Oregon,
Washington, Idaho, Texas, Ohio, New Jersey and Arizona. The Company also
provides personal care and support services and makes available routine nursing
services (as permitted by applicable regulations) designed to meet the health
care needs of its residents. The Company believes that this combination of
residential, personal care, support and health care services provides a cost-
efficient alternative and affords an independent lifestyle for individuals who
do not require the broader array of medical services that nursing facilities are
required by law to provide.
The Company has experienced significant growth since the completion of its
initial public offering in November 1994, growing from a base of five residences
(137 units) primarily through the development of assisted living residences. As
of September 30, 1997, the Company owned, leased or managed a total of 109
operating assisted living residences representing an aggregate of 4,042 units.
Of these residences, the Company owned 50 residences (1,882 units), leased 58
residences (2,121 units) and managed one residence (39 units). For the nine
months ended September 30, 1997, the Company's 35 Stabilized Residences (those
residences that had been operating for twelve months prior to the beginning of
the period or had achieved 95.0% occupancy within the first twelve months of
operations) had an average occupancy rate of approximately 9.37% and an average
monthly rental rate of approximately $1,738 per unit. The Company's 88
residences (3,216 units) in operation for the three months ended September 30,
1997 had an average occupancy rate of approximately 74.4% and an average monthly
rental rate of approximately $1,767 per unit.
The Company is currently developing and, to a lesser extent, seeking to
acquire additional assisted living residences in Arizona, Indiana, New Jersey,
Ohio, Pennsylvania, South Carolina, Washington and other states with regulatory
and reimbursement climates which the Company believes are favorable.
The Company is a Nevada corporation and its principal executive offices are
located at 9955 S.E. Washington, Suite 201, Portland, Oregon 97216, telephone
number (503) 252-6233.
10
<PAGE>
USE OF PROCEEDS
The proceeds from the sale of the Shares offered hereby are solely for the
account of the Selling Stockholders. Accordingly, the Company will receive none
of the proceeds from sales thereof.
SELLING STOCKHOLDERS
The following table sets forth certain information as of November 30, 1997
with respect to the number of shares of common stock beneficially owned by each
Selling Stockholder prior to this offering and the maximum number of shares of
common stock being offered hereby. Because the Selling Stockholders may offer
all, a portion or none of the Shares offered pursuant to this Prospectus, no
estimate can be given as to the number of Shares of Common Stock that will be
held by each Selling Stockholder upon termination of this offering. See "Plan of
Distribution." To the extent required, the names of any agent, dealer, broker or
underwriter participating in any such sales and any applicable commission or
discount with respect to the sale will be set forth in a supplement to this
Prospectus. The Shares offered by means of this Prospectus may be offered from
time to time by the Selling Stockholders named in the following table. Other
than as a result of the ownership of common stock, none of the Selling
Stockholders has had any material relationship with the Company within the past
three years, except as noted herein.
<TABLE>
<CAPTION>
Number of
Shares of
Common Stock/
Number of Percentage of
Shares of Class to be
Common Stock Number of Owned After
Owned Prior to Shares Completion of
Name the Offering to be Sold the Offering
- ----------------------------- --------------- ------------ -------------
<S> <C> <C> <C>
Andre C. Dimitriadis/1/ 31,314 31,314
LTC Properties, Inc./2/ 30,847 30,847
Charles Samuel Allmond 6,231 6,231
Alfred W. Clark 2,692 2,692
The Girvin Group 2,692 2,692
John M. Hartz 10,769 10,769
Geoffrey O. Hartzler 10,769 10,769
Christopher T.Ishikawa 6,231 6,231
Thomas W. Knapp 5,384 5,384
</TABLE>
- ----------------------
* less than 1%
/1/ Mr. Dimitriadis served as a director of the Company from July 1994 to
September 1997.
/2/ LTC Properties, Inc. ("LTC Properties") is a health care REIT with which
the Company has entered into certain sale/leaseback arrangements to finance
its development efforts. In addition, in connection with the recent
acquisition of Carriage House, the Company has agreed to guarantee the payment
and performance of certain obligations of Carriage House's to LTC Properties.
See "The Merger."
11
<PAGE>
<TABLE>
<CAPTION>
Number of
Shares of
Common Stock/
Number of Percentage of
Shares of Class to be
Common Stock Number of Owned After
Owned Prior to Shares Completion of
Name the Offering to be Sold the Offering
- ----------------------------- --------------- ------------ -------------
<S> <C> <C> <C>
James J. Pieczynski 18,695 18,695
Howard J. Privett and
Nell K. Privett 26,923 26,923
Pamela J. Privett 6,231 6,231
Albert Silverman 5,384 5,384
Robert V. Siebel/3/ 65,745 65,745
Zachary H. and
Rhonda L. Shafran 5,384 5,384
Thomas Turner Stuart 5,384 5,384
Roger Wittlin 8,076 8,076
Evelyn Yalung 11,231 6,231
Consulting Management &
Education, Inc./4/ 48,461 48,461
Consolidated Services, Inc. 2,692 2,692
</TABLE>
- -------------------------
/3/ Mr. Siebel is the President of CME. See Note 5.
/4/ In connection with the acquisition of Carriage House, the Company has
assumed the obligations of Consulting Management and Education, Inc. ("CME")
which had guaranteed certain construction loans in favor of LTC Properties.
See "The Merger."
12
<PAGE>
THE MERGER
THE MERGER AND THE MERGER AGREEMENT.
The Shares were originally issued by the Company to the Selling
Stockholders in a private placement pursuant to an Agreement of Merger (as
amended, the "Merger Agreement"), between the Company and Carriage House, a
privately held developer and operator of assisted living residences in Nebraska
which operates four assisted living facilities (156 units) and has an additional
six facilities (198 units) under construction. The Merger Agreement provided
for the merger (the "Merger") of Carriage House, a Delaware corporation, with
and into CH Merger, Inc., a Delaware corporation and a wholly owned subsidiary
of the Company ("Merger Sub").
A copy of the Merger Agreement is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. The description of the Merger
set forth herein describes certain provisions of the Merger Agreement, but does
not purport to be complete and is subject to, and qualified in its entirety by
reference to, all of the provisions of the Merger Agreement, including the
agreements filed as exhibits thereto.
The acquisition of Carriage House was completed on October 31, 1997 for a
purchase price of 337,449 shares of Common Stock and the assumption of
approximately $3.9 million of Carriage House debt. Pursuant to the Merger
Agreement, Carriage House stockholders are also entitled to receive an
additional 33,746 shares of Common Stock in the event the Company fails to
register the resale of the shares by February 28, 1998 with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act"). The Merger Agreement contains customary
representations, warranties and covenants.
The Company has agreed to prepare and file with the Commission a
Registration Statement with respect to the resale of the Shares (the
"Registration Rights Agreement"). The Registration Rights Agreement provides
that the Company will use its reasonable best efforts to cause the Registration
Statement to become effective under the Securities Act by December 31, 1997 and
to maintain the effectiveness of such Registration Statement for a period ending
on the earlier of (i) October 31, 1999 or (ii) such other date by which the
stockholders have sold all the Shares or by and after which such persons may
sell the Shares in the United States without registration under the Securities
Act.
As a result of the Merger, Mr. Robert Siebel, individually and on behalf of
his corporation CME, both of whom are Selling Stockholders in this Offering,
along with certain other individuals, have agreed that until January 31, 2001,
they will not develop, own, lease or operate any assisted living facility, or
provide any services in connection with the development, ownership or operation
of any such assisted living facility which is located within a fifteen-mile
radius of any facility which the Company either then owns, leases or operates,
or is building anywhere within the United States. Such individuals have also
agreed to not disseminate any confidential information regarding the development
or operation of assisted living facilities known to them without the express
written consent of the Company.
In connection with the consummation of the acquisition, the Company agreed
to guarantee all obligations under a certain construction loan agreement between
Carriage House and LTC Properties. In addition, the Company entered into an
agreement in favor of LTC Properties to guarantee the performance of Carriage
House's existing lease obligations with LTC Properties.
Upon the consummation of the Merger, the Company assumed the obligations of
CME, whereby CME had guaranteed certain construction loans in favor of LTC
Properties. LTC Properties agreed to release CME from all such duties and
obligations in consideration of the Company's guarantee of payment and
performance.
13
<PAGE>
PLAN OF DISTRIBUTION
The Company will not receive any of the proceeds from this offering. The
Company has been advised by the Selling Stockholders that the Selling
Stockholders may sell all or a portion of the Shares offered hereby from time to
time on AMEX (or through the facilities of any national securities exchange or
U.S. automated interdealer quotation system of a registered national securities
association on which any of the Shares are then listed, admitted to unlisted
trading privileges or included for quotation) on terms to be determined at the
times of such sales. The Selling Stockholders may also make private sales
directly or through a broker or brokers. Alternatively, any of the Selling
Stockholders may from time to time offer the Shares through underwriters,
dealers or agents, who may receive compensation in the form of underwriting
discounts, commissions or concessions from the Selling Stockholders and the
purchasers of the Shares whom they may act as agent. To the extent required,
the aggregate number of shares of shares of Common Stock to be sold, the names
of the Selling Stockholders, the purchase price, the name of any such agent,
dealer or underwriter and any applicable commissions with respect to a
particular offer will be set forth in an accompanying Prospectus Supplement.
The aggregate proceeds to the Selling Stockholders from the sale of the Shares
offered by the Selling Stockholders hereby will be the purchase price of such
Shares less any commissions. There is no assurance that the Selling
Stockholders will sell any or all of the Shares offered hereby.
The Shares may be sold from time to time in one or more transactions at
fixed offering prices, which may be changed, or at varying prices determined at
the time of sale or at negotiated prices. Such prices will be determined by the
holders of such securities or by agreement between such holders and underwriters
or dealers who may receive fees or commissions in connection therewith.
In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
The Selling Stockholders and any broker-dealers, agents or underwriters
that participate with the Selling Stockholders in the distribution of the Shares
may be deemed to be "underwriters" within the meaning of the Securities Act, in
which event any commissions received by such broker-dealers, agents or
underwriters and any profit on the resale of the Shares purchased by them may be
deemed to be underwriting commissions or discounts under the Securities Act.
The Registration Rights Agreement provides that all expenses relating to
the registration of the shares (other than underwriting discounts and
commissions, transfer taxes, if any and fees and disbursements of counsel to the
Selling Stockholders) will be borne by the Company. See "The Merger." The
Registration Rights Agreement further provides that the Company and the Selling
Stockholders will indemnify one another against certain liabilities, including
civil liabilities under the Securities Act, or will contribute to payments
either party may be required to make in respect thereof.
14
<PAGE>
DESCRIPTION OF SHARES
The following is a brief description of the Common Stock, the Nevada
General Corporation Laws ("NGCL") and the provisions contained in the Company's
Articles of Incorporation and Bylaws. Copies of the Articles of Incorporating
and Bylaws have been filed as exhibits to the Registration Statement of which
this Prospectus forms a part. The description which follows is qualified in its
entirety by reference to the full text of the Articles of Incorporation and
Bylaws.
The Company's Articles of Incorporation authorize 80,000,000 shares of
Common Stock, par value $0.01 per share, and 1,000,000 shares of preferred
stock, par value $0.01 per share. As of September 30, 1997, the Company had
11,083,842 shares of Common Stock issued and outstanding and no outstanding
shares of preferred stock.
COMMON STOCK.
Each holder of Common Stock is entitled to one vote for each share owned of
record on all matters voted upon by stockholders, and a majority vote is
required for all actions to be taken by stockholders. Cumulative voting of
shares is prohibited. Accordingly, the holders of a majority of the voting
power of the shares voting for the election of directors can elect all of the
directors if they choose to do so. The Common Stock bears no preemptive rights,
and is not subject to redemption, sinking fund or conversion provisions.
Holders of Common Stock are entitled to receive dividends if, as and when
declared by the Company's Board of Directors out of funds legally available
therefor, subject to the dividend and liquidation rights of any preferred stock
that may be issued (and subject to any dividend restriction contained in any
credit facility which the Company may enter into in the future) and distributed
pro rata in accordance with the number of shares of Common Stock held by each
stockholder. See "Risk Factors--Dividend Policy."
The Common Stock is listed on the American Stock Exchange. The transfer
agent and registrar for the Common Stock is American Stock Transfer & Trust
Company.
PREFERRED STOCK.
Shares of Preferred Stock may be issued from time to time by the Board of
Directors of the Company, without stockholder approval, in such series and with
such preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications or other provisions, as may be fixed
by the Board of Directors when designating any such series.
The Preferred Stock and the variety of characteristics available for it
offers the Company flexibility in financing and acquisition transactions. An
issuance of Preferred Stock could dilute the book value or adversely affect the
relative voting power of the Common Stock. The issuance of such shares could be
used to enable the holder to block such a transaction. Although the Board of
Directors is required when issuing such stock to act based on its judgment as to
the best interests of the stockholders of the Company, the Board could act in a
manner which would discourage or prevent a transaction some stockholders might
believe is in the Company's best interests or in which stockholders could or
would receive a premium for their shares of Common Stock over the market price.
The Company's Board of Directors has authority to classify or reclassify
authorized but unissued shares of Preferred Stock by setting or changing the
preferences, conversion and other rights, voting powers, restrictions and
limitations as to dividends, qualifications and terms and conditions of
redemption of stock.
RIGHTS PLAN
On June 12, 1997, the Board of Directors of the Company declared a dividend
of one preferred share purchase right (each a "Right" and collectively the
"Rights") on each outstanding share of Common Stock, payable to stockholders
of record on June 30, 1997. Each Right will entitle the holder thereof after the
Rights become exercisable and until June 30, 2007 (or the earlier redemption,
exchange of termination of the Rights), to buy one one-hundredth of a share of
Series A Junior Participating Preferred Stock (the "Series A Preferred Stock")
at an exercise price of $54.00, subject to certain anti-dilution adjustments
(the "Purchase Price"). The Rights will be
15
<PAGE>
represented by the Common Stock certificates and will not be exercisable or
transferable apart from the Common Stock until the earlier of (i) the tenth day
after the public announcement that a Person (defined as any individual or
entity) or group has become an Acquiring Person (a Person who has acquired, or
obtained the right to acquire, beneficial ownership of 15% or more of the Common
Stock) or (ii) the tenth day after a Person or group commences, or announces an
intention to commence, a tender or exchange offer, the consummation of which
would result in the beneficial ownership by a Person or group of 15% or more of
the Common Stock (the earlier of (i) and (ii) is referred to herein the
"Distribution Date"). Prior to the Distribution Date, the Company's Board of
Directors has the power, under certain circumstances, to postpone the
Distribution Date. Separate certificates representing the Rights will be mailed
to holders of the Common Stock as of the Distribution Date. The Rights will
first become exercisable on the Distribution Date, unless earlier redeemed or
exchanged, and may then begin trading separately from the Common Stock. The
Rights will at no time have any voting rights.
In the event that a Person becomes an Acquiring Person (except pursuant to
certain cash offers for all outstanding Common Stock approved by the Board of
Directors of the Company) or if the Company were the surviving corporation in a
merger and its Common Stock were not changed or exchanged, each holder of a
Right, other than Rights that are or were acquired or beneficially owned by the
Acquiring Person (which Rights will thereafter be void), will thereafter have
the right to receive upon exercise that number of shares of Common Stock having
a market value of two times the then-current exercise price of one Right. With
certain exceptions, in the event that (i) the Company were acquired in a merger
or other business combination transaction in which the Company is not the
surviving corporation or its Common Stock is changed or exchanged (other than a
merger which follows certain cash offers for all outstanding Common Stock
approved by the Board of Directors of the Company) or (ii) more than 50% of the
Company's assets or earning power were sold, proper provision shall be made so
that each holder of a Right (except Rights which previously have been voided as
set forth above) shall thereafter have the right to receive, upon exercise
thereof, that number of shares of common stock of the acquiring company which at
the time of such transaction would have a market value of two times the then-
current exercise price of one Right.
At any time after a Person has become an Acquiring Person and prior to the
acquisition of 50% or more of the then-outstanding Common Stock by such
Acquiring Person, the Board of Directors of the Company may cause the Company to
acquire the Rights (other than Rights owned by an Acquiring Person which have
become void), in whole or in part, in exchange for that number of shares of
Common Stock having an aggregate value equal to the excess of the value of the
Common Stock issuable upon exercise of a Right after a Person becomes an
Acquiring Person over the Purchase Price.
The Rights are redeemable at $0.01 per Right prior to the first date of
public announcement that a Person or group has become an Acquiring Person. Prior
to the expiration of the period during which the Rights may be redeemed, the
Board of Directors of the Company has the power, under certain circumstances, to
extend the redemption period. The Rights will expire on June 12, 2007 (unless
earlier redeemed or exchanged). American Stock Transfer & Trust Company is the
Rights Agent. Under certain circumstances set forth in the Rights Agreement, the
decision to redeem or to lengthen or shorten the redemption period shall require
the concurrence of a majority of the Continuing Directors (as defined below).
The term "Continuing Directors" means any member of the Board of
Directors of the Company who was a member of the Board of Directors prior to the
time that any Person becomes an Acquiring Person, and any person who is
subsequently elected to the Board of Directors if such person is recommended or
approved by a majority of the Continuing Directors. Continuing Directors do not
include an Acquiring Person, or an affiliate or associate of an Acquiring
Person, or any representative of the foregoing.
The Purchase Price payable, and the number of shares of Series A Preferred
Stock or other securities or property issuable upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of, the
Series A Preferred Stock, (ii) upon the grant to holders of the Series A
Preferred Stock of certain rights or warrants to subscribe for or purchase the
Series A Preferred Stock or convertible securities at less than the current
market price of the Series A Preferred Stock or (iii) upon the distribution to
holders of the Series A Preferred Stock of evidences of indebtedness, cash,
securities or assets (excluding regular periodic cash dividends at a rate not in
excess of 125% of the last regular periodic cash dividend theretofore paid, or
in case regular periodic dividends have not theretofore been paid, at a rate not
in excess of 50% of the average net income per share of the Company for the four
quarters ended immediately prior to the payment of such dividend, or dividends
payable in the Series A Preferred Stock) or of subscription rights
16
<PAGE>
or warrants (other than those referred to above). No adjustments in the Purchase
Price will be required until cumulative adjustments require an adjustment of at
least 1% in such Purchase Price.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
on terms not approved by the Board of Directors, except pursuant to an offer
conditioned on a substantial number of Rights being acquired. The Rights should
not interfere with any merger or other business combination approved by the
Board of Directors prior to the time that a Person or group has become an
Acquiring Person, as the Rights may be redeemed by the Company at $.01 per Right
prior to such time.
RESTRICTIONS ON BUSINESS COMBINATIONS AND CORPORATE CONTROL.
The NGCL contains provisions restricting the ability of a corporation to
engage in business combinations with an "interested Stockholder." Under the
NGCL, except under certain circumstances, business combinations are not
permitted for a period of three years following the date such Stockholder became
an interested Stockholder. The NGCL defines an "interested Stockholder,"
generally, as a person who beneficially owns 10% or more of the outstanding
shares of a corporation's voting stock.
In addition the NGCL generally disallows the exercise of voting rights with
respect to "control shares" of an "issuing corporation" (as defined in the
NGCL). "Control shares" are the voting shares of an issuing corporation
acquired in connection with the acquisition of a "controlling interest."
"Controlling interest" is defined in terms of threshold levels of voting share
ownership, which, when crossed, trigger application of the voting bar with
respect to the newly acquired shares. The NGCL also permits directors to resist
a change or potential change in control of the corporation if the directors
determine that such a change is opposed to or not in the best interest of the
corporation.
LIMITATIONS ON DIRECTORS LIABILITY.
The Articles of Incorporation limit the liability of directors and officers
to the Company or its stockholders to the fullest extent permitted by the NGCL.
The inclusion of this provision in the Articles of Incorporation may have the
effect of reducing the likelihood of derivative litigation against directors and
may discourage or deter stockholders or management from bringing a lawsuit
against directors for breach of their duty of care, even though such an action,
if successful, might otherwise have benefited the Company and its stockholders.
17
<PAGE>
LEGAL MATTERS
Certain legal matters relating to the validity of the Shares offered hereby
will be passed upon for the Company by Schreck Morris, Las Vegas, Nevada.
EXPERTS
The financial statements of Assisted Living Concepts Group (the predecessor
of the Company) for the eleven months ended November 30, 1994 and of the Company
for the one month ended December 31, 1994, incorporated in this Prospectus by
reference to the Annual Report on Form 10-K for the year ended December 31, 1996
of the Company have been so incorporated by reference in reliance on the report
of Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
The financial statements of the Company as of December 31, 1995 and 1996
and for the years then ended have been incorporated by reference herein and in
the Registration Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
18
<PAGE>
================================================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS IN
CONNECTION WITH THIS OFFERING MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR BY ANY SELLING STOCKHOLDER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE OF THIS PROSPECTUS.
______________________
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
Available Information............................................. 2
Incorporation of Certain Documents by Reference.................. 2
Risk Factors...................................................... 3
The Company....................................................... 10
Use of Proceeds................................................... 11
Selling Stockholders.............................................. 11
The Merger........................................................ 13
Plan of Distribution.............................................. 14
Description of Shares............................................. 15
Legal Matters..................................................... 18
Experts........................................................... 18
</TABLE>
================================================================================
306,135 SHARES
ASSISTED LIVING
CONCEPTS, INC.
COMMON STOCK
--------------
PROSPECTUS
--------------
December , 1997
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the fees and expenses in connection with the
issuance and distribution of the securities being registered hereunder. Except
for the SEC registration fee, all amounts are estimates.
<TABLE>
<S> <C>
SEC Registration Fee........... $ 1,755
Printing Expenses.............. 2,000
Legal Fees and Expenses........ 15,000
Accounting Fees and Expenses... 4,000
Miscellaneous Expenses......... 4,245
-------
Total............ $27,000
=======
</TABLE>
All of the costs identified above will be paid by the Company.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Articles of Incorporation provide that a director or officer
of the Company shall not be personally liable to the Company or its stockholders
for damages for any breach of fiduciary duty as a director or officer, except
for liability for (i) acts or omissions which involve intentional misconduct,
fraud or a knowing violation of law, or (ii) the payment of distributions in
violation of Nevada Revised Statutes 78.300. In addition, Nevada Revised
Statutes 78.751 and Article III, Section 13 of the Company's Bylaws, under
certain circumstances, provide for the indemnification of the Company's
officers, directors, employees, and agents against liabilities which they may
incur in such capacities. A summary of the circumstances in which such
indemnification is provided for is contained herein, but that description is
qualified in its entirety by reference to Article III, Section 13 of the
Company's Bylaws.
In general, any officer, director, employee or agent shall be indemnified
against expenses including attorneys' fees, fines, settlements, or judgments
which were actually and reasonably incurred in connection with a legal
proceeding, other than one brought by or on behalf of the Company, to which he
was a party as a result of such relationship, if he acted in good faith, and in
the manner he believed to be in or not opposed to the Company's best interest
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful. If the action or suit is brought by or on
behalf of the Company, the person to be indemnified must have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
Company's best interest. No indemnification will be made in respect of any
claim, issue or matter as to which such person shall have been adjudged by a
court of competent jurisdiction, after exhaustion of all appeals therefrom, to
be liable to the Company or for amounts paid in settlement to the Company,
unless and only to the extent that the court in which the action or suit was
brought or other court of competent jurisdiction, determines upon application
that in view of all the circumstances of the case, the person is fairly and
reasonably entitled to indemnity for such expenses which such court shall deem
proper.
Any indemnification under the previous paragraphs, unless ordered by a
court or advanced as provided in the succeeding paragraph, must be made by the
Company only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances. The determination must be made (i) by the stockholders, (u) by
the Board of Directors by a majority vote of a quorum consisting of directors
who were not parties to the act, suit or proceeding, (iii) if a majority vote of
a quorum of directors who were not parties to the act, suit or proceeding so
orders, by independent legal counsel in a written opinion or (iv) if a quorum
consisting of directors who were not parties to the act, suit or proceeding
cannot be obtained, by independent
II-1
<PAGE>
legal counsel in a written opinion. To the extent that a director, officer,
employee or agent of the Company has been successful on the merits or otherwise
in defense of any action, suit or proceeding referred to in the previous
paragraph, or in defense of any claim, issue or matter therein, he must be
indemnified by the Company against expenses, including attorneys' fees, actually
and reasonably incurred by him in connection with the defense.
Expenses incurred by an officer or director in defending a civil or
criminal action, suit or proceeding must be paid by the Company as they are
incurred and in advance of the final disposition of the action, suit or
proceeding, upon receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he is not entitled to be indemnified by the Company
as authorized by the By-Laws. Such expenses incurred by other employees and
agents may be so paid upon such terms and conditions, if any, as the Board of
Directors deems appropriate.
The indemnification and advancement of expenses authorized in or ordered by
a court as provided in the foregoing paragraphs does not exclude any other
rights to which a person seeking indemnification or advancement of expenses may
be entitled under the Articles of Incorporation or any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, for either an action in
his official capacity or an action in another capacity while holding his office,
except that indemnification, unless ordered by a court as described in the third
preceding paragraph or for advancement of expenses made as described in the next
preceding paragraph, may not be made to or on behalf of any director or officer
if a final adjudication establishes that his acts or omissions involved
intentional misconduct, fraud or a knowing violation of the law and was material
to the cause of action. If a claim for indemnification or payment of expenses
under Article III, Section 13 of the By-Laws is not paid in full within ninety
(90) days after a written claim therefor has been received by the Company, the
claimant may file suit to recover the unpaid amount of such claim, if successful
in whole or in part, shall be entitled to be paid the expense of prosecuting
such claim. In any such action, the Company shall have the burden of proving
that the claimant was not entitled to the requested indemnification or payment
of expenses under applicable law.
The Board of Directors may authorize, by a vote of a majority of a quorum
of the Board of Directors, the Company to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the Company would have the power to indemnify him against such
liability under the provisions of Article III, Section 13 of the By-Laws. The
Board of Directors may authorize the Company to enter into a contract with any
person who is or was a director, officer, employee or agent of the Company or is
or was serving at the request of the Company as a director, officer, employee or
agent of another partnership, joint venture, trust or other enterprise providing
for indemnification rights equivalent to or, if the Board of Directors so
determines, greater than those provided for in Article III, Section 13 of the
By-Laws.
The Company has also purchased insurance for its directors and officers for
certain losses arising from claims or charges made against them in their
capacities as directors and officers of the Company.
<TABLE>
<CAPTION>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------------------------
<C> <S>
2.1 Agreement and Plan of Merger among the
Company, CH Merger, Inc. and Carriage
House Assisted Living, Inc. dated as of
October 15, 1997.
4.1 Registration Rights Agreement, dated as
of October 31, 1997, between the
Company and Carriage House Assisted
Living, Inc.
5.1 Opinion of Schreck Morris.
23.1 Consent of Schreck Morris (included in
Exhibit 5.1).
23.2 Consent of Price Waterhouse LLP.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------------------------
<C> <S>
23.3 Consent of KPMG Peat Marwick LLP.
24.1 Power of Attorney (included on Page
II-6).
</TABLE>
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement is on Form S-3, Form S-8 or Form
F-3, and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
by the registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
II-3
<PAGE>
(d) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described under Item 15
above, or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer, or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer of controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized in the City of Portland, State of Oregon on the 31st day of December
1997.
ASSISTED LIVING CONCEPTS, INC.
By: /s/William McBride III
------------------------------
William McBride III
Chairman of the Board of Directors and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints William McBride III, Karen Brown Wilson, and
Rhonda S. Marsh or any or all of them to be his or her true and lawful attorney-
in-fact and agent, with full power of substitution and resubstitution, for him
and in his name, place and stead, in any and all capacities, to sign this
Registration Statement, and any and all amendments thereto (including post-
effective amendments and any Registration Statement pursuant to Rule 462(b)),
and to file the same, with exhibits and schedules thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing necessary or desirable to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, thereby ratifying and confirming all that said attorney-in-fact and
agent or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and as of the dates indicated:
Signatures Title Date
---------- ----- ----
/s/ William McBride III Chairman of the Board of December 31, 1997
- ------------------------- Directors and Chief
William McBride III Executive Officer (Principal
Executive Officer and
Principal Financial Officer)
/s/ Keren B. Wilson President, Chief Operating December 31, 1997
- ------------------------- Officer and Vice-Chairman of
Keren B. Wilson the Board of Directors
/s/ Rhonda S. Marsh Vice President, Controller December 31, 1997
- ------------------------- and Chief Accounting Officer
Rhonda S. Marsh
/s/ Gloria Cavanaugh Director December 31, 1997
- ------------------------
Gloria Cavanaugh
II-5
<PAGE>
/s/ Richard C. Ladd Director December 31, 1997
- ------------------------
Richard C. Ladd
/s/ Bradley G. Razook Director December 31, 1997
- -----------------------------
Bradley G. Razook
II-6
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
2.1 Agreement and Plan of Merger among the Company, CH Merger, Inc.
and Carriage House Assisted Living, Inc. dated as of October 15,
1997.
4.1 Registration Rights Agreement, dated as of October 31, 1997,
between the Company and Carriage House Assisted Living, Inc.
5.1 Opinion of Schreck Morris.
23.1 Consent of Schreck Morris (included in Exhibit 5.1).
23.2 Consent of Price Waterhouse LLP.
23.3 Consent of KPMG Peat Marwick LLP.
24.1 Power of Attorney (included on Page II-6).
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
ASSISTED LIVING CONCEPTS, INC.
CH MERGER, INC.
AND
CARRIAGE HOUSE ASSISTED LIVING, INC.
DATED AS OF OCTOBER 15, 1997
<PAGE>
TABLE OF CONTENTS*
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I
THE MERGER................ 1
SECTION 1.01 The Merger..................................... 1
SECTION 1.02 Conversion of Shares........................... 1
SECTION 1.03 Surrender and Payment.......................... 2
SECTION 1.04 Adjustments.................................... 3
SECTION 1.05 Fractional Shares.............................. 3
ARTICLE II
THE SURVIVING CORPORATION........ 3
SECTION 2.01 Certificate of Incorporation................... 3
SECTION 2.02 Bylaws......................................... 3
SECTION 2.03 Directors and Officers......................... 3
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF CARRIAGE HOUSE............ 3
SECTION 3.01 Corporate Existence............................ 3
SECTION 3.02 Corporate Authority; Non-Contravention......... 3
SECTION 3.03 Property....................................... 4
SECTION 3.04 Litigation..................................... 4
SECTION 3.05 Subsidiaries................................... 4
SECTION 3.06 Contingent Liabilities......................... 5
SECTION 3.07 Taxes.......................................... 5
SECTION 3.08 Contracts...................................... 5
SECTION 3.09 Books and Records.............................. 5
SECTION 3.10 Construction Claims............................ 5
SECTION 3.11 Documents...................................... 5
SECTION 3.12 No Mis-Statement of Material Facts............. 5
SECTION 3.13 Capitalization................................. 5
SECTION 3.14 Foreign Person................................. 6
SECTION 3.15 Financial Statements........................... 6
SECTION 3.16 Absence of Certain Changes..................... 6
SECTION 3.17 No Existing Violation.......................... 6
SECTION 3.18 Licenses and Permits........................... 6
SECTION 3.19 Employment Matters............................. 6
SECTION 3.20 Insurance...................................... 6
SECTION 3.21 Intellectual Property.......................... 7
SECTION 3.22 Tax Free Merger................................ 7
SECTION 3.23 Finders' Fees.................................. 7
SECTION 3.24 Vote Required.................................. 7
SECTION 3.25 Accredited Investor............................ 7
SECTION 3.26 Medicare and Medicaid.......................... 7
</TABLE>
<PAGE>
<TABLE>
ARTICLE IV
<S> <C>
REPRESENTATIONS AND WARRANTIES
OF ALC.......................... 8
SECTION 4.01 Corporate Existence.................................... 8
SECTION 4.02 Corporate Authority; Non-Contravention................. 8
SECTION 4.03 Litigation............................................. 8
SECTION 4.04 No Mis-Statement or Material Facts..................... 8
SECTION 4.05 Capitalization......................................... 8
SECTION 4.06 SEC Filings............................................ 8
SECTION 4.07 Financial Statements................................... 9
SECTION 4.08 Tax Free Merger........................................ 9
SECTION 4.09 Finder's Fee........................................... 10
SECTION 4.10 Vote Required.......................................... 10
ARTICLE V
COVENANTS OF CARRIAGE HOUSE............... 10
SECTION 5.01 Conduct of Carriage House.............................. 10
SECTION 5.02 Access to Information.................................. 10
SECTION 5.03 Other Offers........................................... 11
SECTION 5.04 Notice of Certain Events............................... 11
SECTION 5.05 Stockholder Consent.................................... 11
ARTICLE VI
COVENANTS OF ALC..................... 11
SECTION 6.01 Conduct of ALC......................................... 11
SECTION 6.02 Obligations of Merger Subsidiary....................... 12
SECTION 6.03 American Stock Exchange Listing........................ 12
SECTION 6.04 Registration Rights.................................... 12
SECTION 6.05 Notice of Certain Events............................... 12
SECTION 6.06 Use of the Name "Carriage House"....................... 12
ARTICLE VII
COVENANTS OF ALC AND CARRIAGE HOUSE............... 12
SECTION 7.01 Reasonable Best Efforts................................ 13
SECTION 7.02 Certain Filings........................................ 13
SECTION 7.03 Public Announcements................................... 13
SECTION 7.04 Further Assurances..................................... 13
ARTICLE VIII
CONDITIONS TO THE MERGER................ 13
SECTION 8.01 Conditions to the Obligations of Each Party............ 13
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 8.02 Conditions to the Obligations of ALC and Merger
Subsidiary............................................. 13
SECTION 8.03 Conditions to the Obligations of Carriage House........ 14
ARTICLE IX
TERMINATION....................... 15
SECTION 9.01 Termination............................................ 15
SECTION 9.02 Effect of Termination.................................. 15
ARTICLE X
MISCELLANEOUS
SECTION 10.01 Notices............................................... 15
SECTION 10.02 Survival of Representations and Warranties; Indemnity;
No Waiver of Fraud.................................... 16
SECTION 10.03 Amendments; No Waivers................................ 16
SECTION 10.04 Fees and Expenses/Attorney Fees....................... 17
SECTION 10.05 Successors and Assigns................................ 17
SECTION 10.06 Governing Law......................................... 17
SECTION 10.07 Counterparts; Effectiveness........................... 17
SECTION 10.08 Entire Agreement...................................... 17
</TABLE>
LIST OF EXHIBITS
- ----------------
EXHIBIT A ACKNOWLEDGMENT AGREEMENT
EXHIBIT B REGISTRATION RIGHTS AGREEMENT
EXHIBIT C NON-COMPETITION AND CONFIDENTIALITY AGREEMENT
EXHIBIT D ABSOLUTE GUARANTY OF PAYMENT AND PERFORMANCE
EXHIBIT E LEASE GUARANTY
EXHIBIT F RELEASE
LIST OF SCHEDULES
- -----------------
Schedule 1.02 Conversion Exchange Schedule
Schedule 3.03(a) Owned Real Property
Schedule 3.03(b) Leased Real Property
Schedule 3.03(c) Personal Property
Schedule 3.03(d) Permitted Exceptions
Schedule 3.03(e) Environmental Audits
Schedule 3.08 Material Contracts
Schedule 3.19 Employees
Schedule 3.20 Insurance
Schedule 3.21 Intellectual Property
Schedule 8.02(d) Required Consents of Certain Persons.
Schedule 9.01(b) Approved Expenditures
* The Table of Contents is not a part of this Agreement.
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (THIS "AGREEMENT") dated as of October___, 1997,
among Assisted Living Concepts, Inc., a Nevada corporation ("ALC"), CARRIAGE
HOUSE ASSISTED LIVING, INC., a Delaware corporation ("CARRIAGE HOUSE"), and CH
Merger, Inc., a Delaware corporation and wholly owned subsidiary of ALC ("MERGER
SUBSIDIARY").
WHEREAS, the respective Boards of Directors of ALC, Merger Subsidiary and
Carriage House have approved and declared advisable the merger of Merger
Subsidiary into Carriage House (THE "MERGER"), upon the terms and subject to the
conditions set forth herein;
WHEREAS, for federal income tax purposes, it is intended that the Merger shall
qualify as a reorganization within the meaning of Section 368(a)(1)(A) and
(2)(E) of the Code (as defined below); and
WHEREAS, for accounting purposes, it is intended that the Merger shall be
accounted for as a purchase.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01 THE MERGER. (a) Upon the terms and subject to the conditions set
forth herein, and in accordance with the General Corporation Law of the State of
Delaware ("DELAWARE LAW"), Merger Subsidiary shall be merged with and into
Carriage House at the Effective Time (as defined in Section 1.01(b)). Following
the Merger, the separate existence of Merger Subsidiary shall cease, and
Carriage House shall be the surviving corporation (THE "SURVIVING CORPORATION")
and shall succeed to and assume all the rights and obligations of Merger
Subsidiary in accordance with Delaware law.
(b) Not later than three (3) business days after satisfaction or, to the extent
permitted hereunder, waiver of all conditions to the Merger, Carriage House and
Merger Subsidiary will file a certificate of merger with the Secretary of State
of the State of Delaware and make all other filings or recordings required by
Delaware Law in connection with the Merger. The Merger shall become effective
at such time as the certificate of merger is duly filed with the Secretary of
State of the State of Delaware or at such later time as is specified in the
certificate of merger (THE "EFFECTIVE TIME").
SECTION 1.02 CONVERSION OF SHARES. At the Effective Time; by virtue of the
Merger and without any action on the part of any shareholders of ALC, Merger
Subsidiary or Carriage House:
(a) each share of common stock, no par value per share, of Merger Subsidiary
outstanding immediately prior to the Effective Time shall be converted into and
become one share of common stock, no par value per share, of the Surviving
Corporation with the same rights, powers and privileges as the shares so
converted and shall constitute the only outstanding shares of capital stock of
the Surviving Corporation;
(b) each outstanding share of common stock, .01 par value per share, of Carriage
House (THE "CARRIAGE HOUSE SHARES") held by Carriage House as treasury stock or
owned by ALC or any subsidiary of ALC immediately prior to the Effective Time
shall be cancelled, and no payment shall be made with respect thereto;
(c) each Carriage House Share outstanding immediately prior to the Effective
Time shall, except as otherwise provided in Section 1.02(b), be converted into
the right to receive a certain number of shares (THE "CONVERSION NUMBER") of
ALC's common stock, $.01 par value per share (THE "ALC COMMON STOCK"), in
accordance with
<PAGE>
the conversion exchange schedule set forth in SCHEDULE 1.02 attached hereto,
except for the right to receive an additional number of shares as indicated in
the Registration Rights Agreement in the event ALC shall have failed to register
the ALC Common Stock within one hundred twenty (120) days of the Effective Time.
SECTION 1.03 SURRENDER AND PAYMENT. (a) Prior to the Effective Time, ALC shall
appoint an agent reasonably acceptable to Carriage House (THE "EXCHANGE AGENT")
for the purpose of exchanging certificates as provided hereunder. As of the
Effective Time, ALC shall deposit with the Exchange Agent for the benefit of the
holders of Carriage House Shares, for exchange in accordance with this Section
1.03, through the Exchange Agent, certificates representing the shares of ALC
Common Stock issuable pursuant to Section 1.02 in exchange for outstanding
Carriage House Shares. Promptly after the Effective Time, ALC will send, or
will cause the Exchange Agent to send, to each holder of Carriage House Shares
at the Effective Time a letter of transmittal for use in such exchange (which
shall specify that the delivery shall be effected, and risk of loss and title
shall pass, only upon proper delivery of the certificates representing Carriage
House Shares and the Acknowledgment Agreement, as defined below, to the Exchange
Agent).
(b) Each holder of Carriage House Shares that have been converted into a right
to receive ALC Common Stock, upon surrender to the Exchange Agent of (i) a
certificate or certificates representing such Carriage House Shares, and (ii) a
completed and fully executed Acknowledgment Agreement in the form set forth in
EXHIBIT A attached hereto ("ACKNOWLEDGMENT AGREEMENT"), together with a properly
completed letter of transmittal covering such shares, will be entitled to
receive in exchange therefor (1) that number of whole shares of ALC Common Stock
which such holder has the right to receive pursuant to Section 1.02, and (2)
cash in lieu of fractional shares of ALC Common Stock which such holder has the
right to receive pursuant to Section 1.05, and the certificate or certificates
for Carriage House Shares so surrendered shall be cancelled. Until so
surrendered, each such certificate shall, after the Effective Time, represent
for all purposes, only the right to receive upon such surrender the certificate
representing shares of ALC Common Stock and cash in lieu of any fractional
shares of ALC Common Stock as contemplated by this Section 1.03 and Section
1.05.
(c) If any shares of ALC Common Stock are to be issued to a Person other than
the registered holder of the Carriage House Shares represented by the
certificate or certificates surrendered in exchange therefor, it shall be a
condition to such issuance that (i) the certificate or certificates so
surrendered shall be properly endorsed or otherwise be in proper form for
transfer, (ii) that the Person requesting such issuance shall pay to the
Exchange Agent any transfer or other taxes required as a result of such issuance
to a Person other than the registered holder of such Carriage House Shares or
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not payable; and (iii) that the Person requesting such issuance shall
qualify as an "Accredited Investor" under Regulation D promulgated by the United
States Securities and Exchange Commission and shall have completed and executed
an Acknowledgment Agreement. For purposes of this Agreement, "PERSON" means an
individual, a corporation, a partnership, an association, a trust or any other
entity or organization, including a government or political subdivision or any
agency or instrumentality thereof.
(d) After the Effective Time, there shall be no further registration of
transfers of Carriage House Shares. Subject to Section 1.03(e), if, after the
Effective Time, certificates representing Carriage House Shares are presented to
the Surviving Corporation, they shall be cancelled and exchanged as provided
for, and in accordance with the procedures set forth, in this Article I.
(e) Any shares of ALC Common Stock made available to the Exchange Agent pursuant
to Section 1.03(a) that remain unclaimed by the holders of Carriage House Shares
six months after the Effective Time shall be returned to ALC, upon demand, and
any such holder who has not exchanged his Carriage House Shares in accordance
with this Section prior to that time shall thereafter look only to ALC to
exchange such Carriage House Shares. Notwithstanding the foregoing, ALC shall
not be liable to any holder of Carriage House Shares for any amount paid, or any
shares of ALC Common Stock delivered to a public official pursuant to applicable
abandoned property laws. Any shares of ALC Common Stock or other amounts
remaining unclaimed by holders of Carriage House Shares two years after the
Effective Time (or such earlier date immediately prior to such time as such
amounts would otherwise escheat to or become property of any governmental
entity) shall, to the extent permitted by
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applicable law, become the property of ALC free and clear of any claims or
interest of any Person previously entitled thereto.
(f) No dividends or other distributions on shares of ALC Common Stock shall be
paid to the holder of any unsurrendered certificates representing Carriage House
Shares until such certificates are surrendered and exchanged in accordance with
in this Section. Upon such surrender and exchange, there shall be paid, without
interest, to the person in whose name the certificates representing the shares
of ALC Common Stock into which such shares were converted are registered, all
dividends and other distributions paid in respect of such ALC Common Stock on a
date subsequent to, and in respect of a record date after, the Effective Time.
SECTION 1.04 ADJUSTMENTS. If at any time during the period between the date of
this Agreement and the Effective Time, any change in the outstanding shares of
ALC Common Stock shall occur, including by reason of any reclassification,
recapitalization, stock split or combination, exchange or readjustment of
shares, or any stock dividend thereon with a record date during such period, the
Conversion Number shall be appropriately adjusted.
SECTION 1.05 FRACTIONAL SHARES. No fractional shares of ALC Common Stock shall
be issued in the Merger. All fractional shares of ALC Common Stock that a holder
of Carriage House Shares would otherwise be entitled to receive as a result of
the Merger shall be aggregated and if a fractional share results from such
aggregation, such holder shall be entitled to receive, in lieu thereof, an
amount in cash determined by multiplying the number of fractional shares by the
price of $16.25 per share.
ARTICLE II
THE SURVIVING CORPORATION
SECTION 2.01 CERTIFICATE OF INCORPORATION. The certificate of incorporation of
Carriage House in effect at the Effective Time shall be the certificate of
incorporation of the Surviving Corporation until amended in accordance with
applicable law.
SECTION 2.02 BYLAWS. The bylaws of Carriage House in effect at the Effective
Time shall be the bylaws of the Surviving Corporation until amended in
accordance with applicable law.
SECTION 2.03 DIRECTORS AND OFFICERS. From and after the Effective Time, until
successors are duly elected or appointed and qualified in accordance with
applicable law, (i) the directors of Merger Subsidiary at the Effective Time
shall be the directors of the Surviving Corporation, and (ii) the officers of
Merger Subsidiary at the Effective Time shall be the officers of the Surviving
Corporation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CARRIAGE HOUSE
Carriage House represents and warrants to ALC that:
SECTION 3.01 CORPORATE EXISTENCE. Carriage House is a duly formed and validly
existing corporation under the laws of the State of Delaware, and is qualified
to do business and is in good standing in the states of Nebraska and Colorado.
SECTION 3.02 CORPORATE AUTHORITY; NON-CONTRAVENTION. Carriage House has full
power and authority to execute and deliver this Agreement and all related
documents, and to carry out the transactions contemplated herein. This
Agreement is valid, binding and enforceable against Carriage House in accordance
with its terms. The execution of this Agreement and the consummation of the
transactions contemplated herein do not result in a breach of the terms and
conditions of, nor constitute a default under, or violation of, Carriage House's
Certificate of Incorporation
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or Bylaws, or, to Carriage House's actual knowledge, any law, regulation, court
order, mortgage, note, bond, indenture, agreement, license or other instrument
or obligation to which Carriage House is now a party or by which Carriage House
may be bound or affected.
SECTION 3.03 PROPERTY. SCHEDULE 3.03(A) sets forth a complete and accurate legal
description of each parcel of real property, and a description of all buildings,
improvements and fixtures located thereon, owned by Carriage House (THE "OWNED
REAL PROPERTY"). Carriage House has good and marketable, fee simple title to
the Owned Real Property, subject to those liens, encumbrances and other matters
described in Schedule 3.03(d) attached hereto.
(b) SCHEDULE 3.03(B) sets forth a complete and accurate legal description of
each parcel of real property, and a description of all buildings, improvements
and fixtures located thereon, in which Carriage House has a leasehold interest
(THE "LEASED REAL PROPERTY"). All leases pursuant to which Carriage House
leases the Leased Real Property (THE "LEASES") are valid and enforceable in
accordance with their terms and, to the actual knowledge of Carriage House, no
party is in default or breach, or has threatened to default or breach, under
such Leases.
(c) SCHEDULE 3.03(C) sets forth a complete and accurate description of all
personal property used or held for use in connection with the business and
operations of Carriage House (THE "PERSONAL PROPERTY"), identified by location
of such property. To the actual knowledge of Carriage House, no party is in
default or breach under any leases or other agreements relating to the Personal
Property.
(d) For purposes of the Agreement, the term "Property" means the Owned Real
Property, the Leased Real Property and Leases, and the Personal Property. There
are no easements, rights of way, liens, security interests, leases, options to
purchase, rights of first refusal, or other third-party rights or encumbrances
of any kind or nature whatsoever affecting the Property, other than as indicated
in the title reports, land surveys and lien searches identified in SCHEDULE
3.03(D) attached hereto ("PERMITTED EXCEPTIONS").
(e) To Carriage House's actual knowledge, and except as disclosed in the Phase I
environmental audits identified in SCHEDULE 3.03(E) attached hereto (THE
"ENVIRONMENTAL AUDITS"), (1) there does not exist, in or under the Owned Real
Property or Leased Real Property, any contaminant, pollutant, toxic or hazardous
waste, the release or disposal of which is regulated by any law, regulation,
ordinance or code, with the exception of any such materials used by Carriage
House in the ordinary course of business and in accordance with applicable law,
and (2) neither the Owned Real Property nor the Leased Real Property has ever
been used for purposes which may have been conducive to the use or disposal of
hazardous materials on such Property, such as (by way of example only and not by
means of limitation) a dump, gasoline station, car wash, or industrial or
manufacturing use. Carriage House has not received any notice from any
authority having jurisdiction over the Owned Real Property or the Leased Real
Property that Carriage House or such property, or both, are not in compliance
with any applicable environmental laws, regulations, ordinances or orders
relating to such property.
(f) Carriage House has not received (1) from any state or local authority having
jurisdiction over the Property any written notice of any violation of any law,
regulation, ordinance or code affecting any of the Property or the operation
thereof, or (2) any written notice of any threatened litigation or anticipated
condemnation with respect to any of the Property.
(g) Carriage House possesses no rights or interests in real property other than
its rights and interests in the Owned Real Property and Leased Real Property.
Carriage House does not own or lease property of any kind in any state or
jurisdiction other than the Property located in the State of Nebraska.
SECTION 3.04 LITIGATION. There is no pending or, to Carriage House's actual
knowledge, threatened legal action, litigation, arbitration, mediation or
administrative proceeding (including without limitation condemnation
proceedings) affecting Carriage House or the Property.
SECTION 3.05 SUBSIDIARIES. Carriage House has no subsidiaries, parent companies
or other affiliates other than those entities which may be or become
shareholders of Carriage House.
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SECTION 3.06 CONTINGENT LIABILITIES. Carriage House has no actual knowledge of
any conditions, claims, executory contracts or threatened, pending or contingent
liabilities which, on and after the Effective Time, might affect ALC's ability
to use or operate any Property, or consummate the transaction contemplated by
this Agreement.
SECTION 3.07 TAXES. All returns, reports and filings of any kind or nature
(including, but not limited to, federal and state tax filings) required to be
filed by Carriage House have been fully filed, and all such returns, reports and
filings are true, accurate and complete and have been timely filed in compliance
with all requirements applicable thereto, and all taxes or other obligations
which are due and payable for all periods prior to the Effective Time with
respect to the Property and the business operations of Carriage House, and with
respect to this transaction, have been, or on or before the Effective Time shall
have been, timely paid.
SECTION 3.08 CONTRACTS. SCHEDULE 3.08 sets forth a list of all material oral or
written contracts, leases or agreements of any kind affecting or in respect of
the Property, the business operations of Carriage House or the employees of
Carriage House (with respect to such oral obligations, Schedule 3.08 shall
include narrative descriptions of such obligations, the name and addresses of
all parties thereto, and the nature of and date of entry into the
transactions)(THE "CONTRACTS"). Carriage House is in full compliance with each
of the terms and conditions of each of the Contracts. To the actual knowledge
of Carriage House, no other party is in default or breach, or has threatened to
default or breach, under any of the Contracts.
SECTION 3.09 BOOKS AND RECORDS. The records and books of account of Carriage
House that will be made available to ALC are true, complete and correct, and
such records and books of account have been kept in accordance with generally
accepted accounting principles consistently applied and fairly represent and
reflect all transactions relating to the Property and the business operations of
Carriage House.
SECTION 3.10 CONSTRUCTION CLAIMS. To Carriage House's actual knowledge, all
contractors, subcontractors, laborers and materialmen who have performed work
upon or furnished labor and/or materials to improve or benefit any Leased Real
Property have been paid in full and, with respect to Owned Real Property, have
been paid current or within the terms of the applicable construction contracts.
SECTION 3.11 DOCUMENTS. Carriage House has provided ALC with each and every
material document by which Carriage House is bound affecting or in respect of
the Property and the business operations of Carriage House; there have been no
written or oral modifications to or of such documents and no oral
representations, obligations or commitments of any kind have been made by or to
Carriage House with respect to the Property or the business operations of
Carriage House.
SECTION 3.12 NO MIS-STATEMENT OF MATERIAL FACTS. No representation, warranty or
covenant of Carriage House in this Agreement, nor any statement or document
furnished or to be furnished to ALC pursuant to this Agreement or in connection
with the transaction contemplated hereby, includes any misstatement of a
material fact. The copies of all instruments, agreements, other documents and
written information (including the Exhibits attached to this Agreement)
delivered to ALC by Carriage House are complete and correct in all material
respects as of the date of this Agreement.
SECTION 3.13 CAPITALIZATION. As of the date hereof, the authorized capital
stock of Carriage House is Twenty Thousand (20,000) shares, .01 par value, of
which Ten Thousand (10,000) shares (including shares held by ALC) are issued and
outstanding. All issued and outstanding Carriage House Shares are validly
issued, fully paid and non-assessable, and not subject to any preemptive or
similar right. There are, and as of the Effective Time there shall be, (i) no
shares of capital stock or other voting securities of Carriage House outstanding
other than the Carriage House Shares, (ii) no securities of Carriage House
convertible into or exchangeable for shares of capital stock or voting
securities of Carriage House, and (iii) no options, warrants or other rights to
acquire from Carriage House, and no obligation of Carriage House to issue, any
capital stock, voting securities or securities convertible into or exchangeable
for capital stock or voting securities of Carriage House.
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SECTION 3.14 FOREIGN PERSON. Carriage House is not a "foreign person" within
the meaning of Section 1445 of the Internal Revenue Code of 1986, as amended,
and Carriage House agrees to provide a FIRPTA affidavit at Effective Time so
stating.
SECTION 3.15 FINANCIAL STATEMENTS. Carriage House has delivered or made
available to ALC true and complete copies of the consolidated financial
statements (including a balance sheet as of September 30, 1997 and a 1997 year
to date income statement) of Carriage House (THE "FINANCIAL STATEMENTS") as, of
and through September 30, 1997. The Financial Statements fairly present in all
material respects, in conformity with generally accepted accounting principles
applied on a consistent basis, the consolidated financial position of Carriage
House as of the dates thereof and their consolidated results of operations for
the periods then ended.
SECTION 3.16 ABSENCE OF CERTAIN CHANGES. Except as contemplated hereby since
September 30, 1997, Carriage House has conducted its business in all material
respects in the ordinary course consistent with past practices, and (i) Carriage
House has not incurred any material liability or obligation (indirect, direct or
contingent), or entered into any material oral or written agreement or other
transaction, that is not in the ordinary course of business, extent to the
extent disclosed herein; (ii) Carriage House has not sustained any loss or
interference with its business or Properties from fire, flood, windstorm,
accident or other calamity (whether or not covered by insurance); (iii) except
for the closing of additional loans and funding of additional disbursements on
existing loans and/or sale and leaseback transactions or commitments with LTC,
all of which are fully disclosed on its financial statements to the extent
completed prior to the effective date of such financial statements, there has
been no material change in the indebtedness of Carriage House, no change in the
outstanding shares of Carriage House and no dividend or distribution of any kind
declared, paid or made by Carriage House.
SECTION 3.17 NO EXISTING VIOLATION. Carriage House is not in violation of its
charter or other organization documents or by-laws, and, to Carriage House's
actual knowledge, the Property and operations of Carriage House are in
compliance in all material respects with, (i) any and all applicable federal,
state and local laws, statutes, ordinances or administrative or governmental
rules or regulations, permits and licenses, and (ii) any and all orders, decrees
or judgments of any governmental entity having jurisdiction over the Carriage
House, including without limitation all laws, rules, regulations and orders
relating to public and worker health and safety and the protection and clean-up
of the environment and activities or conditions related thereto, including but
not limited to those relating to the generation, handling, disposal,
transportation or release of hazardous materials or substances.
SECTION 3.18 LICENSES AND PERMITS. Carriage House has received such
certificates, permits, licenses, franchises, consents, approvals, orders,
authorizations and clearances from appropriate governmental entities (THE
"COMPANY LICENSES") as are necessary to own or lease and operate its businesses
substantially in the manner as currently owned or leased and conducted, and all
such Company Licenses are valid and in full force and effect. Carriage House is
in compliance in all material respects with its obligations under the Company
Licenses, and no event has occurred that allows, or after notice or lapse of
time, or both, would allow, revocation or termination of any material Company
License.
SECTION 3.19 EMPLOYMENT MATTERS. SCHEDULE 3.19 sets forth the list of all
employees of Carriage House and the location of their employment. Except as
disclosed on SCHEDULE 3.19, all employees of Carriage House are employed on an
at-will basis, and there are no employment contracts, collective bargaining
agreements, pension, bonus, profit sharing, stock option or other agreements or
arrangements providing for employee enumeration or benefits to which Carriage
House is a party. There is no pending or, to the actual knowledge of Carriage
House, threatened labor dispute, strike or work stoppage effecting the
operations of Carriage House.
SECTION 3.20 INSURANCE. SCHEDULE 3.20 sets forth a list of insurance policies
held by Carriage House concerning the operations of its business. Carriage
House has maintained and now maintains (i) adequate insurance on all its assets
of a type customarily insured, covering property damage and loss of income by
fire or other casualty, and (ii) adequate insurance protection against all
liabilities, claims and risks against which it is customary to insure. Carriage
House is not in default with respect to payment of premiums on any such
policies, and to the knowledge of Carriage House, there is no claim pending
under any such policy.
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SECTION 3.21 INTELLECTUAL PROPERTY. SCHEDULE 3.21 attached hereto is a schedule
of all trade names, trademarks, service marks, copyrights and patents owned by
Carriage House or in which it has any rights or licenses, together with a brief
description of each (THE "INTELLECTUAL PROPERTY"). Carriage House has not
infringed, and is not now infringing, on any trade name, trademark, service
mark, copyright or patent belonging to any other Person.
SECTION 3.22 TAX FREE MERGER. (a) At the Effective Time, the Surviving
Corporation will hold at least 90 percent of the fair market value of the net
assets, and at least 70 percent of the fair market value of the gross assets,
held by Carriage House prior to the Merger. For purposes of this representation,
amounts used by Carriage House to pay reorganization expenses and all
redemptions, distributions and payments, in cash or property, made by Carriage
House in connection with the Merger shall be included as assets of Carriage
House prior to the Merger.
(b) In the Merger, Carriage House Shares representing control of Carriage House,
as defined in Section 368(c)(1) of the Internal Revenue Code of 1986, as amended
(THE "CODE"), will be exchanged solely for voting stock of ALC. For purposes of
this representation, Carriage House Shares exchanged for cash or other property
originating with ALC will be treated as outstanding Carriage House Shares on the
date of the Merger.
(c) Since its incorporation there has been no dividend or distribution of any
kind declared, paid or made by Carriage House.
(d) There is no intercorporate indebtedness existing between ALC and Carriage
House or between Merger Subsidiary and Carriage House.
(e) Except as provided in Section 10.04 of this Agreement, Carriage House and/or
the stockholders of Carriage House will pay their respective expenses, if any,
incurred in connection with the Merger.
(f) Carriage House is not an investment company as such term is defined in
Section 368(a)(2)(F)(iii) and (iv) of the Code.
(g) Carriage House is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
(h) on the Effective Date, the fair market value of the assets of Carriage House
will exceed the sum of Carriage House's liabilities plus the amount of
liabilities, if any, to which the assets are subject.
(i) Carriage House has not knowingly taken, and will not knowingly take, any
action that would jeopardize the qualification of the Merger as a reorganization
within the meaning of Section 368(a)(1)(A) and (2)(E) of the Code.
SECTION 3.23 FINDERS' FEES. There is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of Carriage House who might be entitled to any fee or commission in connection
with the transactions contemplated by this Agreement.
SECTION 3.24 VOTE REQUIRED. Except as contemplated by this Agreement, the
affirmative vote of the holders of a majority of the outstanding Carriage House
Shares, voting together as a single class, are the only votes of the holders of
any class or series of Carriage House's capital stock necessary to approve this
Agreement and the transactions contemplated hereby.
SECTION 3.25 ACCREDITED INVESTOR. Prior to and as of the Effective Time, each
holder of Carriage House Shares that have converted to the right to receive ALC
common stock under Section 1.02 hereof, shall qualify as an "accredited
investor" under Regulation D promulgated by the United States Securities and
Exchange Commission.
SECTION 3.26 MEDICARE AND MEDICAID. Reimbursement by Medicare and/or Medicaid is
not permitted in Nebraska for facilities of the type operated by Carriage House.
As a consequence: (a) Carriage House has not filed any Medicare and/or Medicaid
returns, cost reports or other filings; (b) there is no basis for any claims or
requests for
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reimbursement from any such agency, instrumentality, entity or third-party
payor; and (c) Carriage House is not subject to any audit relating to fraudulent
Medicare or Medicaid procedures or practices.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ALC
ALC represents and warrants to Carriage House that:
SECTION 4.01 CORPORATE EXISTENCE. ALC is a duly formed and validly existing
corporation under the laws of the State of Nevada, and Merger Subsidiary is a
duly formed and validly existing corporation under the laws of the State of
Delaware.
SECTION 4.02 CORPORATE AUTHORITY; NON-CONTRAVENTION. Each of ALC and Merger
Subsidiary has full power and authority to execute and to deliver this Agreement
and all related documents, and to carry out the transactions contemplated
herein. This Agreement is valid, binding and enforceable against ALC and Merger
Subsidiary in accordance with its terms. The execution of this Agreement and
the consummation of the transactions contemplated herein do not result in a
breach of the terms and conditions of, nor constitute a default under or
violation of the Certificate of Incorporation or Bylaws of ALC or Merger
Subsidiary, or, to the best of ALC's knowledge, any law, regulation, court
order, mortgage, note, bond, indenture, agreement, license or other instrument
or obligation to which ALC or Merger Subsidiary is now a party or by which ALC
or Merger Subsidiary or any of their assets may be bound or affected.
SECTION 4.03 LITIGATION. There is no pending or threatened legal action,
litigation, arbitration, mediation or administrative proceeding (including
without limitation condemnation proceedings) affecting ALC or Merger Subsidiary,
or their respective assets or properties (or any of them) which, if determined
adversely to ALC or Merger Subsidiary, would have a material adverse effect on
ALC's or Merger Subsidiary's ability to consummate the Merger as contemplated
herein.
SECTION 4.04 NO MIS-STATEMENT OR MATERIAL FACTS. No representation, warranty or
covenant of ALC or Merger Subsidiary in this Agreement, nor any statement or
document furnished or to be furnished to Carriage House pursuant to this
Agreement or in connection with the transaction contemplated hereby, includes
any misstatement of material fact. The copies of all instruments, agreements,
other documents and written information (including the exhibits attached to this
Agreement) delivered to Carriage House by ALC or Merger Subsidiary are complete
and correct in all respects as of the date of this Agreement.
SECTION 4.05 CAPITALIZATION. As of the date hereof, the authorized capital stock
of ALC consists of 80,000,000 shares of ALC Common Stock, par value $.01 per
share, and 1,000,000 shares of Preferred Stock, par value $.01 per share. As of
July 31, 1997 ALC had 11,043,512 shares of Common Stock issued and outstanding
and no outstanding shares of Preferred Stock. The shares of ALC Common Stock
exchanged for Carriage House Shares in the Merger have been duly authorized, and
when issued and delivered in accordance with the terms of this Agreement, will
have been validly issued and will be fully paid and nonassessable and the
issuance thereof will not be subject to any preemptive or other similar right.
SECTION 4.06 SEC FILINGS. (a) ALC has delivered or made available to Carriage
House (i) its annual report on Form 10-K for the fiscal year ended December 31,
1996 (the "ALC 10-K"), (ii) its quarterly report on Form 10-Q for its fiscal
quarter ended March 31, 1997; (iii) its quarterly report on Form 10-Q for its
fiscal quarter ended June 30, 1997, (iv) its current reports on Form 8-K dated
July 24, 1997 (v) its proxy statement relating to the annual meeting of
stockholders held on May 22, 1997, and (vi) all of its other reports,
statements, schedules and registration statements filed by ALC with the SEC
since June 30, 1997, and in each case all materials incorporated therein by
reference or filed therewith as exhibits.
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SECTION 4.07 FINANCIAL STATEMENTS. The audited consolidated financial statements
and unaudited consolidated interim financial statements of ALC and its
subsidiaries included in the ALC 10-K and the quarterly reports on Form 10-Q
referred to in Section 4.06 fairly present in all material respects, in
conformity with generally accepted accounting principles applied on a consistent
basis (except as may be indicated in the notes thereto), the consolidated
financial position of ALC and its subsidiaries as of the dates thereof and their
consolidated results of operations and cash flows for the periods then ended
(subject, in the case of any unaudited interim financial statements, to normal
year-end adjustments).
SECTION 4.08 TAX FREE MERGER. (a) Following the Merger, the Surviving
Corporation will hold at least 90 percent of the fair market value of the net
assets and at least 70 percent of the fair market value of the gross assets,
held by Carriage House prior to the Merger, and at least 90 percent of the fair
market value of the net assets and at least 70 percent of the fair market value
of the gross assets, held by Merger Subsidiary prior to the Merger. For purposes
of this representation, amounts used by Carriage House to pay reorganization
expenses and all redemptions, distributions and payments, in cash or property,
made by Carriage House in connection with the Merger shall be included as assets
of Carriage House prior to the Merger;
(b) prior to the Merger, ALC will be in control of Merger Subsidiary within the
meaning of Section 368(c) of the Code;
(c) ALC has no plan or intention as part of the plan of the Merger to cause the
Surviving Corporation to issue after the Effective Time additional shares of
stock that would result in ALC losing control of the Surviving Corporation
within the meaning of Section 368(c) of the Code or any warrants, options,
convertible securities, or any other type of right pursuant to which any person
could acquire stock in the Surviving Corporation that, if exercised or
converted, would affect ALC's acquisition or retention of control of the
Surviving Corporation, as defined in Section 368(c) of the Code;
(d) ALC has no plan or intention to reacquire any of the ALC Common Stock issued
in the Merger;
(e) ALC has no plan or intention to liquidate the Surviving Corporation, to
merge the Surviving Corporation with or into another corporation or to sell or
otherwise dispose of the Surviving Corporation stock except for transfers of
stock to a corporation controlled by ALC;
(f) following the Merger, the Surviving Corporation will continue Carriage
House's historic business or use a significant portion of its historic business
assets in a business;
(g) Merger Subsidiary will have no liabilities assumed by Carriage House and
will not transfer to Carriage House any assets subject to liabilities, in the
Merger;
(h) there is no intercorporate indebtedness existing between ALC and Carriage
House or between Merger Subsidiary and Carriage House;
(i) except as provided in Section 10.04 of this Agreement, ALC and Merger
Subsidiary will pay their respective expenses incurred in connection with the
Merger;
(j) neither ALC nor Merger Subsidiary is an investment company as such term is
defined in Section 368(a)(2)(F)(iii) and (iv) of the Code;
(k) following the Effective Time, ALC shall use its best efforts, and shall
cause the Surviving Corporation to use its best efforts, to conduct its business
and the Surviving Corporation's business in a manner which would not jeopardize
the characterization of the Merger as a reorganization within the meaning of
Section 368(a)(1)(A) and (2)(E) of the Code.
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SECTION 4.09 FINDERS' FEES. There is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of ALC or any of its Subsidiaries who might be entitled to any fee or commission
in connection with the transactions contemplated by this Agreement.
SECTION 4.10 VOTE REQUIRED. The affirmative vote of the majority of the Board of
Directors of ALC are the only votes necessary to approve this Agreement and the
transactions contemplated hereby on behalf of ALC.
ARTICLE V
COVENANTS OF CARRIAGE HOUSE
Carriage House agrees with ALC that:
SECTION 5.01 CONDUCT OF CARRIAGE HOUSE. Except as expressly contemplated by this
Agreement, from the date hereof until the earlier to occur of the Effective Time
and the termination hereof, Carriage House (i) shall conduct its business in the
ordinary course consistent with past practices and pursuant to its existing
contracts and commitments; (ii) shall use its reasonable best efforts to
preserve intact its business organizations and relationships with third parties
and to keep available the services of its present officers and employees;
preserve and protect the Owned Real Property, the Leased Real Property and the
Personal Property; and (iv) conduct its business in material compliance with all
applicable laws and regulations. Except as otherwise approved in writing by ALC
or as expressly contemplated by this Agreement, and without limiting the
generality of the foregoing, from the date hereof until the Effective Time:
(a) Carriage House will not adopt or propose any change in its certificate of
incorporation or bylaws;
(b) Carriage House will not merge or consolidate with any other Person or
acquire a material amount of stock or assets of any other Person;
(c) Carriage House will not sell, lease, license or otherwise dispose of any of
the Property except (i) pursuant to existing contracts or commitments, (ii) in
the ordinary course consistent with past practice;
(d) Carriage House will not declare or pay any dividends or make any
distributions on any Carriage House Shares;
(e) Carriage House will not (i) issue, deliver or sell, or authorize or propose
the issuance, delivery or sale of, any Carriage House Shares (ii) split, combine
or reclassify any Carriage House Shares, or (iii) repurchase, redeem or
otherwise acquire any Carriage House Shares;
(f) except as otherwise expressly permitted hereby, Carriage House will not make
any commitment or enter into any contract or agreement material to Carriage
House except pursuant to existing written contracts or commitments or in the
ordinary course of business consistent with past practice;
(g) Except pursuant to existing written contracts or commitments, Carriage House
will not take any action that would make any representation and warranty of
Carriage House hereunder inaccurate in any material respect at, or as of any
time prior to, the Effective Time; and
(h) except as otherwise expressly permitted hereby, Carriage House will not
agree or commit to do any of the foregoing.
SECTION 5.02 ACCESS TO INFORMATION. From the date hereof until the earlier to
occur of the Effective Time and the termination hereof, Carriage House will give
ALC, its counsel, financial advisors, auditors and other authorized
representatives full access to the offices, properties, books and records of
Carriage House, will furnish to ALC, its counsel, financial advisors, auditors
and other authorized representatives such financial and operating data and other
information as such Persons may reasonably request and will instruct Carriage
House's employees, counsel
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and financial advisors to cooperate with ALC in its investigation of the
business of Carriage House; provided that no investigation pursuant to this
Section shall affect any representation or warranty given by Carriage House to
ALC hereunder. ALC shall, and shall cause its counsel, financial advisors,
auditors and other authorized representatives to, retain all information
obtained from Carriage House hereunder on a confidential basis.
SECTION 5.03 OTHER OFFERS. From the date hereof until the earlier to occur of
the Effective Time and the termination hereof, Carriage House and the officers,
directors, employees or other agents of Carriage House will not, directly or
indirectly, (i) take any action to solicit, initiate or encourage any Carriage
House Acquisition Proposal (as defined below) or (ii) unless otherwise required
in accordance with the fiduciary duties of the Board of Directors under
applicable law as advised by counsel to Carriage House, engage in negotiations
with, or disclose any non-public information relating to Carriage House or
afford access to the properties, books or records of Carriage House to, any
Person that may be considering making, or has made, a Carriage House Acquisition
Proposal. Carriage House will promptly notify ALC after receipt of any Carriage
House Acquisition Proposal or any indication that any Person is considering
making a Carriage House Acquisition Proposal or any request for non-public
information relating to Carriage House or for access to the properties, books or
records of Carriage House by any Person that may be considering making, or has
made, Carriage House Acquisition Proposal. For purposes of this Agreement,
"Acquisition Proposal" means any offer or proposal for a merger or other
business combination involving Carriage House or the acquisition of any equity
interest in, or a substantial portion of the assets of, Carriage House, other
than the transactions contemplated by this Agreement.
SECTION 5.04 NOTICES OF CERTAIN EVENTS. Carriage House shall promptly notify ALC
of:
(a) any notice or other communication from any Person alleging that the consent
of such Person (or another Person) is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any governmental or regulatory agency
or authority in connection with the transactions contemplated by this Agreement;
or
(c) any actions, suits, claims, investigations or proceedings commenced or, to
its actual knowledge, threatened against, relating to or involving or otherwise
affecting Carriage House, or which relate to the consummation of the
transactions contemplated by this Agreement, or of any event or circumstance
which would cause any of Carriage House's representations and warranties
contained herein to be incorrect in any material respect.
SECTION 5.05 STOCKHOLDER CONSENT. Carriage House shall either cause a meeting of
its stockholders to be duly called and held as soon as reasonably practicable
for the purpose of voting on the approval and adoption of this Agreement and the
Merger, or shall obtain such approval and adoption by unanimous written consent
of its stockholders. The Directors of Carriage House shall, unless otherwise
required in accordance with their fiduciary duties as advised by counsel,
recommend approval and adoption of this Agreement and the Merger by Carriage
House's stockholders. In connection with such meetings or written consents,
Carriage House will, subject to the foregoing, use its reasonable best efforts
to obtain the unanimous approval by its stockholders of this Agreement, the
transactions contemplated hereby and such other matters as are contemplated by
the terms of this Agreement or required by Delaware Law, and will otherwise
comply with all legal requirements applicable to such meetings or written
consents.
ARTICLE VI
COVENANTS OF ALC
ALC agrees with Carriage House that:
SECTION 6.01 CONDUCT OF ALC. Except as expressly contemplated by this Agreement,
from the date hereof until the earlier to occur of the Effective Time and the
termination hereof, unless Carriage House shall have consented in writing
thereto (which consent shall not be unreasonably withheld or delayed), ALC and
its Subsidiaries (i) shall
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conduct their business in the ordinary course consistent with past practices and
pursuant to existing contracts and commitments, (ii) shall use their respective
best efforts to preserve intact their business organizations and relationships
with third parties and to keep available the services of their present officers
and employees, and (iii) shall not amend any of the material terms or provisions
of any ALC Common Stock, except for any such amendments which affect equally all
shares of ALC Common Stock.
SECTION 6.02 OBLIGATIONS OF MERGER SUBSIDIARY. ALC will take all action
necessary to cause Merger Subsidiary to perform its obligations under this
Agreement and to consummate the Merger on the terms and conditions set forth in
this Agreement.
SECTION 6.03 AMERICAN STOCK EXCHANGE LISTING. ALC shall use its reasonable best
efforts to cause the shares of ALC Common Stock to be issued in the Merger to be
approved for listing on the American Stock Exchange subject to official notice
of issuance, prior to the Effective Time.
SECTION 6.04 REGISTRATION RIGHTS. The ALC Common Stock to be issued to the
Shareholders will not be registered under the Securities Act of 1933 (the "1933
Act") prior to being issued in connection with the Merger. The issuance of the
ALC Common Stock will be made to the Accredited Investor Shareholders under
Regulation D promulgated by the SEC pursuant to the 1933 Act. ALC shall take all
action necessary to enter into the Registration Rights Agreement substantially
in the form attached hereto as EXHIBIT B (THE "REGISTRATION RIGHTS AGREEMENT").
After the Effective Time a shelf registration statement shall be filed by ALC
for the Accredited Investor Shareholders. ALC shall use its reasonable best
efforts to cause such registration statement to become effective within sixty
(60) days after the Effective Time and to remain effective during the two-year
period following the Effective Time; provided that, if ALC shall have failed to
register the ALC Common Stock within one hundred twenty (120) days after the
Effective Time, the total number of shares of common stock of ALC to be
distributed to the Shareholders shall be increased by 33,746 shares, which
additional shares shall be distributed to the Shareholders in the same exchange
ratio as provided on Schedule 1.02 to this Agreement.
SECTION 6.05 NOTICE OF CERTAIN EVENTS. Each of ALC and Merger Subsidiary shall
promptly notify Carriage House of:
(a) any notice or other communication from any Person alleging that the consent
of such Person (or other Person) is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any governmental or regulatory agency
or authority in connection with the transactions contemplated by this Agreement;
or
(c) any actions, suits, claims, investigations or proceedings commenced or, to
its knowledge, threatened against, relating to or involving or otherwise
affecting it or any of its Subsidiaries which, if determined adversely to ALC or
Merger Subsidiary, would have a material adverse effect on ALC's or Merger
Subsidiary's ability to consummate the Merger as contemplated herein, or which
relate to the consummation of the transactions contemplated by this Agreement,
or of any event or circumstance which would cause any of ALC's representations
and warranties contained herein to be incorrect in any material respect.
SECTION 6.06 USE OF THE NAME "CARRIAGE HOUSE". ALC shall have the right to the
use of the name "Carriage House" for a period of not to exceed ninety (90) days
after the Effective Date, at which time ALC shall relinquish such right.
ARTICLE VII
COVENANTS OF ALC AND CARRIAGE HOUSE
The parties hereto agree with each other that:
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SECTION 7.01 REASONABLE BEST EFFORTS. Subject to the terms and conditions of
this Agreement, each party will use its reasonable best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement.
SECTION 7.02 CERTAIN FILINGS. Carriage House and ALC shall cooperate with one
another in determining whether any action by or in respect of, or filing with,
any governmental or regulatory agency is required, or any actions, consents,
approvals or waivers are required to be obtained from parties to any material
contracts, in connection with the consummation of the transactions contemplated
by this Agreement, and in seeking any such actions, consents, approvals or
waivers or making any such filings, furnishing information required in
connection therewith and seeking timely to obtain any such actions, consents,
approvals or waivers.
SECTION 7.03 PUBLIC ANNOUNCEMENTS. From and after the date of this Agreement,
ALC and Carriage House will consult with each other before issuing any press
release or making any public statement with respect to this Agreement and the
transactions contemplated hereby and, except as may be required by applicable
law or any listing agreement with any national securities exchange, will not
issue any such press release or make any such public statement prior to such
consultation.
SECTION 7.04 FURTHER ASSURANCES. After the Effective Time, the officers and
directors of the Surviving Corporation will be authorized to execute and
deliver, in the name and on behalf of Carriage House or Merger Subsidiary, any
deeds, bills of sale, assignments, assurances, instruments or other documents
and to take and do, in the name and on behalf of Carriage House or Merger
Subsidiary, any other actions and things to vest, perfect or confirm of record
or otherwise in the Surviving Corporation any and all right, title and interest
in, to and under any of the rights, properties or assets of Carriage House
acquired or to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger.
ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.01 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations of
Carriage House, ALC and Merger Subsidiary to consummate the Merger are subject
to the satisfaction of the following conditions:
(a) the Board of Directors of Carriage House shall have submitted the Merger for
approval to the stockholders of Carriage House in compliance with the applicable
provisions of Delaware Law, and all of the holders of all of the issued and
outstanding Carriage House shares shall have signed written consents or voted in
favor of the Merger; and
(b) no provision of any applicable domestic law or regulation and no judgment,
injunction, order or decree of a court of competent jurisdiction shall restrain
or prohibit the consummation of the Merger.
SECTION 8.02 CONDITIONS TO THE OBLIGATIONS OF ALC AND MERGER SUBSIDIARY. The
obligations of ALC and Merger Subsidiary to consummate the Merger are subject to
the satisfaction of the following further conditions:
(a) Carriage House shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the
Effective Time, the representations and warranties of Carriage House contained
in this Agreement shall be true in all material respects at and as of the
Effective Time as if made at and as of such time, and ALC shall have received a
certificate signed by an executive officer of Carriage House to the foregoing
effect;
(b) ALC shall have received a copy of the resolutions of the Board of Directors
of Carriage House authorizing the Merger, which copy shall be certified by an
executive officer of Carriage House;
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(c) ALC shall have completed a due diligence review of the business and
operations of Carriage House, satisfactory to ALC in its sole discretion;
(d) Carriage House shall have obtained the consent or approval of each Person
whose consent or approval is required in connection with this transaction under
any mortgage, note, bond, indenture, agreement or other instrument to which
Carriage House is now a party, including but not limited to consents from the
Persons listed on Schedule 8.02(d);
(e) ALC shall have obtained the consent or approval, or made filings with, any
governmental entity whose consent or approval, or filing with, is required with
respect to the Company Licenses and Carriage House shall have cooperated with
ALC as reasonably necessary in connection with the same;
(f) Carriage House and LTC, respectively, shall have provided estoppel
certificates, in a form acceptable to ALC, with respect to each of: (i) the
Leases and the Leased Real Property; and (ii) those Contracts relating to the
construction, development and permanent financing of the Owned Real Property;
(g) each holder of Carriage House Shares shall qualify as an "Accredited
Investor" under Regulation D promulgated by the United States Securities and
Exchange Commission and shall have signed an Acknowledgment Agreement
substantially in the form of EXHIBIT A so certifying;
(h) Each of Robert Siebel, Consulting Management and Education, Inc. ("CME"),
Anne Markarian and Paul Parker shall have entered into a Non-Competition and
Confidentiality Agreement substantially in the form attached hereto as EXHIBIT
C; and
(j) the shares of ALC Common Stock to be issued in connection with the Merger
shall have been approved for listing on the American Stock Exchange (THE
"AMEX").
SECTION 8.03 CONDITIONS TO THE OBLIGATIONS OF CARRIAGE HOUSE. The obligations of
Carriage House to consummate the Merger are subject to the satisfaction of the
following further conditions:
(a) ALC and Merger Subsidiary shall have performed in all material respects all
of their respective obligations hereunder required to be performed by them at or
prior to the Effective Time, the representations and warranties of ALC and
Merger Subsidiary contained in this Agreement shall be true in all material
respects at and as of the Effective Time as if made at and as of such time, and
Carriage House shall have received a certificate signed by an executive officer
of each of ALC and Merger Subsidiary to the foregoing effect;
(b) Carriage House shall have received a copy of the resolutions of the Board of
Directors of ALC authorizing the Merger, which copy shall be certified by an
executive officer of ALC;
(c) Carriage House and ALC shall have entered into the Registration Rights
Agreement substantially in the form attached hereto as EXHIBIT B;
(d) The shares of ALC Common Stock to be issued in connection with the Merger
shall have been approved for listing on the AMEX;
(e) ALC shall have entered into the Absolute Guaranty of Payment and Performance
substantially in the form attached hereto as EXHIBIT D;
(f) ALC shall have entered into the Lease Guaranty substantially in the form
attached hereto as EXHIBIT E;
(g) LTC shall have entered into the Release substantially in the form attached
hereto as EXHIBIT F; and
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(h) The Consulting Agreement between Carriage House and CME shall have been
terminated and ALC shall have paid the termination payment to CME of $267,600.
ARTICLE IX
TERMINATION
SECTION 9.01 TERMINATION. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time (notwithstanding any approval
of this Agreement by the stockholders of Carriage House or by the Board of
Directors of ALC):
(a) by Carriage House, if the daily closing price of ALC Common Stock on the
American Stock Exchange shall have been less than $14.00 per share between
September 30, 1997 and the Effective Time;
(b) by ALC if Carriage House makes any expenditures in excess of $10,000, except
for expenditures listed on SCHEDULE 9.01(B), which are approved, without the
prior written approval of William McBride on behalf of ALC.
(c) by mutual written consent of Carriage House and ALC;
(d) by either Carriage House or ALC, if the Merger has not been consummated by
October 31, 1997 (provided that the right to terminate this Agreement under this
clause shall not be available to any party whose failure to fulfill any of its
obligations under this Agreement has been the cause of or resulted in the
failure to consummate the Merger by such date);
(e) by either Carriage House or ALC, if there shall be any applicable domestic
law, rule or regulation that makes consummation of the Merger illegal or
otherwise prohibited or if any judgment, injunction, order or decree of a court
of competent jurisdiction shall restrain or prohibit the consummation of the
Merger, and such judgment, injunction, order or decree shall become final and
nonappealable;
(f) by either Carriage House or ALC, if the unanimous stockholder approval
referred to in Section 8.01(a) shall not have been obtained by reason of the
failure to obtain: (i) the requisite vote upon a vote at a duly held meeting of
stockholders or at any adjournment thereof; or (ii) written consents signed by
all of the holders of all of the issued and outstanding shares of stock of
Carriage House;
(g) by either Carriage House or ALC (the "Terminating Party") if (x) there has
been a breach by the other party of any representation or warranty contained in
this Agreement which would have or would be reasonably likely to have a material
adverse effect on the Terminating Party, or (y) there has been a material breach
of any of the covenants or agreements set forth in this Agreement on the part of
the other party, which breach is not curable or, if curable, is not cured within
30 days after written notice of such breach is given by the Terminating Party to
the other party, or (z) Carriage House has entered into an agreement or
agreement in principle with respect to any Company Acquisition Proposal.
SECTION 9.02 EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
Section 9.01, this Agreement shall become void and of no effect with no
liability on the part of any party hereto, except that the parties shall be
liable for any willful breaches hereof.
ARTICLE X
MISCELLANEOUS
SECTION 10.01 NOTICES. All notices, requests and other communications to any
party hereunder shall be in writing (including telecopy or similar writing) and
shall be given,
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if to ALC or Merger Subsidiary, to:
Assisted Living Concepts, Inc., 9955 SE Washington Street, Suite 201,
Portland, Oregon, 97216, Telephone (503) 252-6233, Facsimile (503) 252-6597
Attention: William McBride, III.
with a copy to:
Bullivant Houser Bailey Pendergrass & Hoffman, 300 Pioneer Tower, 888 SW
Fifth Avenue, Portland, Oregon, 97204, Telephone (503) 228-6351, Facsimile (503)
295-0915 Attention: Sandra Campbell, Esq.
if to Carriage House, to:
Carriage House Assisted Living, Inc., 13185 W. Green Mountain Drive,
Lakewood, Colorado, 80228, Telephone (303) 980-0611, Facsimile (303) 986-4043
Attention: Robert V. Siebel.
with a copy to:
Rosenfeld & Wolff, 2049 Century Park East, Suite 600, Los Angeles,
California, 90067, Telephone (310) 556-1221, Facsimile (310) 556-0401 Attention:
Morton Rosenfeld, Esq.
or such other address or telecopy number as such party may hereafter specify for
the purpose by notice to the other parties hereto. Each such notice, request or
other communication shall be effective (i) if given by telecopy during the
normal business hours of the recipient, when such telecopy is transmitted to the
telecopy number specified in this Section and the appropriate answer back is
received or at the beginning of the next business day of the recipient or (ii)
if given by any other means, when delivered at the address specified in this
Section.
SECTION 10.02 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITY; NO WAIVER
OF FRAUD. (a) The representations and warranties and agreements contained herein
and in any certificate or other writing delivered pursuant hereto shall not
survive the Effective Time, except with respect to: (i) Article I, Section 7.04
and the agreements referenced in Section 8.02(g) and Section 8.03(c), (e), (f)
and (g); and (ii) any liability that any party may have at law or in equity
based upon that party's fraudulent acts or omissions. No provision of this
Agreement shall be deemed a waiver by any party to this Agreement of any right
or remedy which such party may have at law or in equity based upon any other
party's fraudulent acts or omissions, nor shall any such provision limit or be
deemed to limit (x) the amounts of recovery sought or awarded in any such claim
for fraud, (y) the time period during which a claim for fraud may be brought, or
(z) the recourse which any party may seek against another party with respect to
a claim for fraud; provided further that, with respect to such rights and
remedies at law or in equity, the parties further acknowledge and agree that
none of the provisions of this Section 10.02, nor any reference to this Section
10.02 throughout this Agreement, shall be deemed a waiver of any defenses that
might be available in respect of actions or claims for fraud, including but not
limited to, defenses of statutes of limitations or limitations of damages.
SECTION 10.03 AMENDMENTS; NO WAIVERS. (a) Any provision of this Agreement may be
amended or waived prior to the Effective Time if, and only if, such amendment or
waiver is in writing and signed, in the case of an amendment, by Carriage House,
ALC and Merger Subsidiary or, in the case of a waiver, by the party against whom
the waiver is to be effective; provided that (i) any waiver or amendment shall
be effective against a party only if the Board of Directors of such party
approves such waiver or amendment and only the Board of Directors can take
actions on behalf of that party and (ii) after the adoption of this Agreement by
the stockholders of Carriage House, no such amendment or waiver shall, without
the further approval of such stockholders and each party's Board of Directors
upon recommendation, alter or change (x) the amount or kind of consideration to
be received in exchange for any shares of capital stock of Carriage House, (y)
any term of the certificate of incorporation of the Surviving Corporation or (z)
any of the terms or conditions of this Agreement if such alteration or change
would adversely affect the holders of any shares of capital stock of Carriage
House.
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(b) No failure or delay by any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.
SECTION 10.04 FEES AND EXPENSES/ATTORNEY FEES. All costs and expenses incurred
in connection with this Agreement shall be paid by the party incurring such cost
or expense; provided, however, that should any party hereto retain counsel for
the purpose of enforcing or preventing the breach of any provision of this
Agreement, including but not limited to instituting or defending any action or
proceeding to enforce any provision hereof, then, if said matter is settled by
judicial determination, the prevailing party shall be entitled to be reimbursed
by the losing party for all costs and expenses incurred thereby including but
not limited to reasonable attorneys', paralegals', experts' and accountants'
fees. Notwithstanding the foregoing, ALC shall pay the reasonable attorney fees
and costs incurred in the representation of the interests of Carriage House in
this transaction of: (a) Rosenfeld and Wolff not to exceed $25,000; and (b) Don
Banghart not to exceed $5,000.
SECTION 10.05 SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, provided that no party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of the other parties hereto.
SECTION 10.06 GOVERNING LAW. This Agreement shall be construed in accordance
with and governed by the law of the State of Delaware applicable in the case of
agreements made and to be performed entirely within such State.
SECTION 10.07 COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
SECTION 10.08 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersede all
prior agreements, understandings and negotiations, both written and oral,
between the parties with respect to the subject matter of this Agreement. No
representation, inducement, promise, understanding, condition or warranty not
expressly set forth herein has been made or relied upon by either party hereto.
Neither this Agreement nor any provision hereof is intended to confer upon any
Person other than the parties hereto any rights or remedies hereunder except for
the provisions of Article I, which are intended for the benefit of the
stockholders of Carriage House.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
ASSISTED LIVING CONCEPTS, INC.
By: /s/ Keren Brown Wilson
----------------------------
Keren Brown Wilson, President
CH MERGER, INC.
By: /s/ Keren Brown Wilson
----------------------------
Keren Brown Wilson, President
CARRIAGE HOUSE ASSISTED LIVING, INC.
By: /s/ Robert V. Siebel
---------------------------
Robert V. Siebel, President
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ATTESTATIONS
I, Stephen Gordon, Secretary of Assisted Living Concepts, Inc., a Nevada
corporation ("ALC"), certify that the signature of Keren Brown Wilson, President
of ALC, appearing on the foregoing Agreement and Plan of Merger dated as of
October 15, 1997 among ALC, CH Merger, Inc. and Carriage House Assisted Living,
Inc., is a true specimen of her signature.
Dated October 23, 1997
/s/ Stephen Gordon
---------------------------
Stephen Gordon, Secretary
I, Barbara Padak, Secretary of Carriage House Assisted Living, Inc., a Delaware
corporation ("Carriage House"), certify that the signature of Robert Siebel,
President of Carriage House Assisted Living, Inc., appearing on the foregoing
Agreement and Plan of Merger dated as of __________ ___, 1997 among
_______________________, _________ and _________________, is a true specimen of
his signature.
Dated as of October 23, 1997
/s/ Barbara Paddock
---------------------------
Secretary
I, Stephen Gordon, Secretary of CH Merger, Inc., a Delaware corporation ("Merger
Subsidiary"), certify that the signature of Keren Brown Wilson, President of
Merger Subsidiary appearing on the foregoing Agreement and Plan of Merger dated
as of October 15, 1997 among Carriage House Assisted Living, Inc., Assisted
Living Concepts, Inc. and Merger Subsidiary, is a true specimen of her
signature.
Dated October 23, 1997
/s/ Stephen Gordon
----------------------------
Stephen Gordon, Secretary
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EXHIBIT 4.1
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made as of October
31, 1997, by and among Assisted Living Concepts, Inc., a Nevada corporation (the
"Company"), and Carriage House Assisted Living, Inc., a Delaware corporation
("Carriage House"), for the benefit of the Holders, as identified herein.
1. Certain Definitions.
-------------------
As used in this Agreement, the following terms shall have the
following respective meanings:
1.1 "Commission" shall mean the Securities and Exchange Commission or
----------
any other federal agency at the time administering the Securities Act.
1.2 "Common Stock" shall mean the Company's Common Stock, $0.01 par
------------
value.
1.3 "Holder" shall mean a holder of outstanding Registrable
------
Securities which have not been sold to the public, but only if such Holder is a
Holder identified on Schedule A and such Holder has executed the form of
Acknowledgment Agreement referenced in the Merger Agreement pursuant to which
the Holder has agreed to abide by the terms and conditions of, and undertake the
obligations imposed by, this Agreement.
1.4 The terms "register," "registered" and "registration" refer to a
--------- ---------- ------------
registration effected by preparing and filing the Registration Statement in
compliance with the Securities Act ("Registration Statement"), and the
declaration or ordering of the effectiveness of such Registration Statement.
1.5 "Registrable Securities" shall mean all (i) all Common Stock
----------------------
listed on Schedule A and (ii) Common Stock issued pursuant to stock splits,
stock dividends and similar distributions in regard thereto.
1.6 "Registration Statement" shall mean a registration statement
----------------------
("Registration Statement") under the 1933 Act with respect to resale of the
Registrable Securities.
1.7 "Securities Act" shall mean the Securities Act of 1933, as
--------------
amended, or any successor statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
Page 1 - REGISTRATION RIGHTS AGREEMENT
<PAGE>
1.8 "Merger Agreement" shall mean that certain Agreement and Plan of
----------------
Merger dated as of October 15, 1997, among the Company, Carriage House, and CH
Merger, Inc., a Delaware corporation and wholly owned subsidiary of the Company.
2. Registration.
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2.1 General. After the Effective Time, as defined in the Merger
-------
Agreement, the Company shall file the Registration Statement and prepare and
file such amendments and supplements to the Registration Statement and the
prospectus used in connection therewith as may be necessary to comply with the
provisions of the Securities Act with respect to the sale of the Registrable
Securities. The Company shall use its reasonable best efforts to cause the
Registration Statement to become effective under the Securities Act within sixty
(60) days after the Effective Time and to maintain the effectiveness of the
Registration Statement for a period ending on the earlier of (i) two years after
the Effective Time and (ii) such other date by which the Holders have sold all
the Registrable Shares or by and after which such persons may sell the
Registrable Shares in the U.S. without registration under the Securities Act.
If required by applicable law, the Company shall furnish to the Holders offering
Registrable Securities such reasonable number of copies of a prospectus, in
conformity with the requirements of the Securities Act, and any amendments or
supplements thereto and such other documents as the Holders offering Registrable
Securities may reasonably request in order to facilitate the disposition of the
Registrable Securities after the Registration Statement has been declared
effective. The Company shall use reasonable efforts to notify the Holders when
a prospectus relating to Registrable Securities is required to be delivered
under the Securities Act, to notify the Holders of the happening of any event as
a result of which the prospectus included in the Registration Statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing, to promptly
file such amendments and supplements as may be required on account of such
event, and to use its best efforts to cause each such amendment to become
effective. The Holders shall not effect sales of Registrable Securities after
receipt of notice from the Company that any such amendment or supplement is
required on account of any such event, until the amendment becomes effective or
the supplement has been filed. The Company's obligations under this Section 2.1
shall expire at such time as the Company is no longer required to maintain the
effectiveness of the Registration Statement as provided for above.
2.2 Furnish Information; Expenses. It shall be a condition
-----------------------------
precedent to the obligations of the Company in regard to the Registrable
Securities to be registered pursuant to Section 2.1 that the Holders shall
furnish to the Company such information regarding themselves, the Registrable
Securities held by them, and the intended method of disposition of the
Registrable Securities as shall be required to effect the registration of their
Registrable Securities, and shall agree to be bound by the terms of this Section
2 if such Holders are not already parties to this Agreement by means of the
execution of the form of Acknowledgment Agreement referenced in the Merger
Agreement pursuant to which the Holder has agreed to abide by the terms and
conditions of, and undertake the obligations imposed by, this Agreement.
Page 2 - REGISTRATION RIGHTS AGREEMENT
<PAGE>
2.3 Expenses of Registration. All expenses relating to registration
------------------------
of Registrable Securities (other than underwriting discounts and commissions,
transfer taxes, if any, and fees and disbursements of counsel to the Holders)
incurred in connection with the registrations, filings or qualifications
pursuant to Section 2.1 above, including without limitation all registration,
filing and qualification fees, printing and accounting fees, and fees and
disbursements of counsel for the Company, shall be borne by the Company.
3. Indemnification.
---------------
3.1 Indemnification by the Company. To the extent permitted by law,
------------------------------
the Company shall indemnify and hold harmless each Holder against any losses,
claims, damages, or liabilities (joint or several) to which they may become
subject under the Securities Act, the Securities Exchange Act of 1934, as
amended (the "1934 Act"), or other federal or state law, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise out of or
are based upon any of the following statements, omissions or violations (a
"Violation"):
(a) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, including any
preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto,
(b) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, or
(c) any violation or alleged violation by the Company of the
Securities Act, the 1934 Act, any state securities law, or any rule or
regulation promulgated under the Securities Act, the 1934 Act, or any
state securities law.
The Company shall reimburse each such Holder for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, or action. The indemnity agreements
contained in this Section 3.1 shall not apply to amounts paid in settlement of
any loss, claim, damage, liability, or action if such settlement is effected
without the consent of the Company (which consent shall not be unreasonably
withheld), nor shall the Company be liable to a Holder in any such case for any
such loss, claim, damage, liability, or action (A) to the extent that it arises
out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by or on behalf of such Holder, underwriter or
controlling person or (B) in the case of a sale directly by a Holder (including
a sale of such Registrable Securities through any underwriter retained by such
Holder to engage in a distribution solely on behalf of such Holder), if such
untrue statement or alleged untrue statement or omission or alleged omission was
contained in a preliminary prospectus and corrected in a final or amended
prospectus, and such Holder failed to deliver a copy of the final or amended
prospectus at or prior to the confirmation of the sale of the Registrable
Securities to the person asserting any such loss, claim, damage or liability in
any case where such delivery is required by the Securities Act.
Page 3 - REGISTRATION RIGHTS AGREEMENT
<PAGE>
3.2 Indemnification by Holders. To the extent permitted by law,
--------------------------
each Holder shall indemnify and hold harmless the Company, each of its
directors, each of its officers who have signed the Registration Statement, each
person, if any, who controls the Company within the meaning of the Securities
Act, each agent and underwriter for the Company, each other Holder selling
Registrable Securities covered by the Registration Statement, each director,
officer, partner, agent, and employee of such other Holder or underwriter, and
each person, if any, who controls such other Holder or underwriter, against any
losses, claims, damages, or liabilities (joint or several) to which the Company
or any such director, officer, partner, agent, employee, controlling person,
underwriter, or other Holder may become subject, under the Securities Act, the
1934 Act, or other federal or state law, insofar as such losses, claims, damages
or liabilities (or actions in respect thereto) arise out of or are based upon
any Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by or on behalf of such Holder expressly for use in connection with
such registration; and each such Holder shall reimburse any legal or other
expenses reasonably incurred by the Company or any such director, officer,
partner, agent, employee, controlling person, underwriter, or other Holder, in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this subsection 3.2 shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability, or action if such settlement is effected without
the consent of such Holder, which consent shall not be unreasonably withheld;
and provided, further, that the indemnification obligation of each Holder shall
be limited to the aggregate public offering price of the Registrable Securities
sold by such Holder pursuant to such registration.
3.3 Notice, Defense and Counsel. Promptly after receipt by an
---------------------------
indemnified party under this Section 3 of notice of the commencement of any
action (including any governmental action), such indemnified party shall, if a
claim in respect thereof is to be made against any indemnifying party under this
Section 3, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume and control the
defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party shall have the right to retain its own
counsel, with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
3 to the extent of such prejudice, but the omission so to deliver written
notice to the indemnifying party shall not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 3.
3.4 Survival of Rights and Obligations. The obligations of the
----------------------------------
Company and the Holders under this Section 3 shall survive the completion of
any offering of Registrable Securities covered by the Registration Statement.
Page 4 - REGISTRATION RIGHTS AGREEMENT
<PAGE>
4. Miscellaneous.
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4.1 Entire Agreement: Successors and Assigns. This Agreement
----------------------------------------
constitutes the entire contract among the Company, Carriage House, and the
Holders relative to the subject matter hereof. Any previous oral or written
agreement among any two or more of the Company, Carriage House, and/or the
Holders concerning registration rights is superseded by this Agreement. Subject
to the exceptions specifically set forth in this Agreement, the terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective executors, administrators, heirs,
successors and assigns.
4.2 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Oregon (without giving
effect to the choice-of-law provisions thereof).
4.3 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
4.4 Headings. The headings of the Sections of this Agreement are
--------
for convenience and shall not by themselves determine the interpretation of this
Agreement.
4.5 Notices. Any notice required or permitted hereunder shall be
-------
given in writing and shall be conclusively deemed effectively given upon
personal delivery, or five days after deposit in the United States mail, by
registered or certified mail, postage prepaid, addressed (i) if to the Company
or Carriage House, as set forth in the Merger Agreement and (ii) if to a Holder,
at such Holder's address as set forth on Schedule A, or at such other address as
the Company or such Holder may designate by ten (10) days' advance written
notice to the Company (if a Holder has a change of address) or to each Holder
(if the Company changes its address).
Page 5 - REGISTRATION RIGHTS AGREEMENT
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
ASSISTED LIVING CONCEPTS, INC.
By: /s/ Keren Brown Wilson
---------------------------
Keren Brown Wilson, President
CARRIAGE HOUSE ASSISTED LIVING, INC.
By: /s/ Robert V. Seibel
--------------------------
Robert V. Seibel, President
Page 6 - REGISTRATION RIGHTS AGREEMENT
<PAGE>
EXHIBIT 5.1
SCHRECK MORRIS
300 SOUTH FOURTH STREET, SUITE 1200
LAS VEGAS, NEVADA 89101
(702) 382-2101
December 31, 1997
ASSISTED LIVING CONCEPTS, INC.
9955 S.E. Washington, Suite 201
Portland, Oregon 97216
Re: Assisted Living Concepts, Inc.
Ladies and Gentlemen:
In connection with the registration of 306,135 shares of common stock,
par value $.01 per share (the "Shares") of Assisted Living Concepts, Inc. a
Nevada corporation (the "Company"), under the Securities Act of 1933, as amended
(the "Act"), pursuant to a Registration Statement on Form S-3 (File No. 333-
______) as filed with the Securities and Exchange Commission (the "Commission")
on December 31, 1997 (the "Registration Statement"), you have requested our
opinion with respect to the matters set forth below.
In our capacity as your special counsel, we are familiar with the
proceedings taken and proposed to be taken by the Company in connection with the
authorization, issuance and sale of the Shares, and for purposes of this
opinion, have assumed such proceedings will be timely completed in the manner
presently proposed. In addition, we have made such legal and factual
examinations and inquiries, including an examination of originals or copies
certified or otherwise identified to our satisfaction as being true
reproductions of originals of such documents, corporate records and other
instruments, and have obtained from officers of the Company and agents thereof
such certificates and other representations and assurances, as we have deemed
necessary or appropriate for the purposes of this opinion.
In such examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, the
legal capacity of natural persons executing such documents, the authenticity or
the conformity to authentic original documents of all documents submitted to us
as certified, photostatic or facsimile copies, and the accuracy and completeness
of all corporate records made available to us by the Company.
Our opinion herein is limited to the effect on the subject transaction
only of the laws of the State of Nevada. We express no opinion concerning and
assume no responsibility regarding the applicability to, or the effect thereon,
of the laws of any other jurisdiction, or as to any matters of
<PAGE>
municipal law or the laws of any local agencies within the state, and we express
no opinion herein concerning any federal laws, including any federal securities
laws, or any state securities or blue sky laws.
On the basis of the foregoing, we are of the opinion that, as of the
date hereof, the Shares have been duly and validly authorized and issued, and
are fully paid and non-assessable.
We hereby consent to this filing of this opinion as an exhibit to the
Registration Statement and the reference to this firm under the heading "Legal
Matters." In giving this consent, we do not admit that we are in the category
of persons whose consent is required under Section 7 of the Act or the rules and
regulations of the Commission promulgated thereunder.
Very truly yours,
SCHRECK MORRIS
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our reports
dated March 17, 1995, which appear on pages 30 and 31 of Assisted Living
Concepts, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1996
relating to the financial statements of Assisted Living Concepts Group (which is
comprised of Assisted Living Facilities, Inc., a subchapter S Corporation,
Madras Elder Care (dba Aspen Court), a general partnership, and Lincoln City
Partners, a general partnership) for the eleven months ended November 30, 1994,
and of Assisted Living Concepts, Inc. for the one month period ended December
31, 1994. We also consent to the reference to us under the heading "Experts" in
such Prospectus.
/s/ Price Waterhouse LLP
- ------------------------
PRICE WATERHOUSE LLP
Portland, Oregon
December 29, 1997
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Assisted Living Concepts, Inc.:
We consent to the use of our report incorporated herein by reference and to the
reference of our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
Portland, Oregon
December 30, 1997
