<PAGE>
FILED PURSUANT TO RULE 424(b)(2)
REGISTRATION NO. 333-43521
PROSPECTUS
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 January 7,
1998, the last reported sale price of the Common Stock, as reported by AMEX, was
$20.50 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 JANUARY 9, 1998
<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.
2
<PAGE>
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,
3
<PAGE>
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%,
4
<PAGE>
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.
5
<PAGE>
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
6
<PAGE>
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
Maximum Common Stock/
Number of Number of Percentage of
Shares of Shares Class to be
Common Stock to be Sold Owned After
Owned Prior to Pursuant to this Completion of
Name the Offering Prospectus 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
Maximum Common Stock/
Number of Number of Percentage of
Shares of Shares Class to be
Common Stock to be Sold Owned After
Owned Prior to Pursuant to this Completion of
Name the Offering Prospectus 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 5,000
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 4.
/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
--------------
January 9, 1998
================================================================================
