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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 11, 1998
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. [_]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===========================================================================================================================
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>
5.625% Convertible Subordinated
Debentures and shares of Common Stock, $75,000,000 $1,000 $75,000,000 $22,125
par value $.01 per share, issuable
upon conversion thereof........................
===========================================================================================================================
</TABLE>
---------------------------
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.
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.
<PAGE>
PROSPECTUS SUBJECT TO COMPLETION, DATED MAY 11, 1998
$75,000,000
5.625% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2003
(INTEREST PAYABLE MAY 1 AND NOVEMBER 1)
2,864,344 SHARES
COMMON STOCK, PAR VALUE $.01 PER SHARE
ASSISTED LIVING CONCEPTS, INC.
__________________
This Prospectus relates to $75,000,000 aggregate principal amount of 5.625%
Convertible Subordinated Debentures due 2003 (the "Debentures") of Assisted
Living Concepts, Inc., a Nevada corporation (the "Company"), issued in a private
placement on April 13, 1998 (the "Offering") and the 2,864,344 shares of common
stock, par value $.01 per share (the "Common Stock"), of the Company which are
issuable upon conversion of the Debentures (the "Conversion Shares"). The
Debentures or the shares of Common Stock issued upon conversion of the
Debentures may be offered from time to time for the account of holders of
Debentures named herein (the "Selling Debentureholders"). See "Plan of
Distribution." The Company will not receive any proceeds from this Offering.
The aggregate principal amount of Debentures that may be offered by the
Selling Debentureholders pursuant to this Prospectus is $75,000,000. Information
concerning such Selling Debentureholders may change from time to time and will
be set forth in Supplements to this Prospectus. Accordingly, the aggregate
principal amount of Debentures offered hereby may decrease. As of the date of
this Prospectus, the aggregate principal amount of Debentures outstanding is
$75,000,000.
The Debentures are convertible into Common Stock at any time at or prior to
maturity, unless previously redeemed, at a conversion price of $26.184 per
share, subject to adjustment under certain circumstances. The Debentures have
been eligible for trading in the Private Offerings, Resales and Trading through
Automated Linkages ("PORTAL") Market since issuance, but were not traded
publicly prior to ______, 1998, when the Debentures were registered under the
Securities Act of 1933, as amended (the "Securities Act"). Since ______, 1998
the Debentures have traded in the over-the-counter market. Application has been
made to list the Debentures and the Conversion Shares on the American Stock
Exchange ("AMEX"), subject to notice of issuance. The Common Stock is traded on
AMEX under the symbol "ALF." On May 7, 1998, the last reported sale price of
the Common Stock, as reported by AMEX, was $17.50 per share.
The Debentures are redeemable, in whole or in part, at the option of the
Company, for cash, at any time on or after May 15, 2001 on at least 30 days'
notice at a redemption price equal to 100% of the principal amount thereof plus
accrued interest. See "Description of the Debentures."
The Debentures are unsecured and are effectively subordinated in right of
payment to all present and future Senior Indebtedness (as defined) of the
Company and will be effectively subordinated to all indebtedness and other
liabilities of subsidiaries of the Company. See "Description of Debentures."
There is no limitation on the amount of Senior Indebtedness or other
Indebtedness that the Company or its subsidiaries may incur in the future. At
February 28, 1998 the Company's outstanding Senior Indebtedness totaled
approximately $32.5 million and liabilities of the Company's subsidiaries
totaled approximately $19.1 million.
SEE "RISK FACTORS" COMMENCING ON PAGE 4 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 Debentures and Conversion Shares may be offered for sale by the Selling
Debentureholders 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
Debentures or Conversion Shares
<PAGE>
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 Debentureholders 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 Debentureholders and/or
the purchasers of the Debentures and Conversion Shares for whom they may act as
agent or to whom they sell Debentures or Conversion 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 Debentureholders and any broker-dealers, agents or underwriters
that participate with the Selling Debentureholders in the distribution of the
Debentures or shares of Common Stock 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
Debentures or shares of Common Stock purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
THE DATE OF THIS PROSPECTUS IS __________, 1998
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AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the 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 Debentures and
Conversion 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 and as amended by Form 10-K/A for the fiscal year ended
December 31, 1997, (ii) the Company's 1998 Proxy Statement on Schedule 14-A, and
(iii) 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 this Offering 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 Rhonda S. Marsh, Chief
Accounting 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 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 60 to 70
residences in 1998. The Company estimates that the losses to be incurred during
1998 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
$300,000 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 December 31, 1997, 17 residences owned or leased 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 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 common stock and convertible subordinated
debenture offerings in October of 1997 and the completion of the acquisitions of
Carriage House Assisted Living, Inc. and Home and Community Care, Inc., 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 Real Estate
Investment Trusts 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 recent 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 12 to 18 months, it believes that these measures will positively affect its
long-term prospects.
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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, 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;
LEVERAGE
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 new facilities that will be developed during 1998 is between $160 million
and $190 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 March 31, 1998 totaled approximately $27.5 million (adjusted to give effect
to the issuance of the Debentures). These fixed payment obligations will
significantly increase as the Company pursues its development plan. Failure to
meet these obligations may result 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. 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.
The Company is significantly leveraged and at March 31, 1998 had
approximately $201 million (adjusted to give effect to the issuance of the
Debentures) of total long term indebtedness outstanding. The degree to which the
Company is leveraged could have important consequences to holders of the
Debentures, including the following: (i) the Company's ability to obtain
additional financing for working capital, capital expenditures, acquisitions or
general corporate purposes may be impaired; (ii) the Company must pay interest
on the Debentures and interest and principal on its other indebtedness, leaving
less funds for other
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purposes; (iii) the Company may be at a disadvantage compared to less leveraged
competitors; and (iv) the Company could be more vulnerable to a downturn in
general economic conditions.
GEOGRAPHIC CONCENTRATION, DEPENDENCE ON STATE MEDICAID WAIVER PROGRAMS
As of December 31, 1997, 28.5% of the Company's properties are in Texas,
15.4% are in Oregon, 13.1% in Ohio and 10.8% in 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 years ended December 31, 1995, 1996 and 1997, direct payments
received from state Medicaid agencies accounted for approximately 21.4%, 13.8%,
and 11.3%, respectively of the Company's revenue while the tenant-paid portion
of Medicaid residents accounted for approximately 9.6%, 7.6%, and 6.0%,
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 in the future. 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.
SUBORDINATION OF DEBENTURES
The Debentures are unsecured and subordinated in right of payment in full
to all existing and future Senior Indebtedness of the Company. As a result of
such subordination, in the event of bankruptcy, liquidation or reorganization of
the Company, or upon the acceleration of any Senior Indebtedness, the assets of
the Company will be available to pay obligations on the Debentures only after
all Senior Indebtedness has been paid in full, and there may not be sufficient
assets remaining to pay amounts due on any or all of the Debentures then
outstanding. The Company expects from time to time to incur additional
indebtedness, including indebtedness that would constitute Senior Indebtedness.
The Debentures are also structurally subordinated to the liabilities, including
trade payables, of the Company's subsidiaries. In addition, certain of the
Company's operations are conducted by subsidiaries and, subject to stockholder
approval, the Company is exploring the creation of a holding company structure
which could result in substantially all of the Company's assets and operations
being held in operating subsidiaries. As a result of this action, the
Debentures would be effectively subordinated to the liabilities of such
subsidiaries. The Indenture does not prohibit or limit the incurrence of
additional indebtedness, including Senior Indebtedness, by the Company or its
subsidiaries and the incurrence of additional indebtedness by the Company or its
subsidiaries could adversely affect the Company's ability to pay its obligation
on the Debentures. As of February 28, 1998 the Company's outstanding Senior
Indebtedness totaled approximately $32.5 million and liabilities of the
Company's subsidiaries totaled approximately $19.1 million.
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 years ended December 31, 1995, 1996 and 1997, the Company received, as a
percentage of total revenue, under Medicaid programs 21.4%, 13.8%, and 11.3%,
respectively. Furthermore, there can be no assurance the Company's
proportionate 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
6
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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 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.
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.
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 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, the financial condition, results of
operations and prospects.
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
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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 markets
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, Ms. Marsh, its Vice President/Controller and Chief Accounting
Officer, Mrs. Baldwin, its Director of Operations, Mr. Gordon, its Vice
President/Treasurer, Ms. Haile, its Vice President/Financial Operations, Ms.
Campbell, its Senior Vice President/General Counsel and Ms. Gorshe, its Vice
President/Community Relations. The Company has entered into employment
agreements with Mr. McBride, Dr. Wilson and its senior executive officers 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 would 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 other Company's properties reveal all environmental
liabilities.
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 fluctuation also may adversely affect the market price of the
Common Stock.
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 February 28, 1998, the Company owned, leased or managed a total of 139
operating assisted living residences representing an aggregate of 5,235 units.
Of these residences, the Company owned 71 residences (2,727 units) and leased 68
residences (2,508 units). For the three months ended December 31, 1997, the
Company's 54 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 94.5% and an average monthly rental rate of approximately
$1,753 per unit. The Company's 105 residences (3,875 units) in operation for the
three months ended December 31, 1997 had an average occupancy rate of
approximately 73.8% and an average monthly rental rate of approximately $1,790
per unit.
The Company is currently developing and, to a lesser extent, seeking to
acquire additional assisted living residences in Arizona, Georgia, Indiana,
Louisiana, New Jersey, Ohio, Oregon, Pennsylvania, South Carolina, Texas,
Washington and other states with regulatory and reimbursement climates which the
Company believes are favorable. In addition, the Company is adding units to
expand certain of its assisted living residences in Oregon and Texas.
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.
RATIO OF EARNINGS TO FIXED CHARGES
Set forth below is the ratio of earnings to fixed charges for the Company
for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
PRO FORMA
1995 1996 1997 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
(1) (1) (1) (1)
</TABLE>
__________________
(1) For the period ended December 31, 1995, 1996 and 1997 fixed charges
exceeded earnings by $1,152,000, $2,039,000 and $1,076,000 actual and
$5,295,000 pro forma to give effect to the issuance of the Debentures.
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<PAGE>
USE OF PROCEEDS
The proceeds from the sale of the Debentures and shares of Common Stock
offered hereby are solely for the account of the Selling Debentureholders.
Accordingly, the Company will receive none of the proceeds from sales thereof.
SELLING DEBENTUREHOLDERS
The Debentures being offered hereby were acquired by the Selling
Debentureholders in connection with a private placement of the Debentures by the
Company on April 13, 1998 pursuant to Rule 144A and Regulation D under the
Securities Act or in permitted resale transactions from the initial purchasers
of the Debentures (the "Initial Purchasers") or holders acquiring such
Debentures from prior holders thereof in further permitted resale transactions.
The following table sets forth information concerning the principal amount of
Debentures beneficially owned by each Selling Debentureholder which may be
offered from time to time pursuant to this Prospectus. Other than as a result of
the ownership of Debentures or Common Stock, none of the Selling
Debentureholders has had any material relationship with the Company within the
past three years, except as noted herein. The table has been prepared based upon
information furnished to the Company by the Trustee for the Debentures and by
the Depository Trust Company.
<TABLE>
<CAPTION>
Principal Principal
Amount of Amount of
Debentures Debentures Percent of
Beneficially That May Outstanding
Name Owned be Sold Debentures
---- ----- ------- ----------
<S> <C> <C> <C>
The Bank of New York $ 4,690,000 $ 4,690,000 6.2%
Bankers Trust Company 2,108,000 2,108,000 2.8
Bear, Stearns Securities Corp. 9,500,000 9,500,000 12.6
Brown Brothers Harriman & Co. 3,950,000 3,950,000 5.2
Chase Manhattan Bank 13,550,000 13,550,000 18.0
Citibank, N.A. 1,000,000 1,000,000 1.3
Corestates Bank, N.A. 2,000,000 2,000,000 2.6
Crestar Bank 1,500,000 1,500,000 2.0
Custodial Trust Company 3,835,000 3,835,000 5.1
Donaldson, Lufkin and Jenrette
Securities Corporation 500,000 500,000 *
Fiduciary Trust Company
International 120,000 120,000 *
First Union National Bank 1,000,000 1,000,000 1.3
Goldman, Sachs & Co. 1,500,000 1,500,000 2.0
Goldman, Sachs International 1,000,000 1,000,000 1.3
Investors Bank & Trust/M.F.
Custody 150,000 150,000 *
Lehman Brothers, Inc. 3,340,000 3,340,000 4.4
</TABLE>
11
<PAGE>
<TABLE>
Principal Principal
Amount of Amount of
Debentures Debentures Percent of
Beneficially That May Outstanding
Name Owned be Sold Debentures
---- ----- ------- ----------
<S> <C> <C> <C>
Lewco Securities Corp. 2,800,000 2,800,000 3.7
Lehman Brothers International 2,000,000 2,000,000 2.6
Morgan Stanley & Co. Incorporated 500,000 500,000 *
Norwest Bank Minnesota, National
Association 300,000 300,000 *
Northern Bank Minnesota, National
Association 1,635,000 1,635,000 2.2
PNC Bank, National Association 750,000 750,000 1.0
SSB - Custodian 14,845,000 14,845,000 19.8
Suntrust Bank, Atlanta 130,000 130,000 *
U.S. Bank National Association 1,700,000 1,700,000 2.2
Wachovia Bank, N.A. 605,000 605,000 *
</TABLE>
_________________________
* less than 1%
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<PAGE>
PLAN OF DISTRIBUTION
The Company will not receive any of the proceeds from this Offering. The
Company has been advised by the Selling Debentureholders that the Selling
Debentureholders may sell all or a portion of the Debentures and shares of
Common Stock 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
Debentures or Conversion 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 Debentureholders may also make private sales directly or
through a broker or brokers. Alternatively, any of the Selling Debentureholders
may from time to time offer the Debentures or shares of Common Stock through
underwriters, including any of the initial purchasers of the Debentures, dealers
or agents, who may receive compensation in the form of underwriting discounts,
commissions or concessions from the Selling Debentureholders and the purchasers
of the Debentures or shares of Common Stock for whom they may act as agent. To
the extent required, the aggregate principal amount of Debentures and number of
shares of Common Stock to be sold, the names of the Selling Debentureholders,
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
Debentureholders from the sale of the Debentures and Common Stock offered by the
Selling Debentureholders hereby will be the purchase price of such Debentures
and shares of Common Stock less any commissions. There is no assurance that the
Selling Debentureholders will sell any or all of the Debentures or shares of
Common Stock offered hereby.
The Debentures and the shares of Common Stock issued upon conversion of the
Debentures may be sold from time to time in one or more transactions at fixed
offering prices, which may be changed, or at varying prices determined at the
time of sale or at negotiated prices. Such prices will be determined by the
holders of such securities or by agreement between such holders and underwriters
or dealers who may receive fees or commissions in connection therewith.
The Debentures are listed on AMEX. However, there can be no assurance that
an active market for the Debentures will develop.
In order to comply with the securities laws of certain states, if
applicable, the Debentures and Conversion Shares will be sold in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain states, the Debentures and Conversion 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 Debentureholders and any broker-dealers, agents or underwriters
that participate with the Selling Debentureholders in the distribution of the
Debentures or Conversion 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
Debentures or shares of Common Stock purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
The Debentures were originally sold on April 13, 1998 in a private
placement at a purchase price of 100% of their principal amount. The Company
agreed to indemnify and hold the initial purchasers and certain subsequent
holders of the Debentures harmless against certain liabilities under the
Securities Act that could arise in connection with the sale of the Debentures by
the Initial Purchasers or such subsequent holders.
The Company will pay all expenses incident to the offering and sale of the
Debentures and Common Stock to the public other than underwriting discounts and
selling commissions and fees. See "Selling Debentureholders."
DESCRIPTION OF DEBENTURES
The Debentures were issued under an Indenture, dated as of April 13, 1998
(the "Indenture"), executed by the Company and Harris Trust and Savings Bank, as
the trustee under the Indenture (the "Trustee"). The terms of
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<PAGE>
the Debentures include those stated in the Indenture and those made a part of
the Indenture by reference to the Trust Indenture Act of 1939, as amended. A
copy of the Indenture has been filed with the Registration Statement.
The following is a summary of certain provisions of the Indenture and does
not purport to be complete and is qualified in its entirety by reference to the
detailed provisions of the Indenture, including the definitions of certain terms
therein to which reference is hereby made, for a complete statement of such
provisions. Wherever particular provisions or sections of the Indenture or
terms defined therein are referred to herein, such provisions or definitions are
incorporated herein by reference.
GENERAL
The Debentures are unsecured general obligations of the Company, subject to
the rights of holders of Senior Indebtedness of the Company, and will mature on
May 1, 2003. The Debentures are limited to $75.0 million aggregate principal
amount and will bear interest payable semiannually on May 1 and November 1 of
each year, commencing November 1, 1998, at the per annum rate of 5.625%. The
first payment will be for the period from the date of delivery to November 1,
1998. The Company will pay interest on the Debentures to the persons who are
registered holders of Debentures at the close of business on the April 15 or
October 15 preceding the interest payment date. Principal (and premium, if any)
and interest will be payable, the Debentures will be convertible and
exchangeable, and transfers thereof will be registerable, at the office or
agency of the Company maintained for such purposes, initially at the offices of
the Trustee. The Company may pay principal and interest by check and may mail
an interest check to a holder's registered address. Holders must surrender
Debentures to a Paying Agent to collect principal payments.
Initially, the Trustee will act as Paying Agent, Registrar and Conversion
Agent. The Company may change any Paying Agent, Registrar, Conversion Agent or
co-registrar upon prior written notice to the Trustee and may act in any such
capacity itself.
DELIVERY AND FORM OF DEBENTURES
The Debentures were deposited on the Closing Date with the Depository and
registered in the name of Cede & Co., as nominee of the Depository (such nominee
being referred to herein as the "Global Security Holder"). The Debentures were
eligible for trading on PORTAL at the time of issuance.
The Depository is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depository's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depository's
Participants include securities brokers and dealers, banks and trust companies,
clearing corporations and certain other organizations. Access to the
Depository's system is also available to other entities such as bank brokers,
dealers and trust companies (collectively, the "Indirect Participants" or the
"Depository's Indirect Participants") that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly. Persons who are
not Participants may beneficially own securities held by or on behalf of the
Depository only through the Depository's Participants or the Depository's
Indirect Participants.
So long as the Global Security Holder is the registered owner of any
Debentures, the Global Security Holder will be considered the sole holder under
the Indenture of any Debentures evidenced by the Global Security. Beneficial
owners of Debentures evidenced by such Global Securities will not be considered
the owners or holders thereof under the Indenture for any purpose, including
with respect to the giving of any directions, instructions or approvals to the
Trustee thereunder. Neither the Company nor the Trustee will have any
responsibility or liability for any aspect of the records of the Depository or
for maintaining, supervising or reviewing any records of the Depository relating
to the Debentures.
Payments in respect of the principal or premium, if any, and interest on
any Debentures registered in the name of the Global Security Holder on the
applicable record date will be payable to the Trustee to or at the direction of
such Global Security Holder in its capacity as the registered holder under the
Indenture. Under the terms of the Indenture, the Company and the Trustee may
treat the persons in whose names the Debentures are registered as the owner
thereof for the purpose of receiving such payments. Consequently, neither the
Company nor the Trustee has
14
<PAGE>
or will have any responsibility or liability for the payment of such amounts to
beneficial owners of Debentures (including principal or premium, if any, and
interest). The Company believes, however, that it is currently the policy of the
Depository immediately to credit the accounts of the relevant Participants with
such payments, in amounts proportionate to their respective holdings of
beneficial interests in the relevant security as shown on the records of the
Depository. Payments by the Depository's Participants and the Depository's
Indirect Participants to the beneficial owners of Debentures will be governed by
standing instructions and customary practice and will be the responsibility of
the Depository's Participants or the Depository's Indirect Participants.
The Debentures are in fully registered form without coupons in
denominations of $1,000 or any multiples thereof. A holder may transfer or
exchange Debentures in accordance with the Indenture. No service charge will be
made for any registration or transfer, exchange or conversion of Debentures,
except for any tax or other governmental charges that may be imposed in
connection therewith. The Registrar need not transfer or exchange any
Debentures selected for redemption. Also, in the event of a partial redemption,
it need not transfer or exchange any Debentures for a period of 15 days before
selecting Debentures to be redeemed. The Indenture does not contain any
provision requiring the Company to repurchase the Debentures at the option of
the holders thereof in the event of a leveraged buyout, recapitalization or
similar restructuring of the Company, even though the Company's creditworthiness
and the market value of the Debentures may decline significantly as a result of
such transaction. The Indenture does not protect holders of the Debentures
against any decline in credit quality, whether resulting from any such
transaction or from any other cause. The registered holder of a Debenture may
be treated as its owner for all purposes.
CONVERSION RIGHTS
The holders of the Debentures are entitled at any time after the
Registration Date and prior to maturity, subject to prior redemption, to convert
the Debentures or portions thereof (which are $1,000 or multiples thereof) into
shares of Common Stock at the conversion price of $26.184 per share (subject to
adjustments as described below). No payment or adjustment will be made for
accrued interest on a converted Debenture. If any Debenture not called for
redemption is converted between a record date for the payment of interest and
the next succeeding interest payment date, such Debenture must be accompanied by
funds equal to the interest payable to the registered holder on such interest
payment date on the principal amount so converted. The Company will not issue
fractional interests in shares of Common Stock upon conversion of the Debentures
and instead will deliver a check for the fractional share based upon the market
value of the Common Stock on the last trading date prior to the conversion date.
If the Debentures are called for redemption, conversion rights will expire at
the close of business on the redemption date, unless the Company defaults in
payment due upon such redemption.
The conversion price is subject to adjustments, as set forth in the
Indenture, in certain events, including the payment of dividends or
distributions on the Company's Common Stock in shares of capital stock;
subdivisions or combinations of the Common Stock into a greater or smaller
number of shares of Common Stock; reclassification of the shares of Common Stock
resulting in an issuance of any shares of the Company's capital stock;
distribution of rights or warrants to all holders of Common Stock entitling them
to purchase Common Stock at less than the then current price at that time; and
the distribution to all holders of Common Stock of assets, excluding certain
cash dividends and distributions, or debt securities or any rights or warrants
to purchase securities of the Company; provided, however, that no adjustment
will be required if holders of the Debentures receive notice of and are allowed
to participate in such transactions. No adjustment will be required for rights
to purchase Common Stock pursuant to a Company plan for reinvestment of
dividends or interest, or for a change in the par value of the Common Stock. To
the extent that Debentures become convertible into cash, no adjustment will be
required thereafter as to cash. No adjustment in the conversion price need be
made unless such adjustment would require a change of at least 1.0% in the
conversion price; however, any adjustment that would otherwise be required to be
made shall be carried forward and taken into account in any subsequent
adjustment. The Company may voluntarily reduce the conversion price for a
period of time.
If the Company pays dividends on the Common Stock in shares of capital
stock or subdivides or combines the Common Stock or issues by reclassification
of its Common Stock any shares of its capital stock or merges with, or transfers
or leases substantially all of its assets to, another corporation or trust, the
holders of the Debentures then outstanding will be entitled thereafter to
convert such Debentures into the kind and amount of shares of capital stock,
15
<PAGE>
other securities, cash or other assets which they would have owned immediately
after such event had such Debentures been converted before the effective date of
the transaction.
Any Debentures called for redemption, unless surrendered for conversion on
or before the close of business on the redemption date, are subject to being
purchased from the holder of such Debentures at the redemption price by one or
more investment banks or other purchasers who may agree with the Company to
purchase such Debentures and convert them into Common Stock of the Company.
SUBORDINATION OF DEBENTURES
The indebtedness evidenced by the Debentures is subordinated and junior in
right of payment to the extent set forth in the Indenture to the prior payment
in full of amounts then due on all Senior Indebtedness. No payment shall be
made by the Company on account of principal of (or premium if any) or interest
on the Debentures or on account of the purchase or other acquisition of
Debentures, if there shall have occurred and be continuing a default with
respect to any Senior Indebtedness permitting the holders to accelerate the
maturity thereof, or with respect to any Senior Indebtedness and such default
shall be the subject of a judicial proceeding, or the Company shall have
received notice of such default from certain authorized persons, unless and
until such default or event of default shall have been cured or waived or shall
have ceased to exist. By reason of these provisions, in the event of default on
any Senior Indebtedness, whether now outstanding or hereafter issued, payments
of principal of (and premium, if any) and interest on the Debentures may not be
permitted to be made until such Senior Indebtedness is paid in full, or the
event of default on such Senior Indebtedness is cured or waived.
Upon any acceleration of the principal of the Debentures or any
distribution of assets of the Company upon any receivership, dissolution,
winding-up, liquidation, reorganization or similar proceedings of the Company,
whether voluntary or involuntary, or in bankruptcy or insolvency, all amounts
due or to become due upon all Senior Indebtedness must be paid in full before
the holders of the Debentures or the Trustee are entitled to receive or retain
any assets so distributed in respect of the Debentures. By reason of this
provision, in the event of insolvency, holders of the Debentures may recover
less, ratably, than holders of Senior Indebtedness.
"Senior Indebtedness" is defined to mean the principal, premium, if any,
interest on and all other amounts payable under or in respect of Indebtedness
(as defined in the Indenture) of the Company (other than Indebtedness owed to a
subsidiary of the Company, Indebtedness of the Company which is expressly pari
passu with the Debentures or Indebtedness which is expressly subordinated to the
Debentures). There is no limit on the amount of Senior Indebtedness that the
Company may incur.
OPTIONAL REDEMPTION
The Company may, at its option at any time on or after May 15, 2001, redeem
all of the Debentures or some of them, on at least 30 days' but not more than 60
days' notice to each holder of Debentures to be redeemed at his or her
registered address, at a redemption price equal to 100% of the principal amount
thereof, plus accrued interest to the redemption date. The Debentures may not
be so redeemed before May 15, 2001.
CERTAIN RIGHTS TO REQUIRE REPURCHASE OF DEBENTURES BY THE COMPANY
In the event of any Change in Control of the Company occurring after the
date of issuance of the Debentures and on or prior to maturity, each holder of
Debentures will have the right, at such holder's option, to require the Company
to repurchase all or any part of such holder's Debentures on the date (the
"Repurchase Date") that is 75 days after the date the Company gives notice of
the Change in Control (as described below) at a price (the "Repurchase Price")
equal to 101% of the principal amount thereof, together with accrued and unpaid
interest to the Repurchase Date. On or prior to the Repurchase Date, the
Company is required to deposit with the Trustee or a Paying Agent an amount of
money sufficient to pay the Repurchase Price of the Debentures that are to be
repaid on the Repurchase Date. Neither the Board of Directors of the Company
nor the Trustee, acting alone or together, can modify or waive this required
repurchase of the Debentures.
16
<PAGE>
Failure by the Company to repurchase the Debentures when required under the
preceding paragraph will result in an event of default under the Indenture,
whether or not such repurchase is permitted by the subordination provisions of
the Indenture.
On or before the fifteenth day after the occurrence of a Change in Control,
the Company is obligated to mail to all holders a notice of the event
constituting, and the date of such, Change in Control, the Repurchase Date, the
date by which the repurchase right must be exercised, the Repurchase Price for
Debentures, and the procedures that a holder must follow to exercise a
repurchase right. To exercise the repurchase right, a holder of a Debenture
must deliver, on or before the tenth day prior to the Repurchase Date, written
notice to the Company (or an agent designated by the Company for such purpose)
and to the Trustee of the holder's exercise of such right, together with the
certificates evidencing the Debentures with respect to which the right is being
duly exercised, duly endorsed for transfer.
A "Change in Control" will occur when: (i) all or substantially all of the
Company's assets are sold as an entirety to any person or related group of
persons; (ii) there shall be consummated any consolidation or merger of the
Company (A) in which the Company is not the continuing or surviving corporation
(other than a consolidation or merger with a wholly-owned subsidiary of the
Company in which all Common Shares outstanding immediately prior to the
effectiveness thereof are changed into or exchanged for the same consideration)
or (B) pursuant to which the Common Stock is converted into cash, securities, or
other property, in each case other than a consolidation or merger of the Company
in which the holders of the Common Stock immediately prior to the consolidation
or merger have, directly or indirectly, at least a majority of the common stock
of the continuing or surviving corporation immediately after such consolidation
or merger; or (iii) any person, or any persons acting together that would
constitute a "group" for purposes of Section 13(d) of the Exchange Act, together
with any affiliates thereof, acquires beneficial ownership (as defined in Rule
13d-3 under the Exchange Act) of at least 50% of the total voting power of all
classes of capital shares of the Company entitled to vote generally in the
election of directors of the Company. Notwithstanding clause (iii) of the
foregoing definition, a Change in Control will not be deemed to have occurred
solely by virtue of the Company; any Subsidiary; any employee share purchase
plan, share option plan, or other share incentive plan or program; retirement
plan or automatic dividend reinvestment plan; or any substantially similar plan
of the Company or any Subsidiary or any person holding securities of the Company
for or pursuant to the terms of any such employee benefit plan, filing or
becoming obligated to file a report under or in response to Schedule 13D or
Schedule 14D-1 (or any successor schedule, form, or report) under the Exchange
Act disclosing beneficial ownership by it of shares or securities of the
Company, whether at least 50% of the total voting power referred to in clause
(iii) of the foregoing definition or otherwise. A recapitalization or a
leveraged buyout or similar transaction involving members of management or their
affiliates will constitute a Change in Control if it meets the foregoing
definition.
Notwithstanding the foregoing, a Change in Control as described above will
not be deemed to have occurred if (i) the Current Market Price of the Common
Stock on the date of a Change in Control is at least equal to 105% of the
conversion price of the Debentures in effect immediately preceding the time of
such Change in Control; or (ii) all of the consideration (excluding cash
payments for fractional shares) in the transaction giving rise to such Change in
Control to the holders of Common Stock consists of shares of common stock that
are, or immediately upon issuance will be, listed on a national securities
exchange or quoted on the Nasdaq National Market, and as a result of such
transaction the Debentures will become convertible solely into such shares of
common stock; or (iii) the consideration in the transaction giving rise to such
Change in Control to the holders of Common Stock consists of cash or securities
that are, or immediately upon issuance will be, listed on a national securities
exchange or quoted on the Nasdaq National Market, or a combination of cash and
such securities, and the aggregate fair market value of such consideration
(which, in the case of such securities, will be equal to the average of the
daily closing prices of such securities during the 10 consecutive trading days
commencing with the sixth trading day following consummation of such
transaction) is at least 105% of the conversion price of the Debentures in
effect on the date immediately preceding the closing date of such transaction.
There is no definition of the phrase "all or substantially all" as applied
to the Company's assets and used in the definition of Change in Control in the
Indenture, and there is no clear definition of the phrase under applicable law.
As a result of the uncertainty of the meaning of this phrase, in the event the
Company were to sell a significant amount of its assets, the holders and the
Company may disagree over whether the sale gives rise to the right of holders to
require the Company to repurchase the Debentures. In such event, the holders
would likely not be able to require the Company to repurchase unless and until
the disagreement were resolved in favor of the holders.
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The right to require the Company to repurchase Debentures as a result of a
Change in Control could create an event of default under Senior Indebtedness, as
a result of which any repurchase could, absent a waiver, be blocked by the
subordination provisions of the Debentures. See "Subordination of Debentures."
The Company's ability to pay cash to the holders upon a repurchase may also be
limited by certain financial covenants contained in the Company's Senior
Indebtedness.
In the event a Change in Control occurs and the holders exercise their
rights to require the Company to repurchase Debentures, the Company intends to
comply with applicable tender offer rules under the Exchange Act, including
Rules 13e-4 and 14e-1, as then in effect, with respect to any such purchase.
The Change in Control purchase feature of the Debentures may in certain
circumstances make more difficult or discourage a takeover of the Company and,
thus, the removal of incumbent management. The Change in Control purchase
feature, however, is not the result of management's knowledge of any specific
effort to accumulate Common Stock or to obtain control of the Company by means
of a merger, tender offer, solicitation, or otherwise, or part of a plan by
management to adopt a series of anti-takeover provisions. Instead, the Change in
Control purchase feature is a standard term contained in other similar debt
offerings and the specific terms of this feature resulted from negotiations
between the Company and the Underwriters. Management has no present intention to
engage in a transaction involving a Change in Control.
The foregoing provisions would not necessarily afford holders protection in
the event of highly leveraged or other transactions involving the Company that
may adversely affect holders.
MODIFICATION OF THE INDENTURE
Under the Indenture, with certain exceptions, the rights and obligations of
the Company with respect to the Debentures and the rights of holders of the
Debentures may only be modified by the Company and the Trustee with the written
consent of the holders of not less than 66-2/3% in principal amount of the
outstanding Debentures. However, without the consent of each Holder of any
Debenture affected, an amendment, waiver or supplement may not (a) reduce the
amount of Debentures whose holders may consent to an amendment; (b) reduce the
rate or change the time of payment of interest on any Debenture; (c) reduce the
principal of or change the fixed maturity of any Debenture; (d) make any
Debenture payable in money other than that stated in the Debenture; (e) change
the provisions of the Indenture regarding the right of the holders of a majority
of the Debenture to waive defaults under the Indenture or impair the right of
any holder of Debentures to institute suit for the enforcement of any payment of
principal and interest on the Debentures on and after their respective due
dates; or (f) make any change that adversely affects the right to convert any
Debenture.
EVENTS OF DEFAULT, NOTICE AND WAIVER
The following is a summary of certain provisions of the Indenture relating
to events of default notice and waiver.
The following are Events of Default under the Indenture with respect to the
Debentures: (i) default in the payment of interest on the Debentures when due
and payable which continues for 30 days; (ii) default in the payment of
principal of (and premium, if any) on the Debentures when due and payable, at
maturity, upon redemption or otherwise, which continues for five business days;
(iii) failure to perform any other covenant of the Company contained in the
Indenture or the Debentures which continues for 60 days after notice as provided
in the Indenture; (iv) acceleration of any indebtedness for money borrowed
(including obligations under leases required to be capitalized on the balance
sheet of the lessee under generally accepted accounting principles but not
including any indebtedness or obligation for which recourse is limited to
property purchased) in an aggregate principal amount in excess of $5.0 million,
whether existing on the date of the execution of the Indenture or thereafter
created, if such indebtedness is not paid or such acceleration is not annulled
within ten days after notice to the Company of such acceleration; and (v)
certain events of bankruptcy, insolvency or reorganization relating to the
Company.
If an Event of Default occurs and is continuing with respect to the
Debentures, either the Trustee or the Holders of at least a majority in
principal amount of the Debentures may declare all of the Debentures to be due
and payable immediately.
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The Company will not (i) declare or pay any dividends or make any
distribution to holders of its capital stock or (ii) purchase, redeem or
otherwise acquire or retire for value any of its Common Stock, or any warrants,
rights or options, to purchase or acquire any shares of its Common Stock (other
than the Debentures or any other convertible indebtedness of the Company that is
neither secured nor subordinated to the Debentures), if at the time any of the
aforementioned Events of Default has occurred and is continuing or would exist
immediately after giving effect to such action.
The Trustee may require indemnity reasonably satisfactory to it before it
enforces the Indenture or the Debentures. Subject to certain limitations,
holders of a majority in principal amount of the Debentures may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
holders of the Debentures notice of any default (except a default in payment of
principal or interest) if it determines that withholding notice is in their
interests. The Company is required to file with the Trustee annually an
officer's statement as to the absence of defaults in fulfilling any of its
obligations under the Indenture.
No consent of the holders of the Debentures is required for the Company to
consolidate with or merge into or transfer or lease substantially all of its
assets to another corporation or trust which assumes the obligations of the
Company under the Indenture and Debentures or for any reorganization within the
meaning of Section 368(a)(1)(B) of the Internal Revenue Code; nor is any such
consent of holders of the Debentures required for any amendment of the Indenture
or the Debentures by the Company or the Trustee to cure any ambiguity, defect or
inconsistency, or to provide for uncertificated Debentures in addition to
certified Debentures, or to make any change that does not adversely affect the
right of a holder of a Debenture.
Subject to certain conditions, any person having a beneficial interest in
either the Rule 144A Global Security or the Accredited Investor Global Security
may, upon request to the Trustee, exchange such beneficial interest for
Debentures in the form of certificated Debentures. Upon any such issuance, the
Trustee is required to register such certificated Debentures in the name of, and
cause the same to be delivered to, such person or persons (nominee of any
thereof). All such certificated Debentures will be subject to the legend
requirements set forth in the Indenture. In addition, if (i) the Company
notifies the Trustee in writing that the Depository is no longer willing or able
to act as a depository and the Company is unable to locate a qualified successor
within 90 days or (ii) the Company, at its option, notifies the Trustee in
writing that it elects to cause the issuance of Debentures in the form of
certificated Debentures under the Indenture, then, upon surrender by the Global
Security Holder of its Rule 144A Global Security or Accredited Investor Global
Security, as the case may be, Debentures in certificated form will be issued to
each person that the Global Security Holder and the Depository identify as being
the beneficial owner of the related Debentures.
Neither the Company nor the Trustee will be liable for any delay by the
Global Security Holder or the Depository in identifying the beneficial owners of
Debentures, and the Company and the Trustee may conclusively rely on, and will
be protected in relying on, instructions from the Global Security Holder or the
Depository for all purposes.
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
The Indenture provides that the Company may not merge or consolidate with,
or sell or convey all, or substantially all, of its assets to another person
unless: such person is a company or a trust; such person assumes by supplemental
indenture all the obligations of the Company under the Debentures and the
Indenture; and immediately after the transaction no default or Event of Default
shall exist.
MARKETABILITY
At present there is no public market for the Debentures, and it is not
likely that a market will develop after the Offering. The Debentures are being
sold pursuant to exemptions from registration under the Securities Act. The
Company is obligated to file a registration statement under the Securities Act
relating to the resale of Debentures and the Conversion Shares. However, there
can be no assurance that the Company will be able to maintain an effective
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and current registration statement as required. The absence of such a
registration statement may limit the holder's ability to sell such Conversion
Shares or could adversely affect the price at which such Conversion Shares can
be sold.
GOVERNING LAW
The Indenture and the Debentures are governed by and construed in
accordance with the laws of the State of New York.
REGISTRATION RIGHTS AGREEMENT
Pursuant to a Registration Rights Agreement entered into by the Company in
connection with the offering of the Debentures, the Debentures and the
Conversion Shares have been registered under the Securities Act with the
Securities and Exchange Commission (the "Commission"). The Company has agreed to
prepare and file such amendments and supplements to the Registration Statement
as may be necessary to keep the Registration Statement effective until all the
Debentures and the Conversion Shares have been sold thereby or until the
Debentures and the Conversion Shares are no longer, by reason of Rule 144(k)
promulgated under the Securities Act or any other rule of similar effect,
required to be registered for the sale thereof by the Purchasers. The
Registration Rights Agreement entitles the Company to suspend temporarily the
right of holders of Registrable Securities to make dispositions of Registrable
Securities pursuant to the Registration Statement to the extent the Board of
Directors determines such suspension to be necessary in light of the existence
of any undisclosed acquisition, financing activity or other material event the
disclosure of which may reasonably be expected to materially disadvantage the
Company.
DESCRIPTION OF CAPITAL STOCK
The following is a brief description of the capital stock of the Company,
Chapter 78 of the Nevada Revised Statutes (the "Nevada General Corporation Law"
or "NGCL") and the provisions contained in the Company's Articles of
Incorporation, as amended (the "Charter") and By-Laws. The summary of the terms
of the capital stock of the Company set forth below does not purport to be
complete and is subject to and qualified in its entirety by reference to the
Charter and By-Laws of the Company. See "Available Information."
GENERAL
The Company's Charter authorizes 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 April 6, 1998, the Company had 15,742,062 shares of Common
Stock issued and outstanding and 800,000 shares of classified but not issued and
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 action 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. The
shares of Common Stock offered hereby will be, when issued and paid for, fully
paid and non-assessable.
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.
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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 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.
The Preferred Stock and the variety of characteristics that the Board of
Directors may assign to 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.
SERIES A PREFERRED STOCK
On July 15, 1997, the Board of Directors created a class of Preferred
Stock, par value $0.01 per share, consisting of 800,000 shares and designated as
Series A Junior Participating Preferred Stock (the "Series A Preferred Stock").
Holders of shares of Series A Preferred Stock are entitled to receive quarterly
dividends in preference to the holders of Common Stock and any other stock
ranking junior to the Series A Preferred Stock, in an amount per share equal to
the greater of $1.00 or 100 times the aggregate per share amount of all cash and
non-cash dividends (except for a dividend payable in shares of Common Stock).
Such dividends shall be cumulative and do not bear interest.
Each share of Series A Preferred Stock entitles that holder thereof to 100
votes on all matters submitted to a vote of the stockholders of the Company.
Shares of Series A Preferred Stock may be issued in fractional amounts, may not
be redeemed by the Company and shall rank, with respect to the payment of
dividends and the distribution of assets upon liquidation, dissolution or
winding up, junior to all series of any other class of the Company's Preferred
Stock (except to the extent that any such other series specifically provides
that it shall rank on a parity with or junior to the Series A Preferred Stock).
If the Company enters into any consolidation, merger, combination or other
transaction in which shares of Common Stock are exchanged for or changed into
other stock or securities, cash or any other property, then each share of Series
A Preferred Stock shall at the same time be similarly exchanged or changed into
an amount per share equal to 100 times the aggregate amount of stock,
securities, cash or any other property into which or for which each share of
Common Stock is changed or exchanged. Any shares of Series A Preferred stock
purchased or otherwise acquired by the Company must be promptly canceled and
upon such cancellation will become authorized but unissued shares of Preferred
Stock which may be reissued as part of a new series of Preferred 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 Preferred Stock at an exercise price of $54.00, subject to certain
anti-dilution adjustments (the "Purchase Price"). The Rights will be
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
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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 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.
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As long as the Rights are attached to the Common Stock, the Company will
issue one Right with each new share of Common Stock so that all such shares will
have attached Rights. The Company has reserved 800,000 shares of Series A
Preferred Stock for issuance upon exercise of the Rights.
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 Nevada General Corporation Law 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 Charter limits 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 Charter 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 benefitted the Company and its stockholders.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain United States federal
income tax considerations relevant to holders of the Debentures. This
discussion is based on the Internal Revenue Code of 1986, as amended (the
"Code"), Treasury Regulations, Internal Revenue Service ("IRS") rulings and
judicial decisions now in effect, all of which are subject to change (possibly
with retroactive effect) or different interpretations. This discussion does not
purport to deal with all aspects of federal income taxation that may be relevant
to a particular investor's decision to purchase the Debentures, and it is not
intended to be wholly applicable to all categories of investors, some of which,
such as dealers in securities, banks, insurance companies, tax-exempt
organizations and non-United States persons, may be subject to special rules.
In addition, this discussion is limited to persons that purchase the Debentures
in the Offering and hold the Debentures as a "capital asset" within the meaning
of Section 1221 of the Code and not as part of a "hedge," "straddle,"
"conversion transaction," "synthetic security" or other integrated investment.
PROSPECTIVE PURCHASERS OF THE DEBENTURES ARE ADVISED TO CONSULT THEIR TAX
ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES AND THE COMMON STOCK.
STATED INTEREST
Stated interest on a Debenture will be taxable to a holder as ordinary
interest income at the time that such interest accrues or is received, in
accordance with the holder's regular method of accounting for federal income tax
purposes.
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CONVERSION OF DEBENTURES INTO COMMON STOCK
In general, no gain or loss will be recognized for income tax purposes on a
conversion of the Debentures into shares of Common Stock. However, cash paid in
lieu of a fractional share of Common Stock will result in taxable gain (or
loss), which will be capital gain (or loss) to the extent that the amount of
such cash exceeds (or is exceeded by) the portion of the adjusted basis of the
Debenture allocable to such fractional share. The adjusted basis of shares of
Common Stock received on conversion will equal the adjusted basis of the
Debenture converted, reduced by the portion of adjusted basis allocated to any
fractional share of Common Stock exchanged for cash. The holding period of an
investor in the Common Stock received on conversion will include the period
during which the converted Debentures were held.
The conversion price of the Debentures is subject to adjustment under
certain circumstances. See "Description of Debentures--Conversion Rights."
Section 305 of the Code and the Treasury Regulations issued thereunder may treat
the holders of the Debentures as having received a constructive distribution,
resulting in ordinary income to the extent of the Company's current earnings and
profits if and to the extent that certain adjustments in the conversion price
that may occur in limited circumstances (particularly an adjustment to reflect a
taxable dividend to holders of Common Stock) increase the proportionate interest
of a holder of Debentures in the fully diluted Common Stock, whether or not such
holder ever exercises its conversion privilege. Moreover, if there is not a
full adjustment to the conversion price of the Debentures to reflect a stock
dividend or other event increasing the proportionate interest of the holders of
outstanding Common Stock in the assets or earnings and profits of the Company,
then such increase in the proportionate interest of the holders of the Common
Stock generally will be treated as a distribution to such holders, taxable as
ordinary income to the extent of the Company earnings and profits.
MARKET DISCOUNT
Investors acquiring Debentures pursuant to this Prospectus should note that
the resale of those Debentures may be adversely affected by the market discount
provisions of sections 1276 through 1278 of the Code. Under the market discount
rules, if a holder of a Debenture purchases it at market discount (i.e., at a
price below its stated redemption price at maturity) in excess of a statutorily-
defined de minimis amount and thereafter recognizes gain upon a disposition or
retirement of the Debenture, then the lesser of the gain recognized or the
portion of the market discount that accrued on a ratable basis (or, if elected,
on a constant interest rate basis) generally will be treated as ordinary income
at the time of the disposition. Moreover, any market discount on a Debenture may
be taxable to an investor to the extent of appreciation at the time of certain
otherwise non-taxable transactions (e.g., gifts). Any accrued market discount
not previously taken into income prior to a conversion of a Debenture, however,
should (under Treasury Regulations not yet issued) carry over to the Common
Stock received on conversion and be treated as ordinary income upon a subsequent
disposition of such Common Stock to the extent of any gain recognized on such
disposition. In addition, absent an election to include market discount in
income as it accrues, a holder of a market discount debt instrument may be
required to defer a portion of any interest expense that otherwise may be
deductible on any indebtedness incurred or maintained to purchase or carry such
debt instrument until the holder disposes of the debt instrument in a taxable
transaction.
SALE, EXCHANGE OR RETIREMENT OF DEBENTURES
Except as described above under "--Conversion of Debentures Into Common
Stock," each holder of Debentures generally will recognize gain or loss upon the
sale, exchange, redemption, repurchase, retirement, or other disposition of
those Debentures measured by the difference (if any) between (i) the amount of
cash and the fair market value of any property received (except to the extent
such cash or other property is attributable to the payment of accrued interest
not previously interest in income, which amount will be taxable as ordinary
income) and (ii) the holder's adjusted tax basis in those Debentures (including
any market discount previously included income by the holder). Each holder of
Common Stock into which the Debentures are converted, in general, will recognize
gain or loss upon the sale, exchange, or other disposition of the Common Stock
measured under rules similar to those described in the preceding sentence for
the Debentures. Any such gain or loss recognized on the sale, exchange,
repurchase, retirement, or other disposition of a Debenture or share of Common
Stock should be capital gain or loss (except as discussed under "--Market
Discount" above). Pursuant to the recently enacted Taxpayer Relief Act of 1997,
long-term capital gains tax rates will apply to dispositions by individuals of
capital assets (such as the
24
<PAGE>
Debentures or Common Stock) held for more than 18 months. The maximum long-term
capital gains tax rate applicable to individuals is currently 20% (10% for
individuals in the 15% tax bracket). Mid-term capital gains tax rates will apply
to dispositions by individuals of capital assets held for more than one year but
not more than 18 months. The maximum mid-term capital gains tax rate applicable
to individuals is currently 28% (15% for individuals in the 15% tax bracket).
Corporate taxpayers continue to be subject to a maximum regular tax rate of 35%
on all capital gains and ordinary income. An investor's initial basis in a
Debenture will be the cash price paid therefor.
BACKUP WITHHOLDING
A holder of Debentures or Common Stock may be subject to "backup
withholding" at a rate of 31% with respect to certain "reportable payments,"
including interest payments, dividend payments and, under certain circumstances,
principal payments on the Debentures. These backup withholding rules apply if
the holder, among other things, (i) fails to furnish a social security number or
other taxpayer identification number ("TIN") certified under penalties of
perjury within a reasonable time after the request therefor, (ii) furnishes an
incorrect TIN, (iii) fails to report properly interest or dividends, or (iv)
under certain circumstances, fails to provide a certified statement, signed
under penalties of perjury, that the TIN furnished is the correct number and
that such holder is not subject to backup withholding. A holder who does not
provide the Company with its correct TIN also may be subject to penalties
imposed by the IRS. Any amount withheld from a payment to a holder under the
back-up withholding rules is creditable against the holder's federal income tax
liability, provided the required information is furnished to the IRS. Backup
withholding will not apply, however, with respect to payments made to certain
holders, including corporations, tax-exempt organizations and certain foreign
persons, provided their exemption from back-up withholding is properly
established.
The Company will report to the holders of Debentures and Common Stock and
to the IRS the amount of any reportable payments for each calendar year and the
amount of tax withheld, if any, with respect to such payments.
25
<PAGE>
LEGAL MATTERS
Certain legal matters relating to the validity of the Debentures and the
shares of Common Stock offered hereby will be passed upon for the Company by
Latham & Watkins, Los Angeles, California and New York, New York and by Schreck
Morris, Las Vegas, Nevada.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1996 and 1997 and for each of the years in the three year period ending December
31, 1997 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.
26
<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 OF CONTENTS PAGE
<TABLE>
<CAPTION>
<S> <C>
Available Information.............................................. 3
Incorporation of Certain Documents by Reference.................... 3
Risk Factors....................................................... 4
The Company........................................................ 10
Ratio of Earnings to Fixed Charges................................. 10
Use of Proceeds.................................................... 11
Selling Debentureholders........................................... 11
Plan of Distribution............................................... 13
Description of Debentures.......................................... 13
Description of Capital Stock....................................... 20
Certain Federal Income Tax Considerations.......................... 23
Legal Matters...................................................... 26
Experts............................................................ 26
</TABLE>
================================================================================
$75,000,000
5.625% CONVERTIBLE SUBORDINATED
DEBENTURES DUE 2003
2,864,344 SHARES
COMMON STOCK
ASSISTED LIVING
CONCEPTS, INC.
___________________
PROSPECTUS
___________________
, 1998
================================================================================
<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................................................................ $ 22,125
AMEX Filing Fee..................................................................... 25,000
Printing Expenses................................................................... 30,000
Legal Fees and Expenses............................................................. 40,000
Accounting Fees and Expenses........................................................ 30,000
Registrar and Transfer Agent Fees and Expenses...................................... 17,500
Miscellaneous Expenses.............................................................. 15,375
---------
Total..................................................................... $ 180,000
=========
</TABLE>
All of the costs identified above will be paid by the Company.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to the Company's Articles of Incorporation and the Nevada General
Corporation Laws 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 and under certain circumstances, Nevada Revised
Statutes 78.751 and the Company's By-Laws, 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 the Nevada Revised
Statutes and the Company's By-Laws.
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, (ii) 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
II-1
<PAGE>
directors who were not parties to the act, suit or proceeding cannot be
obtained, by independent 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 the Company's 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, and 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 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 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.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
---------- ----------------------
<S> <C>
1.1 Placement Agency Agreement, dated as of April 7, 1998
by and between the Company and Schroder & Co., Inc.
4.1 Indenture, dated as of April 13, 1998 by and between the
Company and Harris Trust and Savings Bank, as Trustee.
4.2 Registration Rights Agreement, dated as of April 7,
1998, by and between the Company and Schroder & Co.,
Inc.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
---------- ----------------------
<S> <C>
4.3 Form of Debenture
5.1 Opinion of Schreck Morris.
12.1 Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of Schreck Morris (included in Exhibit 5.1).
23.2 Consent of KPMG Peat Marwick LLP.
24.1 Power of Attorney (included on Page II-6).
25.1 Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act
of 1939 of the Trustee.
</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.
II-3
<PAGE>
(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.
(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 8th day of May 1998.
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, Keren 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:
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/ William McBride III
- --------------------------------- Chairman of the Board of May 8, 1998
William McBride III Directors and Chief Executive
Officer (Principal Executive
Officer and Principal Financial
Officer)
/s/ Keren B. Wilson
- --------------------------------- President, Chief Operating May 8, 1998
Keren B. Wilson Officer and Vice-Chairman of
the Board of Directors
/s/ Rhonda S. Marsh
- ---------------------------------- Vice President, Controller and May 8, 1998
Rhonda S. Marsh Chief Accounting Officer
/s/ Gloria Cavanaugh
- ---------------------------------- Director May 8, 1998
Gloria Cavanaugh
</TABLE>
II-5
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Richard C. Ladd
- ----------------------------------------------- Director May 8, 1998
Richard C. Ladd
/s/ Bradley G. Razook
- ----------------------------------------------- Director May 8, 1998
Bradley G. Razook
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
---------- ----------------------
<S> <C>
1.1 Placement Agency Agreement, dated as of April 7, 1998
by and between the Company and Schroder & Co., Inc.
4.1 Indenture, dated as of April 13, 1998 by and between the
Company and Harris Trust and Savings Bank, as Trustee.
4.2 Registration Rights Agreement, dated as of April 7,
1998, by and between the Company and Schroder & Co.,
Inc.
4.3 Form of Debenture
5.1 Opinion of Schreck Morris.
12.1 Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of Schreck Morris (included in Exhibit 5.1).
23.2 Consent of KPMG Peat Marwick LLP.
24.1 Power of Attorney (included on Page II-6).
25.1 Form T-1 Statement of Eligibility and Qualification
under the Trust Indenture Act of 1939 of the Trustee.
</TABLE>
<PAGE>
EXHIBIT 1.1
$86,250,000
ASSISTED LIVING CONCEPTS, INC.
5.625% Convertible Subordinated Debentures Due 2003
PLACEMENT AGENCY AGREEMENT
--------------------------
As of April 7, 1998
Schroder & Co. Inc.
787 Seventh Avenue, 5th Floor
New York, New York 10019
Ladies and Gentlemen:
ASSISTED LIVING CONCEPTS, INC., a Nevada corporation (the "Company"),
proposes to issue and sell $75,000,000 aggregate principal amount of its 5.625%
Convertible Subordinated Debentures due May 1, 2003 (the "Firm Debentures"),
which are convertible into common stock, $.01 par value per share (the "Common
Stock"), of the Company, at a conversion price of $26.184 per share, subject to
adjustment under certain circumstances. In addition, the Company shall, at your
option (the "Option") issue and sell up to an additional $11,250,000 aggregate
principal amount of 5.625% Convertible Subordinated Debentures due May 1, 2003
on the terms and conditions set forth below (the "Option Debentures"). The Firm
Debentures and, if purchased, the Option Debentures are hereinafter collectively
referred to as the "Debentures." The shares of Common Stock issuable upon
conversion of the Debentures are hereinafter referred to as the "Conversion
Shares." The Debentures are to be issued pursuant to an Indenture to be dated
as of April 13, 1998 (the "Indenture"), between the Company and Harris Trust and
Savings Bank, as trustee (the "Trustee"). Copies of the Indenture, in
substantially final form, have been delivered to you.
Of the Debentures, the Company proposes to issue and sell (i) a portion
thereof (the "4(2) Debentures") to certain investors in transactions exempt from
the registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to Section 4(2) of the Securities Act ("Section
4(2)") and (ii) the remainder thereof (the "144A Debentures") to Schroder & Co.
Inc. in a transaction exempt from the registration requirements of the
Securities Act pursuant to Section 4(2), which will be resold by Schroder & Co.
Inc. to certain investors pursuant to Rule 144A promulgated under the Securities
Act ("Rule 144A"). The offering of the Debentures as contemplated herein is
hereinafter referred to as the "Offering."
<PAGE>
The Company hereby confirms its agreements with Schroder & Co. Inc. as
follows:
1. Agreements of Schroder & Co. Inc. and the Company. On the basis of the
-------------------------------------------------
representations, warranties and agreements of the Company herein contained and
subject to all the terms and conditions of this Agreement:
(a) The Company hereby retains Schroder & Co. Inc. as its exclusive
agent in connection with the placement of the 4(2) Debentures for a period
commencing on the date hereof and terminating on the Closing Date (as defined in
Section 2 hereof) and Schroder & Co. Inc. agrees to act, on a best efforts
basis, as the Company's exclusive agent in connection with the placement of the
4(2) Debentures and in connection therewith to introduce the Company to certain
"accredited investors" (as such term is defined in Rule 501(a) under the
Securities Act) ("Accredited Investors") as prospective purchasers of the 4(2)
Debentures. Schroder & Co. Inc. may, in its sole discretion, retain one or more
sub-placement agents. The Company agrees to pay to Schroder & Co. Inc. a fee
equal to 3% of the gross proceeds to the Company from the sale of the 4(2)
Debentures (the "Placement Fee"). Such amount shall be payable by the Company on
the Closing Date.
(b) The Company agrees to issue and sell to Schroder & Co. Inc. and
Schroder & Co. Inc. agrees to subscribe and pay for, or procure the subscription
and payment for, the 144A Debentures on the Closing Date at a subscription price
of 100% of the principal amount of the 144A Debentures, less 3% of the aggregate
proceeds to the Company from the sale of the 144A Debentures (the "Subscription
Price"). Schroder & Co. Inc. has advised the Company that it will reoffer (the
"Exempt Resales") the 144A Debentures purchased by it hereunder solely to
persons whom it reasonably believes to be "qualified institutional buyers"
("QIBs"), as such term is defined in Rule 144A. Schroder & Co. Inc. has advised
the Company that it will reoffer the 144A Debentures to such purchasers
initially at a price equal to 100% of the principal amount of such Debentures.
(c) The Company hereby grants, for 30 days from the Closing Date, the
Option to Schroder & Co. Inc. to purchase the Option Debentures at the same
price per Option Debenture as Schroder & Co. Inc. shall pay for the Firm
Debentures. If executed, the Closing for the purchase of the Option Debentures
shall be governed by Section 2 hereunder. Schroder & Co. Inc. shall not be under
any obligation to purchase any of the Option Debentures prior to any exercise of
such option. The Option may be exercised only to cover over-allotments in the
sale of the Firm Debentures by Schroder & Co. Inc.
(d) Schroder & Co. Inc. covenants and agrees that it will take no
action, nor fail to take any action, if such action or failure to take such
action would have the effect that the offer or sale of the Debentures would not
be exempt from the registration requirements of the Securities Act or the
registration or qualification requirements of any state or political subdivision
of the United States in which the Debentures are to be offered or sold. Schroder
& Co. Inc. represents and agrees that (i) it has not offered or sold and will
not offer or sell any Debentures to persons in the United Kingdom except to
persons whose ordinary activities involve them in acquiring, holding, managing
or disposing of investments (as principal or agent) for the purposes of their
businesses or otherwise in circumstances which have not resulted and will not
result in an offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995 or the Financial Securities Act
1986 (the "Act"), and (ii) it has only issued or passed on, and will only issue
or pass
-2-
<PAGE>
on, in the United Kingdom any document received by it in connection with the
issue of the Debentures, other than any document which consists of or any part
of listing particulars, supplementary listing particulars or any other document
required or permitted to be published by listing rules under Part IV of the Act,
to a person who is of a kind described in Article 11(3) of the Financial
Services Act 1986 (Investment Advertisements) (Exemptions) Order 1995 or is a
person to whom the document may otherwise lawfully be issued or passed on.
1. Delivery and Payment. The closing for the purchase and sale of the
--------------------
Debentures (the "Closing") will occur at the offices of Stroock & Stroock &
Lavan LLP, counsel to Schroder & Co. Inc., 180 Maiden Lane, New York, New York
10038, on April 13, 1998, at 10:00 a.m., local time, or at such other time or on
such other date as may be agreed upon by the Company and Schroder & Co. Inc.
(the "Closing Date"). At the Closing, (i) each purchaser of 4(2) Debentures
shall execute and deliver a purchase agreement in substantially the form
included as Exhibit D to the Private Placement Memorandum (as defined in Section
3(a) hereof) (the "Purchase Agreement"), (ii) the purchase and sale of the 4(2)
Debentures shall proceed in accordance with Section 3 of the Purchase Agreement
and (iii) the Company will pay to Schroder & Co. Inc. the Placement Fee.
Delivery of the 144A Debentures shall also be made at the Closing against
payment (or the procurement of payment) by Schroder & Co. Inc. of the
Subscription Price (net of any amounts described in Section 6 hereof and paid to
Schroder & Co. Inc. on behalf of the Company). Such delivery shall be made to
The Depository Trust Company, a New York corporation (55 Water Street, New York,
New York) (the "Depository"), of one or more global Debentures, each in
definitive form, registered in the name of Cede & Co., as nominee of the
Depository, having an aggregate amount corresponding to the aggregate principal
amount of the 144A Debentures. All payments by Schroder & Co. Inc. and the
Company at the Closing shall be in same day funds. Payments by the purchasers
of the 4(2) Debentures shall be made in accordance with Section 3 of the
Purchase Agreement.
2. Representations and Warranties of the Company. The Company represents,
---------------------------------------------
warrants and covenants to Schroder & Co. Inc. as follows:
(b) A Confidential Private Placement Memorandum dated April 7, 1998
relating to the Debentures (the "Private Placement Memorandum") has been
prepared by the Company. No stop order or similar order preventing or suspending
the use of the Private Placement Memorandum has been issued; no proceedings for
that purpose are pending, or, to the knowledge of the Company, threatened by any
securities or other governmental authority in any jurisdiction (including,
without limitation, the Securities and Exchange Commission (the "Commission"));
no order asserting that any of the transactions contemplated by this Agreement
or the Private Placement Memorandum are subject to the registration requirements
of the Securities Act has been issued; and no securities or other governmental
authority (including, without limitation, the Commission) has requested any
additional information to be included in the Private Placement Memorandum or
otherwise. Copies of the Private Placement Memorandum have been delivered to
Schroder & Co. Inc.. The Company will not distribute the Private Placement
Memorandum or prepare any amendment or supplement thereto to which Schroder &
Co. Inc. shall reasonably object in writing after being furnished with a copy
thereof. Any reference herein to the Private Placement Memorandum or any
amendment or supplement thereto shall be deemed to refer to and include the
documents relating to the Company (including financial statements, financial
statement schedules and exhibits) included as exhibits and incorporated by
reference therein pursuant to the terms thereof, and all such documents relating
to the Company are hereinafter referred to as the "Incorporated Documents."
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(c) On the date hereof and on the date of the Private Placement
Memorandum and at all times subsequent to the date hereof through and including
the Closing Date, and on the date of any further amendment or supplement to the
Private Placement Memorandum, no part of the Private Placement Memorandum (as
amended or supplemented) relating to the Company contained or will contain any
untrue statement of a material fact or omitted or will omit to state a material
fact required to be stated therein or necessary to be stated therein in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. On the date on which each Incorporated Document was first
filed by the Company with the Commission pursuant to the Securities Act or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), each such
Incorporated Document, including the financial statements included in each such
Incorporated Document, complied in all material respects with the applicable
provisions of the Securities Act and the rules and regulations of the Commission
thereunder (the "Securities Act Rules and Regulations") or the Exchange Act and
the rules and regulations of the Commission thereunder (the "Exchange Act Rules
and Regulations"), as the case may be. The foregoing representations and
warranties in this Section 3(b) do not apply to any statements or omissions made
in reliance on and in conformity with information relating to Schroder & Co.
Inc. furnished in writing to the Company by Schroder & Co. Inc. expressly for
use in the Private Placement Memorandum. For all purposes of this Agreement
(including, but not limited to, Section 8 hereof), the statements set forth
under the "Plan of Distribution" section of the Private Placement Memorandum
constitute the only information relating to Schroder & Co. Inc. furnished in
writing to the Company by Schroder & Co. Inc. expressly for use in the Private
Placement Memorandum. The Company has not distributed any offering material in
connection with the Offering other than the Private Placement Memorandum.
(d) The Company has no significant subsidiaries as of the date hereof
and the Closing Date. The Company is, and at the Closing Date will be, duly
organized, validly existing and in good standing under the laws of the State of
Nevada. The Company has, and at the Closing Date will have, full corporate or
other power and authority to conduct all the activities conducted by it, to own
or lease all the properties and assets owned or leased by it and to conduct its
business as described in the Private Placement Memorandum. The Company is, and
at the Closing Date will be, duly licensed or qualified to do business and in
good standing as a foreign corporation in all jurisdictions in which the nature
of the activities conducted by it or the character of the properties and assets
owned or leased by it makes such licensing or qualification necessary, except
where the failure to be so qualified does not and will not have a material
adverse effect, singly or in the aggregate, on the business, properties,
prospects, condition (financial or otherwise), net worth or results of
operations of the Company (a "Material Adverse Effect"). Complete and correct
copies of (i) the articles of incorporation and bylaws of the Company and all
amendments thereto have been delivered to Schroder & Co. Inc., and no changes
therein will be made subsequent to the date hereof and prior to the Closing
Date.
(e) The outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid and nonassessable and are
not subject to any preemptive or similar rights. The Company has an authorized,
issued and outstanding capitalization as set forth in the Private Placement
Memorandum. The description of the securities of the Company in the Private
Placement Memorandum is, and at the Closing Date will be, complete and accurate,
in all material respects. Except as set forth in the Private Placement
Memorandum, the Company does not have outstanding, and at the Closing Date will
not have
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<PAGE>
outstanding, any options to purchase, or any rights or warrants to subscribe
for, or any securities or obligations convertible into, or any contracts or
commitments to issue or sell, any shares of its capital stock or any such
warrants, convertible securities or obligations.
(f) The combined financial statements and the related notes and
schedules of the Company and the Predecessor (as defined below) set forth in the
Private Placement Memorandum present fairly the financial condition of the
Company or the Predecessor, as the case may be, as of the dates indicated and
the combined results of operations, partners' and shareholders' equity (as
applicable) and cash flows of the Company or the Predecessor, as the case may
be, for the periods covered thereby, all in conformity with generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
entire period involved, except as otherwise disclosed therein. The selected
financial data for the Company and the Predecessor set forth under the caption
"Selected Financial Data" in the Company's Annual Report on Form 10-K for the
year ended December 31, 1997 included as Exhibit A to the Private Placement
Memorandum and under the captions "Prospectus Summary -- Summary Financial and
Operating Data" and "Selected Financial Data" in the Company's Prospectus
Supplement dated October 21, 1997 included as Exhibit B to the Private Placement
Memorandum (the "Prospectus") have been prepared on a basis consistent with the
combined financial statements of the Company or the Predecessor, as the case may
be. No other financial statements or schedules of the Company are required by
the Exchange Act or the Exchange Act Rules and Regulations to be filed by the
Company with the Commission on or prior to the date hereof or the Closing Date.
KMPG Peat Marwick LLP (the "Company Accountants"), who have reported on those of
such financial statements and schedules which are audited, are independent
accountants with respect to the Predecessor and the Company as required by the
Securities Act and the Securities Act Rules and Regulations. For proposes
hereof, the term "Predecessor" shall mean Assisted Living Facilities, Inc., an
Oregon corporation, and Madras Elder Care, an Oregon co-partnership.
(g) The Company maintains a system of internal accounting control
sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorization, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain accountability for assets,
(iii) access to assets is permitted only in accordance with management's general
or specific authorization, and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(h) Except as set forth or described in the Private Placement
Memorandum, subsequent to the respective dates as of which information is given
in the Private Placement Memorandum and prior to the Closing Date, (i) there has
not been, and will not have been, any change in the capitalization of the
Company or any material adverse change in the business, properties, prospects,
condition (financial or otherwise), net worth or results of operations of the
Company arising for any reason whatsoever, (ii) the Company has not incurred,
and will not have incurred, any material liabilities or obligations, direct or
contingent, (iii) the Company has not entered into, and will not have entered
into, any material transactions other than in the ordinary course of business or
pursuant to this Agreement, and (iv) the Company has not, and
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<PAGE>
will not have, paid or declared any dividends or other distributions of any kind
on any class of its capital stock.
(i) Any deeds of trust, mortgages or similar instruments encumbering
the Company's properties are not convertible into equity interests in such
properties. Such deeds of trust, mortgages or similar instruments are not
cross-defaulted or cross-collateralized to any property not owned directly or
indirectly by the Company.
(i) Except as set forth in the Private Placement Memorandum, the
Company has fee simple title to all properties and assets described in the
Private Placement Memorandum as owned by it, free and clear of all liens,
security interests, pledges, charges, encumbrances, equities, claims, easements,
leases, tenancies or restrictions (collectively, "Encumbrances") the existence
of which would have a Material Adverse Effect, except such as are described in
the Private Placement Memorandum. The Company has valid, subsisting and
enforceable leases for the properties described in the Private Placement
Memorandum that are leased by it, free and clear of all Encumbrances the
existence of which would have a Material Adverse Effect, except such as are
described in the Private Placement Memorandum. Title insurance in favor of the
Company is in full force and effect with respect to all real property owned by
the Company in amounts at least equal to the purchase price paid by the Company
therefore. The Company has no notice of any claim which has been or could be
asserted by anyone adverse to the Company's rights as lessee under any lease or
affecting or questioning the Company's right to the continued possession of the
properties leased by the Company.
(ii) All Encumbrances on or affecting the Company's properties
which are required to be disclosed in the Private Placement Memorandum are
disclosed therein. The use and occupancy of each of the Company's properties
complies with all applicable codes and zoning laws and regulations, except where
the failure to so comply would not have a Material Adverse Effect, and there is
no pending or, to the best knowledge of the Company, threatened condemnation,
zoning change, environmental or other proceeding or action that will in any
material respect adversely affect the size of, use of, improvements on,
construction on, or access to the Company's properties.
(j) The Company is not an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company," as such terms are defined in the Investment Company Act of 1940, as
amended (the "Investment Company Act").
(k) Except as set forth in the Private Placement Memorandum, there are
no actions, suits or proceedings pending or, to the Company's knowledge,
threatened against or affecting the Company or any of its directors, officers or
stockholders in their capacity as such, or any of the properties or assets owned
or leased by the Company, before or by any Federal or state court, commission,
regulatory body, administrative agency or other governmental body, domestic or
foreign (collectively, a "Governmental Body"), which is reasonably likely to
result in a Material Adverse Effect.
(l) The Company has, and at the Closing Date will have, all
governmental licenses, permits, consents, orders, approvals, franchises,
certificates and other authorizations (collectively, "Licenses") necessary to
carry on its business and own or lease its properties as
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<PAGE>
contemplated in the Private Placement Memorandum, except where the failure to
have such Licenses would not have a Material Adverse Effect. The Company has,
and at the Closing Date will have, complied in all material respects with all
laws, regulations and orders applicable to it or its business and properties,
except where the failure to so comply would not have a Material Adverse Effect.
The Company is not, and at the Closing Date will not be, in default (nor has any
event occurred which, with notice or lapse of time or both, would constitute a
default) in the due performance and observation of any term, covenant or
condition of any indenture, mortgage, deed of trust, voting trust agreement,
loan agreement, bond, debenture, note agreement or other evidence of
indebtedness, lease, contract or other agreement or instrument (collectively, a
"contract or other agreement") to which it is a party or by which its properties
is bound or affected, which default would individually or in the aggregate have
a Material Adverse Effect. To the best knowledge of the Company, no other party
under any such contract or other agreement, is in default in any material
respect thereunder. Without limiting the generality of the foregoing, except as
otherwise described in the Private Placement Memorandum, each of the assisted
living residences operated by the Company are certified to participate in the
Medicaid programs. The Company has not received any notice of any governmental
proceedings or actions pending or, to the Company's knowledge, threatened for
the purpose of suspending, modifying or revoking any License held by the Company
(including, without limitation, any proceeding or action to decertify any of the
foregoing facilities from participation in any Medicaid program). The Company is
not in violation of any provision of its Restated Certificate of Incorporation,
as amended.
(m) No consent, approval, authorization or order of, or any filing or
declaration with, any Governmental Body is required for the consummation of the
transactions contemplated by this Agreement or in connection with the issuance
and sale of the Debentures by the Company and the issuance by the Company of the
Conversion Shares upon conversion of the Debentures, except such as have been
obtained and such as may be required under state securities or Blue Sky laws.
(n) The Company has full corporate power and authority to enter into
this Agreement and to carry out all the terms and provisions hereof to be
carried out by it. This Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and binding agreement of the
Company and is enforceable against the Company in accordance with the terms
hereof, subject, as to enforcement, and except as limited by, applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
applicability now or hereafter in effect relating to or affecting creditors'
rights and to general principles of equity. Except as disclosed in the Private
Placement Memorandum, the execution, delivery and the performance of this
Agreement and the consummation of the transactions contemplated hereby will not
result in the creation or imposition of any Encumbrance upon any of the
properties or assets of the Company or any of its Subsidiaries pursuant to the
terms or provisions of, or result in a breach or violation of or conflict with
any of the terms or provisions of, or constitute a default under, or give any
other party a right to terminate any of its obligations under, or result in the
acceleration of any obligation under, (i) the articles of incorporation or
bylaws of the Company, as amended, or (ii) any contract or other agreement to
which the Company is a party or by which the Company or any of its assets or
properties are bound or affected, which is material to the Company, or (iii) any
judgment, ruling, decree, order, law, statute, rule or regulation of any
Governmental Body applicable to the business or properties of the Company. The
Company has full power and authority to authorize, issue, and sell the
Debentures and the Conversion Shares.
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<PAGE>
(o) There is no document or contract of a character required to be
described in any Incorporated Document or to be filed as an exhibit to any
Incorporated Document which is not described or filed as required.
(p) All such contracts to which the Company is a party have been duly
authorized, executed and delivered by the Company and constitute valid and
binding agreements of the Company and are enforceable against the Company in
accordance with the terms thereof.
(q) Neither the Company nor any of its directors, officers or
affiliates (within the meaning of the Securities Act Rules and Regulations) has
taken, nor will he, she or it take, directly or indirectly, any action designed,
or which might reasonably be expected in the future, to cause or result in,
under the Securities Act or otherwise, or which has constituted, stabilization
or manipulation of the price of any security of the Company to facilitate the
sale or resale of the Debentures or otherwise.
(r) No holder of securities of the Company will have rights to the
registration of any securities of the Company as a result of the filing of the
registration statement contemplated by the Private Placement Memorandum with
respect to the Conversion Shares.
(s) The Company is not involved in any material labor dispute with its
employees, and to the Company's knowledge, no such dispute is threatened or
imminent.
(t) The Company owns, or is licensed or otherwise has the right to use,
all material trademarks and trade names which are used in or necessary for the
conduct of its business as described in the Private Placement Memorandum. To the
Company's knowledge, no claims have been asserted by any person to the use of
any such trademarks or trade names or challenging or questioning the validity or
effectiveness of any such trademark or trade name. The use, in connection with
the business and operations of the Company of such trademarks and trade names
does not, to the Company's knowledge, infringe on the rights of any person.
(u) Neither the Company nor, to the Company's knowledge, any employee
or agent of the Company has made any payment of funds of the Company or received
or retained any funds of the Company in violation of any law, rule or regulation
or of a character required to be disclosed in any Incorporated Document, except
as disclosed therein.
(v) The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the business in which the Company is engaged; the Company has
not been refused any insurance coverage sought or applied for; and the Company
has no reason to believe that it will not be able to renew their existing
insurance coverage as and when such coverage expires.
(w) Except as set forth in the Private Placement Memorandum, the
business, operations and facilities of the Company have been and are being
conducted in compliance in all material respects with all applicable laws,
ordinances, rules regulations, Licenses, permits, approvals, plans,
authorizations or requirements relating to occupational safety and health, or
pollution, or protection of health or the environment (including, without
limitation, those relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants or hazardous or toxic substances, materials
or wastes into ambient air, surface water, groundwater or land, or relating
-8-
<PAGE>
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of chemical substances, pollutants, contaminants or
hazardous or toxic substances, materials or wastes, whether solid, gaseous or
liquid in nature) of any governmental department, commission, board, bureau,
agency or instrumentality of the United States, any state or political
subdivision thereof, or any foreign jurisdiction , and all applicable judicial
or administrative agency or regulatory decrees, awards, judgments and orders
relating thereto; and the Company has not received any notice from any
governmental instrumentality or any third party alleging any violation thereof
or liability thereunder (including, without limitation, liability for costs of
investigating or remediating sites containing hazardous substances and/or
damages to natural resources).
(x) The Company filed all foreign, federal, state and local tax returns
that are required to be filed or has requested extensions thereof, and has paid
all taxes required to be paid by it and any other assessment, fine or penalty
levied against it, which alone or in the aggregate would have a Material Adverse
Effect, to the extent that any of the foregoing is due and payable.
(y) Each certificate signed by any officer of the Company and delivered
to Schroder & Co. Inc. or counsel for Schroder & Co. Inc. shall be deemed to be
a representation and warranty by the Company to Schroder & Co. Inc. as to the
matters covered thereby.
(z) The Debentures have been duly and validly authorized and the
Debentures, when the Indenture has been duly executed and delivered by the
Company and the Trustee (assuming the due authorization, execution and delivery
of the Indenture by the Trustee) and when the Debentures have been authenticated
by the Trustee and issued, executed, delivered and sold by the Company in
accordance with the Indenture, will have been duly and validly executed,
authenticated, issued and delivered and will (i) constitute valid and legally
binding obligations of the Company enforceable against the Company in accordance
with their terms and entitled to the benefits provided in the Indenture,
subject, as to enforcement, to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting creditors' rights and to
general principles of equity, and (ii) be convertible into the Conversion Shares
in accordance with the terms of the Indenture. The Conversion Shares have been
duly and validly authorized and reserved for issuance upon conversion of the
Debentures and, when issued and delivered upon such conversion, will be duly and
validly issued and outstanding, fully paid and nonassessable and will not have
been issued in violation of or subject to any preemptive or other similar
rights. The Debentures and the Conversion Shares, when issued, will conform to
the respective descriptions thereof set forth in the Private Placement
Memorandum.
(aa) The Indenture has been duly and validly authorized by the Company
and when the Indenture has been duly executed and delivered by the Company and
the Trustee (assuming the due authorization, execution and delivery of the
Indenture by the Trustee), the Indenture will constitute a valid and legally
binding instrument of the Company, enforceable against the Company in accordance
with its terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or affecting
creditors' rights and to general principles of equity. The Indenture will
conform to the description thereof set forth in the Private Placement
Memorandum.
(bb) Subject to Schroder & Co. Inc.'s conformity to its obligations set
forth herein and in reliance upon the representations and warranties of each
purchaser of 4(2) Debentures to be
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<PAGE>
set forth in their respective Purchase Agreements, the sale to Schroder & Co.
Inc. and resale by Schroder & Co. Inc. of the 144A Debentures as contemplated
herein and in reliance upon the representations and warranties of each purchaser
of 4(2) Debentures to be set forth in their respective Purchase Agreements, the
sale of the Debentures as contemplated herein and in the Private Placement
Memorandum is exempt from the registration and prospectus delivery requirements
of the Securities Act. With respect to the offer or sale of the Debentures and
the Exempt Resales, neither the Company nor any of its representatives (which,
for purposes of this Section 3(aa), shall not include Schroder & Co. Inc.), has
engaged in any form of general solicitation or general advertising, including,
but not limited to, advertisements, articles, notices or other communications
published in any newspaper, magazine or similar medium or broadcast over
television or radio, or any seminar or meeting whose attendees have been invited
by any general solicitation or general advertising (provided that any press
release being issued by the Company solely to disclose the transactions
contemplated herein shall not be deemed to constitute a general solicitation).
No securities of the same class as the Debentures or the Conversion Shares have
been issued and sold by the Company within the six-month period immediately
prior to the date hereof.
(cc) The Company has dealt with no broker, finder, commission agent or
other person in connection with the sale of the Debentures and the transactions
contemplated by this Agreement and the Private Placement Memorandum, other than
Schroder & Co. Inc., and the Company is under no obligation to pay any broker's
fee or commission in connection with such transactions, other than the
commission to Schroder & Co. Inc. contemplated hereby.
(dd) The Private Placement Memorandum, as of its date, and each
amendment or supplement thereto, as of its date, contains all the information
required by Rule 144A.
(ee) No securities of the same class (within the meaning of Rule
144A(d)(3) under the Securities Act) as the Debentures are listed on any
national securities exchange, registered under Section 6 of the Exchange Act or
are quoted in an automated inter-dealer quotation system.
1. Agreements of the Company. The Company covenants and agrees with
-------------------------
Schroder & Co. Inc. as follows:
(d) The Company will not, at any time when the Private Placement
Memorandum is delivered in connection with sales of the Debentures, amend or
supplement the Private Placement Memorandum, unless a copy thereof shall first
have been submitted to Schroder & Co. Inc. within a reasonable period of time
prior to the use thereof and Schroder & Co. Inc. shall not have objected thereto
in good faith.
(e) The Company will notify Schroder & Co. Inc. promptly, and will
confirm such advice in writing, (i) of any request by the securities or other
governmental authority of any jurisdiction for any additional information
(including, but not limited to, any amendments or supplements to the Private
Placement Memorandum), (ii) of the issuance by any securities or other
governmental authority of any jurisdiction (including, but not limited to, the
Commission) of any stop order suspending or preventing the use of the Private
Placement Memorandum or asserting that the offering and sale of the Debentures
is subject to the registration requirements of the Securities Act, or the
initiation of any proceedings for any such purposes or the threat thereof, (iii)
of the happening of any event during the period mentioned in Section 4(a) that
in the judgment of the
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Company makes any statement made in the Private Placement Memorandum untrue or
that requires the making of any changes in the Private Placement Memorandum in
order to make the statements therein not misleading and (iv) of receipt by the
Company or any representative or attorney of the Company of any other
communication from any securities or other governmental authority of any
jurisdiction (including, without limitation, the Commission) relating to the
Company or the Private Placement Memorandum. If at any time any securities or
other governmental authority (including, without limitation, the Commission)
shall issue any order described in clause (ii) of the immediately preceding
sentence, the Company will make every reasonable effort to obtain the withdrawal
of such order at the earliest possible moment. The Company will use its best
efforts to prepare and deliver the Private Placement Memorandum to Schroder &
Co. Inc. as promptly as practicable after the date hereof.
(f) If, at any time when the Private Placement Memorandum relating to
the Debentures is required to be delivered under the laws of any jurisdiction,
any event occurs as a result of which the Private Placement Memorandum, as then
amended, would include any untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements therein not
misleading, or if for any other reason it is necessary at any time to amend the
Private Placement Memorandum to comply with the laws of any jurisdiction, the
Company will promptly notify Schroder & Co. Inc. thereof and, subject to Section
4(b) hereof, will prepare an amendment to the Private Placement Memorandum that
corrects such statement or omission or effects such compliance.
(g) The Company will deliver to Schroder & Co. Inc., without charge, as
many copies of the Private Placement Memorandum or any amendment thereto as
Schroder & Co. Inc. may reasonably request. The Company consents to the use of
the Private Placement Memorandum or any amendment or supplement thereto by
Schroder & Co. Inc. in connection with the Offering.
(h) It will arrange for the qualification of the Debentures for offer
and sale under the securities or Blue Sky laws of such jurisdictions as Schroder
& Co. Inc. may designate and will continue such qualifications in effect for as
long as may be necessary to complete the Offering; provided, however, that in
connection therewith the Company shall not be obligated to qualify as a foreign
corporation or to execute a general consent to service of process in any
jurisdiction where it is not now so subject.
(i) The Company will apply the net proceeds from the sale of the
Debentures as set forth under "Use of Proceeds" in the Private Placement
Memorandum.
(j) The Company will not at any time, directly or indirectly, take any
action intended, or which might reasonably be expected, to cause or result in,
or which will constitute, stabilization of the price of any security of the
Company to facilitate the sale or resale of any of the Debentures.
(k) Neither the Company nor any affiliate (as defined in Rule 501(b) of
Regulation D under the Securities Act) will sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
the Securities Act) which will be integrated with the sale of the Debentures or
the Conversion Shares in a manner which would require the registration under the
Securities Act of the Debentures or the Conversion Shares.
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(l) To the extent the Company remains bound by the Registration Rights
Agreement, dated as of April 7, 1998, by and among the Company and each of the
Purchasers (the "Registration Rights Agreement"), the Company agrees that it
will comply with the terms and provisions thereof.
(m) The Company will cause the Debentures to be listed for trading on
the Private Offering Resales and Trading through Automated Linkages (the "PORTAL
Market") System of the National Association of Securities Dealers, Inc.
("NASD"), subject only to notice of issuance.
(n) The Company will cause the Conversion Shares to be listed on the
American Stock Exchange ("AMEX") no later than the time the Debentures become
convertible pursuant to the Indenture.
(o) Neither the Company nor any affiliate (as defined in Rule 501(b) of
Regulation D under the Securities Act) will sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
the Securities Act) which will be integrated with the sale of the Debentures or
the Conversion Shares in a manner which would require the registration under the
Securities Act of the offer and sale of the Debentures and the Conversion Shares
pursuant to this Agreement.
(p) For so long as any of the Rule 144A Debentures remain outstanding
and are "restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act, the Company covenants and agrees that it shall, during any
period in which it is not subject to Section 13 or 15(d) of the Exchange Act,
make available to any holder or beneficial holder of securities which continue
to be restricted securities in connection with any sale thereof to any
prospective purchaser of such securities from such holder or beneficial holder,
the information specified in, and meeting the requirements of Rule 144A(d)(4)
under the Securities Act.
1. Expenses. The Company will pay, or reimburse if paid by Schroder & Co.
--------
Inc., all costs and expenses incident to the performance of the Company's
obligations under this Agreement, whether or not the transactions contemplated
herein are consummated or this Agreement is terminated, including, but not
limited to all costs and expenses of or relating to (i) the printing or other
production of all documents with respect to the transactions, including any
costs of printing the Private Placement Memorandum, and any amendment or
supplement to either thereof, this Agreement, the Indenture and any blue sky
memoranda; (ii) all arrangements relating to the delivery to Schroder & Co. Inc.
of copies of the foregoing documents, (iii) the fees and disbursements of the
counsel, accountants and any other experts or advisors retained by the Company,
(iv) preparation, issuance and delivery of any certificates evidencing the
Debentures and the Conversion Shares, including Trustee's, transfer agent's and
registrar's fees, (v) the qualification of the Debentures and the Conversion
Shares under blue sky laws, including filing fees and fees and disbursements of
counsel for Schroder & Co. Inc. relating thereto; (vi) the listing of the
Conversion Shares on the AMEX and the qualification for trading of the
Debentures on the National Association of Securities Dealers' PORTAL system, and
(vii) expenses of Company personnel in connection with their attendance at
meetings with prospective investors in the Debentures and advertising relating
to the Offering (other than shall have been specifically approved by Schroder &
Co. Inc. to be paid for by it). If the sale of the Debentures provided for
herein is not consummated because any condition to the obligations of Schroder &
Co. Inc. set forth in Section 6 hereof is not satisfied, because this
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<PAGE>
Agreement is otherwise terminated pursuant to Section 9 hereof or because of any
failure, refusal or inability on the part of the Company to perform all
obligations and satisfy all conditions on its part to be performed or satisfied
hereunder other than by reason of a default by Schroder & Co. Inc., the Company
will reimburse Schroder & Co. Inc. for all out-of-pocket expenses (including the
reasonable fees, disbursements, and other charges of counsel to Schroder & Co.
Inc.) incurred by them in connection herewith. The Company shall not in any
event be liable to Schroder & Co. Inc. for the loss of anticipated profits from
the transactions covered by this Agreement.
2. Conditions of the Obligations of Schroder & Co. Inc. The obligations of
----------------------------------------------------
Schroder & Co. Inc. hereunder are subject to the following conditions:
(g) No stop order or similar order preventing or suspending the use of
the Private Placement Memorandum has been issued; no proceedings for that
purpose are pending, or, to the knowledge of the Company or Schroder & Co. Inc.,
threatened by any securities or other governmental authority in any jurisdiction
(including, without limitation, the Commission); no order asserting that any of
the transactions contemplated by this Agreement or the Private Placement
Memorandum are subject to the registration requirements of the Securities Act
has been issued; no securities or other governmental authority (including,
without limitation, the Commission) has requested any additional information to
be included in the Private Placement Memorandum or otherwise; no order
suspending the qualification or registration of the Debentures or the Conversion
Shares under the securities or Blue Sky laws of any jurisdiction shall be in
effect and no proceeding for such purpose shall be pending before or, to the
knowledge of the Company, threatened by the authorities of any such
jurisdiction; and after the date hereof no amendment or supplement to the
Private Placement Memorandum shall have been prepared unless a copy thereof was
first submitted to Schroder & Co. Inc. and Schroder & Co. Inc. did not object
thereto in good faith.
(h) Since the respective dates as of which information is given in the
Private Placement Memorandum, (i) there shall not have been a material adverse
change in the general affairs, business, business prospects, properties,
management, condition (financial or otherwise) or results of operations of the
Company, whether or not arising from transactions in the ordinary course of
business, and (ii) the Company shall not have sustained any material loss or
interference with its business, assets or properties from fire, explosion, flood
or other casualty, whether or not covered by insurance, or from any labor
dispute or any court or legislative or other governmental action, order or
decree, which is not set forth in the Private Placement Memorandum, if in the
judgment of Schroder & Co. Inc. any such development makes it impracticable or
inadvisable to consummate the sale and delivery of the Debentures.
(i) Since the respective dates as of which information is given in the
Private Placement Memorandum, there shall have been no litigation or other
proceeding instituted against the Company or any of its officers, directors or
stockholders in their capacities as such, or any of their respective assets or
properties, before or by any Governmental Body in which litigation or proceeding
is reasonably likely to result in a Material Adverse Effect.
(j) Each of the representations and warranties of the Company contained
herein shall be true and correct in all material respects at the Closing Date,
as if made on such date, and all covenants and agreements herein contained to be
performed on the part of the Company and all
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<PAGE>
conditions herein contained to be fulfilled or complied with by the Company at
or prior to the Closing Date shall have been fully performed, fulfilled or
complied with.
(k) Schroder & Co. Inc. shall have received an opinion, dated the
Closing Date from Latham & Watkins, counsel for the Company in form and
substance satisfactory to Schroder & Co. Inc. Schroder & Co. Inc. shall have
received an opinion, dated the Closing Date, from Schreck Morris, Nevada counsel
for the Company, in form and substance satisfactory to Schroder & Co. Inc. In
rendering any such opinion, such counsel may rely, as to matters of fact, to the
extent such counsel deems proper, on certificates of responsible officers of the
Company and public officials. The foregoing opinion of Latham & Watkins shall
also state that Schroder & Co. Inc. is justified in relying upon such opinion of
Schreck Morris, and a copy of such opinion shall be delivered to Schroder & Co.
Inc. and Schroder & Co. Inc.'s counsel.
(l) No later than April 13, 1998, the Company Accountants shall have
furnished to Schroder & Co. Inc. a letter, dated the date of its delivery (the
"Original Letter"), addressed to Schroder & Co. Inc. and in form and substance
satisfactory to Schroder & Co. Inc., confirming that (i) they are independent
public accountants with respect to the Company and the Predecessor within the
meaning of the Securities Act and the Securities Act Rules and Regulations; (ii)
in their opinion, the financial statements and any supplementary financial
information and schedules (and pro forma financial information) included or
incorporated in the Private Placement Memorandum, and examined by them comply as
to form in all material respects with the applicable accounting requirements of
the Securities Act and the Securities Act Rules and Regulations; (iii) on the
basis of procedures, not constituting an examination in accordance with the
generally accepted auditing standards, set forth in detail in the Original
Letter, including a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available interim
financial statements of the Company and the Predecessor, inspections of the
minute books of the Company and the minute books and partnership records of the
Predecessor since the latest audited financial statements included or
incorporated in the Private Placement Memorandum, inquiries of officials of the
Company and the Predecessor responsible for financial and accounting matters and
such other inquiries and procedures as may be specified in the Original Letter
to a date not more than five days prior to the date of the Original Letter,
nothing came to their attention that caused them to believe that: (A) the
unaudited financial statements and schedules of the Company and the Predecessor
included or incorporated in the Private Placement Memorandum do not comply as to
form in all material respects with the applicable accounting requirements of the
Securities Act and the Securities Act Rules and Regulations, or are not fairly
presented in conformity with generally accepted accounting principles applied on
a basis substantially consistent with the basis for the audited financial
statements included in the prospectus; (B) any other unaudited income statement
data and balance sheet items included or incorporated in the Private Placement
Memorandum do not agree with the corresponding items in the unaudited financial
statements from which such data and items were derived, and any such unaudited
data and items were not determined on a basis substantially consistent with the
basis for the corresponding amounts in the audited financial statements included
or incorporated in the Private Placement Memorandum; (C) the unaudited financial
statements which were not included or incorporated in the Private Placement
Memorandum but from which were derived an unaudited financial statements
referred to in Clause A and any unaudited income statement data and balance
sheet items included or incorporated in the Private Placement Memorandum and
referred to in Clause (B) were not determined on a basis substantially
consistent with the basis for the audited financial statements included or
incorporated in the Private
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<PAGE>
Placement Memorandum; (D) the unaudited pro forma financial statements included
or incorporated in the Private Placement Memorandum do not comply as to form in
all material respects with the applicable accounting requirements of the
Securities Act and the Securities Act Rules and Regulations or the pro forma
adjustments have not been properly applied to the historical amounts in the
compilation of those statements; (E) as of a specified date not more than five
days prior to the date of the Original Letter, there have been any changes in
the capital stock or partnership interest of the Company or the Predecessor of
any increase in the long-term debt of the Company or the Predecessor, or any
decreases in net current assets or net assets or other items specified by
Schroder & Co. Inc., or any increases in any items specified by Schroder & Co.
Inc., in each case as compared with amounts shown in the latest balance sheet
included or incorporated in the Private Placement Memorandum, except in each
case for changes, increases or decreases which the Private Placement Memorandum
discloses have occurred or may occur or which are described in the Original
Letter; and (F) for the period from the date of the latest financial statements
included or incorporated in the Private Placement Memorandum to the specified
date referred to in Clause E, there were any decreases in revenues or the total
or per share amounts of net income or other items specified by Schroder & Co.
Inc., or any increases in any items specified by Schroder & Co. Inc., in each
case as compared with the comparable period of the preceding year and with any
other period of corresponding length specified by Schroder & Co. Inc. , except
in each case for decreases or increases which the Private Placement Memorandum
discloses have occurred or may occur or which are described in the Original
Letter; and (iv) in addition to the examination referred to in their reports
included in the Private Placement Memorandum, and the procedures referred to in
clause (iii) above, they have carried out certain specified procedures, not
constituting an examination in accordance with generally accepted auditing
standards, with respect to certain amounts, percentages and financial
information specified by Schroder & Co. Inc., which are derived from the general
accounting, financial or other records of the Company or the Predecessor, as the
case may be, which appear in the Private Placement Memorandum or in any
Incorporated Document, and have compared such amounts, percentages and financial
information with such accounting, financial and other records and have found
them to be in agreement. At the Closing Date, the Company Accountants shall have
furnished to Schroder & Co. Inc. a letter, dated the date of its delivery, which
shall confirm, on the basis of a review in accordance with the procedures set
forth in the Original Letter, that nothing has come to their attention during
the period from the date of the Original Letter referred to in the prior
sentence to a date (specified in the letter) not more than five days prior to
the Closing Date which would require any change in the Original Letter if it
were required to be dated and delivered at the Closing Date.
(m) At the Closing Date, there shall be furnished to Schroder & Co. Inc.
a certificate, dated the Closing Date, signed by each of the Chief Executive
Officer and the Vice President and Controller of the Company, to the effect
that:
(i) Each signer of such certificate has carefully examined the
Private Placement Memorandum and (A) as of the date of such certificate,
the Private Placement Memorandum does not contain any untrue statement
of a material fact or omit to state a material fact necessary in order
to make the statements therein not misleading and (B) since the date of
the Private Placement Memorandum no event has occurred as a result of
which it is necessary to amend or supplement the Private Placement
Memorandum in order to make the statements therein not untrue or
misleading in any material respect;
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<PAGE>
(ii) Each of the representations and warranties of the Company
contained in this Agreement were, when originally made, and are, at the
time such certificate is delivered, true and correct in all respects;
(iii) Each of the covenants required herein to be performed by the
Company on or prior to the date of such certificate has been duly,
timely and fully performed and each condition herein required to be
complied with by the Company on or prior to the delivery of such
certificate has been duly, timely and fully complied with; and
(iv) No stop order or similar order preventing or suspending the
use of the Confidential Placement Memorandum or the Preliminary
Confidential Placement Memorandum has been issued; no proceedings for
that purpose are pending, or, to the knowledge of the Company,
threatened by any securities or other governmental authority in any
jurisdiction (including, without limitation, the Commission); no order
asserting that any of the transactions contemplated by this Agreement or
the Confidential Placement Memorandum are subject to the registration
requirements of the Securities Act has been issued; no securities or
other governmental authority (including, without limitation, the
Commission) has requested any additional information to be included in
the Confidential Placement Memorandum, the Preliminary Confidential
Placement Memorandum or otherwise; no order suspending the qualification
or registration of the Debentures or the Conversion Shares under the
securities or Blue Sky laws of any jurisdiction shall be in effect and
no proceeding for such purpose shall be pending before or, to the
Company's knowledge, threatened by the authorities of any such
jurisdiction.
(n) The Company shall have furnished to Schroder & Co. Inc. such
certificates, in addition to those specifically mentioned herein, as Schroder &
Co. Inc. may have reasonably requested as to the accuracy and completeness at
the Closing Date of any statement in the Private Placement Memorandum, as to the
accuracy at the Closing Date of the representations and warranties of the
Company as to the performance by the Company of its obligations hereunder, or as
to the fulfillment of the conditions concurrent and precedent to the obligations
hereunder of Schroder & Co. Inc.
(o) All opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
in form and substance to you. The Company will furnish you with such conformed
copies of such opinions, certificates, letters and other documents as you shall
reasonably request.
(p) The Debentures shall have been approved for listing on the National
Association of Securities Dealers' PORTAL system, subject only to notice of
issuance.
7. Indemnification and Contribution.
--------------------------------
(a) The Company agrees to indemnify and hold harmless Schroder & Co.
Inc. and each person, if any, who controls Schroder & Co. Inc. within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
from and against any and all losses, claims,
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<PAGE>
damages or liabilities, joint or several (and actions in respect thereof), to
which they, or any of them, may become subject under the Securities Act or other
Federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) any untrue statement or alleged
untrue statement made by the Company in Section 3 of this Agreement, (ii) any
untrue statement or alleged untrue statement of any material fact contained in
(A) the Private Placement Memorandum or any amendment or supplement thereto or
(B) any application or other document, or any amendment or supplement thereto,
executed by the Company or based upon written information furnished by or on
behalf of the Company filed in any jurisdiction in order to qualify the
Debentures and the Conversion Shares under the securities or blue sky laws
thereof or filed with the Commission or any securities association or securities
exchange (each, an "Application"), or (iii) the omission or alleged omission to
state in the Private Placement Memorandum or any amendment or supplement thereto
or in any Application a material fact required to be stated therein or necessary
to make the statements therein not misleading, and will reimburse, as incurred,
Schroder & Co. Inc. and each such controlling person for any legal or other
expenses reasonably incurred by Schroder & Co. Inc. or such controlling person
in connection with investigating, defending or appearing as a third-party
witness in connection with any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case to the
- -------- -------
extent that any such loss, claim, damage or liability based upon an untrue
statement or omission or alleged untrue statement or omission in any of such
documents made in reliance upon and in conformity with written information
furnished to the Company by Schroder & Co. Inc. expressly for use therein;
provided, further, that such indemnity with respect to the Private Placement
- -------- -------
Memorandum shall not inure to the benefit of Schroder & Co. Inc. (or any such
controlling person) from whom the person asserting any such loss, claim, damage,
liability or action purchased Debentures which are the subject thereof to the
extent that any such loss, claim, damage or liability (i) results from the fact
that Schroder & Co. Inc. failed to send or give a copy of the Private Placement
Memorandum (as amended or supplemented) to such person at or prior to the
confirmation of the sale of such Debentures to such person in any case where
such delivery is required by the Securities Act and (ii) arises out of or is
based upon an untrue statement or omission of a material fact contained in the
Private Placement Memorandum that was corrected in any amendment or supplement
to the Private Placement Memorandum, unless such failure to deliver the Private
Placement Memorandum (as amended or supplemented) was the result of
noncompliance by the Company with Section 5(c) or 5(d). This indemnity agreement
will be in addition to any liability that the Company might otherwise have. The
Company will not, without the prior written consent of Schroder & Co. Inc.,
settle or compromise or consent to the entry of any judgment in any pending or
threatened claim, action, suit or proceeding in respect of which indemnification
may be sought hereunder (whether or not Schroder & Co. Inc. or any person who
controls Schroder & Co. Inc. within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act is a party to each claim, action, suit or
proceeding), unless such settlement, compromise or consent includes an
unconditional release of Schroder & Co. Inc. and each such controlling person
from all liability arising out of such claim, action, suit or proceeding.
(b) Schroder & Co. Inc. will indemnify and hold harmless the Company,
and each person, if any, who controls the Company within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act, each director of the
Company and each officer of the Company against any losses, claims, damages or
liabilities (or actions in respect thereof) to which the Company, and any such
director, officer or controlling person may become subject under the Securities
Act or other federal or state statutory law or regulation, at common law or
otherwise,
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<PAGE>
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Private Placement
Memorandum or any amendment or supplement to the Private Placement Memorandum or
any Application, or material fact required to be stated therein or (ii) the
omission or the alleged omission to state in the Private Placement Memorandum or
any amendment or supplement thereto, or any Application, a material fact
required to be stated therein or necessary to make the statements therein not
misleading, to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by
Schroder & Co. Inc. expressly for use therein; and, subject to the limitation
set forth immediately preceding this clause, will reimburse, as incurred, any
legal or other expenses reasonably incurred by the Company, and any such
director, officer or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or any action in respect
thereof. This indemnity agreement will be in addition to any liability which
such Placement Agent may otherwise have. The Company acknowledges that for all
purposes under this Agreement, the statements set forth under the heading "Plan
of Distribution" of the Private Placement Memorandum constitute the only
information Schroder & Co. Inc. furnished in writing to the Company expressly
for inclusion in the Private Placement Memorandum. This indemnity agreement will
be in addition to any liability that Schroder & Co. Inc. might otherwise have.
(c) Promptly after receipt by an indemnified party under this Section 7
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party or parties
under this Section 7, notify such indemnifying party or parties of the
commencement thereof; but the omission so to notify the indemnifying party or
parties will not relieve it or them from any liability which it or they may have
to any indemnified party otherwise than under subsection (a) or (b) of this
Section 7 or to the extent that the indemnifying party was not adversely
affected by such omission. If any such action is brought against an indemnified
party and it notifies an indemnifying party or parties of the commencement
thereof, the indemnifying party or parties against which a claim is to be made
will be entitled to participate therein and, to the extent that it or they may
wish, to assume the defense thereof with counsel reasonably satisfactory to such
indemnified party; provided, however, that if the defendants in any such action
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include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be one or more
legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnifying party shall not have the right to direct the defense of such action
on behalf of such indemnified party or parties and such indemnified party or
parties shall have the right to select separate counsel to defend such action on
behalf of such indemnified party or parties. After notice from the indemnifying
party to such indemnified party of its election to assume the defense thereof
and approval by such indemnified party of counsel appointed to defend such
action, the indemnifying party will not be liable to such indemnified party
under this Section 7 for any legal or other expenses other than reasonable costs
of investigation subsequently incurred by such indemnified party in connection
with the defense thereof, unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the next preceding sentence
(it being understood, however, that in connection with such action the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (in addition to local counsel) in any one action or separate
but substantially similar actions in the same jurisdiction arising out of the
same general allegations or circumstances, designated by Schroder &
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<PAGE>
Co. Inc. in the case of paragraph (a) of this Section 7, representing the
indemnified parties under such paragraph (a) who are parties to such action or
actions), or (ii) the indemnifying party has authorized in writing the
employment of counsel for the indemnified party at the expense of the
indemnifying party. After such notice from the indemnifying party to such
indemnified party, the indemnifying party will not be liable for the costs and
expenses of any settlement of such action effected by such indemnified party
without the consent of the indemnifying party, unless such indemnified party
waived its rights under this Section 7 in which case the indemnified party may
effect such a settlement without such consent.
(d) If the indemnification provided for in the preceding paragraphs of
this Section 7 is unavailable or insufficient to hold harmless an indemnified
party under paragraph (a) or (b) above in respect of any losses, claims, damages
or liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) (i) in such proportion as is appropriate to reflect
the relative benefits received by the indemnifying party or parties, on the one
hand, and the indemnified party, on the other, from the Offering or (ii) if
the allocation provided by the foregoing clause (i) is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the indemnifying party or parties on the one hand, and the indemnified party, on
the other, in connection with the statements or omissions or alleged statements
or omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company, on the one hand,
and Schroder & Co. Inc., on the other, shall be deemed to be in the same
proportion as the total proceeds from the Offering (before deducting expenses,
but after deducting Schroder & Co. Inc.'s fee) received by the Company bears to
the total commissions and fee received by Schroder & Co. Inc. Relative fault
shall be determined by reference to whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or Schroder & Co.
Inc., the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission, as well as
any other relevant equitable considerations appropriate in the circumstances.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities (or actions in respect thereof) referred to above
in this Section 7(d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. The Company and Schroder & Co. Inc. agree
that it would not be equitable if the amount of such contribution were
determined by pro rata or per capita allocation or by any other method of
allocation that does not take into account the equitable considerations referred
to in the first sentence of this paragraph (d). Notwithstanding any other
provision of this paragraph (d), Schroder & Co. Inc. shall not be obligated to
make contributions hereunder that in the aggregate exceed the fee received by it
with respect to the Debentures purchased under this Agreement, less the
aggregate amount of any damages that such Placement Agent has otherwise been
required to pay in respect of the same or any substantially similar claim. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) will be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. For purposes of this
Section 7(d), each person, if any, who controls Schroder & Co. Inc. within the
meaning of Section 15
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<PAGE>
of the Securities Act or Section 20 of the Exchange Act shall have the same
rights to contribution as Schroder & Co. Inc., and each director of the Company,
and each person, if any, who controls the Company within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act, shall have the same
rights to contribution as the Company, subject in each case to the provisions of
this paragraph (d). Any party entitled to contribution will, promptly after
receipt of notice of commencement of any action, suit or proceeding against such
party in respect to which a claim for contribution may be made against another
party or parties under this Section 7(d), notify any such party or parties from
whom contribution may be sought, but the omission to notify such party or
parties shall not relieve the party or parties from whom contribution may be
sought from any other obligation(s) it or they may have hereunder or otherwise
than under this paragraph (d) or (y) to the extent that such party or parties
were not adversely affected by such omission. The contribution agreement set
forth above shall be in addition to any liabilities which any indemnifying party
may otherwise have.
8. Survival. The respective representations, warranties, agreements,
--------
covenants, indemnities and other statements of the Company, its officers, and
Schroder & Co. Inc. set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement shall remain in full force and effect,
regardless of (i) any investigation made by or on behalf of the Company, any of
its officers or directors, Schroder & Co. Inc. or any controlling person
referred to in Section 7 hereof and (ii) delivery of and payment for the
Debentures. The respective agreements, covenants, indemnities and other
statements set forth in Sections 5 and 7 hereof shall remain in full force and
effect, regardless of any termination or cancellation of this Agreement.
9. Termination. The obligations of Schroder & Co. Inc. under this
-----------
Agreement may be terminated at any time prior to the Closing Date by notice to
the Company from Schroder & Co. Inc., without liability on the part of Schroder
& Co. Inc. to the Company if, prior to delivery and payment for the Debentures,
in the sole judgment of Schroder & Co. Inc.:
(i) the Company shall have failed, refused or been unable to
perform all obligations and satisfy all conditions on its part to be
performed or satisfied hereunder at or prior thereto;
(ii) trading in any of the equity securities of the Company shall
have been suspended by the Commission or by an exchange that lists the
Common Stock;
(iii) trading in securities generally on the AMEX, New York Stock
Exchange or the International Stock Exchange of the United Kingdom and
The Republic of Ireland, Limited shall have been suspended or limited or
minimum or maximum prices shall have been generally established on
either such exchanges, or additional material governmental restrictions,
not in force on the date of this Agreement, shall have been imposed upon
trading in securities generally by any of such exchanges or by order of
the Commission or any court or other governmental authority;
(iv) a general banking moratorium shall have been declared by
Federal, New York State or United Kingdom authorities; or
(v) any material adverse change in the financial or securities
markets in the United States or United Kingdom or any outbreak or
escalation of hostilities or declaration by the United States or the
United Kingdom of a national emergency or war or other calamity or
crisis shall have occurred, the effect of any of which is such as to
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<PAGE>
make it, in the sole judgment of Schroder & Co. Inc., impracticable or
inadvisable to proceed with the Offering or the delivery of the
Debentures on the terms and in the manner contemplated by the
Confidential Placement Memorandum.
Any termination pursuant to this Section 9 shall be without liability of
any party to any other party except as provided in Sections 5 and 7.
10. Notices. Notice given pursuant to any of the provisions of this
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Agreement shall be in writing and, unless otherwise specified, shall be mailed
or delivered (a) if to the Company, at the office of the Company, 9955 SE
Washington, Suite 303, Portland, Oregon 97216, Attention: Chief Executive
Officer, with a copy to Latham & Watkins, 633 West Fifth Street, Suite 4000, Los
Angeles, CA 90071, Attention: Gary Olson, Esq., or (b) if to Schroder & Co.
Inc., at the offices of Schroder & Co. Inc., 787 Seventh Avenue, 5th Floor, New
York, New York 10019, Attention: Bradley G. Razook. Any such notice shall be
effective only upon receipt. Any notice under Section 8 or 9 may be made by
facsimile or telephone, but if so made shall be subsequently confirmed in
writing.
11. Successors. This Agreement shall inure to the benefit of and shall be
----------
binding upon Schroder & Co. Inc., the Company, and their respective successors
and legal representatives, and nothing expressed or mentioned in this Agreement
is intended or shall be construed to give any other person any legal or
equitable right, remedy or claim under or in respect of this Agreement, or any
provisions herein contained, this Agreement and all conditions and provisions
hereof being intended to be and being for the sole and exclusive benefit of such
persons and for the benefit of no other person except that (i) the indemnities
of the Company contained in Section 7 of this Agreement shall also be for the
benefit of any person or persons who control Schroder & Co. Inc. within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
and (ii) the indemnities of Schroder & Co. Inc. contained in Section 7 of this
Agreement shall also be for the benefit of the directors of the Company, the
officers of the Company and any person or persons who control the Company within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act. No purchaser of 144A Debentures from Schroder & Co. Inc. shall be deemed a
successor because of such purchase. This Agreement shall not be assignable by
either party hereto without the prior written consent of the other party.
12. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT,
--------------
AND THE TERMS AND CONDITIONS SET FORTH HEREIN, SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING
EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAWS.
13. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but both of which
together shall constitute one and the same instrument.
-21-
<PAGE>
If the foregoing correctly sets forth our understanding, please indicate
your acceptance thereof in the space provided below for that purpose, whereupon
this letter shall constitute an agreement binding the Company and Schroder & Co.
Inc.
ASSISTED LIVING CONCEPTS, INC.
By: /s/ Keren Brown Wilson
----------------------------------
Name: Keren Brown Wilson
Title: President and Chief Operating Officer
SCHRODER & CO. INC.
By: /s/ Laurent X de Marval
---------------------------------------
Name: Laurent X de Marvel
Title: Managing Director
-22-
<PAGE>
EXHIBIT 4.1
- --------------------------------------------------------------------------------
ASSISTED LIVING CONCEPTS, INC.
$86,250,000
5.625% Convertible Subordinated Debentures Due 2003
INDENTURE
Dated as of April 13, 1998
HARRIS TRUST AND SAVINGS BANK,
AS TRUSTEE
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. DEFINITIONS AND INCORPORATION BY REFERENCE..................... 1
SECTION 1.1. Definitions.............................................. 1
SECTION 1.2. Other Definitions........................................ 5
SECTION 1.3. Incorporation by Reference to Trust Indenture Act........ 5
SECTION 1.4. Rules of Construction.................................... 6
ARTICLE II. THE SECURITIES................................................. 6
SECTION 2.1. Form; Dating; Incorporation of Form in Indenture......... 6
SECTION 2.2. Execution and Authentication............................. 7
SECTION 2.3. Registrar and Agents..................................... 8
SECTION 2.4. Paying Agent to Hold Money in Trust...................... 9
SECTION 2.5. Transfer and Exchange.................................... 9
SECTION 2.6. Replacement Securities................................... 14
SECTION 2.7. Outstanding Securities................................... 14
SECTION 2.8. Temporary Securities..................................... 15
SECTION 2.9. Cancellation............................................. 15
SECTION 2.10. Defaulted Interest....................................... 16
SECTION 2.11. Securityholder Lists..................................... 16
SECTION 2.12. Persons Deemed Owners.................................... 16
SECTION 2.13 CUSIP Number............................................. 16
ARTICLE III. REDEMPTION..................................................... 17
SECTION 3.1. Notices to Trustee....................................... 17
SECTION 3.2. Selection of Securities to be Redeemed................... 17
SECTION 3.3. Notice of Redemption by the Company...................... 18
SECTION 3.4. Effect of Notice of Redemption........................... 18
SECTION 3.5. Deposit of Redemption Price.............................. 19
SECTION 3.6. Securities Redeemed in Part.............................. 19
ARTICLE IV. COVENANTS...................................................... 19
SECTION 4.1. Payment of the Securities................................ 19
SECTION 4.2. Commission Reports....................................... 19
SECTION 4.3. Waiver of Stay, Extension or Usury Laws.................. 20
SECTION 4.4. Notice of Default........................................ 20
SECTION 4.5. Compliance Certificates.................................. 20
SECTION 4.6. Limitation on Dividends and Other Distributions.......... 21
ARTICLE V. SUCCESSOR CORPORATION.......................................... 21
SECTION 5.1. When Company May Merge, etc.............................. 21
SECTION 5.2. Successor Corporation or Trust Substituted............... 22
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
ARTICLE VI. DEFAULTS AND REMEDIES.......................................... 22
SECTION 6.1. Events of Default........................................ 22
SECTION 6.2. Acceleration............................................. 24
SECTION 6.3. Other Remedies........................................... 24
SECTION 6.4. Waiver of Defaults and Events of Default................. 25
SECTION 6.5. Control by Majority...................................... 25
SECTION 6.6. Rights of Holders to Receive Payment..................... 25
SECTION 6.7. Collection Suit by Trustee............................... 26
SECTION 6.8. Trustee May File Proofs of Claim......................... 26
SECTION 6.9. Priorities............................................... 26
SECTION 6.10. Undertaking for Costs................................... 27
SECTION 6.11. Limitation on Suits..................................... 27
ARTICLE VII. TRUSTEE....................................................... 28
SECTION 7.1 Duties of Trustee........................................ 28
SECTION 7.2. Rights of Trustee........................................ 29
SECTION 7.3. Individual Rights of Trustee............................. 30
SECTION 7.4. Trustee's Disclaimer..................................... 30
SECTION 7.5. Notice of Defaults....................................... 30
SECTION 7.6. Reports by Trustee to Holders............................ 30
SECTION 7.7. Compensation and Indemnity............................... 31
SECTION 7.8. Replacement of Trustee................................... 32
SECTION 7.9. Successor Trustee by Merger, etc......................... 33
SECTION 7.10. Eligibility; Disqualification........................... 33
SECTION 7.11. Preferential Collection of Claims Against Company....... 33
ARTICLE VIII. SATISFACTION AND DISCHARGE OF INDENTURE...................... 33
SECTION 8.1. Satisfaction, Discharge and Defeasance of the Securities. 33
SECTION 8.2. Satisfaction and Discharge of Indenture.................. 34
SECTION 8.3. Survival of Certain Obligations.......................... 34
SECTION 8.4. Application of Trust Money............................... 35
SECTION 8.5. Paying Agent to Repay Monies Held........................ 35
SECTION 8.6. Return of Unclaimed Monies............................... 35
SECTION 8.7. Reinstatement............................................ 36
SECTION 8.8. Indemnity for Government Obligations..................... 36
ARTICLE IX. AMENDMENTS AND WAIVERS......................................... 36
SECTION 9.1. Amendments and Waivers Without Consent of Holders........ 36
SECTION 9.2. Amendments and Waivers with Consent of Holders........... 37
SECTION 9.3. Compliance with Trust Indenture Act...................... 38
SECTION 9.4. Revocation and Effect of Consents........................ 38
SECTION 9.5. Notation on or Exchange of Securities.................... 38
SECTION 9.6. Trustee to Sign Amendments, etc.......................... 39
ARTICLE X. CONVERSION OF SECURITIES........................................ 39
SECTION 10.1. Right of Conversion; Conversion Price.................... 39
SECTION 10.2. Issuance of Shares on Conversion......................... 40
SECTION 10.3. No Adjustment for Interest or Dividends.................. 40
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
SECTION 10.4. Adjustment of Conversion Price.......................... 41
SECTION 10.5. Notice of Adjustment of Conversion Price................ 43
SECTION 10.6. Notice of Certain Corporate Action...................... 43
SECTION 10.7. Taxes on Conversions.................................... 45
SECTION 10.8. Fractional Shares....................................... 45
SECTION 10.9. Cancellation of Converted Securities.................... 45
SECTION 10.10. Provisions in Case of Consolidation, Merger or Sale of
Assets.................................................. 45
SECTION 10.11. Disclaimer by Trustee of Responsibility for Certain
Matters................................................. 46
SECTION 10.12. Covenant to Reserve Shares.............................. 46
ARTICLE XI. SUBORDINATION; SENIORITY....................................... 46
SECTION 11.1. Securities Subordinated to Senior Indebtedness.......... 46
SECTION 11.2. Company Not to Make Payments with Respect to Securities
in Certain Circumstances................................ 47
SECTION 11.3. Subrogation of Securities............................... 49
SECTION 11.4. Authorization by Holders of Securities.................. 50
SECTION 11.5. Notices to Trustee...................................... 50
SECTION 11.6. Trustee's Relation to Senior Indebtedness............... 51
SECTION 11.7. No Impairment of Subordination.......................... 52
SECTION 11.8. Article 11 Not To Prevent Events of Default............. 52
SECTION 11.9. Paying Agents other than the Trustee.................... 52
SECTION 11.10. Securities Senior to Subordinated Indebtedness......... 52
ARTICLE XII. RIGHT TO REQUIRE REPURCHASE.................................... 53
SECTION 12.1. Right to Require Repurchase.............................. 53
SECTION 12.2. Notice; Method of Exercising Repurchase Right........... 53
SECTION 12.3. Deposit Of Repurchase Price.............................. 54
SECTION 12.4. Notes Not Repurchased On Repurchase Date................. 54
SECTION 12.5. "Change in Control" Defined.............................. 54
ARTICLE XIII. MISCELLANEOUS................................................ 56
SECTION 13.1. Trust Indenture Act Controls............................ 56
SECTION 13.2. Notices................................................. 56
SECTION 13.3. Communications by Holders with Other Holders............ 57
SECTION 13.4. Certificate and Opinion as to Conditions Precedent...... 58
SECTION 13.5. Statements Required in Certificate and Opinion.......... 58
SECTION 13.6. Rules by Trustee and Agents............................. 58
SECTION 13.7. Record Date............................................. 59
SECTION 13.8. Legal Holidays.......................................... 59
SECTION 13.9. Governing Law........................................... 59
SECTION 13.10. No Adverse Interpretation of Other Agreements.......... 59
SECTION 13.11. No Recourse Against Others............................. 59
SECTION 13.12. Successors............................................. 59
SECTION 13.13. Multiple Counterparts.................................. 60
SECTION 13.14. Table of Contents, Headings, etc....................... 60
SECTION 13.15. Severability........................................... 60
EXHIBIT A - FORM OF SECURITY
</TABLE>
-iii-
<PAGE>
CROSS-REFERENCE TABLE
ASSISTED LIVING CONCEPTS, INC.
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture
- --------------- ---------
<S> <C>
310(a)(1) 7.10; 12.1
(a)(2) 12.1
(a)(3) 12.1
(a)(4) 12.1
(a)(5) 12.1
(b) 7.10; 12.1
(c) 12.1
311(a) 7.11; 12.1
(b) 7.11; 12.1
(c) 12.1
312(a) 12.1
(b) 12.1; 12.3
(c) 12.1; 12.3
313(a) 7.6; 12.1
(b) 7.6; 12.1
(c) 7.6; 12.1
(d) 7.6; 12.1
314(a) 4.2; 12.1
(b) 12.1
(c) 12.1
(d) 12.1
(e) 12.1
(f) 12.1
315(a) 7.1; 12.1
(b) 7.1; 12.1
(c) 7.1; 12.1
(d) 7.1; 12.1
(e) 7.1; 12.1
316(a) 7.1; 12.1
(b) 7.1; 12.1
(c) 7.1; 12.1
317(a) 12.1
(b) 12.1
318(a) Not Applicable
</TABLE>
___________________
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
INDENTURE dated as of April 13, 1998 by and between ASSISTED LIVING
CONCEPTS, INC., a Nevada corporation (the "Company"), and HARRIS TRUST AND
SAVINGS BANK, an Illinois banking corporation, as trustee ("Trustee").
RECITALS OF THE COMPANY
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders (as defined herein) of the
Company's 5.625% Convertible Subordinated Debentures due 2003 (the
"Securities"):
ARTICLE I.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 Definitions.
-----------
"Affiliate" means any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company. For
the purposes of this definition, "control" (including, with correlative
meanings, the terms "controlled by" and "under common control with"), as used
with respect to any Person, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities or by agreement
or otherwise.
"Agent" means any Registrar, Paying Agent, Conversion Agent, co-
registrar or agent for service of notices and demands.
"Bankruptcy Law" means Title 11 of the U.S. Code or any similar
Federal or State law for the relief of debtors.
"Board of Directors of the Company" means the Board of Directors of
the Company or any committee of the Board of Directors of the Company.
"Board Resolution" means a resolution certified by the Secretary or an
Assistant Secretary of the Company to have been duly adopted by the Board of
Directors of the Company and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means a day that is not a Legal Holiday.
"Capital Stock" means any and all shares or other equivalents (however
designated) of capital stock, including all common stock and all preferred
stock, in the case of a corporation, or partnership interests or other
equivalents (however designated) in the case of a partnership or common shares
of beneficial interest or other equivalents (however designated) in the case of
a trust.
"Closing Price" means with respect to the shares of Capital Stock of
the Company on any day, (i) the reported last sale price regular way or, in case
no such reported sale takes
<PAGE>
place on such day, the average of the reported closing bid and asked prices
regular way, in either case on the American Stock Exchange (the "AMEX"), or (ii)
if the shares of Capital Stock are not listed or admitted to trading on the
AMEX, the reported last sale price regular way or, in case no such reported sale
takes place on such day, the average of the reported closing bid and asked
prices regular way, in either case on the principal national securities exchange
on which the shares of Capital Stock are listed or admitted to trading, or (iii)
if the shares of Capital Stock are not listed or admitted to trading on any
national securities exchange, the average of the closing bid and asked prices as
furnished by any New York Stock Exchange member firm selected from time to time
by the Company for that purpose.
"Company" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means the
successor.
"Corporate Trust Office" means the office of the Trustee at which at
any particular time its corporate trust business shall be principally
administered, which office at the date of execution of this Indenture is located
at 311 West Monroe Street, 12th Floor, Chicago, Illinois.
"Custodian" means any receiver, trustee, liquidator or similar
official under any Bankruptcy Law.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Dollar" or "$" means the lawful money of the United States of
America.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Holder" or "Securityholder" means the Person in whose name a Security
is registered on the Security Register.
"Indebtedness" as applied to any Person, means, without duplication:
(i) all indebtedness for borrowed money whether or not evidenced by a promissory
note, draft or similar instrument; (ii) that portion of obligations with respect
to any lease that is properly classified as a liability on a balance sheet in
accordance with generally accepted accounting principles; (iii) notes payable
and drafts accepted representing extensions of credit; (iv) any balance owed for
all or any part of the deferred purchase price of property or services, which
purchase price is due more than six months from the date of incurrence of the
obligation in respect thereof (except any such balance that constitutes (a) a
trade payable or an accrued liability arising in the ordinary course of business
or (b) a trade draft or note payable issued in the ordinary course of business
in connection with the purchase of goods or services), if and to the extent such
debt would appear as a liability upon a balance sheet of such Person prepared in
accordance with generally accepted accounting principles; (v) any debt of others
described in the preceding clauses (i) through (iv) which such Person has
guaranteed or for which it is otherwise liable; and (vi) any deferral,
amendment, renewal, extension, supplement or refunding of any of the foregoing
indebtedness; provided, however, that, in computing the "Indebtedness" of any
-------- -------
Person, there shall be excluded any particular indebtedness if, upon or prior to
the maturity
-2-
<PAGE>
thereof and at the time of determination of such indebtedness, there shall have
been deposited with a depository in trust money (or evidences of indebtedness if
permitted by the instrument creating such indebtedness) in the necessary amount
to pay, redeem or satisfy such indebtedness as it becomes due, and the amount so
deposited shall not be included in any computation of the assets of such Person.
"Indenture" means this Indenture as amended or supplemented from time
to time.
"Officer" means the Chairman of the Board, the President, any Vice
President, the Treasurer, the Secretary or the Controller of the Company.
"Officers' Certificate" means a certificate signed by two Officers or
by an Officer and an Assistant Treasurer, Assistant Secretary or Assistant
Controller of the Company. See Sections 13.4 and 13.5.
"Opinion of Counsel" means a written opinion from Latham & Watkins or
any other legal counsel who is reasonably acceptable to the Trustee. The
counsel may be an employee of or counsel to the Company or the Trustee. See
Sections 13.4 and 13.5.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government (or any agency, instrumentality or political subdivision thereof).
"Redemption Date" when used with respect to any Security to be
redeemed, means the date fixed for such redemption pursuant to this Indenture.
"Redemption Price" when used with respect to any Security to be
redeemed, means the price fixed for such redemption pursuant to this Indenture
as specified in the form of Security annexed hereto as Exhibit A.
"Registration Statement" means the registration statement that the
Company is required to file with the Securities and Exchange Commission pursuant
to that certain Registration Rights Agreement, dated as of April 13, 1998, by
and between the Company and the Holders from time to time of the Securities.
"Regular Record Date" means, with respect to any Interest Payment
Date, the April 15 or October 15 (whether or not a Business Day), as the case
may be, next preceding such Interest Payment Date.
"Restricted Security", means the Securities, upon original issuance
thereof, and all Securities issued upon registration of transfer thereof or in
exchange therefor, and at all times subsequent thereto, until, in the case of
any such Securities the earlier of the following: (i) such Securities have been
effectively registered under Section 5 of the Securities Act and disposed of in
accordance with a registration statement covering them or (ii) such Securities
have been distributed to the public pursuant to Rule 144 of the Securities Act
(or any similar provisions then in force). When any Security which is a
Restricted Security ceases to be a Restricted
-3-
<PAGE>
Security, such Restricted Security shall no longer be subject to the transfer
restrictions as imposed by Section 2.5(2) hereof.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
"Securities" means the securities in the form of Exhibit A hereto that
are issued under this Indenture as amended or supplemented from time to time.
"Senior Indebtedness" means the principal, premium, if any, and unpaid
interest (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not a claim
for post-filing interest is allowed in such proceeding), fees, charges,
expenses, reimbursement and indemnification obligations, and all other amounts
payable under or in respect of Indebtedness of the Company, whether any such
Indebtedness exists as of the date of this Indenture or shall hereafter be
created, incurred, assumed or guaranteed, as may be amended from time to time
and any renewals, extensions, refundings, amendments and modifications of any
such indebtedness or obligations or of the instruments creating or evidencing
such indebtedness or obligations or guarantees; provided, however, that Senior
-------- -------
Indebtedness shall not include (A) Indebtedness owed to a Subsidiary, (B)
Indebtedness of the Company which is expressly pari passu to the Securities or
(C) Subordinated Indebtedness.
"Subordinated Indebtedness" means the principal, premium, if any, and
interest on any Indebtedness of the Company which by its terms is expressly
subordinated in right of payment to the Securities.
"Subsidiary" means a Person the majority of whose voting stock is
owned by the Company or a subsidiary of the Company. Voting stock is Capital
Stock having voting power under ordinary circumstances to elect directors or
similar positions.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code (S)(S) 77aaa
- - 77bbbb) as amended by the Trust Indenture Reform Act of 1990 and as in effect
on the date of this Indenture.
"Trustee" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means the
successor.
"Trust Officer", when used with respect to the Trustee, means an
officer of the Trustee assigned by the Trustee to administer its corporate trust
matters or any other officer of the Trustee to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
"United States" means the United States of America.
-4-
<PAGE>
SECTION 1.2. Other Definitions.
<TABLE>
<CAPTION>
Term Defined in Section
---- ------------------
<S> <C>
"Common Stock" 10.1
"Company Order" 2.2
"Conversion Agent" 2.3
"conversion price" 10.1
"current market price" 10.4
"DTC" 2.3
"Depository" 2.3
"Event of Default" 6.1
"Interest Payment Date" 2.1
"Legal Holiday" 13.8
"Paying Agent" 2.3
"Payment or Distribution" 11.1
"Registered Accredited
"Investor Securities" 2.1
"Registrar" 2.3
"Rule 144A Securities" 2.1
"Rule 13e-3 Transaction" 10.6
"Security Register" 2.3
"U.S. Government Obligations" 8.1
</TABLE>
SECTION 1.3. Incorporation by Reference to Trust Indenture Act.
-------------------------------------------------
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company or any
other obligor on the indenture securities.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rules have
the meanings assigned to them therein.
-5-
<PAGE>
SECTION 1.4. Rules of Construction.
---------------------
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with United States generally accepted
accounting principles in effect as of the time as to which such
accounting principles are to be applied;
(3) "or" is not exclusive; and
(4) words in the singular include the plural, and in the plural
include the singular.
ARTICLE II.
THE SECURITIES
SECTION 2.1. Form; Dating; Incorporation of Form in Indenture.
------------------------------------------------
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $86,250,000,
except for Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities pursuant to Sections
2.3, 2.5, 2.6, 2.8, 3.6, 9.5 or 10.1.
The Securities shall be known and designated as the 5.625% Convertible
Subordinated Debentures due 2003 of the Company. Their fixed maturity shall be
May 1, 2003, and they shall bear interest at the rate per annum of 5.625%, from
and including the date of issuance thereof until maturity or earlier redemption,
payable semiannually on May 1 and November 1 commencing November 1, 1998 (each
an "Interest Payment Date"), until the principal thereof is paid or made
available for payment. Subject to Section 2.10, such interest shall be paid to
the Holder in whose name each Security was registered at the close of business
on the Regular Record Date next preceding each Interest Payment Date.
The Securities shall be redeemable as provided in Article 3.
The Securities shall be subordinated in right of payment to Senior
Indebtedness, to the extent provided in Article 11.
The Securities shall be convertible as provided in Article 10.
The Securities and the Trustee's certificate of authentication shall
be substantially in the form of Exhibit A which is incorporated in and made part
of this Indenture. The Securities may have notations, legends or endorsements
required by law, stock exchange rules, agreements to which the Company is
subject, or usage. The Company shall approve the form of the Securities and any
notation, legend or endorsement on them. Each Security shall be dated the date
of its authentication.
-6-
<PAGE>
The terms and provisions contained in the Securities shall constitute,
and are hereby expressly made, a part of this Indenture and to the extent
applicable, the Company and the Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be bound thereby.
The Securities (the "Rule 144A Securities") offered and sold to
"qualified institutional buyers" (as such term is defined in Rule 144A under the
Securities Act) will initially be issued in the form of a global Security in the
aggregate principal amount of the Rule 144A Securities, which Security shall be
in substantially the form of Exhibit A hereto, including the paragraphs referred
to in footnotes 1 and 2, and is hereinafter referred to as the "Rule 144A Global
Security." The aggregate principal amount of the Rule 144A Global Security may
from time to time be increased or decreased as hereinafter provided.
All other Securities will be issued in fully registered form in
denominations of U.S. $1,000 and integral multiples thereof (the "Registered
Securities"), which Securities shall be in substantially the form of Exhibit A
hereto, excluding the information called for by footnote 1 thereto but
including, if applicable, the information called for by footnote 2 thereto. The
Registered Securities which are Restricted Securities are hereinafter
collectively referred to as "Registered Accredited Investor Securities."
SECTION 2.2. Execution and Authentication.
----------------------------
Two Officers shall sign the Securities for the Company by manual or
facsimile signature.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall
nevertheless be valid.
A Security shall not be valid until the Trustee manually signs the
certificate of authentication on the Security. Such signature shall be
conclusive evidence that the Security has been authenticated under this
Indenture. Notwithstanding the foregoing, if any Security shall have been
authenticated and delivered hereunder but never issued and sold by the Company,
and the Company shall deliver such Security to the Trustee for cancellation as
provided in Section 2.9, for all purposes of this Indenture such Security shall
be deemed never to have been authenticated and delivered hereunder and shall
never be entitled to the benefits of this Indenture.
The Trustee shall authenticate Securities for original issue in the
aggregate principal amount of up to $86,250,000 upon the execution of the
Indenture and a written order or orders of the Company signed by two Officers or
by an Officer and an Assistant Treasurer of the Company (a "Company Order"). The
aggregate principal amount of the Securities outstanding at any time may not
exceed that amount.
The Trustee may appoint an authenticating agent to authenticate
Securities. An authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent.
-7-
<PAGE>
An authenticating agent has the same rights as an Agent to deal with the Company
or an Affiliate.
The Securities shall be issuable only in registered form without
coupons. The Securities shall be issuable only in denominations of $1,000
principal amount and any whole multiples thereof.
SECTION 2.3. Registrar and Agents.
--------------------
The Company shall maintain an office or agency where Securities may be
presented for registration of transfer or for exchange ("Registrar"), an office
or agency where Securities may be presented for payment ("Paying Agent"), an
office or agency where Securities may be presented for conversion ("Conversion
Agent") and an office or agency where notices and demands to or upon the Company
in respect of the Securities and this Indenture may be served. The Registrar
shall keep a register of the Securities (the "Security Register") and of their
transfer and exchange. The Company may have one or more co-registrars, one or
more additional Paying Agents and one or more additional Conversion Agents. The
Company or any Subsidiary may act as Paying Agent and/or Conversion Agent. The
term "Paying Agent" includes any additional paying agent and the term
"Conversion Agent" includes any additional conversion agent.
The Company may change any Paying Agent, Registrar, Conversion Agent
or Co-Registrar on sixty (60) days' prior written notice to the Trustee. The
Company shall notify the Trustee in writing of the name and address of any such
Agent. If the Company fails to maintain a Registrar, Paying Agent, Conversion
Agent or agent for service of notices and demands, or fails to give the
foregoing notice, the Trustee shall act as such.
The Company initially appoints the Trustee as Registrar, Paying Agent,
Conversion Agent and agent for service of notices and demands.
With respect to the Securities issuable or issued in whole or in part
in the form of Rule 144A Global Securities, the Company hereby appoints The
Depository Trust Company ("DTC"), at present located at 55 Water Street, New
York, New York, 10041 as the depository for the Rule 144A Global Securities upon
the terms and subject to the conditions herein set forth. (DTC and its
successor or successors as such depository are herein called the "Depository.")
SECTION 2.4. Paying Agent to Hold Money in Trust.
-----------------------------------
At least one Business Day prior to each due date of the principal of,
premium if any, and interest on any Securities, the Company shall deposit with
each Paying Agent a sum sufficient to pay such principal, premium, if any, and
interest so becoming due. The Company shall require each Paying Agent other
than the Trustee to agree in writing that it will hold in trust for the benefit
of Holders of Securities or the Trustee all money held by the Paying Agent for
the payment of principal of, premium if any, or interest on the Securities and
to notify the Trustee of any default by the Company (or any other obligor on the
Securities) in making any such payment. If the Company or a Subsidiary acts as
Paying Agent, it shall on or before each due
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date of the principal of, premium, if any, or interest on any Securities
segregate the money and hold it as a separate trust fund. The Company at any
time may require a Paying Agent to pay all money held by it to the Trustee and
the Trustee may at any time during the continuance of any payment default, upon
written request to a Paying Agent, require such Paying Agent to forthwith pay to
the Trustee all sums so held in trust by such Paying Agent. Upon doing so, the
Paying Agent (if other than the Company or a Subsidiary thereof) shall have no
further liability for the money.
The final installment of principal of and premium, if any, on each
Security shall be payable only upon surrender of such Security at the office or
agency of the Company maintained for such purpose. Payments of principal and
premium, if any, and interest on this Security shall be made at the office or
agency of the Company maintained for such purpose, or, in the case of any such
payments other than the final payment of principal and premium, if any, at the
Company's option, by check mailed to the Person entitled thereto at such
Person's address last appearing on the Security Register maintained by the
Registrar.
SECTION 2.5. Transfer and Exchange.
---------------------
(1) When a Security is presented to the Registrar or a co-registrar
with a request to register the transfer thereof, the Registrar or co-registrar
shall register the transfer as requested, and when Securities are presented to
the Registrar or a co-registrar with a request to exchange them for an equal
principal amount of Securities of other authorized denominations, the Registrar
shall make the exchange as requested provided that every Security represented or
surrendered for registration of transfer or exchange shall be duly endorsed and
accompanied by a written instrument of transfer satisfactory to the Company and
the Registrar duly executed by the Holder or such Holder's attorney-in-fact duly
authorized in writing; provided, further, that the Registrar or co-registrar, as
-------- -------
the case may be, shall not register the transfer of such Security if such
Security is a Restricted Security unless the conditions in Section 2.5(2) hereof
shall have been satisfied. The Holder of each Security, including each
Restricted Security, by such Holder's acceptance thereof, agrees to be bound by
the transfer restrictions set forth herein and in the legend on such Security.
(2) Whenever any Restricted Security is presented or surrendered for
registration of transfer or exchange for a Security registered in a name other
than that of the Holder, no registration of transfer or exchange shall be made
unless:
(a) The registered Holder presenting such Restricted
Security for transfer shall have certified to the Trustee in writing
that the registered Holder is transferring the Restricted Security to
the Company;
(b) The Trustee has received written certification from the
registered Holder, and a written opinion of counsel acceptable in form
and substance to the Company and the Trustee, indicating that the
transfer is being made pursuant to an available exemption from, or a
transaction not otherwise subject to, the registration requirements of
the Securities Act; or
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(c) In the case of Rule 144A Securities, the registered
Holder presenting such Restricted Security for transfer shall have
certified to the Trustee in writing that such registered Holder is
transferring such Restricted Securities to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act) in
compliance with the exemption from registration as provided by Rule
144A under the Securities Act.
For purposes of this Section 2.5(2), such certification to the Trustee
in writing shall be in the form of the Transfer Notice set forth on the reverse
of such Security.
(3) Each certificate evidencing Restricted Securities shall bear a
legend in substantially the following form:
THIS SECURITY HAS BEEN ACQUIRED BY THE HOLDER FOR THE PURPOSE OF
INVESTMENT AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION WITH ANY
DISTRIBUTION. THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD
OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS
HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM
THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE
144A THEREUNDER. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE
HEREOF, REPRESENTS, ACKNOWLEDGES AND AGREES FOR THE BENEFIT OF THE
COMPANY THAT: (I) IT HAS ACQUIRED A "RESTRICTED" SECURITY WHICH HAS
NOT BEEN REGISTERED UNDER THE SECURITIES ACT; (II) IT WILL NOT OFFER,
SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO ASSISTED LIVING
CONCEPTS, INC., (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS
BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) IN THE CASE OF A
HOLDER WHO IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT), FOR SO LONG AS THIS SECURITY IS
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, OR (D) IN ACCORDANCE WITH RULE 144 UNDER
THE SECURITIES ACT OR PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, (AND CONFIRMED IN AN
OPINION OF COUNSEL ACCEPTABLE IN FORM AND SUBSTANCE TO THE ISSUER OF
THIS
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<PAGE>
SECURITY IF THE ISSUER SO REQUESTS) AND, IN EACH CASE, IN ACCORDANCE
WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
OR ANY OTHER APPLICABLE JURISDICTION; AND (III) IT WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS
SECURITY FROM IT OF THE RESALE RESTRICTIONS SET FORTH IN (II) ABOVE.
Subject to compliance with Section 2.5(6) hereof, the above legend may be
removed from a certificate when it no longer evidences a Security which is a
Restricted Security.
(4) To permit registrations of transfers and exchanges, the Company
shall issue and the Trustee or any authenticating agent shall authenticate
Securities at the Registrar's or co-registrar's request. No service charge
shall be made for any registration of transfer or exchange of Securities but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto, but this provision
shall not apply to any exchange pursuant to Section 2.8, 3.6, 9.5 or 10.2 not
involving any transfer.
(5) The Registrar shall not be required (i) to issue, register the
transfer of or exchange Securities during a period beginning at the opening of
business 15 days before the day of any selection of Securities for redemption
under Section 3.2 and ending at the close of business on the day of selection,
or (ii) to register the transfer or exchange of any Security so selected for
redemption in whole or in part, except the unredeemed portion of any Security
being redeemed in part.
(6) Any Restricted Security as to which the restrictions on transfer
set forth in Section 2.5(2) hereof shall have expired in accordance with their
terms or shall have terminated may, upon surrender of such Restricted Security
for exchange to the Trustee in accordance with the provisions of this Section
2.5(6) (accompanied, in the event that such restrictions on transfer have
terminated by reason of a transfer pursuant to Rule 144 (or any successor
provision), by an opinion of counsel reasonably acceptable to the Company,
addressed to the Company and the Trustee and in form and scope reasonably
satisfactory to the Company, to the effect that the transfer of such Restricted
Security has been made in compliance with Rule 144 (or such successor
provision)), be exchanged for a new Security, of like tenor and aggregate
principal amount, which shall not bear the restrictive legend required by
Section 2.5(3) hereof. The Company shall promptly inform the Trustee in writing
of the effective date of any registration statement registering the Securities
under the Securities Act.
(7) If the Security so surrendered for exchange is a Registered
Accredited Investor Security and the Holder thereof requests in writing that
such Registered Accredited Investor Security be exchanged for an interest in the
Rule 144A Global Security, such Registered Accredited Investor Security will be
exchangeable into an equal aggregate principal amount of beneficial interests in
the Rule 144A Global Security; provided, however, that, if such Registered
-------- -------
Accredited Investor Security is a Restricted Security, such exchange may only be
made if such Holder certifies to the Trustee in writing that such Holder is a
"qualified institutional buyer" (as defined in Rule 144A under the Securities
Act) by completing the Transfer Notice on the reverse
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of such Security. Upon any exchange as provided in the immediately preceding
sentence, the Trustee shall cancel such Registered Accredited Investor Security
and cause, or direct any custodian for the Rule 144A Global Security to cause,
in accordance with the standing instructions and procedures existing between the
Depository and any such custodian, the aggregate principal amount of Securities
represented by the Rule 144A Global Security to be increased accordingly. If no
Rule 144A Global Securities are then outstanding, the Company shall issue and
the Trustee shall authenticate a new Rule 144A Global Security in the
appropriate principal amount.
Any person having a beneficial interest in a Rule 144A Global Security
may upon request exchange such beneficial interest for a Registered Accredited
Investor Security only as provided in this paragraph. Upon receipt by the
Company and the Trustee of (i) written instructions (or such other form of
instructions as is customary) on behalf of any person having a beneficial
interest in a Rule 144A Global Security and (ii) in the case of a Restricted
Security, the following additional information and documents (all of which may
be submitted by facsimile):
(A) if such beneficial interest is being transferred to the
person designated as being the beneficial owner, a
certification to that effect from such person; or
(B) if such beneficial interest is being transferred to a person
other than the person designated as being the beneficial
owner, the provisions of Section 2.5(2)(b) hereof have been
satisfied;
in which case the Trustee or any custodian for the Rule 144A Global Security, at
the direction of the Trustee, shall, in accordance with the standing
instructions and procedures existing between the Depository and such custodian,
cause the aggregate principal amount of the Rule 144A Global Security to be
reduced accordingly and, following such reduction, the Company shall execute and
the Trustee shall authenticate and deliver to the transferee a Registered
Security in the appropriate principal amount and, if such Security is a
Restricted Security, including the appropriate legend. Securities issued in
exchange for a beneficial interest in the Rule 144A Global Security pursuant to
this paragraph shall be registered in such names and in such authorized
denominations as shall be instructed to the Trustee by the Depository. The
Trustee shall deliver such Securities to the persons in whose names such
Securities are so registered.
(8) Notwithstanding any other provision of this Agreement (other than
the provisions set forth in Section 2.5(2)(c) hereof), the Rule 144A Global
Security may not be transferred as a whole except by the Depository to a nominee
of the Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository or by Depository or any such nominee to a successor
Depository or a nominee of such successor Depository.
(9) If at any time either (i) the Depository for the Rule 144A Global
Security notifies the Company that the Depository is unwilling or unable to
continue as Depository for the Rule 144A Global Security and a successor
Depository for the Rule 144A Global Security is not appointed by the Company
within 90 days after delivery of such notice, or (ii) the Company, at its sole
discretion, notifies the Trustee in writing that it elects to cause the issuance
of Registered
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Securities under this Indenture, then the Company shall execute, and the Trustee
shall authenticate and deliver, Registered Securities in an aggregate principal
amount equal to the principal amount of the Rule 144A Global Security in
exchange for such Rule 144A Global Security.
(10) At such time as all beneficial interests in the Rule 144A Global
Security have either been exchanged for Registered Securities, redeemed,
repurchased or canceled, the Rule 144A Global Security shall be returned to or
retained and canceled by the Trustee. At any time prior to such cancellation,
if any beneficial interest in the Rule 144A Global Security is exchanged for
Registered Securities, redeemed, repurchased or canceled, the principal amount
of Securities represented by the Rule 144A Global Security shall be reduced
accordingly and an endorsement shall be made on the Rule 144A Global Security,
by the Trustee or any custodian therefor, at the direction of the Trustee, to
reflect such reduction.
(11) The transfer and exchange of the Rule 144A Global Security or
beneficial interests therein shall be effected through the Depository, in
accordance with this Indenture and the procedures of the Depository therefor,
which shall include restrictions on transfer comparable to those set forth
herein to the extent required by the Securities Act.
(12) The Trustee shall have no responsibility or obligation to any
beneficial owner of a Rule 144A Global Security, a member of, or a participant
in the Depository or other Person with respect to any ownership interest in the
Securities, with respect to the accuracy of the records of the Depository or its
nominee or of any participant or member thereof or with respect to the delivery
to any participant, member, beneficial owner or other Person (other than the
Depository) of any notice (including any notice of redemption) or the payment of
any amount, under or with respect to such Securities. All notices and
communications to be given to the Holders and all payments to be made to Holders
under the Securities shall be given or made only to the registered Holders
(which shall be the Depository or its nominee in the case of a Rule 144A Global
Security). The rights of beneficial owners in any Rule 144A Global Security in
global form shall be exercised only through the Depository subject to the
applicable rules and procedures of the Depository. The Trustee may rely and
shall be fully protected and indemnified pursuant to Section 7.7 in relying upon
information furnished by the Depository with respect to any beneficial owners,
its members and participants.
The Trustee shall have no obligation or duty to monitor, determine or
inquire as to compliance with any restrictions on transfer imposed under this
Indenture or under applicable law with respect to any transfer of any interest
in any Security (including without limitation any transfers between or among
Depository participants, members or beneficial owners in any Global Security)
other than to require delivery of such certificates and other documentation or
evidence as are expressly required by, and to do so if and when expressly
required by, the terms of this Indenture, and to examine the same to determine
substantial compliance as to form with the express requirements hereof.
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SECTION 2.6. Replacement Securities.
----------------------
If a mutilated Security is surrendered to the Trustee or if the Holder
of a Security presents evidence to the satisfaction of the Company and the
Trustee that the Security has been lost, destroyed or wrongfully taken, the
Company shall issue and the Trustee shall authenticate a new Security in
replacement of and substitution for such Security if the requirements of the
Trustee and the Company are met. An indemnity bond may be required by the
Company or the Trustee that is sufficient in the judgment of the Company to
protect the Company and is sufficient in the judgment of the Trustee to protect
the Trustee or any Agent from any loss which it may suffer if a Security is
replaced pursuant to this Section 2.6. The Company and the Trustee may charge
for its expense in replacing a Security.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its sole discretion
may, instead of issuing a new Security, pay or authorize the payment or convert
or authorize the conversion of such Security.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
SECTION 2.7. Outstanding Securities.
----------------------
Securities outstanding at any time are all Securities theretofore
authenticated and delivered under this Indenture except: (a) Securities
theretofore canceled by the Trustee or delivered to the Trustee for
cancellation; and (b) Securities in exchange for or in lieu of which other
Securities have been authenticated and delivered pursuant to this Indenture,
other than any Securities in respect of which there shall have been presented to
the Trustee proof satisfactory to it that such Securities are held by a bona
fide purchaser in whose hands such Securities are valid obligations of the
Issuer; provided, that in determining whether the Securityholders of the
--------
requisite principal amount of outstanding Securities are present at a meeting of
Securityholders for quorum purposes or have voted or taken or concurred in any
action under this Indenture, including the making of any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or such other obligor shall be disregarded and deemed not outstanding,
except that, in determining whether the Trustee shall be protected in relying
upon any such determination as to the presence of a quorum or upon any such
request, demand, authorization, direction, notice, consent or waiver, only
Securities which a Trust Officer of the Trustee actually knows to be so owned
shall be disregarded.
If a Security is replaced pursuant to Section 2.7, it ceases to be
outstanding until the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
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If the Paying Agent (other than the Company or a Subsidiary) holds on
a Redemption Date or maturity date money deposited with it by or on behalf of
the Company sufficient to pay the principal of, premium, if any, and accrued
interest on Securities payable on that date, then on and after that date such
Securities cease to be outstanding and interest on them ceases to accrue.
A Security does not cease to be outstanding because the Company or an
Affiliate holds the Security.
SECTION 2.8. Temporary Securities.
--------------------
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of definitive Securities but may
have non-material variations that the Company considers appropriate for
temporary Securities. Without unreasonable delay, the Company shall prepare and
the Trustee shall authenticate definitive Securities in exchange for temporary
Securities upon written order of the Company signed by two Officers. Until so
exchanged, temporary Securities represent the same rights as definitive
Securities. Upon request of the Trustee, the Company shall provide a
certificate to the effect that the temporary Securities meet the requirements of
the second sentence of this Section 2.8.
SECTION 2.9. Cancellation.
------------
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar, the Paying Agent and the Conversion Agent shall
forward to the Trustee any Securities surrendered to them for transfer,
exchange, payment or conversion. The Trustee shall cancel all Securities
surrendered for transfer, exchange, payment or conversion and destroy canceled
Securities and deliver a certificate of such destruction to the Company unless
the Company directs the Trustee in writing prior to such destruction to deliver
canceled Securities to the Company. Subject to Sections 2.6, 3.6 and the second
paragraph of Section 10.2, the Company may not issue Securities to replace
Securities that it has previously paid or delivered to the Trustee for
cancellation or that a Securityholder has converted pursuant to Article 10
hereof.
SECTION 2.10. Defaulted Interest.
------------------
If the Company defaults in a payment of interest on Securities when
the same becomes due and payable and such default continues for a period of 30
days, it shall pay the defaulted interest to the Persons who are Holders of the
Securities on a subsequent special record date. After the deposit by the Company
with the Trustee of money sufficient to pay such defaulted interest, the Trustee
shall fix the special record date and payment date. Each such special record
date shall be not less than 10 days prior to such payment date. Each such
payment date shall be not more than 60 days after the deposit by the Company of
money to pay the defaulted interest. At least 15 days before the special record
date, the Company shall mail to each Holder of a Security, with a copy to the
Trustee, a notice that states the special record date, the payment date, and the
amount of defaulted interest to be paid.
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SECTION 2.11. Securityholder Lists.
--------------------
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Securityholders, a copy of which list shall be provided to the Company upon its
written request. If the Trustee is not the Registrar, the Registrar shall
furnish to the Trustee at least seven Business Days prior to each semiannual
interest payment date and at such other times as the Trustee may reasonably
request in writing a list in such form and as of such date as the Trustee may
require of the names and addresses of Securityholders upon which the Trustee may
conclusively rely. The Trustee may destroy any such list upon receipt of a
replacement list. The Paying Agent will solicit from each Securityholder a
certification of social security number or taxpayer identification number in
accordance with its customary practice and as required by law, unless the Paying
Agent is in possession of such certification. Each Paying Agent is authorized
to impose back-up withholding with respect to payments to be made to
Securityholders to the extent required by law.
SECTION 2.12. Persons Deemed Owners.
---------------------
Prior to registration of transfer, the Company, the Trustee and any
agent of the Company or the Trustee may treat the Person in whose name such
Security is registered as the owner of such Security and neither the Company,
the Trustee nor any agent of the Company or the Trustee shall be affected by
notice to the contrary.
SECTION 2.13. CUSIP Number.
------------
The Company shall use a "CUSIP" number when issuing the Rule 144A
Securities, but shall not use a "CUSIP" number when issuing Registered
Accredited Investor Securities. The Trustee may use the CUSIP number in notices
of redemption or exchange as a convenience to Securityholders; provided that any
such notice may state that no representation is made as to the correctness or
accuracy of the CUSIP number printed in the notice or on the Securities and that
reliance may be placed only on the other identification numbers printed on the
Securities, and any such redemption or exchange shall not be affected by any
defect in or omission of such numbers.
ARTICLE III.
REDEMPTION
SECTION 3.1. Notices to Trustee.
------------------
If the Company wants to redeem the Securities pursuant to the optional
redemption provisions of Paragraph 5 of the Securities, it shall notify the
Trustee of the Redemption Date and the principal amount of Securities to be
redeemed. The notice shall be given to the Trustee in writing at least 60 days
prior to the Redemption Date (unless a shorter notice period shall be
satisfactory to the Trustee in its discretion) and accompanied by an Officers'
Certificate stating that the redemption complies with the provisions of this
Indenture.
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Redemptions provided for in Paragraph 5 of the Securities shall be effected as
provided in said Paragraph 5 or as otherwise agreed upon by the Company and the
Trustee.
SECTION 3.2. Selection of Securities to be Redeemed.
--------------------------------------
If less than all the Securities are to be redeemed, the Trustee shall
select the Securities to be redeemed pro rata or by lot or by any other method
that the Trustee considers fair and appropriate under the circumstances. The
Trustee shall promptly notify the Company of the Securities to be so called for
redemption. The Trustee shall make the selection from Securities outstanding
and not previously called for redemption. The Trustee may select for redemption
portions of the principal of Securities that have denominations larger than
$1,000 principal amount. Securities and portions of them it selects shall be in
principal amounts of $1,000 or multiples thereof. Provisions of this Indenture
that apply to Securities called for redemption also apply to portions of
Securities called for redemption. The Trustee's selection of Securities for
redemption by any method authorized by this Section 3.2 shall be conclusively
deemed reasonable.
Upon any redemption of less than all the Securities, the Company and
the Trustee, for the purpose of selecting Securities to be redeemed, may treat
as outstanding any Securities surrendered for conversion during the period of 15
days next preceding the selection of the Securities and need not treat as
outstanding any Security authenticated and delivered during such period in
exchange for the unconverted portion of any Security converted in part during
such period.
SECTION 3.3. Notice of Redemption by the Company.
------------------------------------
At least 30 days but not more than 60 days before a Redemption Date,
the Company shall mail a notice of redemption by first-class mail to each Holder
of Securities to be redeemed, with a copy to the Trustee.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) the Conversion Price;
(4) the name and address of the Paying Agent and the Conversion
Agent;
(5) that Securities called for redemption may be converted at any
time before the close of business on the Redemption Date and, if not
converted prior to the close of business on the Redemption Date, the
right of conversion will be lost;
(6) that Holders who want to convert Securities must satisfy the
requirements of Paragraph 7 thereof;
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(7) that Securities called for redemption must be surrendered to
the Paying Agent to collect the Redemption Price;
(8) that interest on Securities called for redemption ceases to
accrue on and after the Redemption Date; and
(9) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
Redemption Date, upon surrender of such Security, a new Security or
Securities in principal amount equal to the unredeemed portion thereof
will be issued.
At the Company's written request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. If a CUSIP
number is listed in such notice or printed on the Security, the notice shall
state that no representation is made as to the correctness or accuracy of such
CUSIP number.
SECTION 3.1. Effect of Notice of Redemption.
------------------------------
Once notice of redemption is mailed, Securities called for redemption
become due and payable on the applicable Redemption Date and at the applicable
Redemption Price. Upon surrender to the Paying Agent, such Securities shall be
paid at the Redemption Price, plus accrued interest to the Redemption Date.
SECTION 3.2. Deposit of Redemption Price.
---------------------------
On or before the Redemption Date, the Company shall deposit with the
Paying Agent (or if the Company or a Subsidiary is the Paying Agent, shall
segregate and hold in trust or cause such Subsidiary to segregate and hold in
trust) in immediately available funds money sufficient to pay the Redemption
Price of and accrued interest on all Securities to be redeemed on that date.
The Trustee or the Paying Agent shall return to the Company any money so
deposited not required for that purpose.
SECTION 3.3. Securities Redeemed in Part.
---------------------------
Upon surrender of a Security that is redeemed in part, the Trustee
shall authenticate for the Holder, at the expense of the Company, a new Security
equal in principal amount to the unredeemed portion of the Security surrendered.
ARTICLE IV.
COVENANTS
SECTION 4.1. Payment of the Securities.
-------------------------
The Company shall pay the principal of, premium, if any, and interest
on the Securities on the dates and in the manner provided in the Securities and
this Indenture. An installment of principal, premium, if any, or interest shall
be considered paid on the date it is due
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if the Trustee or Paying Agent (if other than the Company or a Subsidiary) holds
on that date money designated for and sufficient to pay the installment. The
Company shall pay interest on overdue principal and premium, if any, at the rate
borne by the Security; it shall pay interest, including post-petition interest
in the event of a proceeding under any Bankruptcy Law, on overdue installments
of interest at the same rate to the extent lawful.
SECTION 4.2. Commission Reports.
------------------
The Company shall file with the Trustee, promptly after filing with
the Commission, copies of the annual reports and of the information, documents
and other reports (or copies of such portions of any of the foregoing as the
Commission may by rules and regulations prescribe) which the Company is required
to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act.
The Company shall also comply with the other provisions of TIA (S) 314(a).
So long as the Securities remain outstanding, the Company shall cause
its annual reports to stockholders (containing audited financial statements) and
any other financial reports furnished by it to stockholders to be mailed to the
Holders at their addresses appearing in the Security Register maintained by the
Registrar.
For so long as any of the Rule 144A Securities remain outstanding and
are "restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act, the Company covenants and agrees that it shall, during any
period in which it is not subject to Section 13 or 15(d) of the Exchange Act,
make available to any holder or beneficial holder of securities which continue
to be restricted securities in connection with any sale thereof to any
prospective purchase of such securities from such holder or beneficial holder,
the information specified in, and meeting the requirements of the Rule
144A(d)(4) under the Securities Act.
SECTION 4.3. Waiver of Stay, Extension or Usury Laws.
---------------------------------------
The Company expressly waives (to the extent that it may lawfully do
so) any stay or extension law or any usury law or other law that would prohibit
or forgive the Company from paying all or any portion of the principal of,
premium, if any, or interest on Securities as contemplated herein, wherever
enacted, now or at any time hereafter in force, or that may affect the covenants
or the performance of this Indenture, and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
SECTION 4.4. Notice of Default.
-----------------
The Company will, so long as any Securities are outstanding, deliver
to the Trustee, within 10 days of becoming aware of any Default or Event of
Default in the performance of any covenant, agreement or condition in this
Indenture, an Officers' Certificate
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specifying such Default or Event of Default, the period of existence thereof and
what action the Company is taking or proposes to take with respect thereto.
SECTION 4.5. Compliance Certificates.
-----------------------
The Company will deliver to the Trustee, within 120 days after the end
of each fiscal year of the Company (which as of the date hereof is December 31),
a written statement signed by the principal executive officer, principal
financial officer or principal accounting officer of the Company, stating, as to
each signer thereof:
(1) that a review of the activities of the Company during such
year and of performance under this Indenture has been made under his
or her supervision;
(2) that to the best of his or her knowledge, based on such
review, the Company has kept, observed, performed and fulfilled in all
material respects each and every condition and covenant contained in
this Indenture throughout such year, or, if there has been a default
in the fulfillment of any such condition or covenant, specifying each
such default known to him or her and the nature and status thereof;
and
(3) the conversion price (as described in Article 10 of this
Indenture) then in effect.
The Company will give the Trustee written notice of a change in the
fiscal year of the Company, within a reasonable time after such change is
effected.
SECTION 4.6. Limitation on Dividends and Other Distributions.
-----------------------------------------------
The Company will not declare or pay any dividends or make any
distribution to holders of its Capital Stock (other than dividends or
distributions payable in Capital Stock of the Company), or purchase, redeem or
otherwise acquire or retire for value any of its Capital Stock or permit any
Subsidiary to purchase, redeem or otherwise acquire or retire for value any of
the Company's Capital Stock if at the time of any of the aforementioned actions
an Event of Default has occurred and is continuing or would exist immediately
after giving effect to such action.
Notwithstanding the foregoing, the provisions of this Section 4.6 will
not prevent (i) the payment of any dividend within 60 days after the date of
declaration when the payment would have complied with the foregoing provisions
on the date of declaration; or (ii) the retirement of any shares of the
Company's Capital Stock by exchange for, or out of the proceeds of the
substantially concurrent sale (other than to a Subsidiary) of, other shares of
its Capital Stock.
ARTICLE V.
SUCCESSOR CORPORATION
SECTION 5.1. When Company May Merge, etc.
----------------------------
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The Company shall not consolidate with or merge into, or transfer all
or substantially all of its assets to, another Person in any transaction in
which the Company is not the continuing or surviving entity, unless (i) the
resulting, surviving or transferee Person is a corporation which assumes by
supplemental indenture, in form satisfactory to the Trustee, all the obligations
of the Company under the Securities and this Indenture or is a reorganization
within the meaning of Section 368(a)(1)(B) of the Internal Revenue Code of 1986,
as amended; (ii) such corporation is organized and existing under the laws of
the United States, a State thereof or the District of Columbia although it in
turn may be owned by a foreign entity; (iii) immediately after giving effect to
such transaction no Default or Event of Default shall have happened and be
continuing and the Officers' Certificate referred to in the following clause
reflects that such Officers are not aware of any such Default or Event of
Default that shall have happened and be continuing, and (iv) the Company shall
have delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that such consolidation, merger or transfer and such
supplemental indenture comply with this Indenture, and thereafter all
obligations of the Company shall terminate.
SECTION 5.2. Successor Corporation or Trust Substituted.
------------------------------------------
Upon any consolidation or merger, or any transfer of all or
substantially all of the assets of the Company in accordance with Section 5.1,
the successor corporation formed by such consolidation or into which the Company
is merged or to which such transfer is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under this Indenture
with the same effect as if such successor corporation has been named as the
Company herein; the Company shall thereupon be relieved of any further
obligation or liability hereunder or upon the Securities; and the Company as the
predecessor corporation may thereupon or at any time thereafter be dissolved,
wound up or liquidated. Such successor corporation thereupon may cause to be
signed, and may issue either in its own name or in the name of Assisted Living
Concepts, Inc., any or all of the Securities issuable hereunder which
theretofore shall not have been signed by the Company and delivered to the
Trustee; and, upon the order of such successor corporation, instead of the
Company, and subject to all the terms, conditions and limitations in this
Indenture prescribed, the Trustee shall authenticate and shall deliver any
Securities which previously shall have been signed and delivered by the Officers
to the Trustee for authentication, and any Securities which such successor
corporation thereafter shall cause to be signed and delivered to the Trustee for
that purpose. All the Securities so issued shall in all respects have the same
legal rank and benefit under this Indenture as the Securities theretofore or
thereafter issued in accordance with the terms of this Indenture as though all
such Securities had been issued at the date of the execution hereof.
ARTICLE VI.
DEFAULTS AND REMEDIES
SECTION 6.1. Events of Default.
-----------------
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An "Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be occasioned by the provisions of Article 11 or be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order or any court or any order, rule or regulation of any
administrative or governmental body):
(1) the Company defaults in the payment of interest on any
Security when the same becomes due and payable and such default
continues for a period of 30 days;
(2) the Company defaults in the payment of the principal of or
premium, if any, on any Security when the same becomes due and payable
at maturity, upon redemption or otherwise, and such default continues
for five Business Days;
(3) the Company fails to comply with any of its other covenants,
agreements or conditions in the Securities or this Indenture and such
default continues for the period and after the notice specified in the
last paragraph of this Section 6.1;
(4) there shall be a default under any bond, debenture, note or
other evidence of Indebtedness or under any mortgage, indenture or
other instrument under which there may be issued or by which there may
be secured or evidenced any Indebtedness of the Company or any
Subsidiary, whether any such Indebtedness now exists or shall
hereafter be created, if (a) either (i) such event of default results
from the failure to pay any such Indebtedness at maturity or (ii) as a
result of such event of default, the maturity of such Indebtedness has
been accelerated prior to its stated maturity and such acceleration
shall not be rescinded or annulled or the accelerated amount paid
within ten days after notice to the Company of such acceleration, or
such Indebtedness having been discharged and (b) the principal amount
of such Indebtedness, together with the principal amount of any other
such Indebtedness in default for failure to pay principal or interest
thereon, or the maturity of which has been so accelerated, aggregates
$5,000,000 or more;
(5) the Company pursuant to or within the meaning of any
Bankruptcy Law:
(a) commences a voluntary case or proceeding,
(b) consents to the entry of an order for relief against it
in an involuntary case or proceeding,
(c) consents to the appointment of a Custodian of it or for
all or substantially all of its property, or
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(d) makes a general assignment for the benefit of its
creditors; or
(6) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law:
(a) for relief against the Company in an involuntary case or
proceeding,
(b) appointing a Custodian of the Company or for all or
substantially all of its property, or
(c) ordering the liquidation of the Company,
and the order or decree remains unstayed and in effect for 90 days.
A default under clause (3) is not an Event of Default until the
Trustee notifies the Company, or the Holders of a majority in principal amount
of the Securities then outstanding notify the Company and the Trustee in
writing, of the default and the Company does not cure the default within 60 days
after receipt of such notice. The notice must specify the default, demand that
it be remedied and state that the notice is a "Notice of Default." The Trustee
shall give such notice to the Company only if directed to do so in writing by
the Holders of a majority in principal amount of the Securities then
outstanding. Such notice by the Trustee shall not be deemed to be a
certification by the Trustee as to whether an Event of Default has occurred.
SECTION 6.2. Acceleration.
------------
If an Event of Default (other than an Event of Default specified in
Section 6.1(5) or 6.1(6) occurs and is continuing, the Trustee by notice to the
Company, or the Holders of a majority in principal amount of the Securities then
outstanding by notice to the Company and the Trustee, may declare to be due and
payable immediately the principal amount of the Securities plus accrued interest
to the date of acceleration. Upon any such declaration, such amount shall be
due and payable immediately, and upon payment of such amount all of the
Company's obligations with respect to the Securities, other than obligations
under Section 7.7, shall terminate. If an Event of Default specified in Section
6.1(5) or 6.1(6) occurs, all unpaid principal and accrued interest on the
Securities then outstanding shall become and be immediately due and payable
without any declaration or the act on the part of the Trustee or any Holder.
The Holders of a majority in principal amount of the outstanding Securities by
written notice to the Trustee may rescind an acceleration and its consequences
if (x) all existing Events of Default, other than the non-payment of the
principal of the Securities, which have become due solely by such declaration of
acceleration, have been cured or waived, (y) to the extent the payment of such
interest is lawful, interest on overdue installments of interest and overdue
principal and premium, if any, which has become due otherwise than by such
declaration of acceleration, has been paid, and (z) the rescission would not
conflict with any judgment or decree of a court of competent jurisdiction. The
Trustee may rely upon such notice of rescission without any independent
investigation as to the satisfaction of conditions (x), (y) and (z).
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SECTION 6.3. Other Remedies.
--------------
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of and premium, if any, or interest on the Securities or to
enforce the performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.4. Waiver of Defaults and Events of Default.
----------------------------------------
Subject to Section 9.2, the Holders of a majority in principal amount
of the Securities then outstanding, on behalf of all the Securityholders, by
written notice to the Trustee may waive a Default or Event of Default with
respect to the Securities and its consequences. When a Default or Event of
Default is waived, it is considered to be cured and ceases to exist; but no such
waiver shall extend to any subsequent or other Default or impair any right
consequent thereon.
SECTION 6.5. Control by Majority.
-------------------
The Holders of a majority in principal amount of the Securities then
outstanding may direct in writing the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred on it. The Trustee, however, may refuse to follow any direction
that conflicts with law or this Indenture, that the Trustee determines may be
unduly prejudicial to the rights of other Securityholders, it being understood
that (subject to Section 7.1) the Trustee shall have no duty to ascertain
whether or not such actions or forbearances are unduly prejudicial to such
Securityholders, or that may involve the Trustee in personal liability or for
which the Trustee does not have indemnification reasonably satisfactory to the
Trustee pursuant to Sections 7.1(5) and 7.2(6); provided that, the Trustee may
--------
take any other action deemed proper by the Trustee which is not inconsistent
with such direction.
SECTION 6.6. Rights of Holders to Receive Payment.
------------------------------------
Subject to Article 11, notwithstanding any other provision of this
Indenture, the right of any Securityholder to receive payment of principal of,
premium, if any, and interest on the Security, on or after the respective due
dates expressed in the Security, or to bring suit for the enforcement of any
such payment on or after such respective dates, is absolute and unconditional
and shall not be impaired or affected without the consent of the Holder.
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Notwithstanding any other provision of this Indenture, the right of
any Holder of any Security to convert such Security or to bring suit for the
enforcement of such right shall not be impaired or affected without the written
consent of the Holder.
SECTION 6.7. Collection Suit by Trustee.
--------------------------
If an Event of Default in payment of interest or principal, and
premium, if any, specified in Section 6.1(1) or (2) occurs and is continuing,
the Trustee may recover judgment in its own name and as trustee of an express
trust against the Company or any other obligor on the Securities for the whole
amount of unpaid principal, and premium, if any, and accrued interest remaining
unpaid on the Securities, together with interest on overdue principal, and
premium, if any, and to the extent that payment of such interest is lawful,
interest on overdue installments of interest, in each case at the rate borne by
the Securities and such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.8. Trustee May File Proofs of Claim.
--------------------------------
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of Securities allowed in any judicial proceedings relative to the
Company (or any other obligor upon the Securities), its creditors or its
property and shall be entitled and empowered to collect and receive any monies
or other property payable or deliverable on any such claims and to distribute
the same. Any Custodian in any such judicial proceeding is hereby authorized by
each Securityholder to make such payments to the Trustee, and in the event that
the Trustee shall consent to the making of such payments directly to the Holders
of Securities, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.7.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Securityholder any
plan or reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof, or to authorize the Trustee to
vote in respect of the claim of any Securityholder in any such proceedings.
SECTION 6.9. Priorities.
----------
If the Trustee collects any money pursuant to this Article 6, it shall
pay out the money in the following order:
FIRST: to the Trustee amounts due under Section 7.7;
SECOND: to holders of any Senior Indebtedness as required by Article
11;
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THIRD: to the Holders of the Securities for amounts due and unpaid on
the Securities for principal, premium, if any, and interest, ratably,
without preference or priority of any kind, according to the amounts
due and payable on the Securities for principal, premium, if any, and
interest, respectively; and
FOURTH: to the Company.
The Trustee may fix a record date and payment date for any payment to
Holders of Securities pursuant to this Section 6.9.
SECTION 6.10. Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorney's fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.10 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.6 or a suit by Holders of more than 10% in principal
amount of the Securities then outstanding or a suit by any holder of Senior
Indebtedness.
SECTION 6.11. Limitation on Suits.
-------------------
A Securityholder may not pursue any remedy with respect to this
Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice stating that
an Event of Default is continuing;
(2) the Holders of at least 25% in aggregate principal amount of
the Securities at the time outstanding make a written request to the
Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable
security or indemnity against any loss, liability or expense
satisfactory to the Trustee;
(4) the Trustee does not comply with the request within 60 days
after receipt of notice, the request and the offer of security or
indemnity; and
(5) the Holders of a majority in aggregate principal amount of
the Securities at the time outstanding do not give the Trustee a
direction inconsistent with the request during such 60-day period.
A Securityholder may not use this Indenture to prejudice the rights of
any other Securityholder or to obtain a preference or priority over any other
Securityholder.
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ARTICLE VII.
TRUSTEE
SECTION 7.1. Duties of Trustee.
-----------------
(1) The duties and responsibilities of the Trustee shall be as
provided by the TIA. If an Event of Default has occurred and is continuing, the
Trustee shall exercise its rights and powers vested in it by this Indenture and
use the same degree of care and skill in their exercise as a prudent Person
would exercise or use under the circumstances in the conduct of his own affairs.
(2) Except during the continuance of an Event of Default and after the
curing or waiving of all such Events of Default which may have occurred:
(a) The Trustee need perform only those duties that are
specifically set forth in this Indenture, and the Trustee shall not be
liable except for the performance of such duties as are specifically
set forth in this Indenture, and no others, and no implied covenants
or obligation shall be read into this Indenture against the Trustee.
(b) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any statements,
certificates or opinions furnished to the Trustee and conforming to
the requirements of this Indenture. The Trustee, however, shall
examine the certificates and opinions to determine whether or not they
conform to the requirements of this Indenture.
(3) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(a) This paragraph does not limit the effect of paragraph (2) of
this Section 7.1.
(b) The Trustee shall not be liable for any error in judgment
made in good faith by a Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts.
(c) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.5.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or in the
exercise of any of its rights or powers, if it
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shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(4) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (1), (2) and (3) of this Section 7.1 and
subject to Sections 315 and 316 of the TIA.
(5) Subject to subsection (3), the Trustee may refuse to perform any
duty or exercise any right or power unless, subject to the provisions of the
TIA, it receives indemnity satisfactory to it against any loss, liability,
expense or fee.
(6) The Trustee shall not be liable for interest on any money received
by it. Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law.
SECTION 7.2. Rights of Trustee.
-----------------
(1) The Trustee may rely on and shall be protected in acting or
refraining from acting upon any document believed by it to be genuine and to
have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.
(2) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel, or both, which shall conform to
Section 13.5. The Trustee shall not be liable for any action it takes or omits
to take in good faith in reliance on such Officers' Certificate or Opinion of
Counsel.
(3) The Trustee may act through agents or attorneys and shall not be
responsible for the misconduct or negligence of such agents or attorneys
appointed with due care and shall not be responsible for their supervision.
(4) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers.
(5) The Trustee may consult with counsel of its choice and the written
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by the Trustee hereunder in good faith and reliance thereon.
(6) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders of Securities pursuant to this Indenture, unless such Holders
shall have offered to the Trustee security or indemnity reasonably satisfactory
to the Trustee against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction.
SECTION 7.3. Individual Rights of Trustee.
----------------------------
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The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company or its
Affiliates with the same rights it would have if it were not Trustee. Any Agent
may do the same with like rights. The Trustee, however, is subject to Sections
7.10 and 7.11.
SECTION 7.4. Trustee's Disclaimer.
--------------------
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities, and it shall not be responsible for any
statement of the Company in the Indenture or any statement in the Securities
other than its certificate of authentication or in any document used in the sale
of the Securities other than any statement in writing provided by the Trustee
expressly for use in such document.
SECTION 7.5. Notice of Defaults.
------------------
If a Default or Event of Default occurs and is continuing and if it is
actually known to the Trustee, the Trustee shall mail to each Holder of
Securities notice of the Default or Event of Default within 90 days after it
becomes known to the Trustee. Except in the case of a default in payment of
principal of, premium, if any, or interest on any Security, the Trustee may
withhold the notice if and so long as a committee of its Trust Officers in good
faith determines that withholding the notice is in the interests of Holders of
Securities. Notwithstanding anything to the contrary expressed in this
Indenture, the Trustee shall not be deemed to have knowledge of any Event of
Default hereunder unless and until a Trust Officer shall have actual knowledge
thereof, or shall have received written notice thereof from the Company at its
principal Corporate Trust Office as specified in Section 13.1. The Trustee
shall not be deemed to have actual knowledge of an Event of Default hereunder,
except in the case of an Event of Default under Sections 6.1(1) or 6.1(2)
(provided that the Trustee is the Paying Agent), until a Trust Officer receives
written notice thereof from the Company or any Securityholder that such a
Default or an Event of Default has occurred.
SECTION 7.6. Reports by Trustee to Holders.
-----------------------------
Within 60 days after each April 15 beginning with April 15 of the
first year in which Securities are outstanding hereunder, the Trustee, if
required by the provisions of TIA (S) 313(a), shall mail to each Securityholder
a brief report dated as of April 15 of such year that complies with TIA (S)
313(a). The Trustee also shall comply with TIA (S) 313(b), (S) 313(c) and (S)
313(d).
A copy of each report at the time of its mailing to Securityholders
shall be filed with the Securities and Exchange Commission and each securities
exchange, if any, on which the Securities are listed. The Company agrees to
notify the Trustee in writing whenever the Securities become listed or delisted
on or from any securities exchange.
SECTION 7.7. Compensation and Indemnity
--------------------------
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The Company shall pay to the Trustee from time to time, and the
Trustee shall be entitled to, reasonable compensation for its services (which
compensation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust). The Company shall reimburse the
Trustee upon request for all reasonable disbursements, expenses and advances
incurred or made by it. Such expenses may include, but shall not be limited to,
the reasonable compensation, disbursements and expenses of the Trustee's agents,
consultants and counsel.
The Company shall indemnify the Trustee and its officers, directors,
stockholders, agents and employees for, and hold them harmless against, any loss
or liability incurred by it in connection with the acceptance or administration
of this trust, including the costs and expenses of defending themselves against
any claim or liability in connection with the Securities or the exercise or
performance of any of the Trustee's powers or duties hereunder. The Trustee
shall notify the Company promptly of any claim asserted against the Trustee for
which it may seek indemnity; provided, however, that any failure to so notify
-------- -------
the Company shall not relieve the Company of its indemnity obligations hereunder
except to the extent the Company's ability to defend such claim shall be
prejudiced thereby. The Company may elect by written notice to the Trustee to
assume the defense of any such claim at the Company's expense with counsel
reasonably satisfactory to the Trustee; provided, however, that if the Trustee
is advised by counsel that the interests of the Company and the Trustee
conflict, the Trustee shall have the right to retain separate counsel.
The Company need not reimburse the Trustee for any expense or
indemnify it against any loss or liability incurred by it through the Trustee's
negligence or willful misconduct. The Company shall not be liable for any
settlement of any claim or action effected without the Company's consent, which
consent shall not be unreasonably withheld. To secure the Company's payment
obligations in this Section, the Trustee shall have a lien prior to the
Securities on all money or property held or collected by the Trustee.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1 occurs, the expenses and the compensation for
the services are intended to constitute expenses of administration under any
applicable bankruptcy or comparable law. The provisions of this Section shall
survive termination of this Indenture.
SECTION 7.8. Replacement of Trustee.
----------------------
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 7.8.
The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount of the Securities then outstanding may remove the
Trustee by so notifying the Trustee and may appoint a successor Trustee with the
Company's written consent. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
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(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee.
If a successor Trustee does not take office within 45 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of a majority in principal amount of the Securities then outstanding may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall, upon payment of its fees and expenses, transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.7, the resignation or removal of the retiring Trustee
shall become effective, and the successor Trustee shall have all the rights,
powers and duties of the Trustee under this Indenture. Notwithstanding the
replacement of the Trustee pursuant to this Section 7.8, the Company's
obligations under Section 7.7 shall continue for the benefit of the retiring
Trustee with respect to expenses and liabilities incurred by it and compensation
earned by it prior to such replacement or otherwise or the Indenture. A
successor Trustee shall mail notice of its succession to each Holder of
Securities.
SECTION 7.9. Successor Trustee by Merger, etc.
---------------------------------
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust assets to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
SECTION 7.10. Eligibility; Disqualification.
-----------------------------
This Indenture shall always have a Trustee who satisfies the
requirements of TIA (S) 310(a)(1). The Trustee shall have a combined capital
and surplus of at least $50,000,000 as set forth in its most recent published
annual report of condition. The Trustee shall comply with TIA (S) 310(b),
including the optional provision permitted by the second sentence of TIA (S)
310(b)(9).
SECTION 7.11. Preferential Collection of Claims Against Company.
-------------------------------------------------
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The Trustee is subject to TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
ARTICLE VIII.
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 8.1. Satisfaction, Discharge and Defeasance of the
---------------------------------------------
Securities.
The Company shall be deemed to have paid and discharged the entire
indebtedness on the Securities after the date of the deposit referred to in
paragraph (1) below, the provisions of this Indenture shall no longer be in
effect in respect of the Securities, and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of such indebtedness; provided that the following conditions shall
--------
have been satisfied:
(1) the Company has deposited or caused to be deposited with the
Trustee irrevocably as trust funds in trust, specifically pledged as
security for, and dedicated solely to, the benefit of the Holders of
the Securities, with reference to this Section 8.1, (a) money or (b)
U.S. Government Obligations or (c) a combination thereof, sufficient,
in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to
the Trustee, to pay and discharge the entire indebtedness on all the
Securities for principal, premium, if any, and interest, if any, to
the maturity date of the Securities as such principal, premium, if
any, or interest becomes due and payable in accordance with the terms
of this Indenture and the Securities;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company in connection with all of the
Securities, including all fees and expenses of the Trustee; and
(3) the Company has delivered to the Trustee an Opinion of
Counsel and an Officers' Certificate, each stating that all conditions
precedent herein provided for relating to the satisfaction and
discharge of the entire Indebtedness on the Securities and the
discharge of this Indenture and the termination of the Company's
obligations hereunder have been complied with.
"U.S. Government Obligations" means direct, non-callable obligations
of, or non-callable obligations guaranteed by, the United States of America for
the timely payment of which obligation or guarantee the full faith and credit of
the United States of America is pledged.
SECTION 8.2. Satisfaction and Discharge of Indenture.
---------------------------------------
In addition to its rights under Section 8.1, the Company may terminate
all of its obligations under this Indenture when:
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(1) all of the Securities theretofore authenticated and delivered
(other than (a) Securities which have been destroyed, lost or stolen
and which have been replaced or paid as provided in Section 2.7 hereof
and (b) Securities for whose payment money has theretofore been
deposited with the Trustee or the Paying Agent in trust or segregated
and held in trust by the Company and thereafter repaid to the Company
or discharged from such trust, as provided in Section 2.4 and Section
8.6 hereof) have been delivered to the Trustee for cancellation
(including any cancellation resulting from the conversion of such
Securities pursuant to Paragraph 7 of the Securities); and
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company in connection with the outstanding
Securities, including all fees and expenses of the Trustee.
SECTION 8.3. Survival of Certain Obligations.
-------------------------------
Notwithstanding the satisfaction and discharge of this Indenture
pursuant to Section 8.1, the respective obligations of the Company specified in
Sections 2.3, 2.4, 2.5, 2.6, 2.11, 4.1, 7.7, 8.5, 8.6, 8.7 and in Article 10
shall survive until the Securities are no longer outstanding, and after the
Securities are no longer outstanding, or upon compliance with Section 8.2, only
the obligations of the Company in such Sections 7.7 and 8.6 shall survive.
Nothing contained in this Article 8 shall abrogate any of the obligations or
duties of the Trustee under this Indenture.
SECTION 8.4. Application of Trust Money.
--------------------------
(1) Subject to the provisions of Section 8.6, all money and U.S.
Government Obligations deposited with the Trustee for the Securities pursuant to
Section 8.1 or Section 8.2, and all money received by the Trustee in respect of
U.S. Government Obligations deposited with the Trustee for the Securities
pursuant to Section 8.1 or Section 8.2 shall be held in trust and reinvested by
the Trustee in (a) U.S. Government Obligations or (b) beneficial interests in
one or more mutual funds which invest solely in U.S. Government Obligations and
which are rated in the highest applicable rating category by a nationally-
recognized statistical rating organization in accordance with the Company's
written instructions and applied by the Trustee in accordance with the
provisions of the Securities and this Indenture, to the payment, either directly
or through any Paying Agent (including the Company or any Subsidiary acting as
Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of
the principal, premium, if any, and interest, if any, on the Securities; but
such money need not be segregated from other funds except to the extent required
by law. Money and U.S. Government Obligations so held in trust are not subject
to the subordination provisions of Article 11.
(2) The Trustee shall deliver or pay to the Company from time to time
upon the Company's written request any U.S. Government Obligations or money held
by it as provided in Section 8.1 or Section 8.2 which, in the written opinion of
a nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, are then in excess of
the amount thereof which then would have been required to be
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deposited for the purpose for which such U.S. Government Obligations, or money,
were deposited or received.
SECTION 8.5. Paying Agent to Repay Monies Held.
---------------------------------
Upon the satisfaction and discharge of this Indenture, all monies then
held by any Paying Agent under the provisions of this Indenture shall, upon
written demand of the Company, be repaid to it or paid to the Trustee, and
thereupon such Paying Agent shall be released from all further liability with
respect to such monies.
SECTION 8.6. Return of Unclaimed Monies.
--------------------------
Any monies deposited with or paid to the Trustee or any Paying Agent
for the Securities, or then held by the Company in trust, for the payment of any
principal, premium, if any, and interest, if any, on the Securities and not
applied but remaining unclaimed by the Holders of the Securities for two years
after the date upon which the principal of, premium, if any, and interest, if
any, on the Securities, as the case may be, shall have become due and payable,
shall, unless otherwise required by mandatory provisions of applicable escheat
or abandoned or unclaimed property law, be repaid to the Company by such Trustee
or any Paying Agent on written demand by the Company or (if then held by the
Company or any Affiliate) shall be discharged from such trust; and the Holders
of the Securities entitled to receive such payment shall thereafter look only to
the Company for the payment thereof; provided, however, that, before being
-------- -------
required to make any such repayment, the Trustee may, or shall at the written
request of the Company, at the expense of the Company, cause to be published
once in an authorized newspaper in the same city in which the place of payment
with respect to the Securities shall be located and in an authorized newspaper
in the City of New York, or mail to each such Holder, a notice (in such form as
may be deemed appropriate by the Trustee) that said monies remain unclaimed and
that, after a date named therein, any unclaimed balance of said monies then
remaining will be returned to the Company.
SECTION 8.7. Reinstatement.
-------------
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Section 8.1 by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Company's obligations under this Indenture and the Securities shall be revived
and reinstated as though no deposit had occurred pursuant to Section 8.1 until
such time as the Trustee or Paying Agent is permitted to apply all such money or
U.S. Government Obligations in accordance with Section 8.4; provided, however,
-------- -------
that if the Company has made any payment of principal of, premium, if any, or
interest on the Securities because of the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Securities to
receive such payment from the money or U.S. Government Obligations held by the
Trustee or Paying Agent.
SECTION 8.8. Indemnity for Government Obligations.
------------------------------------
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The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against U.S. Government Obligations
deposited with the Trustee pursuant hereto or the principal and interest
received on such U.S. Government Obligations.
ARTICLE IX.
AMENDMENTS AND WAIVERS
SECTION 9.1. Amendments and Waivers Without Consent of Holders.
-------------------------------------------------
The Company, when authorized by Board Resolution, and the Trustee at
any time and from time to time, may amend or supplement this Indenture, (any
such amendment or supplement to be in a form satisfactory to the Trustee) or the
Securities without notice to or consent of any Securityholder for any of the
following purposes:
(1) to comply with Section 5.1; or
(2) to provide for uncertificated Securities in addition to or in
place of certificated Securities; or
(3) to cure any ambiguity, defect or inconsistency, or to make
any other change that does not adversely affect the interests of the
Holders of Securities in any material respect; or
(4) to add to the covenants of the Company, for the benefit of
the Holders or to surrender any right or power herein conferred upon
the Company; or
(5) to add any Event of Default.
The Trustee shall be entitled to receive upon request an Opinion of
Counsel to its satisfaction with respect to any supplement to this Indenture
without consent of the Holders that all conditions precedent have been
satisfied.
SECTION 9.2. Amendments and Waivers with Consent of Holders.
----------------------------------------------
With the written consent of the Holders of not less than 66-2/3% in
aggregate principal amount of the Securities at the time outstanding, the
Company, when authorized by Board Resolution, and the Trustee may amend or
supplement this Indenture (any such amendment or supplement to be in a form
satisfactory to the Trustee) or the Securities for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of any supplemental indenture or of modifying in any manner
the rights of the Holders of the Securities. The Holders of a majority in
principal amount of the Securities then outstanding may waive compliance in a
particular instance by the Company with any provision of this Indenture or the
Securities without notice to any Securityholder. Subject to Section 9.4, without
the consent of each Holder of Securities affected, however, an amendment,
supplement or waiver, including a waiver pursuant to Section 6.4, may not:
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(1) reduce the amount of Securities whose Holders must consent to
an amendment or waiver;
(2) reduce the rate of or extend the time for payment of interest
on any Security;
(3) reduce the principal of or extend the fixed maturity of any
Security;
(4) waive (except unless theretofore cured) a default in the
payment of the principal of (and premium, if any on), interest on or
redemption amounts with respect to any Security;
(5) make any Security payable in currency other than that stated
in the Security;
(6) make any change in Sections 6.4, 6.6 or 9.2;
(7) make any change that adversely affects the right to convert
any Security; or
(8) make any change in Article 11 that adversely affects the
rights of any Securityholder.
To secure a consent of the Holders under this Section, it shall not be
necessary for the Holders to approve the particular form of any proposed
amendment or waiver; rather, it shall be sufficient if such consent approves the
substance thereof.
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment.
SECTION 9.3. Compliance with Trust Indenture Act.
-----------------------------------
Every amendment or supplement to this Indenture or the Securities
shall comply with the TIA as then in effect.
SECTION 9.4. Revocation and Effect of Consents.
---------------------------------
Subject to this Indenture, each amendment, supplement or waiver
evidencing other action shall become effective in accordance with its terms.
Until an amendment, supplement or waiver becomes effective, a consent to it by a
Holder of a Security is a continuing consent by the Holder even if notation of
the consent is not made on any Security. Any such Holder or subsequent Holder,
however, may revoke the consent as to his Security or portion of a Security, if
the Trustee receives the notice of revocation before the date the amendment,
waiver or other action becomes effective.
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The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then notwithstanding the
provisions of the immediately preceding paragraph, those Persons who were
Holders at such record date (or their duly designated proxies) and only those
Persons, shall be entitled to consent to such amendment, supplement or waiver or
to revoke any consent previously given, whether or not such Persons continue to
be Holders after such record date. No consent shall be valid or effective for
more than 90 days after such record date unless consent from Holders of the
principal amount of Securities then outstanding required hereunder for such
amendment, supplement or waiver to be effective shall have also been given and
not revoked within such 90-day period.
After an amendment, waiver or other action becomes effective, pursuant
to Section 9.1 or Section 9.2, as the case may be, it shall bind every Holder of
a Security.
SECTION 9.5. Notation on or Exchange of Securities.
-------------------------------------
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may request the Holder of the Security to deliver it to the Trustee.
The Trustee may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determine, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms the
cost and expense of which will be borne by the Company.
SECTION 9.6. Trustee to Sign Amendments, etc.
--------------------------------
The Trustee need not sign any amendment that adversely affects its
rights or interests, as determined by the Trustee in its sole discretion. In
signing or refusing to sign any amendment the Trustee shall be entitled to
receive and shall be fully protected in relying upon, an Opinion of Counsel
stating that such amendment is authorized or permitted by this Indenture. The
Company may not sign an amendment until its Board of Directors approves it.
ARTICLE X.
CONVERSION OF SECURITIES
SECTION 10.1. Right of Conversion; Conversion Price.
-------------------------------------
Subject to the provisions of Section 7 of the Securities, the Holder
of any Security or Securities shall have the right, at such Holder's option, at
any time after the effective date of the Registration Statement and before the
close of business on May 1, 2003 (except that, with respect to any Security or
portion of a Security which shall be called for redemption, such right shall
terminate at the close of business on the Redemption Date fixed for redemption
of such Security or portion of a Security unless the Company shall default in
payment due upon redemption thereof), to convert, subject to the terms and
provisions of this Article 10, the principal of any such Security or Securities
or any portion thereof which is $1,000 principal amount or an integral multiple
thereof into shares of common stock of the Company, $.01 par
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value per share ("Common Stock"), initially at the conversion price per share of
$26.184 or, in case an adjustment of such price has taken place pursuant to the
provisions of Section 10.4, then at the price as last adjusted (such price or
adjusted price being referred to herein as the "conversion price"), upon
surrender of the Security or Securities, the principal of which is so to be
converted, accompanied by written notice of conversion duly executed, to the
Company, at any time during usual business hours at the office or agency
maintained by it for such purpose, and, if so required by the Conversion Agent
or Registrar, accompanied by a written instrument or instruments of transfer in
form satisfactory to the Conversion Agent or Registrar duly executed by the
Holder or his duly authorized representative in writing. For convenience, the
conversion of any portion of the principal of any Security or Securities into
shares of Common Stock is hereinafter sometimes referred to as the conversion of
such Security or Securities.
SECTION 10.2. Issuance of Shares on Conversion.
--------------------------------
As promptly as practicable after the surrender, as herein provided, of
any Security or Securities for conversion, the Company shall deliver or cause to
be delivered at its said office or agency, to or upon the written order of the
Holder of the Security or Securities so surrendered, certificates representing
the number of fully paid and nonassessable shares of Common Stock into which
such Security or Securities may be converted in accordance with the provisions
of this Article 10. Such conversion shall be deemed to have been made as of the
close of business on the date that such Security or Securities shall have been
surrendered for conversion by delivery thereof with a written notice of
conversion duly executed, so that the rights of the Holder of such Security or
Securities as a Securityholder shall cease at such time and, subject to the
following provisions of this paragraph, the Person or Persons entitled to
receive the shares of Common Stock upon conversion of such Security or
Securities shall be treated for all purposes as having become the record holder
or holders of such shares of Common Stock at such time and such conversion shall
be at the conversion price in effect at such time; provided, however, that no
-------- -------
such surrender on any date when the stock transfer books of the Company shall be
closed shall be effective to constitute the Person or Persons entitled to
receive the shares of Common Stock upon such conversion as the record holder or
holders of such shares of Common Stock on such date, but such surrender shall be
effective to constitute the Person or Persons entitled to receive such shares of
Common Stock as the record holder or holders thereof for all purposes at the
close of business on the next succeeding day on which such stock transfer books
are open; and provided, further, that in such event such conversion shall be at
-------- -------
the conversion price in effect on the date that such Security or Securities
shall have been surrendered for conversion by delivery thereof, as if the stock
transfer books of the Company had not been closed. The Company shall give or
cause to be given to the Trustee written notice whenever the stock transfer
books of the Company shall be closed.
Upon Conversion of any Security which is converted in part only, the
Company shall execute and the Trustee shall authenticate and deliver to or on
the order of the Holder thereof, at the expense of the Company, a new Security
or Securities of authorized denominations in principal amount equal to the
unconverted portion of such Security.
SECTION 10.3. No Adjustment for Interest or Dividends.
---------------------------------------
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<PAGE>
No payment or adjustment in respect of interest on the Securities or
dividends on the shares of Common Stock shall be made upon the conversion of any
Security or Securities; provided, however, that if a Security or any portion
-------- -------
thereof shall be converted subsequent to any Regular Record Date and on or prior
to the next succeeding Interest Payment Date, the interest falling due on such
Interest Payment Date shall be payable on such Interest Payment Date
notwithstanding such conversion, and such interest (whether or not punctually
paid or duly provided for) shall be paid to the Person in whose name such
Security is registered at the close of business on such Regular Record Date and
Securities surrendered for conversion during the period from the close of
business on any Regular Record Date to the opening of business on the
corresponding Interest Payment Date must be accompanied by payment of an amount
equal to the interest payable on such Interest Payment Date.
SECTION 10.4. Adjustment of Conversion Price.
-------------------------------
(1) In case the Company shall pay or make a dividend or other
distribution on any class of Capital Stock of the Company in shares of Common
Stock, the conversion price in effect at the opening of business on the day
following the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution shall be reduced by multiplying such
conversion price by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the date fixed
for such determination and the denominator shall be the sum of such number of
shares and the total number of shares constituting such dividend or other
distribution, such reduction to become effective immediately after the opening
of business on the day following the date fixed for such determination.
(2) In case the Company shall issue rights or warrants to all or
substantially all holders of its shares of Common Stock entitling them to
subscribe for or purchase shares of Common Stock (or securities convertible into
or exchangeable for Common Stock) at a price per share (or having a conversion
or exchange price per share) less than the current market price per share
(determined as provided in paragraph (6) of this Section 10.4) of the shares of
Common Stock on the date fixed for the determination of stockholders entitled to
receive such rights or warrants, the conversion price in effect at the opening
of business on the day following the date fixed for such determination shall be
reduced by multiplying such conversion price by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at the close
of business on the date fixed for such determination plus the number of shares
of Common Stock which the aggregate of the subscription price of the total
number of shares of Common Stock so offered for subscription or purchase (or the
aggregate conversion of exchange price of the convertible or exchangeable
securities so offered) would purchase at such current market price and the
denominator shall be the number of shares of Common Stock outstanding at the
close of business on the date fixed for such determination plus the number of
shares of Common Stock so offered for subscription or purchase, such reduction
to become effective immediately after the opening of business on the day
following the date fixed for such determination. In the event that all of the
shares of Common Stock subject to such rights or warrants have not been issued
when such rights or warrants expire, then the conversion price shall promptly be
readjusted to the conversion price which would then be in effect had the
adjustment upon the issuance of such
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<PAGE>
rights or warrants been made on the basis of the actual number of shares of
Common Stock issued upon the exercise of such rights or warrants. No adjustment
will be required for rights to purchase Common Stock pursuant to a Company plan
for reinvestment of dividends or interest, or for a change in the par value of
the Common Stock. For the purposes of this paragraph (2), the number of shares
of Common Stock at any time outstanding shall not include shares held in the
treasury of the Company but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of Common Stock. The Company
will not issue any rights or warrants in respect of shares of Common Stock held
in the treasury of the Company.
(3) In case the outstanding shares of Common Stock shall be subdivided
into a greater number of shares, the conversion price in effect at the opening
of business on the day following the day upon which such subdivision becomes
effective shall be proportionately reduced, and, conversely, in case outstanding
shares of Common Stock shall each be combined into a smaller number of shares,
the conversion price in effect at the opening of business on the day following
the day upon which such combination becomes effective shall be proportionately
increased, such reduction or increase, as the case may be, to become effective
immediately after the opening of business on the day following the day upon
which such subdivision or combination becomes effective.
(4) In case the Company shall, by dividend or otherwise, distribute to
all or substantially all holders of shares of Common Stock evidences of
indebtedness or assets (including securities, but excluding any (a) rights or
warrants referred to in paragraph (2) of this Section 10.4, (b) any dividend or
distribution not prohibited by Section 4.6 hereof and (c) any dividend or
distribution referred to in paragraph (1) of this Section 10.4), the conversion
price shall be adjusted so that the same shall equal the price determined by
multiplying the conversion price in effect immediately prior to the close of
business on the day fixed for the determination of stockholders entitled to
receive such distribution by a fraction of which the numerator shall be the
current market price per share (determined as provided in paragraph (6) of this
Section) of the shares of Common Stock on the date fixed for such determination
less the then fair market value as determined by the Board of Directors of the
Company (whose determination shall be conclusive and described in a resolution
of the Board of Directors of the Company filed with the Trustee) of the portion
of the assets or evidences of indebtedness so distributed allocable to one share
of Common Stock and the denominator shall be such current market price per share
of the shares of Common Stock, such adjustment to become effective immediately
prior to the opening of business on the day following the date fixed for the
determination of stockholders entitled to receive such distribution.
(5) In case the shares of Common Stock shall be changed into the same
or a different number of shares of any class or classes of stock, whether by
capital reorganization, reclassification, or otherwise (other than a subdivision
or combination of shares or a stock dividend described in paragraph (1) or (3)
of this Section 10.4, or a consolidation, merger or sale of assets described in
Section 10.10), then and in each such event the Holders of Securities shall have
the right thereafter to convert such Securities into the kind and amount of
shares of stock and other securities and property receivable upon such
reorganization, reclassification or other
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change, by holders of the number of shares of Common Stock into which such
Securities might have been converted immediately prior to such reorganization,
reclassification or change.
(6) For the purpose of any computation under paragraphs (2) and (4) of
this Section, the current market price per share of Common Stock on any date
shall be deemed to be the average of the Closing Prices for the 15 consecutive
Business Days selected by the Company commencing not more than 30 and not less
than 20 Business Days before the date in question.
(7) No adjustment in the conversion price shall be required unless
such adjustment (plus any adjustments not previously made by reason of this
paragraph (7)) would require an increase or decrease of at least 1% in such
price; provided, however, that any adjustments which by reason of this paragraph
-------- -------
(7) are not required to be made shall be carried forward and taken into account
in any subsequent adjustment. All calculations under this paragraph (7) shall
be made to the nearest cent.
(8) The Company may, but shall not be required to, make such
reductions in the conversion price, in addition to those required by paragraph
(1), (2), (3), (4) and (5) of this Section 10.4 as the Company's Board of
Directors considers to be advisable in order to avoid or diminish any income tax
to any holders of shares of Common Stock resulting from any dividend or
distribution of stock or issuance of rights or warrants to purchase or subscribe
for stock or from any event treated as such for income tax purposes or for any
other reason. The Company's Board of Directors shall have the power to resolve
any ambiguity or correct any error in the adjustments made pursuant to this
Section 10.4 and its actions in so doing shall be final and conclusive.
(9) The adjustments provided for in this Section 10.4 shall be made
successively whenever any event listed above shall occur.
SECTION 10.5. Notice of Adjustment of Conversion Price.
----------------------------------------
Whenever the conversion price for the Securities is adjusted as herein
provided:
(1) the Company shall compute the adjusted conversion price in
accordance with Section 10.4 and shall prepare an Officers'
Certificate setting forth the adjusted conversion price and showing in
reasonable detail the facts upon which such adjustment is based and
the computation thereof, and such certificate shall forthwith be filed
at each office or agency maintained for the purpose of conversion of
the Securities pursuant to Section 2.4 and with the Trustee; and
(2) a notice stating that the conversion price has been adjusted
and setting forth the adjusted conversion price shall as soon as
practicable be mailed by the Company to all Holders of the Securities
at their last addresses as they shall appear in the Security Register.
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(3) If the conversion price is adjusted and the Company fails to
file an Officers' Certificate with the Trustee as provided by Section
10.5(1) and the Trustee is acting as the Conversion Agent, the Trustee
shall be entitled to rely conclusively on the conversion price set
forth in the Officer's Certificate most recently received by the
Trustee (or as set forth in the Securities and this Indenture if the
conversion price shall not have been adjusted).
SECTION 10.6. Notice of Certain Corporate Action.
----------------------------------
(1) In case:
(a) the Company shall authorize the granting to holders of its
shares of Common Stock of rights or warrants entitling them to
subscribe for or purchase any shares of Capital Stock of any class or
of any other rights; or
(b) of any reclassification of the shares of Common Stock of the
Company, or of any consolidation or merger to which the Company is a
party and for which approval of any stockholders of the Company is
required, or of the sale or transfer of all or substantially all of
the assets of the Company; or
(c) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of the Securities pursuant to Section 2.3 and shall
cause to be mailed to the Trustee and all Holders of the Securities at their
last addresses as they shall appear in the Security Register, at least 20 days
(or 10 days in any case specified in clause (a) or (b) above) prior to the
applicable record date hereinafter specified, a notice stating (x) the date on
which a record is to be taken for the purpose of such dividend, distribution,
rights or warrants, or, if a record is not to be taken, the date as of which the
Holders of shares of Common Stock of record to be entitled to such dividend,
distribution, rights or warrants are to be determined, or (y) the date on which
such reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up is expected to become effective, and the date as of
which it is expected that holders of shares of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up. Such notice shall also state
whether such transaction will result in any adjustment in the conversion price
applicable to the Securities and, if so, shall state what the adjusted
conversion price will be and when it will become effective. Neither the failure
to give the notice required by this Section, nor any defect therein, to any
particular Holder shall affect the sufficiency of the notice or the legality or
validity of any such dividend, distribution, right, warrant, reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution or winding-up,
or the vote on any action authorizing such with respect to the other holders.
(2) In case the Company or any Affiliate of the Company shall propose
to engage in a "Rule 13e-3 Transaction" as defined in the Commission's Rule 13e-
3 under the
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Exchange Act, the Company shall, no later than the date on which any information
with respect to such Rule 13e-3 Transaction is first required to be given to the
Commission or any other Person pursuant to such Rule 13e-3, cause to be mailed
to all Holders at their last addresses as they shall appear in the Security
Register, a copy of all information required to be given to the holders of the
Company's Capital Stock pursuant to such Rule 13e-3. The information required to
be given under this paragraph shall be in addition to and not in lieu of any
other information required to be given by the Company pursuant to this Section
10.6 or any other provision of the Securities or this Indenture.
SECTION 10.7. Taxes on Conversions.
--------------------
The Company will pay any and all stamp or similar taxes that may be
payable in respect of the issuance or delivery of shares of Common Stock on
conversion of the Securities pursuant hereto. The Company shall not, however,
be required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of shares of Common Stock in a name other
than that of the Holder of the Security or Securities to be converted, and no
such issuance or delivery shall be made unless and until the Person requesting
such issuance has paid to the Company the amount of any such tax, or has
established to the satisfaction of the Company that such tax has been paid.
SECTION 10.8. Fractional Shares.
-----------------
No fractional shares or scrip representing fractional shares shall be
issued upon any conversion of the Securities. If any such conversion would
otherwise require the issuance of a fractional share an amount equal to such
fraction multiplied by the current market price per share of Common Stock
(determined as provided in paragraph (6) of Section 10.4) on the day of
conversion shall be paid to the Holder in cash by the Company.
SECTION 10.9. Cancellation of Converted Securities.
------------------------------------
All Securities delivered for conversion shall be delivered to the
Trustee or the Conversion Agent to be canceled by or at the direction of the
Trustee or the Conversion Agent, which shall dispose of the same as provided in
Section 2.10.
SECTION 10.10. Provisions in Case of Consolidation, Merger or Sale of
------------------------------------------------------
Assets.
- ------
(1) In case of any consolidation of the Company with, or merger of the
Company into, any Person, or in case of any merger of another Person into the
Company (other than a consolidation or merger which does not result in any
reclassification, conversion, exchange or cancellation of outstanding shares of
Common Stock), or in case of any sale or transfer of all or substantially all of
the assets of the Company, the Person formed by such consolidation or resulting
from such merger or which acquires such assets, as the case may be, shall
execute and deliver to the Trustee a supplemental indenture providing that the
Holder of each Security then outstanding shall have the right thereafter, during
the period such Security shall be convertible as specified in Section 10.1 to
convert such Security only into the kind and amount of securities, cash and
other property receivable upon such consolidation, merger, sale or
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transfer by a holder of the number of shares of Common Stock into which such
Security might have been converted immediately prior to such consolidation,
merger, sale or transfer. Such supplemental indenture shall provide for
adjustments which, for events subsequent to the effective date of such
supplemental indenture, shall be as nearly equivalent as may be practicable to
the adjustments provided for in this Article 10. The above provisions of this
Section 10.10 shall similarly apply to successive consolidations, mergers, sales
or transfers.
(2) The Trustee shall not be under any responsibility to determine the
correctness of any provisions contained in any such supplemental indenture
relating either to the kind or amount of shares of stock or securities or
property receivable by Holders upon the conversion of their Securities after any
such reclassification, change, consolidation, merger, sale or conveyance or to
any adjustment to be made with respect thereto.
SECTION 10.11. Disclaimer by Trustee of Responsibility for Certain
---------------------------------------------------
Matters.
- -------
The Trustee and each Conversion Agent (other than the Company or any
Subsidiary) shall not at any time be under any duty or responsibility to any
Holder of the Securities to determine whether any facts exist which may require
any adjustment of the conversion price, how it should be calculated or what it
should be, or with respect to the nature or extent of any such adjustment when
made, or with respect to the method employed, or herein or in any supplemental
indenture provided to be employed, in making the same. The Trustee and each
Conversion Agent (other than the Company or any Subsidiary) shall not be
accountable with respect to the validity, value, kind or amount of any shares of
Common Stock, or of any securities or property, which may at any time be issued
or delivered upon the conversion of any Security; and it makes no representation
with respect thereto. The Trustee and each Conversion Agent (other than the
Company or any Subsidiary) shall not be responsible for any failure of the
Company to issue, transfer or deliver any shares of Common Stock or stock
certificates or other securities or property upon the surrender of any Security
for the purpose of conversion or, subject to Section 7.1, to comply with any of
the covenants of the Company contained in this Article 10.
SECTION 10.12. Covenant to Reserve Shares.
--------------------------
The Company covenants that it will at all times reserve and keep
available, free from preemptive rights, out of its authorized shares of Common
Stock, solely for the purpose of issuance upon conversion of the Securities as
herein provided, such number of shares of Common Stock as shall then be issuable
upon the conversion of all outstanding Securities. The Company covenants that
all shares of Common Stock which shall be so issuable shall be, when issued,
duly and validly issued and fully paid and non-assessable. For purposes of this
Section 10.12, the number of shares of Common Stock which shall be deliverable
upon the conversion of all outstanding Securities shall be computed as if at the
time of computation all outstanding Securities were held by a single holder.
ARTICLE XI.
SUBORDINATION; SENIORITY
SECTION 11.1. Securities Subordinated to Senior Indebtedness.
----------------------------------------------
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(1) The Company agrees, and each Holder of the Securities by his
acceptance thereof likewise agrees, that the payment of the principal of,
premium, if any, and interest on the Securities (all of the foregoing, a
"Payment or Distribution") is subordinated and junior in right of payment, to
the extent and in the manner provided in this Article 11, except as provided in
Article 8, to the prior payment in full in cash of all Senior Indebtedness
whether outstanding on the date hereof or hereafter created, incurred, assumed
or guaranteed.
A Payment or Distribution shall include any asset of any kind or
character, and may consist of cash, securities or other property, by set-off or
otherwise, and shall include, without limitation, any purchase, redemption or
other acquisition of Securities or the making of any deposit of funds or
securities pursuant to this Indenture (including, without limitation, any
deposit pursuant to Article 8 hereof).
(2) The Senior Indebtedness of the Company shall continue to be Senior
Indebtedness and entitled to the benefit of these subordination provisions
irrespective of any amendment, modification or waiver of any term of any
instrument relating to refinancing of the Senior Indebtedness.
(3) All the provisions of this Indenture and the Securities shall be
subject to the provisions of this Article 11 so far as they may be applicable
thereto, except that nothing in this Article 11 shall apply to claims for, or
payments to, the Trustee under or pursuant to Section 7.7.
(4) No right of any holder of any Senior Indebtedness to enforce
subordination as herein provided shall at any time or in any way be affected or
impaired by any failure to act on the part of the Company, any Paying Agent, the
Holders of the Securities, the Trustee or the holders of the Senior
Indebtedness, or by any noncompliance by the Company, any Paying Agent, the
Holders of the Securities or the Trustee with any of the terms, provisions and
covenants of the Securities or this Indenture, regardless of any knowledge
thereof that any such holder of Senior Indebtedness may have or be otherwise
charged with.
SECTION 11.2. Company Not to Make Payments with Respect to Securities
-------------------------------------------------------
in Certain Circumstances.
- ------------------------
No Payment or Distribution shall be made by the Company, the Trustee
or any Paying Agent on account of principal of, premium, if any, or interest on
the Securities, whether upon stated maturity, upon redemption or acceleration,
or otherwise, or on account of the purchase or other acquisition of Securities,
whether upon stated maturity, upon redemption or acceleration, or otherwise, if
there shall have occurred and be continuing a default with respect to any Senior
Indebtedness permitting the acceleration thereof or with respect to the payment
of any Senior Indebtedness and (a) such default is the subject of a judicial
proceeding or (b) written notice of such default has been given to the Company
by any holder or holders of any Senior Indebtedness, unless and until such
default or event of default shall have been cured or waived or shall have ceased
to exist.
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Upon any acceleration of the principal of the Securities or any
payment by the Company or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, to creditors upon any
dissolution or winding up or liquidation or reorganization of the Company,
whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or
other proceedings, all amounts due or to become due upon all Senior Indebtedness
shall first be paid in full in cash, or payment thereof provided for to the
satisfaction of the holders thereof, before any Payment or Distribution is made
on account of the redemption price or principal of (and premium, if any) or
interest on the Securities; and (subject to the power of a court of competent
jurisdiction to make other equitable provision, which shall have been determined
by such court to give effect to the rights conferred in this Article upon the
Senior Indebtedness and the holders thereof with respect to the Securities or
the Holders thereof or the Trustee, by a lawful plan of reorganization or
readjustment under applicable law) upon any such dissolution or winding up or
liquidation or reorganization, any Payment or Distribution by the Company or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities (other than securities of the Company as reorganized or
readjusted or securities of the Company or any other company, trust or
corporation provided for by a plan of reorganization or readjustment, the
payment of which is junior or otherwise subordinate, at least to the extent
provided in this Article 11 with respect to the Securities to the payment of all
Senior Indebtedness at the time outstanding and to the payment of all securities
issued in exchange therefor to the holders of the Senior Indebtedness at the
time outstanding, and the rights of the holders of Senior Indebtedness of the
Company are not altered by such plan of reorganization or readjustment), to
which the Holders of the Securities or the Trustee would be entitled except for
the provisions of this Article 11, shall be paid by the Company or by any
receiver, trustee in bankruptcy, liquidating trustee, agent or other Person
making such Payment or Distribution directly to the holders of Senior
Indebtedness of the Company or their representative or representatives, or to
the trustee or trustees under any indenture pursuant to which any instruments
evidencing any Senior Indebtedness may have been issued, as their respective
interests may appear, to the extent necessary to pay all Senior Indebtedness in
full in cash, after giving effect to any concurrent payment or distribution to
or for the holders of Senior Indebtedness, before any Payment or Distribution is
made to the Holders of the Securities or to the Trustee, except that the Trustee
will have a lien for the payment of its fees and expenses.
In the event that, notwithstanding the foregoing, any Payment or
Distribution by the Company of any kind or character, (whether such payment
shall be in cash, property or securities) which is prohibited by the foregoing,
shall have been made to the Trustee or the Holders of the Securities before all
Senior Indebtedness is paid in full in cash, or provision is made for such
payment to the satisfaction of the holders thereof, and if such fact shall then
have been or thereafter be made known to a Trust Officer of the Trustee or, as
the case may be, such Holder, then and in such event such Payment or
Distribution shall be paid over by the Trustee (if the Notice required by
Section 11.5 has been timely received by the Trustee) or such Holder or
delivered to the holders of Senior Indebtedness or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any Senior Indebtedness may have been issued,
as their respective interests may appear, for application to the payment of all
Senior Indebtedness remaining unpaid to the extent necessary to pay all Senior
Indebtedness in full in cash, after giving effect to any concurrent Payment or
Distribution to or
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for the holders of such Senior Indebtedness, and, until so delivered, the same
shall be held in trust by any Holder of a Security as the property of the
holders of Senior Indebtedness.
The consolidation of the Company with, or the merger of the Company
into, another Person or the liquidation or dissolution of the Company following
the conveyance or transfer of its property as an entirety, or substantially as
an entirety, to another corporation upon the terms and conditions provided in
Article 5 shall not be deemed a dissolution, winding up, liquidation or
reorganization for the purposes of this Section 11.2 if such other Person shall,
as a part of such consolidation, merger, conveyance or transfer, comply with the
conditions stated in Article 5. Nothing in this Section shall apply to claims
of, or payments to, the Trustee under or pursuant to Section 7.7.
The holders of Senior Indebtedness may, at any time and from time to
time, without the consent of or notice to the Holders of the Securities, without
incurring responsibility to the Holders of the Securities and without impairing
or releasing the obligations of the Holders of the Securities hereunder to the
holders of Senior Indebtedness: (i) change the manner, place or terms of payment
or change or extend the time of payment of, or renew or alter, Senior
Indebtedness, or otherwise amend in any manner Senior Indebtedness or any
instrument evidencing the same or any agreement under which Senior Indebtedness
is outstanding; (ii) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Indebtedness; (iii) release any
Person liable in any manner for the collection of Senior Indebtedness; (iv)
apply any amounts received to any liability of the Company owing to holders of
Senior Indebtedness; and/or (v) exercise or refrain from exercising any rights
against the Company and any other Person.
SECTION 11.3. Subrogation of Securities.
-------------------------
Subject to the payment in full in cash of all amounts then due
(whether by acceleration of the maturity thereof or otherwise) on account of all
Senior Indebtedness at the time outstanding, the Holders of the Securities shall
be subrogated to the rights of the holders of Senior Indebtedness to receive
Payments or Distributions of cash, property or securities of the Company
applicable to the Senior Indebtedness until the principal of, premium, if any,
and interest on the Securities shall be paid in full; and, for the purposes of
such subrogation, no Payments or Distributions to the holders of Senior
Indebtedness to which the Holders of the Securities or the Trustee would be
entitled except for the provisions of this Article 11, and no payments over
pursuant to the provisions of this Article 11 to the holders of Senior
Indebtedness by Holders of the Securities or the Trustee, shall, as between the
Company, the Company's creditors other than holders of Senior Indebtedness, and
the Holders of the Securities, be deemed to be a payment by the Company to or on
account of the Senior Indebtedness. It is understood that the provisions of
this Article 11 are and are intended solely for the purpose of defining the
relative rights of the Holders of the Securities, on the one hand, and the
holders of Senior Indebtedness, on the other hand.
Nothing contained in this Article 11 or elsewhere in this Indenture or
in the Securities is intended to or shall impair, as among the Company, its
creditors other than the
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holders of Senior Indebtedness, and the Holders of the Securities, the
obligation of the Company, which is absolute and unconditional, to pay to the
Holders of the Securities the principal of, premium, if any, and interest on the
Securities as and when the same shall become due and payable in accordance with
their terms, or is intended to or shall affect the relative rights of the
Holders of the Securities and creditors of the Company other than the holders of
Senior Indebtedness, nor shall anything herein or therein prevent the Trustee or
the Holder of any Security from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if any,
under this Article 11 of the holders of Senior Indebtedness in respect of cash,
property or securities of the Company received upon the exercise of any such
remedy. Nothing in this Article 11 shall prevent conversions of Securities
pursuant to Article 10.
Upon any payment or distribution of assets of the Company referred to
in this Article 11, the Trustee, subject to the provisions of Section 7.1, and
the Holders of the Securities shall be entitled to rely upon any order or decree
made by any court of competent jurisdiction in which any dissolution, winding
up, liquidation or reorganization proceedings are pending, or certificate of the
receiver, trustee in bankruptcy, liquidating trustee, agent or other Person
making such payment or distribution, delivered to the Trustee or to the Holders
of the Securities, for the purpose of ascertaining the Persons entitled to
participate in such distribution, the holders of Senior Indebtedness and other
indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article 11.
SECTION 11.4. Authorization by Holders of Securities.
--------------------------------------
Each holder of a Security by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate, as between the Holder of the Security and the holders
of Senior Indebtedness, the subordination provided in this Article 11 and
appoints the Trustee his attorney-in-fact for any and all such purposes
including, without limitation, to execute, verify, deliver and file any proofs
of claim which any holder of Senior Indebtedness may at any time require in
order to prove and realize upon any rights or claims pertaining to the
Securities and to effectuate the full benefit of the subordination contained
herein. If the Trustee shall fail to do so prior to 30 days prior to the
expiration of the period for filing such claims, any such holder of Senior
Indebtedness shall be deemed to be irrevocably appointed the agent and attorney-
in-fact of the Holder to execute, verify, deliver and file any such proofs of
claim; provided that no holder of Senior Indebtedness shall incur any liability
for any failure to exercise its right to file any such proofs of claim.
SECTION 11.5. Notices to Trustee.
------------------
The Company shall give prompt written notice to the Trustee of any
fact known to it which would prohibit the making of any payment of moneys to or
by the Trustee in respect of the Securities pursuant to the provisions of this
Article 11. Notwithstanding the provisions of this Article 11 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts which would prohibit the making of any payment of
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moneys to or by the Trustee in respect of the Securities pursuant to the
provisions of this Article 11 unless and until a Trust Officer of the Trustee
shall have received at its Corporate Trust Office written notice thereof from
the Company or a holder or holders of Senior Indebtedness or from any trustee or
agent therefor; and, prior to the receipt of any such written notice, the
Trustee, subject to the provisions of Section 7.1, shall be entitled in all
respects to assume that no such facts exist; provided, however, that if a Trust
-------- -------
Officer of the Trustee shall not have received at least three Business Days
prior to the date upon which by the terms hereof any such moneys may become
payable for any purpose (including, without limitation, the payment of the
principal of, premium, if any, or interest on any Security) with respect to such
moneys the notice provided for in this Section 11.5, then, anything herein
contained to the contrary notwithstanding, the Trustee shall have the full power
and authority to receive such moneys and to apply the same to the purpose for
which they were received and shall not be affected by any notice to the contrary
which may be received by it within three Business Days prior to such date or at
any time thereafter.
The Trustee shall be entitled to rely conclusively on the delivery to
it of a written notice by a Person representing himself to be a holder of Senior
Indebtedness (or a trustee on behalf of such holder) to establish that such
notice has been given by a holder of Senior Indebtedness or a trustee or agent
on behalf of any such holder. In the event that the Trustee determines in good
faith that further evidence is required with respect to the right of any Person
as a holder of Senior Indebtedness to participate in any payment or distribution
pursuant to this Article 11, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article 11, and if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
SECTION 11.6. Trustee's Relation to Senior Indebtedness.
-----------------------------------------
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article 11 in respect of any Senior Indebtedness at any
time held by it, to the same extent as any other holder of Senior Indebtedness,
and nothing in Section 7.11 or elsewhere in this Indenture shall deprive the
Trustee of any of its rights as such holder.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article 11, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not owe any
fiduciary duty to the holders of Senior Indebtedness and shall not be liable to
any such holder if it shall mistakenly pay over or distribute to Holders of the
Securities or the Company or any other Person money or assets to which any
holder of Senior Indebtedness shall be entitled by virtue of this Article 11 or
otherwise.
SECTION 11.7. No Impairment of Subordination.
-------------------------------
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No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company,
the Trustee or the Holder of any of the Securities or by any act, or failure to
act, in good faith, by any such holder of Senior Indebtedness, or by any
noncompliance by the Company, the Trustee or the Holder of any of the Securities
with the terms, provisions and covenants of this Indenture, regardless of any
knowledge thereof which any such holder may have or otherwise be charged with.
SECTION 11.8. Article 11 Not To Prevent Events of Default.
-------------------------------------------
The failure to make a payment on account of principal of, premium, if
any, or interest on the Securities by reason of any provision in this Article 11
shall not be construed as preventing the occurrence of an Event of Default with
respect to such Securities under Section 6.1.
SECTION 11.9. Paying Agents other than the Trustee.
------------------------------------
In any case at any time any Paying Agent other than the Trustee shall
have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article 11 shall in such case (unless the context
shall otherwise require) be construed as extending to and including such Paying
Agent within its meaning as fully for all intents and purposes as if such Paying
Agent were named in this Article 11 in addition to or in place of the Trustee.
SECTION 11.10. Securities Senior to Subordinated Indebtedness.
----------------------------------------------
The indebtedness represented by the Securities will be senior and
prior in right of payment to all Subordinated Indebtedness, to the extent and in
the manner provided in such Subordinated Indebtedness.
ARTICLE XII.
RIGHT TO REQUIRE REPURCHASE
SECTION 12.1. Right to Require Repurchase.
---------------------------
In the event that there shall occur a Change in Control (as defined in
Section 12.5), each Holder shall have the right, at such Holder's option, to
require the Company to purchase, and upon the exercise of such right, the
Company shall, subject to the provisions of Article XI, purchase, all or any
part of such Holder's Notes on the date (the "Repurchase Date") that is 75 days
after the date the Company gives notice of the Change in Control as contemplated
in Section 12.2(1) at a price (the "Repurchase Price") equal to 101% of the
principal amount thereof, together with accrued and unpaid interest to the
Repurchase Date. In connection with the exercise of the repurchase right by a
Holder prior to a Redemption Date, a Holder's right to exercise his repurchase
right shall terminate at the close of business on the Business Day prior to the
Redemption Date.
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SECTION 12.2. Notice; Method of Exercising Repurchase Right.
---------------------------------------------
(1) On or before the 15th day after the occurrence of a Change in
Control, the Company or, at the request of the Company, the Trustee (in the name
and at the expense of the Company), shall give notice of the occurrence of the
Change in Control and of the repurchase right set forth herein arising as a
result thereof by first-class mail, postage prepaid, to each Holder of the Notes
at such Holder's address appearing in the Note Register. The Company shall also
deliver a copy of such notice of a repurchase right to the Trustee.
Each notice of a repurchase right shall state:
(a) the event constituting the Change in
Control and the date thereof;
(b) the Repurchase Date;
(c) the date by which the repurchase right must
be exercised;
(d) the Repurchase Price; and
(e) the procedures a Holder must follow to
exercise a repurchase right.
No failure of the Company to give the foregoing notice shall limit any
Holder's right to exercise a repurchase right. The Trustee shall have no
affirmative obligation to determine if there shall have occurred a Change in
Control.
(2) To exercise a repurchase right, a Holder shall deliver to the
Company (or an agent designated by the Company for such purpose in the notice
referred to in (1) above) and to the Trustee on or before the tenth day prior to
the Repurchase Date (a) written notice of the Holder's exercise of such right,
which notice shall set forth the name of the Holder, the principal amount of the
Note or Notes (or portion of a Note) to be repurchased and a statement that an
election to exercise the repurchase right is being made thereby and (b) the Note
or Notes with respect to which the repurchase right is being exercised, duly
endorsed for transfer to the Company. Such written notice shall be irrevocable.
If the Repurchase Date falls between any Regular Record Date and the next
succeeding Interest Payment Date, Notes to be repurchased must be accompanied by
payment from the Holder of an amount equal to the interest thereon which the
registered Holder thereof is to receive on such Interest Payment Date. A Holder
that fails to exercise a repurchase right in accordance with the terms hereof
shall waive such repurchase right but the rights of such Holder to receive
principal of and interest on the Notes and all other rights of such Holder under
this Indenture shall not be affected thereby.
(3) In the event a repurchase right shall be exercised in accordance
with the terms hereof, the Company shall on the Repurchase Date pay or cause to
be paid in cash to the Holder thereof the Repurchase Price of the Note or Notes
as to which the repurchase right has been exercised. In the event that a
repurchase right is exercised with respect to less than the entire principal
amount of a surrendered Note, the Company shall execute and deliver to the
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Trustee and the Trustee shall authenticate for issuance in the name of the
Holder a new Note or Notes in the aggregate principal amount of the
unrepurchased portion of such surrendered Note.
SECTION 12.3. Deposit Of Repurchase Price.
---------------------------
On or prior to the Repurchase Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 2.4) an amount of
money sufficient to pay the Repurchase Price of the Notes which are to be repaid
on the Repurchase Date.
SECTION 12.4. Notes Not Repurchased On Repurchase Date.
----------------------------------------
If any Note surrendered for repurchase shall not be so paid on the
Repurchase Date, the principal shall, until paid, bear interest to the extent
permitted by applicable law from the Repurchase Date at the rate per annum borne
by such Note.
SECTION 12.5. "Change In Control" Defined.
---------------------------
For purposes of this Article, "Change In Control" means any of the
following events that occur after the date of this Indenture and on or prior to
Maturity:
(1) all or substantially all of the Company's assets are sold as an
entirety to any person or related group of persons;
(2) there shall be consummated any consolidation or merger of the
Company (a) in which the Company is not the continuing or surviving corporation
(other than a consolidation or merger with a wholly-owned subsidiary of the
Company in which all Common Stock outstanding immediately prior to the
effectiveness thereof are changed into or exchanged for the same consideration)
or (b) pursuant to which the Common Stock are converted into cash, securities or
other property, in each case other than a consolidation or merger of the Company
in which the holders of the Common Stock immediately prior to the consolidation
or merger have, directly or indirectly, at least a majority of the common shares
of the continuing or surviving corporation immediately after such consolidation
or merger; or
(3) any person, or any persons acting together which would constitute
a "group" for purposes of Section 13(d) of the Securities Exchange Act of 1934
(a "Group"), together with any Affiliates thereof, shall acquire beneficial
ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934)
of at least 50% of the total voting power of all classes of capital shares of
the Company entitled to vote generally in the election of directors of the
Company.
Notwithstanding anything to the contrary set forth in this definition,
a Change in Control shall not be deemed to have occurred:
(A) under paragraph (3) above, solely by virtue of the Company, any
Subsidiary, any employee share purchase plan, share option plan or other share
incentive plan or
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program, retirement plan or automatic dividend reinvestment plan or any
substantially similar plan of the Company or any Subsidiary or any Person
holding securities of the Company for or pursuant to the terms of any such
employee benefit plan, filing or becoming obligated to file a report under or in
response to Schedule 13D or Schedule 14D-1 (or any successor schedule, form or
report) under the Securities Exchange Act of 1934 disclosing beneficial
ownership by it of shares or securities of the Company, whether at least 50% of
the total voting power referred to in paragraph (3) above, or otherwise; a
recapitalization or a leveraged buyout or similar transaction involving members
of management or their affiliates will constitute a Change in Control if it
meets the foregoing definition; or
(B) under paragraphs (1), (2) or (3) above if:
(i) the Current Market Price of the Common Stock on the date the
Change in Control shall have occurred is at least equal to 105% of the
Conversion Price in effect immediately preceding the time of such Change in
Control; or
(ii) all of the consideration (excluding cash payments for fractional
shares) in the transaction giving rise to such Change in Control to the holders
of Common Stock consists of common shares that are, or immediately upon issuance
will be, listed on a national securities exchange or quoted on the Nasdaq
National Market, and as a result of such transaction the Notes become
convertible solely into such common shares; or
(iii) the consideration in the transaction giving rise to such Change
in Control to the holders of Common Stock consists of cash, securities that are,
or immediately upon issuance will be, listed on a national securities exchange
or quoted on the Nasdaq National Market, or a combination of cash and such
securities, and the aggregate fair market value of such consideration (which, in
the case of such securities, shall be equal to the average of the daily Closing
Prices of such securities during the ten consecutive Trading Days commencing
with the sixth Trading Day following consummation of such transaction) is at
least 105% of the Conversion Price in effect on the date immediately preceding
the closing date of such transaction.
If a Change in Control shall have occurred under paragraph (2) above,
the Company shall deliver the Officers' Certificate and Opinion of Counsel
called for under Section 13.4 as well as the notices called for under Section
10.5.
For purposes of this definition of Change of Control, "Current Market
Price" on any date means the average daily Closing Prices for the five
consecutive Trading Days selected by the Company commencing not more than ten
Trading Days before, and ending not later than, the date in question; "Closing
Price" for any Trading Day means the last reported sale price (or, if none on
any day, the mean between the bid and asked quotations on such day) of the
securities in question for such date, in either case on the New York Stock
Exchange or, if the securities are not listed or admitted to trading on such
exchange, on the principal national securities exchange on which such securities
are listed or admitted to trading or, if not listed or admitted to trading on
any national securities exchange, on The Nasdaq
-53-
<PAGE>
National Market or, if the securities are not listed or admitted to trading on
any national securities exchange or quoted on the Nasdaq National Market, the
average of the closing bid and asked prices in the over-the-counter market as
furnished by any New York Stock Exchange member firm selected by the Company for
such purpose; and "Trading Day", with respect to any stock exchange or
securities market, means any Monday, Tuesday, Wednesday, Thursday or Friday on
which such stock exchange or securities market is open for business.
ARTICLE XIII.
MISCELLANEOUS
SECTION 13.1. Trust Indenture Act Controls.
----------------------------
If any provision of this Indenture limits, qualifies or conflicts with
another provision which is required to be included in this Indenture by the TIA,
the required provisions shall control. The provisions of TIA Sections 310
through 317 that impose duties on any Person (including the provisions
automatically deemed included herein unless expressly excluded by this
Indenture) are a part of and govern this Indenture, whether or not physically
contained herein.
SECTION 13.2. Notices.
-------
Any notices or other communications required or permitted hereunder
shall be in writing, and shall be sufficiently given if made by hand delivery,
or first class mail, postage prepaid (except that any notice by the Trustee to
the Company of a default or an Event of Default under this Indenture shall be by
registered or certified mail, postage prepaid, return receipt requested), or by
a nationally-recognized overnight express courier service (which notices or
communications shall be deemed received, in the case of the Company, the
business day after the receipt thereof by such service and, in the case of the
Trustee, upon receipt), addressed as follows:
if to the Company:
Assisted Living Concepts, Inc.
9955 S.E. Washington, Suite 201
Portland, Oregon 97216
Attention: President
if to the Trustee:
Harris Trust and Savings Bank
311 West Monroe Street
12th Floor
Chicago, Illinois 60606
Attention: Corporate Trust Department
The Company or the Trustee by notice to the other may designate additional or
different addresses as shall be furnished in writing by either party. Any
notice or communication to the Company or the Trustee shall be deemed to have
been given or made as of the date so delivered
-54-
<PAGE>
if personally delivered, and five (5) calendar days after mailing if sent by
registered or certified mail (except that a notice of change of address shall
not be deemed to have been given until actually received by the addressee).
Any notice or communication mailed to a Securityholder shall be mailed
to the address of such Securityholder as it appears on the registration books of
the Registrar and shall be sufficiently given if so mailed within the time
prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
In case by reason of the suspension of regular mail service, or by
reason of any other cause, it shall be impossible to mail any notice, as
required by this Indenture, then such method of notification as shall be made
with the approval of the Trustee shall constitute a sufficient mailing of such
notice.
If the Company mails any notice or communication to Securityholders,
it shall mail a copy to the Trustee and all Agents at the same time.
SECTION 13.3. Communications by Holders with Other Holders.
--------------------------------------------
Securityholders may communicate pursuant to TIA (S) 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA (S) 312(c).
SECTION 13.4. Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate (which shall include the statements
set forth in Section 13.5) stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel (which shall include the statements set
forth in Section 13.5) stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
-55-
<PAGE>
SECTION 13.5. Statements Required in Certificate and Opinion.
----------------------------------------------
Each Certificate and Opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made
such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
Person, such covenant or condition has been complied with.
SECTION 13.6. Rules by Trustee and Agents.
---------------------------
The Trustee may make reasonable rules for action by or at a meeting of
Securityholders. The Registrar, Paying Agent or Conversion Agent may make
reasonable rules for its functions.
SECTION 13.7. Record Date.
-----------
Whenever the Company or the Trustee solicits an act of
Securityholders, the Company or the Trustee may fix in advance of the
solicitation of such act a date as the record date for determining
Securityholders entitled to perform said act. The record date shall be not more
than 15 days prior to the date fixed for the solicitation of said act.
SECTION 13.8. Legal Holidays.
--------------
A "Legal Holiday" is a Saturday, a Sunday or a day on which banks or
trust companies in the city in which either the Trustee or the Company is
located are not required to be open. If a payment date is a Legal Holiday at a
place of payment, payment may be made at that place on the next succeeding day
that is not a Legal Holiday, and no interest shall accrue for the intervening
period.
-56-
<PAGE>
SECTION 13.9. Governing Law.
-------------
The laws of the State of New York shall govern this Indenture and the
Securities without regard to principles of conflicts of law. Each of the
parties hereto agrees to submit to the jurisdiction of the Courts of the State
of New York and the U.S. Federal Courts, in each case sitting in the Borough of
Manhattan, and waives any objection as to venue or forum non conveniens.
SECTION 13.10. No Adverse Interpretation of Other Agreements.
---------------------------------------------
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or a Subsidiary. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture.
SECTION 13.11. No Recourse Against Others.
--------------------------
No stockholder, director or officer, as such, past, present or future,
of the Company or of any successor corporation or trust shall have any liability
for any obligation of the Company under the Securities or the Indenture or for
any claim based on, in respect of or by reason of, such obligations or their
creation. Each Holder of a Security by accepting a Security waives and releases
all such liability. The waiver and release are part of the consideration for
the issuance of the Securities.
SECTION 13.12. Successors.
----------
All agreements of the Company in this Indenture and the Securities
shall bind its successor. All agreements of the Trustee in this Indenture shall
bind its successor.
SECTION 13.13. Multiple Counterparts.
---------------------
The parties may sign multiple counterparts of this Indenture. Each
signed counterpart shall be deemed an original, but all of them together
represent the same agreement.
SECTION 13.14. Table of Contents, Headings, etc.
---------------------------------
The table of contents, cross-reference sheet and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
SECTION 13.15. Severability.
------------
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby,
and a Holder shall have no claim therefor against any party hereto.
-57-
<PAGE>
(Signature page follows.)
-58-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the date first written above.
ASSISTED LIVING CONCEPTS, INC.
a Nevada corporation
By: /S/ Keren Brown Wilson
-------------------------------------
Name: Keren Brown Wilson
Title: President and
Chief Operating Officer
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By: /S/ Dan Donovan
-------------------------------------
Name: D. G. Donovan
Title: Assistant Vice President
-59-
<PAGE>
EXHIBIT A
FORM OF SECURITY
[Attached]
<PAGE>
FORM OF SECURITY
[FORM OF FACE OF SECURITY]
Unless and until it is exchanged in whole or in part for Securities in
definitive form, this Security may not be transferred except as a whole by the
Depository to a nominee of the Depository or by a nominee of the Depository to
the Depository or another nominee of the Depository or by the Depository or any
such nominee to a successor Depository or a nominee of such successor
Depository. Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation (55 Water
Street, New York, New York) ("DTC"), to the issuer or its agent for registration
of transfer, exchange or payment, and any certificate issued is registered in
the name of Cede & Co. or such other name as may be requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or such other
entity as may be requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein./1/
[THIS SECURITY HAS BEEN ACQUIRED BY THE HOLDER FOR THE PURPOSE OF INVESTMENT AND
NOT WITH A VIEW TO OR FOR SALE IN CONNECTION WITH ANY DISTRIBUTION. THIS
SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY
NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF
THIS SECURITY, BY ITS ACCEPTANCE HEREOF, REPRESENTS, ACKNOWLEDGES AND AGREES FOR
THE BENEFIT OF THE COMPANY THAT: (I) IT HAS ACQUIRED A "RESTRICTED" SECURITY
WHICH HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT; (II) IT WILL NOT OFFER,
SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO ASSISTED LIVING CONCEPTS,
INC., (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT, (C) IN THE CASE OF A HOLDER WHO IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), FOR SO
LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON
WHO THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, OR (D) IN ACCORDANCE WITH RULE 144 UNDER THE
SECURITIES ACT OR PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS
- ----------------------------
/1/ This paragraph should be included only if the Security is issued in global
form.
<PAGE>
OF THE SECURITIES ACT, (AND CONFIRMED IN AN OPINION OF COUNSEL ACCEPTABLE IN
FORM AND SUBSTANCE TO THE ISSUER OF THIS SECURITY IF THE ISSUER SO REQUESTS)
AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION; AND (III) IT
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS
SECURITY FROM IT OF THE RESALE RESTRICTIONS SET FORTH IN (II) ABOVE.]/2/
ASSISTED LIVING CONCEPTS, INC.
5.625% Convertible Subordinated Debenture Due 2003
ASSISTED LIVING CONCEPTS, INC., a Nevada corporation, promises to pay
to ________________________________ or registered assigns, the principal sum of
_____________ Dollars, on May 1, 2003.
Interest Payment Dates: May 1 and November 1
Record Dates: April 15 and October 15
Additional provisions of this Security are set forth on other side of this
Security.
Dated:
CERTIFICATE OF AUTHENTICATION ASSISTED LIVING CONCEPTS, INC.
HARRIS TRUST AND SAVINGS BANK
as Trustee, certifies that this
is one of the Securities referred
to in the within mentioned By:___________________
Indenture.
By:______________________
Authorized Signatory By:___________________
SEAL
- -------------------
/2/ To be included on all Securities which are Restricted Securities.
-2-
<PAGE>
[FORM OF REVERSE OF SECURITY]
ASSISTED LIVING CONCEPTS, INC.
5.625% Convertible Subordinated Debenture Due 2003
1. Interest. Assisted Living Concepts, Inc., a Nevada corporation
--------
(the "Company"), promises to pay interest on the principal amount of this
Security at the rate per annum shown above. The Company will pay interest
semiannually on May 1 and November 1 of each year beginning November 1, 1998.
Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from April 13, 1998;
provided that, if there is no existing Default in the payment of interest, and
if this Security is authenticated between a record date referred to on the face
hereof and the next succeeding interest payment date, interest shall accrue from
such interest payment date. Interest will be computed on the basis of a 360 day
year of twelve 30-day months.
2. Method of Payment. The Company will pay interest on the Securities
-----------------
(except defaulted interest) to the persons who are the registered Holders of the
Securities at the close of business on the April 15 or October 15 immediately
preceding the interest payment date. Holders must surrender Securities to a
Paying Agent to collect principal and premium payments. The Company will pay
principal, premium and interest in money of the United States that at the time
of payment is legal tender for payment of public and private debts. The
Company, however, may pay principal, premium and interest by its check payable
in such money. It may mail an interest check to a Holder's registered address.
The payment of principal of and premium, if any, on this Security shall
be payable only upon surrender of this Security at the office or agency of the
Paying Agent in the Borough of Manhattan, City and State of New York. Payments
of principal of, premium, if any, and interest on this Security shall be made at
the office or agency of the Trustee maintained in the Borough of Manhattan, City
and State of New York, or, in the case of any such payments other than the
payment of principal and premium, if any, at the Company's option, by check
mailed to the Person entitled thereto at such Person's address last appearing on
the Company's register.
3. Registrar and Agents. Initially, Harris Trust and Savings Bank
--------------------
will act as Registrar, Paying Agent, Conversion Agent and agent for service of
notices and demands. The Company may change any Registrar, co-registrar, Paying
Agent, Conversion Agent and agent for service of notices and demands without
notice. The Company or any of its Subsidiaries may act as Paying Agent or
Conversion Agent. The address of Harris Trust and Savings Bank is 311 West
Monroe Street, 12th Floor, Chicago, IL 60606.
4. Indenture; Limitations. The Company issued the Securities under an
----------------------
Indenture, dated as of April 13, 1998 (the "Indenture"), between the Company and
Harris Trust and Savings Bank (the "Trustee"). Capitalized terms herein are
used as defined in the Indenture unless otherwise defined herein. The terms of
the Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.
<PAGE>
Code (S)(S) 77aaa-77bbbb) as in effect on the date of the Indenture. The
Securities are subject to all such terms, and the Holders of the Securities are
referred to the Indenture and said Act for a statement of them.
The Securities are general unsecured obligations of the Company limited
to $86,250,000 principal amount. The Indenture imposes certain limitations on
the ability of the Company to, among other things, make payments in respect of
its Capital Stock, merge or consolidate with any other Person and sell, lease,
transfer or otherwise dispose of its properties or assets.
5. Optional Redemption by the Company. The Company may, at its
----------------------------------
option, at any time on or after May 15, 2001, redeem all of the Debentures or
some of them, on at least 30 days' but not more than 60 days' notice to each
holder of Debentures to be redeemed at his or her registered address, at a
redemption price equal to 100% of the principal amount thereof, plus accrued
interest to the redemption date. The Debentures may not be so redeemed before
May 15, 2001.
6. Certain Rights to Require Repurchase of Debentures by the Company.
-----------------------------------------------------------------
In the event that there shall occur a Change in Control of the Company, each
Holder shall have the right, at such Holder's option, to require the Company to
purchase, all or any part of such Holder's Notes, 75 days after the date the
Company gives notice of the Change in Control as contemplated in the Indenture,
at a price equal to 101% of the principal amount thereof, together with accrued
and unpaid interest.
7. Notice of Redemption. Notice of redemption will be mailed at
--------------------
least 30 days but not more than 60 days before the Redemption Date to each
Holder of Securities to be redeemed at his registered address. Securities in
denominations larger than $1,000 principal amount may be redeemed in part, but
only in whole multiples thereof. On and after the Redemption Date interest
ceases to accrue on Securities or portions of them called for redemption.
8. Conversion. A Holder of a Security may convert such Security into
----------
shares of common stock of the Company after the effective date of the
Registration Statement and before the close of business on May 1, 2003. If the
Security is called for redemption, the Holder may convert it at any time before
the close of business on the date fixed for such redemption. The initial
conversion price is $26.184 per share, subject to adjustment in certain events.
To determine the number of shares issuable upon conversion of a Security, divide
the principal amount to be converted by the conversion price in effect on the
conversion date. The Company will deliver a check for any fractional share.
To convert a Security, a Holder must (1) complete and sign the
conversion notice on the back of the Security, (2) surrender the Security to the
Conversion Agent, (3) furnish appropriate endorsements and transfer documents if
required by the Registrar or Conversion Agent and (4) pay any transfer or
similar tax if required. No payment or adjustment is to be made on conversion
for interest accrued hereon or for dividends on shares of common stock issued on
conversion; provided, however, that if a Security is surrendered for conversion
-------- -------
after the
<PAGE>
record date for a payment of interest and on or before the interest payment
date, then, notwithstanding such conversion, the interest falling due to such
interest payment date will be paid to the Person in whose name the Security is
registered at the close of business on such record date and any Security
surrendered for conversion during the period from the close of business on any
regular record date to the opening of business on the corresponding interest
payment date must be accompanied by payment of an amount equal to the interest
payable on such interest payment date. A Holder may convert a portion of a
Security if the portion is $1,000 principal amount or an integral multiple
thereof.
If the Company is a party to a consolidation or merger or a transfer
or lease of all or substantially all of its assets, the right to convert a
Security into shares of common stock may be changed into a right to convert it
into securities, cash or other assets of the Company or another Person.
9. Subordination. This Security is subordinated to all Senior
-------------
Indebtedness of the Company. To the extent and in the manner provided in the
Indenture, Senior Indebtedness must be paid before any payment may be made to
any Holders of Securities. Any Securityholder by accepting this Security agrees
to such subordination and authorizes the Trustee to give it effect.
In addition to all other rights of Senior Indebtedness described in
the Indenture, the Senior Indebtedness shall continue to be Senior Indebtedness
and entitled to the benefits of the subordination provisions irrespective of any
amendment, modification or waiver of any term of any instrument relating to the
Senior Indebtedness or extension or renewal of the Senior Indebtedness.
10. Denominations, Transfer, Exchange. The Securities issued under
---------------------------------
the Indenture are in the aggregate principal amount of up to $86,250,000. The
Securities are in registered form without coupons in denominations of $1,000
principal amount and integral multiples thereof. A Holder may register the
transfer of or exchange Securities in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not register the transfer
of or exchange any Securities selected for redemption or register the transfer
of or exchange any Securities for a period of 15 days before a selection of
Securities to be redeemed.
11. Persons Deemed Owners. The registered Holder of a Security may
---------------------
be treated as its owner for all purposes.
12. Unclaimed Money. If money for the payment of principal or
---------------
interest on any Securities remains unclaimed for two years, the Trustee and the
Paying Agent will pay the money back to the Company at its written request.
After that, Holders may look only to the Company for payment.
13. Discharge Prior to Redemption or Maturity. The Indenture will be
-----------------------------------------
discharged and canceled except for certain sections thereof upon payment of all
the Securities, or
-3-
<PAGE>
upon the irrevocable deposit with the Trustee of funds or U.S. Government
Obligations maturing on or before such payment date or Redemption Date,
sufficient to pay principal, premium, if any, and interest on such payment or
redemption.
14. Amendment and Waiver. Subject to certain exceptions, without
--------------------
notice to the Holders of the Securities, the Indenture or the Securities may be
amended with the consent of the Holders of at least 66-2/3% in principal amount
of the Securities then outstanding and any existing default or compliance with
any provision may be waived with the consent of the Holders of a majority in
principal amount of the Securities then outstanding. Without the consent of or
notice to any Securityholder, the Company may amend or supplement the Indenture
or the Securities to, among other things, provide for uncertificated Securities,
to cure any ambiguity, defect or inconsistency or make any other change that
does not adversely affect the rights of any Securityholder.
15. Successors. When a successor assumes all the obligations of its
----------
predecessor under the Securities and the Indenture, the predecessor will be
released from those obligations.
16. Defaults and Remedies. If an Event of Default, as defined in the
---------------------
Indenture (other than a Event of Default relating to bankruptcy of the Company),
occurs and is continuing, the Trustee or the Holders of a majority in principal
amount of Securities may declare all the Securities to be due and payable
immediately in the manner and with the effect provided in the Indenture. If an
Event of Default relating to bankruptcy of the Company occurs, then all
Securities shall become immediately due and payable without any declaration or
act on the part of the Trustee or any Holder. Holders of Securities may not
enforce the Indenture or the Securities except as provided in the Indenture.
The Trustee may require indemnity satisfactory to it, subject to the provisions
of the TIA, before it enforces the Indenture or the Securities. Subject to
certain limitations, Holders of a majority in principal amount of the Securities
then outstanding may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders of Securities notice of any continuing
default (except a default in payment of principal or interest) if it determines
that withholding notice is in their interests. The Company is required to file
periodic reports with the Trustee as to the absence of any Default or Event of
Default.
17. Trustee Dealings with the Company. Harris Trust and Savings
---------------------------------
Bank, the Trustee under the Indenture, in its individual or any other capacity,
may make loans to, accept deposits from, and perform services for the Company or
its Affiliates, and may otherwise deal with the Company or its Affiliates, as if
it were not Trustee.
18. No Recourse Against Others. No stockholder, director, officer or
--------------------------
incorporator, as such, past, present or future, of the Company or any successor
corporation shall have any liability for any obligation of the Company under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder of a Security by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Securities.
-4-
<PAGE>
19. Authentication. This Security shall not be valid until the
--------------
Trustee signs the certificate of authentication on the other side of this
Security.
20. Abbreviations. Customary abbreviations may be used in the name of
-------------
a Securityholder or an assignee, such as: TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship
and not as tenants in common), CUST (=Custodian), and U/G/M/A (=Uniform Gifts to
Minors Act).
The Company will furnish to any Securityholder upon written request and
without charge a copy for the Indenture. It also will furnish the text of this
Security in larger type. Requests may be made to: Assisted Living Concepts,
Inc., 9955 S.E. Washington, Suite 201, Portland, Oregon 97216. Attention:
President.
-5-
<PAGE>
TRANSFER NOTICE
If you, the Holder, wants to assign this Security, fill in the form below and
have your signature guaranteed:
For value received, I or we assign and transfer this Security to
________________________________________________________________________________
(INSERT ASSIGNEE'S SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER)
_______________________________________________________________
_______________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
_________________________________________________________________________ agent
to transfer this Security on the books of the Company. The agent may substitute
another to act for him.
In connection with the transfer of this Security, the undersigned
certifies that:
(Check one)
[_] (a) This Security is being transferred to a "qualified
institutional buyer" (as defined in Rule 144A under the
Securities Act) in compliance with the exemption from
registration under the Securities Act provided by Rule
144A.
[_] (b) This Security is being transferred to Assisted Living
Concepts, Inc.
[_] (c) Transfer other than those above in connection with which
the Company has received an opinion of counsel
(satisfactory to it in form and substance) to the effect
that the transfer is being made pursuant to an exemption
from, or in a transaction not subject to, the
registration requirements of the Securities Act.
<PAGE>
[_] (d) This Security is being exchanged for a beneficial
interest in the Rule 144A Global Security and the
undersigned is a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act of 1933).
Date:___________________________________________________________________________
Your signature:_________________________________________________________________
(Sign exactly as your name appears on the other side of this
Security)
Signature Guaranteed by*:_______________________________________________________
* Signature must be guaranteed by an eligible guarantor institution within the
meaning of Securities and Exchange Commission Rule 17Ad-15 (including banks,
stock brokers, savings and loan associations, national securities exchanges,
registered securities associations, clearing agencies and credit unions) with
membership or participation in the Securities Transfer Agents Medallion Program
("STAMP") or such other signature guarantee medallion program as may be approved
by the Registrar in addition to, or substitution for, STAMP, if this Security is
to be delivered other than to and in the name of the registered holder.
IF NONE OF THE FOREGOING BOXES IS CHECKED, THE TRUSTEE SHALL NOT BE OBLIGATED TO
REGISTER THE TRANSFER OF THIS SECURITY UNLESS AND UNTIL THE CONDITIONS TO ANY
SUCH TRANSFER OF REGISTRATION SET FORTH HEREIN, ON THE FACE HEREOF AND IN THE
INDENTURE SHALL HAVE BEEN SATISFIED.
-2-
<PAGE>
CONVERSION NOTICE
To convert this Security into shares of common stock of the Company, check the
box:
______________
______________
To convert only part of this Security, state the principal amount to be
converted (which must be a minimum of $1,000 or any multiple thereof):
________________________________________________________
$
________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
If you want the Security certificate, if any, made out in another person's name,
fill in the form below:
(INSERT OTHER PERSON'S SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER)
______________________________________________________________________
______________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
Date:.__________________________________________________________________________
Your signature:.________________________________________________________________
(Sign exactly as your name appears on the other side of this Security)
Signature Guaranteed By*:_______________________________________________________
*Signature must be guaranteed by an eligible guarantor institution within the
meaning of Securities and Exchange Commission Rule 17Ad-15 (including banks,
stock brokers, savings and loan associations, national securities exchanges,
registered securities associations, clearing agencies and credit unions) with
membership or participation in the Securities Transfer Agents
<PAGE>
Medallion Program ("STAMP") or such other signature guarantee medallion program
as may be approved by the Registrar in addition to, or substitution for, STAMP,
if this Security is to be delivered other than to and in the name of the
registered holder.
-2-
<PAGE>
EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered
into as of April 7, 1998, by and between ASSISTED LIVING CONCEPTS, INC., a
Nevada corporation (the "Company"), and the purchaser whose name and address is
set forth on the signature page hereof (the "Purchaser").
This Agreement is made pursuant to the Purchase Agreement, dated as of
April 7, 1998, between the Company and the Purchaser (the "Purchase Agreement").
In order to induce the Purchaser to enter into the Purchase Agreement, the
Company has agreed to provide for the benefit of the holders (initially
consisting of the Purchaser and the Other Purchasers as defined below) of the
Company's Transfer Restricted Securities (as defined below) the registration
rights set forth in this Agreement. The execution of this Agreement is a
condition to the Closing under the Purchase Agreement.
The Company proposes to enter into substantially this same form of
registration rights agreement with certain other investors (the "Other
Purchasers") and expects to complete sales of the Debentures to them. The
Purchaser and the Other Purchasers are hereinafter sometimes collectively
referred to as the "Purchasers," and this Agreement and the registration rights
agreements executed by the Other Purchasers are hereinafter sometimes
collectively referred to as the "Agreements." The term "Placement Agent" shall
mean Schroder & Co. Inc.
The parties hereby agree as follows:
1. Definitions
-----------
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Closing: Has the meaning such term is given in the Purchase Agreement.
-------
Closing Date: Has the meaning such term is given in the Purchase
------------
Agreement.
Common Stock: The shares of common stock of the Company, $.01 par value
------------
per share.
Debentures: The Company's 5.625% Convertible Subordinated Debentures due
----------
May 1, 2003 being sold and issued pursuant to the Purchase Agreement and the
Indenture in an aggregate principal amount of $75 million.
Effective Date: The date the Shelf Registration is declared effective by
--------------
the SEC.
<PAGE>
Exchange Act: The Securities Exchange Act of 1934, as amended from time to
------------
time.
Indemnified Holder: See Section 6(a).
------------------
Indenture: The Indenture, dated as of April 13, 1998, between the Company
---------
and Harris Trust and Savings Bank, as Trustee.
NASD: National Association of Securities Dealers, Inc.
----
Person: Any individual, partnership, corporation, trust or unincorporated
------
organization, or government (or any agency, instrumentality or political
subdivision thereof).
Prospectus: The prospectus included in any Registration Statement, as
----------
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Transfer Restricted Securities, pursuant
to any registration covered by the Registration Statement and by all other
amendments and supplements to the prospectus, including post-effective
amendments and all material incorporated by reference in such prospectus.
Registrable Securities: The Debentures and the shares of Common Stock
----------------------
issuable upon conversion of the Debentures; provided that a Debenture or a share
-------- ----
of Common Stock, as the case may be, ceases to be a Registrable Security when it
is no longer a Transfer Restricted Security.
Registration Expenses. See Section 5.
---------------------
Registration Statement: Any registration statement of the Company which
----------------------
covers any of the Transfer Restricted Securities pursuant to the provisions of
this Agreement, including the Prospectus, amendments and supplements to such
Registration Statement, including post-effective amendments, and all exhibits
and all material incorporated by reference in such Registration Statement.
Securities Act: The Securities Act of 1933, as amended from time to time.
--------------
SEC: The Securities and Exchange Commission.
---
Selling Expenses: All underwriting discounts, selling commissions and
----------------
stock transfer taxes applicable to the Registrable Securities.
Shelf Registration: See Section 3.
------------------
Transfer Restricted Debentures: The Debentures upon original issuance
------------------------------
thereof and at all times subsequent thereto until the earlier of the following:
(i) such Debentures have been effectively registered under Section 5 of the
Securities Act and disposed of in accordance with the Registration Statement
covering them or (ii) such Debentures have been distributed to the public
pursuant to Rule 144 (or any similar provisions then in force).
-2-
<PAGE>
Transfer Restricted Securities: The Transfer Restricted Debentures and the
------------------------------
Transfer Restricted Shares.
Transfer Restricted Shares: The shares of Common Stock issuable upon
--------------------------
conversion of the Debentures until the earlier of the following: (i) such
shares of Common Stock have been effectively registered under Section 5 of the
Securities Act and disposed of in accordance with the Registration Statement
covering them or (ii) such shares of Common Stock have been distributed to the
public pursuant to Rule 144 (or any similar provisions then in force).
Trustee: The Trustee under the Indenture.
-------
2. Securities Subject to this Agreement
------------------------------------
(b) Registrable Securities. The securities entitled to the benefits of this
----------------------
Agreement are the Registrable Securities.
(c) Holders of Registrable Securities. A Person is deemed to be a holder of
---------------------------------
Registrable Securities whenever such Person is the beneficial owner of
Registrable Securities. The Company is entitled to treat the record holder of
Registrable Securities as beneficial owner of Registrable Securities unless
otherwise notified by such holder.
3. Shelf Registration: Timing of Filing, Effectiveness and Period of Usability
---------------------------------------------------------------------------
Subject to the provisions of Section 4 hereof, the Company shall use its
best efforts to cause to be declared effective as promptly as practicable after
the Closing and in any event not later than 180 days after the Closing (October
10, 1998), a "shelf" Registration Statement (a "Shelf Registration") on Form S-3
or any other appropriate form pursuant to Rule 415 (or similar rule that may be
adopted by the SEC) under the Securities Act for all the Registrable Securities,
which form shall be available for the sale of the Registrable Securities in
accordance with the intended method or methods of distribution thereof.
The Company agrees to use its best efforts to keep the Registration
Statement continuously effective and usable for resale of Registrable Securities
until two (2) years from the Effective Date or such shorter period which will
terminate when all the Registrable Securities covered by such Registration
Statement have been sold pursuant to such Registration Statement or when all
Registrable Securities otherwise have been sold pursuant to Rule 144 or are
freely tradeable in essentially the same manner as contemplated in Section 4
below (the "Effectiveness Period").
4. Registration Procedures
-----------------------
In connection with the Company's obligation to file a Registration Statement
as provided in Section 3 hereof, the Company will as expeditiously as possible:
(a) before filing a Registration Statement or Prospectus or any amendments
or supplements thereto, furnish to Purchaser and the holders of the Registrable
Securities covered
-3-
<PAGE>
by such Registration Statement a copy of all such documents proposed to be
filed, which documents will be subject to the review of Purchaser and such
holders and the Company will not file any Registration Statement or amendment
thereto or any Prospectus or any supplement thereto to which the holders of a
majority in aggregate principal amount of the Registrable Securities covered by
such Registration Statement shall reasonably object (provided that the Company
may assume, for the purposes of the foregoing that any holder of Registrable
Securities has no objection if the Company has not received notice from such
holder within five business days after delivery of such documents to such
holder);
(b) prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement, and such supplements to the
Prospectus, as may be required by the rules, regulations or instructions
applicable to the registration form utilized by the Company or by the Securities
Act or rules and regulations thereunder for shelf registration or otherwise
necessary to keep the Registration Statement effective for the applicable period
and cause the Prospectus as so supplemented to be filed pursuant to Rule 424
under the Securities Act; and comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such Registration
Statement during the applicable period in accordance with the intended methods
of disposition by the sellers thereof set forth in such Registration Statement
or supplement to the Prospectus;
(c) notify Purchaser and the holders of Registrable Securities promptly,
and confirm such advice in writing:
(1) when the Prospectus or any Prospectus supplement or post-
effective amendment has been filed, and, with respect to the Registration
Statement or any post-effective amendment, when the same has become
effective,
(2) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose, and
(3) of the receipt by the Company of any notification with respect to
the suspension of the qualification of the Registrable Securities for sale
in any jurisdiction or the initiation or threatening of any proceeding for
such purpose;
(a) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of the Registration Statement at the earliest
possible moment;
(b) furnish, without charge, to Purchaser and each selling holder of
Registrable Securities, at least one conformed copy of the Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules, all documents incorporated therein by reference and
all exhibits (including those incorporated by reference);
(c) deliver to Purchaser and each selling holder of Registrable Securities
without charge, as many copies of the Prospectus (including each preliminary
prospectus) and any amendment or supplement thereto as such Persons may
reasonably request; the Company consents to the use of the Prospectus or any
amendment or supplement thereto by each of
-4-
<PAGE>
Purchaser and the selling holders of Registrable Securities in connection with
the offering and sale of the Registrable Securities covered by the Prospectus or
any amendment or supplement thereto;
(d) at least 14 days prior to filing of the Registration Statement, use
its best efforts to furnish by certified mail to the beneficial holders of the
Registrable Securities, at the addresses of record specified on the transfer
books held by the Trustee, notice of the Company's intention to file a
Registration Statement and request that all holders of Registrable Securities
desiring to sell their Registrable Securities pursuant to the Registration
Statement notify the Company promptly in writing;
(e) cooperate with Purchaser and the selling holders of Registrable
Securities to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold and not bearing any restrictive
legends;
(f) use its best efforts to cause the Registrable Securities covered by
the Registration Statement to be registered with or approved by such
governmental agencies or authorities as may be necessary to enable the seller or
sellers thereof to consummate the disposition of such Registrable Securities in
such jurisdictions within the United States of America as the sellers may
specify in response to inquiries to be made by the Company, provided that the
Company will not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action which would
subject it to general service of process in any such jurisdiction where it is
not then so subject;
(g) as provided in Section 3, if any event shall occur as a result of
which it is necessary, in the opinion of counsel for the Company or for the
holders of a majority of the Registrable Securities, to amend or supplement the
Prospectus in order to make the Prospectus not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser, prepare a
supplement or post-effective amendment to the Registration Statement or the
related Prospectus or any document incorporated therein by reference or file any
other required document so that, as thereafter delivered to the purchasers of
the Registrable Securities, the Prospectus will not contain an untrue statement
of a material fact or omit to state any material fact necessary to make the
statements therein not misleading;
(h) obtain a CUSIP number for all Registrable Securities (unless already
obtained), not later than the Effective Date;
(i) make available for inspection during normal business hours by a
representative of the holders of a majority of Registrable Securities and any
attorney or accountant retained by such representative, all material financial
and other records, pertinent and material corporate documents and properties of
the Company, and cause the Company's officers, directors and employees to supply
all material information reasonably requested by such representative or any such
attorney or accountant in connection with the Registration Statement; provided
that all such records, information or documents shall be kept confidential by
such Persons unless disclosure of such records, information or documents is
required by court or administrative order or is
-5-
<PAGE>
generally available to the public other than as a result of disclosure in
violation of this paragraph (l);
(j) otherwise use its best efforts to comply with all applicable rules and
regulations of the SEC, and make generally available to their security holders
an earning statement satisfying the provisions of Section 11(a) of the
Securities Act (in accordance with Rule 158 thereunder or otherwise), no later
than 45 days after the end of the 12-month period (or 90 days, if such period is
a fiscal year) beginning with the first month of the Company's first fiscal
quarter commencing after the Effective Date, which statements shall cover said
12-month period;
(k) cause the Indenture to be qualified under the Trust Indenture Act of
1939, as amended from time to time (the "TIA"), and, in connection therewith,
cooperate with the Trustee under the Indenture and the holders of the Debentures
to effect such changes to the Indenture as may be required for the Indenture to
be so qualified in accordance with the terms of the TIA and execute, and use
their best efforts to cause the Trustee to execute, all documents as may be
required to effect such changes, and all other forms and documents required to
be filed with the SEC to enable the Indenture to be so qualified in a timely
manner; and
(l) if at any time an event of the kind described in Section 4(j) shall
occur, promptly notify Purchaser and the holders of Registrable Securities that
the use of the Prospectus must be discontinued.
Each selling holder of Registrable Securities as to which any registration
is being effected agrees, as a condition to the registration obligations with
respect to such holder provided herein, to furnish to the Company such
information regarding the distribution of such securities as the Company may
from time to time reasonably request in writing.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company
described in paragraph 4(o), such holder will forthwith discontinue disposition
of Registrable Securities until such holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 4(j) hereof, or until
it is advised in writing by the Company (which notice the Company shall give as
promptly as reasonably possible), that the use of the Prospectus may be resumed,
and has received copies of any additional or supplemental filings which are
incorporated by reference in the Prospectus, and, if so directed by the Company,
such holder will deliver to the Company (at the Company's expense) all copies,
other than permanent file copies then in such holder's possession, of the
Prospectus covering such Registrable Securities current at the time of receipt
of such notice.
5. Registration Expenses
---------------------
(e) All expenses (other than Selling Expenses) incident to the Company's
performance of or compliance with this Agreement, including without limitation:
(1) all registration, filing and listing fees;
(2) fees and expenses of compliance with securities or blue sky laws
-6-
<PAGE>
(including reasonable fees and disbursements of one counsel in connection
with blue sky qualifications of the Registrable Securities and
determination of their eligibility for investment under the laws of such
jurisdictions as the holders of a majority in principal amount of the
Registrable Securities being sold may reasonably designate);
(3) printing, messenger, telephone and delivery expenses;
(4) fees and disbursements of counsel for the Company;
(5) fees and disbursements of all independent certified public
accountants of the Company (including the expenses of any special audit
necessary to satisfy the requirements of the Securities Act and any "cold
comfort" letters required by or incident to such performance);
(6) securities acts liability insurance if the Company so desires;
(7) fees and expenses of other Persons retained by the Company; and
(8) fees and expenses associated with any NASD filing required to be
made in connection with the Registration Statement
(all such expenses being herein called "Registration Expenses") will be borne by
the Company, regardless of whether the Registration Statement becomes effective.
The Company will, in any event, pay its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, the
fees and expenses incurred in connection with the listing of the securities to
be registered on a securities exchange, rating agency fees and the fees and
expenses of any Person, including special experts, retained by the Company.
6. Indemnification and Contribution
--------------------------------
(f) Indemnification by the Company. The Company agrees, to indemnify and
------------------------------
hold harmless each holder of Registrable Securities, its officers, directors,
employees and agents and each Person who controls such holder within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act
(each such person being sometimes hereinafter referred to as an "Indemnified
Holder") from and against all losses, claims, damages, liabilities and expenses
(including reasonable costs of investigation and legal expenses) arising out of
or based upon any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement or Prospectus or in any amendment
or supplement thereto or in any preliminary prospectus, or arising out of or
based upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, liabilities or
expenses arise out of or are based upon any such untrue statement or omission or
allegation thereof based upon information furnished in writing to the Company by
such holder expressly for use therein; provided, however, that the Company shall
-------- -------
not be liable in any such case to the extent that any
-7-
<PAGE>
such loss, claim, damage, liability or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in any preliminary prospectus if (i) such holder failed to send or deliver
a copy of the Prospectus with or prior to the delivery of written confirmation
of the sale of Registrable Securities and (ii) the Prospectus would have
corrected such untrue statement or omission; and provided further, that the
-------- -------
Company shall not be liable in any such case to the extent that any such loss,
claim, damage, liability or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission in the
Prospectus, if such untrue statement or alleged untrue statement, omission or
alleged omission is corrected in an amendment or supplement to the Prospectus
and if, having previously been furnished by or on behalf of the Company with
copies of the Prospectus as so amended or supplemented, such holder thereafter
fails to deliver such Prospectus as so amended or supplemented, prior to or
concurrently with the sale of a Registrable Security to the person asserting
such loss, claim, damage, liability or expense who purchased such Registrable
Security which is the subject thereof from such holder. This indemnity will be
in addition to any liability which the Company may otherwise have. The Company
will also indemnify underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution, their
officers and directors and each Person who controls such Persons (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
to the same extent as provided above with respect to the indemnification of the
holders of Registrable Securities.
If any action or proceeding (including any governmental investigation or
inquiry) shall be brought or asserted against any Indemnified Holder in respect
of which indemnity may be sought from the Company, such Indemnified Holder shall
promptly notify the Company in writing (but the omission to so notify the
Company shall not relieve it of any liability that it may have against any
Indemnified Holder otherwise than under this subsection), and the Company shall
assume the defense thereof, including the employment of counsel reasonably
satisfactory to such Indemnified Holder and the payment of all expenses.
Indemnified Holders shall have the right, collectively, to employ their own
counsel in any such action and to participate in the defense thereof, but the
fees and expenses of such counsel shall be the expense of the Indemnified
Holders unless (a) the Company has agreed to pay such fees and expenses or (b)
the Company shall have failed to assume the defense of such action or proceeding
and have failed to employ counsel reasonably satisfactory to the Indemnified
Holders in any such action or proceeding or (c) the named parties to any such
action or proceeding (including any impleaded parties) include the Indemnified
Holders and the Company, and the Indemnified Holders shall have been advised by
counsel that there may be one or more legal defenses available to the
Indemnified Holders which are different from or additional to those available to
the Company (in which case, if the Indemnified Holders notify the Company in
writing that they elect to employ their own counsel at the expense of the
Company, the Company shall not have the right to assume the defense of such
action or proceeding on behalf of the Indemnified Holders, it being understood,
however, that the Company shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys (together with appropriate local counsel) at any
time for the
-8-
<PAGE>
Indemnified Holders which firm shall be designated in writing by the Indemnified
Holders representing at least a majority of the aggregate principal amount of
the outstanding Debentures). Any such fees and expenses payable by the Company
shall be paid to the Indemnified Holders entitled thereto as incurred by the
Indemnified Holders. The Company shall not be liable for any settlement of any
such action or proceeding effected without its written consent, but if settled
with its written consent, or if there be a final judgment for the plaintiff in
any such action or proceeding, the Company agrees to indemnify and hold harmless
the Indemnified Holders from and against any loss or liability by reason of such
settlement or judgment.
(b) Indemnification by Holder of Registrable Securities. Each holder of
---------------------------------------------------
Registrable Securities agrees to indemnify and hold harmless the Company, its
respective directors, officers, employees and agents and each Person, if any,
who controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Company to such holder, but only with respect to
information relating to such holder furnished in writing by such holder
expressly for use in any Registration Statement or Prospectus, or any amendment
or supplement thereto, or any preliminary prospectus. In case any action or
proceeding shall be brought against the Company or its respective directors,
officers, employees or agents or any such controlling person, in respect of
which indemnity may be sought against a holder of Registrable Securities, such
holder shall have the rights and duties given the Company, and the Company or
its respective directors, officers, employees or agents or such controlling
person shall have the rights and duties given to each holder by the preceding
paragraph. In no event shall the liability of any selling holder of Registrable
Securities hereunder be greater in amount than the dollar amount of the proceeds
received by such holder upon the sale of the Registrable Securities giving rise
to such indemnification obligation. Each holder of Registrable Securities will
also indemnify underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution, their
officers and directors and each Person who controls such Persons (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
to the same extent as provided above with respect to the indemnification of the
Company. The Company and each holder of Registrable Securities shall be
entitled to receive indemnities from underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in the
distribution, to the same extent as provided above with respect to information
so furnished in writing by such Persons specifically for inclusion in any
Prospectus or Registration Statement.
(c) Contribution. If the indemnification provided for in this Section 6 is
------------
unavailable to an indemnified party under Section 6(a) or Section 6(b) hereof
(other than by reason of exceptions provided in those Sections) in respect of
any losses, claims, damages, liabilities or expenses referred to therein, then
each applicable indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses, (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Company from the sale of the Debentures to Purchaser pursuant to the
Purchase Agreement on the one hand and each holder of Registrable Securities
from the offering of the Registrable Securities by such holder, on the other
hand, or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in
-9-
<PAGE>
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and each holder of Registrable Securities on the other in
connection with the statements or omissions that resulted in such losses,
claims, damages, or liabilities, as well as the other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and each holder of Registrable Securities on the other shall be deemed to be in
the same proportion as the aggregate amount paid by Purchaser to the Company
pursuant to the Purchase Agreement for the Registrable Securities purchased by
such holder that were sold pursuant to the Registration Statement bears to the
difference (the "Difference") between the amount such holder paid for the
Registrable Securities that were sold pursuant to the Registration Statement and
the amount received by such holder from such sale. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or the particular
holder and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The Company
and the holders of Registrable Securities agree that it would not be just and
equitable if contributions pursuant to this subsection (c) were to be determined
by pro rata allocation or by any other method of allocation that does not take
account of the equitable consideration referred to in the first sentence of this
subsection (c). The amount paid by an indemnified party as a result of the
losses, claims, damages or liabilities referred to in the first sentence of this
subsection (c) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigation or defending
against any action or claim that is the subject of this subsection (c).
Notwithstanding the provision of this subsection (c), each holder of Registrable
Securities shall not be required to contribute any amount in excess of the
amount by which the Difference exceeds the amount of any damages that such
holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act),
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
2. Rule 144 and Rule 144A
----------------------
During the Effectiveness Period and for so long as the Company is subject
to the reporting requirements of Section 13 or 15 of the Exchange Act, the
Company covenants that it will file the reports required to be filed by it under
the Securities Act and Section 13(a) or 15(d) of the Exchange Act and the rules
and regulations adopted by the SEC thereunder. If the Company is not subject to
the reporting requirements of Section 13 or 15 of the Exchange Act, the Company
also covenants that it will provide the information required pursuant to Rule
144A(d)(4) under the Securities Act upon the request of any holder of
Registrable Securities which continues to be "restricted securities" within the
meaning of Rule 144(a)(3) under the Securities Act and it will take such further
action as any holder of such Registrable Securities may reasonably request, all
to the extent required from time to time to enable such holder to sell its
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144 under the Securities Act,
as such Rule may be amended from time to time, so long as such provision does
not require the public filing of information
-10-
<PAGE>
relating to the Company which the Company is not otherwise required to file, (b)
Rule 144A under the Securities Act, as such Rule may be amended from time to
time, or (c) any similar rule or regulation hereafter adopted by the SEC that
does not require the public filing of information relating to the Company. Upon
the request of any holder of Registrable Securities, the Company will deliver to
such holder a written statement as to whether it has complied with such
requirements.
8. Miscellaneous
-------------
(h) No Inconsistent Agreements. The Company will not on or after the date
--------------------------
of this Agreement enter into any agreement with respect to their securities
which is inconsistent with the rights granted to the holders of Registrable
Securities in this Agreement or otherwise conflicts with the provisions hereof.
The rights granted to the holders of Registrable Securities hereunder do not in
any way conflict with and are not inconsistent with the rights granted to the
holders of the Company's securities under any such agreements.
(i) Adjustments Affecting Registrable Securities. The Company will not
--------------------------------------------
take any action, or permit any change to occur, with respect to the Registrable
Securities which would adversely affect the ability of the holders of
Registrable Securities to include such Registrable Securities in a registration
undertaken pursuant to this Agreement.
(j) Amendments and Waivers. The provisions of this Agreement, including
----------------------
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given unless the Company has obtained the written consent of holders of a
majority of the Transfer Restricted Debentures and a majority of the Transfer
Restricted Shares. Notwithstanding the foregoing, a waiver of consent to
departure from the provision hereof that relates exclusively to the rights of
holders of Registrable Securities whose securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other holders of Registrable Securities may be given by the holders of
a majority of the Transfer Restricted Securities being sold.
(k) Notices. All notices, requests, consents and other communications
-------
hereunder shall be in writing, shall be mailed by first-class registered or
certified airmail, telecopier, or nationally recognized overnight express
courier postage prepaid, and shall be deemed given when so mailed or if
telecopied, when receipt is acknowledged, and shall be delivered as addressed as
follows:
(1) if to the Purchaser, at the most current address given by the
Purchaser to the Company in accordance with the provisions of this Section
8(d), which address initially is as set forth on the signature page hereto;
(2) if to a holder of Registrable Securities, at its address of
record as indicated on the books of the transfer agent and registrar for
the Registrable Securities; and
(3) if to the Company, initially at its address set forth in the
Purchase Agreement and thereafter at such other address, notice of which is
given in accordance
-11-
<PAGE>
with the provisions of this Section 8(d).
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee under the
Indenture at the addresses specified in the Indenture.
(e) Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
holders of Registrable Securities.
(f) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS
RULES AS TO CONFLICTS OF LAW.
(i) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(j) Entire Agreement. This Agreement is intended by the parties as a
----------------
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter hereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein with respect to
the registration rights granted by the Company with respect to the securities
sold pursuant to the Purchase Agreement. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
[signature page follows]
-12-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
ASSISTED LIVING CONCEPTS, INC.
By: /S/ Keren Brown Wilson
---------------------------------------------
Name: Keren Brown Wilson
Title: President and Chief Operating Officer
Print or Type:
Name of Purchaser (Individual or Institution):
/S/ Schroder & Co., Inc.
--------------------------------------------------
Name of Individual representing
Purchaser (if an Institution):
/S/ Laurent X de Marval
--------------------------------------------------
Title of Individual representing
Purchaser (if an Institution):
Managing Director
--------------------------------------------------
Signature by:
Purchaser or Individual
representing Purchaser:
/S/ Laurent X de Marval
--------------------------------------------------
Address: 787 Seventh Avenue, New York, NY 10019
Telephone: (212) 492-6000
Telecopier: (212) 492-7224
-13-
<PAGE>
EXHIBIT 4.3
Unless and until it is exchanged in whole or in part for Securities in
definitive form, this Security may not be transferred except as a whole by the
Depository to a nominee of the Depository or by a nominee of the Depository to
the Depository or another nominee of the Depository or by the Depository or any
such nominee to a successor Depository or a nominee of such successor
Depository. Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation (55 Water Street, New
York, New York) ("DTC"), to the issuer or its agent for registration of
transfer, exchange or payment, and any certificate issued is registered in the
name of Cede & Co. or such other name as may be requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or such other
entity as may be requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THIS SECURITY HAS BEEN ACQUIRED BY THE HOLDER FOR THE PURPOSE OF INVESTMENT AND
NOT WITH A VIEW TO OR FOR SALE IN CONNECTION WITH ANY DISTRIBUTION. THIS
SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY
NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF
THIS SECURITY, BY ITS ACCEPTANCE HEREOF, REPRESENTS, ACKNOWLEDGES AND AGREES FOR
THE BENEFIT OF THE COMPANY THAT: (I) IT HAS ACQUIRED A "RESTRICTED" SECURITY
WHICH HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT; (II) IT WILL NOT OFFER,
SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO ASSISTED LIVING CONCEPTS,
INC., (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT, (C) IN THE CASE OF A HOLDER WHO IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), FOR SO
LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON
WHO THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, OR (D) IN ACCORDANCE WITH RULE 144 UNDER THE
SECURITIES ACT OR PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, (AND CONFIRMED IN AN OPINION OF COUNSEL
ACCEPTABLE IN FORM AND SUBSTANCE TO THE ISSUER OF THIS SECURITY IF THE ISSUER SO
REQUESTS) AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION; AND
(III) IT WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS SET FORTH IN (II) ABOVE.
<PAGE>
FORM OF DEBENTURE
ASSISTED LIVING CONCEPTS, INC.
5.625% Convertible Subordinated Debenture Due 2003
ASSISTED LIVING CONCEPTS, INC., a Nevada corporation, promises to pay
to ________________________________ or registered assigns, the principal sum of
_____________ Dollars, on May 1, 2003.
Interest Payment Dates: May 1 and November 1
Record Dates: April 15 and October 15
Additional provisions of this Security are set forth on other side of this
Security.
Dated:
CERTIFICATE OF AUTHENTICATION ASSISTED LIVING CONCEPTS, INC.
HARRIS TRUST AND SAVINGS BANK
as Trustee, certifies that this
is one of the Securities referred
to in the within mentioned By:___________________
Indenture.
By:______________________
Authorized Signatory By:___________________
SEAL
<PAGE>
ASSISTED LIVING CONCEPTS, INC.
5.625% Convertible Subordinated Debenture Due 2003
1. Interest. Assisted Living Concepts, Inc., a Nevada corporation
--------
(the "Company"), promises to pay interest on the principal amount of this
Security at the rate per annum shown above. The Company will pay interest
semiannually on May 1 and November 1 of each year beginning November 1, 1998.
Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from April 13, 1998;
provided that, if there is no existing Default in the payment of interest, and
if this Security is authenticated between a record date referred to on the face
hereof and the next succeeding interest payment date, interest shall accrue from
such interest payment date. Interest will be computed on the basis of a 360 day
year of twelve 30-day months.
2. Method of Payment. The Company will pay interest on the Securities
-----------------
(except defaulted interest) to the persons who are the registered Holders of the
Securities at the close of business on the April 15 or October 15 immediately
preceding the interest payment date. Holders must surrender Securities to a
Paying Agent to collect principal and premium payments. The Company will pay
principal, premium and interest in money of the United States that at the time
of payment is legal tender for payment of public and private debts. The
Company, however, may pay principal, premium and interest by its check payable
in such money. It may mail an interest check to a Holder's registered address.
The payment of principal of and premium, if any, on this Security shall
be payable only upon surrender of this Security at the office or agency of the
Paying Agent in the Borough of Manhattan, City and State of New York. Payments
of principal of, premium, if any, and interest on this Security shall be made at
the office or agency of the Trustee maintained in the Borough of Manhattan, City
and State of New York, or, in the case of any such payments other than the
payment of principal and premium, if any, at the Company's option, by check
mailed to the Person entitled thereto at such Person's address last appearing on
the Company's register.
3. Registrar and Agents. Initially, Harris Trust and Savings Bank
--------------------
will act as Registrar, Paying Agent, Conversion Agent and agent for service of
notices and demands. The Company may change any Registrar, co-registrar, Paying
Agent, Conversion Agent and agent for service of notices and demands without
notice. The Company or any of its Subsidiaries may act as Paying Agent or
Conversion Agent. The address of Harris Trust and Savings Bank is 311 West
Monroe Street, 12th Floor, Chicago, IL 60606.
4. Indenture; Limitations. The Company issued the Securities under an
----------------------
Indenture, dated as of April 13, 1998 (the "Indenture"), between the Company and
Harris Trust and Savings Bank (the "Trustee"). Capitalized terms herein are
used as defined in the Indenture unless otherwise defined herein. The terms of
the Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code (S)(S)
77aaa-77bbbb) as in effect on the date of the Indenture. The Securities are
subject to all such terms, and the Holders of the Securities are referred to the
Indenture and said Act for a statement of them.
<PAGE>
The Securities are general unsecured obligations of the Company limited
to $86,250,000 principal amount. The Indenture imposes certain limitations on
the ability of the Company to, among other things, make payments in respect of
its Capital Stock, merge or consolidate with any other Person and sell, lease,
transfer or otherwise dispose of its properties or assets.
5. Optional Redemption by the Company. The Company may, at its
----------------------------------
option, at any time on or after May 15, 2001, redeem all of the Debentures or
some of them, on at least 30 days' but not more than 60 days' notice to each
holder of Debentures to be redeemed at his or her registered address, at a
redemption price equal to 100% of the principal amount thereof, plus accrued
interest to the redemption date. The Debentures may not be so redeemed before
May 15, 2001.
6. Certain Rights to Require Repurchase of Debentures by the Company.
-----------------------------------------------------------------
In the event that there shall occur a Change in Control of the Company, each
Holder shall have the right, at such Holder's option, to require the Company to
purchase, all or any part of such Holder's Notes, 75 days after the date the
Company gives notice of the Change in Control as contemplated in the Indenture,
at a price equal to 101% of the principal amount thereof, together with accrued
and unpaid interest.
7. Notice of Redemption. Notice of redemption will be mailed at
--------------------
least 30 days but not more than 60 days before the Redemption Date to each
Holder of Securities to be redeemed at his registered address. Securities in
denominations larger than $1,000 principal amount may be redeemed in part, but
only in whole multiples thereof. On and after the Redemption Date interest
ceases to accrue on Securities or portions of them called for redemption.
8. Conversion. A Holder of a Security may convert such Security into
----------
shares of common stock of the Company after the effective date of the
Registration Statement and before the close of business on May 1, 2003. If the
Security is called for redemption, the Holder may convert it at any time before
the close of business on the date fixed for such redemption. The initial
conversion price is $26.184 per share, subject to adjustment in certain events.
To determine the number of shares issuable upon conversion of a Security, divide
the principal amount to be converted by the conversion price in effect on the
conversion date. The Company will deliver a check for any fractional share.
To convert a Security, a Holder must (1) complete and sign the
conversion notice on the back of the Security, (2) surrender the Security to the
Conversion Agent, (3) furnish appropriate endorsements and transfer documents if
required by the Registrar or Conversion Agent and (4) pay any transfer or
similar tax if required. No payment or adjustment is to be made on conversion
for interest accrued hereon or for dividends on shares of common stock issued on
conversion; provided, however, that if a Security is surrendered for conversion
-------- -------
after the record date for a payment of interest and on or before the interest
payment date, then, notwithstanding such conversion, the interest falling due to
such interest payment date will be paid to the Person in whose name the Security
is registered at the close of business on such
<PAGE>
record date and any Security surrendered for conversion during the period from
the close of business on any regular record date to the opening of business on
the corresponding interest payment date must be accompanied by payment of an
amount equal to the interest payable on such interest payment date. A Holder may
convert a portion of a Security if the portion is $1,000 principal amount or an
integral multiple thereof.
If the Company is a party to a consolidation or merger or a transfer
or lease of all or substantially all of its assets, the right to convert a
Security into shares of common stock may be changed into a right to convert it
into securities, cash or other assets of the Company or another Person.
9. Subordination. This Security is subordinated to all Senior
-------------
Indebtedness of the Company. To the extent and in the manner provided in the
Indenture, Senior Indebtedness must be paid before any payment may be made to
any Holders of Securities. Any Securityholder by accepting this Security agrees
to such subordination and authorizes the Trustee to give it effect.
In addition to all other rights of Senior Indebtedness described in
the Indenture, the Senior Indebtedness shall continue to be Senior Indebtedness
and entitled to the benefits of the subordination provisions irrespective of any
amendment, modification or waiver of any term of any instrument relating to the
Senior Indebtedness or extension or renewal of the Senior Indebtedness.
10. Denominations, Transfer, Exchange. The Securities issued under
---------------------------------
the Indenture are in the aggregate principal amount of up to $86,250,000. The
Securities are in registered form without coupons in denominations of $1,000
principal amount and integral multiples thereof. A Holder may register the
transfer of or exchange Securities in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not register the transfer
of or exchange any Securities selected for redemption or register the transfer
of or exchange any Securities for a period of 15 days before a selection of
Securities to be redeemed.
11. Persons Deemed Owners. The registered Holder of a Security may
---------------------
be treated as its owner for all purposes.
12. Unclaimed Money. If money for the payment of principal or
---------------
interest on any Securities remains unclaimed for two years, the Trustee and the
Paying Agent will pay the money back to the Company at its written request.
After that, Holders may look only to the Company for payment.
13. Discharge Prior to Redemption or Maturity. The Indenture will be
-----------------------------------------
discharged and canceled except for certain sections thereof upon payment of all
the Securities, or upon the irrevocable deposit with the Trustee of funds or
U.S. Government Obligations maturing on or before such payment date or
Redemption Date, sufficient to pay principal, premium, if any, and interest on
such payment or redemption.
<PAGE>
14. Amendment and Waiver. Subject to certain exceptions, without
--------------------
notice to the Holders of the Securities, the Indenture or the Securities may be
amended with the consent of the Holders of at least 66-2/3% in principal amount
of the Securities then outstanding and any existing default or compliance with
any provision may be waived with the consent of the Holders of a majority in
principal amount of the Securities then outstanding. Without the consent of or
notice to any Securityholder, the Company may amend or supplement the Indenture
or the Securities to, among other things, provide for uncertificated Securities,
to cure any ambiguity, defect or inconsistency or make any other change that
does not adversely affect the rights of any Securityholder.
15. Successors. When a successor assumes all the obligations of its
----------
predecessor under the Securities and the Indenture, the predecessor will be
released from those obligations.
16. Defaults and Remedies. If an Event of Default, as defined in the
---------------------
Indenture (other than a Event of Default relating to bankruptcy of the Company),
occurs and is continuing, the Trustee or the Holders of a majority in principal
amount of Securities may declare all the Securities to be due and payable
immediately in the manner and with the effect provided in the Indenture. If an
Event of Default relating to bankruptcy of the Company occurs, then all
Securities shall become immediately due and payable without any declaration or
act on the part of the Trustee or any Holder. Holders of Securities may not
enforce the Indenture or the Securities except as provided in the Indenture.
The Trustee may require indemnity satisfactory to it, subject to the provisions
of the TIA, before it enforces the Indenture or the Securities. Subject to
certain limitations, Holders of a majority in principal amount of the Securities
then outstanding may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders of Securities notice of any continuing
default (except a default in payment of principal or interest) if it determines
that withholding notice is in their interests. The Company is required to file
periodic reports with the Trustee as to the absence of any Default or Event of
Default.
17. Trustee Dealings with the Company. Harris Trust and Savings
---------------------------------
Bank, the Trustee under the Indenture, in its individual or any other capacity,
may make loans to, accept deposits from, and perform services for the Company or
its Affiliates, and may otherwise deal with the Company or its Affiliates, as if
it were not Trustee.
18. No Recourse Against Others. No stockholder, director, officer or
--------------------------
incorporator, as such, past, present or future, of the Company or any successor
corporation shall have any liability for any obligation of the Company under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder of a Security by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Securities.
19. Authentication. This Security shall not be valid until the
--------------
Trustee signs the certificate of authentication on the other side of this
Security.
20. Abbreviations. Customary abbreviations may be used in the name of
-------------
a Securityholder or an assignee, such as: TEN COM (=tenants in common), TEN ENT
(=tenants
<PAGE>
by the entireties), JT TEN (=joint tenants with rights of survivorship and not
as tenants in common), CUST (=Custodian), and U/G/M/A (=Uniform Gifts to Minors
Act).
The Company will furnish to any Securityholder upon written request and
without charge a copy for the Indenture. It also will furnish the text of this
Security in larger type. Requests may be made to: Assisted Living Concepts,
Inc., 9955 S.E. Washington, Suite 201, Portland, Oregon 97216. Attention:
President.
<PAGE>
TRANSFER NOTICE
If you, the Holder, wants to assign this Security, fill in the form below and
have your signature guaranteed:
For value received, I or we assign and transfer this Security to
_______________________________________________________________________________
(INSERT ASSIGNEE'S SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER)
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Print or type assignee's name, address and zip code)
________________________________________________________ agent to transfer this
Security on the books of the Company. The agent may substitute another to act
for him.
In connection with the transfer of this Security, the undersigned
certifies that:
(Check one)
[_] (a) This Security is being transferred to a "qualified
institutional buyer" (as defined in Rule 144A under the
Securities Act) in compliance with the exemption from
registration under the Securities Act provided by Rule
144A.
[_] (b) This Security is being transferred to Assisted Living
Concepts, Inc.
[_] (c) Transfer other than those above in connection with which
the Company has received an opinion of counsel
(satisfactory to it in form and substance) to the effect
that the transfer is being made pursuant to an exemption
from, or in a transaction not subject to, the
registration requirements of the Securities Act.
<PAGE>
[_] (d) This Security is being exchanged for a beneficial
interest in the Rule 144A Global Security and the
undersigned is a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act of 1933).
Date:
--------------------------------------------------------------------------
Your signature:
----------------------------------------------------------------
(Sign exactly as your name appears on the other side of this
Security)
Signature Guaranteed by*:
------------------------------------------------------
* Signature must be guaranteed by an eligible guarantor institution within the
meaning of Securities and Exchange Commission Rule 17Ad-15 (including banks,
stock brokers, savings and loan associations, national securities exchanges,
registered securities associations, clearing agencies and credit unions) with
membership or participation in the Securities Transfer Agents Medallion Program
("STAMP") or such other signature guarantee medallion program as may be approved
by the Registrar in addition to, or substitution for, STAMP, if this Security is
to be delivered other than to and in the name of the registered holder.
IF NONE OF THE FOREGOING BOXES IS CHECKED, THE TRUSTEE SHALL NOT BE OBLIGATED TO
REGISTER THE TRANSFER OF THIS SECURITY UNLESS AND UNTIL THE CONDITIONS TO ANY
SUCH TRANSFER OF REGISTRATION SET FORTH HEREIN, ON THE FACE HEREOF AND IN THE
INDENTURE SHALL HAVE BEEN SATISFIED.
<PAGE>
CONVERSION NOTICE
To convert this Security into shares of common stock of the Company, check the
box:
________
________
To convert only part of this Security, state the principal amount to be
converted (which must be a minimum of $1,000 or any multiple thereof):
---------------------------
$
---------------------------
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
If you want the Security certificate, if any, made out in another person's name,
fill in the form below:
(INSERT OTHER PERSON'S SOCIAL SECURITY OR TAX IDENTIFICATION NUMBER)
-------------------------------------------------
-------------------------------------------------
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Print or type assignee's name, address and zip code)
Date:.
-------------------------------------------------------------------------
Your signature:.
---------------------------------------------------------------
(Sign exactly as your name appears on the other side of this Security)
Signature Guaranteed By*:______________________________________________________
*Signature must be guaranteed by an eligible guarantor institution within the
meaning of Securities and Exchange Commission Rule 17Ad-15 (including banks,
stock brokers, savings and loan associations, national securities exchanges,
registered securities associations, clearing agencies and credit unions) with
membership or participation in the Securities Transfer Agents Medallion Program
("STAMP") or such other signature guarantee medallion program as may be
approved by the Registrar in addition to, or substitution for, STAMP, if this
Security is to be delivered other than to and in the name of the registered
holder.
<PAGE>
Exhibit 5.1
SCHRECK MORRIS
300 SOUTH FOURTH STREET, SUITE 1200
LAS VEGAS, NEVADA 89101
(702) 382-2101
May 11, 1998
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 $75,000,000 principal amount of
5.625% Convertible Subordinated Debentures due 2003 (the "Debentures") and
2,864,344 shares of common stock, par value $.01 per share (the "Conversion
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 May 11, 1998 (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
this authorization, issuance and sale of the Conversion 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 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 Conversion Shares have been duly and validly authorized and,
when issued and sold upon conversion of the Debentures in the
<PAGE>
manner contemplated by the prospectus covering the Conversion Shares and forming
a part of the Registration Statement, will be validly issued, and 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 12.1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------
1995/2/ 1996 1997
---------- ----------- -----------
<S> <C> <C> <C>
Income before provision for income taxes $ (575) $ 149 $ 6,336
Add Fixed charges
Interest expense including amortization of debt
issuance costs 133 - 930
---------- ----------- -----------
Earnings (442) 149 7,266
======================================
Fixed Charges
Interest expense including amortization of debt
issuance costs 133 - 930
Capitalized interest 577 2,188 7,412
---------- ----------- -----------
Total fixed charges 710 $ 2,188 8,342
======================================
Ratio of earnings to fixed charges (0.62) 0.07 .87
(Deficiency of) Earnings to cover fixed charges (1,152) (2,039) (1,076)
</TABLE>
<PAGE>
Exhibit 23.2
CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders
Assisted Living Concepts, Inc.
We consent to the use of our report incorporated herein by reference and the
reference to our firm under heading "Experts" in the Prospectus.
/s/ KPMG Peat Marwick LLP
May 8, 1998
<PAGE>
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
Statement of Eligibility
Under the Trust Indenture Act of 1939
of a Corporation Designated to Act as
Trustee
Check if an Application to Determine
Eligibility of a Trustee Pursuant to Section
305(b)(2) ______________
HARRIS TRUST AND SAVINGS BANK
(Name of Trustee)
Illinois 36-1194448
(I.R.S Employer
(State of Incorporation) Identification No.)
111 West Monroe Street, Chicago, Illinois 60603
(Address of principal executive offices)
Daniel G. Donovan, Harris Trust and Savings Bank,
11 West Monroe Street, Chicago, Illinois, 60603
312-461-2908
(Name, address and telephone number for agent for service)
ASSISTED LIVING CONCEPTS, INC.
(Name of Obligor)
Nevada 93-1148702
(I.R.S Employer
(State of Incorporation) Identification No.)
9955 SE Washington, Suite 201
Portland, OR 97216
(Address of principal executive offices)
5.625% Convertible Subordinated Debentures due 2003
(Title of indenture securities)
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1. GENERAL INFORMATION. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Commissioner of Banks and Trust Companies, State of Illinois,
Springfield, Illinois; Chicago Clearing House Association, 164
West Jackson Boulevard, Chicago, Illinois; Federal Deposit
Insurance Corporation, Washington, D.C.; The Board of Governors
of the Federal Reserve System, Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Harris Trust and Savings Bank is authorized to exercise corporate
trust powers.
2. AFFILIATIONS WITH OBLIGOR. If the Obligor is an affiliate of the Trustee,
describe each such affiliation.
The Obligor is not an affiliate of the Trustee.
3. thru 15.
NO RESPONSE NECESSARY
16. LIST OF EXHIBITS.
1. A copy of the articles of association of the Trustee as now in effect
which includes the authority of the trustee to commence business and
to exercise corporate trust powers.
A copy of the Certificate of Merger dated April 1, 1972 between Harris
Trust and Savings Bank, HTS Bank and Harris Bankcorp, Inc. which
constitutes the articles of association of the Trustee as now in
effect and includes the authority of the Trustee to commence business
and to exercise corporate trust powers was filed in connection with
the Registration Statement of Commercial Federal Corporation, File
No. 33320711, and is incorporated herein by reference.
2. A copy of the existing by-laws of the Trustee.
A copy of the existing by-laws of the Trustee was filed in connection
with the Registration Statement of Commercial Federal Corporation
File No. 333-20711, and is incorporated herein by reference.
3. The consents of the Trustee required by Section 321(b) of the Act.
(included as Exhibit A on page 2 of this statement)
4. A copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or examining
authority.
(included as Exhibit B on page 3 of this statement)
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SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee,
HARRIS TRUST AND SAVINGS BANK, a corporation organized and existing under the
laws of the State of Illinois, has duly caused this statement of eligibility to
be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of Chicago, and State of Illinois, on the 8th day of May, 1998.
Harris Trust and Savings Bank
BY:/s/ D.G. Donovan
------------------------------
D.G. Donavan
Assistant Vice President
EXHIBIT A
The consents of the Trustee required by Section 321(b) of the Act.
Harris Trust and Savings Bank, as the Trustee herein named, hereby consents that
reports of examinations of said trustee by Federal and State authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
Harris Trust and Savings Bank
By:/s/ D.G. Donavan
------------------------------
D.G Donavan
Assistant Vice President
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<PAGE>
EXHIBIT B
Attached is a true and correct copy of the statement of condition of Harris
Trust and Savings Bank as of December 31, 1997, as published in accordance with
a call made by the State Banking Authority and by the Federal Reserve Bank of
the Seventh Reserve District.
[LOGO] HARRIS BANK
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
of Chicago, Illinois, And Foreign and Domestic Subsidiaries, at the close of
business on December 31, 1997, a state banking institution organized and
operating under the banking laws of this State and a member of the Federal
Reserve System. Published in accordance with a call made by the Commissioner of
Banks and Trust Companies of the State of Illinois and by the Federal Reserve
Bank of this District.
Bank's Transit Number 71000288
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<CAPTION>
THOUSANDS
ASSETS OF DOLLARS
<S> <C> <C>
Cash and balances due from depository
institutions:
Non-interest bearing balances and
currency and coin..................... $ 1,252,381
Interest bearing balances.............. $ 598,062
Securities:.............................
a. Held-to-maturity securities $ 0
b. Available-for-sale securities $ 3,879,399
Federal funds sold and securities
purchased under agreements to resell... $ 71,725
Loans and lease financing receivables:
Loans and leases, net of unearned
income............................... $8,813,821
LESS: Allowance for loan and lease
losses............................... $ 99,678
----------
Loans and leases, net of unearned
income, allowance, and reserve
(item 4.a minus 4.b).................. $ 8,714,143
Assets held in trading accounts......... $ 136,538
Premises and fixed assets (including
capitalized leases).................... $ 221,312
Other real estate owned................. $ 642
Investments in unconsolidated
subsidiaries and associated companies.. $ 103
Customer's liability to this bank on
acceptances outstanding................ $ 46,480
Intangible assets....................... $ 279,897
Other assets............................ $ 653,101
-----------
TOTAL ASSETS $15,853,783
===========
</TABLE>
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<PAGE>
<TABLE>
LIABILITIES
<S> <C> <C>
Deposits:
In domestic offices................... $ 8,926,635
Non-interest bearing............. $3,692,891
Interest bearing................. $5,233,744
In foreign offices, Edge and
Agreement subsidiaries, and IBF's.... $ 1,763,669
Non-interest bearing............. $ 22,211
Interest bearing................. $1,741,458
Federal funds purchased and securities
sold under agreements to repurchase in
domestic offices of the bank and of
its Edge and Agreement subsidiaries,
and in IBF's:
Federal funds purchased & securites
sold under agreements to repurchase.. $ 2,693,600
Trading Liabilities
Other borrowed money:................... 82,861
a. With remaining maturity of one year
or less $ 601,799
b. With remaining maturity of more
than one year $ 0
Bank's liability on acceptances
executed and outstanding $ 46,480
Subordinated notes and debentures....... $ 325,000
Other liabilities....................... $ 134,309
---------- -----------
TOTAL LIABILITIES $14,574,353
===========
EQUITY CAPITAL
Common stock............................ $ 100,000
Surplus................................. $ 601,026
a. Undivided profits and capital
reserves............................... $ 573,416
b. Net unrealized holding gains
(losses) on available-for-sale
securities $ 4,988
---------- -----------
TOTAL EQUITY CAPITAL $ 1,279,430
===========
Total liabilities, limited-life
preferred stock, and equity capital.... $15,853,783
===========
</TABLE>
I, Pamela Piarowski, Vice President of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with the
instructions issued by the Board of Governors of the Federal Reserve System and
is true to the best of my knowledge and belief.
PAMELA PIAROWSKI
1/30/98
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and, to the best of our
knowledge and belief, has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and the
Commissioner of Banks and Trust Companies of the State of Illinois and is true
and correct.
EDWARD W. LYMAN,
ALAN G. McNALLY,
RICHARD E. TERRY
Directors.
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