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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: May 14, 1997
(Date of earliest event reported)
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ALTERNATIVE LIVING SERVICES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-11999 39-1771281
(State or other jurisdiction of (Commission file number) (I.R.S. Employer Identification No.)
incorporation or organization)
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450 N. SUNNYSLOPE ROAD, SUITE 300
BROOKFIELD, WISCONSIN 53005
(Address of principal executive offices)
(414) 789-9565
(Registrant's telephone number, including area code)
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Item 5. Other Information.
On May 14, 1997, Alternative Living Services, Inc. (the
"Company") issued a press release announcing that it would sell $50 million of
7% convertible debentures due 2004 (the "Debentures"), at par value.
On May 21, 1997 (the "Closing Date"), the Company closed the
sale of the Debentures and received $48,150,000 in net proceeds therefrom. The
terms of the Debentures are described below.
DESCRIPTION OF DEBENTURES
The Debentures were issued under an Indenture dated as of May
21, 1997 (the "Indenture") executed by the Company and IBJ Schroder Bank &
Trust Company, as the trustee under the Indenture (the "Trustee"). The terms of
the Debentures include those stated in the Indenture and those made a part of
the Indenture by reference to the Trust Indenture Act of 1939, as amended.
The following is a summary of certain provisions of the
Indenture and does not purport to be complete and is qualified in its entirety
by reference to the detailed provisions of the Indenture, including the
definitions of certain terms therein to which reference is hereby made, for a
complete statement of such provisions. Wherever particular provisions or
sections of the Indenture or terms defined therein are referred to herein, such
provisions or definitions are incorporated herein by reference.
GENERAL
The Debentures are unsecured general obligations of the
Company, subject to the rights of holders of Senior Indebtedness of the
Company, and will mature on June 1, 2004. The Debentures are limited to $50.0
million aggregate principal amount and bear interest payable semiannually on
June 1 and December 1 of each year, commencing December 1, 1997, at the per
annum rate of 7.0%. The first payment will be for the period from the date of
delivery to December 1, 1997. The Company will pay interest on the Debentures
to the persons who are registered holders of Debentures at the close of
business on the May 15 or November 15 preceding the interest payment date.
Principal (and premium, if any) and interest will be payable, the Debentures
will be convertible and exchangeable, and transfers thereof will be
registerable, at the office or agency of the Company maintained for such
purposes, initially at the offices of the Trustee. The Company may pay
principal and interest by check and may mail an interest check to a holder's
registered address. Holders must surrender Debentures to a Paying Agent to
collect principal payments.
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.
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DELIVERY AND FORM OF DEBENTURES
Debentures in the face amount of $35 million were sold to
qualified institutional buyers (as defined in Rule 144A under the Securities
Act of 1933, as amended (the "Securities Act")) and are represented by a single
global Debenture (the "Rule 144A Global Security"), which was deposited on the
Closing Date with, or on behalf of, The Depository Trust Company (the
"Depository") and registered in the name of Cede & Co., as nominee of the
Depository (such nominee being referred to herein as the "Rule 144A Global
Security Holder"). The Company understands that the Debentures represented by
the Rule 144A Global Security are eligible for trading on the Private Offerings
Resales and Trading through Automatic Linkages ("PORTAL") System of the
National Association of Securities Dealers, Inc. The $15 million of Debentures
that were sold to accredited investors (the "Accredited Investor Securities")
are in fully registered form and were delivered to National Westminster Bank
PLC, New York Bank (the "Placement Agent") on behalf of such investors. The
Rule 144A Global Security and the Accredited Investor Securities were delivered
for the accounts of the purchasers (the "Purchasers") thereof on the Closing
Date.
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 Rule 144A Global Security Holder is the
registered owner of any Debentures, the Rule 144A Global Security Holder will
be considered the sole holder under the Indenture of any Debentures evidenced
by the Rule 144A Global Security. Beneficial owners of Debentures evidenced by
the Rule 144A Global Security 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 Rule 144A Global
Security Holder on the applicable record date will be payable to the Trustee to
or at the direction of the Rule 144A 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, including the Rule 144A Global Security, are registered as the
owner thereof for the purpose of
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receiving such payments. Consequently, neither the Company nor the Trustee has
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 credit
worthiness and the market value of the Debentures may decline significantly as
a result of such transaction. The Indenture does not protect holders of the
Debentures against any decline in credit quality, whether resulting from any
such transaction or from any other cause. The registered holder of a Debenture
may be treated as its owner for all purposes.
CONVERSION RIGHTS
The holders of the Debentures are entitled at any time after
the registration statement required to be filed by the Company pursuant to the
Registration Rights Agreement described below (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 the
Company's common stock, $.01 par value per share (the "Common Stock"), at the
conversion price of $20.25 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.
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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, 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 (as
hereinafter defined). 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
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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 Debentures will be subject to redemption, as a whole or
in part, at any time or from time to time commencing on or after June 15, 2000
at the option of the Company on at least 30 days' and not more than 60 days'
prior notice by mail. The redemption prices (expressed as a percentage of
principal amount) are as follows for the 12-month period beginning on or after
June 15 of the following years:
Redemption
Year Price
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2000 103%
2001 102%
2002 101%
2003 and thereafter 100%
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
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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 Debentures 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.
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
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amount of the Debentures may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from holders of the Debentures notice of any
default (except a default in payment of principal or interest) if it determines
that withholding notice is in their interests. The Company is required to file
with the Trustee annually an officer's statement as to the absence of defaults
in fulfilling any of its obligations under the Indenture.
No consent of the holders of the Debentures is required for
the Company to consolidate with or merge into or transfer or lease
substantially all of its assets to another corporation or trust which assumes
the obligations of the Company under the Indenture and Debentures or for any
reorganization within the meaning of Section 368(a)(1)(B) of the Internal
Revenue Code; nor is any such consent of holders of the Debentures required for
any amendment of the Indenture or the Debentures by the Company or the Trustee
to cure any ambiguity, defect or inconsistency, or to provide for
uncertificated Debentures in addition to certified Debentures, or to make any
change that does not adversely affect the right of a holder of a Debenture.
Subject to certain conditions, any person having a beneficial
interest in the Rule 144A Global Security may, upon request to the Trustee,
exchange such beneficial interest for Debentures in the form of certificated
Debentures. Upon any such issuance, the Trustee is required to register such
certificated Debentures in the name of, and cause the same to be delivered to,
such person or persons (nominee of any thereof). All such certificated
Debentures will be subject to the legend requirements set forth in the
Indenture. In addition, if (i) the Company notifies the Trustee in writing that
the Depository is no longer willing or able to act as a depository and the
Company is unable to locate a qualified successor within 90 days or (ii) the
Company, at its option, notifies the Trustee in writing that it elects to cause
the issuance of Debentures in the form of certificated Debentures under the
Indenture, then, upon surrender by the Rule 144A Global Security Holder of its
Rule 144A Global Security, Debentures in certificated form will be issued to
each person that the Rule 144A Global Security Holder and the Depository
identify as being the beneficial owner of the related Debentures.
Neither the Company nor the Trustee will be liable for any
delay by the Rule 144A Global Security Holder or the Depository in identifying
the beneficial owners of Debentures, and the Company and the Trustee may
conclusively rely on, and will be protected in relying on, instructions from
the Rule 144A Global Security Holder or the Depository for all purposes.
The Debentures may not be sold or otherwise transferred
except (i) (A) to the Company, (B) pursuant to a registration statement which
has been declared effective under the Securities Act, or (C) 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 Company if the
Company 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 (ii) in accordance with the provisions set forth in the
Indenture.
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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.
GOVERNING LAW
The Indenture and the Debentures are governed by and will be
construed in accordance with the laws of the State of New York.
REGISTRATION RIGHTS AGREEMENT
The Company has agreed to use its best efforts, subject to
the receipt of necessary information from the Purchasers, to prepare and file
with the Securities and Exchange Commission (the "Commission") a registration
statement (the "Registration Statement") with respect to the resale of the
Debentures and the shares of Common Stock issuable upon conversion thereof (the
"Conversion Shares") from time to time on the American Stock Exchange, in the
over-the-counter market or in privately negotiated transactions, as the case
may be, and to cause the Registration Statement to become effective as promptly
as practicable after the Company becomes eligible for Form S-3 promulgated by
the Commission and in any event not later than November 14, 1997. The Company
has also 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 the Common Stock registerable thereby (the
"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.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) None.
(b) None.
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(c) Exhibits.
4.1 Indenture dated as of May 21, 1997 by and
between the Company and IBJ Schroder Bank &
Trust Company, as Trustee.
99.1 Press release dated May 14, 1997 announcing
proposed sale of convertible debentures.
99.2 Form of Registration Rights Agreement dated
as of May 21, 1997 by and between the
Company and the Purchasers of the
Debentures.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Dated: May 27, 1997
ALTERNATIVE LIVING SERVICES, INC.
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(Registrant)
By: /s/ Thomas E. Komula
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Thomas E. Komula, Senior Vice President,
Treasurer and Chief Financial Officer
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