Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. ASSISTED LIVING CONCEPTS INC (929994) 10-Q published on May 08, 2013 at 4:27 pm
Reporting Period: Mar 30, 2013
At March 31, 2013, we had approximately $184.2 million of outstanding debt of which $143.3 million is due within one year. $113.0 million of amounts due within one year are owed under the U.S. Bank Credit Facility (the "US Bank Indebtedness") and $28.6 million is due under the 6.24% 2014 Note. Our cash flow from operations in 2013 will not be sufficient to repay either the US Bank Indebtedness or the 6.24% 2014 Note. In the first quarter of 2013, ALC incurred unpaid expenses primarily related to legal fees and transaction costs, a portion of which are due and payable prior to the closing of the Merger (as defined below). Pursuant to the Third Amendment, ALC is required to obtain additional liquidity in the aggregate amount of $15 million ($3 million of which has already been raised), whether pursuant to sales of unencumbered assets, additional credit facilities, or otherwise, on or before July 2, 2013. With an additional capital raise or an amendment or waiver to the U.S. Bank Credit Facility, ALC believes it can meet its short term obligations; however, ALC can not provide assurance that such capital raise, amendment or waiver will be successful.
If and when the Merger is consummated in accordance with the terms of the Merger Agreement (the “Effective Time”), all Options/SARs outstanding immediately prior to the Effective Time, whether or not then exercisable or vested, will be automatically cancelled and then converted, in full settlement and cancellation thereof, into a right to receive, at the Effective Time, a lump sum cash payment by the Surviving Corporation in an amount equal to (i) the excess, if any, of (a) $12.00 over (b) the exercise price per share of Class A Common Stock subject to such Option/SAR, multiplied by (ii) the number of shares of Class A Common Stock subject to such Option/SAR immediately prior to the Effective Time.
On June 29, 2012, a lawsuit captioned Laurie Bebo v. Assisted Living Concepts, Inc. was filed in Waukesha County Circuit Court, State of Wisconsin. The lawsuit seeks an order requiring ALC to produce certain company records previously requested by Ms. Bebo as a director of ALC and a judgment requiring ALC to indemnify Ms. Bebo for all expenses incurred in connection with ALC’s internal investigation relating to the Ventas lease as well as to advance Ms. Bebo all expenses incurred by her in connection with the investigation. On October 19, 2012, the court granted ALC’s motion to dismiss Ms. Bebo’s claim for access to company records and allowed the claims for indemnification. On December 5, 2012, Ms. Bebo filed an amended complaint in this action. Pursuant to the amended complaint, Ms. Bebo seeks a judgment against ALC for indemnification and advancement of all expenses incurred by Ms. Bebo in connection with ALC’s internal investigation. On December 21, 2012, ALC filed an answer to Ms. Bebo’s amended complaint denying Ms. Bebo’s claims in their entirety. On April 8, 2013, Ms. Bebo filed a motion for leave to file a second amended complaint in this action. The proposed second amended complaint contains a new claim seeking a judgment against ALC for indemnification and advancement of expenses related to three lawsuits filed against Ms. Bebo-Lifson v. Assisted Living Concepts, Inc. and Laurie A. Bebo, No. 12-CV-884, filed in the United States District Court for the Eastern District of Wisconsin, Passaro v. Laurie A. Bebo, et al., No 12-CV-010106, filed in the Circuit Court of Milwaukee County, State of Wisconsin, and Somers v. Bebo, et al., No A-12-674054-C, filed in the Eighth Judicial District Court for Clark County, Nevada. ALC stipulated to the filing of the second amended complaint, and the parties have agreed that ALC will respond to such complaint by May 10, 2013. ALC will continue to vigorously defend against Ms. Bebo’s claims.
On April 3, 2013, an action asserting violations of Sections 14(a) and 20(a) of the Exchange Act was filed against ALC and its directors in the United States District Court for the District of Nevada, captioned Lee Olson, Individually and On Behalf of All Others Similarly Situated v. Alan Bell, et al., Case No. 2:13-cv-00571-JCM-NJK. The complaint alleges that the individual defendants and ALC failed to disclose all material information about the proposed Merger to ALC’s public stockholders in violation of Section 14(a) of the 1934 Exchange Act. The Olson complaint also alleges that the individual defendants failed to prevent the alleged violations of Section 14(a), which itself allegedly is a violation of Section 20(a) of the Exchange Act. Along with the Olson complaint, the plaintiff brought a motion for “limited expedited discovery and an order scheduling a preliminary injunction hearing” in advance of the special meeting which was denied without prejudice by the court. On April 23, 2013, the plaintiff in the Olson action filed an amended complaint, adding new class action claims alleging breach of state law fiduciary duties by the Company’s directors and adding TPG, Aid Holdings and Aid Merger Sub as additional defendants alleging that TPG, Aid Holdings and Aid Merger Sub aided and abetted such alleged breach. ALC believes that this lawsuit is without merit.
Defendants specifically deny the allegations made in the Actions and all other purported concerns expressed by Plaintiffs with respect to the Merger Agreement, and Defendants maintain that they have committed no breach of fiduciary duty or other wrongdoing whatsoever, have committed no disclosure or other violations in connection with the merger agreement and have not aided or abetted any breach of fiduciary duty or other alleged wrongdoing. However, Defendants, to avoid the costs, disruption and distraction of further litigation, and to permit the timely consummation of the Merger, and without admitting the validity of any allegations made in the Actions or of any of the additional purported concerns expressed by Plaintiffs about the Merger Agreement, or any liability with respect thereto, have concluded that it is desirable that the claims against them be settled on the terms reflected in the MOU. Plaintiffs and their counsel believe that a settlement of the Actions on the terms reflected in the MOU is fair, reasonable, adequate and in the best interests of the Company’s stockholders. Plaintiffs have agreed to stay the Actions pending final approval by the applicable courts of the proposed settlement and to dismiss the Actions with prejudice upon final approval by the applicable courts of the settlement of the Actions.
A hearing is expected to be scheduled at which the applicable courts will consider the fairness, reasonableness and adequacy of the proposed settlement. Notwithstanding the MOU, there can be no assurance that the applicable courts will approve the settlement contemplated by the MOU. In such event, the settlement contemplated by the MOU may be terminated.