Preferred Stock Channel
AlerisLife Inc | Series B Preferred Stock (ALR.PRB)

Prospectus excerpt:  The following is a summary of the material terms of the Series B Preferred Stock. This summary does not purport to be complete and is subject to, and qualified in its entirety by reference to, the provisions of the certificate of designations creating the Series B Preferred Stock, the form of which is attached as Annex B to the proxy statement/prospectus included in our Registration Statement on Form S-4/A filed by us on March 25, 2008.

Liquidation preference: $400 per share, plus accumulated but unpaid dividends.

Dividend: $12.00, or 3%, for each share of Series B Preferred Stock per year. Dividends will be cumulative from the date of issuance and, to the extent (a) permitted under our credit facility, (b) assets are legally available under Delaware law to pay dividends and (c) our board of directors or an authorized committee declares a dividend payable, we will pay dividends in (i) cash, (ii) shares of our common stock, (iii) if the dividend is paid on or before June 4, 2015, shares of Series B Preferred Stock (or convertible preferred stock having substantially the same terms as the Series B Preferred Stock) or (iv) any combination thereof at our discretion, every quarter.

If we elect to make any dividend payment, or portion thereof, in shares of our common stock, such shares shall be valued for such purpose at 97% of the average of the daily volume-weighted average price per share of our common stock for each of the five consecutive trading days ending on the second trading day immediately prior to the record date for such dividend.

If we elect to make any dividend payment, or portion thereof, in shares of Series B Preferred Stock, such shares shall be valued for such purpose at 97% of the average of the daily volume-weighted average price per share of Series B Preferred Stock for each of the five consecutive trading days ending on the second trading day immediately prior to the record date of such dividend.

If we elect to make any dividend payment, or portion thereof, in shares of convertible preferred stock having substantially the same terms as the Series B Preferred Stock, such shares shall be valued for such purpose at 97% of the fair market value per share of such convertible preferred stock as determined by a nationally recognized investment banking firm (unaffiliated with us) retained for this purpose.

If we fail to pay dividends on the shares of Series B Preferred Stock for six quarterly dividend periods (whether consecutive or not), then holders of shares of Series B Preferred Stock will be entitled to receive, when, as and if declared by our board of directors, out of funds legally available therefor, dividends at the rate per annum equal to 3.0% plus 1.0% until we have paid all dividends on the shares of Series B Preferred Stock for all dividend periods up to and including the dividend payment date on which the accumulated and unpaid dividends are paid in full. Any further failure to pay dividends would cause the dividend rate to increase again by 1.0% to 5.0% per annum until we have again paid all dividends for all dividend periods up to and including the dividend payment date on which the accumulated and unpaid dividends are paid in full.

No dividends or other distributions (other than a dividend payable solely in shares of a like or junior ranking) may be paid or set apart for payment upon any parity shares or junior shares, nor may any parity shares or junior shares be redeemed or acquired for any consideration by us or any liquidation amount with respect to any such parity or junior shares (except by conversion into or exchange for shares of a like or junior ranking) unless all accumulated and unpaid dividends have been paid or funds or shares of common stock or Series B Preferred Stock (if permitted) therefor have been set apart on the Series B Preferred Stock and any parity shares.

Ranking: The Series B Preferred Stock will rank: senior to all of the shares of our common stock and to all of our other capital stock issued in the future unless the terms of such capital stock expressly provide that it ranks senior to, or on a parity with, the shares of Series B Preferred Stock; on a parity with all of our other capital stock issued in the future the terms of which expressly provide that it will rank on a parity with the shares of Series B Preferred Stock; and junior to all shares of our capital stock issued in the future the terms of which expressly provide that such shares will rank senior to the shares of Series B Preferred Stock. The issuance of any class or series of capital stock having rights on liquidation or as to distributions (including dividends) senior to the Series B Preferred Stock is subject to the requirements set forth below under ÙVoting Rights.ˆ

Conversion at election of holder: Each share of Series B Preferred Stock will be convertible, at the option of the holder, into 5.7703 shares of our common stock (the Ùconversion rateˆ) (which is equivalent to an initial conversion price of approximately $69.32 per share, as calculated by dividing the $400 per share liquidation preference by the 5.7703 conversion rate), plus cash in lieu of fractional shares, in the following circumstances, to the following extent and, until the ÙAuthorized Share Increaseˆ described below is obtained (which is covered by Proposal 2), our ability to deliver shares of common stock to satisfy our obligations upon conversion will be subject to a sufficient number of shares of common stock being available for issuance: During any calendar quarter beginning with the second calendar quarter after the issuance date of the Series B Preferred Stock, if the closing sale price of our common stock on AMEX for each of 20 or more trading days within any period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter exceeds 130% of the conversion price per share of common stock in effect on the last trading day of the immediately preceding calendar quarter. For example, if the conversion price per share of common stock in effect on the last trading of the immediately preceding calendar quarter was $69.32, the Series B Preferred Stock would not be convertible unless our common stock closing sale price exceeded $90.11 for each of 20 or more trading days within any period of 30 consecutive trading days ending on the last trading day of such immediately preceding calendar quarter. During the 5 consecutive business days immediately after any 5 consecutive trading day period (such 5 consecutive trading day period, the Ùpreferred measurement periodˆ) in which the average trading price per share of Series B Preferred Stock was equal to or less than 97% of the average conversion value of the Series B Preferred Stock during the preferred measurement period. Upon the occurrence of a fundamental change, as described below under ÙAdditional conversion right upon a fundamental change.ˆ If we are party to a consolidation, amalgamation, statutory arrangement, merger or binding share exchange pursuant to which our common stock would be converted into or exchanged for, or would constitute, solely the right to receive, cash, securities or other property. At our option, the settlement of a conversion may also be made in cash or a combination of cash and shares as described below under ÙOptional Settlement of Conversions.ˆ Upon conversion, holders will not receive any cash payment representing accumulated dividends, if any. The conversion rate will be subject to adjustments as described below under ÙAnti-dilution adjustments.ˆ

Forced Conversion: We may, at our option and, until the Authorized Share Increase is obtained (which is covered by Proposal 2), subject to a sufficient number of shares of our common stock being available for issuance upon conversion, cause the Series B Preferred Stock to be automatically converted into that number of shares of common stock that are issuable at the then prevailing conversion rate under the circumstances described below. We may exercise our right to force conversion on or prior to the third anniversary of the issuance date if, for 20 trading days within any period of 30 consecutive trading days (including the last trading day of such period), the closing price of our common stock on AMEX exceeds 150% of the then prevailing conversion price of the Series B Preferred Stock. We may exercise our right to force conversion after the third anniversary of the issuance date if, for 20 trading days within any period of 30 consecutive trading days (including the last trading day of such period), the closing price of our common stock on AMEX exceeds 130% of the then prevailing conversion price of the Series B Preferred Stock.

At our option, the settlement of an automatic conversion may alternatively be made in cash or a combination of cash and shares as described below under ÙOptional Settlement of Conversion.ˆ

If we exercise our right to force conversion on or prior to the third anniversary of the issuance date, we will also pay to each holder of Series B Preferred Stock the following payments: (1) a payment equal to the aggregate amount of any unpaid dividends such holder was entitled to with respect to any dividend periods terminating on or prior to the date of such forced conversion and (2) a redemption premium equal to the amount of dividends such holder would have received after the date of such forced conversion through the three-year anniversary of the issuance date of the Series B Preferred Stock, if such holder?s shares had not otherwise been converted. At our option, these payments may be made in the form of cash, shares of our common stock, or a combination of cash and shares of our common stock: provided that any payment or partial payment made in the form of our common stock will be valued at 97% of the daily volume-weighted average price of common stock on the trading day immediately preceding the date of the forced conversion.

Optional Settlement of Conversion: Upon a conversion of shares of Series B Preferred Stock, we may, at our option and in our sole discretion, satisfy the entire conversion obligation in cash, or through a combination of cash and common stock, to the extent permitted under our credit facility and under Delaware law and, until the Authorized Share Increase is obtained (which is covered by Proposal 2), subject to a sufficient number of shares of common stock being available for issuance upon conversion. We are not obligated to satisfy any such conversion with cash.

Cash Settlement. If we elect to satisfy the entire conversion obligation in cash, then we will deliver to each holder of Series B Preferred Stock, for each of the 20 trading days in the applicable conversion measurement period, a cash settlement amount equal to the daily conversion value per share of Series B Preferred Stock, as described below.

Combined Settlement. If we elect to satisfy a portion of the conversion obligation in cash (expressed either as a dollar amount or as a percentage of the daily conversion value) and a portion of the conversion obligation in shares of common stock, then we will deliver for each share of Series B Preferred Stock, for each of the 20 trading days in the applicable conversion measurement period, (1) such partial cash settlement amount divided by 20 (or, if expressed as a percentage of the conversion obligation, such partial cash settlement amount calculated as a percentage of the daily conversion value), plus (2) a number of shares equal to (a) the daily conversion value minus such daily partial cash settlement amount divided by (b) the daily volume-weighted average price of our common stock on that trading day.

As used above, the term Ùconversion measurement periodˆ means the 20 consecutive trading days beginning on the third trading day following the date on which the shares of Series B Preferred Stock are tendered for conversion.

As used above, the Ùdaily conversion valueˆ means, for each of the 20 trading days during the applicable conversion measurement period, one-twentieth (1/20) of the product of (1) the then applicable conversion rate and (2) the daily volume-weighted average price of a share of our common stock on that trading day.

Anti-dilution adjustments: The conversion rate of the Series B Preferred Stock is subject to adjustment upon the occurrence of certain events (including payment of cash distributions to holders of our common stock, stock splits, combinations, reclassifications, distribution of certain rights and warrants, certain distributions of non-cash property, certain tender and exchange offers and certain business combinations in which we are not the surviving entity), but will not be adjusted for accumulated and unpaid dividends.

If, however, application of the above would result in a decrease in the conversion rate (other than a share split or share combination), no adjustment to the conversion rate shall be made.

Stockholder Approvals, Share Issuance Limit: We have agreed to use our best efforts to obtain the approval of our stockholders at the annual meeting to allow us to issue as many shares of common stock in connection with the Matria merger as may be required to allow for full conversion of, and payment of dividends on, the Series B Preferred Stock in accordance with the terms thereof and upon the exercise of Matria stock options assumed by us in the Matria merger so that such issuance may be made in compliance with the 20% Rule (the ÙShare Issuance Approvalˆ). The Share Issuance Approval is covered by this Proposal 4. In the event our stockholders do not approve the Share Issuance Approval, we may not issue shares of our common stock under the Series B Preferred Stock (whether upon conversion or as dividends) in an amount that, when combined with any shares of our common stock issuable upon exercise of Matria stock options assumed by us in the Matria merger, is equal to or exceeds 20% of our outstanding common stock immediately prior to the effective time of the Matria merger. In the event our stockholders do not approve the Share Issuance Approval prior to a fundamental change that will result in a conversion rate increase to an amount that would cause the common stock issuable in the Matria merger to equal or exceed 20% of our issued and outstanding common stock as of the effective time of the Matria merger, we have agreed to use our best efforts to obtain such Share Issuance Approval in connection with such fundamental change.

We have also agreed to use our best efforts to obtain stockholder approval at the annual meeting to increase the number of shares of authorized common stock to allow for conversion of all shares of Series B Preferred Stock into shares of our common stock (the ÙAuthorized Share Increaseˆ). Proposal 2 contained in this proxy statement covers the Authorized Share Increase.

Additional conversion right upon a fundamental change: Upon the occurrence of a fundamental change (as described below), if the market value per share of our common stock multiplied by the conversion rate then in effect is less than the liquidation preference, each holder of Series B Preferred Stock will have the option to convert all or a portion of its Series B Preferred Stock into our common stock, at an adjusted conversion rate equal to the lesser of (1) the liquidation preference divided by the market value per share of our common stock and (2) 11.5406 shares (two times the initial conversion rate). In lieu of issuing common stock pursuant to this alternative conversion right in the event of a fundamental change, we may make a cash payment to converting holders equal to the liquidation preference of such Series B Preferred Stock, plus accrued but unpaid dividends. Our ability to deliver shares of our common stock to satisfy our obligations upon conversion will be subject to a sufficient number of shares of our common stock being available for issuance until the Authorized Share Increase is approved and, as applicable, the Share Issuance Approval is received.

A Ùfundamental changeˆ will be deemed to have occurred upon the occurrence of any of the following: the sale, lease or transfer, in one or a series of related transactions, of all or substantially all of our assets (determined on a consolidated basis) to any person or group; the adoption of a plan the consummation of which would result in our liquidation or dissolution; the acquisition, directly or indirectly, by any person or group, of beneficial ownership of more than 50% of the aggregate voting power of our voting stock; any share exchange, consolidation or merger of us (excluding a merger solely for the purpose of changing our jurisdiction of incorporation) pursuant to which our common stock will be converted into cash, securities or other property, to or with any person other than one of our subsidiaries; provided that any such transaction where the holders of more than 50% of all classes of our common equity immediately prior to such transaction continue to own, directly or indirectly, more than 50% of all classes of common equity of the continuing or surviving corporation or transferee or the parent thereof immediately after such event shall not be a fundamental change; during any period of two consecutive years, individuals who at the beginning of such period comprised our board of directors (together with any new directors whose election by such board of directors or whose nomination for election by our stockholders was approved by a vote of a majority of our directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of our board of directors then in office; or our common stock ceases to be listed on a national securities exchange including AMEX, or quoted on an over-the-counter market in the United States.

However, a fundamental change will not be deemed to have occurred in the case of a merger or consolidation, if (i) at least 90% of the consideration (excluding cash payments for fractional shares and cash payments pursuant to dissenters? appraisal rights) in the merger or consolidation consists of common stock of a United States company traded on a national securities exchange including AMEX (or which will be so traded when issued or exchanged in connection with such transaction) and (ii) as a result of such transaction or transactions the shares of Series B Preferred Stock become convertible solely into such common stock. This type of transaction is referred to as an ÙExcluded Transaction.ˆ

Adjustment to conversion rate upon the occurrence of a make-whole fundamental change: If a make-whole fundamental change (as described below) occurs, we will increase the conversion rate applicable to the shares of Series B Preferred Stock that are surrendered at any time from, and including, the 30th day before the date we originally announce as the anticipated effective date of the make-whole fundamental change to, and including, the 40th business day after the effective date of the make-whole fundamental change. Until the Authorized Share Increase is obtained, our ability to deliver shares of our common stock to satisfy our obligations upon conversion will be subject to a sufficient number of shares of common stock being available for issuance.

A Ùmake-whole fundamental changeˆ will be deemed to have occurred upon the occurrence of any of the following: the sale, transfer, lease conveyance or other disposition of all or substantially all of our property or assets to any person or group (an Ùasset sale make-whole fundamental changeˆ); or a transaction or series of related transactions (other than an Excluded Transaction), in connection with which our common stock is exchanged for, converted into, acquired for or constitutes solely the right to receive other securities, other property, assets or cash (a Ùcommon stock make-whole fundamental changeˆ).

In connection with the make-whole fundamental change, we will increase the conversion rate by an amount equal to: the excess, if any, of (1) the average trading price per share of Series B Preferred Stock for the five consecutive trading days immediately preceding the public announcement of the make-whole fundamental change, over (2) the product of (a) the market value per share of our common stock for the five consecutive trading days immediately preceding the public announcement of the make-whole fundamental change, and (b) the conversion rate then in effect; divided by the applicable price, as described below.

If the make-whole fundamental change is an asset sale make-whole fundamental change and the consideration paid for our property and assets consists solely of cash, then the change in the conversion rate will be based on (i) the amount of cash paid for our property and assets (expressed as an amount per share of our common stock outstanding on the effective date of the asset sale make-whole fundamental change) and (ii) the effective date of the make-whole fundamental change. If the make-whole fundamental change is a common stock make-whole fundamental change and the consideration paid for our common stock consists solely of cash, then the change in the conversion rate will be based on (i) the cash amount paid per share of our common stock in the make-whole fundamental change and (ii) the effective date of the make-whole fundamental change. In all other cases, the conversion rate will be based on the average of the closing sale prices per share of our common stock on AMEX for the 5 consecutive trading days immediately preceding the public announcement of the make-whole fundamental change.

However, we will not increase the conversion rate as described above to the extent the increase will cause the conversion rate to exceed 7.5014 (subject to adjustment from time to time). A make-whole fundamental change will not be deemed to have occurred in the case of an Excluded Transaction.

Full Prospectus PDF », Secondary Prospectus PDF », ALR Page »

Series:B
Alternate symbology:ALR-B, ALR-PB, ALRprB
Redeemable?:Yes
Perpetual?:Yes
Cumulative?:Yes
Conversion Ratio:5.7703
Conversion Price:$69.32
Liquidation Preference:$400.00
Original Coupon:3.00%
Pay Period:Quarterly
CDx3 Compliance Rating: Learn ALR.PRB's Rating
AlerisLife is a holding company. Through its subsidiaries, Co. has two segments: residential (Five Star Senior Living), which consist of the operation of primarily independent and assisted living senior living communities, including memory care, as well as active adult communities; and lifestyle services (Ageility Physical Therapy Solutions and Ageility Fitness (Collectively Ageility) as well as Windsong Home Health), which provides a suite of lifestyle services including Ageility rehabilitation and fitness, Windsong home health and other home based, concierge services at senior living communities it owns and operates or manages as well as at unaffiliated senior living communities.

Preferred: ALR.PRB


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Name:  AlerisLife Inc
Website:  www.alerislife.com
Sector:  Hospital & Medical Practitioners

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