<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
BROOKDALE LIVING COMMUNITIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO OF BROOKDALE LIVING COMMUNITIES, INC.]
Michael W. Reschke
Chairman of the Board
April 20, 1998
Dear Stockholder:
You are cordially invited to attend the first Annual Meeting of Stockholders
(the "Meeting") of Brookdale Living Communities, Inc. (the "Company") to be held
on Thursday, May 21, 1998 at 9:00 a.m., local time, at 35 West Wacker Drive,
35th Floor, Conference Room A, Chicago, Illinois.
The purpose of the Meeting is to consider and vote upon proposals to (i) elect
two directors, (ii) ratify the appointment of the Company's independent
auditors, (iii) approve the Company's 1998 Stock Incentive Plan and (iv)
transact such other business as may properly come before the Meeting. Additional
information with respect to these matters is set forth in the enclosed Proxy
Statement.
Whether or not you plan to attend the Meeting and regardless of the number of
shares you own, it is important that your shares be represented at the Meeting.
Therefore, after you read the enclosed Proxy Statement, I urge you to mark,
date, sign and promptly return the enclosed Proxy Card to ensure that your vote
will be recorded on the business matters to be considered at the Meeting.
The Board of Directors appreciate your investment and your interest in the
Company. I look forward to your participation in the Meeting.
/s/ Michael W. Reschke
Michael W. Reschke
Chairman of the Board
<PAGE>
BROOKDALE LIVING COMMUNITIES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on May 21, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Meeting")
of Brookdale Living Communities, Inc., a Delaware corporation (the "Company"),
will be held at 35 West Wacker Drive, 35th Floor, Conference Room A, Chicago,
Illinois, on Thursday, May 21, 1998, at 9:00 a.m., local time, to consider and
take action on the following matters:
1. To elect two Class I directors for a term of three years each;
2. To ratify the appointment of Ernst & Young LLP as independent auditors of
the Company for the fiscal year ending December 31, 1998;
3. To approve the 1998 Stock Incentive Plan authorizing the grant to
directors, executive officers and other key employees of options to
purchase up to 250,000 shares of Common Stock of the Company; and
4. To transact such other business as may properly come before the Meeting
and at any adjournment(s) thereof.
Stockholders of record at the close of business on April 13, 1998 shall be
entitled to notice of, and to vote at, the Meeting.
By order of the Board of Directors,
/s/ Robert J. Rudnik
Robert J. Rudnik, Secretary
April 20, 1998
- --------------------------------------------------------------------------------
IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE
MARK, DATE AND SIGN YOUR PROXY, AND RETURN IT PROMPTLY IN THE STAMPED
ENVELOPE ENCLOSED FOR YOUR CONVENIENCE.
- --------------------------------------------------------------------------------
<PAGE>
Brookdale Living Communities, Inc.
77 West Wacker Drive
Chicago, Illinois 60601
-----------------------------
PROXY STATEMENT
FOR THE
1998 ANNUAL MEETING OF STOCKHOLDERS
To be held on May 21, 1998
The enclosed proxy is solicited by and on behalf of the board of directors
(the "Board of Directors" or the "Board") of Brookdale Living Communities, Inc.,
a Delaware corporation (the "Company"), for use at the Annual Meeting of
Stockholders (the "Meeting") to be held at 35 West Wacker Drive, 35th Floor,
Conference Room A, Chicago, Illinois on May 21, 1998 at 9:00 a.m., local time,
and at any adjournments thereof. It is anticipated that this Proxy Statement
will be mailed to stockholders on or about April 20, 1998.
DESCRIPTION OF THE PROXY; PROXY SOLICITATION
If the enclosed form of proxy is properly executed and returned to the Company
in time to be voted at the Meeting, the shares represented thereby will be voted
in accordance with the instructions marked thereon. EXECUTED BUT UNMARKED
PROXIES WILL BE VOTED (I) FOR THE ELECTION OF THE BOARD OF DIRECTORS' TWO
NOMINEES AS CLASS I DIRECTORS FOR A TERM OF THREE YEARS EACH, (II) FOR THE
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS OF
THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 1998 AND (III) FOR APPROVAL
OF THE 1998 STOCK INCENTIVE PLAN. If any other matters are properly brought
before the Meeting, the persons named in the accompanying proxy will vote the
shares represented by such proxies on such matters as determined by a majority
of the Board of Directors. The presence of a stockholder at the Meeting will not
automatically revoke such stockholder's proxy. Stockholders may, however, revoke
a proxy at any time prior to its exercise by filing with the Secretary of the
Company a written revocation or a duly executed proxy bearing a later date or by
attending the Meeting and voting in person.
The cost of solicitation of proxies in the form enclosed herewith will be
borne by the Company. In addition to the solicitation of proxies by mail, the
Company may use the services of its directors, officers and regular employees to
solicit proxies, personally or by telephone. Those persons will not be
compensated specially for such services. The Company will also request that
brokers, banks, custodians, nominees and fiduciaries holding shares of stock in
their names or the names of their nominees forward proxy material to and obtain
proxies from the beneficial owners of such shares held of record by such
persons. The Company will reimburse such holders for reasonable out-of-pocket
expenses incurred by them in connection with such solicitation. The Company has
retained MacKenzie Partners, Inc., a proxy solicitation firm, to assist in
solicitation of proxies at a fee of $3,000, plus reimbursement of out-of-pocket
expenses.
QUORUM AND VOTE REQUIRED
Only stockholders of record at the close of business on April 13, 1998 (the
"Record Date") are entitled to vote at the Meeting or any adjournment thereof. A
list of all stockholders entitled to vote at the Meeting will be available for
inspection by any stockholder for any purpose reasonably related to the Meeting
during ordinary business hours for a period of 10 days prior to the Meeting at
the Company's principal executive office at 77 West Wacker Drive, Chicago,
Illinois. On the Record Date, 9,475,000 shares of the Company's Common
<PAGE>
Stock, par value $0.01 per share ("Common Stock"), were outstanding. Each share
of Common Stock entitles the owner to one vote. The Company's Restated
Certificate of Incorporation does not provide for cumulative voting in the
election of directors.
The presence, in person or by proxy, of stockholders holding a majority of the
outstanding shares of Common Stock will constitute a quorum at the Meeting.
Abstentions and broker non-votes (which occur when a nominee holding shares for
a beneficial owner does not vote on a particular proposal because the nominee
does not have discretionary voting power with respect to that item and has not
received instructions from the beneficial owner) are counted for purposes of
determining the presence or absence of a quorum at the Meeting. Abstentions are
counted in tabulations of the votes cast on proposals presented to stockholders
and, therefore, have the same effect as negative votes on such proposals by
increasing the number of votes cast on such proposals. Broker non-votes are not
counted in tabulations of the votes cast on proposals presented to stockholders.
A copy of the Company's Annual Report to Stockholders for the year ended
December 31, 1997 accompanies this Proxy Statement. THE COMPANY WAS REQUIRED TO
FILE AND FILED AN ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31,
1997 WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC"). STOCKHOLDERS MAY
OBTAIN, FREE OF CHARGE, A COPY OF THE COMPANY'S 1997 ANNUAL REPORT ON FORM 10-K
(WITHOUT EXHIBITS) BY WRITING TO BROOKDALE LIVING COMMUNITIES, INC., 77 WEST
WACKER DRIVE, CHICAGO, ILLINOIS 60601. THE COMPANY WILL PROVIDE COPIES OF THE
EXHIBITS TO THE FORM 10-K UPON PAYMENT OF A REASONABLE FEE.
PRINCIPAL SECURITY HOLDERS OF THE COMPANY
The following table sets forth certain information with respect to beneficial
ownership of the Common Stock as of March 31, 1998 by (i) each person known by
the Company to be the beneficial owner of more than 5% of the Common Stock; (ii)
each director of the Company; (iii) the Chairman of the Board, the President and
Chief Executive Officer and each of the six other persons who are the most
highly compensated executive officers of the Company (the "named executive
officers"); and (iv) all directors and executive officers of the Company as a
group.
<TABLE>
<CAPTION>
Common Stock
----------------------------
Amount and Nature
of Beneficial Percent
Name and Address of Beneficial Owner(1) Ownership (2) of Class
- -------------------------------------------------------------------------------------------
<S> <C> <C>
The Prime Group, Inc.(3) 4,044,350 42.7%
Michael W. Reschke(4) 4,069,350 42.8
Mark J. Schulte(5) 341,707 3.6
Darryl W. Copeland, Jr.(6) 199,500 2.1
Wayne D. Boberg(7) 4,167 *
Bruce L. Gewertz(8) 1,667 *
Darryl W. Hartley-Leonard(9) 3,667 *
Daniel J. Hennessy(10) 13,167 *
Craig G. Walczyk(11) 6,950 *
Robert J. Rudnik 127,284 1.3
Matthew F. Whitlock(12) 7,275 *
Mark J. Iuppenlatz(13) 8,750 *
Stephan T. Beck(8) 6,250 *
Executive officers and directors as a group (15 persons)(14) 4,677,234 48.5
</TABLE>
- ---------------
* Less than 1%.
2
<PAGE>
(1) All of the directors and executive officers of the Company may be contacted
c/o Brookdale Living Communities, Inc., 77 West Wacker Drive, Chicago,
Illinois 60601.
(2) Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended, a person has beneficial ownership of any securities as to which
such person, directly or indirectly, through any contract, arrangement,
undertaking, relationship or otherwise has or shares voting power and/or
investment power and as to which such person has the right to acquire such
voting and/or investment power within 60 days. Percentage of beneficial
ownership as to any person (which includes shares as to which such person
has the right to acquire voting and/or investment power within 60 days) as
of a particular date is calculated by dividing the number of shares
beneficially owned by such person by the sum of the number of shares
outstanding as of such date and the number of shares as to which such
person has the right to acquire voting and/or investment power within 60
days.
(3) Includes shares of Common Stock held directly by The Prime Group, Inc. and
certain affiliates of The Prime Group, Inc., 100,000 shares of Common Stock
subject to an option to purchase held by Darryl W. Copeland, Jr. pursuant
to the stock option and deposit agreement between The Prime Group, Inc. and
Mr. Copeland, 25,000 shares of Common Stock that Mr. Copeland has agreed to
purchase from The Prime Group, Inc. pursuant to the stock purchase
agreement and agreement concerning option shares among The Prime Group,
Inc., Prime Group VI, L.P. and Mr. Copeland and 12,500 shares of Common
Stock subject to an option to purchase held by Blackacre Bridge Capital
L.L.C. pursuant to the stock option agreement between The Prime Group, Inc.
and Blackacre Bridge Capital L.L.C. See "Other Information--Certain
Relationships and Related Transactions--Stock Option and Purchase
Agreements." The address of The Prime Group, Inc. is 77 West Wacker Drive,
Suite 3900, Chicago, Illinois 60601.
(4) Includes 4,044,350 shares of Common Stock held directly by The Prime Group,
Inc. and certain of its affiliates, including 100,000 shares of Common
Stock subject to an option to purchase held by Darryl W. Copeland, Jr.
pursuant to the stock option agreement between The Prime Group, Inc. and
Mr. Copeland, 25,000 shares of Common Stock that Mr. Copeland has agreed to
purchase from The Prime Group, Inc. pursuant to the stock purchase
agreement and agreement concerning option shares among The Prime Group,
Inc., Prime Group VI, L.P. and Mr. Copeland, 12,500 shares of Common Stock
subject to an option to purchase held by Blackacre Bridge Capital L.L.C.
pursuant to the stock option agreement between The Prime Group, Inc. and
Blackacre Bridge Capital L.L.C. and 25,000 shares of Common Stock issuable
upon the exercise of stock options that are exercisable within 60 days of
March 31, 1998. See "Other Information--Certain Relationships and Related
Transactions--Stock Option and Purchase Agreements." Mr. Reschke is the
Chairman of the Board, Chief Executive Officer and President of The Prime
Group, Inc.
(5) Includes 297,957 shares of Common Stock held directly and 43,750 shares of
Common Stock issuable upon the exercise of stock options that are
exercisable within 60 days of March 31, 1998.
(6) Includes 12,000 shares of Common Stock held directly, 100,000 shares of
Common Stock subject to an option to purchase held by Mr. Copeland that is
exercisable within 60 days of March 31, 1998 pursuant to the stock option
and deposit agreement between The Prime Group, Inc. and Mr. Copeland,
25,000 shares of Common Stock that Mr. Copeland has agreed to purchase from
The Prime Group, Inc. pursuant to the stock purchase agreement and
agreement concerning option shares among The Prime Group, Inc., Prime Group
VI, L.P. and Mr. Copeland and 62,500 shares of Common Stock issuable upon
the exercise of stock options that are exercisable within 60 days of March
31, 1998. See "Other Information--Certain Relationships and Related
Transactions--Stock Option and Purchase Agreements."
(7) Includes 2,500 shares of Common Stock held directly and 1,667 shares of
Common Stock issuable upon the exercise of stock options that are
exercisable within 60 days of March 31, 1998.
(8) Includes shares of Common Stock issuable upon the exercise of stock options
that are exercisable within 60 days of March 31, 1998.
(9) Includes 2,000 shares of Common Stock held directly and 1,667 shares of
Common Stock issuable upon the exercise of stock options that are
exercisable within 60 days of March 31, 1998.
(10) Includes 11,000 shares of Common Stock held directly, 500 shares of Common
Stock held in custodial accounts for which Mr. Hennessy serves as custodian
and 1,667 shares of Common Stock issuable upon the exercise of stock
options that are exercisable within 60 days of March 31, 1998.
(11) Includes 700 shares of Common Stock held directly and 6,250 shares of
Common Stock issuable upon the exercise of stock options that are
exercisable within 60 days of March 31, 1998.
(12) Includes 1,025 shares of Common Stock held directly and 6,250 shares of
Common Stock issuable upon the exercise of stock options that are
exercisable within 60 days of March 31, 1998.
(13) Includes 2,500 shares of Common Stock held directly and 6,250 shares of
Common Stock issuable upon the exercise of stock options that are
exercisable within 60 days of March 31, 1998.
(14) Includes 4,376,816 shares of Common Stock held directly by executive
officers and directors as a group and 300,418 shares of Common Stock
issuable upon the exercise of stock options that are exercisable within 60
days of March 31, 1998.
3
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation provides for a minimum of
two directors and a maximum of 11 directors. The Board of Directors currently
consists of seven members. The Board of Directors is divided into three classes,
each class consisting of approximately one-third of the total number of
directors. Class I directors consist of Mr. Reschke and Dr. Gewertz; Class II
directors consist of Messrs. Hartley-Leonard and Copeland; and Class III
directors consist of Messrs. Schulte, Boberg and Hennessy. The Board of
Directors proposes the election of two Class I directors at the Meeting, each to
hold office for a three-year term until the 2001 Annual Meeting of Stockholders
and until his successor is duly elected and qualified. Class II and Class III
directors will be elected at the Annual Meetings to be held in 1999 and 2000,
respectively, for three-year terms, and until their respective successors are
duly elected and qualified. It is intended that the shares of Common Stock
underlying the accompanying form of Proxy will be voted for the nominees for
Class I director set forth below, each of whom is currently a Class I director
of the Company. If some unexpected occurrence should make necessary, in the
Board of Directors' judgment, the substitution of some other person or persons
for any of the nominees, shares will be voted for such other person or persons
as the Board of Directors may select. The Board of Directors is not aware that
any nominee may be unable or unwilling to serve as a director. The following
sets forth certain information with respect to each nominee for Class I director
and also with respect to each Class II and Class III director.
Nominees for Election
<TABLE>
<CAPTION>
Year Term
Director of Office Served as a
Name Age Class Will Expire Director Since
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Michael W. Reschke 42 Class I 1998 1997
Bruce L. Gewertz 48 Class I 1998 1997
</TABLE>
Michael W. Reschke. Michael W. Reschke has served as Chairman of the Board of
Directors of the Company since May 1997. Mr. Reschke founded The Prime Group,
Inc. in 1981 and, since that time, has served as The Prime Group, Inc.'s
Chairman, Chief Executive Officer and President. For the last 16 years, Mr.
Reschke has directed and managed the development, finance, construction,
leasing, marketing, acquisition, renovation and property management activities
of The Prime Group, Inc. Mr. Reschke also is Chairman of the Board of Prime
Retail, Inc. (NYSE: PRT), a publicly traded real estate investment trust
involved in the ownership, acquisition, development and management of upscale
factory outlet centers and the successor in interest to the former retail
division of The Prime Group, Inc. In addition, Mr. Reschke is Chairman of the
Board of Prime Group Realty Trust (NYSE: PGE), a publicly traded real estate
investment trust involved in the ownership, acquisition, development and
management of office and industrial buildings and the successor in interest to
the former office and industrial divisions of The Prime Group, Inc. Mr. Reschke
is also a member of the Board of Directors of Ambassador Apartments, Inc. (NYSE:
AAH), a publicly traded real estate investment trust involved in the ownership,
acquisition, redevelopment and management of multi-family residential projects
and the successor in interest to the former multi-family division of The Prime
Group, Inc. Mr. Reschke is licensed to practice law in the State of Illinois and
is a certified public accountant. Mr. Reschke is a member of the Chairman's
Round Table and the Executive Committee of the National Realty Committee, as
well as a full member of the Urban Land Institute. Mr. Reschke also serves on
the Board of Visitors of the University of Illinois Law School.
Dr. Bruce L. Gewertz. Dr. Bruce L. Gewertz has served as a director of the
Company since May 1997. Dr. Gewertz has served as The Dallas B. Phemister
Professor and Chairman, Department of Surgery since 1992, and served as the
first Faculty Dean of Medical Education from 1989 to 1992, at the University of
Chicago Pritzker School of Medicine. Dr. Gewertz is Editor of the Journal of
Surgical Research and serves on the Editorial Board of Annals of Vascular
Surgery.
4
<PAGE>
Directors are elected by a plurality vote (i.e., the two nominees receiving
the greatest number of votes will be elected) of the holders of the shares of
Common Stock present or represented and entitled to vote at the Meeting.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR REELECTION OF MR.
RESCHKE AND DR. GEWERTZ AS CLASS I DIRECTORS OF THE COMPANY WITH THREE-YEAR
TERMS EXPIRING IN 2001.
<TABLE>
<CAPTION>
Continuing Class II and Class III Directors
Year Term
Director of Office Served as a
Name Age Class Will Expire Director Since
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mark J. Schulte 44 Class III 2000 1997
Darryl W. Copeland, Jr. 38 Class II 1999 1997
Wayne D. Boberg 45 Class III 2000 1997
Darryl W. Hartley-Leonard 52 Class II 1999 1997
Daniel J. Hennessy 40 Class III 2000 1997
</TABLE>
Mark J. Schulte. Mark J. Schulte has served as President and Chief Executive
Officer and a director of the Company since May 1997. From January 1991 to May
1997, Mr. Schulte was employed by The Prime Group, Inc. in its Senior Housing
Division, most recently serving as Executive Vice President, with primary
responsibility for overseeing all aspects of The Prime Group, Inc.'s Senior
Housing Division. Prior to joining The Prime Group, Inc., Mr. Schulte had 13
years of experience in the development and operation of multi-family housing,
senior housing, senior and assisted living and health care facilities. Mr.
Schulte is licensed to practice law in the State of New York. Mr. Schulte serves
on the Executive Committee of the American Seniors Housing Association.
Darryl W. Copeland, Jr. Darryl W. Copeland, Jr. has served as Executive Vice
President and a director of the Company since May 1997. From March 1997 to May
1997, Mr. Copeland was a consultant to The Prime Group, Inc.'s Senior Housing
Division. From August 1989 to February 1997, Mr. Copeland was employed by
Donaldson, Lufkin & Jenrette Securities Corporation as an investment banker,
most recently serving as Senior Vice President in the Health Care and Leveraged
Finance groups.
Wayne D. Boberg. Wayne D. Boberg has served as a director of the Company since
May 1997. Mr. Boberg is licensed to practice law in the State of Illinois and
has been a partner of the law firm of Winston & Strawn since 1985, specializing
in the representation of corporate clients in connection with debt and equity
financings and acquisitions. Mr. Boberg serves on the Board of Visitors of the
Indiana University School of Law.
Darryl W. Hartley-Leonard. Darryl W. Hartley-Leonard has served as a director
of the Company since May 1997. Mr. Hartley-Leonard is Chairman of the Board and
Chief Executive Officer of Production Group International, Inc., an event
production agency, Chairman of the Board and Partner of Metropolitan Hotel
Corporation, a hotel company in the long term stay/suite hotel business directed
at the upscale market, a founding partner of H-LK Partners, a hotel development
and management company, and Chairman of the Board and Partner of Cohabaco Cigar
Co., a nationwide cigar distribution company. Mr. Hartley-Leonard retired as
Chairman of the Board of Hyatt Hotels Corporation in 1996 after a 32-year career
with Hyatt and its diversified affiliates. Mr. Hartley-Leonard also serves on
the Board of Directors of LaSalle Partners, The United States Committee for
UNICEF and Evanston Northwestern Healthcare.
5
<PAGE>
Daniel J. Hennessy. Daniel J. Hennessy has served as a director of the Company
since May 1997. Mr. Hennessy co-founded Code, Hennessy & Simmons, Inc., a
Chicago based private equity investment firm, in August 1988 and, since that
time, has served as a partner.
Information Regarding Meetings and Committees of the Board of Directors
The Company's Board of Directors has established an Audit Committee, an
Executive Committee, a Compensation Committee and a Committee of Independent
Directors.
Audit Committee. The members of the Audit Committee consist of Dr. Gewertz and
Messrs. Boberg, Hartley-Leonard and Hennessy. The Audit Committee, among other
things, makes recommendations concerning the engagement of independent auditors,
reviews the results and scope of the annual audit and other services provided by
the Company's independent auditors and reviews the adequacy of the Company's
internal accounting controls.
Executive Committee. The members of the Executive Committee consist of Messrs.
Reschke, Schulte and Copeland. The Executive Committee has been granted certain
authority to acquire and dispose of real property and the power to authorize, on
behalf of the Board of Directors, the execution of certain contracts and
agreements, including those related to certain borrowings by the Company. The
Executive Committee generally meets monthly (or more frequently if necessary)
and all actions by the committee are reported at the next meeting of the Board
of Directors.
Compensation Committee. The members of the Compensation Committee consist of
Dr. Gewertz and Messrs. Hartley-Leonard and Hennessy. The Compensation Committee
makes recommendations to the full Board of Directors concerning salary and bonus
compensation and benefits for executive officers of the Company. In addition,
the Compensation Committee has the power and authority to implement and
administer the Company's existing Stock Incentive Plan (the "1997 Stock
Incentive Plan").
Committee of Independent Directors. The members of the Committee of
Independent Directors consist of Dr. Gewertz and Messrs. Boberg, Hartley-Leonard
and Hennessy. The Committee of Independent Directors was established to consider
and approve or reject, on behalf of the full Board of Directors, any proposed
transactions between the Company and any of its affiliates, stockholders,
directors, officers or employees.
During the fiscal year ended December 31, 1997, the Audit Committee held no
meetings, the Compensation Committee held no meetings, the Committee of
Independent Directors held one meeting and the Board of Directors held seven
meetings.
6
<PAGE>
PROPOSAL NO. 2
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Company has selected Ernst & Young LLP as
independent auditors of the Company for the year ending December 31, 1998. Ernst
& Young LLP served in this capacity for the year ended December 31, 1997. A
representative of Ernst & Young LLP will attend the meeting and, while not
intending to make a statement, will respond to appropriate questions directed to
Ernst & Young LLP.
The appointment of auditors is approved annually by the Board of Directors and
subsequently submitted to the stockholders for ratification. The decision of the
Board of Directors is based on the recommendation of the Audit Committee. The
Audit Committee also reviews and approves proposed nonaudit services to ensure
that they will not impair the independence of the auditors.
Before making its recommendation to the Board of Directors for appointment of
Ernst & Young LLP, the Audit Committee carefully considered that firm's
qualifications as auditors for the Company. This included a review of its
performance last year, as well as its reputation for integrity and competence in
the fields of accounting and auditing. The Audit Committee has expressed its
satisfaction with Ernst & Young LLP in all of these respects.
The approval by the affirmative vote of the holders of a majority of the
shares of Common Stock present or represented and entitled to vote at the
Meeting is required to approve the appointment of Ernst & Young LLP as the
Company's auditors. Abstentions will have the same effect as negative votes.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR RATIFICATION OF
THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S AUDITORS FOR THE YEAR
ENDING DECEMBER 31, 1998.
COMPENSATION OF DIRECTORS
The Company pays its directors who are not employees of the Company a fee for
their services as directors. Such persons receive annual compensation of $12,000
plus a fee of $1,000 for attendance at each meeting of the Board of Directors
and $500 for attendance at each committee meeting. The members of the Board
receive reimbursement of all travel and lodging expenses related to their
attendance at both Board and committee meetings.
Pursuant to the 1997 Stock Incentive Plan, the Company granted options to
purchase an aggregate of 20,000 shares of Common Stock to non-employee directors
as follows (with the number of shares of Common Stock to be issued upon exercise
thereof indicated parenthetically): Wayne D. Boberg (5,000), Bruce L. Gewertz
(5,000), Darryl W. Hartley-Leonard (5,000) and Daniel J. Hennessy (5,000). The
options vest, subject to certain conditions being met, at the rate of one-third
per year over the three years following the date of grant, commencing on the
first anniversary of their date of grant, and have a term of 10 years. The
exercise price of such options is $11.50 per share, which represents the initial
public offering price for the Common Stock. The exercise price for any of such
options is generally payable in cash or, in certain circumstances, by the
surrender, at the fair market value on the date on which such option is
exercised, of shares of Common Stock. See "Compensation of Executive
Officers--1997 Stock Incentive Plan."
7
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table
Prior to the completion of its initial public offering on May 7, 1997, the
Company did not pay any compensation to its officers. The following table sets
forth the compensation earned for the period from May 7, 1997 to December 31,
1997 with respect to the named executive officers.
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
----------------------- ---------------
Name and Principal Position Salary Bonus Options/SARs(1)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Michael W. Reschke
Chairman of the Board $ 63,653 $ -- 100,000
Mark J. Schulte
President and Chief Executive Officer 173,937 203 175,000
Darryl W. Copeland, Jr.
Executive Vice President 159,134 150,101(2) 250,000
Craig G. Walczyk
Vice President - Chief Financial Officer 79,062 203 25,000
Robert J. Rudnik
General Counsel and Secretary 50,903(3) 217 30,000
Matthew F. Whitlock
Vice President - Acquisitions 60,087 116,651 25,000
Mark J. Iuppenlatz
Vice President - Development 85,388 15,101 25,000
Stephan T. Beck
Vice President - Operations 63,250 12,151 25,000
</TABLE>
- --------------------------
(1) Granted pursuant to the 1997 Stock Incentive Plan. See "--1997 Stock
Incentive Plan."
(2) Mr. Copeland received a signing bonus of $150,000 from the Company in May
1997.
(3) Mr. Rudnik has served as General Counsel and Secretary of the Company since
July 1997.
Employment Agreements
The Company has entered into employment agreements with Messrs. Reschke,
Schulte, Copeland, Whitlock and Iuppenlatz. These agreements (the "Employment
Agreements") generally provide that such executive officers shall devote
substantially all of their business time to the operation of the Company, except
Mr. Reschke, who shall only be required to devote such time as he deems
necessary to fulfill his duties and obligations to the Company as Chairman of
the Board. The Employment Agreements establish the initial base salaries
reflected in the table above and provide for an initial three-year term (except
for Mr. Copeland, whose Employment Agreement has an initial four-year term)
which is automatically extended for an additional year after expiration of the
initial term and any extension period unless the Company provides the executive
officer with at least 30 days' prior written notice that such term shall not be
extended. The Employment Agreements with Messrs. Reschke, Schulte and Copeland
also provide for an annual bonus of up to 100% of the base salary based on
certain performance criteria. The Employment Agreements with Messrs. Whitlock
and Iuppenlatz
8
<PAGE>
also provide for annual bonuses based on certain performance criteria. If any of
such Employment Agreements are terminated by the Company "without cause" or due
to disability, the executive so terminated will be entitled to a lump sum
payment. With regard to Messrs. Whitlock and Iuppenlatz, such lump sum payment
will be an amount equal to six months' base salary. With regard to Messrs.
Reschke, Schulte and Copeland, such executives will receive a lump sum payment
equal to the base salary for one year plus a pro rata portion of the annual
bonus payable under such executives' respective Employment Agreements. Messrs.
Reschke, Schulte and Copeland may terminate their respective Employment
Agreements and be entitled to approximately two times their annual compensation
and bonus in the event of a "change in control" of the Company and a material
diminution of their respective duties and responsibilities or compensation. In
the event any of Messrs. Schulte, Copeland, Whitlock and Iuppenlatz voluntarily
terminates his employment with the Company or in the event the employment of any
of Messrs. Schulte, Copeland, Whitlock and Iuppenlatz is terminated by the
Company "with cause," the executive will be subject to a non-compete covenant
which has a term of two years for each of Messrs. Schulte and Copeland and which
has a term of one year for each of Messrs. Whitlock and Iuppenlatz. Mr. Reschke
is bound by a non-compete agreement among The Prime Group, Inc. and certain of
its affiliates (collectively, "PGI"), the Company and Mr. Reschke. See "Other
Information--Certain Relationships and Related Transactions--Non-Compete
Agreement." In addition, PGI and Mr. Copeland entered into certain agreements
pursuant to which Mr. Copeland has the option to purchase certain additional
shares of Common Stock from PGI. See "Other Information--Certain Relationships
and Related Transactions--Stock Option and Purchase Agreements."
Option Grants in 1997
The following table shows all options to purchase Common Stock granted to each
of the named executive officers of the Company in 1997. The table also shows the
potential value of such grants if the Common Stock appreciates at compounded
annual rates of 5% and 10% over the remaining term of the option from the grant
date price. The 5% and 10% rates of appreciation based on the grant date price
are required to be disclosed by the rules of the SEC and are not intended to
forecast potential future appreciation, if any, in the price of the Company's
Common Stock. The Company did not use an alternative present value formula
permitted by the rules of the SEC because, in the Company's view, potential
future unknown or volatile factors result in there being no such formula that
can determine with reasonable accuracy the present value of such option grants.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed Annual Rates
of Stock Price Appreciation
for Option Term Based on
Individual Grants Grant-Date Stock Price
----------------------------- -----------------------------
% of Total
Options/SARs Exercise
Granted to or Base
Options/SARs Employees in Price Expiration
Name Granted (#) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Michael W. Reschke 100,000 13.48% $11.50 05/07/07 $ 723,229 $1,832,804
Mark J. Schulte 175,000 23.60 11.50 05/07/07 1,265,650 3,207,407
Darryl W. Copeland, Jr. 250,000 33.71 11.50 05/07/07 1,808,072 4,582,010
Craig G. Walczyk 25,000 3.37 11.50 05/07/07 180,807 458,201
Robert J. Rudnik 30,000 4.05 11.875 06/30/97 224,044 567,771
Matthew F. Whitlock 25,000 3.37 11.50 05/07/07 180,807 458,201
Mark J. Iuppenlatz 25,000 3.37 11.50 05/07/07 180,807 458,201
Stephan T. Beck 25,000 3.37 11.50 05/07/07 180,807 458,201
</TABLE>
9
<PAGE>
Option Exercises and Holdings
The following table sets forth information with respect to the Company's named
executive officers concerning options held as of December 31, 1997. No options
were exercisable by the named executive officers during 1997.
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money
Options at 12/31/97 Options at 12/31/97(1)
------------------------------ --------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Michael W. Reschke -- 100,000 -- $ 575,000
Mark J. Schulte -- 175,000 -- 1,006,250
Darryl W. Copeland, Jr. -- 250,000 -- 1,437,500
Craig G. Walczyk -- 25,000 -- 143,750
Robert J. Rudnik -- 30,000 -- 161,250
Matthew F. Whitlock -- 25,000 -- 143,750
Mark J. Iuppenlatz -- 25,000 -- 143,750
Stephan T. Beck -- 25,000 -- 143,750
</TABLE>
- ----------------
(1) These amounts were calculated by subtracting the exercise price from the
market value of the underlying Common Stock as of year-end. The market
value of the Common Stock was $17.25 per share as of December 31, 1997 (the
last trading date in 1997) based on the closing price per share on the
Nasdaq National Market.
1997 Stock Incentive Plan
The Company established the 1997 Stock Incentive Plan for the purpose of
attracting and retaining directors, executive officers and other key employees.
Each option granted pursuant to the 1997 Stock Incentive Plan shall be
designated at the time of grant as either an "incentive stock option" or as a
"non-qualified stock option."
The 1997 Stock Incentive Plan provides for the grant of options ("Options") to
purchase a specified number of shares of Common Stock. Under the 1997 Stock
Incentive Plan, 830,000 shares of Common Stock were made available for grants.
Participants in the 1997 Stock Incentive Plan, who may be directors, officers or
employees of the Company or its subsidiaries, or Company-owned partnerships or
limited liability companies, are selected by the Compensation Committee. See
"Compensation of Directors."
The 1997 Stock Incentive Plan authorizes the Compensation Committee to grant
Options at an exercise price to be determined by it, provided that such price
cannot be less than 100% of the fair market value of the Common Stock on the
date on which the Option is granted. If, however, an incentive stock option is
to be granted to an employee who owns over 10% of the total combined voting
power of all classes of the Company's capital stock, then the exercise price may
not be less than 110% of the fair market value of the Common Stock covered by
such option on the day it is granted. The exercise price for any of these
Options is generally payable in cash or, in certain circumstances, by the
surrender, at the fair market value on the date on which the Option is
exercised, of shares of Common Stock.
In connection with the completion of the Company's initial public offering of
Common Stock in May 1997 (the "IPO"), the Company granted Options to purchase an
aggregate of 675,000 shares of Common Stock (the "Initial Grants") to the
following executive officers of the Company (with the number of shares of Common
Stock to be issued upon exercise thereof indicated parenthetically): Michael W.
Reschke (100,000); Mark J. Schulte (175,000); Darryl W. Copeland, Jr. (250,000);
Craig G. Walczyk (25,000); Matthew F.
10
<PAGE>
Whitlock (25,000); Mark J. Iuppenlatz (25,000); Stephan T. Beck (25,000);
Margaret B. Shontz (25,000); and Sheryl A. Wolf (25,000). The Initial Grants
vest, subject to certain conditions being met, at the rate of 25% per year over
the four years following the date of grant, commencing on the first anniversary
of their date of grant, and have a term of 10 years. The exercise price of the
Options issued pursuant to the Initial Grants is $11.50 per share, which
represents the initial public offering price of the Common Stock.
Concurrent with the completion of the IPO, the Company also granted Options to
purchase an aggregate of 20,000 shares of Common Stock to the Company's non-
employee directors that vest, subject to certain conditions being met, at the
rate of one-third per year over the three years following the date of grant,
commencing on the first anniversary of their date of grant, and have a term of
10 years. The exercise price of these Options is $11.50 per share, the initial
public offering price of the Common Stock.
On June 30, 1997, the Company granted an aggregate of 56,000 Options to
certain employees that vest, subject to certain conditions being met, at the
rate of 25% per year over the four years following the date of grant, commencing
on the first anniversary of their date of grant, and have a term of 10 years.
The exercise price of these Options is $11.875 per share.
On December 26, 1997, the Company granted an aggregate of 10,600 Options to
certain employees that vest, subject to certain conditions being met, at the
rate of 25% per year over the four years following the date of grant, commencing
on the first anniversary of their date of grant, and have a term of 10 years.
The exercise price of these Options is $16.6625 per share.
Upon a "change in control" (as defined in the 1997 Stock Incentive Plan), all
unvested Options then outstanding, and to the extent not previously forfeited,
will vest. The rights of any participants to exercise an Option may not be
transferred in any way other than by will or applicable laws of descent and
distribution.
Under the 1997 Stock Incentive Plan, the Compensation Committee may grant
options with lower exercise prices in substitution for outstanding options with
higher exercise prices. In addition, in the event of certain extraordinary
events, the Compensation Committee may make adjustments in the aggregate number
and kind of shares reserved for issuance, the number and kind of shares covered
by outstanding awards and the exercise prices specified therein as may be
determined to be appropriate.
As of December 31, 1997, 68,400 additional shares of Common Stock were
available to be granted pursuant to the 1997 Stock Incentive Plan.
For a description of the federal tax consequences applicable to the 1997 Stock
Incentive Plan, see "1998 Stock Incentive Plan--Federal Tax Consequences
Associated With the Stock Incentive Plans."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors, which is composed
entirely of non-employee directors, is charged with determining compensation for
the Company's executive officers. Dr. Bruce L. Gewertz and Messrs. Darryl W.
Hartley-Leonard and Daniel J. Hennessy currently serve on the Compensation
Committee.
No executive officer of the Company served as a member of (i) the compensation
committee of another entity, one of whose executive officers served on the
Company's Compensation Committee, (ii) the Board of Directors of another entity,
one of whose executive officers served on the Company's Compensation Committee,
or (iii) the compensation committee of another entity, one of whose executive
officers served as a member of the Company's Board of Directors, during the year
ended December 31, 1997.
11
<PAGE>
REPORT OF COMPENSATION COMMITTEE
The Compensation Committee makes recommendations to the full Board of
Directors concerning salary and bonus compensation and benefits for executive
officers of the Company. In addition, the Compensation Committee has the power
and authority to implement and administer the Company's Stock Incentive Plans.
The current members of the Compensation Committee are Dr. Gewertz and Messrs.
Hartley-Leonard and Hennessy. Prior to the completion of the IPO, the Company
did not pay any compensation to its executive officers.
The purpose of the Company's executive compensation programs is to attract and
retain highly qualified individuals while providing the economic incentive
necessary to achieve the Company's performance goals. The Company intends to
maintain executive compensation policies, plans and programs that will reward
executive officers, provide incentives for the achievement of the Company's
operating and financial objectives and, consequently, maximize stockholder
value. The Compensation Committee believes that, through their ownership of
equity interests in the Company (through ownership of Common Stock and Options),
the financial interests of the Company's executive officers are closely aligned
with the financial interests of the Company's stockholders.
While the Compensation Committee will continue to evaluate the executive
compensation practices of the Company's industry peer group as an important
factor in determining executive compensation, the Company's achievement of its
performance goals and the contribution of executive officers to such achievement
will greatly influence whether the Company's compensation programs remain at or
exceed the median of its peer group. The peer group of companies indentified by
the Compensation Committee is further described in the Performance Graph
presented elsewhere in this Proxy Statement.
The Company's executive compensation programs consist of the following
components:
(a) employment agreements with its most senior executive officers setting base
salaries at fixed levels, subject to discretionary increases determined by
the Compensation Committee, and containing such other provisions
sufficient to attract and retain executive officers capable of
contributing to the Company's performance objectives;
(b) annual performance bonuses based on certain performance criteria;
(c) stock options with scheduled vesting periods to align the interests of the
executive officers with those of the Company's stockholders; and
(d) participation in other benefit programs generally available to employees.
The Company has entered into employment agreements with the Chairman of the
Board, the President and Chief Executive Officer, the Executive Vice President
and certain other senior executive officers. The employment agreements
established the base salaries of such executive officers for 1997. The
annualized base salary of the Chairman of the Board for the period from May 7,
1997 to December 31, 1997 was $100,000.
12
<PAGE>
The annualized base salary for the President and Chief Executive Officer for
the period from May 7, 1997 through December 31, 1997 was $275,000. The
annualized base salary for the Executive Vice President for the period from May
7, 1997 through December 31, 1997 was $250,000. See "Compensation of Executive
Officers--Employment Agreements." As provided in the employment agreements,
annual base salary increases may be made at the discretion of the Compensation
Committee based on individual performance reviews.
Other elements of the employment agreements that serve to retain senior
executive officers include non-competition provisions that under certain
circumstances extend for a specified time beyond the term of employment. The
employment agreements of the President and Chief Executive Officer and the
Executive Vice President generally prohibit these executive officers from
directly or indirectly competing with the business of the Company during the
term of employment and for a two-year period after termination "with cause" by
the Company. See "Compensation of Executive Officers--Employment Agreements."
The Chairman of the Board is bound by the non-compete agreement among PGI, the
Company and the Chairman of the Board. See "Other Information--Certain
Relationships and Related Transactions--Non-Compete Agreement."
In connection with the Company's IPO, the Company granted stock options to the
Chairman of the Board, the President and Chief Executive Officer, the Executive
Vice President and certain other executive officers of the Company. The Company
determined the number of stock options to be granted to each executive officer
based upon discussions with the underwriters participating in the Company's IPO
and a comparative analysis of compensation programs for public companies similar
to the Company. The Chairman of the Board, the President and Chief Executive
Officer and the Executive Vice President were granted options to purchase
100,000, 175,000 and 250,000 shares of Common Stock, respectively. The
Compensation Committee believes the options granted under the 1997 Stock
Incentive Plan and the vesting schedules thereof will continue to align the
interests of the Company's executive officers with those of the Company's
stockholders by emphasizing long-term stock ownership and increases in
stockholder value. See "Compensation of Executive Officers--1997 Stock Incentive
Plan."
The Internal Revenue Code of 1986, as amended (the "Code"), limits the ability
of a publicly-held corporation such as the Company to deduct compensation in
excess of $1,000,000 per individual, other than certain performance-based
compensation. It is the Company's policy to take this rule into account in
setting the compensation of its affected executives. The Company does not expect
to be denied any deduction under Section 162(m) of the Code for compensation
paid during its taxable year ending December 31, 1997. The 1997 Stock Incentive
Plan was structured with the intention that compensation attributable to options
granted thereunder would not be subject to the Section 162(m) limitation. Based
upon Department of Treasury regulations, bonuses payable to the Company's
executives under their present employment agreements and compensation
attributable to options granted under the 1997 Stock Incentive Plan may be
considered as compensation subject to the Section 162(m) limitation.
Accordingly, it is possible that in some future year some portion of the
compensation to the Company executive will not be tax deductible under Section
162(m). This will depend on the market price of the Company's shares on the date
options are exercised and the number of options exercised in any one taxable
year.
COMPENSATION COMMITTEE
Dr. Bruce L. Gewertz
Darryl W. Hartley-Leonard
Daniel J. Hennessy
13
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Company's Common Stock from May 2, 1997, the date the Company's Common Stock
began trading on the Nasdaq National Market, through December 31, 1997, with the
cumulative total return of the Nasdaq Composite and the Assisted Living
Composite (as defined below*). The graph assumes an initial investment of $100
in the Company's Common Stock on May 2, 1997. The initial public offering price
of the Company's Common Stock was $11.50 per share.
Comparison of Cumulative Total Return**
May 2, 1997 to December 31, 1997
<TABLE>
<CAPTION>
5/2/97 6/97 7/97 8/97 9/97 10/97 11/97 12/31/97
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Brookdale Living Communities, Inc. $100.00 $104.84 $119.36 $141.94 $163.44 $163.44 $165.59 $148.39
Assisted Living Composite 100.00 116.78 119.08 113.92 124.14 128.43 124.19 132.90
Nasdaq Composite 100.00 102.98 113.82 113.35 120.38 113.80 114.30 112.14
</TABLE>
________________
* Assisted Living Composite is composed of selected assisted living companies.
These companies are American Retirement Corporation, Assisted Living
Concepts, Inc., Alternative Living Services, Inc., ARV Assisted Living, Inc.,
Atria Communities, Inc., Carematrix Corporation, Capital Senior Living
Corporation, Emeritus Corporation, Greenbriar Corporation, Karrington Health,
Inc., Regent Assisted Living, Inc. and Sunrise Assisted Living, Inc.
** Cumulative Total Return assumes an initial investment of $100 in the
Company's Common Stock on May 2, 1997 and the reinvestment of dividends. The
Company did not pay any dividends during the period presented.
14
<PAGE>
PROPOSAL NO. 3
APPROVAL OF THE 1998 STOCK INCENTIVE PLAN
1998 Stock Incentive Plan
The Board of Directors has adopted, subject to stockholder approval, the 1998
Stock Incentive Plan (the "1998 Stock Incentive Plan") for the purpose of
attracting and retaining directors, executive officers and other key employees.
Each option granted pursuant to the 1998 Stock Incentive Plan shall be
designated at the time of grant as either an "incentive stock option" or as a
"non-qualified stock option." The summary of the 1998 Stock Incentive Plan set
forth below is qualified in its entirety by reference to the text of the 1998
Stock Incentive Plan attached hereto as Annex A.
The 1998 Stock Incentive Plan provides for the grant of options ("1998
Options") to purchase a specified number of shares of Common Stock. Under the
1998 Stock Incentive Plan, 250,000 shares of Common Stock will be available for
grants. With respect to any optionee during any calendar year, the maximum
number of shares of Common Stock that may be subject to 1998 Options under the
1998 Stock Incentive Plan is 250,000. Participants in the 1998 Stock Incentive
Plan, who may be directors, officers or employees of the Company or its
subsidiaries or Company-owned partnerships or limited liability companies, will
be selected by the Compensation Committee.
The 1998 Stock Incentive Plan authorizes the Compensation Committee to grant
1998 Options at an exercise price to be determined by it, provided that such
price cannot be less than 100% of the fair market value of the Common Stock on
the date on which the 1998 Option is granted. If, however, an incentive stock
option is to be granted to an employee who owns over 10% of the total combined
voting power of all classes of the Company's stock, then the exercise price may
not be less than 110% of the fair market value of the Common Stock covered by
such 1998 Option on the day it is granted.
Generally, 1998 Options granted under the 1998 Stock Incentive Plan will vest
as determined by the Compensation Committee. Upon a "change in control" (as
defined in the 1998 Stock Incentive Plan), however, all unvested 1998 Options
then outstanding, and to the extent not previously forfeited, will vest. The
terms of the 1998 Options may not exceed 10 years. The rights of any
participants to exercise a 1998 Option may not be transferred in any way other
than by will or applicable laws of descent and distribution.
Under the 1998 Stock Incentive Plan, the Compensation Committee may grant
options with lower exercise prices in substitution for outstanding options with
higher exercise prices. In addition, in the event of certain extraordinary
events, the Compensation Committee may make adjustments in the aggregate number
and kind of shares reserved for issuance, the number and kind of shares covered
by outstanding awards and the exercise prices specified therein as may be
determined to be appropriate.
No Options may be granted under the 1998 Stock Incentive Plan after the 10th
anniversary of the date on which the plan was adopted by the Board of Directors
(March 2, 2008).
15
<PAGE>
Federal Tax Consequences Associated With the Stock Incentive Plans
The following is a general description of the federal income tax consequences
associated with the 1997 Stock Incentive Plan and the 1998 Stock Incentive Plan
(collectively, the "Stock Incentive Plans"). It is not intended as a description
of all federal tax consequences, nor does it describe state, foreign or local
tax consequences.
No taxable income is realized by the optionee upon the grant or exercise of an
incentive stock option. However, the exercise of an incentive stock option
increases the optionee's alternative minimum taxable income and may, therefore,
result in alternative minimum tax liability for the optionee. If no disposition
of shares issued to an optionee pursuant to the exercise of an incentive stock
option is made by the optionee within two years from the date of grant or within
one year after the transfer of such shares to the optionee, then (a) upon sale
of such shares, any amount realized in excess of the option price (the amount
paid for the shares) will be taxed to the optionee as a long-term capital gain
and any loss sustained will be a long-term capital loss, and (b) no deduction
will be allowed to the Company.
If any share of Common Stock acquired upon the exercise of an incentive stock
option is disposed of prior to the expiration of the two-year and one-year
holding periods described above (a "disqualifying disposition"), generally (a)
the optionee will realize ordinary income in the year of disposition in an
amount equal to the excess (if any) of the fair market value of the shares at
exercise (or, if less, the amount realized on an arm's length sale of such
shares) over the option price thereof, and (b) the Company will be entitled to a
deduction in such amount. Any further gain realized will be taxed as short-term
or long-term capital gain and will not result in any deduction by the Company.
To the extent incentive stock options to any optionee become exercisable for
the first time in any calendar year for shares having a fair market value
(determined at the date of grant of the option) in excess of $100,000, the
option will be treated for tax purposes as a non-qualified option.
With respect to non-qualified options, no income is realized by the optionee
at the time the option is granted. Generally, (a) at exercise, ordinary income
is realized by the optionee in an amount equal to the difference between the
option price and the fair market value of the shares on the date of exercise,
and the Company receives a tax deduction for the same amount provided it
satisfies certain withholding obligations, and (b) at disposition, appreciation
or depreciation after the date of exercise is treated as either short-term or
long-term capital gain or loss depending on how long the shares have been held.
The approval by the affirmative vote of the holders of a majority of the
shares of Common Stock present or represented and entitled to vote at the
Meeting is required to approve the 1998 Stock Incentive Plan. Abstentions will
have the same effect as negative votes.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR APPROVAL OF THE
1998 STOCK INCENTIVE PLAN.
16
<PAGE>
OTHER INFORMATION
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of the ownership and changes in the
ownership (Forms 3, 4 and 5) with the SEC and the National Association of
Securities Dealers. Officers, directors and beneficial owners of more than 10%
of the Company's stock are required by SEC regulation to furnish the Company
with copies of all such forms which they file.
Based solely on the Company's review of the copies of Forms 3, 4 and 5 and the
amendments thereto received by it for the period ended December 31, 1997, or
written representations from certain reporting persons that no Forms 5 were
required to be filed by those persons, the Company believes that during the
period ended December 31, 1997, no reportable transactions were reported late
except the following: (i) Mr. Hennessy's purchase of 2,000 shares of Common
Stock on August 22, 1997 was reported on March 20, 1998 and (ii) Mr. Schulte's
purchase of 1,000 shares of Common Stock on December 31, 1997 was reported on
February 17, 1998. With the following exceptions, based solely on the Company's
review of the copies of Forms 3, 4 and 5 and the amendments thereto received by
it for the period ended December 31, 1997, no reports on Form 3, 4 or 5 required
to be filed for such period were late other than one Form 4 report filed by each
of Mr. Hennessy and Mr. Schulte and one Form 3 report filed by each of Mr.
Rudnik, Ms. Shontz and Ms. Wolf.
Certain Relationships and Related Transactions
Formation Agreement. Upon completion of the IPO, the Company and PGI entered
into the Formation Agreement, pursuant to which PGI transferred to the Company
all of the common stock of BLC Property, Inc., its interests in the Heritage and
the Devonshire facilities and the operations relating to its senior and assisted
living division. In return for such contribution, the Company issued 1,703,043
shares of its Common Stock to PGI and assumed certain indebtedness in the
aggregate amount of $65.0 million. In addition, the Company paid PGI
approximately $8.4 million to reimburse PGI for earnest monies previously paid
by PGI in connection with the acquisition of the Edina Park Plaza and Hawthorn
Lakes facilities, the Park Place facility, a third party's interest in the
Heritage and the Devonshire facilities and the proposed acquisition of the
development sites located in Glen Ellyn, Illinois, Southfield, Michigan and
Austin, Texas for certain costs and fees previously paid by PGI relating to the
replacement credit enhancement on the $65.0 million of tax-exempt bonds relating
to the Heritage and the Devonshire facilities and for certain costs and expenses
previously paid by PGI relating to the issuance and distribution of Common Stock
pursuant to the IPO. In accordance with the Formation Agreement, Mark J. Schulte
transferred all of his interests in PGI's senior and assisted living division to
the Company in exchange for 296,957 shares of Common Stock from the Company.
Except as expressly set forth in the Formation Agreement with regard to title,
liens, claims and certain other items and PGI's representations that the
Heritage, Devonshire and Hallmark facilities had been operated in the ordinary
course since December 31, 1996, no party made any representation or warranty as
to the assets, businesses or liabilities transferred or assumed pursuant to such
agreement, as to any consents or approvals required in connection therewith, as
to the value thereof or as to freedom from counterclaim with respect to any
claim of any party. Except as expressly set forth in the Formation Agreement,
all assets were transferred on an "as is, where is" basis. In the Formation
Agreement, PGI covenanted that the partnerships owning the Heritage and the
Devonshire facilities had no less than $800,000 in the aggregate in unrestricted
cash, plus any cash balances in real estate tax and capital reserve accounts,
upon the completion of the IPO; however, any unrestricted cash in excess of
$800,000 then held by such partnerships was distributed to PGI.
17
<PAGE>
The Company indemnified PGI and its affiliates against certain losses, claims,
damages or liabilities including those arising out of: (i) any inaccurate
representation or breach of warranty by the Company under the Formation
Agreement; and (ii) any indebtedness, lease, contract or other obligation
assumed by the Company pursuant to the Formation Agreement. The Company also
indemnified PGI, as a controlling person, against any loss, claim, damage or
liability arising out of the IPO, except for losses, claims, damages or
liabilities arising from the inaccuracy of information supplied in writing by
PGI for inclusion in the prospectus related thereto. PGI similarly indemnified
the Company and its subsidiaries with respect to any inaccurate representation
or breach of warranty by PGI under the Formation Agreement.
Registration Rights Agreement. Upon completion of the IPO, the Company granted
demand and incidental registration rights to PGI for the registration of shares
of Common Stock owned by PGI under the Securities Act of 1933, as amended. Three
demand registrations are permitted during the first five years following the IPO
and one registration per year each year thereafter until PGI owns less than 10%
of the outstanding Common Stock. The Company will pay the fees and expenses of
the demand registrations and the incidental registrations, while PGI will pay
all underwriting discounts and commissions. These registration rights are
subject to certain conditions and limitations, including the right of
underwriters to limit the number of shares owned by PGI included in such
registration.
Voting Agreement. Upon completion of the IPO, PGI entered into a Voting
Agreement pursuant to which it agreed to vote all of its shares of Common Stock
at any meeting at which directors are elected in favor of the election of
independent directors so that after such election, if such persons are elected,
there will be at least four independent directors. The Voting Agreement will
continue in effect until the earlier of three years from the closing date of the
IPO and the date PGI first owns less than 10% of the outstanding Common Stock.
Non-Compete Agreement. Upon completion of the IPO, the Company, PGI and
Michael W. Reschke entered into a Non-Compete Agreement that will prevent PGI
and Mr. Reschke from developing, acquiring, owning, managing or operating senior
and assisted living facilities and semi-acute care facilities in the United
States for a period expiring on the earlier of (i) four years from the closing
date of the IPO and (ii) one year from the date of a merger of the Company or
the sale of all or substantially all of the stock or assets of the Company;
however, PGI will be permitted to maintain its ownership interest in the Island
on Lake Travis facility. In addition, to the extent PGI or Mr. Reschke were to
acquire a group of properties that included facilities similar to those operated
by the Company, then the Company would have the right and opportunity to
purchase such similar facilities at a price equal to their fair market value.
PGI and Mr. Reschke will be allowed to provide debt, preferred equity or lease
financing for properties that are similar to the facilities owned or managed by
the Company.
Management Agreement. Upon completion of the IPO, the Company and PGI entered
into a management agreement for a term of two years with respect to the Island
on Lake Travis facility. The Company is paid a monthly fee of 5.0% of the gross
revenues of such facility for each month and reimbursement of expenses. The
management agreement may be terminated by PGI only for cause as set forth in the
management agreement during its initial term and upon 60 days' prior written
notice at any time after the expiration of the initial term. The Company may
terminate the management agreement at any time upon 60 days' advance notice.
Space Sharing Agreement. Upon completion of the IPO, the Company and PGI
entered into a space sharing agreement for office space located at 77 West
Wacker Drive in Chicago, Illinois to be used as headquarters for the Company.
The space sharing agreement, which included a base rental rate of approximately
$8,800 per month plus a pro rata share of real estate taxes and operating
expenses, was terminated effective September 30, 1997.
18
<PAGE>
Office Lease. On September 25, 1997, the Company entered into a five year
lease (the "Office Lease"), commencing October 1, 1997, for its corporate office
with 77 West Wacker Limited Partnership (the "Landlord"), a partnership which is
now owned by Prime Group Realty Trust, the publicly-traded successor of PGI's
office and industrial divisions. The corporate office is located at 77 West
Wacker Drive, Suite 4800, Chicago, Illinois 60601. The office space is
approximately 13,500 square feet, with base rent of $18.50 per square foot
escalating at $0.75 per square foot each anniversary of the commencement date.
On October 2, 1997, in connection with the signing of the lease, the Company
received a $404,000 cash payment from the Landlord.
On March 17, 1998, the Company and the Landlord amended the Office Lease,
pursuant to which the Company and the Landlord agreed (i) to relocate the
Company's corporate office from the 48th floor to the 44th floor effective April
24, 1998, (ii) to increase the space leased by the Company to approximately
22,600 square feet and (iii) to extend the term of the Office Lease until April
30, 2005. The base rent under the amended Office Lease continues to be $18.50
per square foot, escalating $0.75 per square foot on each May 1 of the term
commencing May 1, 1999. In consideration for executing the amendment of the
Office Lease, the Company received a $452,000 cash payment from the Landlord.
Stock Option and Purchase Agreements. Upon completion of the IPO, The Prime
Group, Inc. entered into a stock option agreement with Darryl W. Copeland, Jr.
pursuant to which Mr. Copeland received an option, subject to a one year vesting
period, to purchase 100,000 shares of Common Stock from The Prime Group, Inc. at
a purchase price of $0.01 per share. In the event the employment of Mr. Copeland
is terminated by the Company for any reason or in the event Mr. Copeland
voluntarily terminates his employment with the Company due to a "change of
control" of the Company and a material diminution of his duties and
responsibilities or compensation prior to the expiration of the vesting period,
the option will immediately vest. Upon completion of the IPO, Mr. Copeland also
entered into an agreement with PGI to purchase an additional 25,000 shares of
Common Stock.
Exchangeable Note Transaction. PGI has issued an exchangeable note having a
principal amount of $20 million and a five year term (the "Exchangeable Note")
to an unaffiliated third party (the "Noteholder"), the repayment of which is
secured by the pledge by PGI of 1,370,000 shares of its Common Stock. Pursuant
to the terms of the Exchangeable Note, the Noteholder will have the right,
commencing on November 15, 1998 (the "Initial Exchange Date"), to exchange a
portion of the outstanding principal amount of the Exchangeable Note, plus the
accrued interest thereon, for shares of Common Stock of the Company held by PGI,
at the exchange rate specified therein. On and after the Initial Exchange Date,
the Noteholder will be entitled to exchange up to $5 million of the outstanding
principal under the Exchangeable Note, plus accrued interest thereon, for shares
of Common Stock of the Company held by PGI. Thereafter, the Noteholder will be
entitled to exchange up to a further $5 million of the outstanding principal
amount under the Exchangeable Note, plus accrued interest thereon, on each of
January 15, 1999, March 15, 1999 and May 15, 1999. Subject to certain
exceptions, the numbers of shares of Common Stock subject to exchange for a
given amount of principal and accrued interest to be exchanged pursuant to the
terms of the Exchangeable Note will be equal to (x) such amount of principal and
accrued interest divided by (y) the product of (A) 88% multiplied by (B) the
average of the closing bid prices for the Common Stock on the Nasdaq National
Market on the seven trading days immediately proceeding the date of exchange.
Other Transactions. Wayne D. Boberg, a director of the Company, is a partner
of the law firm of Winston & Strawn, which has provided, and continues to
provide, legal services to the Company. As of the date of this Proxy Statement,
Mr. Boberg beneficially owns 2,500 shares of Common Stock and has Options to
acquire an additional 5,000 shares of Common Stock.
Transactions between the Company and its officers, directors, stockholders and
their affiliates require the approval of the Committee of Independent Directors
of the Board of Directors.
19
<PAGE>
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 1999 Annual Meeting
of Stockholders must be received by the Company no later than December 21, 1998
pursuant to the proxy soliciting rules of the SEC in order to be considered for
inclusion in the Company's Proxy Statement and form of Proxy related to the 1999
annual meeting. Nothing in this paragraph shall be deemed to require the Company
to include in its Proxy Statement and Proxy relating to the 1999 annual meeting
any stockholder proposal which may be omitted from the Company's proxy materials
pursuant to applicable regulations of the SEC in effect at the time such
proposal is received. Pursuant to the Company's Amended and Restated By-laws,
any stockholder of the Company who intends to present a proposal for action at
the 1999 annual meeting also must file a copy thereof with the Secretary of the
Company at least 60 days prior to the meeting; however, in the event that less
than 75 days' notice or prior public disclosure of the date of the meeting is
given or made to stockholders, notice by the stockholder to be timely must be
received no later than the close of business on the 15th day following the day
on which such notice of the date or public disclosure was made.
OTHER BUSINESS
The Board of Directors knows of no business that will be presented for
consideration at the Meeting other than the matters described in this Proxy
Statement. If any other matter should be presented at the Meeting for action,
the persons named in the accompanying proxy card will vote such proxy in
accordance with the determination of a majority of the Company's Board of
Directors.
/s/ Robert J. Rudnik
Robert J. Rudnik
Secretary
Chicago, Illinois
April 20, 1998
20
<PAGE>
Annex A
1998 BROOKDALE LIVING COMMUNITIES, INC.
STOCK INCENTIVE PLAN
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- -----------------------------------------------------------------------------
<S> <C> <C>
1. PURPOSE OF PLAN A-1
2. DEFINITIONS A-1
3. STOCK SUBJECT TO PLAN A-3
3.1 Stock Subject to Plan A-3
3.2 Unexercised Options A-3
3.3 Changes in Company Capitalization A-3
4. GRANTING OF OPTIONS A-4
4.1 Eligibility A-4
4.2 Incentive Stock Options A-4
4.3 Granting of Options A-4
4.4 Administration of the Plan A-5
5. TERMS OF OPTIONS A-6
5.1 Option Agreement A-6
5.2 Vesting of Options A-6
5.3 Option Exercise Price A-6
5.4 Exercise Periods A-6
5.5 Requirement of Continued Employment A-7
5.6 Adjustments in Outstanding Options A-8
5.7 Merger, Consolidation, Acquisition, Liquidation or Dissolution A-8
5.8 No Right to Continued Employment A-8
6. EXERCISE OF OPTIONS A-8
6.1 Person Eligible to Exercise A-8
6.2 Partial Exercise A-9
6.3 Manner of Exercise A-9
6.4 Conditions to Issuance of Stock Certificates A-10
6.5 Rights as Stockholders A-10
6.6 Transfer Restrictions A-10
7. ADDITIONAL PROVISIONS A-11
7.1 Approval of Plan by Stockholders A-11
7.2 Nontransferability A-11
7.3 Death or Disability of Optionee A-11
7.4 Securities Act A-11
7.5 Withholding of Tax A-11
7.6 Termination and Amendment of Plan A-11
7.7 Duties of the Company A-12
8. GENERAL PROVISIONS A-12
</TABLE>
<PAGE>
SECTION 1. PURPOSE OF PLAN
The purpose of the 1998 Brookdale Living Communities, Inc. Stock Incentive
Plan (the "Plan") is to provide a means by which Brookdale Living Communities,
Inc. (the "Company") may attract and retain directors, executive officers and
other key employees with outstanding qualifications and consultants and advisers
who provide substantial and important services to the Company, by affording
those individuals with incentives to exert maximum efforts for the success of
the Company through opportunities to participate in the growth, development and
financial success of the Company.
SECTION 2. DEFINITIONS
Wherever the following capitalized terms are used in the Plan, they shall
have the following respective meanings:
2.1 "Board of Directors" means the Board of Directors of the Company.
2.2 "Change in Control" shall be deemed to have occurred if
(a) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company, a
corporation owned directly or indirectly by the stockholders of the
Company in substantially the same proportions as their ownership of
the Common Stock, Michael W. Reschke or The Prime Group, Inc. or any
of their respective affiliates, becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 50% or more of
the total voting power represented by the Company's then outstanding
securities which vote generally in the election of directors
(referred to herein as "Voting Securities");
(b) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors and any
new directors whose election by the Board of Directors or nomination
for election by the Company's stockholders was approved by a vote of
at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease
for any reason to constitute a majority of the Board of Directors;
(c) the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than a merger or
consolidation which would result in the Voting Securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into Voting
Securities of the surviving entity) more than 50% of the total voting
power represented by the Voting Securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation; or
(d) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company (in one transaction or a series of
transactions) of all or substantially all of the Company's assets.
<PAGE>
2.3 "Code" means the Internal Revenue Code of 1986, as amended.
2.4 "Committee" means as specified in Section 4.4.
2.5 "Common Stock" means the Common Stock of the Company, par value $0.01
per share.
2.6 "Company" means Brookdale Living Communities, Inc., a Delaware
corporation. In addition, "Company" shall mean any corporation assuming, or
issuing new employee stock options in substitution for, Incentive Stock Options
outstanding under the Plan, in a transaction to which Section 424(a) of the Code
applies.
2.7 "Date of Grant" means the date as of which an Option has been granted
pursuant to the Plan.
2.8 "Disability" means, with respect to an individual, a physical or mental
condition resulting from any medically determinable physical or mental
impairment that renders such individual incapable of engaging in any substantial
gainful employment and that can be expected to result in death or that has
lasted or can be expected to last for a continuous period of not less than four
consecutive months.
2.9 "Eligible Individual" means (i) any director, officer or key employee of
the Company or a Subsidiary, (ii) any officer or key employee of a partnership
in which the Company owns directly or indirectly at least 50% of the capital or
profits interest or (iii) any consultant or adviser whom the Committee
determines provides substantial and important service to the Company.
2.10 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
2.11 "Fair Market Value" means the per share value of the Common Stock as of
a given date, determined as follows:
(a) If the Common Stock is listed or admitted for trading on the New York
Stock Exchange (or if not, on another national securities exchange
upon which the Common Stock is listed), the Fair Market Value of the
Common Stock is the closing quotation for such stock based on
composite transactions for the New York Stock Exchange (or if not
listed on it, such other national securities exchange) on the last
trading day for such stock prior to such given date.
(b) If the Common Stock is not traded on any national securities
exchange, but is quoted on the National Association of Securities
Dealers, Inc. Automated Quotation System (NASDAQ System) or any
similar system of automated dissemination of quotations of prices in
common use, the Fair Market Value of the Common Stock is the average
of the last sales price (if the stock is then listed as a national
market issue under the NASDAQ System) or the mean between the closing
representative bid and asked prices (in all other cases) for the
stock on the last 5 trading days for such stock preceding such given
date as reported by the NASDAQ System (or such similar quotation
system).
(c) If neither clause (a) nor clause (b) of this Section 2.12 is
applicable, the Fair Market Value of the Common Stock is the fair
market value per share as of such valuation date, as determined by
the Board of Directors in good faith and in accordance with uniform
principles consistently applied.
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2.12 "Incentive Stock Option" means an Option which qualifies under Section
422 of the Code and which is designated as an Incentive Stock Option by the
Company or the Committee.
2.13 "Non-Qualified Option" means an Option which is not an Incentive Stock
Option and which is designated as a Non-Qualified Option by the Company or the
Committee.
2.14 "Option" means any Incentive Stock Option or Non-Qualified Option
granted under this Plan.
2.15 "Optionee" means an Eligible Individual to whom an Option is granted
under this Plan.
2.16 "Plan" means the 1998 Brookdale Living Communities, Inc. Stock Incentive
Plan, as it may be amended from time to time.
2.17 "Secretary" means the Secretary of the Company.
2.18 "Securities Act" means the Securities Act of 1933, as amended.
2.19 "Severance Date" means (i) as to an Eligible Individual who is an
employee of the Company, a Subsidiary or a Company-owned partnership, the date
the individual ceases to be so employed, (ii) as to an Eligible Individual who
is a director of the Company or a Subsidiary but not an employee described in
(i) next above, the date the individual ceases to be such a director, or (iii)
as to an Eligible Individual who is not included in (i) or (ii) above, the date
specified in the applicable Stock Option Agreement.
2.20 "Stock Option Agreement" means the agreement reflecting the terms and
conditions of an Option pursuant to Section 5.1.
2.21 "Subsidiary" means a subsidiary of the Company within the meaning of
Section 424(f) of the Code.
SECTION 3. STOCK SUBJECT TO PLAN
3.1 Stock Subject to Plan
The stock subject to an Option shall be shares of the Company's Common
Stock. The aggregate number of such shares which may be issued upon exercise of
Options granted under Section 4 of the Plan shall not exceed 250,000 unless and
until a larger number shall have been approved by the Company's stockholders
pursuant to Section 7.6.
3.2 Unexercised Options
If any Option expires or is cancelled without having been fully
exercised, a new Option or Options for the number of shares of Common Stock that
would have been issued upon exercise of the unexercised portion of such Option
may be granted under this Plan, subject to the limitations of Section 3.1.
3.3 Changes in Company Capitalization
In the event that the outstanding shares of Common Stock are hereafter
changed into or exchanged for a different number or kind of shares or other
securities of the Company, or of another corporation, by
A-3
<PAGE>
reason of reorganization, merger, consolidation, recapitalization,
reclassification, or the number of shares is increased or decreased by reason of
a stock split, stock dividend, combination of shares or any other increase or
decrease in the number of such shares of Common Stock effected without receipt
of consideration by the Company (provided, however, that conversion or exchange
of any convertible or exchangeable securities of the Company shall not be deemed
to have been "effected without receipt of consideration"), the Committee shall
make appropriate adjustments in the number and kind of shares for the purchase
of which Options may be granted, including adjustments of the limitations in
Section 3.1 and Section 4.1.
SECTION 4. GRANTING OF OPTIONS
4.1 Eligibility
The maximum number of shares of Common Stock that may be subject to
Options granted during any calendar year to any one Optionee shall not exceed
250,000. Options granted to an Eligible Individual who is an employee of the
Company or a Subsidiary may be either Incentive Stock Options or Non-Qualified
Options. Options granted to any other Eligible Individual may only be Non-
Qualified Options.
4.2 Incentive Stock Options
No Incentive Stock Option shall be granted unless it qualifies as an
"incentive stock option" under Section 422 of the Code on the Date of Grant.
4.3 Granting of Options
(a) Subject to the availability of shares as provided under Sections 3.1 and
7.6, the Committee shall from time to time, in its absolute discretion:
(i) Determine who are the Eligible Individuals and select from among
them those to be granted Options;
(ii) Determine the number of shares to be subject to such Options
granted to such selected individuals, and to the extent permitted
by the Code, determine whether such Options are to be Incentive
Stock Options or Non-Qualified Options; and
(iii) Determine the terms and conditions of such Options, consistent with
the Plan.
(b) Upon the selection of an individual to be granted an Option, the
Committee shall instruct the Secretary to issue such Option and may
impose such conditions on the grant of such Option as it deems
appropriate. Without limiting the generality of the preceding sentence,
the Committee may, in its discretion and on such terms as it deems
appropriate, require as a condition on the grant of an Option to an
individual that the individual surrender for cancellation some or all of
the unexercised Options which have been previously granted to him. An
Option the grant of which is conditioned upon such surrender may have an
Option price lower (or higher) than the Option price of the surrendered
Option, may cover the same (or a lesser or greater) number of shares as
the surrendered Option, may contain such other terms as the Committee
deems appropriate and shall be exercisable in accordance with its terms,
without regard to the number of shares, price, Option period or any other
term or condition of the surrendered Option.
A-4
<PAGE>
4.4 Administration of the Plan
(a) The Plan shall be administered by the Compensation Committee of the
Board, or by any other Committee appointed by the Board, which Committee
(unless otherwise determined by the Board) shall satisfy the "nonemployee
director" requirements of Rule 16b-3 under the Exchange Act and the
regulations of Rule 16b-3 under the Exchange Act and the "outside
director" provisions of Code Section 162(m), or any successor regulations
or provisions. The members of the Committee shall be appointed from time
to time by, and shall serve at the discretion of, the Board of Directors.
Committee members may resign by delivering written notice to the
Secretary.
(b) Except as otherwise provided in the Plan and except as otherwise
expressly stated to the contrary in the Company's Articles of
Incorporation, Bylaws, or elsewhere, the Committee shall have the sole
discretionary authority (i) to select the Eligible Individuals who are to
be granted Options under the Plan, (ii) to determine the number of
Options to be granted to any Eligible Individual at any time, (iii) to
authorize the granting of Options, (iv) to impose such conditions and
restrictions on Options as it determines appropriate, (v) to interpret
the Plan, (vi) to prescribe, amend and rescind rules and regulations
relating to the Plan, and (vii) to take any other actions in connection
with the Plan as it may deem necessary or advisable for the
administration of the Plan. The determinations of the Committee on the
matters referred to in this Section 4 shall be conclusive.
(c) A majority of the members of the Committee shall constitute a quorum. All
determinations of the Committee shall be made by a majority of its
members. Any decision or determination reduced to writing and signed by
all of the members of the Committee shall be fully effective as if it had
been made by a majority vote at a meeting duly called and held.
(d) The Committee may delegate to one or more persons any of its powers,
other than its power to authorize the granting of Options, or designate
one or more persons to do or perform those matters to be done or
performed by the Committee, including administration of the Plan. Any
person or persons delegated or designated by the Committee shall be
subject to the same obligations and requirements imposed on the Committee
and its members under the Plan.
(e) Members of the Committee shall receive such compensation for their
services as members as may be determined by the Board of Directors. All
expenses and liabilities incurred by members of the Committee in
connection with the administration of the Plan shall be borne by the
Company. The Committee may employ attorneys, consultants, accountants,
appraisers, brokers or other persons. The Committee, the Company and the
Board of Directors shall be entitled to rely upon the advice, opinions or
valuations of any such persons. All elections taken and all
interpretations and determinations made by the Committee in good faith
shall be final and binding upon all Optionees, the Company and all other
interested persons. No member of the Committee shall be personally liable
for any action, determination or interpretation made in good faith with
respect to the Plan. Members of the Committee and each person or persons
designated or delegated by the Committee shall be entitled to
indemnification by the Company for any action or any failure to act in
connection with services performed by or on behalf of the Committee for
the benefit of the Company to the fullest extent provided or permitted by
the Company's Articles of Incorporation, Bylaws, any insurance policy or
other agreement intended for the benefit of the Committee, or by any
applicable law.
A-5
<PAGE>
SECTION 5. TERMS OF OPTIONS
5.1 Option Agreement
Each Option shall be evidenced by a written Stock Option Agreement, which
shall be executed by the Optionee and an authorized officer of the Company and
which shall indicate the Date of the Grant and contain such terms and conditions
as the Committee shall determine with respect to such Option, consistent with
the Plan. Stock Option Agreements evidencing Incentive Stock Options shall
contain such terms and conditions as may be necessary to qualify such Options as
"incentive stock options" under Section 422 of the Code.
5.2 Vesting of Options
(a) Options granted under the Plan shall vest as determined by the Committee
and set forth in the respective Stock Option Agreement.
(b) Unless otherwise provided in the Stock Option Agreement, in the event of
a Change in Control on or before the Optionee's Severance Date, each
outstanding Option held by such Optionee to the extent not theretofore
vested shall fully vest as of the date of such Change in Control.
(c) Subject to the provisions of Section 7.3, Options which have been granted
but not yet vested under this Section 5.2 as of an Optionee's Severance
Date shall be forfeited unless otherwise provided in the Stock Option
Agreement.
5.3 Option Exercise Price
The exercise price per share for Options granted under the Plan shall be
set by the Committee; provided, however, that the price per share shall be not
less than 100% of the Fair Market Value of such share on the Date of Grant;
provided, further, that, in the case of an Incentive Stock Option, the price per
share shall not be less than 110% of the Fair Market Value of such share on the
Date of Grant in the case of an individual then owning (within the meaning of
Section 424(d) of the Code) more than 10% of the total combined voting power of
all classes of stock of the Company or any Subsidiary.
5.4 Exercise Periods
(a) No Option may be exercised in whole or in part until it has vested,
except as may be provided in Section 5.7.
(b) Subject to the provisions of Sections 5.4(c), 5.7 and 7.3, Options shall
become exercisable at such times and in such installments (which may be
cumulative) as the Committee shall provide in the terms of each
individual Stock Option Agreement; provided, however, that, by resolution
adopted after an Option is granted, the Committee may, on such terms and
conditions as it may determine to be appropriate and subject to Sections
5.4(c), 5.7 and 7.3, accelerate the time at which such Option or any
portion thereof may be exercised.
(c) To the extent that the aggregate Fair Market Value of stock with respect
to which Incentive Stock Options (within the meaning of Section 422 of
the Code, but without regard to Section 422(d) of the Code) are
exercisable for the first time by an Optionee during any calendar year
(under the Plan and all other incentive stock option plans of the
Company) exceeds $100,000, such Options shall be treated as Non-Qualified
Options. The rule set forth in the preceding sentence shall be applied
A-6
<PAGE>
by taking Options into account in the order in which they were granted.
For purposes of this Section 5.4(c), the Fair Market Value of Common
Stock shall be determined as of the time the Option with respect to such
Common Stock is granted.
(d) No Option may be exercised to any extent by anyone after the first to
occur of the following events:
(i) In the case of an Incentive Stock Option,
(A) the expiration of ten years from the Date of Grant; or
(B) in the case of an Optionee owning (within the meaning of
Section 424(d) of the Code), at the Date of Grant, more than
10% of the total combined voting power of all classes of
stock of the Company or any subsidiary of the Company, the
expiration of five years from the Date of Grant; or
(C) except in the case of any Optionee who is disabled (within
the meaning of Section 22(e)(3) of the Code), the expiration
of three months from the Optionee's Severance Date unless
either such Severance Date occurs due to such Optionee's
death or the Optionee dies within said three-month period;
or
(D) in the case of an Optionee who is disabled (within the
meaning of Section 22(e)(3) of the Code), the expiration of
one year from the Optionee's Severance Date unless either
such Severance Date occurs due to such Optionee's death or
the Optionee dies within said one-year period; or
(E) the expiration of one year from the date of the Optionee's
death.
(ii) In the case of a Non-Qualified Option,
(A) the expiration of ten years from the Date of Grant; or
(B) the expiration of one year from the Optionee's Severance
Date unless the Optionee dies within said one-year period;
or
(C) the expiration of one year from the date of the Optionee's
death.
(e) Subject to the provisions of Section 5.4(d), the Committee shall provide,
in the terms of each individual Stock Option Agreement, when such Option
expires and becomes unexercisable.
5.5 Requirement of Continued Employment
An Option shall be forfeited if the Optionee's Severance Date occurs
within one year from the Date of Grant unless such Severance Date occurs due to
a Change in Control.
A-7
<PAGE>
5.6 Adjustments in Outstanding Options
In the event that the outstanding shares of Common Stock subject to
Options are changed into or exchanged for a different number or kind of shares
of the Company or other securities of the Company by reason of merger,
consolidation, recapitalization, reclassification, or the number of shares is
increased or decreased by reason of a stock split-up, stock dividend,
combination of shares or any other increase or decrease in the number of such
shares of Common Stock effected without receipt of consideration by the Company
(provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt of consideration"),
the Committee shall make appropriate adjustments in the number and kind of
shares as to which all outstanding Options, or portions thereof then
unexercised, shall be exercisable, to the end that after such event the
Optionee's proportionate interest shall be maintained as before the occurrence
of such event. Such adjustment in an outstanding Option shall be made without
change in the total price applicable to the Option or the unexercised portion of
the Option (except for any change in the aggregate price resulting from
rounding-off of share quantities or prices) and with any necessary corresponding
adjustment in Option price per share; provided, however, that, in the case of
Incentive Stock Options, each such adjustment shall be made in such manner as
not to constitute a "modification" within the meaning of Section 424(h)(3) of
the Code. Any such adjustment made by the Committee shall be final and binding
upon all Optionees, the Company and all other interested persons.
5.7 Merger, Consolidation, Acquisition, Liquidation or Dissolution
Notwithstanding the provisions of Section 5.6, in its absolute
discretion, and on such terms and conditions as it deems appropriate, the
Committee may provide by the terms of any Option that such Option cannot be
exercised after the merger or consolidation of the Company with or into another
corporation, the acquisition by another corporation or person (excluding any
trustee or other fiduciary holding securities under an employee benefit plan of
the Company) of all or substantially all of the Company's assets or more than
50% of the Company's then outstanding voting stock, or the liquidation or
dissolution of the Company; and if the Committee so provides, it may, in its
absolute discretion and on such terms and conditions as it deems appropriate,
also provide, either by the terms of such Option or by a resolution adopted
prior to the occurrence of such merger, consolidation, acquisition, liquidation
or dissolution, that, for some period of time prior to such event, such Option
shall be exercisable to all shares covered thereby, notwithstanding anything to
the contrary in Section 5.4(a), Section 5.4(b) and/or any installment provisions
of such Option.
5.8 No Right to Continued Employment
Nothing in this Plan or in any Stock Option Agreement hereunder shall
confer upon any Optionee any right to continued employment or retention in
service or shall interfere with or restrict in any way the rights of the
Company, a Subsidiary or any other person to terminate or discharge any Optionee
at any time for any reason whatsoever.
SECTION 6. EXERCISE OF OPTIONS
6.1 Person Eligible to Exercise
During the lifetime of the Optionee, only such Optionee may exercise an
Option (or any portion thereof) granted to such Optionee. After the death of
the Optionee, any exercisable portion of an Option may, prior to the time when
such portion becomes unexercisable under the Plan or the applicable Stock Option
Agreement, be exercised by the personal representative of such Optionee or by
any person empowered to do so under the deceased Optionee's will or under the
then applicable laws of descent and distribution.
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6.2 Partial Exercise
At any time and from time to time prior to the time when any exercisable
Option or exercisable portion thereof becomes unexercisable under the Plan or
the applicable Stock Option Agreement, such Option or portion thereof may be
exercised in whole or in part; provided, however, that the Company shall not be
required to issue fractional shares and the Committee may, by the terms of the
Stock Option Agreement, require any partial exercise to be with respect to a
specified minimum number of shares.
6.3 Manner of Exercise
An exercisable Option, or any exercisable portion thereof, may be
exercised solely by delivery to the Secretary or his office of all of the
following prior to the time when such Option or such portion becomes
unexercisable under the Plan or the applicable Stock Option Agreement:
(a) notice in writing signed by the Optionee or other person then entitled to
exercise such Option or portion, stating that such Option or portion is
exercised, such notice complying with all applicable rules established by
the Committee; and
(b) (i) full payment (in cash or by check) for the shares with respect to
which such Option or portion is thereby exercised; or
(ii) if permitted under the terms of an Optionee's Stock Option
Agreement or with the consent of the Committee, (A) shares of the
Company's Common Stock owned by the Optionee duly endorsed for
transfer to the Company, or (B) shares of the Company's Common
Stock issuable to the Optionee upon exercise of the Option, with a
Fair Market Value on the date of Option exercise equal to the
aggregate Option price of the shares with respect to which such
Option or portion is thereby exercised; or
(iii) with the consent of the Committee, a full recourse promissory note
bearing interest (at least such rate as shall then preclude the
imputation of interest under the Code or any successor provision)
and payable upon such terms as may be prescribed by the Committee.
The Committee may also prescribe the form of such note and the
security to be given for such note. No Option may, however, be
exercised by delivery of a promissory note or by a loan from the
Company when or where such loan or other extension of credit is
prohibited by law; or
(iv) with the consent of the Committee, any combination of the
consideration provided in the foregoing subsections (i), (ii) and
(iii); and
(c) the payment to the Company of all amounts which it is required to
withhold under federal, state or local law in connection with the
exercise of the Option; provided that, with the consent of the Committee,
(i) shares of the Company's Common Stock owned by the Optionee duly
endorsed for transfer, or (ii) shares of the Company's Common Stock
issuable to the Optionee upon exercise of the Option, valued at Fair
Market Value as of the date of Option exercise, may be used to make all
or part of such payment; and
(d) such representations and documents as the Committee, in its absolute
discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act and any other federal or
state securities laws or regulations, including the representation that
the shares of the
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Common Stock are being acquired for investment and not resale. The
Committee may, in its absolute discretion, also take whatever additional
actions it deems appropriate to effect such compliance including, without
limitation, placing legends on share certificates and issuing stop-
transfer orders to transfer agents and registrars; and
(e) in the event that the Option or portion thereof shall be exercised
pursuant to Section 6.1 by any person or persons other than the Optionee,
appropriate proof of the right of such person or persons to exercise the
Option or portion thereof.
6.4 Conditions to Issuance of Stock Certificates
The shares of Common Stock issuable and deliverable upon the exercise of
an Option, or any portion thereof, may be either previously authorized but
unissued shares or issued shares which have then been reacquired by the Company.
The Company shall not be required to issue or deliver any certificate or
certificates for shares of Common Stock purchased upon the exercise of any
Option or portion thereof prior to fulfillment of all of the following
conditions:
(a) the satisfaction of all requirements set forth in Section 6.3, including
payment of the exercise price; and
(b) the obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable; and
(c) the lapse of such reasonable period of time following the exercise of the
Option as the Committee may establish from time to time for reasons of
administrative convenience.
6.5 Rights as Stockholders
The holders of Options shall not be, nor have any of the rights or
privileges of, stockholders of the Company in respect to any shares purchasable
upon the exercise of any part of an Option unless and until the Option is
exercised, the Option price has been paid to the Company and certificates
representing such shares have been issued by the Company to such holders.
6.6 Transfer Restrictions
The Committee, in its absolute discretion, may impose such restrictions
on the transferability of the shares purchasable upon the exercise of an Option
as it deems appropriate. Any such restriction shall be set forth in the
respective Stock Option Agreement and may be referred to on the certificates
evidencing such shares. The Committee may require any Optionee to give the
Company prompt notice of any disposition of shares of stock acquired by exercise
of an Incentive Stock Option, within two years from the Date of Grant of such
Option or one year after the acquisition of such shares by such Optionee. The
Committee may direct that the certificates evidencing shares acquired by
exercise of an Option refer to such requirement to give prompt notice of
disposition.
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SECTION 7. ADDITIONAL PROVISIONS
7.1 Approval of Plan by Stockholders
This Plan will be submitted for the approval of the Company's
stockholders within twelve months before or after the date of the Board of
Directors' initial adoption of the Plan. Options may be granted prior to such
stockholder approval; provided, however, that such Options shall not be
exercisable prior to the time when the Plan is approved by the stockholders;
provided, further, that if such approval has not been obtained at the end of
said twelve-month period, all Options previously granted under the Plan shall
thereupon be cancelled and become null and void.
7.2 Nontransferability
No Option or interest or right therein or part thereof shall be liable
for the debts, contracts or engagements of the Optionee or any successors in
interest to the Optionee or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect; provided, however, that nothing in this
Section 7.2 shall prevent transfers by will or by the applicable laws of descent
and distribution.
7.3 Death or Disability of Optionee
If an Optionee dies or incurs a Severance Date due to Disability, any
Option of such Optionee which has been outstanding for at least one year shall
fully and immediately be vested. In the event of an Optionee's death the
executor, administrator or other personal representative of the Optionee's
estate, or any heir, successor, assign or other transferee of the Optionee
receiving such Options by will or by the laws of descent and distribution, shall
have the right, subject to the restrictions hereof, to exercise all vested
Options to acquire shares of Common Stock subject to such Options at any time
within one year after the date of the Optionee's death.
7.4 Securities Act
No shares of Common Stock of the Company shall be required to be
distributed until the Company shall have taken such action, if any, as is then
required to comply with the provisions of the Securities Act or any other then
applicable securities law. The Company reserves the right to place a legend on
any stock certificate issued pursuant to the Plan to assure compliance with this
Section and with the vesting requirements of Section 5.2.
7.5 Withholding of Tax
The Company shall have the right to deduct from compensation otherwise
payable to an Optionee any federal, state or local income or other taxes
required by law to be withheld with respect to any distributions under the Plan.
7.6 Termination and Amendment of Plan
The Committee may at any time suspend or terminate the Plan, or make such
modifications of the Plan as it shall deem advisable, provided that the Plan
shall not be so changed to increase the cost of the Plan
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to the Company. However, without approval of the Company's stockholders given
within twelve months before or after the action by the Committee, no action of
the Committee may, except as provided in Section 3.3, increase any limit imposed
in Section 3.1 on the maximum number of shares which may be issued upon exercise
of Options, materially modify the eligibility requirements of Section 4.1,
reduce the minimum Option price requirements of Section 5.3, or extend the limit
imposed in this Section 7.6 on the period during which Options may be granted.
No Option may be granted during any period of suspension nor after termination
of the Plan, and in no event may any Option be granted under this Plan after the
first to occur of the following events:
(a) the expiration of ten years from the date the Plan is adopted by the
Board of Directors; or
(b) the expiration of ten years from the date the Plan is approved by the
Company's stockholders under Section 7.1.
7.7 Duties of the Company
The Company shall, at all times during the term of each Option, reserve
and keep available for issuance or delivery such number of shares of Common
Stock as will be sufficient to satisfy the requirements of all Options at the
time outstanding, shall pay all original issue taxes with respect to the
issuance or delivery of shares pursuant to the exercise of such Option and all
other fees and expenses necessarily incurred by the Company in connection
therewith.
SECTION 8. GENERAL PROVISIONS
(a) No individual shall have any claim or right to be granted Options under the
Plan. Neither the adoption and maintenance of the Plan nor the granting of
Options pursuant to the Plan shall be deemed to constitute a contract of
employment between the Company and any individual or to be a condition of
the employment of any person.
(b) The Company shall pay all costs and expenses of administering the Plan.
(c) The granting of Options and the issuance of shares of Common Stock under
the Plan shall be subject to all applicable laws, rules, and regulations,
and to such approvals by any governmental agencies or national securities
exchanges as may be required. The provisions of this Plan shall be
interpreted so as to comply with the conditions or requirements of the
Securities Act, the Exchange Act, and rules and regulations issued
thereunder unless a contrary interpretation of any such provision is
otherwise required by applicable law.
(d) The granting of an Option shall impose no obligation upon the Optionee to
exercise such Option.
(e) Whenever the context so indicates, the singular or plural number, and the
masculine, feminine or neuter gender shall each be deemed to include the
other.
(f) This Plan and all Option agreements entered into pursuant hereto shall be
construed and enforced in accordance with, and governed by, the laws of the
State of Delaware, determined without regard to its conflict of interest
rules.
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BROOKDALE LIVING COMMUNITIES, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 21, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder hereby appoints Michael W. Reschke, Mark J.
Schulte, Darryl W. Copeland, Jr. and Robert J. Rudnik, and each of them, as
proxies with full power of substitution, to represent and to vote as designated
below all of the shares of Common Stock, par value $0.01 per share, of Brookdale
Living Communities, Inc. which the undersigned stockholder is entitled to vote
at the Annual Meeting of Stockholders (the "Annual Meeting") to be held on May
21, 1998 at 9:00 a.m., local time, at 35 West Wacker Drive, 35th Floor,
Conference Room A, Chicago, Illinois, and at any adjournments thereof, upon the
following matters:
This proxy will be voted as directed by the undersigned stockholder. UNLESS
CONTRARY DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
NOMINEES LISTED IN PROPOSAL 1, FOR PROPOSAL 2, FOR PROPOSAL 3 AND IN ACCORDANCE
WITH THE RECOMMENDATIONS OF A MAJORITY OF THE BOARD OF DIRECTORS AS TO OTHER
MATTERS.
PLEASE VOTE, SIGN EXACTLY AS NAME APPEARS ABOVE, DATE AND RETURN
THIS PROXY PROMPTLY USING THE ENCLOSED POSTAGE PAID ENVELOPE.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
<PAGE>
BROOKDALE LIVING COMMUNITIES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. ()
1. TO ELECT TWO CLASS I DIRECTORS FOR A TERM OF THREE YEARS EACH.
NOMINEES: MICHAEL W. RESCHKE
BRUCE L. GEWERTZ
FOR WITHHOLD FOR ALL
ALL ALL EXCEPT THE FOLLOWING NOMINEE(S) (WRITE NAME(S) BELOW)
[ ] [ ] [ ]
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<S> <C> <C> <C>
2. To ratify the appointment of Ernst & Young LLP as the Company's For Against Abstain
auditors for the fiscal year ending December 31, 1998. [ ] [ ] [ ]
3. To approve the 1998 Stock Incentive Plan. For Against Abstain
[ ] [ ] [ ]
</TABLE>
The undersigned stockholder hereby acknowledges receipt from the Company of its
Notice of Annual Meeting and Proxy Statement dated April 20, 1998 and hereby
revokes any proxy or proxies heretofore given. This proxy may be revoked at any
time prior to its exercise.
If you receive more than one proxy card, please date, sign and return all cards
in the accompanying envelope.
Dated: ______________________________________________________, 1998
Signature(s) ______________________________________________________
___________________________________________________________________
Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please sign in full corporate name
by President or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
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