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 the 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.
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(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 transactions 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>
[Brookdale Living Communities, Inc. logo]
Michael W. Reschke
Chairman of the Board
April 19, 1999
Dear Stockholder:
You are cordially invited to attend the second Annual Meeting of
Stockholders (the "Meeting") of Brookdale Living Communities, Inc. (the
"Company") to be held on Thursday, May 20, 1999 at 10:00 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 1999 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 20, 1999
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 20, 1999, at 10:00 a.m., local time, to
consider and take action on the following matters:
1. To elect two Class II 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,
1999;
3. To approve the 1999 Stock Incentive Plan authorizing the grant
to directors, executive officers and other key employees of
options to purchase up to 200,000 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 12, 1999 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 19, 1999
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
Suite 4400
Chicago, Illinois 60601
-----------------
PROXY STATEMENT
FOR THE
1999 ANNUAL MEETING OF STOCKHOLDERS
To be held on May 20, 1999
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 20, 1999 at 10:00 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 19, 1999.
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 II 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, 1999 AND (III) FOR APPROVAL
OF THE 1999 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
<PAGE>
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 12, 1999
(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,
Suite 4400, Chicago, Illinois. On the Record Date, 11,572,082 shares of the
Company's common 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, 1998 accompanies this Proxy Statement. THE COMPANY FILED AN
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998 WITH THE
SECURITIES AND EXCHANGE COMMISSION (THE "SEC"). STOCKHOLDERS MAY OBTAIN, FREE OF
CHARGE, A COPY OF THE COMPANY'S 1998 ANNUAL REPORT ON FORM 10-K (WITHOUT
EXHIBITS) BY WRITING TO BROOKDALE LIVING COMMUNITIES, INC., 77 WEST WACKER
DRIVE, SUITE 4400, CHICAGO, ILLINOIS 60601, ATTENTION: INVESTOR RELATIONS. THE
COMPANY WILL PROVIDE COPIES OF THE EXHIBITS TO THE FORM 10-K UPON PAYMENT OF A
REASONABLE FEE.
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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, 1999 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 four other persons who
were the most highly compensated executive officers of the Company in 1998 (the
"named executive officers"); and (iv) all directors and executive officers of
the Company as a group.
Common Stock
------------
Amount and Nature
of Beneficial Percent of
Name and Address of Beneficial Owner(1) Ownership(2) Class
- --------------------------------------- ------------ -----
The Prime Group, Inc.(3)........................... 4,044,350 34.9%
Delaware Management Holdings, Inc.(4).............. 968,372 8.4
Becker Capital Management, Inc.(5)................. 709,250 6.1
Michael W. Reschke(6).............................. 4,112,350 35.3
Mark J. Schulte(7)................................. 418,707 3.6
Darryl W. Copeland, Jr.(8)......................... 272,000 2.3
Wayne D. Boberg(9)................................. 5,833 *
Dr. Bruce L. Gewertz(10)........................... 2,533 *
Darryl W. Hartley-Leonard(11)...................... 5,333 *
Daniel J. Hennessy(12)............................. 30,133 *
Robert J. Rudnik(13)............................... 143,534 1.2
Matthew F. Whitlock(14)............................ 13,775 *
Mark J. Iuppenlatz(15)............................. 8,750 *
Executive officers and directors
as a group (14 persons)(16) .................. 5,038,948 42.2
- ------------------
* Less than 1%.
(1) All of the directors and executive officers of the Company may be
contacted c/o Brookdale Living Communities, Inc., 77 West Wacker Drive,
Suite 4400, 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.
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<PAGE>
(3) Includes shares of Common Stock held 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 that Mr. Copeland has
agreed to purchase from Prime Group III, L.P. 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 the
Assumption Agreement between Prime Group VI, L.P. and Prime Group III,
L.P. and 12,500 shares 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. The
address of The Prime Group, Inc. is 77 West Wacker Drive, Suite 4200,
Chicago, Illinois 60601.
(4) Based on a Schedule 13G filed with the SEC on February 8, 1999 by
Delaware Management Holdings, Inc. and certain of its affiliates
("DMHI"). The Schedule 13G indicates that DMHI beneficially owns
968,372 shares of Common Stock. The address of DMHI is 2005 Market
Street, Philadelphia, Pennsylvania 19103.
(5) Based on a Schedule 13G filed with the SEC on February 11, 1999 by
Becker Capital Management, Inc. ("BCMI"). The Schedule 13G indicates
that BCMI beneficially owns 709,250 shares of Common Stock. The
Schedule 13G indicates that the Common Stock is owned by advisory
clients of BCMI and BCMI disclaims beneficial ownership of the Common
Stock. The address of BCMI is 1211 SW Fifth Avenue, Suite 2185,
Portland, Oregon 97204.
(6) Includes 4,044,350 shares of Common Stock held by The Prime Group, Inc.
and certain of its affiliates (including 100,000 shares 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 that Mr. Copeland has agreed to purchase
from Prime Group III, L.P. 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 the Assumption Agreement between
Prime Group VI, L.P. and Prime Group III, L.P. and 12,500 shares
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 68,000 shares issuable
upon the exercise of stock options held by Mr. Reschke that are
exercisable as of or within 60 days of March 31, 1999. Mr. Reschke is
the Chairman, Chief Executive Officer and President of The Prime Group,
Inc.
(7) Includes 321,707 shares of Common Stock held directly by Mr. Schulte
and 97,000 shares issuable upon the exercise of stock options held by
Mr. Schulte that are exercisable as of or within 60 days of March 31,
1999.
(8) Includes 12,000 shares of Common Stock held directly by Mr. Copeland,
100,000 shares subject to an option to purchase held by Mr. Copeland
pursuant to the Stock Option and Deposit Agreement between The Prime
Group, Inc. and Mr. Copeland, 25,000 shares that Mr. Copeland has
agreed to purchase from Prime Group III, L.P. 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 the
Assumption Agreement between Prime Group VI, L.P. and Prime Group III,
L.P. and 135,000 shares issuable upon the exercise of
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<PAGE>
stock options held by Mr. Copeland that are exercisable as of or within
60 days of March 31, 1999.
(9) Includes 2,500 shares of Common Stock held directly by Mr. Boberg and
3,333 shares issuable upon the exercise of stock options held by Mr.
Boberg that are exercisable as of or within 60 days of March 31, 1999.
(10) Includes 866 shares of Common Stock held directly by Dr. Gewertz and
1,667 shares issuable upon the exercise of stock options held by Dr.
Gewertz that are exercisable as of or within 60 days of March 31, 1999.
(11) Includes 2,000 shares of Common Stock held directly by Mr.
Hartley-Leonard and 3,333 shares issuable upon the exercise of stock
options held by Mr. Hartley-Leonard that are exercisable as of or
within 60 days of March 31, 1999.
(12) Includes 27,966 shares of Common Stock held directly by Mr. Hennessy,
500 shares held in custodial accounts for which Mr. Hennessy serves as
custodian and 1,667 shares issuable upon the exercise of stock options
held by Mr. Hennessy that are exercisable as of or within 60 days of
March 31, 1999.
(13) Includes 127,284 shares of Common Stock held directly by Mr. Rudnik and
16,250 shares issuable upon the exercise of stock options held by Mr.
Rudnik that are exercisable as of or within 60 days of March 31, 1999.
(14) Includes 1,025 shares of Common Stock held directly by Mr. Whitlock and
12,750 shares issuable upon the exercise of stock options held by Mr.
Whitlock that are exercisable as of or within 60 days of March 31,
1999.
(15) Mr. Iuppenlatz resigned from the Company effective August 31, 1998.
(16) Includes 4,674,448 shares of Common Stock held directly or indirectly
by executive officers and directors as a group (including 4,044,350
shares of Common Stock held directly by The Prime Group, Inc. and its
affiliates) and 364,500 shares issuable upon the exercise of stock
options held by executive officers and directors as a group that are
exercisable as of or within 60 days of March 31, 1999.
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 II directors at the Meeting, each
to hold office for a three-year term until the 2002 Annual Meeting of
Stockholders and until his successor is duly elected and qualified. Class III
and Class I directors will be elected at the Annual Meetings to be held in 2000
and 2001, respectively, for three-year terms, and until their respective
successors are duly elected and qualified.
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<PAGE>
It is intended that the shares of Common Stock underlying the accompanying form
of Proxy will be voted for the nominees for Class II director set forth below,
each of whom is currently a Class II 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 II director and also with respect to each
Class I and Class III director.
<TABLE>
<CAPTION>
Nominees for Election
Year Term
of Office Served as a
Name Age Director Class Will Expire Director Since
- ---- --- -------------- ----------- --------------
<S> <C> <C> <C> <C>
Darryl W. Copeland, Jr.................... 39 Class II 1999 1997
Darryl W. Hartley-Leonard................. 53 Class II 1999 1997
</TABLE>
Darryl W. Copeland, Jr. Darryl W. Copeland, Jr. has served as Executive
Vice President and a director of the Company since May 1997 and as Chief
Financial Officer of the Company since May 1998. 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.
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.
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. COPELAND AND MR. HARTLEY-LEONARD AS CLASS II
DIRECTORS OF THE COMPANY WITH THREE-YEAR TERMS EXPIRING IN 2002.
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<PAGE>
<TABLE>
<CAPTION>
Continuing Class I and Class III Directors
Year Term
of Office Served as a
Name Age Director Class Will Expire Director Since
- ---- --- -------------- ----------- --------------
<S> <C> <C> <C> <C>
Michael W. Reschke........................ 43 Class I 2001 1997
Mark J. Schulte........................... 45 Class III 2000 1997
Wayne D. Boberg........................... 46 Class III 2000 1997
Bruce L. Gewertz.......................... 49 Class I 2001 1997
Daniel J. Hennessy........................ 41 Class III 2000 1997
</TABLE>
Michael W. Reschke. Michael W. Reschke has served as Chairman of the
Board and a director 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 18 years,
Mr. Reschke has directed and managed the development, finance, construction,
leasing, marketing, acquisition, renovation and property management activities
of The Prime Group, Inc. and its affiliates ("Prime Group"). Mr. Reschke also is
Chairman of the Board and a director of Prime Retail, Inc. (NYSE: PRT), a
publicly traded real estate investment trust involved in the ownership,
acquisition, development and management of factory outlet centers and the
successor in interest to the former retail division of Prime Group. In addition,
Mr. Reschke is Chairman of the Board and a director 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 Prime Group. Mr. Reschke is also a member of the Board of Directors
of Horizon Group Properties, Inc. (NASDAQ: HGPI), a publicly traded corporation
involved in the ownership, acquisition, development and management of factory
outlet centers. 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.
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 Prime Group'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.
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
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<PAGE>
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.
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.
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 1997 Brookdale Living Communities, Inc. Stock
Incentive Plan (the "1997 Stock Incentive Plan") and the 1998 Brookdale Living
Communities, Inc. Stock Incentive Plan (the "1998 Stock Incentive Plan") and, if
approved, shall have the power and authority to implement and administer the
1999 Brookdale Living Communities, Inc. Stock Incentive Plan (the "1999 Stock
Incentive Plan").
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<PAGE>
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, 1998, the Audit Committee
held one meeting, the Compensation Committee held one meeting, the Committee of
Independent Directors held no meetings and the Board of Directors held three
meetings.
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, 1999. Ernst
& Young LLP served in this capacity for the year ended December 31, 1998. 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
accountants.
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 ratify 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, 1999.
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<PAGE>
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.
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<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 and for the year ended December 31, 1998 with respect to the named
executive officers.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
Name and Principal Position ------------------- ------------
--------------------------- Other
Year Salary Bonus Options Compensation(1)
---- ---------- ------------ ------- ---------------
<S> <C> <C> <C> <C> <C>
Michael W. Reschke .................................. 1998 $100,000 -- 18,000 (2)(3) --
Chairman of the Board 1997 63,653 -- 100,000 (4) --
Mark J. Schulte ..................................... 1998 275,000 -- 49,500 (2)(3) $2,500
President and Chief Executive Officer 1997 173,937 $ 203 175,000 (4) --
Darryl W. Copeland, Jr. ............................. 1998 250,000 -- 45,000 (2)(3) 2,500
Executive Vice President and Chief Financial 1997 159,134 150,101 (5) 250,000 (4) 2,375
Officer
Robert J. Rudnik .................................... 1998 141,667 25,000 35,000 (2) --
Executive Vice President, General Counsel and 1997 50,903 (6) 217 30,000 (4) --
Secretary
Matthew F. Whitlock ................................. 1998 95,000 260,340 1,000 (2) 2,500
Vice President--Acquisitions 1997 60,087 116,651 25,000 (4) 2,142
Mark J. Iuppenlatz (7) .............................. 1998 114,058 77,500 1,000 (2) 2,500
Vice President--Development 1997 85,388 15,101 25,000 (4) 675
</TABLE>
- -----------------------------
(1) Consists of annual Company matching contributions to the Brookdale
Living Communities, Inc. Retirement Savings Plan.
(2) Granted pursuant to the 1998 Stock Incentive Plan.
(3) Granted in lieu of a bonus to which the executive officer was entitled
pursuant to his Employment Agreement.
(4) Granted pursuant to the 1997 Stock Incentive Plan.
(5) Mr. Copeland received a signing bonus of $150,000 from the Company in
May 1997.
(6) Mr. Rudnik joined the Company in July 1997.
(7) Mr. Iuppenlatz resigned from the Company effective August 31, 1998.
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<PAGE>
Option Grants in 1998
The following table shows all options to purchase Common Stock granted
to each of the named executive officers of the Company in 1998. The table also
shows the potential value of such grants if the Common Stock appreciates at
compounded annual rates of 5% and 10% over the remaining term of the option from
the grant date price. The 5% and 10% rates of appreciation based on the grant
date price are required to be disclosed by the rules of the SEC and are not
intended to forecast potential future appreciation, if any, in the price of the
Company's Common Stock. The Company did not use an alternative present value
formula permitted by the rules of the SEC because, in the Company's view,
potential future unknown or volatile factors result in there being no such
formula that can determine with reasonable accuracy the present value of such
option grants.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Option Term Based on
Grant-Date Stock
Individual Grants Price
----------------- -----------------------
% of Total
Name Options/SARs Exercise
- ---- Granted to or Base
Options/SARs Employees in Price Expiration
Granted (#) Fiscal Year ($/Sh)(1) Date 5% ($) 10% ($)
----------- ------------- ---------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Michael W. Reschke................... 18,000(2) 5.77% $23.475 05/21/08 $ 253,660 $ 654,201
Mark J. Schulte...................... 49,500(2) 15.88 23.475 05/21/08 697,564 1,799,052
Darryl W. Copeland, Jr............... 45,000(2) 14.43 23.475 05/21/08 634,149 1,635,502
Robert J. Rudnik..................... 35,000(3) 11.23 23.475 05/21/08 493,227 1,272,057
Matthew F. Whitlock.................. 1,000(3) .32 23.475 05/21/08 14,092 36,344
Mark J. Iuppenlatz................... 1,000(3) .32 23.475 05/21/08 14,092 36,344
- -----------------------
(1) Based on the average closing price for the five business days preceding
the grant date. The exercise price for the options is generally payable
in cash or, in certain circumstances, by the surrender, at fair market
value on the date on which the option is exercised, of shares of Common
Stock.
(2) Options are fully vested.
(3) Options vest, subject to certain conditions being met, at the rate of
25% per year over four years following the grant date, commencing on
the first anniversary of the grant date.
</TABLE>
Option Exercises and Holdings
The following table sets forth information with respect to options to
purchase shares of Common Stock exercised by the named executive officers during
1998 and the number of shares of Common Stock underlying options held by each of
the named executive officers and the value of such officers' exercisable and
unexercisable options on December 31, 1998.
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<PAGE>
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money Options
Shares Options at 1998 Year-End(#) at 1998 Year-End($)(1)
Acquired on Value --------------------------- ----------------------
Name Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
---- ------------ ------------ --------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Michael W. Reschke -- -- 43,000 / 75,000 $ 200,000 / 600,000
Mark J. Schulte 40,000 $ 585,000 53,250 / 131,250 30,000 /1,050,000
Darryl W. Copeland, Jr. 35,000 551,250 72,500 / 187,500 220,000 /1,500,000
Robert J. Rudnik -- -- 7,500 / 57,500 57,188 / 171,563
Matthew F. Whitlock -- -- 6,250 / 19,750 50,000 / 150,000
Mark J. Iuppenlatz 6,250 56,250 -- / -- -- / --
- -----------------------
(1) These amounts were calculated by subtracting the exercise price from
the market value of the underlying Common Stock as of 1998 year-end.
The market value of the Common Stock was $19.50 per share as of
December 31, 1998 (the last trading date in 1998) based on the closing
price per share on the Nasdaq National Market.
</TABLE>
Employment Agreements
The Company has entered into employment agreements with each of the
named executive officers in the Summary Compensation Table above other than Mr.
Rudnik. These agreements (the "Employment Agreements") generally provide that
Messrs. Reschke, Schulte, Copeland and Whitlock shall devote substantially all
of their business time to the operation of the Company, except that Mr. Reschke
is required to devote only such time as he deems necessary to fulfill his duties
and obligations to the Company as Chairman of the Board. The Employment
Agreements for Messrs. Reschke and Schulte provide for terms expiring on May 7,
2000, while the Employment Agreement for Mr. Copeland provides for a term
expiring on May 7, 2001, and the Employment Agreement for Mr. Whitlock provides
for a term expiring on January 31, 2001. The terms of the Employment Agreements
are automatically extended for one-year terms unless either the Company or the
executive officer provides the other with at least 30 days' prior written notice
that such term shall not be extended.
The Employment Agreements with Messrs. Reschke, Schulte and Copeland
provide for an annual bonus of up to 100% of the base salary based on certain
performance criteria. The Employment Agreement with Mr. Whitlock provides for
annual bonuses based on certain performance criteria. If any of such Employment
Agreements are terminated by the Company "without cause" or, with respect to
Messrs. Schulte and Copeland, due to disability, the executive so terminated
will be entitled to a lump sum payment. With regard to Mr. Whitlock, 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
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<PAGE>
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 either of Messrs. Schulte or
Copeland voluntarily terminates his employment with the Company "without good
reason" or in the event the employment of either of Messrs. Schulte or Copeland
is terminated by the Company "with cause," the executive officer will be subject
to a non-compete covenant that has a term of two years. 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. In addition, Mr.
Copeland has the option to purchase certain additional shares of Common Stock
from The Prime Group, Inc. and an affiliate of The Prime Group, Inc.
The Employment Agreements provide for base salaries of $100,000 for Mr.
Reschke, $275,000 for Messrs. Schulte and Copeland and $95,000, with an increase
to $200,000, which began February 1, 1999, for Mr. Whitlock. The current terms
of compensation for Mr. Rudnik include a base salary of $162,500.
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, 1998.
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.
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
-14-
<PAGE>
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 identified 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 certain of 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
Company employees.
Base Salaries
The Company has entered into Employment Agreements with Messrs.
Reschke, the Chairman of the Board of the Company, Schulte, the President and
Chief Executive Officer of the Company, Copeland, the Executive Vice President
and Chief Financial Officer of the Company, and Whitlock, the Vice
President-Acquisitions of the Company. Pursuant to such agreements, the base
salaries of Messrs. Reschke, Schulte, Copeland and Whitlock for the period from
January 1, 1998 to December 31, 1998 were $100,000, $275,000, $275,000 and
$95,000, respectively. The Employment Agreement for Mr. Whitlock was amended and
restated as of February 1, 1999. 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.
-15-
<PAGE>
Other elements of the Employment Agreements that serve to retain such
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 Messrs. Schulte and Copeland 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 or termination "without good reason" by
the executive officer. See "Compensation of Executive Officers--Employment
Agreements." Mr. Reschke is bound by the non-compete agreement among PGI, the
Company and Mr. Reschke.
Performance Bonuses
Performance bonuses for such senior executive officers are contained in
their respective Employment Agreements. Messrs. Reschke, Schulte and Copeland
receive bonuses based on the achievement of the Company's annual business plan
as reflected in the Company's audited financial statements. These bonuses may be
no greater than 100% of the executive officer's base salary. In addition,
Messrs. Reschke, Schulte and Copeland are eligible for discretionary bonuses of
no more than 20% of their base salary based on corporate or individual
performance goals that may be established by the Board of Directors or the
Compensation Committee from time to time. Messrs. Reschke, Schulte and Copeland
did not receive any cash bonuses in 1998, but were granted vested options
pursuant to the 1998 Stock Incentive Plan. Mr. Whitlock is entitled to receive a
performance bonus based upon property acquisitions of the Company. All other
executive officers are eligible for performance bonuses based on the achievement
of certain performance goals. Pursuant to these bonus plans, Messrs. Rudnik and
Whitlock received performance bonuses of $25,000 and $260,340, respectively, in
1998.
Stock Options
Pursuant to the 1998 Stock Incentive Plan, on May 21, 1998, the Company
granted stock options to each of Messrs. Reschke, Schulte, Copeland, Rudnik and
Whitlock, the other executive officers of the Company and certain other key
employees. Messrs. Reschke, Schulte, Copeland, Rudnik and Whitlock were granted
options to purchase 18,000, 49,500, 45,000, 35,000 and 1,000 shares of Common
Stock, respectively, under the 1998 Stock Incentive Plan. The options of Messrs.
Reschke, Schulte and Copeland were fully vested upon grant. The options of
Messrs. Rudnik and Whitlock vest at the rate of 25% per year over four years
following the grant date, commencing on the first anniversary of the grant date.
The Compensation Committee believes the options granted under the 1998 Stock
Incentive Plan 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.
Other Benefits
The Company has established the Brookdale Living Communities, Inc.
Retirement Savings Plan (the "401(k) Plan") for all employees of the Company
that meet minimum employment criteria.
-16-
<PAGE>
The 401(k) Plan provides that participants may defer up to 15% of their eligible
compensation on a pre-tax basis subject to certain maximum amounts. The Company
makes matching contributions of 25% of the employees' contributions to the
401(k) Plan. Employees' contributions vest immediately, while the Company's
contributions vest over five years.
Compensation Deductibility Policy
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 ended December 31, 1998. The 1997
Stock Incentive Plan and the 1998 Stock Incentive Plan were 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 and the 1998 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 a Company
executive will not be tax deductible under Section 162(m). This will depend upon
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
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, 1998, with the
cumulative total return of the S&P Composite - 500 Stock Index, the Nasdaq
Composite Index, the Russell 2000 Index and the Company's Peer Group (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**
-17-
<PAGE>
May 2, 1997 to December 31, 1998
December 31,
-------------------------------------
1997 1998
- --------------------------------------------------------------------------------
Brookdale Living Communities, Inc. $ 150.00 $ 169.56
S&P 500 122.56 157.59
Nasdaq Composite Index 124.95 175.17
Russell 2000 Index 128.56 125.68
Company's Peer Group 141.72 137.23
- --------------------------------------------------------------------------------
- ---------
* The Company's Peer Group 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., Balanced Care Corporation, Carematrix
Corporation, Capital Senior Living Corporation, Emeritus Corporation,
Grand Court Lifestyles, Inc., Greenbriar Corporation, 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.
PROPOSAL NO. 3
APPROVAL OF THE 1999 STOCK INCENTIVE PLAN
1999 Stock Incentive Plan
The Board of Directors has adopted, subject to stockholder approval,
the 1999 Stock Incentive Plan for the purpose of attracting and retaining
directors, executive officers and other key employees. Each option granted
pursuant to the 1999 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 1999 Stock Incentive Plan set forth below is
qualified in its entirety by reference to the text of the 1999 Stock Incentive
Plan attached hereto as Annex A.
The 1999 Stock Incentive Plan provides for the grant of options ("1999
Options") to purchase a specified number of shares of Common Stock. Under the
1999 Stock Incentive Plan, 200,000
-18-
<PAGE>
shares of Common Stock will be available for grants, with no limit as to the
maximum number of shares of Common Stock that may be subject to 1999 Options
granted to any single optionee under the 1999 Stock Incentive Plan. Participants
in the 1999 Stock Incentive Plan, who may be directors, officers or employees of
the Company, its subsidiaries or Company-owned partnerships or any consultant or
adviser who provides substantial and important service to the Company, will be
selected by the Compensation Committee.
The 1999 Stock Incentive Plan authorizes the Compensation Committee to
grant 1999 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 1999 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 1999 Option on the day it is granted.
Generally, 1999 Options granted under the 1999 Stock Incentive Plan
will have such terms, including vesting schedules, as determined by the
Compensation Committee. Upon a "change in control" (as defined in the 1999 Stock
Incentive Plan), however, all unvested 1999 Options then outstanding, and to the
extent not previously forfeited, will vest. The 1999 Options must be exercised
within 10 years from the date of the grant. The rights of any participants to
exercise a 1999 Option may not be transferred in any way other than by will or
applicable laws of descent and distribution.
Under the 1999 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 1999 Stock Incentive Plan after the
10th anniversary of the date on which the 1999 Stock Incentive Plan was adopted
by the Board of Directors (March 18, 2009).
Based on the $14.94 closing price of the Company's Common Stock on the
Nasdaq National Market on March 25, 1999, the aggregate market value of the
200,000 shares of Common Stock issuable upon the exercise of the 1999 Options is
$2,988,000.
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, the 1998 Stock
Incentive Plan and the 1999 Stock Incentive Plan
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<PAGE>
(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 1999 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 1999 STOCK INCENTIVE PLAN.
OTHER INFORMATION
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<PAGE>
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. 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 that 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,
1998, 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, 1998, (a) no reportable transactions were reported
late except that Michael W. Reschke reported (i) the transfer of 1,233,606
shares of Common Stock from The Prime Group, Inc. to Prime Group VI, L.P. and
(ii) the transfer of 25,000 shares of Common Stock from Prime Group VI, L.P. to
Prime Group III, L.P. on December 18, 1998 on a Form 5 filed on February 16,
1999 and (b) no Forms 3, 4, or 5 required to be filed were late except that R.
Stanley Young filed one Form 3 report late.
Certain Relationships and Related Transactions
Management Agreement. The Company has entered into a management
agreement with an affiliate of The Prime Group, Inc. ("Owner") with respect to
the Island on Lake Travis facility. The management agreement provided for an
initial term expiring on April 30, 1999, which has been automatically renewed to
April 30, 2000 and automatically renews on an annual basis unless and until
terminated. 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 Owner 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 or any renewal term.
The Company may terminate the management agreement at any time upon 60 days'
advance notice.
Office Lease. On September 25, 1997, the Company entered into a
five-year lease (the "Office Lease"), which commenced October 1, 1997, for its
corporate office with 77 West Wacker Limited Partnership (the "Landlord"), a
partnership which is currently owned by Prime Group Realty Trust, the
publicly-traded successor of the office and industrial divisions of Prime Group.
The original Office Lease provided for the lease by the Company of approximately
13,500 square feet of office space on the 48th floor, with base rent of $18.50
per square foot escalating at $0.75 per square foot at each anniversary of the
commencement date. On October 2, 1997, in connection with the signing of the
Office Lease, the Company received a $404,000 cash payment from the Landlord for
tenant improvements which are amortized over the term of the Office Lease.
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<PAGE>
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 for
tenant improvements which are amortized over the term of the amended Office
Lease.
Insurance Brokerage and Risk Management Services with Thilman &
Filippini, LLC. The Company has an ongoing business relationship with respect to
insurance brokerage and risk management services with Thilman & Filippini, LLC,
a limited liability company in which Thomas W. Filippini is an indirect member.
Mr. Filippini is the brother-in-law of Robert J. Rudnik, Executive Vice
President, General Counsel and Secretary of the Company. Thilman & Filippini,
LLC receives commissions and fees in connection with insurance policies arranged
on behalf of the Company and for providing certain risk management services for
the Company.
Services Contract with Workplace Dynamics, Inc. David J. Schaus, Senior
Vice President-Human Services of the Company, is the owner of Workplace
Dynamics, Inc. ("WDI"). Pursuant to a contract with WDI, WDI provided training
services to the Company from January 1998 to May 1998 for which the Company paid
WDI $61,100. Since Mr. Schaus joined the Company in August 1998, WDI and the
Company have not transacted any business.
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 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.
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 2000 Annual
Meeting of Stockholders must be received by the Company no later than December
21, 1999 pursuant to the
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<PAGE>
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 2000 annual meeting.
Nothing in this paragraph shall be deemed to require the Company to include in
its Proxy Statement and Proxy relating to the 2000 annual meeting any
stockholder proposal that 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 2000 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.
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<PAGE>
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.
Robert J. Rudnik
/s/ Robert J. Rudnik
Secretary
Chicago, Illinois
April 19, 1999
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<PAGE>
Annex A
1999 BROOKDALE LIVING COMMUNITIES, INC.
STOCK INCENTIVE PLAN
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
1. PURPOSE OF PLAN...............................................................................................A-1
2. DEFINITIONS...................................................................................................A-1
3. STOCK SUBJECT TO PLAN.........................................................................................A-4
3.1 Stock Subject to Plan...........................................................................A-4
3.2 Unexercised Options.............................................................................A-4
3.3 Changes in Company Capitalization...............................................................A-4
4. GRANTING OF OPTIONS...........................................................................................A-4
4.1 Eligibility.....................................................................................A-4
4.2 Incentive Stock Options.........................................................................A-4
4.3 Granting of Options.............................................................................A-5
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-7
5.3 Option Exercise Price...........................................................................A-7
5.4 Exercise Periods................................................................................A-7
5.5 Requirement of Continued Employment.............................................................A-8
5.6 Adjustments in Outstanding Options..............................................................A-9
5.7 Merger, Consolidation, Acquisition, Liquidation or Dissolution..................................A-9
5.8 No Right to Continued Employment................................................................A-9
6. EXERCISE OF OPTIONS...........................................................................................A-10
6.1 Person Eligible to Exercise.....................................................................A-10
6.2 Partial Exercise................................................................................A-10
6.3 Manner of Exercise..............................................................................A-10
6.4 Conditions to Issuance of Stock Certificates....................................................A-11
6.5 Rights as Stockholders..........................................................................A-12
6.6 Transfer Restrictions...........................................................................A-12
7. ADDITIONAL PROVISIONS.........................................................................................A-12
7.1 Approval of Plan by Stockholders................................................................A-12
7.2 Nontransferability..............................................................................A-12
7.3 Death or Disability of Optionee.................................................................A-12
7.4 Securities Act..................................................................................A-13
7.5 Withholding of Tax..............................................................................A-13
7.6 Termination and Amendment of Plan...............................................................A-13
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
7.7 Duties of the Company...........................................................................A-13
8. GENERAL PROVISIONS............................................................................................A-14
</TABLE>
ii
<PAGE>
SECTION 1. PURPOSE OF PLAN
The purpose of the 1999 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
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(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.
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.
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(b) If the Common Stock is not traded on any national
securities exchange, but is quoted on the Nasdaq Stock Market 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 on the Nasdaq Stock Market 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 Stock Market (or such similar quotation system).
(c) If neither clause (a) nor clause (b) of this Section 2.11
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.
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 1999 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.
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<PAGE>
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
200,000 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 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 200,000. 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.
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<PAGE>
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.
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.
A-5
<PAGE>
(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-6
<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.
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<PAGE>
(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 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.
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(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.
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.
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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.
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, shares
of the Company's Common Stock owned by the Optionee duly
endorsed for transfer to the Company, other than shares of the
Company's Common Stock held for less than six months unless
acquired on the open market, with a Fair Market Value on the
date of Option
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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, other than shares of the Company's
Common Stock held for less than six months unless acquired on the open
market, 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, but only up to the minimum withholding requirement for
supplemental wages; 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 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
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(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.
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
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(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 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
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(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
thereto 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 20, 1999
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
20, 1999 at 10:00 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 USING DARK INK ONLY. ( )
1. TO ELECT TWO CLASS II DIRECTORS FOR A TERM OF THREE YEARS EACH.
NOMINEES: DARRYL W. COPELAND, JR.
DARRYL W. HARTLEY-LEONARD
FOR WITHHOLD FOR ALL
ALL ALL EXCEPT
[ ] [ ] [ ]
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Nominee Exception
<TABLE>
<CAPTION>
<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, 1999. [ ] [ ] [ ]
3. To approve the 1999 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 19, 1999 and hereby
revokes any proxy or proxies heretofore given. This proxy may be revoked at any
time prior to its exercise.
Dated: -----------------------, 1999
Signature(s) -------------------------------------------
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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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