<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
AMERICAN RETIREMENT CORPORATION
- --------------------------------------------------------------------------------
(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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(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):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] 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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
AMERICAN RETIREMENT CORPORATION
111 WESTWOOD PLACE, SUITE 402
BRENTWOOD, TENNESSEE 37027
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 5, 1998
As a shareholder of American Retirement Corporation (the "Company"),
you are hereby given notice of and invited to attend in person or by proxy the
Annual Meeting of Shareholders of the Company to be held at the Loews Vanderbilt
Plaza Hotel, 2100 West End Avenue, Nashville, Tennessee, on Tuesday, May 5,
1998, at 11:00 a.m., local time, for the following purposes:
1. To elect four Class I directors to serve for a term of
three years and until their successors are duly elected and qualified;
and
2. To transact such other business as may properly come before
the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 9,
1998, as the record date (the "Record Date") for the determination of
shareholders entitled to notice of and to vote at the meeting and any
adjournment thereof. Only shareholders of record at the close of business on the
Record Date are entitled to notice of and to vote at the meeting.
You are cordially invited to attend the annual meeting. Whether or not
you expect to attend the meeting, management desires to have the maximum
representation at the meeting and respectfully requests that you date, execute,
and mail promptly the enclosed proxy in the enclosed stamped envelope, which
requires no postage if mailed in the United States. A proxy may be revoked by a
shareholder any time prior to its use as specified in the enclosed proxy
statement.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ GEORGE T. HICKS
------------------------------------
GEORGE T. HICKS
SECRETARY
Brentwood, Tennessee
March 31, 1998
<PAGE> 3
AMERICAN RETIREMENT CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 5, 1998
To Our Shareholders:
This Proxy Statement is furnished to shareholders of American
Retirement Corporation (the "Company") in connection with the solicitation of
proxies by the Board of Directors of the Company (the "Board of Directors") to
be voted at the Annual Meeting of Shareholders (the "Annual Meeting") to be held
at the date, time, and place and for the purposes set forth in the accompanying
Notice of Annual Meeting of Shareholders, or at any adjournment or adjournments
thereof. The approximate date on which this Proxy Statement and the enclosed
proxy are first being sent to shareholders is March 31, 1998.
The purposes of the Annual Meeting are to elect four Class I directors
and to transact such other business as may properly be brought before the Annual
Meeting or any adjournment thereof.
Any shareholder who signs and returns a proxy has the unconditional
right to revoke such proxy at any time prior to the voting thereof by any action
inconsistent with the proxy, including notifying the Secretary of the Company in
writing, executing a subsequent proxy, or personally appearing at the Annual
Meeting and casting a contrary vote. No such revocation will be effective,
however, unless and until notice of such revocation has been received by the
Company at or prior to the Annual Meeting. Shares of Common Stock represented at
the Annual Meeting by valid proxies will be voted in accordance with the
instructions contained therein. Where no choice is specified in the proxy, such
shares will be voted FOR the director nominees.
The Board of Directors knows of no other matters that are to be brought
to a vote at the Annual Meeting. If any other matter does come before the Annual
Meeting, the persons appointed in the proxy or their substitutes will vote in
accordance with their best judgement on such matters.
The record of shareholders entitled to notice of and to vote at the
Annual Meeting was taken at the close of business on March 9, 1998 (the "Record
Date"). On the Record Date, 11,420,860 shares of the Company's common stock, par
value $0.01 per share (the "Common Stock"), were outstanding. Each shareholder
is entitled to one vote for each share of Common Stock held on the Record Date.
The representation in person or by proxy of at least a majority of the
outstanding shares of Common Stock entitled to vote is necessary to constitute a
quorum to transact business at the Annual Meeting. The directors will be elected
by a plurality of the votes cast by shareholders entitled to vote at the Annual
Meeting. Abstentions and broker non-votes will be counted as present for
purposes of determining a quorum. A broker non-vote occurs when a broker holding
shares registered in street name is permitted to vote, in the broker's
discretion, on routine matters without receiving instructions from the client,
but is not permitted to vote without instructions on non-routine matters, and
the broker returns a proxy card with no vote (the "non-vote") on the non-routine
matter. Because directors are elected by a plurality of the votes cast,
abstentions and non-votes are not considered in the election.
The cost of solicitation of proxies will be borne by the Company,
including expenses in connection with preparing, assembling, and mailing this
Proxy Statement. Such solicitation will be made by mail and may also be made by
the Company's regular officers or employees personally or by telephone or
telecopy. The Company may reimburse brokers, custodians, and their nominees for
their expenses in sending proxies and proxy materials to beneficial owners.
<PAGE> 4
ELECTION OF DIRECTORS
The Board of Directors of the Company is divided into three classes
(Class I, Class II, and Class III), each class to be as nearly equal in number
as possible. The current Board of Directors is comprised of eleven members. At
each annual meeting of shareholders, directors comprising one class are elected
for a three-year term. The terms of the four Class I directors will expire upon
the election and qualification of new directors at the Annual Meeting. The Board
of Directors has nominated Jack O. Bovender, Jr., Christopher J. Coates, Daniel
K. O'Connell, and Lawrence J. Stuesser, all of whom are currently directors of
the Company, to serve until the annual meeting of shareholders in 2001 and until
their successors are duly elected and qualified. The terms of the Class II and
Class III directors will expire at the annual meeting in 1999 and 2000,
respectively.
If any of the nominees should become unable to serve as directors, the
persons named in the proxy may vote for such other person or persons as may be
designated by the Board of Directors. Management has no reason to believe that
any of the nominees named above will be unable to serve. Certain information
with respect to nominees for election as Class I directors and with respect to
the Class II and Class III directors (who are not nominees for election at the
Annual Meeting) is set forth below.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" ALL OF THE
DIRECTOR NOMINEES.
<TABLE>
<CAPTION>
Name Age Principal Occupation/Directorships Director Since
- ---- --- ---------------------------------- --------------
<S> <C> <C> <C>
DIRECTOR NOMINEES
Class I Directors
(Terms Expire 2001)
Jack O. Bovender, Jr. 52 Mr. Bovender has been president and chief operating officer of 1997
Columbia/HCA Healthcare Corporation ("Columbia/HCA") since August
1997. From March 1994 to August 1997, Mr. Bovender was retired.
Prior to March 1994, Mr. Bovender worked for Hospital Corporation of
America, a predecessor to Columbia/HCA, for over 18 years in various
capacities, including executive vice president and chief operating officer.
Mr. Bovender is a director of America Service Group, Inc., a provider of
managed health care services to correctional facilities.
Christopher J. Coates 47 Mr. Coates has served as President and Chief Operating Officer of the 1998
Company and its predecessors since January 1993. From 1988 to 1993,
Mr. Coates served as chairman of National Retirement Company, a senior
living management company acquired by a subsidiary of the Company in
1992. From 1985 to 1988, Mr. Coates was senior director of the
Retirement Housing Division of Radice Corporation, following that
company's purchase in 1985 of National Retirement Consultants, a
company formed by Mr. Coates.
Daniel K. O'Connell 69 Mr. O'Connell has served as a director of the Company since its inception 1997
and as a director of various of the Company's predecessors since 1985.
Until his retirement in 1990, Mr. O'Connell worked for Ryder System,
Inc. for over 25 years in various capacities, including legal counsel and
chief financial officer.
</TABLE>
2
<PAGE> 5
<TABLE>
<S> <C> <C> <C>
Lawrence J. Stuesser 55 Since June 1996, Mr. Stuesser has been the president and chief executive 1997
officer and a director of Computer People, Inc., an information technology
professional services and staffing company and a subsidiary of Delphi
Group plc, of which Mr. Stuesser serves as a director. From August 1993
to May 1996, Mr. Stuesser was a private investor and independent
business consultant. From January 1991 to July 1993, Mr. Stuesser was
chairman and chief executive officer of Kimberly Quality Care, Inc., a
home health care services company. Mr. Stuesser is chairman of the
board of Curative Health Services, Inc., a disease management company
in the chronic wound care market, and a director of IntegraMed America,
Inc., an owner and operator of clinical ambulatory care facilities.
CONTINUING DIRECTORS
Class II Directors
(Terms Expire 1999)
Frank M. Bumstead 56 Since 1989, Mr. Bumstead has been president and a principal shareholder 1997
of Flood, Bumstead, McCready & McCarthy, Inc., a business management
firm that represents, among others, artists, songwriters, and producers in
the music industry. Since 1993, Mr. Bumstead has also served as the
chairman and chief executive officer of FBMS Financial, Inc., an
investment advisor registered under the Investment Company Act of 1940.
Mr. Bumstead is vice chairman and a director of Response Oncology, Inc.,
a physician practice management company specializing in oncology, and
a director of TBA Entertainment, Inc., an owner and operator of
restaurants and hotels. Mr. Bumstead also serves as a director, secretary,
and treasurer of Imprint Records, Inc., a music recording company.
Clarence Edmonds 64 Mr. Edmonds has served as a director of the Company since its inception 1997
and as a director of various of the Company's predecessors since 1987.
Mr. Edmonds has served in various capacities, including vice president
and treasurer, of Massey Company, an investment services firm, since
1969.
Nadine C. Smith 40 Ms. Smith is president and chief executive officer of Enidan Capital 1997
Partners, L.P., an investment company that makes equity investments in
public and privately held companies ("Enidan"). Prior to co-founding
Enidan, Ms. Smith was managing general partner of NC Smith & Co., a
financial and management consulting firm, from 1990 to 1997. Ms. Smith
also is president and chief executive officer of Sirrom Resource Funding,
L.P., which provides financing to environmental companies.
</TABLE>
3
<PAGE> 6
<TABLE>
<S> <C> <C> <C>
Class III Directors
(Terms Expire 2000)
W.E. Sheriff 55 Mr. Sheriff has served as Chairman and Chief Executive Officer of the 1997
Company and its predecessors since April 1984. From 1973 to 1984, Mr.
Sheriff served in various capacities for Ryder System, Inc., including as
president and chief executive officer of its Truckstops of America division.
Mr. Sheriff also serves on the boards of several privately-held companies
and various educational and charitable organizations. Mr. Sheriff serves
in varying capacities with several trade organizations, including as a
member of the board of the National Association for Senior Living
Industries and as a member of the American Association of Homes and
Services for the Aging and the American Senior Housing Association.
H. Lee Barfield II 51 Mr. Barfield has served as a director of the Company since its inception 1997
and as director of various of the Company's predecessors since 1978. Mr.
Barfield is a member in the law firm of Bass, Berry & Sims PLC, the
Company's outside general counsel, and has served in various capacities
for that firm since 1974.
John A. Morris, Jr., M.D. 51 Dr. Morris has served in varying capacities of the medical profession since 1997
1977 and is currently a Professor of Surgery and the Director of the
Division of Trauma and Surgical Critical Care at the Vanderbilt
University School of Medicine, the Medical Director of the Life Flight Air
Ambulance Program at Vanderbilt University Hospital, and an Associate
in the Department of Health Policy and Management at Johns Hopkins
University. Dr. Morris is also chairman of the board of Sirrom Capital
Corporation, a small business investment company.
Robin G. Costa 31 Since 1994, Ms. Costa has served as chief operating officer of Maddox 1997
Companies, a group of over 40 entities involved in oil and gas exploration,
real estate development and investment, and other investments. Ms. Costa
has served in various capacities for the Maddox Companies since 1985,
including as secretary and treasurer from 1992 to 1994.
</TABLE>
The Board of Directors holds regular quarterly meetings and meets on
other occasions when required by special circumstances. Certain directors also
devote their time and attention to the Board's principal standing committees.
The committees, their primary functions, and memberships are as follows:
Executive Committee -- This committee is authorized generally to act on
behalf of the Board of Directors between scheduled meetings of the
Board, subject to certain limitations established by the Board and
applicable corporate law. Members of the Executive Committee are
Messrs. Bovender, Bumstead, and Sheriff and Dr. Morris.
Audit Committee -- This committee makes recommendations to the Board of
Directors with respect to the Company's financial statements and the
appointment of independent accountants, reviews significant audit and
accounting policies and practices, meets with the Company's independent
public accountants concerning, among other things, the scope of audits
and reports, and reviews the performance of the overall accounting and
financial controls of the Company. Members of the Audit Committee are
Messrs. Barfield and Edmonds and Ms. Costa.
Compensation Committee -- This committee has the responsibility for
reviewing and approving the salaries, bonuses, and other compensation
and benefits of executive officers, advising management regarding
benefits and other terms and conditions of compensation, and
administering the Company's
4
<PAGE> 7
stock incentive, stock purchase, 401(k), and other executive
compensation plans. Members of the Compensation Committee are Messrs.
O'Connell and Stuesser and Ms. Smith. See "Compensation Committee
Report on Executive Compensation."
The Board of Directors held five meetings during the fiscal year ended
December 31, 1997 ("Fiscal 1997"). The Executive Committee held four meetings
during Fiscal 1997, the Audit Committee held three meetings during Fiscal 1997,
and the Compensation Committee held five meetings during Fiscal 1997. During
Fiscal 1997, each of the directors attended at least 75% of the aggregate of the
total number of meetings of the Board of Directors and the committees on which
such director served.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
As of the Record Date, there were 11,420,860 shares of Common Stock
outstanding and entitled to vote at the Annual Meeting. The following table sets
forth, as of March 26, 1998, the beneficial ownership of each current director
(including the four nominees for director), each of the executive officers named
in the Summary Compensation Table beginning on page 6 hereof, the directors and
executive officers as a group, and each shareholder known to management of the
Company to own beneficially more than 5% of the outstanding Common Stock. Unless
otherwise indicated, the Company believes that the beneficial owner set forth in
the table has sole voting and investment power.
<TABLE>
<CAPTION>
Amount and Nature of Percent of
Name of Beneficial Owner Beneficial Ownership(1)(2) Class%
------------------------ -------------------------- ------
<S> <C> <C>
NAMED EXECUTIVE OFFICERS:
W.E. Sheriff 619,217(3)(4) 5.4
Christopher J. Coates 243,303(5) 2.1
George T. Hicks 170,839(6) 1.5
H. Todd Kaestner 180,244(7) 1.6
James T. Money 175,252(8) 1.5
DIRECTORS:
H. Lee Barfield II 625,577(9)(10) 5.5
Jack O. Bovender, Jr. 5,000 *
Frank M. Bumstead 10,000 *
Robin G. Costa 1,443,259(11)(12) 12.6
Clarence Edmonds 370,073(13) 3.2
John A. Morris, Jr., M.D. 363,490(14) 3.2
Daniel K. O'Connell 18,285 *
Nadine C. Smith 34,956 *
Lawrence J. Stuesser 72,547(15) *
OTHER 5% SHAREHOLDERS:
DMAR Limited Partnership 1,372,037(11) 12.0
Mary Louise Frist Barfield 625,577(16)(17) 5.5
Robert A. Frist, M.D. 591,838(18)(19) 5.2
All directors and executive officers as a group (16 persons) 4,560,631 39.8
</TABLE>
- -------------------
* Less than one percent.
(1) Pursuant to the rules of the Securities and Exchange Commission (the
"SEC"), shares of Common Stock that certain persons presently have the
right to acquire pursuant to the conversion provisions of the Company's
5 3/4% Convertible Subordinated Debentures Due 2002 ("Conversion
Shares") are deemed outstanding for the purpose of computing such
person's percentage ownership, but not deemed outstanding for the
purpose of computing the percentage ownership of the other persons
shown in the table. Likewise, shares subject to options held by
directors and executive officers of the Company that are exercisable
within 60 days of the date hereof are deemed outstanding for the
purpose of computing such director's or executive officer's beneficial
ownership and the beneficial ownership of all directors and executive
officers as a group.
(2) Includes the following shares of Common Stock issuable upon the
exercise of options granted pursuant to the 1997 Stock Plan which the
following persons are entitled to exercise within 60 days of the date
hereof: Mr. Barfield, 5,000; Mr. Bovender, 5,000; Mr. Bumstead, 5,000;
Ms. Costa, 5,000; Mr. Edmonds, 5,000; Dr. Morris, 5,000; Mr. O'Connell,
5,000; Ms. Smith, 5,000; Mr. Stuesser, 5,000; and directors and
executive officers as a group (16 persons), 45,000.
(3) Address: 111 Westwood Place, Suite 402, Brentwood, Tennessee 37027.
5
<PAGE> 8
(4) Includes 324,519 shares, including 4,166 Conversion Shares,
beneficially owned by a family limited partnership in which Mr. Sheriff
is a general partner.
(5) Includes 1,860 shares beneficially owned by Sylvester I, L.P.
("Sylvester I") as to which Mr. Coates holds a pecuniary interest.
(6) Includes 1,860 shares beneficially owned by Sylvester I as to which Mr.
Hicks holds a pecuniary interest.
(7) Includes 1,860 shares beneficially owned by Sylvester I as to which Mr.
Kaestner holds a pecuniary interest.
(8) Includes 1,860 shares beneficially owned by Sylvester I as to which Mr.
Money holds a pecuniary interest.
(9) Address: 2700 First American Center, Nashville, Tennessee 37238.
(10) Includes 2,708 Conversion Shares. Also includes 473,065 shares
beneficially owned by Mr. Barfield's wife, Mary Louise Frist Barfield.
See Note 17. Mr. Barfield is the brother-in-law of Robert A. Frist.
(11) Address: 3833 Cleghorn Avenue, Suite 400, Nashville, Tennessee 37215.
(12) Includes 1,372,037 shares beneficially owned by DMAR Limited
Partnership ("DMAR"). Ms. Costa is a Vice President of Margaret Energy,
Inc., the general partner of DMAR. Also includes an aggregate of 18,000
shares beneficially owned by trusts as to which Ms. Costa exercises
voting and dispositive power and 48,222 shares held in an estate as to
which Ms. Costa is co-executor.
(13) Includes 4,166 Conversion Shares beneficially owned by Mr. Edmonds,
335,888 shares beneficially owned by The Jack C. Massey Foundation, of
which Mr. Edmonds serves as a co-trustee, 5,000 shares beneficially
owned by a trust of which Mr. Edmonds and his wife serve as co-trustees
and or lifetime beneficiaries, and 20,019 shares beneficially owned by
Mr. Edmonds's wife. Mr. Edmonds disclaims beneficial ownership of his
wife's shares.
(14) All shares are beneficially owned by partnerships owned and controlled
by Dr. Morris, his brother, and other members of Dr. Morris's family.
(15) Includes 67,547 shares beneficially owned by a corporation, of which
Mr. Stuesser is a director and 50% shareholder.
(16) Address: c/o H. Lee Barfield II, 2700 First American Center, Nashville,
Tennessee 37238.
(17) Includes 208 Conversion Shares beneficially owned by Mrs. Barfield,
2,708 Conversion Shares and 149,803 shares beneficially owned by Mrs.
Barfield's husband, H. Lee Barfield II, and an aggregate of 184,804
shares beneficially owned by trusts for the benefit of Mrs. Barfield's
children, of which Mrs. Barfield serves as trustee. See Note 10. Mrs.
Barfield is the sister of Robert A. Frist.
(18) Address: 1326 Page Road, Nashville, Tennessee 37205.
(19) Includes 31,735 shares beneficially owned by Dr. Frist's wife,
including 4,166 Conversion Shares. Does not include shares beneficially
owned by Dr. Frist's children who are 18 years of age or older. Dr.
Frist is the brother of Mary Louise Barfield Frist and the
brother-in-law of H. Lee Barfield II.
6
<PAGE> 9
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the total compensation paid or accrued by
the Company's predecessor, American Retirement Communities, L.P. ("ARCLP"), for
the year ended December 31, 1996 and by the Company during Fiscal 1997
(including amounts paid by ARCLP for the period from January 1, 1997 through May
29, 1997) on behalf of the Company's Chief Executive Officer and the four other
most highly-paid executive officers of the Company (collectively, the "Named
Executive Officers").
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
Annual Compensation(1) ---------------------
------------------------ Securities Underlying All Other
Name and Principal Positions Fiscal Year Salary($) Bonus($) Options(#) Compensation($)
- ------------------------------------ ------------ ----------- ---------- --------------------- ---------------
<S> <C> <C> <C> <C> <C>
W.E. Sheriff, 1997 221,500 -- 60,000 12,723(2)
Chairman and Chief Executive 1996 212,400 30,515 -- 84,000(2)
Officer
Christopher J. Coates, 1997 168,000 15,000 45,000 8,549(3)
President and Chief Operating 1996 153,400 22,038 -- 11,033(3)
Officer
George T. Hicks, 1997 120,000 15,000 35,000 5,870(3)
Executive Vice President - 1996 100,300 14,410 -- 7,214(3)
Finance, Chief Financial
Officer, Treasurer, and
Secretary
H. Todd Kaestner, 1997 130,000 15,000 35,000 6,296(3)
Executive Vice President - 1996 106,200 15,257 -- 7,637(3)
Corporate Development
James T. Money, 1997 120,000 15,000 35,000 5,870(3)
Executive Vice President - 1996 100,300 14,410 -- 7,214(3)
Development Services
</TABLE>
- -----------------
(1) Does not include amounts distributed by American Retirement
Communities, LLC ("LLC") to its members, including the Named Executive
Officers. In 1996, LLC distributed $13,561 to Mr. Sheriff, $9,686 to
Mr. Coates, and $7,749 to each of Messrs. Hicks, Kaestner, and Money in
accordance with their ownership interests in LLC.
(2) Reflects insurance premiums paid by the Company for insurance policies
benefiting Mr. Sheriff.
(3) Reflects contributions by the Company under the Company's Section 162
deferred compensation plan.
7
<PAGE> 10
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning options
granted in Fiscal 1997 to the Named Executive Officers. No options were granted
by the Company prior to May 1997. None of the Named Executive Officers were
granted stock appreciation rights ("SARS").
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------------------------------
Percent of
Total Potential Realizable Value at
Number of Options Assumed Annual Rates of
Securities Granted to Stock Price Appreciation
Underlying Employees Exercise for Option Term
Options in Fiscal or Base Expiration -----------------------------
Name Granted(#)(*) Year(%) Price($/Sh) Date 5%($) 10%($)
- --------------------------- ---------------- ------------- ----------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
W.E. Sheriff 60,000 7.9 14.00 5/30/07 528,271 1,338,744
Christopher J. Coates 45,000 6.0 14.00 5/30/07 396,204 1,004,058
George T. Hicks 35,000 4.6 14.00 5/30/07 308,158 780,934
H. Todd Kaestner 35,000 4.6 14.00 5/30/07 308,158 780,934
James T. Money 35,000 4.6 14.00 5/30/07 308,158 780,934
</TABLE>
- -----------------
* All options granted to the Named Executive Officers vest and become
exercisable in three equal annual installments beginning May 30, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides information as to the number and value of
the unexercised options held by the Named Executive Officers at December 31,
1997. None of the Named Executive Officers exercised options during Fiscal 1997.
None of the Named Executive Officers has held or exercised SARs.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money
Fiscal Year-End(#) Options at Fiscal Year-End($)(1)
---------------------------------- ----------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ------------------------- -------------- ----------------- -------------- -----------------
<S> <C> <C> <C> <C>
W.E. Sheriff -- 60,000 -- 360,000
Christopher J. Coates -- 45,000 -- 270,000
George T. Hicks -- 35,000 -- 210,000
H. Todd Kaestner -- 35,000 -- 210,000
James T. Money -- 35,000 -- 210,000
</TABLE>
- -----------------
(1) Based on the closing price of the Common Stock on the New York Stock
Exchange on December 31, 1997 ($20.00).
8
<PAGE> 11
COMPENSATION OF DIRECTORS
Directors who are employees of the Company do not receive additional
compensation for serving as directors of the Company. Non-employee directors are
entitled to an annual retainer of $12,000 payable, in arrears, on the date of
each annual meeting of shareholders, commencing with the Annual Meeting.
Non-employee directors are also entitled to a fee of $500 for each board meeting
attended by such director and $250 for each committee meeting attended by such
director that is not on the same day as a meeting of the Board of Directors. All
directors are entitled to reimbursement for their actual out-of-pocket expenses
incurred in connection with attending meetings.
In addition, non-employee directors receive options to purchase shares
of Common Stock in accordance with the provisions of the Company's 1997 Stock
Incentive Plan (the "1997 Stock Incentive Plan"). Options to purchase 9,000
shares of Common Stock were automatically granted to each person serving as an
outside director of the Company (an "Outside Director") on the date of the
Company's initial public offering (May 30, 1997). Any person who was not
previously a member of the Board of Directors and who is elected or appointed an
Outside Director prior to the date of the annual meeting of shareholders of the
Company in the year 2000 will automatically be granted an option to purchase
7,000 shares of Common Stock if such Outside Director's service begins prior to
May 30, 1999 and 5,000 shares of Common Stock if such Outside Director's service
begins thereafter. The Board of Directors may, in its discretion, increase or
decrease the number of shares subject to such option to reflect the extent to
which such Outside Director's expected service may exceed two years or may be
less than one year. Options granted to Outside Directors prior to the annual
meeting of shareholders in the year 2000 shall vest with respect to 5,000 shares
on the date of the first annual meeting of shareholders following the date of
grant, 2,000 shares on the date of the second annual meeting of shareholders
following the date of grant, and any remaining shares on the date of the third
annual meeting of shareholders following the date of grant.
On the date of each annual meeting of the shareholders of the Company
beginning with the annual meeting of shareholders held in the year 2000, unless
the 1997 Stock Incentive Plan has been terminated, each Outside Director who
will continue as a director following such meeting will receive an option to
purchase 3,000 shares of Common Stock. Such options will vest with respect to
all 3,000 shares on the date of the next annual meeting of shareholders. All
options automatically granted to an Outside Director will enable the optionee to
purchase shares of Common Stock at the fair market value of the Common Stock on
the date of grant. The terms of such options are ten years from the date of
grant. The exercise price may be paid in cash, shares of Common Stock, or a
combination thereof. The Board of Directors has the discretion to reduce, but
not increase, the number of shares awardable to Outside Directors.
CERTAIN TRANSACTIONS
THE REORGANIZATION
Immediately prior to the Company's initial public offering, ARCLP was
reorganized (the "Reorganization") such that all of its assets and liabilities
were contributed to the Company. Pursuant to the Reorganization, the Company
issued an aggregate of 7,812,500 shares of Common Stock and a promissory note in
the principal amount of $21.9 million (the "Reorganization Note") to ARCLP.
Following the Reorganization, ARCLP distributed 1,350,000 shares of Common Stock
to LLC as general partner of ARCLP, and an aggregate of 6,462,500 shares of
Common Stock to the limited partners of ARCLP, generally in accordance with the
limited partners' ARCLP contribution accounts. In addition, ARCLP distributed,
in liquidation, proceeds from the repayment of the Reorganization Note to the
limited partners of ARCLP, generally in accordance with the limited partners'
contribution accounts.
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<PAGE> 12
In connection with the Reorganization, certain executive officers,
directors, and other limited partners of ARCLP who beneficially own more than 5%
of the Common Stock (and, in each case, their immediate family members and
affiliates), received shares of Common Stock and received proceeds from the
Reorganization Note as set forth in the table below.
<TABLE>
<CAPTION>
NUMBER OF SHARES PROCEEDS FROM THE
NAME OF COMMON STOCK(1) REORGANIZATION NOTE($)
------------------------- ----------------------------
<S> <C> <C>
W.E. Sheriff..................................... 619,217(2) 1,084,371(3)
Christopher J. Coates............................ 242,603(4) 108,666(5)
George T. Hicks.................................. 170,259(4) 6,294(5)
H. Todd Kaestner................................. 180,244(4) 40,093(5)
James T. Money................................... 175,252(4) 23,194(5)
H. Lee Barfield II............................... 602,661(6) 2,039,949(7)
Robin G. Costa................................... 1,372,037 4,644,228(8)
Clarence Edmonds................................. 360,907 1,221,640(9)
John A. Morris, Jr., M.D......................... 358,490 1,213,458(10)
Daniel K. O'Connell.............................. 10,285 34,814
Nadine C. Smith.................................. 29,956 101,399
Lawrence J. Stuesser............................. 67,547 228,640(11)
American Retirement Communities, LLC............. 1,350,000 --
Dan Maddox(12)................................... 1,420,259(13) 4,807,456(14)
DMAR Limited Partnership......................... 1,372,037 4,644,228
The Jack C. Massey Foundation.................... 335,888 1,136,954
Mary Louise Frist Barfield....................... 602,661(15) 2,039,949(16)
Robert A. Frist, M.D............................. 573,872(17) 1,942,507(18)
</TABLE>
- -----------------
(1) See Notes to "Security Ownership of Management and Certain Beneficial
Owners" for certain beneficial ownership information.
(2) Does not include shares distributed to LLC, of which Mr. Sheriff served
as Chief Manager, as to which Mr. Sheriff did not have a pecuniary
interest.
(3) Amounts distributed to a family limited partnership in which Mr.
Sheriff is a general partner.
(4) Does not include shares distributed to LLC or Sylvester I, as to which
such person did not have a pecuniary interest.
(5) Includes $6,294, which represents such person's pro rata portion of
amounts distributed to Sylvester I.
(6) Does not include shares distributed to Robert A. Frist or an aggregate
of 841,555 shares distributed to Mr. Barfield's father-in-law,
sister-in-law, and trusts for the benefit of Mr. Barfield's
brother-in-law and nephews.
(7) Includes $977,470 distributed to Mr. Barfield's wife, Mary Louise Frist
Barfield, and an aggregate of $572,331 distributed to trusts for the
benefit of Mr. Barfield's children, of which Mrs. Barfield serves as
trustee. See Note 16. Does not include amounts distributed to Robert A.
Frist and his wife and children; Mr. Barfield's brother-in-law; or an
aggregate of $2,848,592 distributed to Mr. Barfield's father-in-law,
sister-in-law, and trusts for the benefit of Mr. Barfield's
brother-in-law and nephews.
(8) All amounts distributed to DMAR. Ms. Costa is a Vice President of
Margaret Energy, Inc., the general partner of DMAR.
(9) Includes $1,136,954 distributed to The Massey Foundation and $84,686
distributed to Mr. Edmonds's wife.
(10) All amounts distributed to partnerships owned and controlled by Dr.
Morris, his brother, and members of Dr. Morris's family.
(11) Amounts received by a corporation, of which Mr. Stuesser is a director
and 50% shareholder.
(12) Mr. Maddox passed away in January 1998.
(13) Does not include an aggregate of 158,939 shares distributed to Mr.
Maddox's son.
(14) Includes $4,644,228 distributed to DMAR. Does not include an aggregate
of $443,496 distributed to Mr. Maddox's son.
(15) Does not include shares distributed to Robert A. Frist or an aggregate
of 841,555 shares distributed to Ms. Barfield's father, sister, and
trusts for the benefit of Ms. Barfield's brother and nephews.
(16) Includes $490,148 distributed to Mrs. Barfield's husband, H. Lee
Barfield II, and an aggregate of $572,331 distributed to trusts for the
benefit of Mrs. Barfield's children, of which Mrs. Barfield serves as
trustee. See Note 7. Does not include amounts distributed to Robert A.
Frist and his wife and children; Mrs. Barfield's brother; or an
aggregate of $2,848,592 distributed to Ms. Barfield's father, sister,
and trusts for the benefit of Ms. Barfield's brother and nephews.
(17) Does not include shares distributed to H. Lee Barfield II or Mary
Louise Frist Barfield, or an aggregate of 841,555 shares distributed to
Dr. Frist's father, sister, or trusts for the benefit of Dr. Frist's
brother and nephews.
(18) Includes $76,393 distributed to Dr. Frist's wife. Does not include an
aggregate of $648,395 distributed to Dr. Frist's children who are 18
years of age or older. Dr. Frist is the brother of Mary Louise Frist
Barfield and the brother-in-law of H. Lee Barfield II. Does not include
amounts distributed to H. Lee Barfield II or Mary Louise Frist Barfield
and trusts for the benefit of their children, or an aggregate of
$2,848,592 distributed to Dr. Frist's father, sister, and trusts for
the benefit of Dr. Frist's brother and nephews.
10
<PAGE> 13
MANAGEMENT AGREEMENTS
The Company is providing full development services related to, and has
entered into management agreements to manage, five assisted living residences
with an aggregate capacity for 389 residents owned by affiliates of Jim Maddox,
the son of the late Dan Maddox, who was a significant shareholder of the
Company. The residences are currently under construction. Such management
agreements provide for the payment of management fees to the Company based on a
percentage of the gross revenues of each residence and require the Company to
pay operating deficits above a specified amount. The management agreements also
provide the Company with the option to purchase the subject facilities. The
Company expects to enter into additional management agreements with Jim Maddox
or his affiliates, and similar arrangements with affiliates of Dr. Morris, a
director of the Company.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers and persons who
beneficially own more than ten percent of the Common Stock to file reports of
ownership and changes in ownership with the SEC. Such directors, officers, and
greater than ten percent shareholders are required by SEC regulations to furnish
the Company with copies of all Section 16(a) forms they file.
Based solely on the Company's review of the copies of such forms
furnished to the Company, or written representations from certain reporting
persons, the Company believes that during Fiscal 1997 its officers, directors,
and greater than ten percent beneficial owners were in compliance with all
applicable filing requirements, except for Mr. O'Connell who filed one late
report to report a single transaction.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Until the Reorganization, the executive officers of the Company were
compensated by the Company's predecessor, ARCLP. The limited partners' committee
of ARCLP, which was comprised of the current directors of the Company other than
Mr. Sheriff, made all decisions with respect to the compensation of the Named
Executive Officers for the period from January 1, 1997 through May 29, 1997.
Prior to the Company's initial public offering in May 1997, the Board of
Directors established a Compensation Committee composed of Messrs. O'Connell and
Stuesser and Ms. Smith.
Currently, each of the Named Executive Officers of the Company is
compensated in accordance with the terms established by the limited partners'
committee prior to the creation of the Compensation Committee and the Company's
initial public offering. The overall objectives of the Company's compensation
program, as established by the limited partners' committee of ARCLP and
confirmed by the Compensation Committee, are to:
- attract and retain the highest quality talent to lead the
Company;
- reward key executives based upon corporate and individual
performance; and
- provide incentives designed to maximize shareholder value.
The philosophy upon which these objectives are based is to provide incentives to
the Company's officers to enhance the profitability of the Company and to align
closely the financial interests of the Company's officers with those of its
shareholders. In order to implement this philosophy, the Compensation Committee
is currently reviewing the individual elements of executive compensation,
including salaries, incentive compensation awards, and stock option awards. The
Compensation Committee has not engaged an independent compensation consulting
firm to assist the Compensation Committee in further developing the Company's
compensation program, but may do so during 1998.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), generally disallows a corporate deduction for compensation over $1.0
million paid to the Company's Chief Executive Officer and any of the four other
most highly compensated officers. The $1.0 million limitation applies to all
types of compensation, including
11
<PAGE> 14
restricted stock awards and amounts realized on the exercise of stock options
and stock appreciation rights, unless the awards and plan under which the awards
are made qualify as "performance based" under the terms of the Code and related
regulations. Under the regulations, executive compensation pursuant to the 1997
Stock Incentive Plan should qualify as "performance based" compensation and
therefore be excluded from the $1.0 million limit. Other forms of compensation
provided by the Company, however, are not excluded from such limit. The Company
currently anticipates that compensation of its executive officers will be
deductible under Section 162(m) because executive officer compensation is
presently below the limit and because the Company intends to continue to utilize
performance based compensation in future periods.
DANIEL K. O'CONNELL LAWRENCE J. STUESSER NADINE C. SMITH
PERFORMANCE GRAPH
The following graph compares the cumulative returns of $100 invested on
May 30, 1997 (the date of the Company's initial public offering) in (a) the
Company; (b) the Standard and Poor's 500 Stock Index; and (c) a self-
constructed peer group (as described below), assuming reinvestment of all
dividends.
<TABLE>
<CAPTION>
Measurement Period American
(Fiscal Year Covered) Retirement Corp. Peer Group S&P 500
<S> <C> <C> <C>
05/30/97 100 100 100
12/31/97 140.35 131.55 114.97
</TABLE>
- ----------------
* The Company's self-constructed peer group is composed of the following
senior living companies: Assisted Living Concepts, Inc., Alternative Living
Services, Inc., Atria Communities, Inc., Brookdale Living Communities,
Inc., CareMatrix Corporation, Emeritus Corporation, Greenbriar Corporation,
Karrington Health, Inc., Kapson Senior Quarters, Inc., Regent Assisted
Living, Inc., Sunrise Assisted Living, Inc., and ARV Assisted Living, Inc.
12
<PAGE> 15
PROPOSALS OF SHAREHOLDERS
A proper proposal submitted by a shareholder in accordance with applicable
rules and regulations for presentation at the Company's annual meeting of
shareholders in 1999 and received at the Company's executive offices no later
than December 1, 1998 will be included in the Company's Proxy Statement and form
of proxy relating to such annual meeting.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
KPMG Peat Marwick LLP, which has been the Company's independent certified
public accountants since its organization, has been selected as the independent
certified public accountants of the Company for the 1998 fiscal year. The
Company has been informed that representatives of KPMG Peat Marwick LLP plan to
attend the Annual Meeting. Such representatives will have the opportunity to
make a statement if they desire to do so and will be available to respond to
questions by the shareholders.
FINANCIAL STATEMENTS AVAILABLE
A copy of the Company's 1997 Annual Report containing audited financial
statements accompanies this Proxy Statement. The Annual Report does not
constitute a part of the proxy solicitation material.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR FISCAL 1997 MAY BE
OBTAINED, WITHOUT CHARGE, BY ANY SHAREHOLDER TO WHOM THIS PROXY STATEMENT IS
SENT, UPON WRITTEN REQUEST TO GEORGE T. HICKS, SECRETARY, AMERICAN RETIREMENT
CORPORATION, 111 WESTWOOD PLACE, SUITE 402, BRENTWOOD, TENNESSEE 37027.
March 31, 1998
13
<PAGE> 16
APPENDIX A
PROXY AMERICAN RETIREMENT CORPORATION PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF SHAREHOLDERS OF AMERICAN RETIREMENT CORPORATION (THE
"COMPANY") TO BE HELD ON MAY 5, 1998.
The undersigned hereby appoints W.E. Sheriff and George T. Hicks, and each
of them, as proxies, with full power of substitution, to vote all shares of the
undersigned as shown below on this proxy at the Annual Meeting of Shareholders
of the Company to be held at the Loews Vanderbilt Plaza Hotel, 2100 West End
Avenue, Nashville, Tennessee, on Tuesday, May 5, 1998 at 11:00 a.m., local time,
and any adjournments thereof.
YOUR SHARES WILL BE VOTED IN ACCORDANCE WITH YOUR INSTRUCTIONS. IF NO
CHOICE IS SPECIFIED, SHARES WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES.
[ ] Check here for address change.
New Address:
-----------------------------------
-----------------------------------
-----------------------------------
(Please date and sign this proxy on the reverse side.)
AMERICAN RETIREMENT CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
<TABLE>
<S> <C> <C> <C>
1. Election of Directors: FOR WITHHOLD FOR ALL (Except Nominee(s)
written below)
[ ] [ ] [ ]
Nominees: Jack O. Bovender, Jr.,
Christopher J. Coates, Daniel K.
O'Connell, and Laurence J. Stuesser
</TABLE>
- -------------------------------------------------------------------------------
2. In their discretion on any other matter that may properly come before said
meeting or any adjournments thereof.
PLEASE SIGN HERE AND RETURN PROMPTLY
Dated: ______________, 1998
Signature(s) _______________________
____________________________________
Please sign exactly as your name
appears at left. If registered in
the names of two or more persons,
each should sign. Executors,
administrators, trustees, guardians,
attorneys, and corporate officers
should show their full titles.
