<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 10, 2000
As a shareholder of American Retirement Corporation, 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 Wednesday, May 10, 2000, at
11:00 a.m., local time, for the following purposes:
1. To elect four Class III directors to serve for a term of
three years; and
2. To transact such other business as may properly come before
the meeting.
Shareholders of record at the close of business on March 22, 2000 are
entitled to notice of and to vote at the meeting and any adjournment or
postponement thereof.
You can ensure that your shares of common stock are voted at the
annual meeting by signing and dating the enclosed proxy and returning it in the
envelope provided. Sending in a signed proxy will not affect your right to
attend the annual meeting and vote in person. WHETHER OR NOT YOU PLAN TO
ATTEND, WE URGE YOU TO SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY
IN THE ENVELOPE PROVIDED.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ George T. Hicks
GEORGE T. HICKS
SECRETARY
Brentwood, Tennessee
March 30, 2000
<PAGE> 3
AMERICAN RETIREMENT CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 10, 2000
This proxy statement contains information related to the annual
meeting of shareholders of American Retirement Corporation to be held at the
date, time, and place and for the purposes set forth in the accompanying notice
of annual meeting of shareholders, and at any adjournment or postponement
thereof. This proxy statement and the enclosed proxy are first being sent to
shareholders on or about March 30, 2000.
At the annual meeting, shareholders will elect four Class III
directors. In addition, the company's management will report on the performance
of the company during fiscal 1999 and respond to questions from shareholders.
Shareholders of record on the record date, March 22, 2000, are
entitled to notice of and to vote at the annual meeting. Each shareholder is
entitled to one vote for each share of common stock held on the record date.
The presence at the meeting, 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. As
of the record date, 17,145,343 shares of the company's common stock were
outstanding. Proxies received but marked as abstentions will be counted as
present for purposes of determining a quorum on all matters. Broker non-votes
will also be counted as present for purposes of determining a quorum on all
matters presently known to be brought to a vote at the annual meeting. 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.
Shares of common stock represented by a proxy properly signed and
received at or prior to the annual meeting, unless subsequently revoked, will
be voted in accordance with the instructions thereon. Shareholders are urged to
specify their choices by marking the appropriate boxes on the enclosed proxy.
If a proxy is dated, signed, and returned without specifying choices, the
shares will be voted as recommended by the company's board of directors. A
shareholder who signs and returns a proxy may revoke it at any time before it
is voted by attending the annual meeting and electing to vote in person, by
notifying the secretary of the company in writing, or by duly executing a proxy
bearing a later date. Shareholders whose shares of common stock are held in
street name who wish to attend the meeting and vote in person will need to
obtain a proxy form from the institution that holds their shares.
The affirmative vote of a plurality of the votes cast at the annual
meeting is required for the election of directors. Abstentions and broker
non-votes will not be counted as votes for or against any director nominee. Any
other matters that may properly come before the meeting or any adjournment
thereof shall be approved by the affirmative vote of a majority of the votes
cast by the holders of common stock represented and entitled to vote at the
annual meeting, and abstentions and "non-votes" will have no effect on the
outcome of the vote.
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 the recommendation of the board of directors or,
if no recommendation is given, in their best judgment.
1
<PAGE> 4
PROPOSAL ONE: ELECTION OF DIRECTORS
The board of directors of the company is divided into three classes,
each class to be as nearly equal in number as possible. The current board of
directors is comprised of 11 members. At each annual meeting of shareholders,
directors comprising one class are elected for a three-year term. The terms of
the four Class III directors will expire at the annual meeting. The board of
directors has nominated W. E. Sheriff, H. Lee Barfield II, Robin G. Costa, and
John A. Morris, Jr., M.D., all of whom are currently serving as directors of
the company, to be reelected to serve until the annual meeting of shareholders
in 2003 and until their successors are duly elected and qualified. The terms of
the Class I and Class II directors will expire at the annual meeting in 2001
and 2002, respectively.
Each of the nominees has consented to serve, if elected. If any of the
nominees should become unable or unwilling to serve as a director, the persons
named in the proxy may vote for such other person or persons as may be
designated by the board of directors. Certain information with respect to the
nominees for election as Class III directors and with respect to the Class I
and Class II directors (who are not being elected 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
- ---- --- ---------------------------------- --------------
DIRECTOR NOMINEES
Class III Directors
(Terms Expire 2003)
<S> <C> <C> <C>
W.E. Sheriff 57 Mr. Sheriff has served as chairman and chief executive officer of the 1997
company and its predecessors since April 1984. Mr. Sheriff serves on
the boards of several privately-held companies and various educational
and charitable organizations.
H. Lee Barfield II 53 Mr. Barfield has served as a director of the company since its 1997
inception and as a 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.
Robin G. Costa 33 Since January 1998, Ms. Costa has served as president 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 chief operating officer from 1994
to January 1998 and secretary and treasurer from 1992 to 1994.
John A. Morris, Jr., 53 Dr. Morris has served in varying capacities of the medical 1997
M.D. profession since 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.
</TABLE>
2
<PAGE> 5
CONTINUING DIRECTORS
Class I Directors
(Terms Expire 2001)
<TABLE>
<S> <C> <C> <C>
Christopher J. Coates 49 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 71 Mr. O'Connell has served as a director of the company since its 1997
inception 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. Mr. O'Connell is a director
of PNV, Inc., a public company that provides television and
telecommunications services to truck drivers.
Lawrence J. Stuesser 57 Since June 1999, Mr. Stuesser has been a private investor. From 1997
June 1996 to May 1999, Mr. Stuesser served as the president and chief
executive 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 also served 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., a disease management company in
the assisted reproductive therapy market.
</TABLE>
3
<PAGE> 6
Class II Directors
(Terms Expire 2002)
<TABLE>
<S> <C> <C> <C>
Frank M. Bumstead 58 Since 1989, Mr. Bumstead has been president and a principal 1997
shareholder of Flood, Bumstead, McCready & McCarthy, Inc., a business
management firm that represents, among others, artists, songwriters,
and producers in the music industry. From 1993 to December 1998, Mr.
Bumstead 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 entertainment marketing and artist management company. He is
also a director of Syntroleum Corporation, a natural gas processor and
real estate company.
Clarence Edmonds 66 Mr. Edmonds has served as a director of the company since its 1997
inception 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. Mr. Edmonds is a certified public
accountant.
Robert G. Roskamp 61 Mr. Roskamp is president of Roskamp Management Company, 1998
LLC, a manager and developer of senior living communities. Mr. Roskamp
has served as a consultant to the company since July 1998. Prior to
July 1998, Mr. Roskamp served as chief executive officer and chairman
of the board of Freedom Group, Inc., which was acquired by the company
in July 1998.
Nadine C. Smith 42 Since 1997, Ms. Smith has been president and chief executive 1997
officer of Enidan Capital Corporation, which is the general partner of
Enidan Capital Partners, L.P., an investment company that makes equity
investments in public and privately-held companies. 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 is a director of UTI Energy Corp., a contract drilling
company, and also serves on the boards of several privately-held
companies.
</TABLE>
The board of directors holds regular quarterly meetings and meets on
other occasions when required by special circumstances. The board of directors
met seven times during 1999. Each director attended at least 75% of the total
number of meetings of the board of directors and the committees on which he or
she served.
The board of directors has standing executive, audit, and compensation
committees. The membership and functions of the committees 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. Bumstead, Roskamp, and Sheriff and Dr. Morris. The executive
committee met three times during 1999.
4
<PAGE> 7
Audit Committee -- This committee makes recommendations to the board
of directors with respect to the company's financial statements and
the appointment of independent auditors, reviews significant audit and
accounting policies and practices, meets with the company's
independent auditors quarterly to review financial results and to
discuss, among other things, the scope of audits and reports, reviews
the performance of the overall accounting and financial controls of
the company, and oversees the corporate compliance activities of the
company. Members of the audit committee are Messrs. Barfield and
Edmonds and Ms. Costa. The audit committee met five times during 1999.
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 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. The
compensation committee met five times during 1999.
Mr. Roskamp was appointed as a director of the company in August 1998
pursuant to a Shareholder's Agreement between the company and Mr. Roskamp.
Under this agreement, the company has agreed to use its best efforts to cause
Mr. Roskamp or his designee to be recommended to the company's shareholders for
election as a director at each annual meeting at which Class II directors stand
for reelection for so long as Mr. Roskamp or his permitted transferees own
greater than 411,000 shares of common stock and the shares of common stock
owned by Mr. Roskamp and his affiliates constitute 1% or more of the
outstanding common stock.
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. Non-employee directors are also
entitled to a fee of $500 for each board meeting attended and $250 for each
committee meeting attended 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 pursuant to the company's 1997 Stock Incentive Plan. Options to
purchase 9,000 shares of common stock were automatically granted to each person
serving as a non-employee director of the company on the date of the company's
initial public offering. Non-employee directors first elected or appointed to
the board of directors following the date of the company's initial public
offering and prior to the date of this year's annual meeting of shareholders of
the company were granted an option to purchase 7,000 shares of common stock.
Non-employee directors first elected or appointed following the date of this
year's annual meeting of shareholders of the company will receive an option to
purchase 5,000 shares of common stock. Options granted to non-employee
directors prior to this year's annual meeting of shareholders 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 this year's annual meeting, each non-employee 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 a non-employee 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 non-employee
directors.
5
<PAGE> 8
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table shows the number of shares of common stock
beneficially owned by each current director (including the four nominees for
director), each of the executive officers named in the Summary Compensation
Table beginning on page seven hereof, the directors and executive officers as a
group, and each shareholder known to management of the company to own
beneficially more than five percent 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>
W.E. Sheriff 786,884(3) 4.6
Christopher J. Coates 317,727 1.9
George T. Hicks 201,499 1.2
H. Todd Kaestner 180,524 1.1
James T. Money 205,959 1.2
H. Lee Barfield II 629,577(4) 3.7
Frank M. Bumstead 24,000 *
Robin G. Costa 1,389,037(5)(6) 8.1
Clarence Edmonds 378,239(7) 2.2
John A. Morris, Jr., M.D. 367,490(8) 2.1
Daniel K. O'Connell 35,000 *
Robert G. Roskamp 829,000 4.8
Nadine C. Smith 40,956 *
Lawrence J. Stuesser 42,774 *
Capital Guardian Trust Company 2,061,600(9)(10) 12.0
DNMC Public Holdings, L.L.C. 1,675,000(11) 9.8
DMAR Limited Partnership 1,372,037(5) 8.0
Wellington Management Company, LLP 1,412,417(9)(12) 8.2
All directors and executive officers as a group (15 persons) 5,428,666 30.9
</TABLE>
- -------------------
* Less than one percent.
(1) Pursuant to the rules of the Securities and Exchange Commission,
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 company's 1997 Stock
Incentive Plan that the following persons are entitled to exercise
within 60 days of the date hereof: Mr. Sheriff, 131,667; Mr. Coates,
75,000; Mssrs. Hicks, Kaestner, and Money, 48,167; Mses. Costa and
Smith, Dr. Morris, and Mssrs. Barfield, Bumstead, Edmonds, O'Connell,
and Stuesser, 9,000; Mr. Roskamp, 7,000; and directors and executive
officers as a group (15 persons), 430,168.
(3) Includes 331,353 shares, including 4,166 conversion shares,
beneficially owned by a family limited partnership in which Mr.
Sheriff is a general partner.
(4) Includes 2,916 conversion shares. Also includes 473,065 shares
beneficially owned by Mr. Barfield's wife.
(5) Address: 3833 Cleghorn Avenue, Suite 400, Nashville, Tennessee 37215.
(6) Includes 1,372,037 shares beneficially owned by DMAR Limited
Partnership. Ms. Costa is President of Margaret Energy, Inc., the
general partner of DMAR. Also includes an aggregate of 8,000 shares
beneficially owned by trusts as to which Ms. Costa exercises voting
and dispositive power.
(7) Includes 4,166 conversion shares owned by Mr. Edmonds, 335,888 shares
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 lifetime beneficiaries,
20,019 shares beneficially owned by Mr. Edmonds's wife, and 4,166
conversion shares owned by Mr. Edmonds' wife. Mr. Edmonds disclaims
beneficial ownership of his wife's shares.
(8) All shares are beneficially owned by partnerships owned and controlled
by Dr. Morris, his brother, and other members of Dr. Morris's family.
(9) Based solely upon information set forth in a Schedule 13G filed with
the Securities and Exchange Commission.
(10) Address: 11100 Santa Monica Boulevard, Los Angeles, California 90025.
Capital Guardian, a bank, reported that it has sole voting power with
respect to 1,654,200 shares of common stock and sole dispositive power
with respect to 2,021,600 shares.
(11) Based solely upon information set forth in a Schedule 13D filed
jointly by DNMC Public Holdings, L.L.C., Walton Street Real Estate
Fund II, L.P., Walton Street Managers II, L.P., and WSC Managers II,
L.P. with the Securities and Exchange Commission. Address: 900 North
Michigan Avenue, Chicago, Illinois 60611. These entities engage
principally in the business of investing in securities and/or real
estate.
(12) Address: 75 State Street, Boston, Massachusetts 02109. Wellington, an
investment adviser, reported that it has shared voting power with
respect to 546,250 shares of common stock and shared dispositive power
with respect to 1,412,417 shares.
6
<PAGE> 9
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the total compensation paid or accrued
by the company during 1997, 1998, and 1999, including amounts paid by the
company's predecessor, American Retirement Communities, L.P., 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 -----------------------
------------------------ Securities Underlying All Other
Name and Principal Positions Fiscal Year Salary($) Bonus($) Options(#) Compensation($)
- ------------------------------------ ------------ ----------- ---------- ----------------------- ------------------
<S> <C> <C> <C> <C> <C>
W.E. Sheriff, 1999 270,000 -- 70,000 93,500 (1)
Chairman and Chief Executive 1998 237,667 78,017 225,000 90,000
Officer 1997 221,500 -- 60,000 86,500
Christopher J. Coates, 1999 200,000 -- 95,000 2,835(2)
President and Chief Operating 1998 178,667 58,567 60,000 8,604
Officer 1997 168,000 15,000 45,000 8,549
George T. Hicks, 1999 150,000 -- 52,500 2,126(2)
Executive Vice President - 1998 130,000 42,614 42,000 6,146
Finance, Chief Financial Officer, 1997 120,000 15,000 35,000 5,870
Treasurer, and Secretary
H. Todd Kaestner, 1999 160,000 -- 52,500 2,268(2)
Executive Vice President - 1998 140,000 45,892 42,000 6,658
Corporate Development 1997 130,000 15,000 35,000 6,296
James T. Money, 1999 140,000 -- 52,500 1,984(2)
Executive Vice President - 1998 126,667 41,522 42,000 6,146
Development Services 1997 120,000 15,000 35,000 5,870
</TABLE>
- -----------------
(1) Reflects insurance premiums paid by the company for insurance
policies benefitting Mr. Sheriff.
(2) 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 1999 to the named executive officers. None of the named executive
officers were granted stock appreciation rights.
<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(#)(1) Year(%) Price($/Sh) Date 5%($) 10%($)
- ------------------------- --------------- ------------ ----------- ------------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
W.E. Sheriff 50,000 16.125 4/20/09 1,313,296 2,091,205
20,000 5.000 10/27/04 127,628 161,051
------
70,000 6.9
Christopher J. Coates 50,000 16.125 4/20/09 1,313,296 2,091,205
25,000 17.625 5/12/09 717,732 1,142,868
20,000 5.000 10/27/04 127,628 161,051
------
95,000 9.3
George T. Hicks 12,500 16.125 4/20/09 328,324 522,801
20,000 17.625 5/12/09 574,185 914,294
20,000 5.000 10/27/04 127,628 161,051
------
52,500 5.2
H. Todd Kaestner 12,500 16.125 4/20/09 328,324 522,801
20,000 17.625 5/12/09 574,185 914,294
20,000 5.000 10/27/04 127,628 161,051
------
52,500 5.2
James T. Money 12,500 16.125 4/20/09 328,324 522,801
20,000 17.625 5/12/09 574,185 914,294
20,000 5.000 10/27/04 127,628 161,051
------
52,500 5.2
</TABLE>
- -----------------
(1) All options granted in 1999 to the named executive officers vest and
become exercisable in three equal, annual installments commencing on
the first anniversary of the date of grant.
FISCAL YEAR-END OPTION VALUES
The following table provides information as to the number and value of
the unexercised options held by the named executive officers at December 31,
1999. None of the named executive officers exercised options during 1999. None
of the named executive officers has held or exercised stock appreciation
rights.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money
Fiscal Year-End(#) Options at Fiscal Year-End($)(1)
---------------------------------- ----------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ------------------------- -------------- ----------------- -------------- -----------------
<S> <C> <C> <C> <C>
W.E. Sheriff 115,000 240,000 0 58,750
Christopher J. Coates 50,000 150,000 0 58,750
George T. Hicks 37,333 92,167 0 58,750
H. Todd Kaestner 37,333 92,167 0 58,750
James T. Money 37,333 92,167 0 58,750
</TABLE>
- -----------------
(1) Based on the closing price of the company's common stock on the New
York Stock Exchange on December 31, 1999 ($7.9375).
8
<PAGE> 11
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT
The compensation paid to the company's executive officers is reviewed
and approved annually by the compensation committee of the board of directors,
which is composed of non-employee directors. The current members of the
compensation committee are Ms. Smith and Messrs. O'Connell and Stuesser. In
addition to reviewing and approving salary and bonus arrangements for the
company's executive officers, the compensation committee approves long-term
incentive awards for the executive officers and the other key employees of the
company and administers the stock incentive plan, stock purchase plan, 401(k)
plan, and other compensation plans maintained by the company.
COMPENSATION POLICIES APPLICABLE TO EXECUTIVE OFFICERS
The objectives of the company's executive compensation program are to:
- attract, motivate, and retain the executives responsible for
the success of the company;
- reward key executives based upon corporate and individual
performance; and
- provide incentives designed to maximize shareholder value.
The compensation committee reviews the company's executive officer compensation
program annually to ensure that the compensation paid to the company's
executive officers is consistent with the company's business strategy,
corporate culture, and operating performance. The compensation committee also
reviews the compensation policies of similar companies in the senior living
industry to ensure that the company's compensation policies are competitive
with other companies in the industry. The three primary components of the
company's executive officer compensation program are a base salary, the
potential for a performance-based annual bonus, and periodic grants of stock
options.
BASE SALARIES. Base salaries for the company's executive officers, as
well as changes in such salaries, are based upon a number of factors,
including:
- recommendations by the chief executive officer;
- annual base salaries of similarly situated executives at
companies the committee deems to be comparable to the
company;
- the nature of the executive officer's position;
- the committee's subjective determination of the executive
officer's contribution to the performance of the company;
- the experience of the officer; and
- the term of the officer's employment with the company.
The chief executive officer reviews all salary recommendations with the
compensation committee, which then approves or disapproves such
recommendations.
In August 1998, the compensation committee reviewed the base salaries
for the company's executive officers. Based upon a review of the base
compensation payable to executive officers of comparable companies and
discussions with the company's chief executive officer, the committee
determined that the base compensation levels for the company's executive
officers were lower than the average base compensation levels of executive
officers with similar responsibilities at comparable companies. As a result,
the compensation committee approved increases in the bases salaries of the
company's executive officers effective September 1998 averaging approximately
20%. In 1999, the compensation committee did not increase the base salaries of
any of the company's executive officers.
ANNUAL BONUSES. No annual bonuses were accrued on behalf of the
executive officers of the company for fiscal 1999. The compensation committee
has approved an officers' compensation plan for 2000 that provides for the
payment of bonuses based upon the attainment of certain 2000 earnings targets.
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STOCK OPTIONS. In order to align the long-term interests of the
executive officers with those of shareholders, the compensation committee from
time to time awards stock options to the company's executive officers. The
terms of these options, including the sizes of the grants, are determined by
the compensation committee based upon the recommendations of the company's
chief executive officer and the committee's subjective discretion. Awards of
stock options to executive officers have been historically at then-current
market prices and with periodic vesting over three years.
In 1999, the compensation committee granted stock options to purchase
an aggregate of 322,500 shares to the company's executive officers. The options
vest over a three-year period and are exercisable at the market price of the
common stock on the date of grant.
SECTION 162 DEFERRED COMPENSATION PLAN. In addition, the company
maintains a non-qualified deferred compensation plan that allows executive
officers who are deemed "highly compensated" under Internal Revenue Service
guidelines to make after-tax contributions to an investment account established
in such executive officer's name. The company makes additional contributions at
the discretion of the committee. For 1999, the company made no such
contributions to any executive officers' gross earnings. Contributions for
quarterly amounts for the fourth quarter of 1998, however, were made by the
company on behalf of the executive officers in early 1999.
CHIEF EXECUTIVE OFFICER COMPENSATION
In establishing the compensation of W.E. Sheriff, the company's chief
executive officer, the compensation committee utilized the same compensation
policies applicable to executive officers in general. In September 1998, Mr.
Sheriff's annual base salary was increased by approximately 20%. Mr. Sheriff
did not receive an increase in his base salary in 1999 or a bonus for fiscal
year 1999. The compensation committee awarded Mr. Sheriff options to purchase
70,000 shares of common stock. The options vest over a three-year period and
are exercisable at the market price of the common stock on the date of grant.
LIMITATIONS ON THE DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue 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 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 are not excluded from the $1.0 million
limit. The Company currently anticipates that the compensation of its executive
officers will be deductible under Section 162(m) because executive officer
compensation is presently below the $1.0 million limit and because the company
intends to continue to utilize performance based compensation in future
periods.
DANIEL K. O'CONNELL NADINE C. SMITH LAWRENCE J. STUESSER
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CERTAIN TRANSACTIONS
MANAGEMENT AGREEMENTS
The company has agreed to develop ten assisted living residences for
an unaffiliated third-party. Following completion of construction, these
residences are leased to affiliates of John Morris, a director of the company.
At December 31, 1999, four of the residences were operational and six were
under construction. The company has agreed to manage such residences pursuant
to management agreements that 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 losses above a specified amount. During
1999, the company recognized $114,000 in management fees and did not make any
payments for operating losses pursuant to the management agreements.
FREEDOM GROUP TRANSACTION - ONGOING OBLIGATIONS
In July 1998, the company consummated the acquisition of Freedom
Group, Inc. and certain entities affiliated with Freedom Group and Robert G.
Roskamp, Freedom Group's founder and chairman, and certain related
transactions. As part of the transactions with Freedom Group, the company
entered into a 20-year management agreement, with two ten-year renewal options,
for Freedom Plaza, a retirement community located in Peoria, Arizona. The
owners of the community include a charitable foundation of which Mr. Roskamp is
a director. Pursuant to the management agreement, the company receives a
management fee equal to all revenue from the community that is in excess of
operating expenses, refunds of entrance fees, capital expenditure reserves,
debt service, and certain payments to the community's owners. During 1999, the
company recognized $1.5 million in management fees pursuant to the management
agreement.
The company also entered into a 20-year management agreement, with two
ten-year renewal options, for Freedom Square, a retirement community located in
Seminole, Florida in which Mr. Roskamp owns a 98% interest. In connection with
the management agreement, the company assumed Freedom Group's existing guaranty
of approximately $19.9 million of the mortgage debt associated with the
community, $19.1 million of which was outstanding at December 31, 1999.
Pursuant to the management agreement, the company receives a management fee
equal to all revenue from the community that is in excess of operating
expenses, refunds of entrance fees, capital expenditure reserves, debt service,
and certain payments to the community's owner. The company also acquired an
option to purchase Freedom Square upon the occurrence of certain events,
including the expiration of the agreement, for a formula purchase price. During
1999, the company recognized $368,000 in management fees pursuant to the
management agreement.
The company also entered into a three-year management agreement for
Freedom Village Brandywine, a retirement community located in Brandywine,
Pennsylvania that is owned by a partnership in which Mr. Roskamp owns a 70.0%
interest. Pursuant to the management agreement, the company receives a
management fee equal to 5.0% of the gross revenues of the community. The
company paid a non-refundable deposit of $2.0 million to acquire an option to
purchase the Freedom Village Brandywine community for a purchase price of $14.0
million, plus the assumption of certain specified liabilities. The Company has
exercised the option and anticipates closing the acquisition during the second
quarter of 2000, in which event the company's deposit will be credited against
the purchase price. In connection with the execution of the Freedom Village
Brandywine management and option agreements, the company assumed Freedom
Group's existing guaranty of approximately $42.1 million of the mortgage debt
associated with the community, which debt had been paid in full at December 31,
1999. The company also assumed Freedom Group's remaining development
obligations relating to Freedom Village Brandywine. During 1999, the company
recognized $383,000 in management fees pursuant to the management agreement.
Pursuant to the transactions with Freedom Group, the company also
entered into an agreement to provide development services related to the
development and construction of a proposed retirement community to be known as
the Sarasota Bay Club in Sarasota, Florida, which is currently in the
development and planning phase. The Sarasota Bay Club is owned by a limited
liability company in which Mr. Roskamp owns a 39% interest. In return for its
development services and costs associated therewith, the company is to receive
aggregate development fees of $2.1 million, $1.35 million of which had been
paid at December 31, 1999. The company will manage the
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<PAGE> 14
Sarasota Bay Club following its completion pursuant to a five-year management
agreement that provides for a management fee equal to 5.0% of the gross
revenues of the community. In consideration of the company's payment of a $2.0
million fully-refundable deposit, the company acquired a right of first refusal
for the Sarasota Bay Club and an option to purchase the community for a price
to be negotiated. The company will receive a credit against the purchase price
in the amount of its deposit if the company exercises its right of first
refusal or purchase option.
In connection with the transactions with Freedom Group, Mr. Roskamp
entered into a three-year consulting agreement with the company that provides
for annual payments of $150,000 to Mr. Roskamp. In addition, pursuant to a
shareholder's agreement entered into by the company and Mr. Roskamp, the
company caused Mr. Roskamp to be elected to the board of directors of the
company and to the executive committee of the board of directors and has agreed
to use its best efforts to cause Mr. Roskamp or his designee to be recommended
to the company's shareholders for election as a director at each annual meeting
at which Class II directors stand for reelection for so long as Mr. Roskamp or
his permitted transferees own greater than 411,000 shares of common stock and
the shares of common stock owned by Mr. Roskamp and his affiliates constitute
1% or more of the outstanding common stock. The company also granted certain
contractual registration rights to Mr. Roskamp.
FREEDOM PLAZA HEALTH CENTER
W.E. Sheriff owns 50% of Maybrook Realty, Inc., which in October 1999
acquired a 128-bed skilled nursing center then known as Hacienda de Vida,
located in Peoria, Arizona. Maybrook simultaneously leased the nursing center
to Freedom Plaza, which, in turn, operates the nursing center as a part of the
Freedom Plaza retirement campus under the name Freedom Plaza Health Center. As
described above, the Freedom Plaza retirement community (including Freedom
Plaza Health Center after October 1999) is managed by the company pursuant to a
management agreement providing the company with a net cash flow management fee.
In connection with the acquisition of Freedom Plaza Health Center, Maybrook
agreed to pay the company an acquisition and financing fee of $200,000.
The company has guaranteed the payment and performance of Freedom
Plaza's obligations under its lease with Maybrook. Mr. Sheriff has also agreed
to indemnify the company from any loss or liability that the company incurs
under the guaranty of such lease.
The company is serving as the developer of a proposed expansion of the
Freedom Plaza Health Center. Pursuant to the terms of its development agreement
with Maybrook, the company is to receive a development fee of $125,000.
Maybrook has also granted to the company an option to acquire the health center
for a formula purchase price beginning in October 2009.
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 Securities and Exchange Commission.
Such directors, officers, and greater than ten percent shareholders are
required by Securities and Exchange Commission 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 1999 its officers, directors, and
greater than ten percent beneficial owners were in compliance with all
applicable filing requirements, except that Mr. Sheriff filed one late report
relating to one transaction.
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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.
[GRAPH]
<TABLE>
<CAPTION>
30-May-97 31-Dec-97 31-Dec-98 31-Dec-99
<S> <C> <C> <C> <C>
ACR $ 100 $ 129 $ 101 $ 51
S&P 500 $ 100 $ 115 $ 145 $ 173
Peer Group $ 100 $ 141 $ 159 $ 43
</TABLE>
- ----------------
* The company's self-constructed peer group is composed of the following
senior living companies: Alterra Healthcare Corporation, Brookdale Living
Communities, Inc., CareMatrix Corporation, Emeritus Corporation,
Greenbrier Corporation, Regent Assisted Living, Inc., Sunrise Assisted
Living, Inc., and ARV Assisted Living, Inc.
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<PAGE> 16
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 2001 and received at the company's executive offices
no later than November 30, 2000 will be included in the company's proxy
statement and form of proxy relating to such annual meeting.
In addition, the company's bylaws contain an advance notice provision
that provides that for a shareholder proposal to be brought before and
considered at the next annual meeting of shareholders, such shareholder must
provide notice thereof to the Secretary of the company no later than November
30, 2000 and the proposal and the shareholder must comply with Regulation 14A
under the Securities Exchange Act. In the event that a shareholder proposal
intended to be presented for action at the next annual meeting is not received
prior to November 30, 2000 proxies solicited by the board of directors in
connection with the annual meeting will be permitted to use their discretionary
voting authority with respect to the proposal, whether or not the proposal is
discussed in the proxy statement for the annual meeting.
INDEPENDENT AUDITORS
KPMG LLP, which has been the company's independent auditors since its
organization, has been selected as the independent auditors of the company for
the 2000 fiscal year. The company has been informed that representatives of
KPMG 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.
PROXY SOLICITATION COSTS
The enclosed form of proxy is solicited on behalf of the board of
directors of the company. 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.
FINANCIAL STATEMENTS AVAILABLE
A copy of the company's 1999 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 THE FISCAL YEAR
ENDED DECEMBER 31, 1999 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.
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<PAGE> 17
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 10, 2000.
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 on the reverse side of 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 Wednesday, May 10, 2000 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.
(PLEASE DATE AND SIGN THE PROXY ON THE REVERSE SIDE.)
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF SHAREHOLDERS
AMERICAN RETIREMENT CORPORATION
MAY 10, 2000
* Please Detach And Mail In the Envelope Provided *
A [X] Please mark your
votes as in this
example.
1. Election of FOR WITHHOLD
Directors: [ ] [ ] NOMINEES: W.E. Sheriff
H. Lee Barfield II
Robin G. Costa
John A. Morris, Jr. M.D.
FOR ALL, except Nominees(s) written below):
[ ] ___________________________
2. In their discretion on any other matter that may properly come
before said meeting or any adjournments thereof.
PLEASE SIGN BELOW AND RETURN PROMPTLY
Signature(s) ________________________________________
________________________________________
Dated: ___________________, 2000
NOTE: PLEASE SIGN ABOVE AND RETURN PROMPTLY. Please sign exactly as your name
appears hereon. 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.
