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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ASSISTED LIVING CONCEPTS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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ASSISTED LIVING CONCEPTS, INC.
_____________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 1998
The 1998 Annual Meeting of Stockholders of Assisted Living Concepts, Inc.
(the "Company") will be held at the Kingstad Meeting Center, 5933 NE Win Sivers
Drive, Portland, Oregon, on Wednesday, May 20, 1998 at 11:00 a.m. local time,
for the following purposes:
( 1 ) To elect a board of five directors for the ensuing year or until the
election and qualification of their respective successors;
( 2 ) To transact such other business as may properly come before the
meeting.
Only stockholders whose names appear of record on the books of the Company
at the close of business on April 1, 1998, are entitled to notice of, and to
vote at, such Annual Meeting or any adjournments thereof.
The enclosed proxy is solicited by the Board of Directors of the Company,
which recommends that stockholders vote FOR the directors nominated in Proposal
1. Please refer to the attached Proxy Statement, which forms a part of this
Notice and is incorporated herein by reference, for further information with
respect to the business to be transacted at the Annual Meeting.
You are cordially invited to attend the meeting in person. WHETHER OR NOT
YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN AND DATE THE ENCLOSED PROXY AND
RETURN IT AS PROMPTLY AS POSSIBLE IN THE ENCLOSED SELF-ADDRESSED, POSTAGE-
PREPAID ENVELOPE. If you attend the Annual Meeting and wish to vote in person,
your proxy will not be used.
By order of the Board of Directors
Sandra Campbell
Secretary
Portland, Oregon
April 23, 1998
<PAGE>
ASSISTED LIVING CONCEPTS, INC., AND SUBSIDIARIES
________________
PROXY STATEMENT
This proxy statement is furnished to the stockholders of Assisted Living
Concepts, Inc., a Nevada corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company for use at the
Annual Meeting of Stockholders to be held on May 20, 1998 at 11:00 a.m., local
time, and at any and all adjournments thereof (the "Annual Meeting"). The
approximate date on which this proxy statement and the form of proxy solicited
on behalf of the Board of Directors will be sent to the Company's stockholders
is April 23, 1998.
On April 1, 1998, the record date for the determination of stockholders
entitled to notice of, and to vote at, the Annual Meeting, the Company had
15,742,062 shares of common stock, par value $0.01 per share (the "Shares" or
the "Common Stock"), outstanding. Each such Share is entitled to one vote on
all matters properly brought before the meeting. The five nominees receiving
the highest number of affirmative votes of the Shares present or represented and
entitled to be voted for them shall be elected as directors. Votes withheld
from any director are counted for purposes of determining the presence or
absence of a quorum but otherwise have no legal effect in the election of
directors. Stockholders are not permitted to cumulate their Shares for the
purpose of electing directors or otherwise. A majority of the outstanding
shares of Common Stock, represented in person or by proxy, will constitute a
quorum at the Annual Meeting. Shares represented by proxies that reflect
abstentions or "broker non-votes" will be counted as shares that are present and
entitled to vote for purposes of determining the presence of a quorum. However,
proxies that reflect abstentions as to a particular proposal will be treated as
voted for the purpose of determining the approval of that proposal and will have
the same effect as a vote against that proposal, while proxies that reflect
broker non-votes will be treated as unvoted for purposes of determining approval
and will not be counted as voted for or against that proposal.
A person giving the enclosed proxy has the power to revoke it at any time
before it is exercised. The power of the proxy is suspended if the person
giving it attends the meeting and elects to vote in person.
The principal executive offices of the Company are located at 9955 S.E.
Washington Street, Suite 303, Portland, Oregon 97216.
1
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting, five directors will be elected to hold office until
the 1998 Annual Meeting of Stockholders and, in each case, until their
respective successors have been duly elected and qualified.
The nominees for election as directors at the Annual Meeting are William
McBride III, Keren Brown Wilson, Richard C. Ladd, Bradley G. Razook and Gloria
Cavanaugh, each of whom is presently serving as a director of the Company.
Unless authority to vote for the election of directors has been specifically
withheld, the persons named in the accompanying proxy intend to vote for the
election of the nominees named above to hold office as directors until the 1998
Annual Meeting of Stockholders and until their respective successors have been
duly elected and qualified.
If any nominee becomes unavailable to serve as a director for any reason
(which event is not anticipated), the Shares represented by the enclosed proxy
may (unless such proxy contains instructions to the contrary) be voted for such
other person or persons as may be determined by the holders of such proxies.
DIRECTORS
The following information concerning the directors of the Company is given
as of March 31, 1998.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
William McBride III 38 Chief Executive Officer and Chairman of the Board of Directors
Keren Brown Wilson 49 Chief Operating Officer, President and Vice Chairman
Richard C. Ladd (1)(2) 59 Director
Bradley G. Razook (2) 41 Director
Gloria Cavanaugh(1)(2) 55 Director
</TABLE>
__________________
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
WILLIAM MCBRIDE III is a co-founder of the Company and has been a director
since its formation, and currently serves as Chief Executive Officer and
Chairman of the Board of Directors. From August 1992 to September 1997, Mr.
McBride served as President and Chief Operating Officer of LTC Properties, Inc.
("LTC"), a health care real estate investment trust specializing in the long-
term care industry, which was co-founded by Mr. McBride in 1992. Prior to
founding LTC, Mr. McBride was employed from April 1988 to July 1992 by Beverly
Enterprises, Inc., an owner/operator of long-term care facilities, retirement
living facilities and pharmacies where he served as Vice President, Controller
and Chief Accounting Officer. From 1982 to 1988, Mr. McBride was employed by
the public accounting firm of Ernst & Young. Mr. McBride served as a member of
the board of directors of LTC from August 1992 to September 1997 and currently
serves on the board of directors of Malan Realty Investors, Inc.
2
<PAGE>
DR. KEREN B. WILSON is a co-founder of the Company and became the
President/Chief Operating Officer of the Company upon its formation in July
1994, and currently serves as Vice Chairman of the Board of Directors. Dr.
Wilson has over twenty years of experience in aging service delivery systems and
has, for the past twelve years, focused primarily on assisted living. From 1988
to September 1994, Dr. Wilson was the President and sole director of Concepts in
Community Living, a corporation which specializes in the development and
management of assisted living residences. From 1992 to August 1994, Dr. Wilson
was also President of Sterling Management Company, a company which provides
management services to private (non-Medicaid) assisted living facilities in the
state of Kansas. From 1986 to 1988, Dr. Wilson was a Senior Vice President at
Milestone, Inc., an assisted living development and management company. Prior to
1986, Dr. Wilson was an owner and management agent for Park Place Living Center
in Portland, Oregon, and the Director of Research and Education for the Oregon
Association of Homes for the Aging in Portland, Oregon. Since 1983, Dr. Wilson
has also been an Associate Professor at the Institute for Aging at Portland
State University. In these capacities, Dr. Wilson was responsible for designing,
developing and managing the state of Oregon's first assisted living residence
along with the state's first Medicaid-eligible assisted living residence.
RICHARD C. LADD has been a director of the Company since September 1994.
Since September 1994, Mr. Ladd has been the President of Ladd and Associates, a
health and social services consulting firm. He is also co-director of the
National Long-Term Care Balancing Project and is an adjunct assistant professor
at the School of Internal Medicine, University of Texas Medical Branch at
Galveston, Texas. From June 1992 to September 1994, Mr. Ladd served as the
Texas Commissioner of Health and Human Services where he oversaw the development
and implementation of a 22,000-bed Medicaid Waiver Program to be used for
assisted living and other community-based service programs. From November 1981
to June 1992, Mr. Ladd served as Administrator of the Oregon Senior and Disabled
Services Division. He is also a member of numerous professional and honorary
organizations.
BRADLEY G. RAZOOK has been a director of the Company since August 1994.
Mr. Razook is currently Managing Director and Head of Health Care Industry Group
of Schroeder & Co., Inc. From 1990 to July 1997, Mr. Razook was Executive Vice
President of National Westminster Bank PLC, New York Branch (NatWest Markets).
Prior to being appointed Executive Vice President, Mr. Razook held the position
of Managing Director. From 1985 to 1990, Mr. Razook was a First Vice President
and counsel at Drexel Burnham Lambert, Inc., an investment banking firm.
GLORIA J. CAVANAUGH was appointed as a director of the Company on September
7, 1997. Ms. Cavanaugh has been the executive director of the American Society
on Aging since 1975. From 1968 to 1975, she was Director of Continuing
Education at the Andrus Gerontology Center, University of Southern California.
Ms. Cavanaugh has almost thirty years experience developing and offering
educational programming on aging issues, including such areas as aging in
place/housing and assisted living. Ms. Cavanaugh serves on the Board of
Directors of Generations United, The National Alliance for Caregiving, The
National Policy and Resource Center on Women and Aging and the Center for
Assistive Technology, State University of New York at Buffalo.
Board of Directors and Committees of the Board
The Board of Directors held 27 meetings during 1997. During that period,
no incumbent director attended fewer than 75% of the total number of meetings of
the Board and committees of the Board on which he or she served.
3
<PAGE>
The Board of Directors has an Audit Committee and a Compensation
Committee. There is no standing Nominating Committee.
The Audit Committee is presently comprised of Mr. Ladd, Ms. Cavanaugh and
Mr. Razook. Mr. Ladd and Ms. Cavanaugh serve as co-chairpersons of the
Committees. Mr. McBride served as the chairman of the Audit Committee until his
resignation on September 8, 1997 as a result of his intended appointment as
Chief Executive Officer on October 3, 1998. Mr. Dimitriadis served as a member
of the Audit Committee until his resignation from the Board of Directors on
September 8, 1997. The Audit Committee is authorized to select and recommend to
the Board of Directors the independent accountants to serve the Company for the
ensuing year, review with the independent accountants the scope and results of
the audit, review management's evaluation of the Company's system of internal
controls, and review non-audit professional services provided by the independent
accountants and the range of audit and non-audit fees. To ensure independence
of the audit, the Audit Committee consults separately and jointly with the
independent accountants and management. During the fiscal year ended December
31, 1997, the Audit Committee held two meetings.
The Compensation Committee is presently comprised of Mr. Razook, Mr. Ladd
and Ms. Cavanaugh. Mr. Razook serves as the chairman of the Committee. Mr.
McBride served as a member of the Compensation Committee until his resignation
on September 8, 1997 as a result of his intended appointment as Chief Executive
Officer on October 3, 1998. Mr. Dimitriadis served as chairman of the
Compensation Committee until his resignation from the Board of Directors in
September 1997. The Compensation Committee reviews and approves the
compensation of the Company's executive officers and determines the general
compensation policy for the Company. The Compensation Committee also is
responsible for the administration of the Company's 1994 Amended and Restated
Stock Option Plan and is authorized to determine the options to be granted under
the plan and the terms and provisions of such options. During the fiscal year
ended December 31, 1997, the Compensation Committee held one meeting.
Each non-employee director receives a fee of $12,000 per year for services
as a director, plus $500 for attendance in person at each meeting of the Board
of Directors or of any committee meeting held on a day on which the Board of
Directors does not meet. In addition, the Company reimburses the directors for
travel expenses incurred in connection with their duties as directors of the
Company. During 1997, the Company granted the non-employee directors non-
qualified stock options to purchase a total of 45,000 shares of Common Stock at
$16.50 per share. Each of the non-employee directors received options to
purchase 15,000 shares. Such options vest ratably on each of November 25, 1998,
1999 and 2000 or such director's earlier death or disability, and are
exercisable within ten years from the date of grant.
4
<PAGE>
PRINCIPAL STOCKHOLDERS AND MANAGEMENT OWNERSHIP
The following table sets forth information as of March 31, 1998 with
respect to the beneficial ownership of the Common Stock of the Company by (1)
each person who is known by the Company to own beneficially more than 5% of its
Shares, (2) each director of the Company, (3) the Chief Executive Officer for
the fiscal year ended December 31, 1997 and (4) the Company's directors and
executive officers as a group.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
NAME AND ADDRESS OF BENEFICIAL OWNER (1) OWNED(2) PERCENT OF CLASS
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
William McBride III 494,000 3.1%
Keren B. Wilson 927,845 5.8%
Richard C. Ladd 40,000 *
Bradley G. Razook (3) 69,000 *
170 Water Street, 20th Floor
New York, NY 10038
Baron Capital Group, Inc. (4) 803,600 5.1%
767 Fifth Avenue
24th Floor
New York, NY 10153
AMVESCAP PLC (5) 873,721 5.6%
11 Devonshire Square
London EC2M 4YR
England
FMR Corp. (6) 1,203,000 7.6%
82 Devonshire Street
Boston, MA 02109
ARK Asset Management Co., Inc. (7) 1,625,000 10.3%
One New York Plaza
New York, NY 10004
All directors and executive officers as a group 1,615,843 10.0%
(11 persons)
___________
</TABLE>
* Less than 1%
( 1 ) Except as otherwise noted below, the address of the Company's directors
and officers is c/o Assisted Living Concepts, Inc., 9955 S.E.
Washington, Suite 201, Portland, Oregon, 97216.
( 2 ) Includes options to purchase 135,000 shares of Common Stock held by Mr.
McBride, 178,333 by Dr. Wilson, 40,000 by Mr. Ladd and 55,000 by Mr.
Razook, which are exercisable within 60 days of March 31, 1998.
( 3 ) Includes 14,000 shares owned by Mr. Razook's son.
( 4 ) Based on the Form 13G as filed on February 17, 1998.
( 5 ) Based on the Form 13G as filed on February 12, 1998.
( 6 ) Based on the Form 13G as filed on February 9, 1998.
( 7 ) Based on the Form 13G as filed on February 4, 1998.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation paid
during the fiscal year ended December 31, 1997 to the Company's Named Executive
Officers. No other executive officer of the Company received total compensation
of $100,000 or more in fiscal 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
ANNUAL COMPENSATION(1) Awards
-------------------------------------------------------- --------------------------
Other Annual Restricted Securities All Other
Compen- Stock Under- Compen-
Name and YEAR Salary Bonus sation Awards lying sation
Principal Position ($) ($) ($) ($)(2) Options (#) ($)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
William McBride III (3) 1997 --- --- --- 3,400,000 --- ---
Chief Executive --- ---
Officer and Chairman --- ---
Keren B. Wilson 1997 $200,000 --- --- 850,000 ---
Chief Operating 1996 130,000 --- --- --- 15,000 ---
Officer, President, 1995 100,000 --- --- --- 15,000 ---
Vice Chairman
Stephen J. Gordon(4) 1997 $100,000 --- --- --- --- ---
Vice President and 1996 79,125 --- --- --- --- ---
Treasurer 1995 29,840 --- --- --- 40,000 ---
Connie Baldwin 1997 $100,000 --- --- --- 25,000 ---
Vice President/ 1996 79,791 --- --- --- --- ---
Field Operations 1995 59,166 --- --- --- 60,000 ---
</TABLE>
_____________
(1) Excludes certain perquisites and other personal benefit amounts, such as car
allowance, which, for any executive officer did not exceed, in the
aggregate, the lesser of $50,000 or 10% of the total annual salary and bonus
for such executive.
(2) Restricted stock awards are valued in the table above at their fair market
value based on $17.00, the per share closing price of the Company's Common
Stock on the American Stock Exchange on the date of the award. At December
31, 1997, Mr. McBride and Dr. Wilson held 200,000 and 50,000 shares,
respectively, of restricted stock valued at $3,950,000 and $987,500,
respectively (calculated by multiplying the amount of restricted stock by
the closing market price of $19.75 on the last trading day of 1997).
Dividends are payable on the restricted stock to the extent paid on all
other shares of Common Stock. Shares of restricted stock vest in equal
installments over four years beginning on October 3, 2001, the fourth
anniversary of the date of the award, subject to acceleration in the event
of a change of control.
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(3) Mr. McBride became Chief Executive Officer on October 3, 1997, but did not
begin receiving compensation until January 1, 1998.
(4) Mr. Gordon was employed by the Company in July 1995 and served as the Chief
Financial Officer and Chief Administrative Officer through December 1997
until his appointment as Vice-President and Treasurer.
Stock Option Grants
The following table provides information on stock options granted during
1997 to the Named Executive Officers.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------------------------
NUMBER OF % OF TOTAL POTENTIAL REALIZABLE VALUE
SECURITIES OPTIONS AT ASSUMED ANNUAL RATE
UNDERLYING GRANTED TO EXERCISE OF STOCK PRICE APPRECIATION
OPTIONS EMPLOYEES IN PRICE EXPIRATION FOR OPTION TERM (2)
NAME GRANTED (#) FISCAL YEAR ($/Sh) DATE 5% ($) 10% ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
William McBride III -- -- -- -- -- --
Keren B. Wilson -- -- -- -- -- --
Stephen J. Gordon -- -- -- -- -- --
Connie Baldwin (1) 25,000 2.6% $16.50 11/25/07 $259,419 $657,419
</TABLE>
- -------------------
(1) These options become exercisable in three equal installments beginning on
the first anniversary of the date of grant and expire ten years from the
date of grant.
(2) In accordance with rules of the Securities and Exchange Commission (the
"Commission"), shown are the gains or "option spreads" that would exist for
the respective options granted. These gains are based on the assumed rates
of annual compound stock price appreciation of 5% and 10% from the date the
option was granted over the full option term. These assumed annual compound
rates of stock price appreciation are mandated by the rules of the
Commission and do not represent the Company's estimate or projection of
future Common Stock prices.
7
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STOCK OPTION HOLDINGS
The following table provides information with respect to the Named
Executive Officers concerning unexercised stock options held as of December 31,
1997.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
YEAR-END FISCAL YEAR-END (1)
---------------------------------------------------------------
SHARES VALUE
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) ($) UNEXERCISABLE (#) UNEXERCISABLE ($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
William McBride III -- -- 135,000/15,000 2,008,750/189,950
Keren Brown Wilson -- -- 178,333/36,667 2,582,912/477,038
Stephen John Gordon -- -- 53,333/26,667 743,462/371,738
Connie Baldwin 20,000 217,675 26,666/38,334 353,325/257,926
</TABLE>
___________
(1) The closing trading price on the American Stock Exchange for the Common
Stock on December 31, 1997 was $19.75.
EMPLOYMENT AGREEMENTS
Mr. McBride and Dr. Wilson entered into employment agreements with the
Company in October 1997, providing for Mr. McBride's services as Chief Executive
Officer and Dr. Wilson's services as President and Chief Operating Officer.
Each agreement is for a four-year period; provided, however, that the term of
each agreement will be automatically extended until the date (if any) which is
the fourth anniversary of the Company's notice, or six months after the
employee's notice, of a desire to terminate the agreement. Notwithstanding such
"evergreen" provisions of the agreement, it may be terminated by the Company for
cause or by the employee for "Good Reason." The latter is defined in the
agreements as material diminution of title, duties, or salary, reduction in
benefit not generally applicable to senior executive personnel, or a direction
by the Board of Directors to report to any person or group other than the Board
of Directors. In the event of a termination of either agreement for any reason
other than "Good Reason," the employee shall be entitled to the payment of an
amount equal to four times his or her annual salary. In the event of a
termination for any reason other than the death or disability of the employee or
a termination by the Company for cause and such termination takes place within
one year of a change in control (as defined in the agreement), Mr. McBride shall
be entitled to a $4.0 million termination payment and Dr. Wilson shall be
entitled to a $3.0 million termination payment. The agreements also contain
"gross-up" provisions to compensate the employees in the event that any payment
under such contracts is subject to an excise tax imposed under Section 4999 of
the Internal Revenue Code. Mr. McBride and Dr. Wilson are currently being paid
compensation at the annual rate of $265,000 and $200,000, respectively.
Pursuant to the employment agreements, Mr. McBride and Dr. Wilson were awarded,
without cost to them, 200,000 and 50,000 shares of "restricted stock,"
respectively, under the Company's 1994 Amended and Restated Stock Option Plan.
The restrictions applicable to such shares lapse, and such shares will no longer
be subject to forfeiture in the event of termination of employment, at the rate
of 25% per year commencing on October 3, 2001, the fourth anniversary of the
date of award, subject to
8
<PAGE>
acceleration in the event of a change in control. Dividends are payable on the
restricted stock to the extent paid on all other shares of Common Stock. The
restricted stock does not have voting rights.
The Company entered into an employment agreement with Ms. Connie Baldwin in
March 1998 for her services as Vice President/Field Operations. The agreement
is for a two year term but may be terminated by the Company for "Cause" (as
defined in the agreement) or by the employee at any time upon 90 days written
notice. In the event of a termination by the Company other than for "Cause" or
a termination within one year after a change in control (as defined in the
agreement), the employee shall be entitled to the payment of an amount equal to
twice her annual salary. The agreement provides that the annual compensation
will be established each year by the President or Chief Executive Officer of the
Company subject to adjustment from time to time at the discretion of the Board
of Directors. Ms. Baldwin's current annual compensation is $125,000. The
agreement further provides that Ms. Baldwin is subject to confidential
information restrictions for as long as Ms. Baldwin possesses any such
confidential information and non-competition provisions for the duration of the
employment agreement and one year thereafter.
COMPENSATION COMMITTEE REPORT
The Compensation Committee (the "Committee") is presently comprised of Mr.
Razook, Mr. Ladd and Ms. Cavanaugh. Mr. Razook serves as the Chairman of the
Committee. Mr. McBride served as a member of the Compensation Committee until
his resignation September 8, 1997 as a result of his intended appointment as
Chief Executive Officer in October 1997. Mr. Dimitriadis served as Chairman of
the Compensation Committee until his resignation from the Board of Directors in
September 1997.
The Committee reviews and approves the compensation of the Company's
executive officers and determines the general compensation policy for the
Company. The Committee is also responsible for the administration of the
Company's 1994 Amended and Restated Stock Option Plan and is authorized to
determine the options to be granted under the plan and the terms and provisions
of such options. The Company has eight executive officers.
Compensation Philosophy
The Committee endeavors to ensure that the compensation programs for
executive officers of the Company are effective in attracting and retaining key
executives responsible for the success of the Company and are administered in
appropriate fashion in the long-term interests of the Company and its
stockholders. The Committee seeks to align total compensation for senior
management with the overall performance of the Company as well as the individual
performance of each executive officer. The Company's compensation package,
which currently is comprised of base salary, bonuses, stock options and
restricted stock, is intended to reinforce management's commitment to enhancing
profitability and stockholder value.
In determining the level and composition of compensation for the executive
officers of the Company, the Committee considers various corporate and
individual performance measures. Although the Committee considers earnings per
share as an important measure of Company performance, the Committee does not
apply any specific quantitative formula in making compensation decisions. The
Committee also evaluates other external factors such as market conditions as
well as compensation practices and financial performance of other companies in
the assisted living residence business.
9
<PAGE>
Base Salaries
Base salaries are reviewed and adjusted by the Committee on an annual
basis. The Committee seeks to ensure that the base salaries are established at
levels considered appropriate in light of responsibilities and duties of the
executive officers as well as at levels competitive to amounts paid to executive
officers of its peer group.
Bonuses
Bonuses are awarded based on the overall performance of the Company and
individual performance of each executive officer. The amounts awarded may vary
from year to year and may be awarded to executive officers in other forms such
as stock awards in lieu of cash payments.
Stock Option Plan
The Committee administers the Company's 1994 Amended and Restated Stock
Option Plan, as amended (the "Plan"), which provides for grants of incentive and
nonqualified stock options as well as the award of shares of restricted stock.
Under the Plan, options are granted and shares of restricted stock are awarded
to provide incentives to the Company's directors, officers, key employees and
consultants to promote long-term performance of the Company and specifically, to
retain and motivate senior management in achieving a sustained increase in
stockholder value. Currently, the Plan has no pre-set formula or criteria for
determining the number of options that may be granted, except that no person can
be granted options or restricted stock in any calendar year covering more than
200,000 shares of Common Stock. The Committee reviews and evaluates the overall
compensation package of the executive officers and determines the awards based
on the overall performance of the Company and the individual performance of the
executive officers.
During 1993, the Internal Revenue Code of 1986, as amended, (the "Code")
was amended to include Section 162(m) which denies a deduction to any publicly
held corporation for compensation paid to any "covered employee" (which are
defined as the chief executive officer and the Company's other four most highly
compensated officers, as of the end of a taxable year) to the extent that the
compensation exceeds $1 million in any taxable year of the corporation beginning
after 1993. Compensation which constitutes "performance based compensation" is
excludable in applying the $1 million limit. In structuring the Company's
compensation programs and in determining the appropriateness of awards, the
Committee's primary consideration is the achievement of the Company's strategic
business goals, taking into consideration competitive practice, market
economics, and other factors. To the extent fulfilling these goals is
consistent with favorable tax treatment, the Committee intends to design the
Company's compensation programs to conform with the regulations so that total
compensation paid to any employee will not exceed $1 million in any one year,
except for awards as part of executive compensation that are performance-based
and thus deductible by the Company. However, this commitment does not rule out
the ability to make awards or to approve compensation that may not qualify for
the compensation deduction, if there exists sound corporate reasons for so
doing.
Chief Executive Officer
Dr. Wilson served as the Company's CEO through October 3, 1997 at which
time she was appointed as President, Chief Operating Officer and Vice-Chairman
of the Board of Directors. Pursuant to the terms of her original employment
agreement, which were determined when the terms of the Company's initial public
offering were negotiated in November of 1994 and not by the Compensation
Committee, Dr. Wilson, in her capacity as CEO, received salary at the annual
rate of
10
<PAGE>
$130,000 through October 2, 1997. Although Mr. McBride was appointed as CEO of
the Company as of September 8, 1997, no cash compensation was paid to Mr.
McBride during 1997.
In late 1997, in connection with the employment of Mr. McBride, the
Committee undertook a review of the Company's executive employment and
compensation arrangements. As a result of this review, the Committee determined
to recommend, and the Board of Directors approved, the offering of employment
agreements to Mr. McBride, Dr. Wilson and Ms. Baldwin. The terms of the
employment agreements of the Named Executive Officers are summarized under the
caption "Executive Compensation - Employment Agreements." In addition to
formalizing the current terms under which the executives are employed, these
agreements provide for certain enhanced employee benefits and severance payments
and thus provide benefits the Committee believes are more in line with
competitive practices. These benefits were provided both in recognition of past
service and as an inducement to enter into long-term agreements.
In connection with their new employment agreements, both Dr. Wilson and Mr.
McBride also received restricted stock awards at no cost to them valued on the
date of award at $850,000 (50,000 shares) and $3,400,000 (200,000 shares),
respectively. With respect to Dr. Wilson, the Committee believes this award was
merited by Dr. Wilson's performance as CEO in 1997 along with the Company's
overall performance. With respect to Mr. McBride, the Committee determined
that the restricted stock award was merited based on his previous substantial
contributions to the Company in his role as a director and in order to induce
Mr. McBride to enter into a long-term employment contract with the Company as
its new CEO. The restricted stock awards for both Dr. Wilson and Mr. McBride
vest ratably over a four year period beginning on October 3, 2001. In making
such awards, the Committee took into account that any compensation realized by
either Mr. McBride or Dr. Wilson with respect to such awards will not qualify as
"performance based compensation" for purposes of Section 162(m) and as a result
such compensation will not be deductible to the extent it causes aggregate
compensation payable to either Mr. McBride or Dr. Wilson exceed the Section
162(m) $1 million dollar limit discussed above. Additional information with
respect to these awards is described in footnote 2 to the Summary Compensation
Table.
Bradley Razook, Chairman
Richard Ladd
Gloria Cavanaugh
The Board Compensation Committee Report on Executive Compensation shall not
be deemed incorporated by reference by any general statement incorporating by
reference this proxy statement into any filings under the Securities Act of
1933, as amended (the "Securities Act"), or the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), except to the extent that the Company
specifically incorporates this information by reference and shall not otherwise
be deemed filed under such Acts.
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<PAGE>
STOCK PERFORMANCE GRAPH
The following Stock Performance Graph shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filings under the Securities Act or the Exchange Act, except
to the extent that the Company specifically incorporates this information by
reference and shall not otherwise be deemed filed under such Acts.
The following graph compares the Company's cumulative total stockholder
return on its Common Stock (no dividends have been paid thereon) with the
cumulative total return, assuming reinvestment of dividends, of (i) S & P
Healthcare Composite and (ii) American Stock Exchange from November 22, 1994,
the first day of trading of the Common Stock on the American Stock Exchange, to
December 31, 1997. The comparison assumes $100 was invested on November 22,
1994 in the Company's Common Stock and each of the foregoing indices and assumes
reinvestment of dividends before consideration of income taxes.
The historical stock price performance of the Common stock shown on the
Stock Performance Graph set forth below is not necessarily indicative of future
stock price performance.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG ASSISTED LIVING CONCEPTS, AMEX MAJOR MARKET AND S&P HEALTHCARE COMPOSITE
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
AMEX S&P Healthcare
ALC Major Market Composite
--- ------------ ---------
<S> <C> <C> <C>
11/22/94 100.00 100.00 100.00
12/30/94 91.89 104.48 103.15
12/29/95 141.89 143.45 162.71
12/31/96 164.86 183.02 196.22
12/31/97 427.01 234.04 282.06
</TABLE>
12
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The Compensation Committee is presently comprised of Mr. Razook, Mr. Ladd
and Ms. Cavanaugh. Mr. McBride served on the Compensation Committee until his
appointment as Chief Executive Officer in September 1997. Mr. Dimitriadis
served as the chairman of the Compensation Committee until his resignation from
the Board of Directors in September 1997.
Mr. Razook, a director of the Company, is Managing Director and Head of the
Health Care Industry Group of Schroder & Co. Inc. ("Schroders"), an investment
banking firm. Schroders acted as lead underwriter in connection with the sale
of $86.3 million in principal amount of 6% convertible subordinated debentures
and 4.1 million of Common Stock in underwritten public offerings in October
1997. In addition, in April 1998 Schroders acted as placement agent in
connection with the sale of $75 million in principal amount of 5.625%
convertible subordinated debentures. Schroders and its affiliates may provide
additional investment banking services to the Company in the future.
CERTAIN TRANSACTIONS
HCI ACQUISITION
In October 1997, the Company acquired Home and Community Care, Inc. ("HCI")
for a cash purchase price of $5.3 million dollars and agreed to make "earnout"
payments to the HCI stockholders over a two year period based on the number of
HCI's assisted living residence sites which the Company elects to complete
during the two-year period following the closing. The terms of the acquisition
were approved by a committee of independent directors. LTC and certain officers
and directors of the Company were officers, directors or stockholders of HCI.
LTC, Mr. McBride and Dr. Wilson's spouse, owned 41.2%, 13.9% and 4.7%,
respectively, of HCI's outstanding common stock at the time of acquisition,
substantially all of which was acquired in March 1997. Prior to the
acquisition, HCI effected a distribution to its stockholders, which resulted in
a return of their investment with respect to the HCI capital stock held by them.
As a result of the HCI acquisition, LTC, Mr. McBride and Dr. Wilson's spouse
received $2,000,000, $500,000 and $200,000, respectively, in cash at the closing
and are expected to receive up to approximately $1,700,000, $570,000 and
$195,000, respectively, based on HCI's projection as of March 31, 1998 of sites
to be developed. Prior to the acquisition, HCI paid the Company $600,000 in
development and licensing fees and $48,000 in rent related to home health care
agencies operated at eight of the Company's assisted living residences.
CARRIAGE HOUSE ACQUISITION
On October 31, 1997, the Company issued 337,449 shares of Common Stock in
connection with its acquisition of Carriage House Assisted Living, Inc.
("Carriage House"), a privately-held developer and operator of assisted living
residences in Nebraska. This transaction was approved by the independent
directors. LTC and Mr. McBride, who was a director of Carriage House, owned
9.1% and of 9.2%, respectively, of its common stock, which they acquired in May
1996 for no cash consideration. Upon completion of the Carriage House
acquisition, LTC and Mr. McBride received 30,847 and 31,314 shares,
respectively, of the Company's Common Stock valued at $484,297 and $491,630,
respectively.
TRANSACTIONS WITH LTC
Through September 8, 1997, two members of the Company's Board of Directors
served as executive officers of LTC. On September 8, 1997 Mr. Dimitriadis
resigned from the Company's
13
<PAGE>
Board of Directors and Mr. McBride resigned as an executive officer and member
of the Board of Directors of LTC. During 1997, the Company sold to and leased
back from LTC 20 residences (788 units) for a sale price of $51.4 million and
paid LTC rent of $3,900,000. The residences were sold at approximate cost. The
Company also received $43.2 million of mortgage financing from LTC on 19
residences, which were to be converted to sale leaseback transactions by June
1998. As of December 31, 1997, the Company had converted or had repaid the
mortgage financing on all of the properties except one ($2.2 million) which was
subsequently sold and leased back after December 31, 1997. Interest on these
mortgages was paid on a monthly basis ranging from 9.9% to 10.4% per annum and
aggregated $5.4 million in 1997. These mortgage financings were in connection
with a $50 million commitment with LTC to provide financing through sale and
leaseback arrangements. The commitment was renegotiated and $22.5 million
remains to close through September 30, 1998. As of December 31, 1997, an
additional $113,000,000 of sale leaseback financing commitments with LTC
remained outstanding which, pursuant to their terms, must be closed by various
dates through December 31, 2000. The Company also assumed four additional leases
with LTC as a result of the Carriage House acquisition and paid LTC rent
pursuant to such leases of $159,000 in 1997.
During 1997, the Company paid approximately $414,906 to LTC Development
Company, Inc. ("LDC"), a wholly-owned subsidiary of LTC, for market feasibility
analysis, preacquisition services and construction management oversight. The
Company terminated its relationship with LDC in the fourth quarter of 1997 and,
in December 1997, the Company acquired certain assets of LDC for $59,000.
TRANSACTIONS WITH SHS
During 1997, Supportive Housing Services, Inc. ("SHS"), a company that is
owned 80% by Dr. Wilson's spouse, provided services to the Company for market
feasibility analysis, pre-acquisition services and construction management
oversight for residences of the Company under development. The Company paid
$480,000 for these services during the last quarter of 1997.
OTHER
The Company leases six residences from Assisted Living Facilities, Inc.
("ALF"). Dr. Wilson's spouse owns a 25% interest in ALF. During 1997, the
Company paid ALF aggregate lease deposits of $31,500 and rent of $1.1 million.
In addition, the Company leased one residence from Oregon Heights Partners in
1997, in which Dr. Wilson's spouse owns through CCL a 34% interest. During 1997,
the Company paid Oregon Heights Partners $50,000 in lease deposits and $278,000
in rent.
During 1997, Concepts in Community Living, Inc. ("CCL"), a company owned by
Dr. Wilson's spouse, provided feasibility studies and pre-development consulting
services with respect to certain assisted living residence sites being developed
and constructed by the Company. Such services were provided to LDC, SHS and
certain other developers of the Company's assisted living residences. CCL
received approximately $575,000 for rendering such services in 1997.
14
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's officers,
directors and greater than ten-percent stockholders to file with the Commission
and the American Stock Exchange initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
Such persons or entities are required by Commission regulations to furnish the
Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1997 all
Section 16(a) filing requirements applicable to its officers, directors and 10%
Stockholders were complied with except that Ms. Cavanaugh failed to timely file
a Form 3 and Form 4, Dr. Wilson failed to timely file four Form 4s, Mr. Ladd
failed to timely file two Form 4s, Mr. Razook failed to timely file one Form 4.
The Company has instituted procedures to ensure timely compliance in the future.
INDEPENDENT PUBLIC ACCOUNTANTS
KPMG Peat Marwick L.L.P. audited the Company's financial statements for the
period ended December 31, 1997 and have been the Company's auditors since
November 3, 1995. The directors have selected the firm of KPMG Peat Marwick,
L.L.P. as independent accountants for the Company for the fiscal year ending
December 31, 1998. A representative of KPMG Peat Marwick, L.L.P. is expected to
be present at the May 20, 1998 Annual Meeting and will have an opportunity to
make a statement if he desires to do so, and such representative is expected to
be available to respond to appropriate questions.
DEADLINE FOR SUBMISSION OF STOCKHOLDER
PROPOSALS FOR NEXT YEAR'S ANNUAL MEETING
The proxy rules adopted by the SEC provide that certain Stockholder
proposals must be included in the proxy statement for the Company's Annual
Meeting. For a proposal to be considered for inclusion in next year's proxy
statement, it must be received by the Company no later than December 24, 1998
and must otherwise comply with the applicable provisions of the Exchange Act and
the Company's Bylaws.
OTHER MATTERS
The Board of Directors of the Company knows of no matters to be presented
at the Annual Meeting other than those described in this proxy statement. Other
business may properly come before the meeting, and in that event it is the
intention of the persons named in the accompanying proxy to vote in accordance
with their judgment on such matters.
The cost of the solicitation of proxies will be borne by the Company. In
addition to solicitation by mail, directors and officers of the Company, without
receiving any additional compensation, may solicit proxies personally or by
telephone or telegraph. The Company will request brokerage houses, banks, and
other custodians or nominees holding stock in their names for others to forward
proxy materials to their customers or principals who are the beneficial owners
of Shares and will reimburse them for their expenses in doing so. The Company
has retained the services of American Stock Transfer Company, Inc. for out-of-
pocket expenses, to assist in the solicitation of proxies.
15
<PAGE>
The Company's Annual Report to Stockholders, including the Company's
audited financial statements for the year ended December 31, 1997, is being
mailed herewith to all stockholders of record. THE COMPANY WILL PROVIDE WITHOUT
CHARGE TO ANY PERSON SOLICITED HEREBY, UPON THE WRITTEN REQUEST OF ANY SUCH
PERSON, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1997 FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. SUCH
REQUESTS SHOULD BE DIRECTED TO THE SECRETARY OF THE COMPANY, AT 9955 S.E.
WASHINGTON, SUITE 303, PORTLAND, OR 97216.
ALL STOCKHOLDERS ARE URGED TO COMPLETE, SIGN AND RETURN THE ACCOMPANYING
PROXY CARD IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors
Sandra Campbell
Secretary
Portland, Oregon
April 23, 1998
16
<PAGE>
ASSISTED LIVING CONCEPTS, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS - MAY 20, 1998
The undersigned hereby appoints KEREN BROWN WILSON and WILLIAM MCBRIDE III,
or either of them, each with power of substitution, as Proxies, and hereby
authorizes each of them to represent and vote, as designated on the reverse side
of this Proxy Card, the shares held of record by the undersigned at the annual
meeting of stockholders of Assisted Living Concepts, Inc., to be held at
Kingstad Meeting Center, 5933 NE Win Sivers Drive, Portland, Oregon, on
Wednesday, May 20, 1998 at 11:00 a.m. local time, or any adjournments or
postponements thereof, as designated on the reverse, and in their discretion,
the proxies are authorized to vote upon such other business as may properly come
before the meeting.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE>
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
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A [X] Please mark your
votes as in this
example.
FOR WITHHELD
1. Election of NOMINEES: Keren Brown Wilson
Directors [_] [_] William McBride III
Gloria Cavanaugh
Richard C. Ladd
Bradley G. Razook
For, except vote withheld from the following nominee(s)
_______________________________________________________
THIS PROXY WILL BE VOTED AS DIRECTED. IF NO CONTRARY DIRECTION IS MADE, THIS
PROXY WILL BE VOTED "FOR" ALL NOMINEES LISTED IN ITEM (1).
In accordance with the judgments of the Proxies, upon any other matter that may
properly come before the Annual Meeting of Stockholders or any adjournment
thereof.
NOTE: If you receive more than one proxy card, please date and sign each card
and return all proxy cards in the enclosed envelope.
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY PROMPTLY USING THE ENVELOPE
PROVIDED.
SIGNATURE _____________________________ DATE _______________________
SIGNATURE _____________________________ DATE _______________________
IMPORTANT: Please sign your name exactly as it appears hereon. When signing as
attorney, executor, administrator, trustee or guardian add such title to your
signature.
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