<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_]Confidential, for Use of the [_] Definitive Additional Materials
Commission Only (as Permitted by
Rule 14a-6(e)(2))
[_] Soliciting Material Pursuant to
Rule 14a-12
[_]Preliminary Proxy Statement
[X]Definitive Proxy Statement
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:
(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:
Notes:
<PAGE>
ASSISTED LIVING CONCEPTS, INC.
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 16, 2001
The 2001 Annual Meeting of Stockholders of Assisted Living Concepts, Inc.
("ALC" or the "Company") will be held at the offices of Latham & Watkins, 885
Third Avenue, Suite 1000, New York, New York on Tuesday, January 16, 2001 at
4:00 p.m. local time, for the following purposes:
(1) To elect a board of six 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 ALC at the
close of business on December 13, 2000, 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 ALC, 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.
Certain information included in this proxy statement relates to the
Company's management during the fiscal year ended December 31, 1999, as
required by the rules promulgated under the Exchange Act. The Company has also
provided more current information in this proxy statement where appropriate
and available.
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
Senior Vice President, General
Counsel and Secretary
Portland, Oregon
December 20, 2000
<PAGE>
ASSISTED LIVING CONCEPTS, INC.
----------------
PROXY STATEMENT
This proxy statement is furnished to the stockholders of Assisted Living
Concepts, Inc., a Nevada corporation ("ALC" or the "Company"), in connection
with the solicitation of proxies by the Board of Directors of ALC for use at
the Annual Meeting of Stockholders to be held on Tuesday, January 16, 2001 at
4:00 p.m., local time, at the offices of Latham & Watkins, 885 Third Avenue,
Suite 1000, New York, New York, 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
ALC's stockholders is December 20, 2000.
On December 13, 2000, the record date for the determination of stockholders
entitled to notice of, and to vote at, the Annual Meeting, 17,120,745 shares
of common stock, par value $0.01 per share (the "Common Stock"), were
outstanding. Each such share is entitled to one vote on all matters properly
brought before the meeting. The six 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 votes 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 un-voted for purposes of determining approval and
will not be counted as voted for or against that proposal.
You may revoke your proxy by filing a written notice of revocation with the
Company. You may also revoke your proxy by (1) filing a new proxy bearing a
later date with the Company, or (2) by attending the meeting and voting in
person.
Your shares will be voted as you direct on your signed proxy card. If you do
not specify on your proxy card how you want to vote your shares, the Company
will vote signed returned proxies "for" the Board's nominees. The Company does
not know of any other business that may be presented at the annual meeting. If
a proposal other than the one listed in the Notice is presented at the annual
meeting, your signed proxy card gives authority to Wm. James Nicol and John
Gibbons to vote your shares on such matters in their discretion.
Certain information included in this proxy statement relates to the
Company's management during the fiscal year ended December 31, 1999, as
required by the rules promulgated under the Securities and Exchange Act of
1934, as amended (the "Exchange Act"). The Company has also provided more
current information in this proxy statement where appropriate and available.
The Company's principal executive offices are located at 11835 NE Glenn
Widing Drive, Building E, Portland, Oregon 97220.
1
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting, six directors will be elected to hold office until the
2002 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 Wm. James
Nicol, John M. Gibbons, Richard C. Ladd, Jill M. Krueger, Leonard Tannenbaum,
and Bruce E. Toll. Messrs. Nicol, Gibbons and Ladd and Ms. Krueger presently
serve as directors 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 2002 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 of Common Stock 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 table sets forth certain information concerning the nominees
for election.
<TABLE>
<CAPTION>
Name Age(1) Position
---- ------ --------
<S> <C> <C>
Wm. James Nicol (2).................. 57 Chairman of the Board of Directors
John M. Gibbons (2)(3)(4)............ 52 Director
Jill M. Krueger (2)(3)............... 41 Director
Richard C. Ladd(3)................... 61 Director
Leonard Tannenbaum................... 29 Director
Bruce E. Toll........................ 57 Director
</TABLE>
--------
(1) As of December 13, 2000.
(2) Current member of Executive Committee.
(3) Current member of Audit Committee.
(4) Current member of Compensation Committee.
Wm. James Nicol was appointed Chairman of the Board in March 2000. Mr. Nicol
has over 20 years experience in senior executive management, including finance
and corporate development in health care service organizations. Mr. Nicol has
most recently served as the Chief Financial Officer of HemoTherapies, Inc., a
San Diego based medical device start-up company. Prior to joining
HemoTherapies, he served in various senior executive roles for numerous
companies, including Chief Operating Officer of Laguna Medical Systems,
President and Chief Executive Officer of Health Management, Inc. and Chief
Financial Officer of Careline, Inc. and Quantum Health Resources, Inc. Mr.
Nicol has served as a senior officer and/or member of the Board of Directors of
six publicly-traded companies.
John M. Gibbons was appointed a Director in March 2000. He brings over 16
years of public company senior management experience in finance and executive
management positions. During his six years at The Sports Club Company, a
developer and operator of luxury sports and fitness clubs, Mr. Gibbons held a
number of positions, including Chief Financial Officer, Chief Operating Officer
and most recently President and Chief Executive Officer. He was a director of
The Sports Club from 1995 through February 2000. Prior to joining The Sports
Club, Mr. Gibbons was employed by Com-Systems, a publicly-traded long-distance
telecommunications company, where he served in multiple capacities, including
as Senior Vice-President, General Manager and Chief Financial Officer. He is
currently a director of Deckers Outdoor Corporation.
2
<PAGE>
Jill M. Krueger was elected to the Board of Directors in April 1999, and
presently serves as Chairman of the Company's Audit Committee. Since 1996, Ms.
Krueger has served as President and Chief Executive Officer of Health
Resources Alliance, an organization designed to optimize market position and
achieve synergies which enable its 20 member organizations to prosper in a
managed care environment. From 1988 to 1996 Ms. Krueger was a partner at KPMG
LLP where she served as its Partner in charge of the firm's National Long Term
Care and Retirement Housing Practice.
Richard C. Ladd served as Chairman of the Company's Board of Directors from
March 1999 to March 2000 and has been a director 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 was 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.
Leonard Tannenbaum, CFA, has not previously served on the Company's Board of
Directors. Mr. Tannenbaum is currently the Managing Partner at MYFM Capital
LLC, an investment banking firm. Mr. Tannenbaum currently serves on the board
of directors of the following public companies: Cortech, Inc.; New World
Coffee-Manhattan Bagel, Inc.; and General Devices, Inc. He also currently
serves on the board of Timesys, an embedded Linux company, and
Transcentives.com, an internet holding company. He formerly served on the
board of Westower Corporation. Previously, Mr. Tannenbaum was the president of
the on-line auction company CollectingNation.com, a partner in a $50 million
hedge fund, an assistant portfolio manager at Pilgrim Baxter, and an Assistant
Vice President in Merrill Lynch's small company group. Mr. Tannenbaum received
both his M.B.A. and Bachelors of Science from the Wharton School at the
University of Pennsylvania. He is the son-in-law of Bruce E. Toll.
Bruce E. Toll has not previously served on the Company's Board of Directors.
Mr. Toll serves on the Board of Directors of UbiquiTel, Inc., a publicly
traded company which provides Sprint PCS digital communication services to
mid-size markets in the western and mid-western United States. He is the owner
of BET Investments, Inc., which owns, develops, and manages commercial and
industrial properties in the Philadelphia area. He is also the owner and
operator of an automobile agency, Robert Auto Mall in Downingtown,
Pennsylvania and the Chairman of Puresyn Corp., a biotech company located in
Malvern, Pennsylvania. In addition, he is the President of Toll Management
Company, which owns and manages commercial and apartment properties on the
Philadelphia area. Mr. Toll is Vice-Chairman, founder, and director of Toll
Brothers, Inc., which today is the leading builder of luxury homes in the
nation and recipient of a number of awards. He is the father-in-law of Leonard
Tannenbaum.
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
Committees
The Board of Directors has an Executive Committee, an Audit Committee and a
Compensation Committee. There is no standing Nominating Committee.
The Executive Committee was formed on February 29, 2000 and assists the
Board in the management of the business of the Company, subject to the
restrictions imposed under the Bylaws, and meets on a regular informal basis.
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
3
<PAGE>
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. The
Company has adopted a written charter for the Audit Committee, a copy of which
is attached to this proxy statement as Appendix A. To ensure independence of
the audit, the Audit Committee consults separately and jointly with the
independent accountants and management.
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 Amended and Restated 1994 Stock Option Plan
(the "1994 Stock Option Plan") (except that the Board administers the 1994
Stock Option Plan as it applies to non-employee directors) and its Non-
Executive Employee Equity Participation Plan (the "Non-Officer Plan"), and is
authorized to determine the options to be granted under each of these plans
and the terms and provisions of such options.
Activities of the Board and Committees
Year Ended December 31, 2000
During 2000, the Board of Directors held 18 meetings and took actions
through unanimous written consents in lieu of meetings three times. 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.
During the fiscal year ended December 31, 2000, the Audit Committee and the
Compensation Committee each held four meetings.
No meeting of the Board of Directors or any committee is scheduled during
the remainder of 2000.
Year Ended December 31, 1999
During 1999, the Board of Directors held 24 meetings and took actions
through unanimous written consents in lieu of meetings 11 times. 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.
During the fiscal year ended December 31, 1999, the Audit Committee held
five meetings, and the Compensation Committee held two meetings.
Board of Directors Compensation
General
Non-employee directors are compensated for services as a director and are
reimbursed for travel expenses incurred in connection with their duties as
directors of the Company. Under the terms of the 1994 Stock Option Plan, each
new non-employee director receives non-qualified options to purchase 20,000
shares of common stock at the time he or she joins the Board of Directors.
Such director options vest with respect to one third of the amount of each
grant on each of the first, second and third anniversaries of the grant date,
and expire on the earlier of the seventh anniversary of the date of vesting or
one year following the director's ceasing to be a director for any reason.
Year Ended December 31, 2000
During 2000, each non-employee director received a fee of $12,000 per year
for services as a director, plus $1,000 for attendance in person, or $500 for
attendance by telephone, at each meeting of the Board of Directors or of any
committee meeting held on a day on which the Board of Directors did not meet.
During 2000, those outside directors serving on the Executive Committee
received $5,000 per month for such services and on
4
<PAGE>
February 29, 2000, Mr. Nicol and Mr. Gibbons each received non-qualified
options to purchase 30,000 shares of common stock at $1.81 per share for acting
in such capacity.
Mr. Nicol and Mr. Gibbons each received new non-employee director options to
purchase 20,000 shares of Common Stock under the 1994 Stock Option Plan at
$1.81 per share on February 29, 2000. In addition, on February 29, 2000, Ms.
Krueger, Ms. Ladd and Ms. Cavanaugh received nonqualified options to purchase
at $1.81 per share, 30,000, 10,000 and 10,000 shares of Common Stock,
respectively.
Year Ended December 31, 1999
During 1999, each non-employee director received a fee of $12,000 per year
for services as a director, plus $1,000 for attendance in person, or $500 for
attendance by telephone, at each meeting of the Board of Directors or of any
committee meeting held on a day on which the Board of Directors did not meet.
Ms. Krueger received new non-employee director options to purchase 20,000
shares of Common Stock under the 1994 Stock Option Plan at $2.88 per share on
April 15, 1999.
5
<PAGE>
PRINCIPAL STOCKHOLDERS AND MANAGEMENT OWNERSHIP
The Company has set forth in the following table information as of December
13, 2000 with respect to the beneficial ownership of its Common Stock (based
upon information provided by such persons) by:
(1) each of its directors and nominees for director;
(2) each of the Named Executive Officers for the fiscal year ended December
31, 1999 and certain other officers;
(3) each person who is known by its to own beneficially more than 5% of its
shares of Common Stock; and
(4) its directors (excluding nominees for director) and executive officers
as a group.
<TABLE>
<CAPTION>
Shares Percent
Beneficially of
Name and Address of Beneficial Owner(1) Owned(2) Class
--------------------------------------- ------------ -------
<S> <C> <C>
Wm. James Nicol......................................... -- *
Richard C. Ladd......................................... 67,500 *
John M. Gibbons......................................... -- *
Jill Krueger............................................ 9,167 *
Bruce E. Toll(3)........................................ 3,105,698.65 17.5%
3103 Philmont Avenue
Huntington Valley, Pennsylvania 19006
Leonard Tannenbaum...................................... 469,603 2.7%
Bradley G. Razook(4).................................... 56,500 *
170 Water Street, 20th Floor
New York, NY 10038
Gloria Cavanaugh........................................ 37,500 *
Sandra Campbell......................................... 60,794 *
Nancy Gorshe............................................ 43,334 *
Drew Q. Miller.......................................... 37,500 *
Keren Brown Wilson(5)................................... 882,912 5.2%
William McBride......................................... 90,314 *
James W. Cruckshank..................................... 2,000 *
Leslie J. Mahon......................................... 11 *
John W. Adams(6)........................................ 1,550,000 9.1%
885 Third Avenue, 34th Floor
New York, New York 10022
Greenlight Capital, L.L.C.(7)........................... 1,566,012 8.8%
420 Lexington Avenue, Suite 875
New York, New York 10170
Capital Group International, Inc. and Capital Guardian
Trust(8)............................................... 1,445,000 8.4%
11800 Santa Monica Blvd.
Los Angeles, CA 90025
All directors and executive officers as a group (17
persons)............................................... 1,313,888 7.7%
</TABLE>
--------
* Less than 1%.
(1) Except as otherwise noted above, the address of the directors and officers
is c/o Assisted Living Concepts, Inc., 11835 NE Glenn Widing Drive,
Portland, Oregon, 97220.
(2) Includes options to purchase 217,500 shares held by Dr. Wilson, 67,500
shares held by Mr. Ladd, 52,500 shares held by Mr. Razook, 37,500 shares
held by Ms. Cavanaugh, 9,167 shares held by Ms. Krueger, 60,000 shares
held by Ms. Campbell, 37,500 shares held by Mr. Miller, 43,334 shares held
by Ms. Gorshe,
6
<PAGE>
and 116,670 shares held collectively by the executive officers not named
above, which are exercisable within 60 days of December 13, 2000. In
December 2000, the Company made an offer to cancel all outstanding options
with an exercise price of $5 or more per share, which offer is still
pending. See "Compensation Committee Report--Stock Option Plans."
Accordingly, the number of shares subject to options is subject to probable
reduction in the near future.
(3) Based on the Form 13D as filed on November 22, 2000. 575,098.65 of such
shares are held by BET Associates, L.P., a partnership controlled by Mr.
Toll, and 2,530,600 of such shares are held by BRU Holding Company Inc.,
LLC, a limited liability company controlled by Mr. Toll.
(4) Includes 4,000 shares owned by Mr. Razook's children.
(5) Based on the Form 13G as filed on April 12, 2000.
(6) Based on the Form 13G as filed on May 2, 2000. These shares are held by JWA
Investment Corp. and Tempe Wicke Investments L.P., which in turn are
controlled by Mr. Adams.
(7) Based on the Form 13D as filed on December 30, 1999. 667,412 of such shares
are issuable upon the conversion of the Company's 6.0% Debentures.
(8) Based on the Form 13G as filed on February 11, 2000.
7
<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 cumulative total stockholder return on the
Company's Common Stock (no dividends have been paid thereon) with the
cumulative total return, assuming reinvestment of dividends, of (i) the
Company; (ii) a self-constructed peer group, as described below; (iii) S&P
500; (iv) the S&P Healthcare Composite Index and (v) the American Stock
Exchange Major Market Index from November 22, 1994, the first day of trading
of the Common Stock on the American Stock Exchange, to December 31, 1999. 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 Company has historically compared total stockholder return with the
return on the AMEX Major Market Index and the S&P Healthcare Composite Index.
In preparing the performance graph below, the Company has also compared the
Company's performance with that of a peer group (comprised as defined below)
and the S&P 500 Index. These two new indices will replace the AMEX Major
Market and S&P Healthcare Composite Indices in the future. The Company has
chosen the new indices because they are widely utilized by other assisted
living companies, and therefore provide a more meaningful comparison to the
Company's performance.
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. As of December 5, 2000, the closing trading
price for the Common Stock was $0.313 and the cumulative total stockholder
return, assuming a $100 investment on November 22, 1994, was $31.30.
[GRAPH]
Total Return to Stockholders
(Assumes $100 Investment on 12/30/94)
Total Return Analysis
12/30/94 12/29/95 12/31/96 12/31/97 12/31/98 12/31/99
Assisted Living
Concepts $ 100.00 $ 154.41 $ 179.41 $ 464.70 $ 308.81 $ 50.00
Peer Group $ 100.00 $ 82.03 $ 89.54 $ 135.63 $ 151.13 $ 51.36
S&P 500 $ 100.00 $ 137.54 $ 169.09 $ 225.49 $ 289.93 $ 350.93
S&P Health Care $ 100.00 $ 157.74 $ 190.23 $ 273.45 $ 394.29 $ 361.76
AMEX Major
Market $ 100.00 $ 137.30 $ 175.17 $ 224.00 $ 269.96 $ 323.57
Source: Carl Thomas Associates www.ctaonline.com (800) 959-9677. Data from
Bloomberg Financial Markets.
The Company's self-constructed peer group consists of: Sunrise Assisted
Living, Inc., American Retirement Corporation, Capital Senior Living
Corporation, Alterra Healthcare Corporation, Emeritus Corporation, ARV
Assisted Living, Inc., Balanced Care Corporation, Regent Assisted Living,
Inc., and Carematrix Corporation.
8
<PAGE>
AUDIT COMMITTEE REPORT
Membership and Role of the Audit Committee
The Audit Committee is currently comprised of Ms. Krueger, Mr. Gibbons, and
Mr. Ladd. Ms. Krueger serves as the chairperson of this committee. From
January 1, 2000 to March 29, 2000, the Audit Committee was comprised of Ms.
Cavanaugh, Mr. Ladd, and Ms. Krueger. On March 29, 2000, Ms. Cavanaugh was
replaced by Mr. Gibbons. Mr. Nicol also served on the Audit Committee from May
3, 2000 until his October 19, 2000 appointment as President and Chief
Executive Officer of the Company. Ms. Krueger served as Chairperson of the
Audit Committee throughout 2000. Each of the members of the Audit Committee is
independent as defined in Section 121(A) of the American Stock Exchange
Listing Standards. The Audit Committee operates under a written charter
adopted by the Board of Directors which is included in this proxy statement as
Appendix A.
The primary function of the Audit Committee is to provide assistance to the
Company's Board of Directors in fulfilling the Board's oversight
responsibilities regarding the Company's accounting and system of internal
controls, the quality and integrity of the Company's financial reports and the
independence and performance of the Company's outside auditor. The Audit
Committee's primary duties and responsibilities are to: (1) review and
appraise the audit efforts of the Company's independent accountants; (2)
evaluate the Company's quarterly financial performance as well as its
compliance with laws and regulations; (3) serve as an independent and
objective party to monitor the Company's financial reporting process and
internal control system; (4) oversee management's establishment and
enforcement of financial policies and business practices; and (5) provide an
open avenue of communication among the independent accountants, financial and
senior management, counsel and the Board of Directors.
Review of the Company's Audited Financial Statements for the Fiscal Year Ended
December 31, 1999
The Audit Committee has reviewed and discussed the audited financial
statements of the Company for the fiscal year ended December 31, 1999 with the
Company's management. The Audit Committee has discussed with KPMG LLP, the
Company's independent public accountants, the matters required to be discussed
by Statement on Auditing Standards No. 61 (Communication with Audit
Committees).
The Audit Committee has also received the written disclosures and the letter
from KPMG LLP required by Independence Standards Board Standard No. 1
(Independence Discussion with Audit Committees) and the Audit Committee has
discussed the independence of KPMG LLP with that firm.
Based on the Audit Committee's review and discussions noted above, the Audit
Committee recommended to the Board of Directors that the Company's audited
financial statements be included in the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1999 for filing with the SEC.
Submitted By:Jill M. Krueger, Chairperson
John Gibbons
Dick Ladd
The Board Audit Committee Report shall not be deemed to be 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.
9
<PAGE>
COMPENSATION COMMITTEE REPORT
The Compensation Committee is presently comprised of Mr. Gibbons, Bradley
Razook, and Gloria Cavanaugh. From January 1, 2000 to March 28, 2000, the
Compensation Committee was comprised of Mr. Razook, Ms. Cavanaugh, and Ms.
Krueger. On March 28, 2000, Mr. Nicol replaced Ms. Krueger on the Compensation
Committee. In November 2000, Mr. Gibbons replaced Mr. Nicol on the Compensation
Committee following Mr. Nicol's Ocotber 19, 2000 appointment as President and
Chief Executive Officer of the Company. Mr. Razook served as Chairperson of the
Compensation Committee throughout 2000. Mr. Razook and Ms. Cavanaugh are not
nominees for reelection to the Board of Directors, and the Board may elect to
place other directors on the Compensation Committee following the annual
meeting.
The Compensation Committee reviews and approves the compensation of the
Company's executive officers and determines the Company's general compensation
policy. The Compensation Committee is also responsible for the administration
of the 1994 Stock Option Plan (except for its application to non-employee
directors which is administered by the board) and the Non-Officer Plan, and is
authorized to determine the options to be granted under the plans and the terms
and provisions of such options.
Compensation Philosophy
The Compensation Committee endeavors to ensure that the compensation programs
for the Company's executive officers are effective in attracting and retaining
key executives responsible for the Company's success and are administered in
appropriate fashion in the Company's long-term interests and those of the
Company's stockholders. The Compensation Committee seeks to align total
compensation for senior management with the Company's overall performance as
well as the individual performance of each executive officer. The Company's
compensation package, which currently is comprised of base salary, bonuses and
stock options, is intended to reinforce management's commitment to enhancing
profitability and stockholder value.
In determining the level and composition of compensation for the Company's
executive officers, the Compensation Committee considers various corporate and
individual performance measures. The Compensation 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. The Compensation Committee does not apply any specific
quantitative formula in making compensation decisions.
Base Salaries
Base salaries are reviewed and adjusted by the Compensation Committee on an
annual basis. The Compensation 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 Company's overall performance and individual
performance of each executive officer. The amounts awarded may vary from year
to year. During 1999 the Company awarded Mr. Mahon and Ms. Gorshe bonuses of
$17,500 and $15,000, respectively. In addition, Ms. Campbell received a bonus
of $51,250 in 1999 pursuant to the terms of her employment agreement.
Stock Option Plans
The Compensation Committee administers the 1994 Stock Option Plan (except for
its application to non-employee directors which is administered by the board),
which provides for grants of incentive and nonqualified stock options as well
as the award of shares of restricted stock. Under the 1994 Stock Option Plan,
options are granted and shares of restricted stock may be awarded to provide
incentives to the Company's directors, officers,
10
<PAGE>
key employees and consultants to promote the Company's long-term performance
and specifically, to retain and motivate senior management in achieving a
sustained increase in stockholder value. Currently, the 1994 Stock Option 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 Compensation Committee reviews and evaluates the overall compensation
package of the executive officers and determines the awards based on the
Company's overall performance and the individual performance of the executive
officers.
The Compensation Committee also administers the Non-Officer Plan, adopted by
the Company in 1998. The Non-Officer Plan provides for the issuance of non-
qualified options exercisable for up to 1,000,000 shares of Common Stock.
Directors, officers and significant employees of the Company are not eligible
to participate in the Non-Officer Plan; however, consultants and non-executives
are eligible. The Non-Officer Plan was adopted to extend similar performance-
based benefits to employees who were not eligible to participate in the 1994
Stock Option Plan, and the Compensation Committee applies the same policies to
determinations regarding grants under the Non-Officer Plan as it applies to
determinations under the 1994 Stock Option Plan.
In November 2000, the Board of Directors, at the recommendation of the
Compensation Committee, approved an offer (the "Offer") by the Company to
holders of options under both the 1994 Stock Option Plan and the Non-Officer
Plan, which the Company expects to complete by December 21, 2000. Under the
terms of the Offer, each option holder that agrees to the cancellation all of
such holder's options having an exercise price of $5.00 or greater ("Eligible
Options") will receive a lump sum payment of $250, except that certain
executive officers, directors, and consultants have been asked to agree to the
cancellation of their Eligible Options without any payment. Until the Company
has completed the Offer, it will not be able to determine the number of shares
of Common Stock subject to stock options that will be cancelled in connection
with the Offer or the aggregate amount of the payments in connection with such
cancellation; however, if all of the option holders holding Eligible Options
accept the Offer, the Company will cancel options covering a total of 812,641
shares of Common Stock and will make payments in respect of such cancellation
of $28,750.
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 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 Compensation
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 Compensation 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 sound corporate reasons
exist for so doing.
Chief Executive Officer
Mr. McBride served as the Company's Chief Executive Officer until March 1999.
In March 1999, Mr. McBride resigned as Chief Executive Officer and agreed to
provide consulting services to the Company pursuant to the Consulting Agreement
described under the heading "Executive Compensation--Employment and Consulting
Agreements--William McBride." The Consulting Agreement provided for the payment
to Mr. McBride of a lump-sum cash termination payment of $490,000 (which was
reduced to $390,000 to reflect repayment of a $100,000 bonus paid in 1998). In
addition, the Company agreed to pay Mr. McBride a lump-sum cash payment of
$750,000 in consideration for Mr. McBride's agreement to forfeit his interest
in 200,000 shares of restricted stock. In addition, Mr. McBride agreed to
forfeit a $4.0 million termination payment he would be
11
<PAGE>
entitled to receive under certain circumstances, including upon a change of
control. Pursuant to the Consulting Agreement the Company compensates Mr.
McBride at a rate of $15,000 per month for consulting services rendered over a
two-year period commencing in March 1999. These payments, together with the
lump sum cash payments and salary paid to Mr. McBride in his capacity as CEO,
totaled $1.4 million in 1999.
Dr. Wilson served as the Company's President and Chief Operating Officer
until March 1999. In March 1999, the Company entered into an amendment with
Dr. Wilson to her employment agreement to provide that the Company employ Dr.
Wilson as President and Chief Executive Officer. In addition, the Company
agreed to pay Dr. Wilson a lump-sum cash payment of $187,500 (which was
reduced to $87,500 to reflect repayment of a $100,000 bonus paid in 1998) in
consideration for Dr. Wilson's agreement to forfeit her interest in 50,000
shares of restricted stock. The total compensation paid to Dr. Wilson on 1999,
including the $87,500 lump sum cash payment, totaled $287,000.
Effective on October 19, 2000, Dr. Wilson and the Company agreed that Dr.
Wilson's Amended and Restated Employment Agreement, as amended, is deemed
terminated. Also, effective on that date, Dr. Wilson and the Company agreed
among other things to the following: (i) Dr. Wilson will be an at-will
employee until December 31, 2001, and her base salary is to be $16,666.67 per
month, with a total of $200,000 to be paid in any event; (ii) when Dr.
Wilson's employment terminates, her stock options will vest, if not already
vested, and she will have one year from that date to exercise the stock
options; and (iii) the Company will pay Dr. Wilson $559,677.37, plus 10%
interest per annum from October 19, 2000, until fully paid, to be paid in four
(4) equal quarterly installments commencing December 31, 2000.
On October 19, 2000, the Board of Directors elected Wm. James Nicol, the
Chairman of the Board, to the position of President and Chief Executive
Officer of the Company. The Company entered into an employment agreement with
Mr. Nicol pursuant to which Mr. Nicol will receive a monthly salary of $30,000
and will be eligible for bonus payments and incentive compensation awards
based on certain performance targets to be agreed between the Company and Mr.
Nicol. The agreement also provides for the payment of four months salary to
Mr. Nicol upon his termination. Mr. Nicol's employment agreement is further
described under the heading "Executive Compensation--Employment and Consulting
Agreements--Wm. James Nicol."
Other Employment Agreements
During 1999, the Compensation Committee recommended, and the Board of
Directors approved, the offering of employment agreements to Mr. Cruckshank
and Mr. Mahon. The Compensation Committee also recommended, and the Board of
Directors approved, employment agreements for several other officers that are
not Named Executive Officers. Effective January 1, 2000, the Company entered
into amendments to its employment agreements with Sandra Campbell and Nancy
Gorshe. Ms. Gorshe's employment agreement was amended from a fixed term to a
rolling one-year term that is location specific. Ms. Campbell's employment
agreement amendment restructures Ms. Campbell's bonus and salary structure.
Effective March 16, 2000, in connection with the termination of the employment
of James Cruckshank as Chief Financial Officer, the Company entered into a
Separation and Consulting Agreement with Mr. Cruckshank which provided, among
other things, for the termination of his employment agreement. Also effective
March 16, 2000, the Company entered into an employment agreement with Drew Q.
Miller in connection with Mr. Miller's employment as Chief Financial Officer
of the Company. The terms of the Company's agreements with the Named Executive
Officers are summarized under the caption "Executive Compensation--Employment
and Consulting Agreements."
Submitted By: Bradley Razook, Chairperson
Gloria Cavanaugh
John Gibbons
The Board Compensation Committee Report shall not be deemed to be
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.
12
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
From January 1, 1999 to May 11, 1999, Mr. Razook, Mr. Ladd and Ms. Cavanaugh
served on the Compensation Committee. From May 11, 1999 to November 16, 1999,
Mr. Razook, Ms. Krueger and Mr. McBride served as the Compensation Committee.
From November 16, 1999 through December 31, 1999, Ms. Cavanaugh replaced Mr.
McBride on the Committee since he did not stand for reelection to the Board in
November. Throughout 1999, Mr. Razook served as the Chairperson of the
Compensation Committee.
In March 1999, one of the members of the Compensation Committee, Mr. Razook,
became President and Managing Director at Cohen & Steers Capital Advisors LLC
("C&S Advisors"). Pursuant to an agreement entered into during 1999 with Cohen
& Steers Capital Management, Inc., an affiliate of C&S Advisors ("CSCM"), the
Company paid CSCM and C&S Advisors an aggregate of $1.3 million in 1999 for
financial advisory services. On January 24, 2000, the Company's agreement with
CSCM was terminated by mutual consent, and a new agreement with C&S Advisors
was entered into. Pursuant to the 2000 agreement, the Company paid C&S Advisors
$359,000 through November 30, 2000 for financial advisory services. The 2000
agreement terminates on December 31, 2000, except that (a) the Company may
terminate the agreement at any time upon 90 days written notice and (b) even
after the expiration or termination of the 2000 agreement the Company will be
required to pay C&S Advisors fees under this agreement if the Company completes
certain financing and merger and acquisition transactions on or prior to
December 31, 2001. As is discussed below, the Company is currently exploring
various financing alternatives and the closing of any such financing could
result in the payment of fees to C&S Advisors.
See also "Certain Transactions" immediately below.
CERTAIN TRANSACTIONS
The Company is currently discussing an agreement with MYFM Capital, LLC under
which the Company may establish a closed-end line of credit with BET Associates
LP ("BET") as lender, providing for loans of up to $10.0 million. This line of
credit would be secured by approximately eight properties owned by the Company
and approved by BET. The Company expects to pay fees of 1.0% of the line of
credit to each of BET and MYFM (or $100,000 each) at the time of closing this
line of credit. The line of credit would mature on December 31, 2001, provided
that the Company may request a six-month extension with the payment of an
additional fee of 1.0% of the outstanding balance at the time of the request as
long as no default exists and certain debt service coverage ratios are
maintained. The interest rate over the term of the line would be floating 90-
Day Libor plus 385 basis points, to be reset monthly. Bruce E. Toll, an
investor in the Company and a current nominee to the Company's Board of
Directors is the sole member of BRU Holdings Company, Inc., LLC, which is the
sole general partner of BET. Leonard Tannenbaum is the Managing Partner of MYFM
Capital, LLC, the son-in-law of Mr. Toll, a 10% limited partner of BET, and is
also a current nominee to the Company's Board of Directors. The Company is also
exploring various other financing alternatives, and may enter into such other
arrangements after the closing of the BET line of credit. The lenders in
connection with such other arrangements may, as a condition to entering into
such arrangements, require that the Company terminate the BET line of credit,
or else change the terms of the BET line of credit related to maturity,
subordination or otherwise. If the Company is required to terminate the BET
line of credit in connection with a future financing, the Company will not be
able to recover the fees incurred in obtaining the BET line of credit.
During 1999, Supportive Housing Services, Inc. ("SHS") provided services to
the Company for market feasibility analysis, site pre-acquisition services,
construction management oversight and building setup in conjunction with the
Company's development activities. SHS is owned 75% by Dr. Wilson's spouse. In
July 1999, the Company delivered 180 days' written notice terminating its
agreement with SHS. The Company paid SHS $1.6 million (including $255,000
reflecting payment to CCL (as defined below) in 1999) and $69,000 during the
years ended December 31, 1999 and 2000, respectively. No further payments are
expected.
13
<PAGE>
During 1999, Concepts in Community Living, Inc. ("CCL"), a company owned by
Dr. Wilson's spouse, provided feasibility studies and pre-development
consulting services to SHS and certain developers with respect to certain
assisted living residence sites the Company was developing and constructing.
The Company paid CCL approximately $255,000 indirectly through SHS for
rendering such services in 1999. In June 1999, the Company entered into a new
agreement with CCL pursuant to which CCL provided market research, demographic
review and competitor analysis in certain of the Company's markets. The Company
directly paid CCL $157,000 and $59,000 for such services during the years ended
December 31, 1999 and 2000, respectively. The June 1999 agreement was
terminated on December 12, 1999. No further payments are expected.
The Company leases six residences from Assisted Living Facilities, Inc. in
which Dr. Wilson's spouse owns a 25% interest. During each of 1999 and 2000,
the Company paid Assisted Living Facilities, Inc. rent of approximately $1.3
million.
During 1998, Mr. McBride owned a $400,000 or 16.6% interest, and Dr. Wilson's
spouse owned a $200,000 or 8.3% interest, in Health Equity Investors ("HEI").
In the second quarter of 1997, the Company entered into joint venture
agreements with HEI to operate certain new assisted living residences that the
Company owned or leased. The joint venture concurrently entered into a non-
cancelable management agreement with the Company pursuant to which the Company
managed the properties operated by the joint venture for an amount equal to the
greater of 8% of gross revenues or $2,000 per month per residence. Through
February 10, 1999, the Company consolidated 100% of the revenues and expenses
attributable to these residences with its revenues and expenses, and HEI
reimbursed the Company for 90.0% of the start-up losses of the joint venture.
The Company received loss reimbursements from HEI of $4.7 million for the year
ended December 31, 1998, and no loss reimbursements in 1999. As of December 31,
1998, 17 residences owned or leased by the Company were being operated by the
joint venture. On February 10, 1999, the Company purchased HEI's joint venture
interest with respect to the 17 properties then being operated by the joint
venture for an aggregate purchase price of approximately $3.8 million. HEI's
investment with respect to such properties was $3.2 million. As a result of
such purchases, Mr. McBride and Dr. Wilson's spouse received distributions of
approximately $537,000 and $269,000, respectively, in 1999.
In October 1997, the Company acquired Home and Community Care, Inc. ("HCI").
Certain of the Company's officers and directors were officers, directors or
stockholders of HCI. Mr. McBride and Dr. Wilson's spouse owned 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. Pursuant to the HCI
acquisition agreement, payments were made totaling $207,000 to Mr. McBride and
$75,000 to Dr. Wilson's spouse in 1999. No further payments are expected.
For information regarding certain other relationships and related
transactions, see "Compensation Committee Interlocks and Insider
Participation," above.
14
<PAGE>
EXECUTIVE COMPENSATION
The information set forth below under the heading "Summary Compensation
Table," "Stock Option Grants in Last Fiscal Year" and "Aggregated Option
Exercises in Last Fiscal Year and Fiscal Year-End Option Values" is with
respect to Mr. McBride and Dr. Wilson, each of whom served as the Company's
Chief Executive Officer during a portion of 1999, and each of the four other
most highly compensated executive officers for the fiscal year ended December
31, 1999, Leslie J. Mahon, Sandra Campbell, Nancy Gorshe and James Cruckshank
(collectively, the "Named Executive Officers"). During 2000, the employment of
each of Dr. Wilson as President and Chief Executive Officer, Mr. Cruckshank as
Chief Financial Officer and Mr. Mahon as Chief Operating Officer, was
terminated. As of December 13, 2000, Wm. James Nicol serves as the President
and Chief Executive Officer of the Company and Drew Q. Miller serves as the
Chief Financial Officer of the Company. The Company has entered into agreements
with each of the Named Executive Officers, as well as Mr. Nicol and Mr. Miller.
These agreements are summarized below under the heading "Employment Agreements
with Current Officers" and "Employment Agreements with Former Officers."
Summary Compensation Table
The following table sets forth information concerning the compensation paid
during the year ended December 31, 1999 to each of the Named Executive
Officers. No other executive officer of the Company received total compensation
of $100,000 or more in fiscal 1999.
<TABLE>
<CAPTION>
Annual Compensation(1) Long-Term Compensation Awards
------------------------------------ ----------------------------------
Restricted Securities
Name and Principal Other Annual Stock Underlying All Other
Position Year Salary Bonus(2) Compensation(3) Awards(3) Options Compensation
------------------ ---- --------- --------- --------------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
William McBride III(4)... 1999 $ 68,500 $(100,000) $1,375,000 -- -- --
Former Chief Executive 1998 247,000 100,000 -- -- -- --
Officer and Chairman 1997 -- -- -- $3,400,000 -- --
Keren Brown Wilson....... 1999 $ 200,000 $(100,000) $ 187,500 -- 7,500 --
President and Chief 1998 203,000 100,000 -- -- -- --
Executive Officer Vice
Chairman 1997 200,000 -- -- $ 850,000 -- --
Leslie J. Mahon(5)....... 1999 $ 141,300 $ 17,500 -- -- 30,000 --
Chief Operating Officer
Sandra Campbell(6)....... 1999 $ 150,000 $ 51,250 -- -- -- --
Senior Vice President, 1998 141,600 25,000 -- -- 15,000 --
General Counsel and
Secretary
Nancy Gorshe(7).......... 1999 $ 125,000 $ 15,000 -- -- -- --
Senior Vice President 1998 101,300 -- -- -- 55,000 --
Of Community Relations
James Cruckshank(5)...... 1999 $ 115,400 -- -- -- 30,000 --
Chief Financial Officer
</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) Each of Mr. McBride and Dr. Wilson was paid a bonus of $100,000 in 1998
related to the execution of a merger agreement. Payments made to each of
them subsequent to December 31, 1998 were reduced by $100,000 to reflect
repayment of these bonus payments.
(3) 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
15
<PAGE>
award. At December 31, 1998, Mr. McBride and Dr. Wilson held 200,000 and
50,000 shares, respectively, of restricted stock valued at $2.6 million and
$656,000, respectively (calculated by multiplying the amount of restricted
stock by the closing market price of $13.125 on the last trading day of
1998). As of March 15, 1999 Mr. McBride and Dr. Wilson agreed to forfeit
the shares of restricted stock held by each of them for $750,000 and
$187,500, respectively. In addition, during 1999 Mr. McBride received a
severance payment of $490,000 and consulting payments of $135,000. See
"Employment and Consulting Agreements--Keren Brown Wilson" and "--William
McBride."
(4) Mr. McBride became Chief Executive Officer on October 3, 1997, but did not
begin receiving compensation until January 1, 1998. In March 1999, Mr.
McBride resigned as Chief Executive Officer.
(5) Mr. Mahon and Mr. Cruckshank each began his employment with the Company in
March 1999.
(6) Ms. Campbell began her employment with the Company on December 31, 1997
and began receiving compensation in January 1998.
(7) Ms. Gorshe began her employment with the Company in February 1998.
Stock Option Grants in Last Fiscal Year
The following table sets forth information on stock options granted during
1999 to the Named Executive Officers.
<TABLE>
<CAPTION>
Potential
Realizable Value
at Assumed Annual
Rate of Stock
Price Appreciation
Individual Grants for Option Term(1)
----------------------------------------------- ------------------
Number of % of Total
Securities Options
Underlying Granted to
Options Employees in Exercise Expiration
Name Granted Fiscal Year Price ($/Sh) Date 5% 10%
---- ---------- ------------ ------------ ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
William McBride III..... -- -- -- -- -- --
Keren Brown Wilson...... 7,500 1.6% $ 1.69 11/16/09 $ 7,000 $ 17,200
Leslie J. Mahon......... 30,000 6.5% $ 5.00 03/01/09 $ 82,700 $ 203,700
Sandra Campbell......... -- -- -- -- -- --
Nancy Gorshe............ -- -- -- -- -- --
James Cruckshank........ 30,000 6.5% $ 3.81 03/18/09 $ 63,000 $ 155,200
</TABLE>
--------
(1) 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.
16
<PAGE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table sets forth information with respect to the Named
Executive Officers concerning unexercised stock options held as of December
31, 1999.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised In-
Underlying Unexercised The-Money Options at
Shares Options at Fiscal Year-End Fiscal Year-End(1)
Acquired Value ---------------------------- -------------------------
Name on Exercise Realized Exercisable/Unexercisable(2) Exercisable/Unexercisable
---- ----------- -------- ---------------------------- -------------------------
<S> <C> <C> <C> <C>
William McBride III..... -- -- 145,000/0 $0/$0
Keren Brown Wilson...... -- -- 215,000/7,500 $0/$3,263
Leslie J. Mahon......... -- -- 0/30,000 $0/$0
Sandra Campbell......... -- -- 38,334/26,666 $0/$0
Nancy Gorshe............ -- -- 25,001/29,999 $0/$0
James Cruckshank........ -- -- 0/30,000 $0/$0
</TABLE>
--------
(1) The closing trading price on the American Stock Exchange for the Common
Stock on December 31, 1999 was $2.125. As of December 5, 2000, the closing
trading price for the Common Stock was $0.313, and the value of all of the
exercisable and un-exercisable options held by each of the Named Executive
Officers was $0.
(2) Mr. McBride agreed to the cancellation of his stock options, effective
November 7, 2000.
Employment Agreements with Current Officers
Set forth below are summaries of employment and consulting agreements
between the Company and certain individuals who were Named Executive Officers
during 1999, as well as summaries of employment agreements entered into during
2000 with certain individuals who are expected to be among the top five most
highly compensated officers in 2000.
Wm. James Nicol
Effective November 1, 2000, the Company entered into an employment agreement
with Wm. James Nicol, providing for Mr. Nicol's services as President and
Chief Executive Officer. The agreement provides for such employment on a
month-to-month basis, at a salary of not less than $30,000 per month. Mr.
Nicol will also be eligible for bonus payments and incentive compensation
awards based on certain performance targets to be agreed between the Company
and Mr. Nicol. Under the agreement, in the event of a termination of
employment by the Company for any reason other than "Cause" (as defined), Mr.
Nicol will be entitled to four months of pay, as well as a pro rated bonus
payment. In connection with his employment agreement, the Company agreed to
indemnify Mr. Nicol to the extent permitted under Nevada law against liability
and expenses incurred by him in any proceeding in which he is involved due to
his role as officer or director. The agreement includes an agreement to
indemnify Mr. Nicol to the extent permitted under Nevada law against liability
and expenses incurred by him in any proceeding in which he is involved due to
his role as an officer.
Sandra Campbell
On December 31, 1997, the Company entered into an employment agreement with
Sandra Campbell providing for Ms. Campbell's services as Senior Vice
President, General Counsel and Secretary. The agreement provides for an
initial two and one-half-year term, which expired without having been
terminated, consequently the agreement is automatically extended on a
continuous basis. The Company may terminate the agreement by providing Ms.
Campbell with two and one-half years' prior notice of the Company's intention
to terminate her employment, and Ms. Campbell may terminate the agreement by
providing the Company with four months' prior notice of her intention to
resign. In addition, the Company may terminate the agreement at any time for
"Cause" and Ms. Campbell may terminate the agreement for "Good Reason" (each
as defined), and the agreement automatically terminates upon Ms. Campbell's
death or permanent disability. If the Company terminates Ms.
17
<PAGE>
Campbell's employment other than for Cause and without providing the notice
referred to above, or if Ms. Campbell terminates the agreement for Good
Reason, then the Company must make a lump-sum payment to Ms. Campbell equal to
two times her then-annual salary plus $10,000. In addition, if there is a
Change in Control (as defined), regardless of whether she remains in the
Company's employ, Ms. Campbell is entitled to receive an additional amount
equal to two times her then-annual salary plus $10,000, and all options
exercisable for common stock automatically vest and become exercisable. The
agreement provides that Ms. Campbell's salary is $195,000. In addition, Ms.
Campbell received options to purchase 50,000 shares of Common Stock, to become
exercisable in annual installments of 16,666 shares commencing December 31,
1998, at an exercise price of $16.50, equal to the fair market value of the
Common Stock on the date of grant. The agreement includes an agreement to
indemnify Ms. Campbell to the extent permitted under Nevada law against
liability and expenses incurred by her in any proceeding in which she is
involved due to her role as an officer.
Nancy Gorshe
On February 3, 1998, the Company entered into an employment agreement with
Nancy Gorshe providing for Ms. Gorshe's services as Vice President/Community
Relations. The agreement provides for an initial two-year term, subject to
automatic one year extensions unless the Company notifies Ms. Gorshe during
the 90-day period ending on February 3 of each year that it wishes to
terminate the agreement on February 3 of the following year. The Company may
terminate the agreement at any time for "Cause" (as defined). If the Company
terminates Ms. Gorshe's employment without Cause and without offering Ms.
Gorshe comparable employment (employment with the Company or any affiliated
company that is not materially different in level of responsibility, at the
same or higher salary level, with same or similar title or rank and within a
20-mile radius of her immediately prior position with the Company) or if
within one year following a Change of Control (as defined) the Company either
terminates Ms. Gorshe without Cause or she voluntarily resigns (and the
Company has not offered her comparable employment in either case), then the
Company must make a lump-sum payment to Ms. Gorshe in an amount equal to twice
her then annual salary. In addition, if the Company terminates Ms. Gorshe
within one year following a Change in Control, all Common Stock options held
by Ms. Gorshe will automatically become immediately exercisable. The agreement
provides that the Company's President or Chief Executive Officer will
determine Ms. Gorshe's annual compensation subject to adjustment from time to
time at the discretion of the Board of Directors. Ms. Gorshe's current salary
is $150,000. The agreement further provides that Ms. Gorshe is subject to
confidential information, and non-competition provisions until one year after
the termination of Ms. Gorshe's employment. In addition, Ms. Gorshe received
options to purchase 20,000 shares of Common Stock, to become exercisable in
annual installments of 6,667 shares commencing on July 27, 1999, at an
exercise price of $16.50, equal to the fair market value of the Common Stock
on the date of grant.
Drew Q. Miller
On March 16, 2000, the Company entered into an employment agreement with
Drew Q. Miller providing for Mr. Miller's services as Senior Vice President,
Chief Financial Officer and Treasurer. The agreement provides that Mr.
Miller's annual base salary shall equal $190,000. The agreement provides for
an initial two-year term. If the agreement has not been terminated prior to
the expiration of the initial term, then the agreement is automatically
extended on a continuous basis. The Company may terminate the agreement by
providing Mr. Miller with one and one-half years' prior notice of the
Company's intention to terminate his employment, and Mr. Miller may terminate
the agreement by providing the Company with 45-days' prior notice of his
intention to resign. In addition, the Company may terminate the agreement at
any time for "Cause" (as defined) or Mr. Miller's permanent disability, and
Mr. Miller may terminate the agreement in the event there is a Change of
Control (as defined) or a material reduction in the scope and/or authority of
his duties. The agreement automatically terminates upon Mr. Miller's death. If
the Company terminates Mr. Miller's employment other than in connection with
Mr. Miller's death or disability or for Cause, or if Mr. Miller terminates the
agreement as a result of a Change of Control or a material reduction in the
scope and/or authority of his duties, the Company will continue to be
obligated to pay Mr. Miller's base salary until March 16, 2002 and all of Mr.
Miller's options exercisable for common stock shall automatically vest and
become exercisable. Pursuant to the agreement,
18
<PAGE>
Mr. Miller received options to purchase 150,000 shares of Common Stock, to
become exercisable in monthly installments of 4,167 shares commencing April
16, 2000, at an exercise price of $1.44, equal to the fair market value of the
Common Stock on the date of grant. The agreement includes an agreement to
indemnify Mr. Miller to the extent permitted under Nevada law against
liability and expenses incurred by him in any proceeding in which he is
involved due to his role as an officer.
Agreements with Former Officers
Keren Brown Wilson
On October 19, 2000, as part of a restructuring of the Company's
relationship with Dr. Keren Brown Wilson, Dr. Wilson resigned from the Board
of Directors and from her position as Chief Executive Officer. Effective on
this date, Dr. Wilson and the Company agreed among other things to the
following: (i) Dr. Wilson will be an at-will employee until December 31, 2001,
and her base salary is to be $16,666.67 per month, with a total of $200,000 to
be paid in any event; (ii) when Dr. Wilson's employment terminates, her stock
options will vest, if not already vested, and she will have one year from that
date to exercise the stock options; and, (iii) the Company will pay Dr. Wilson
$559,677.37, plus 10% interest per annum from October 19, 2000, until fully
paid, to be paid in four (4) equal quarterly installments commencing December
31, 2000.
In addition, the Company and Dr. Wilson have agreed to the termination of
Dr. Wilson's employment agreement with the Company effective October 19, 2000.
The employment agreement provided for Dr. Wilson's services as President and
Chief Executive Officer. The employment agreement provided for an initial
four-year term, subject to automatic extension absent notice of termination
under the terms of the employment agreement.
Under the employment agreement, in the event of a termination of employment
for any reason other than "Cause" (as defined), Dr. Wilson was entitled to the
payment of an amount equal to four times her annual salary. In the event of a
termination within one year of a Change in Control (as defined) for any reason
other than the death or disability or a termination by the Company for Cause,
Dr. Wilson would be entitled to a $3.0 million termination payment. The
employment agreement also contained "gross-up" provisions to compensate Dr.
Wilson in the event that any payment under the employment agreement was
subject to an excise tax imposed under Section 4999 of the Internal Revenue
Code. The employment agreement provided that Dr. Wilson was entitled to
compensation at an annual rate of $200,000.
In connection with her employment agreement, the Company agreed to indemnify
Dr. Wilson to the extent permitted under Nevada law against liability and
expenses incurred by her in any proceeding in which she is involved due to her
role as officer or director.
William McBride
Effective as of March 15, 1999, the Company entered into a consulting
agreement with Mr. McBride which provided, among other things, for the
termination of Mr. McBride's employment agreement, entered into in October
1997.
Pursuant to the consulting agreement, Mr. McBride agreed to provide
consulting services to the Company for a period of two years at a rate of
$15,000 per month. During the consulting term, Mr. McBride is entitled to
participate in the Company's medical insurance plans at a cost equal to the
Company's cost of providing coverage. If the Company terminates the consulting
relationship without Cause, Mr. McBride will be entitled to the balance of the
cash amounts which he would have received had the consulting relationship
continued for the remainder of the two year term. In addition, upon the
occurrence of a "Change in Control" of the Company (as defined), the
consulting relationship will automatically terminate and Mr. McBride will be
entitled to a lump-sum cash payment in an amount equal to the balance of the
cash amounts which he would have received had the consulting relationship
continued for the remainder of the two year term.
19
<PAGE>
In connection with his employment agreement, the Company agreed to indemnify
Mr. McBride to the extent permitted under Nevada law against liability and
expenses incurred by him in any proceeding in which he is involved due to his
role as officer or director.
James Cruckshank
Effective as of March 3, 2000, the Company entered into a separation and
consulting agreement with Mr. Cruckshank which provided, among other things,
for the termination of Mr. Cruckshank's employment agreement, entered into on
March 15, 1999.
Pursuant to the separation and consulting agreement, Mr. Cruckshank will
provide consulting services to the Company through December 31, 2000, for
which the Company will pay him a bi-weekly amount equal to $3,000. If the
Company terminates the consulting relationship without Cause, Mr. Cruckshank
will be entitled to the balance of the cash amounts which he would have
received had the consulting relationship continued for the remainder of its
term. During the consulting term, Mr. Cruckshank will also be entitled to
participate in the Company's medical insurance plans at his sole expense.
Pursuant to Mr. Cruckshank's employment agreement, Mr. Cruckshank was
granted options exercisable for 30,000 shares of Common Stock. In connection
with the termination of employment, Mr. Cruckshank agreed to the termination,
as of March 2, 2000, of his options to purchase 20,000 shares of Common Stock,
which were to vest on March 15, 2001 and March 15, 2002. The Company also
agreed with Mr. Cruckshank that his options to purchase 10,000 shares of
Company Common Stock, which have an exercise price of $3.813 per share, will
expire on the earlier of 90 days after (a) December 31, 2000 or (b) the
termination of his consulting agreement for Cause; provided that Mr.
Cruckshank will forfeit such options if he breaches the consulting agreement,
is terminated for Cause, or voluntarily terminates his consulting agreement
with the Company.
Leslie Mahon
On March 15, 1999, the Company entered into an employment agreement with
Leslie Mahon providing for Mr. Mahon's services as Vice President and Chief
Operating Officer. On April 21, 2000, the position of Vice President and Chief
Operating Officer was eliminated and the Company paid Mr. Mahon a lump-sum
payment of $350,000 in accordance with his employment agreement. Except with
respect to such payment and the termination of Mr. Mahon's employment, the
provisions of Mr. Mahon's employment agreement remain in effect. The
employment agreement provides that Mr. Mahon is subject to confidential
information restrictions for as long as Mr. Mahon possesses any confidential
information, and non-competition provisions until one year after the
termination of Mr. Mahon's employment. In addition, Mr. Mahon received options
to purchase 30,000 shares of Common Stock, exercisable in annual installments
of 10,000 shares commencing March 15, 2000, at an exercise price of $5.00,
equal to the fair market value of the Common Stock on the date of the grant.
Mr. Mahon agreed to the cancellation of these options.
20
<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 the Company's Common Stock and other equity. 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, 1999, each of
the Company's officers, directors and 10% stockholders complied with all
Section 16(a) filing requirements applicable to them.
INDEPENDENT PUBLIC ACCOUNTANTS
KPMG LLP audited the Company's financial statements for the period ended
December 31, 1999, have been the Company's auditors since November 3, 1995, and
have been selected as the Company's auditors for 2000. A representative of KPMG
LLP is expected to be present at the January 16, 2001 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 August 22, 2001, must otherwise comply
with the applicable provisions of the Exchange Act and the Company's Bylaws.
In addition, the Company's Bylaws contain an advance notice provision that
provides that for a stockholder proposal to be brought before and considered at
the next annual meeting of stockholders, notice of the proposal must be
delivered to or mailed and received at the principal executive offices of the
Company no less than 50 days nor more than 75 days prior to the meeting. In the
event that less than 60 days' notice or prior public disclosure of the date of
the annual meeting is given or made to stockholders, notice must be received
not later than the close of business on the 15th day following the day on which
such notice of the date of the annual meeting is mailed or public disclosure is
made, whichever is earlier.
OTHER MATTERS
The Board of Directors of ALC 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, the Company's directors and officers, 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.
21
<PAGE>
The Company's Annual Report to stockholders, including its audited financial
statements for the year ended December 31, 1999, and its Report on Form 10-Q
for the three and nine months ended September 30, 2000, are 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 ITS ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999 AND
ITS QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2000,
EACH AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. SUCH REQUESTS SHOULD
BE DIRECTED TO THE SECRETARY OF THE COMPANY, AT 11835 NE GLENN WIDING DRIVE,
BUILDING E, PORTLAND, OREGON 97220-9057.
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
Senior Vice President, General
Counsel and Secretary
Portland, Oregon
December 20, 2000
22
<PAGE>
APPENDIX A
ASSISTED LIVING CONCEPTS, INC.
AUDIT COMMITTEE CHARTER
(As Adopted March 28, 2000)
Purpose
The purpose of the Audit Committee (the "Committee") is to provide
assistance to the Board of Directors (the "Board") of Assisted Living
Concepts, Inc. (the "Company") in fulfilling the Board's oversight
responsibilities regarding the Company's accounting and system of internal
controls, the quality and integrity of the Company's financial reports and the
independence and performance of the Company's outside auditor. In so doing,
the Committee should endeavor to maintain free and open means of communication
between the members of the Committee, other members of the Committee, other
members of the Board, the outside auditor and the financial management of the
Company.
In the exercise of its oversight responsibilities, it is not the duty of the
Committee to plan or conduct audits or to determine that the Company's
financial statements fairly present the Company's financial position and
results of operation and are in accordance with generally accepted accounting
principles. Instead, such duties remain the responsibility of management and
the outside auditor. Nothing contained in this charter is intended to alter or
impair the operation of the "business judgment rule" as interpreted by the
courts under the Nevada Revised Statutes. Further, nothing contained in this
charter is intended to alter or impair the right of the members of the
Committee under the Nevada Revised Statutes to rely, in discharging their
responsibilities, on the records of the Company and on other information
presented to the Committee, Board or Company by its officers or employees or
by outside experts such at the outside auditor.
Membership
The Committee shall consist of three members of the Board. The members shall
be appointed by action of the Board and shall serve at the discretion of the
Board. Each Committee member shall satisfy the "independence" requirements of
the American Stock Exchange. Each Committee member must be able to read and
understand fundamental financial statements, including a company's balance
sheet, income statement, and cash flow statement or must be able to do so
within a reasonable period of time after his or her appointment to the
Committee. At least one Committee member must have past employment experience
in finance or accounting, requisite professional certification in accounting,
or any other comparable experience or background (including a current or past
position as a chief executive or financial officer or other senior officer
with financial oversight responsibilities) which results in the Committee
member's financial sophistication.
Committee Organization and Procedures
1. The members of the Committee shall appoint a Chair of the Committee by
majority vote. The Chair (or in his or her absence, a member designated by the
Chair) shall preside at all meetings of the Committee.
2. The Committee shall have the authority to establish its own rules and
procedures consistent with the bylaws of the Company for notice and conduct of
its meetings, should the Committee, in its discretion, deem it desirable to do
so.
3. The Committee shall meet at least four times in each fiscal year, and
more frequently as the Committee in its discretion deems desirable.
4. The Committee may, in its discretion, include in its meetings members of
the Company's financial management, representatives of the outside auditor and
other financial personnel employed or retained by the Company. The Committee
may meet with the outside auditor in separate executive sessions to discuss
any
1
<PAGE>
matters that the Committee believes should be addressed privately, without
management's presence. The Committee may likewise meet privately with
management, as it deems appropriate.
5. The Committee may, in its discretion, utilize the services of the
Company's regular corporate legal counsel with respect to legal matters or, at
its discretion, retain other legal counsel if it determines that such counsel
is necessary or appropriate under the circumstances.
Responsibilities
Outside Auditor
6. The outside auditor shall be ultimately accountable to the Committee and
the Board in connection with the audit of the Company's annual financial
statements and related services. In this regard, the Committee shall select and
periodically evaluate the performance of the outside auditor and, if necessary,
recommend that the Board replace the outside auditor. As appropriate, the
Committee shall recommend to the Board the nomination of the outside auditor
for stockholder approval at any meeting of stockholders.
7. The Committee shall approve the fees to be paid to the outside auditor and
any other terms of the engagement of the outside auditor.
8. The Committee shall receive from the outside auditor, at least annually, a
written statement delineating all relationships between the outside auditor and
the Company, consistent with Independence Standards Board Standard 1. The
Committee shall actively engage in a dialogue with the outside auditor with
respect to any disclosed relationships or services that, in the view of the
Committee, may impact the objectivity and independence of the outside auditor.
If the Committee determines that further inquiry is advisable, the Committee
shall recommend that the Board take any appropriate action in response to the
outside auditor's report to satisfy itself of the auditor's independence.
Annual Audit
9. The Committee shall meet in person or by conference telephone call with
the outside auditor and management of the Company in connection with each
annual audit to discuss the scope of the audit and the procedures to be
followed.
10. The Committee shall review and discuss the audited financial statements
with the outside auditor and the management of the Company.
11. The Committee shall discuss with the outside auditor the matters required
to be discussed by Statement on Auditing Standards No. 61 as then in effect
including, among others, (i) the methods used to account for any significant
unusual transactions reflected in the audited financial statements; (ii) the
effect of significant accounting policies in any controversial or emerging
areas for which there is a lack of authoritative guidance or a consensus to be
followed by the outside auditor; (iii) the process used by management in
formulating particularly sensitive accounting estimates and the basis for the
auditor's conclusions regarding the reasonableness of those estimates; and (iv)
any disagreements with management over the application of accounting
principles, the basis for management's accounting estimates or the disclosures
in the financial statements.
12. The Committee shall, based on the review and discussions in paragraphs 10
and 11 above, and based on the disclosures received from the outside auditor
regarding its independence and discussions with the auditor regarding such
independence in paragraph 8 above, recommend to the Board whether the audited
financial statements should be included in the Company's Annual Report on Form
10-K for the fiscal year subject to the audit.
2
<PAGE>
Quarterly Review
13. The outside auditor is required to review the interim financial
statements to be included in any Form 10-Q of the Company using professional
standards and procedures for conducting such reviews, as established by
generally accepted auditing standards as modified or supplemented by the
Securities and Exchange Commission, prior to the filing of the Form 10-Q. The
Committee shall discuss with management and the outside auditor in person or by
conference telephone call the results of the quarterly review including such
matters as significant adjustments, management judgments, accounting estimates,
significant new accounting policies and disagreements with management. The
Chair may represent the entire Committee for purposes of this discussion.
Internal Controls
14. The Committee shall discuss with the outside auditor, at least annually,
the adequacy and effectiveness of the accounting and financial controls of the
Company, and consider any recommendations for improvement of such internal
control procedures.
15. The Committee shall discuss with the outside auditor and with management
any management letter provided by the outside auditor and any other significant
matters brought to the attention of the Committee by the outside auditor as a
result of its annual audit. The Committee should allow management adequate time
to consider any such matters raised by the outside auditor.
Other Responsibilities
16. The Committee shall review and reassess the Committee's charter at least
annually and submit any recommended changes to the Board for its consideration.
17. The Committee shall provide the report for inclusion in the Company's
Annual Proxy Statement required by Item 306 of Regulation S-K of the Securities
and Exchange Commission.
18. The Committee, through its Chair, shall report periodically, as deemed
necessary or desirable by the Committee, but at least annually, to the full
Board regarding the Committee's actions and recommendations, if any.
3
<PAGE>
ASSISTED LIVING CONCEPTS, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS--JANUARY 16, 2001
The undersigned hereby appoints Wm. James Nicol and John Gibbons as proxies,
each with the power to appoint his substitute, and hereby authorizes either of
them to represent and to 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. (the "Company"), to be held on
January 16, 2001 at 4:00 p.m. local time, at the offices of Latham & Watkins,
885 Third Avenue, Suite 1000, New York, New York, and at any adjournment or
postponement thereof, according to the number of votes the undersigned would be
entitled to vote if personally present on the proposal set forth on the reverse
side of this card (and as more particularly set forth in the Notice of Meeting
enclosed herewith) and, in accordance with his discretion, on such other
business that may properly come before the meeting and any adjournment or
postponement thereof.
ALL SHARES OF THE COMPANY'S COMMON STOCK THAT ARE REPRESENTED AT THE ANNUAL
MEETING BY PROPERLY EXECUTED PROXIES RECEIVED PRIOR TO OR AT THE ANNUAL MEETING
AND NOT REVOKED WILL BE VOTED AT THE ANNUAL MEETING IN ACCORDANCE WITH THE
INSTRUCTIONS INDICATED ON THE REVERSE SIDE OF THIS CARD. IF NO INSTRUCTIONS FOR
THE PROPOSAL ARE INDICATED ON AN EXECUTED PROXY CARD, SUCH PROXIES WILL BE VOTED
IN ACCORDANCE WITH THE RECOMMENDATION OF THE BOARD OF DIRECTORS AS SET FORTH
HEREIN WITH RESPECT TO SUCH PROPOSAL.
PLEASE SIGN AND DATE THE REVERSE SIDE
ASSISTED LIVING CONCEPTS, INC.
11835 NE GLENN WIDING DRIVE, BUILDING E
PORTLAND, OREGON 97220-9057
--------------------------------------------------------------------------------
/\ FOLD AND DETACH HERE /\
<PAGE>
Please mark your votes
as in this example, [X]
using dark ink only
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" PROPOSAL ONE:
FOR AGAINST ABSTAIN
1. Election of Directors: [_] [_] [_]
Nominees: Wm. James Nicol,
Richard C. Ladd, Jill M.
Krueger, Leonard Tannenbaum,
Bruce E. Toll and
John. M. Gibbons
2. In their discretion, the proxies are
authorized to transact such other
business as may properly come before
the special meeting and any
adjournments or postponements thereof.
[_] FOR, except vote withheld from the
following nominee(s):
---------------------------------------------------------------
If you plan to attend the Annual Meeting of
Stockholders, please mark the following box [_]
and promptly return this Proxy Card.
THIS PROXY WILL BE VOTED AS DIRECTED. IF
NO CONTRARY DIRECTION IS MADE, THIS PROXY
WILL BE VOTED "FOR" ALL NOMINEES LISTED
IN PROPOSAL ONE.
NOTE: If you receive more than one Proxy
Card, please date and sign each Proxy
Card and return all Proxy Cards in the
enclosed envelope.
PLEASE MARK, SIGN, DATE AND MAIL THIS
PROXY PROMPTLY USING THE ENVELOPE
PROVIDED.
Please sign and date below and return promptly in the enclosed postage-paid
envelope.
x _______________________ x _______________________ Date: ______________, 2000
IMPORTANT: Signatures of stockholders should correspond exactly with the
names shown on the Proxy Card. Attorneys, trustees, executors,
administrators, guardians and others signing in a representative
capacity should designate their full titles. If a corporation,
please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership
name by authorized person. Joint owners should both sign.
