<PAGE> 1
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 240.14a-11(c) or 240.14a-12
ARV ASSISTED LIVING, 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
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
ARV ASSISTED LIVING, INC.
May 15, 2000
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
ARV Assisted Living, Inc. (the "Company") to be held on Friday, June 9, 2000, at
9:00 a.m. local time, at the Airport Hilton, 18800 MacArthur Blvd., Irvine,
California 92715.
At the Annual Meeting you will be asked to approve the re-election of
Maurice J. DeWald to the Board of Directors of the Company and to ratify the
reappointment of KPMG, LLP as the Company's independent auditors for the current
fiscal year as detailed in the enclosed Proxy Statement. I urge you to read
carefully the proxy statement.
I hope that you will be able to attend the meeting in person. However,
whether or not you plan to attend the meeting, please mark, sign, date and
return the enclosed proxy card promptly. A prepaid envelope is provided for this
purpose. Your shares will be voted at the meeting in accordance with your proxy,
if given.
I look forward to seeing you at the Annual Meeting.
Sincerely,
/s/ Douglas M. Pasquale
Douglas M. Pasquale
President and Chief Executive Officer
<PAGE> 3
ARV ASSISTED LIVING, INC.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 9, 2000
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of ARV Assisted Living, Inc., a Delaware corporation (the "Company"),
will be held on June 9, 2000, at 9:00 a.m. local time, at the Airport Hilton,
18800 MacArthur Blvd., Irvine, California 92715, to consider and act upon:
1. The election of one director to the Company's Board of Directors to
serve for the term of three years or until a successor has been duly
elected and qualified or until the directors resigns, becomes
disqualified, disabled or is otherwise removed;
2. The appointment of KPMG, LLP as the Company's independent auditor for
the year 2000; and
3. Transacting other business that may properly come before the Annual
Meeting or any postponement or adjournment of the Annual Meeting.
Holders of record of Common Stock of the Company as of the close of
business on May 15, 2000, are entitled to receive notice of, and to vote at, the
Annual Meeting. The outstanding Common Stock constitutes the only class of
securities of the Company entitled to vote at the Annual Meeting. Each share of
Common Stock entitles its holder to one vote. At the close of business on May
15, 2000, there were 17,459,689 shares of Common Stock issued and outstanding.
We urge you to review carefully the enclosed materials. Your vote is
important. We encourage all stockholders to attend the meeting in person or by
proxy. If you receive more than one proxy card because your shares are
registered in different names or at different addresses, please mark, sign, date
and return each proxy card so that all of your shares will be represented at the
Annual Meeting.
Sincerely,
/s/ Douglas M. Pasquale
Douglas M. Pasquale
President and Chief Executive Officer
May 15, 2000
IT IS IMPORTANT THAT ALL PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR NOT
YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE
ENCLOSED PROXY IN THE ENCLOSED POSTAGE PAID ENVELOPE. YOU MAY, IF YOU WISH,
REVOKE YOUR PROXY AT ANY TIME PRIOR TO THE TIME IT IS VOTED, INCLUDING BY VOTING
AT THE MEETING.
<PAGE> 4
ARV ASSISTED LIVING, INC.
------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
JUNE 9, 2000
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL. This Proxy Statement is furnished in connection with the
solicitation by the Board of Directors of ARV Assisted Living, Inc. (the
"Company") of proxies for use at the Annual Meeting of Stockholders (the "Annual
Meeting") to be held at the Airport Hilton, 18800 MacArthur Boulevard, Irvine,
California 92715, at 9:00 a.m., local time, on Friday June 9, 2000, for the
purposes set forth in the accompanying Notice of Annual Meeting of Stockholders.
The principal executive offices of the Company are located at 245 Fischer
Avenue, D-1, Costa Mesa, California 92626. The Company expects to mail this
Proxy Statement and the accompanying form of proxy to stockholders on or about
May 17, 2000.
RECORD DATE AND OUTSTANDING SHARES. Holders of record of the Company's
common stock (the "Common Stock") at the close of business on May 15, 2000 are
entitled to notice of and to vote at the Annual Meeting. On that date there were
17,459,689 shares of Common Stock outstanding.
REVOCABILITY OF PROXIES. Stockholders who submit proxies for use at the
Annual Meeting may revoke them at any time prior to the time they are voted. You
may revoke a proxy either by (i) filing with the Secretary of the Company prior
to the Annual Meeting, at the Company's principal executive offices, either a
written revocation or a duly executed proxy card bearing a later date, or (ii)
by attending the Annual Meeting and voting in person, regardless of whether you
have previously given a proxy. Your presence at the Annual Meeting will not
revoke your proxy unless you vote in person.
QUORUM AND VOTING. Under Delaware law, a quorum must exist in order for
action to be taken on a matter submitted to stockholders. A majority of the
outstanding shares entitled to vote, present in person or represented by proxy,
constitutes a quorum at a meeting of the Company's stockholders.
Shares represented at the Annual Meeting by properly executed proxy cards
in the accompanying form and not revoked will be voted at the Annual Meeting.
The Board of Directors knows of no matters other than those listed in the
attached Notice of Annual Meeting of Stockholders that are likely to be brought
before the Annual Meeting. If, however, any other matters should properly come
before the Annual Meeting or any adjournment of the Annual Meeting, the persons
named in the enclosed proxy will vote all proxies given to them according to
their best judgment on such matters.
SOLICITATION OF PROXIES. Certain of the Company's directors, officers and
regular employees will solicit proxies, without receiving any additional
compensation. We will solicit proxies by personal interview, mail and telephone
and the Company will bear the costs of the solicitation. In addition, the
Company may reimburse brokerage firms and other persons representing beneficial
owners of Common Stock for their expenses in forwarding solicitation materials
to such beneficial owners.
The date of this Proxy Statement is May 15, 2000.
<PAGE> 5
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
GENERAL
The Company's authorized number of directors is currently 5, consisting of
two Class A positions, two Class B positions and a Class C position. Five
directors (two Class A, two Class B and one Class C) currently are serving on
the Board of Directors. Each class is elected to a three-year term and the
election of directors is staggered, so that only one class of directors is
elected at each annual meeting of stockholders. The Class C director's term
expires at the Annual Meeting.
Stockholders of record as of May 15, 2000 will be entitled to vote on the
election of the Class C director for a three-year term at the Annual Meeting.
The Company has named a nominee, Maurice J. DeWald. Proxies cannot be voted for
a greater number of persons than the number of nominees named in this Proxy
Statement.
The director will be elected by a favorable vote of a plurality of the
shares of voting stock present and entitled to vote, in person or by proxy, at
the Annual Meeting. Abstentions or broker non-votes as to the election of the
director will not affect the election of the candidate receiving a plurality of
votes. If the nominee for Director should be unable or decline to serve, the
authority provided in the proxy to vote for the election of a director will be
exercised to vote for a substitute. As of the date of this Proxy Statement,
management has no knowledge that the nominee will be unable or will decline to
serve. Neither the nominee or the other incumbent directors has a family
relationship with any incumbent director or any executive officer of the
Company. The Company's Certificate of Incorporation and Bylaws contain
provisions eliminating or limiting the personal liability of directors for
violations of a director's fiduciary duty to the extent permitted by Delaware
law.
NOMINEE FOR ELECTION TO SERVE UNTIL THE 2003 ANNUAL MEETING OF STOCKHOLDERS
(CLASS C NOMINEE)
The Company's nominee for election to the Board of Directors is as follows:
MAURICE J. DEWALD. Mr. DeWald is Chairman and Chief Executive Officer of
Verity Financial Group, Inc., a firm he founded in 1992. He currently is an
incumbent director of ARV Assisted Living Inc. and a director of Tenet
Healthcare Corporation, Dai-Ichi Kangyo Bank of California and Monarch Funds.
The Board of Directors has concluded that the re-election of Maurice J.
DeWald as a Class C director is in the best interest of the Company and
recommends approval of his election.
INCUMBENT DIRECTORS
<TABLE>
<CAPTION>
YEAR FIRST BECAME
A DIRECTOR OF
NAME AGE POSITION THE COMPANY CLASS
---- --- -------- ----------------- -----
<S> <C> <C> <C> <C>
Douglas M. Pasquale............. 45 President, Chief Executive 1998 A
Officer, Chairman
David P. Collins................ 61 Director 1985 B
John A. Moore................... 38 Director 1999 B
Jeffrey D. Koblentz............. 32 Director 2000 A
Maurice J. DeWald............... 60 Director 1995 C
</TABLE>
DOUGLAS M. PASQUALE. Mr. Pasquale was appointed Chief Executive Officer of
the Company on March 29, 1999 and elected Chairman of the Board on December 22,
1999. He joined us as President and Chief Operating Officer on June 1, 1998.
Prior to joining the Company, Mr. Pasquale was employed for 12 years by
Richfield Hospitality Services, Inc., and Regal Hotels International-North
America, a leading hotel ownership and hotel management company based in
Englewood, CO. He served as its President and Chief Executive Officer from 1996
to 1998 and as Chief Financial Officer from 1994 to 1996.
2
<PAGE> 6
JOHN A. MOORE. Mr. Moore is a Principal of Lazard Freres Real Estate
Investors L.L.C. and its Chief Financial Officer. He joined Lazard in 1998 from
World Financial Properties, where he was Executive Vice President and Chief
Financial Officer from 1996. Previously, he worked with Olympia and York as
Senior Vice President, Finance. Mr. Moore joined Olympia and York in 1988.
JEFFREY D. KOBLENTZ. Mr. Koblentz is a Vice President of Lazard Freres Real
Estate Investors L.L.C. He joined Lazard in 1998 from Arthur Andersen LLP, where
he was a Manager in the Real Estate Services Group. Mr. Koblentz joined Arthur
Andersen in 1992.
DAVID P. COLLINS. Mr. Collins currently is President and Chief Executive
Officer of EuroSenior Living, Lisbon, Portugal. He served the Company in several
capacities between 1981 and 1999, last serving as President of ARV Assisted
Living International, Inc., our wholly owned subsidiary, from 1998 to January
1999. From 1985 until January 1998, Mr. Collins served as the Senior Executive
Vice President of the Company, responsible for investor relations and for
capital formation for the Company and affiliated entities. He has served as a
Director of the Company continuously since 1985.
INFORMATION ON COMMITTEES OF THE BOARD AND MEETINGS
The Board established a Compensation Committee and an Audit Committee at or
about the time of the initial public offering of our common stock in October
1995. In addition, our Board has occasionally appointed special committees of
one or more directors to analyze and/or take action on items of interest to the
Board.
The Compensation Committee establishes salaries, incentives and other forms
of compensation for directors and executive officers, administers the Stock
Option and Incentive Plans (the "1995 Stock Option Plan" and the "1999 Stock
Option Plan") and recommends policies relating to benefit plans. During the year
ended December 31, 1999, the Compensation Committee consisted of John Rydzewski
(resigned January 13, 1999), Maurice J. DeWald, Chairman, and Robert Freeman
(resigned September 29, 1999). The Compensation Committee met four times during
the year ended December 31, 1999 and at least two members were in attendance at
every meeting. As of May 15, 2000, the Compensation Committee consisted of
Maurice J. DeWald, David P. Collins and John A. Moore.
The Audit Committee reviews our accounting practices, internal accounting
controls and financial results and oversees the engagement of our independent
auditors. The Audit Committee, during the year ended December 31, 1999,
consisted of Maurice J. DeWald, R. Bruce Andrews (resigned January 12, 1999) and
Murry Gunty (resigned September 29, 1999). The Audit Committee met one time in
the year ended December 31, 1999. As of May 15, 2000, the Audit Committee
consisted of Maurice J. DeWald, David P. Collins and John A. Moore.
COMPENSATION OF DIRECTORS
Prior to January 28, 1998, non-employee directors received $12,000 as an
annual retainer, paid quarterly in advance, and $500 for each meeting of the
Board or committee of the Board that they attended. Commencing January 28, 1998,
the annual retainer was increased to $18,000 and the fee per meeting increased
to $1,000. In addition, an annual committee chairmanship fee of $3,000 was added
as of January 28, 1998.
In April 2000, the Company filed the 1999 Stock Option Plan, which Plan was
adopted at the last Annual Shareholder's Meeting. The 1999 Stock Option and
Incentive Plan replaced the 1995 Stock Option Plan. The 1999 Stock Option Plan
provides, among other things, that each non-employee director who is initially
elected or appointed to the Board will, upon such election or appointment,
automatically be granted an option to purchase 10,000 shares of Common Stock,
vesting at the rate of 2,500 shares per year measured from the date of grant, at
an exercise price equal to the fair market value of the Common Stock on the date
of grant. In addition, every fourth year following the date on which a
non-employee director is elected or appointed, on the date of the annual meeting
of the shareholders of the Company, if the person has continuously served as a
non-employee director, he or she will automatically receive an option to
purchase 10,000 shares of Common Stock, at an exercise price equal to the fair
market value of the Common Stock on the date of grant, vesting at
3
<PAGE> 7
the rate of 2,500 shares per year measured from the date of grant. As of January
28, 1998, each non-employee director also, participates in a stock-based cash
compensation plan that is intended to provide compensation on a deferred basis
and link the directors' interests more directly with those of our stockholders.
Under the plan, 2,500 "stock units" (each stock unit is deemed to be equivalent
to one outstanding share of Common Stock) are credited on each January 1 to each
non-employee director who served as a non-employee director for the entire
preceding calendar year. Stock units are payable in cash based on the fair
market value of the Common Stock at the time the payment is triggered and are
fully vested at the time of crediting. Stock units become payable on the first
to occur of:
- three years after the date such stock units were first credited;
- a change of control of the Company, as defined by the Plan;
- the director is no longer serving as a member of our Board of Directors
(for any reason); or
- termination of the Plan.
In August 1999, Maurice DeWald received 5,600 shares of the Company's common
stock were given as a special compensation for extraordinary efforts during
1999. No other directors have any vested stock units.
THE COMPANY'S EXECUTIVE OFFICERS
The following table sets forth certain information regarding the executive
officers of the Company as of May 15, 2000. There are no arrangements or
understandings among these individuals relating to their election as officers.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
Douglas M. Pasquale............. 45 President, Chief Executive Officer and
Chairman of the Board
Abdo H. Khoury.................. 51 Senior Vice President, Chief Financial
Officer and Secretary
Robertson K. Chandler........... 44 Senior Vice President, Operations
Laura J. Loda................... 42 Senior Vice President, Human Resources
and Vice President Operations
</TABLE>
For a description of Mr. Pasquale's background, see "Incumbent Directors"
above. Biographical information for Mr. Khoury, Mr. Chandler, and Ms. Loda is
provided below:
ABDO H. KHOURY. Mr. Khoury was appointed Senior Vice President, Chief
Financial Officer and Secretary on March 30, 1999. Previously he had served the
Company as Vice President, Asset Strategy and Treasury, since January 1999, and
as President of the Apartment Division since coming to the Company in May 1997.
Mr. Khoury's prior background includes more than 25 years in accounting and real
estate. He was a principal with Financial Performance Group in Newport Beach,
CA, from 1991 to 1997.
ROBERTSON K. CHANDLER. Mr. Chandler was appointed Senior Vice President,
Operations, in February 1999. Previously he was Vice President of Operations,
Home Care and Hospice, with Mariner Specialty Health Services in Longmont, CO,
from 1997 to 1999. From 1993 to 1997, he was Chief Operating Officer and a
Director of Colorado Home Care, a home care agency headquartered in Broomfield,
CO.
LAURA J. LODA. Ms. Loda joined the Company as Vice President, Human
Resources in June 1998. She was promoted to Senior Vice President in February
1999. She became the Senior Vice President, Human Resources and Vice President,
Operations in December, 1999. Previously, she served as Director of Corporate
Human Resources for Taco Bell, an Irvine, CA-based fast food operation of Tricon
Global Restaurants from 1996 to 1998. From 1993 to 1996, Ms. Loda was Director
of Compensation for Gap, Inc., an international clothing chain based in San
Francisco. Prior, Ms. Loda worked for the Marriott Corporation for 13 years.
None of the directors or officers are related to each other by blood or marriage
and none of the directors or officers are involved in any legal proceedings as
described in Section 401(f) of Regulation S-K.
4
<PAGE> 8
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain information with respect to
compensation earned by the Chief Executive Officer and the four next most highly
compensated executive officers whose annual salary and bonus exceeded $100,000
(the "Named Executive Officers"), for the years ended December 31, 1999 and 1998
and the nine-month period ended December 31, 1997. In October 1997, the Company
changed its fiscal year end from March 31 to December 31. Accordingly, the
nine-month period ended December 31, 1997 (denoted below as 1997T) is the
transition period beginning April 1, 1997 and ending December 31, 1997.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
SECURITIES ALL
ANNUAL COMPENSATION ------------ OTHER
---------------------------- UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS OPTIONS (2)(3)(4)
--------------------------- ---- --------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Douglas M. Pasquale...................................... 1999 345,833 210,000 550,000 13,837
Chairman, President and Chief 1998 175,000 137,500 150,000 4,586
Executive Officer (hired June 1, 1998) 1997T -- -- -- --
Abdo H. Khoury........................................... 1999 196,250 70,951 250,000 10,854
Senior Vice President, Chief 1998 125,000 17,314 7,500 8,868
Financial Officer and Secretary 1997T 30,000 3,000 22,500 60,983
(hired October 1, 1997)
Patricia J. Gifford...................................... 1999 186,015 30,000 -- 44,769
Vice President, Chief Medical 1998 108,333 30,000 30,000 2,229
Officer (appointed June 12, 1998) 1997T -- -- -- --
Robertson K. Chandler.................................... 1999 153,461 44,650 175,000 7,118
Senior Vice President Operations 1998 -- -- -- --
(hired February 22, 1999) 1997T -- -- -- --
Suzanne Shirley.......................................... 1999 150,000 18,000 30,000 80,724
Vice President Investor Relations 1998 105,192 -- -- --
(hired April 20, 1998; resigned 1997T -- -- -- --
February 29, 2000)
</TABLE>
- ---------------
(1) Amounts shown include cash compensation earned by the executive officers.
The amounts do not include the value of certain perquisites that in the
aggregate did not exceed the lesser of either $50,000 or 10 percent of the
total annual salary and bonus reported for the Named Executive Officer.
(2) Includes amounts we paid for consulting fees to Mr. Khoury for services in
1997 prior to his employment of $59,624.
(3) Includes premiums for term life, medical, dental and disability insurance
purchased for the benefit of certain of the Named Executive Officers in the
following amounts: Mr. Pasquale -- $12,421, $4,586, and $0; Mr.
Khoury -- $10,854, $8,868, and $1,359; Dr. Gifford -- $9,769, $2,229 and $0;
for the years ended December 31, 1999 and 1998, and the nine-month period
ended December 31, 1997, respectively. And, Mr. Chandler and Ms. Shirley for
$7,118 and $5,724 for the year ended December 31, 1999. These amounts
represent insurance premiums we paid over what we pay for other similarly
situated employees.
(4) Includes payments and accruals in accordance with Separation Agreements (see
"-- Employment Agreements"): Ms. Shirley $75,000 and Dr. Gifford $35,000.
5
<PAGE> 9
Option Grants in Last Fiscal Year.
The following table sets forth certain information regarding options
granted during the year ended December 31, 1999 to the Named Executive Officers
pursuant to the Stock Option Plans. Ms. Shirley's options have expired.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(3)
OPTIONS EMPLOYEES IN PRICE ------------------------
NAME GRANTED(1) FISCAL YEAR(2) PER SHARE EXPIRATION DATE 5% 10%
---- ---------- -------------- --------- ----------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Douglas M. Pasquale....... 250,000 14.3% $ 3.00 April 14, 2009 $1,221,671 $1,945,307
Douglas M. Pasquale....... 300,000 17.2% $1.625 December 20, 2009 794,086 1,264,449
Abdo H. Khoury............ 100,000 5.7% $ 3.00 April 14, 2009 488,668 778,123
Abdo H. Khoury............ 150,000 8.6% $1.625 December 20, 2009 397,043 632,225
Robertson K Chandler...... 75,000 4.3% $ 3.00 April 14, 2009 366,501 583,592
Robertson K. Chandler..... 100,000 5.7% $1.625 December 20, 2009 264,695 421,483
Laura Loda................ 50,000 2.9% $ 3.00 April 14, 2009 244,334 389,061
Laura Loda................ 100,000 5.7% $1.625 December 20, 2009 264,695 421,483
</TABLE>
- ---------------
(1) These options were granted for a term of 10 years, subject to termination in
certain events related to termination of employment, and become exercisable
in three annual installments beginning in 2001. Options included in the
December 20, 1999 grants for 100,000, 50,000, 33,333 and 33,333 to Mr.
Pasquale, Mr. Khoury, Mr. Chandler and Ms. Loda, respectively, have three
year vesting schedules such that on the first day of the quarter immediately
following the Company achieving a positive cash flow and profitability the
option will begin vesting, but in no case will vesting begin later than
December 20, 2004.
(2) In 1999, we granted options to employees to purchase an aggregate of
1,745,000 shares under the Stock Option Plans and this number was used in
calculating the percentage set forth in this column. During 1999, options to
purchase 937,750 shares under the Stock Option Plans were canceled due to
termination of employment.
(3) Assumed rates of stock price appreciation are calculated based on
requirements promulgated by the Securities and Exchange Commission and are
for illustrative purposes only. Actual stock prices will vary from time to
time based upon market factors and our financial performance. There can be
no assurance that the assumed rates of appreciation will be achieved.
Aggregated Option Exercises and Fiscal Year-End Option Values.
None of the Named Executive Officers exercised options during the year
ended December 31, 1999. The following table sets forth certain information
regarding options held as of the end of such fiscal year by the Named Executive
Officers.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Douglas M. Pasquale.............. -- -- -- 700,000 -- --
Abdo H. Khoury................... -- -- -- 280,000 -- --
Robertson K. Chandler............ -- -- -- 175,000 -- --
Laura Loda....................... -- -- -- 150,000 -- --
</TABLE>
- ---------------
(1) Options are "in-the-money" if the fair market value of the underlying
securities on that date exceeds the exercise price of the option. Based on
the last sale price of $1.50 per share of Common Stock on December 31, 1999
(as reported on the American Stock Exchange), none of the options held by
the Named Executive Officers were "in the money" at year end.
6
<PAGE> 10
Employment Agreements.
We have entered into employment agreements with each of the Named Executive
Officers.
Mr. Pasquale's employment agreement requires Mr. Pasquale to devote his
full productive time to the Company during the term of the Agreement, except as
otherwise permitted by the consent of the Board of Directors. Mr. Pasquale's
employment agreement provides for a base salary, performance-based increases in
the base salary each year beginning in 1999, a guaranteed bonus of 37.5% of his
base salary, and additional bonuses based on the achievement of agreed-upon
targets. Mr. Pasquale was granted an option to purchase 150,000 shares of Common
Stock upon the execution of his employment agreement. Mr. Pasquale's employment
agreement was renegotiated in light of his promotion to Chief Executive Officer
and he was granted an option to purchase 250,000 shares of Common Stock at an
exercise price of $3.00 per share. On December 20, 1999, Mr. Pasquale was
granted an option to purchase 300,000 shares of Common Stock with an exercise
price of $1.625 per share. Beginning December 20, 2000, 200,000 of these options
vest on a three year schedule and the remaining 100,000 options begin a three
year vesting on the first day of the quarter immediately following the Company
achieving a positive cash flow and profitability, but in no case will vesting
begin later than December 20, 2004. Mr. Pasquale's employment agreement provides
that we may terminate Mr. Pasquale without cause by making him a payment equal
to the greater of:
- three times the sum of his current annual base salary plus target bonus,
plus any additional bonus paid in the last 12 months; plus
- the sum of his current annual base salary plus his minimum bonus divided
by 12 and multiplied by the number of remaining months under the
employment agreement; plus
- the payment of premiums for COBRA benefits for the maximum period of
eligibility and the payment of certain other miscellaneous amounts; plus
- Mr. Pasquale's stock options would fully vest.
The agreement further provides that if Mr. Pasquale voluntarily terminates
his employment, he will receive a lump-sum payment equal to three months' base
salary. The covenant not to compete is not applicable, however, in the event
severance pay is waived by Mr. Pasquale.
Mr. Khoury's employment agreement requires Mr. Khoury to devote his full
productive time to the Company during the term of the Agreement, except as
otherwise permitted by the consent of the President and/or Chief Executive
Officer and the Board of Directors. Under Mr. Khoury's agreement, his base
salary may be increased effective each January 1st, commencing in 2000, based on
his and the Company's performance results and his annual performance and salary
review. Mr. Khoury may also receive an annual discretionary bonus determined by
the Board based on the Company's earnings and other criteria as may be
determined by the Compensation Committee. The target established by the Company
for this bonus is 30% of his base salary. Mr. Khoury may also receive certain
bonuses based upon the sale of certain assets of the Company's apartment
division. If the Company terminates Mr. Khoury other than for cause, the Company
is required to pay Mr. Khoury the following amounts:
- his accrued base salary;
- his accrued vacation pay;
- his bonus, if any, for the calendar year ending before the date of
termination (if not yet paid);
- one year's current base salary; and
- certain other miscellaneous amounts.
If the Company requires Mr. Khoury to change the location of his employment
to a location outside Orange County, California, Mr. Khoury has the right to
treat such requirement as termination without cause. Pursuant to his employment
agreement Mr. Khoury was granted options to purchase 100,000 shares of Common
Stock at an exercise price of $3.00 per share on April 14, 1999. Additionally,
on December 20, 1999 Mr. Khoury was granted options to purchase 150,000 shares
of Common Stock at an exercise price of
7
<PAGE> 11
$1.625 per share. Beginning December 20, 2000, 100,000 of these options vest on
a three year schedule and the remaining 50,000 options begin a three year
vesting on the first day of the quarter immediately following the Company
achieving a positive cash flow and profitability, but in no case will vesting
begin later than December 20, 2004.
Mr. Chandler's employment agreement requires Mr. Chandler to devote his
full productive time to the Company during the term of the Agreement, except as
otherwise permitted by the consent of the President and/or Chief Executive
Officer and the Board of Directors. Under Mr. Chandler's agreement, his base
salary may be increased effective each January 1st, commencing in 2000, based on
his and the Company's performance results and his annual performance and salary
review. Mr. Chandler may also receive an annual discretionary bonus determined
by the Board based on the Company's earnings and other criteria as may be
determined by the Compensation Committee. The target established by the Company
for this bonus is 30% of his base salary. If the Company terminates Mr. Chandler
other than for cause, the Company is required to pay Mr. Chandler the following
amounts:
- his accrued base salary;
- his accrued vacation pay;
- his bonus, if any, for the calendar year ending before the date of
termination (if not yet paid);
- one year's current base salary; and
- certain other miscellaneous amounts.
If the Company requires Mr. Chandler to change the location of his
employment to a location outside Orange County, California, Mr. Chandler has the
right to treat such requirement as termination without cause. Pursuant to his
employment agreement Mr. Chandler was granted options to purchase 75,000 shares
of Common Stock at an exercise price of $3.00 per share on April 14, 1999.
Additionally, on December 20, 1999 Mr. Chandler was granted options to purchase
100,000 shares of Common Stock at an exercise price of $1.625 per share.
Beginning December 20, 2000 for 66,667 of these options and the remaining 33,333
options begin a three year vesting the first day of the quarter immediately
following the Company achieving a positive cash flow and profitability, but no
later than December 20, 2004.
Change in Control Arrangements
To better assure that the Named Executive Officers would continue to
provide independent leadership consistent with our best interests in the event
of an actual or threatened change of control of the Company, the employment
agreement of each of the Named Executive Officers provides certain protections
in the event of a change in control. For Mr. Khoury and Mr. Chandler, a "change
in control" is defined to include the following events:
- Change in Ownership of the Company: for Mr. Khoury and Mr. Chandler, the
date that any person or group acquires ownership of 50% or more of the
voting power of the Company's outstanding voting securities;
- Change in Effective Control of the Company: either (a) a person or group
acquires ownership of capital stock of the Company possessing 50% or more
of the total voting power of the Company's capital stock or (b) a
majority of the members of the Board are replaced during any 12-month
period by directors whose appointment or election was not endorsed by a
majority of the members of the Board prior to the date of such
appointment or election; and
- Change in Ownership of a Substantial Portion of the Company's Assets: the
date on which any person or group acquires assets from the Company that
have a total fair market value equal to or greater than 33 1/3% of the
total fair market value of all of the Company's assets immediately prior
to such acquisition.
Following a change in control, if Mr. Khoury or Mr. Chandler terminates
their employment with the Company for any reason within the period beginning six
months after the change in control and ending nine
8
<PAGE> 12
months after the change of control, or if their employment is terminated by the
Company (with or without cause) within nine months after the change in control,
the Company is required to pay the sum of the following amounts:
- their respective accrued base salary;
- their respective accrued vacation pay;
- their respective bonus, if any, for the calendar year ending prior to the
date of termination (if not yet paid);
- a salary payment equal to one and one-half times their base salary if
they terminated their employment, or two times their base salary if the
Company terminated their employment; and
- certain other miscellaneous payments.
In addition, as of the date of the change in control, their stock options become
fully vested, regardless of whether they remain employed by the Company.
Mr. Pasquale's employment agreement also provides for certain protections
in the event of a change in control. Mr. Pasquale's employment agreement defines
a "change in control" as any of the following:
- the acquisition by any person or group of greater than 50% of the
combined voting power of our outstanding voting securities;
- the acquisition by any person other than Prometheus Assisted Living LLC,
an affiliate of Lazard Freres Real Estate Investors, LLC, of greater than
20% of our outstanding voting securities; or
- the replacement of a majority of the members of the Board during any 12
month period by directors whose appointment or election was not endorsed
by a majority of the members of the Board prior to the date of such
appointment or election; or
- the date on which any person acquired assets from us that have total fair
market value equal to or more than 33 1/3% of the total fair market value
of all of our assets.
Following a change in control, if Mr. Pasquale terminates his employment
for any reason within the period beginning six months after the change in
control and ending 12 months after the change of control, or if his employment
is terminated by the Company (with or without cause) at any time during the
12-month period following the change in control, then the Company is required to
pay him three times the sum of his base salary and target bonus, in addition to
certain other miscellaneous payments. In addition, as of the date of the change
in control, his stock options become fully vested, regardless of whether he
remains employed by the Company.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Decisions regarding compensation of our executive officers, including those
related to stock and stock options, are considered by the Compensation
Committee, based upon the recommendations and analysis performed by our senior
management. The Compensation Committee (the "Committee") is currently composed
of Maurice J. DeWald, John Moore and David Collins. Maurice J. DeWald has
chaired the committee since January 12, 1999.
Fiscal 1999 Executive Compensation Components
Executive compensation consists of three components: base salary, bonus and
long-term incentive awards.
BASE SALARY. Base salaries for the Named Executive Officers were
established in their respective employment contracts, resulting in payment,
during Fiscal 1999 of $345,833, $196,250, $186,015, $153,461, and $150,000 to
Mr. Pasquale, Mr. Khoury, Dr. Gifford (resigned December 1, 1999), Robertson K.
Chandler and Suzanne Shirley (resigned February 29, 2000) respectively. The
salaries of all Named Executive Officers are subject to performance-based
increases in each year.
9
<PAGE> 13
BONUS. Mr. Pasquale is entitled to a guaranteed bonus of $131,250 and
additional bonuses based on achievement of agreed-upon targets up to a maximum
of $315,000.
Regarding the remaining Named Executive Officers, for the fiscal year 1999,
bonuses were awarded at the discretion of management, subject to the approval of
the Committee. Bonuses of $70,951 and $44,650 were paid to Mr. Khoury and Mr.
Chandler, respectively in recognition of performance in 1999.
LONG TERM INCENTIVE AWARDS. Stock options are granted to provide a
long-term incentive opportunity that is directly linked to shareholder value.
Douglas M. Pasquale was awarded 250,000 options to purchase common stock on
April 14, 1999. The exercise price per share is $3.00 and the option becomes
exercisable in three equal annual increments on April 14, 2000, 2001, and 2002,
respectively. On December 20, 1999, Mr. Pasquale, Mr. Khoury, Mr. Chandler and
Ms. Loda were awarded 300,000, 150,000, 100,000 and 100,000, respectively,
options to purchase common stock at an exercise price of $1.625 with 2/3 of the
grant amount having a three year vesting schedule beginning December 20, 2000
and the remaining 1/3 with a three year vesting schedule that begins on the
first day of the quarter immediately following the Company achieving a positive
cash flow and profitability, but not later than December 20, 2004.
In the fiscal year 1999, we granted 1,745,000 stock options to 18
employees, 3 of whom were hired in that period.
Policy with Respect to Section 162(m)
Section 162(m) of the Code includes potential limitations on the
deductibility for federal income tax purposes of compensation in excess of $1
million paid or accrued with respect to any of the executive officers whose
compensation is required to be reported in the Company's proxy statement.
Qualifying performance-based compensation is not subject to the deduction limit
if certain requirements are met. For the fiscal year 1999, the Committee does
not contemplate that there will be any such nondeductible compensation.
Additional information concerning the salary, bonus and stock awards for
the Company's Named Executive Officers can be found in the tables appearing
under "Executive Compensation."
THE COMPENSATION COMMITTEE
MAURICE J. DEWALD, CHAIRMAN
10
<PAGE> 14
PERFORMANCE GRAPH
The following line graph compares the yearly percentage change in the
cumulative total stockholder return on the Common Stock against the cumulative
total return of a peer group of nine assisted living companies selected by the
Company (the "Peer Group") and the AMEX Market Value Index, each for the period
from October 19, 1995 to December 31, 1999. The performance graph assumes the
investment of $100 on October 19, 1995 in the Common Stock and in each index
(except the AMEX Market Value Index, which assumes investment on September 30,
1995), and that all dividends were reinvested.
The Peer Group consists of Alterra Healthcare, Inc.; Assisted Living
Concepts, Inc.; Carematrix Corporation; Greenbriar Corporation; Emeritus
Corporation; Just Like Home, Inc.; Karrington Health, Inc.; Regent Assisted
Living, Inc.; and Sunrise Assisted Living, Inc. All of the companies in the Peer
Group are weighted by their respective market capitalization. Atria Communities,
Inc. was deleted from the Peer Group in 1998 because it became a private
company.
COMPARISON OF 51 MONTH CUMULATIVE TOTAL RETURN*
AMONG ARV ASSISTED LIVING INC., THE AMEX MARKET VALUE INDEX AND PEER GROUP
PERFORMANCE GRAPH
<TABLE>
<CAPTION>
PEER GROUP WEIGHTED
ARV ASSISTED LIVING, INC. AVERAGE AMEX MARKET VALUE
------------------------- ------------------- -----------------
<S> <C> <C> <C>
Oct-95 100 100 100
Mar-96 121 115 105
Mar-97 70 84 107
Dec-97 114 125 130
Dec-98 44 129 132
Dec-99 11 31 229
</TABLE>
- ---------------
* $100 invested on 10/19/95 in stock or 9/30/95 in index -- including
reinvestment of dividends. Fiscal year ending December 31.
11
<PAGE> 15
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of April 28, 2000 (based on a total of
17,459,689 outstanding shares of Common Stock) by each of our directors, each of
the Named Executive Officers and all executive officers and directors as a
group. Except as otherwise indicated, we believe the persons named in the table
have sole voting and investment power with respect to all shares beneficially
owned, subject to community property laws where applicable.
Amounts and percentages listed below include warrants and options that are
exercisable within 60 days of April 28, 2000.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIALLY PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNERSHIP OF CLASS
--------------------------------------- ----------------- ----------
<S> <C> <C>
Prometheus Assisted Living LLC(2)............... 7,595,069 43.5%
John A. Moore(2)................................ -- *
Jeffrey Koblentz(2)............................. -- *
Douglas M. Pasquale(3).......................... 131,134 *
David P. Collins(4)............................. 525,745 3.0%
Maurice J. DeWald(5)............................ 16,600 *
Abdo H. Khoury(6)............................... 48,209 *
Laura Loda(7)................................... 19,667 *
Robertson K. Chandler(8)........................ 25,000 *
All directors and executive officers as a group
(13 persons).................................. 8,361,524 47.9%
</TABLE>
- ---------------
* Less than 1%.
(1) Except where otherwise noted, the address of the Company's directors and
executive officers is c/o ARV Assisted Living, Inc., 245 Fischer Avenue,
Costa Mesa, California 92626.
(2) Does not include 375,000 shares of Common Stock beneficially owned by Lazard
Freres Strategic Realty Investors II Assisted Living LLC ('LFSRI II AL")
pursuant to a warrant issued in connection with a Term Loan Agreement dated
April 24, 2000 between the Company and LFSRI II AL. According to the
Schedule 13D/A filed on April 28, 2000 by Prometheus Assisted Living LLC
("Prometheus"), (i) Lazard Freres Strategic Realty Investors II L.P.
("LFSRI") is the managing member of LFSRI II AL and (ii) LFSRI, LFSRI II
Alternative Partnership L.P. and LFSRI II-CADIM Alternative Partnership L.P.
are managing members of Prometheus and share voting and dispositive power
over the shares beneficially owned by Prometheus. Messrs. Moore and Koblentz
are principals of Lazard Freres Real Estate Investors LLC ("LFREI"), which
controls each of the managing members of Prometheus. Mr. Moore is the Chief
Financial Officer of LFREI.
(3) Of the 131,134 shares beneficially owned by Mr. Pasquale, 9,800 are held in
his name and 121,334 are options exercisable within 60 days of April 28,
2000.
(4) Of the 525,745 shares beneficially owned by Mr. Collins, 98,678 are held of
record by the D & V Collins Family Limited Partnership (as to which Mr.
Collins has shared voting and investment power), 416,008 shares are held by
the Collins Family Community Property Trust (as to which Mr. Collins has
shared voting and investment power), 8,559 held by Mr. Collins IRA, and
2,500 are options exercisable within 60 days of April 28, 2000.
(5) Of the 16,600 shares beneficially owned by Mr. DeWald, as a non-employee
director, 6,600 are held in his name and 10,000 are options exercisable
within 60 days of April 26, 2000.
(6) Of the 48,209 shares beneficially owned by Mr. Khoury, 13,000 are held in
his name and 35,209 are options exercisable within 60 days of April 28,
2000.
(7) Of the 19,667 shares beneficially owned by Ms. Loda, 3,000 are held in her
name and 16,667 are options exercisable within 60 days of April 28, 2000.
(8) Of the 25,000 shares beneficially owned by Mr. Chandler, 25,000 are options
exercisable within 60 days of April 28, 2000.
12
<PAGE> 16
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of May 6, 2000, the following persons are known to the Company to be the
beneficial owners of more than five percent of the Company's Common Stock. The
numbers shown on the table should be interpreted in light of the related
footnote.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS(3)
-------------- ------------------------------------ -------------------- -------------------
<C> <S> <C> <C>
Common Prometheus Assisted Living LLC(1) 7,595,069 43.5 %
Thirty Rockefeller Plaza, 63rd Floor
New York, NY 10020
Common Dimensional Fund Advisors Inc.(2) 1,002,600 5.74%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
</TABLE>
- ---------------
(1) According to the Schedule 13D/A filed on April 28, 2000 by Prometheus
Assisted Living LLC ("Prometheus"). Does not included 375,000 shares of
Common Stock beneficially owned by Lazard Freres Strategic Realty Investors
II Assisted Living LLC ("LFRSI II AL") pursuant to a warrant issued in
connection with a Term Loan Agreement dated April 24, 2000 between the
Company and LFSRI II AL. According to Prometheus's Schedule 13D/A, (i)
Lazard Freres Strategic Realty Investors II L.P. ("LFSRI") is the managing
member of LFSRI II AL and (ii) LFSRI, LFSRI II Alternative Partnership L.P.
and LFSRI II-CADIM Alternative Partnership L.P. are managing members of
Prometheus and share voting and dispositive power over the shares
beneficially owned by Prometheus.
(2) According to Schedule 13G filed on February 3, 2000 by Dimensional Fund
Advisors, Inc.
(3) Based on 17,459,689 shares of Common Stock issued and outstanding as of May
6, 2000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Our Compensation Committee consisted of John J. Rydzewski, Robert P.
Freeman and Maurice J. DeWald, who were members of our Board for the fiscal year
1999. Mr. Rydzewski resigned as a member of our Board and the Compensation
Committee as of January 13, 1999 and Mr. Freeman resigned from our Board and the
Compensation Committee as of September 29, 1999. Mr. John Moore and Mr. David
Collins were appointed to the Compensation Committee as of September 29, 1999.
No member of the Compensation Committee is or was an officer or employee of ARV
during 1999.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We utilize the services of J&D Design, as well as others, for interior
design work at our communities. The principal of J&D Design is Joan Davidson,
wife of former Senior Vice President Eric Davidson and daughter-in-law of the
former Chairman, President and Chief Executive Officer, Gary Davidson. Services
provided by J&D Design include design work and the purchase of furniture,
fixtures and equipment ("FF&E") for developed assisted living communities and
rehabilitation of existing or newly acquired assisted living communities. We
paid J&D Design approximately $13,000, $560,000, and $755,000 for the years
ended December 31, 1999 and 1998 and the nine-month period ended December 31,
1997, respectively, a portion of which was for design services and a portion of
which was for reimbursement of costs for FF&E.
Mr. R. Bruce Andrews, a former member of our Board of Directors, is
President of Nationwide Health Properties, Inc. ("NHP"), a Health Care REIT. NHP
is the owner of 16 assisted living communities that are leased to the Company.
Of that number, leases for 13 assisted living communities were entered into
prior to November 29, 1995, the date Mr. Andrews became a Board member, and
leases for three assisted living communities were entered into during Mr.
Andrews' tenure as Board member. Lease expenses have aggregated approximately
$12.0 million, $11.3 million, and $8.2 million for the years ended December 31,
1999 and 1998, and the nine-month period ended December 31, 1997, respectively.
On September 29, 1999 Prometheus Assisted Living, LLC ("Prometheus") and
certain f its affiliates agreed to settle all outstanding legal actions with us
and accept a promissory note for $1.5 million as full
13
<PAGE> 17
satisfaction of its claims, $0.4 million of which has been recorded as
additional private placement costs. This note will bear interest beginning on
April 1, 2001 at a rate equal to the 30 day Treasury bill rate quoted by the
Wall Street Journal. Interest payments will be made on the first day of each
month beginning on May 1, 2001 and continue until maturity of the note on April
1, 2002. In the event of default, the note is immediately due and payable and
interest shall accrue at a rate that is 4% above the interest rate otherwise in
effect. Because the note payable is non-interest bearing, a 12% imputed interest
discount was used in recording the obligation. We have the right at any time to
prepay the Note in whole or in part. Any time prior to November 1, 1999 the
prepayment price is equal to 91% of the aggregate principal balance. Such
prepayment price shall increase by 0.5% of the aggregate principal amount of the
Note on the 10th day of each month thereafter until April 1, 2002.
The agreement settled all outstanding litigation between us and LFREI and
provided mutual release of certain claims that we and Prometheus may have had
against each other. Pursuant to the settlement agreement, we withdrew our appeal
of the decision issued on May 12, 1999 by the Superior Court of the State of
California, County of Orange. Prometheus dismissed the lawsuit it filed against
us and two of our former directors in the Delaware Chancery Court. As part of
the settlement agreement, the board of directors was reduced to five persons.
Murry N. Gunty, John A. Booty and Robert P. Freeman resigned from the board.
On April 24, 2000, the Company entered into a Term Loan Agreement with
LFSRI II Assisted Living LLC ("LFSRI"), an affiliate of Prometheus. As of May 6,
2000, Prometheus beneficially owned approximately 43.5% of the Company's
outstanding Common Stock. Pursuant to the term Loan Agreement, the Company may
borrow up to $10,000,000 from LFSRI with a maturity date of April 24, 2002,
which, subject to certain condition, may be extended by one year if no default
has occurred. The outstanding amount under the loan will bear interest at the
annual rate equal to the LIBOR rate for each interest period plus a 10% margin.
In connection with the Term Loan Agreement, the Company issued to LFSRI a
warrant to purchase up to 750,000 share of the company's Common Stock at a price
of $3.00 per share, subject to various adjustments, exercisable until April 24,
2005. The Company also amended its stockholder rights agreement to prevent
shares that Prometheus may be deemed to beneficially own by reason of LFSRI's
rights under the warrant from causing Prometheus to become an "Acquiring Person"
and thus causing a triggering event under the rights agreement.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors, and persons who own more than ten percent of a registered class
of the Company's equity securities (collectively, "Reporting Persons"), to file
reports on Forms 3, 4 and 5 of stock ownership and changes in ownership with the
Securities and Exchange Commission. Reporting Persons are required to furnish
the Company with copies of all forms that they file. Based on the Company's
review of copies of Forms 3, 4 and 5, and amendments thereto, received by the
Company for the year ended December 31, 1999, or written representations from
certain Reporting Persons that no Forms 5 were required to be filed by those
persons, the Company believes that during Fiscal 1999 all filing requirements
were complied with by the Reporting Persons, except that the Form 4 required for
Abdo H. Khoury was filed late due to administrative oversight.
The Board of Directors has selected the accounting firm of KPMG Peat
Marwick, LLP as the independent public accountants of the Company during the
2000 fiscal year. Representatives of KPMG Peat Marwick are expected to be
present at the Annual Meeting with the opportunity to make a statement, if they
desire to do so, and to answer stockholders' questions.
14
<PAGE> 18
APPROVAL OF INDEPENDENT PUBLIC AUDITORS
(PROPOSAL NO. 2)
KPMG LLP were the independent auditors for the Company for the fiscal year
ended December 31, 1999 and have reported on the Company's financial statements
included in the Annual Report of the Company which accompanies this Proxy
Statement. The Company's independent auditors are appointed by the Board. The
Board has reappointed KPMG LLP as the Company's independent auditors for the
fiscal year ending December 31, 2000. A representative of KPMG LLP will be (i)
available to participate by conference call at the Annual Meeting, (ii) able to
make a statement by conference call if he or she so desires, and (iii) available
to respond by conference call to appropriate questions.
The Board of Directors recommends a vote in favor of ratification of the
reappointment of KPMG LLP.
The ratification of independent accountant is not a matter required to be
submitted to a vote of the shareholder, but, is being submitted because the
Company believes this may provide the auditors with a greater degree of
independence from management.
DEADLINE FOR SUBMISSION OF SHAREHOLDER PROPOSALS
FOR 2001 ANNUAL MEETING
Any stockholder intending to submit to the Company a proposal to be
included in our proxy materials relating to the 2001 Annual Meeting must submit
it in time for us to receive it at our principal executive offices no later than
February 12, 2001. In addition, the Company's Certificate of Incorporation
provides that a stockholder may propose other business or nominate a candidate
for director before the Annual Meeting only by delivering notice to the Company
in the manner and within the time limits provided in the Certificate of
Incorporation. The Secretary of the Company must receive written notice at the
Company's principal executive offices not less than 180 days before the
scheduled annual meeting, regardless of any postponements, deferrals or
adjournments of that meeting; however, if less than 180 days notice or public
disclosure is given by the Company, then the stockholder notice must be
delivered or received no later than the close of business on the tenth day
following the earlier of the day on which the Company mailed notice of the date
of the scheduled annual meeting or the day on which the Company publicly
disclosed the date of the scheduled Annual Meeting. The notice must also provide
certain other information as required in the Certificate of Incorporation.
Copies of the Certificate of Incorporation are available to stockholders free of
charge upon request to the Company's Secretary.
OTHER MATTERS
The Company is not aware of any matters that may be presented for action by
the stockholders at the Annual Meeting other than those set forth above. If any
other matter properly comes before the Annual Meeting, the persons named in the
accompanying form of proxy intend to vote according to their best judgment.
The Annual Report of the Corporation for the fiscal year 1999, including
financial statements, is being mailed to stockholders together with these proxy
materials.
THE ANNUAL REPORT TO STOCKHOLDERS AND THE COMPANY'S FORM 10-K, INCLUDING
ANNUAL FINANCIAL STATEMENTS, CAN BE OBTAINED BY ANY STOCKHOLDER ENTITLED TO VOTE
AT THE MEETING UPON WRITTEN REQUEST. SEND REQUESTS TO ARV ASSISTED LIVING, INC.,
P.O. BOX 5046, COSTA MESA, CA 92628-5046, ATTN: ABDO KHOURY, CHIEF FINANCIAL
OFFICER.
15
<PAGE> 19
STOCKHOLDERS ARE URGED TO IMMEDIATELY MARK, DATE, SIGN AND RETURN THE
ENCLOSED PROXY IN THE ENVELOPE PROVIDED. NO POSTAGE IS NECESSARY IF IT IS MAILED
IN THE UNITED STATES.
Sincerely,
/s/ Douglas M. Pasquale
Douglas M. Pasquale
President and Chief Executive Officer
May 15, 2000
Costa Mesa, California
16
<PAGE> 20
PROXY
ARV ASSISTED LIVING, INC.
ANNUAL MEETING OF STOCKHOLDERS - JUNE 9, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of ARV Assisted Living, Inc. does hereby
nominate, constitute and appoint Douglas M. Pasquale and Abdo H. Khoury or
either of them, the true and lawful proxies, agents and attorneys of the
undersigned, with full power of substitution, to vote for the undersigned all
of the common stock of said corporation standing in the name of the undersigned
on its books at the close of business on May 15, 2000 at the Annual Meeting of
Stockholders to be held at the Airport Hilton, 18800 MacArthur Blvd., Irvine,
California 92715, on Friday, June 9, 2000 or at any adjournment thereof, with
all of the powers which would be possessed by the undersigned if personally
present as follows.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE.
SEE REVERSE
SIDE
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
MAP TO MEETING PLACE.
<PAGE> 21
PLEASE MARK
VOTES AS IN [X]
THIS EXAMPLE
1. Elect member of the Board of Directors of ARV Assisted Living, Inc.
FOR ALL WITHHOLD
nominees AUTHORITY
listed below to vote for
in the class all nominees
indicated listed below
[ ] [ ]
Class C Director (to serve until the 2003 annual meeting of stockholders):
Maurice J. Dewald
2. Approve the appointment of KPMG as the Company's independent auditor.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any postponement or
adjournment thereof (such postponement or adjournment may be for the purpose
of soliciting more votes to approve a proposal).
THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED HEREIN. IF NO DIRECTION IS MADE
WITH RESPECT TO A PROPOSAL THIS PROXY WILL BE VOTED FOR SUCH PROPOSAL.
Mark here for address change and note below [ ]
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders dated May 16, 2000 and the Proxy Statement furnished therewith.
PLEASE FILL IN, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
Signature(s): Date:
------------------------------------------------------ --------
NOTE: Please sign name exactly as your name (or names) appear on the stock
certificate. When signing as attorney, executor, administrator, trustee or
guardian please give full title. If more than one trustee, all should sign. All
joint owners must sign.
- --------------------------------------------------------------------------------
*FOLD AND DETACH HERE*
ANNUAL MEETING OF STOCKHOLDERS
ARV ASSISTED LIVING, INC.
DATE: JUNE 9, 2000
TIME: 9:00 A.M.
PLACE: AIRPORT HILTON
18800 MACARTHUR BLVD.
IRVINE, CA 92715
(PLEASE SEE REVERSE SIDE)
