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SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Alternative Living Services
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(Name of Registrant as Specified in Its Charter)
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(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.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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ALTERNATIVE LIVING SERVICES LOGO
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 16, 1997
To the Stockholders of Alternative Living Services, Inc.:
Notice is hereby given that the Annual Meeting of Stockholders (together
with any adjournments or postponements thereof, the "Meeting") of Alternative
Living Services, Inc. (the "Company") will be held at The Milwaukee Marriott --
Brookfield, Hospitality Suite 2, 375 South Moorland Road, Brookfield, Wisconsin
53005, on Wednesday, July 16, 1997 at 10:00 a.m., Milwaukee time, for the
purpose of considering and voting upon the following matters:
(1) To elect a board of seven directors each to serve a one-year term;
and
(2) To transact such other business as may properly come before the
Meeting.
These items are more fully described in the accompanying Proxy Statement,
which is hereby made a part of this Notice of Annual Meeting of Stockholders.
The Board of Directors has fixed the close of business on May 23, 1997 as
the record date for the determination of stockholders entitled to notice of, and
to vote at, the Meeting.
A copy of the Company's Annual Report for the year ended December 31, 1996
is enclosed. The Annual Report is not a part of the proxy soliciting material
enclosed with this Notice.
By Order of the Board of Directors,
John W. Kneen
John W. Kneen
Secretary
Brookfield, Wisconsin
June 17, 1997
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ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE,
SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO
ENSURE YOUR REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS
POSTAGE-PREPAID IF MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT
PURPOSE. EVEN IF YOU HAVE GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON
IF YOU ATTEND THE MEETING. PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE
HELD OF RECORD BY A BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO VOTE AT
THE MEETING, YOU MUST BRING TO THE MEETING A LETTER FROM THE BROKER, BANK
OR OTHER NOMINEE CONFIRMING YOUR BENEFICIAL OWNERSHIP OF THE SHARES.
ADDITIONALLY, IN ORDER TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE
RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
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ALTERNATIVE LIVING SERVICES LOGO
450 N. SUNNYSLOPE ROAD
SUITE 300
BROOKFIELD, WISCONSIN 53005
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS OF
ALTERNATIVE LIVING SERVICES, INC.
JULY 16, 1997
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
This Proxy Statement (the "Proxy Statement") and the accompanying form of
proxy are being furnished to the stockholders of Alternative Living Services,
Inc. (the "Company") in connection with the solicitation of proxies by the Board
of Directors of the Company (the "Board") from holders of its outstanding common
stock, $.01 par value per share (the "Common Stock"), for use at the Annual
Meeting of Stockholders of the Company (together with any adjournments or
postponements thereof, the "Meeting") to be held at The Milwaukee Marriott --
Brookfield, Hospitality Suite 2, 375 South Moorland Road, Brookfield, Wisconsin
53005, on Wednesday, July 16, 1997 at 10:00 a.m., Milwaukee time. This Proxy
Statement, the accompanying form of proxy and the Annual Report to Stockholders
are expected to be mailed to stockholders of the Company on or about June 17,
1997.
SOLICITATION
The expense of this solicitation will be borne by the Company. Solicitation
will be primarily by use of the mails. Executive officers and other employees of
the Company may solicit proxies, without additional compensation, personally and
by telephone and other means of communication. The Company will also reimburse
brokers and other persons holding Common Stock in their names or in the names of
their nominees for their reasonable expenses in forwarding proxies and proxy
materials to beneficial owners.
VOTING RIGHTS AND OUTSTANDING SHARES
Stockholders of record as of the close of business on May 23, 1997 (the
"Record Date") will be entitled to vote at the Meeting. Each share of
outstanding Common Stock is entitled to one vote. As of the Record Date, there
were 12,996,498 shares of Common Stock outstanding and entitled to vote. The
Company has been advised that certain beneficial owners, directors and executive
officers of the Company, who hold in the aggregate approximately 22.2% of the
outstanding Common Stock, intend to vote their shares in favor of the nominees
and in accordance with the recommendations of the Board.
The presence at the Meeting, in person or by proxy, of a majority of the
outstanding shares of Common Stock as of the Record Date will constitute a
quorum for transacting business at the Meeting. Abstentions and broker non-votes
are counted towards a quorum. Provided a quorum is present at the Meeting,
directors will be elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the Meeting.
All votes will be tabulated by the inspector of elections appointed for the
Meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as
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negative votes, whereas broker non-votes will not be counted for any purposes in
determining whether a matter has been approved.
REVOCABILITY OF PROXIES
The shares of Common Stock represented by proxy will be voted as instructed
if received in time for the Meeting. If no instructions are indicated, such
shares will be voted in favor of (FOR) each nominee for election as a director
specified herein and in the discretion of the proxy holder as to any other
matter that may properly come before the Meeting. Any person signing and mailing
the proxy may, nevertheless, revoke it at any time before it is exercised by
written notice to the Company (Attention: Thomas E. Komula, Senior Vice
President) at its headquarters at 450 N. Sunnyslope Road, Suite 300, Brookfield,
Wisconsin 53005, or by attending in person and voting at the Meeting. Attendance
at the Meeting, however, will not itself constitute the revocation of a proxy.
ELECTION OF DIRECTORS
Seven directors, constituting the entire Board, are to be elected at the
Meeting and, if elected, will serve until the 1998 Annual Meeting of
Stockholders and until their successors have been elected and qualified. The
Company's Restated Bylaws, as amended, provide that the Board shall consist of
no less than four members and no more than nine members, with the actual number
to be established by resolution of the Board. The Board has by resolution
established the number of directors at seven.
The nominees of the Board are set forth below. All of the current members
of the Board have been nominated to continue to serve as directors of the
Company. In the event any nominee is unable or declines to serve as a director
at the time of the Meeting, the proxies will be voted for any nominee who shall
be designated by the present Board to fill the vacancy. In the event that
additional persons are nominated for election as directors, the proxy holders
intend to vote all proxies received by them for the nominees listed below unless
instructed otherwise. As of the date of this Proxy Statement, the Company is not
aware of any nominee who is unable or who will decline to serve as a director,
if elected.
NOMINEES FOR ELECTION AS DIRECTORS
Set forth below are the names, ages (at June 1, 1997), positions and
offices held and a brief description of the business experience during the past
five years of each person nominated to serve as a director of the Company.
WILLIAM G. PETTY, JR. (age 51) has served as Chairman of the Board since
December 1993 and served as Chief Executive Officer of the Company from December
1993 to April 1996. He has served as a Managing Director of Beecken, Petty &
Company, the general partner of a private health care investment fund, since
September 1996. Mr. Petty has served as the Vice Chairman of GranCare, Inc.
("GranCare") since July 1995. Mr. Petty also served as the Chairman of the
Board, Chief Executive Officer and President of Evergreen Healthcare, Inc.
("Evergreen") from June 1993 to July 1995, the date of its merger with GranCare,
and as Chairman of the Board, Chief Executive Officer and President of National
Heritage, Inc., predecessor to Evergreen, from October 1992 to June 1993.
RICHARD W. BOEHLKE (age 48) has served as the Vice Chairman of the Board of
the Company since May 1996. Mr. Boehlke served as President and Chief Executive
Officer of New Crossings International Corporation ("Crossings"), which he
founded in 1984, until Crossings merged with the Company in May 1996.
GENE E. BURLESON (age 56) has served as a director of the Company since
July 1995. Mr. Burleson has served as the Chief Executive Officer and a director
of Vitalink Pharmacy Services, Inc. since February 1997. He has served as
Chairman of the Board of GranCare, Inc. ("GranCare") since January 1994 and as
Chief Executive Officer of GranCare from December 1990 to February 1997. Mr.
Burleson also currently serves on the Board of Directors of Deckers Outdoor
Corporation, a shoe manufacturer, and Walnut Financial Services, a small
business investment company.
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ROBERT HAVEMAN (age 48) has served as a director of the Company since May
1995. Mr. Haveman has served as Treasurer of EDP Management Corp. since April
1997 and as the Secretary/Treasurer of the Prince Corporation, an automotive
interior trim manufacturer, since 1987.
RONALD G. KENNY (age 41) has served as a director of the Company since May
1995. He has served as Executive Vice President of Huizenga Capital Management,
a privately held investment management company, since 1990. Mr. Kenny also
currently serves on the Board of Directors of GranCare.
WILLIAM F. LASKY (age 43) has served as Chief Executive Officer of the
Company since April 1996 and as President of the Company since December 1993. He
served as the Managing Partner of Alternative Living Services, a Wisconsin
general partnership ("the ALS Partnership"), from 1981 to December 1993 and as
the President of Care Living Centers, Inc. ("CLC") from 1989 to December 1993.
The ALS Partnership and CLC developed and operated assisted living residences,
six of which are currently managed by the Company. Mr. Lasky is a member of the
Board of Directors and the Chairman of The Assisted Living Federation of America
and is a licensed nursing home administrator.
JERRY L. TUBERGEN (age 43) has served as a director of the Company since
May 1995. He has served as President and Chief Executive Officer of RDV
Corporation, a private financial management firm, since its formation in 1991.
Mr. Tubergen served as Managing Partner of Deloitte & Touche in Grand Rapids,
Michigan from 1987 to 1991. Mr. Tubergen also currently serves on the Board of
Directors of the Orlando Magic, Ltd., a NBA franchise, and Genmar Holdings,
Inc., a manufacturer and marketer of motorized pleasure boats.
MANAGEMENT OF THE COMPANY
BOARD OF DIRECTORS
The Company's Board of Directors is currently comprised of the seven
individuals set forth under "Election of Directors" above.
BOARD COMMITTEES AND MEETINGS
During 1996, the Board met six times. The Board has established an audit
committee (the "Audit Committee") and a compensation committee (the
"Compensation Committee"). The Board does not have a nominating committee. No
incumbent Board member attended fewer than 75% of the aggregate of (i) the total
number of meetings of the Board which such director was eligible to attend
during 1996 and (ii) the total number of meetings held by any committee of the
Board upon which such director served during 1996.
The Audit Committee is comprised of Messrs. Burleson, Haveman and Tubergen
with Mr. Tubergen serving as a Chairman. The Audit Committee convenes when
deemed appropriate or necessary by its members. The primary functions of the
Audit Committee are to: (i) recommend an accounting firm to be appointed by the
Company and its independent auditors; (ii) consult with the Company's
independent auditors regarding the audit plan; and (iii) determine that
management placed no restrictions on the scope or implementation of the
independent auditors' examination. The Audit Committee did not meet during 1996.
The Compensation Committee is comprised of Messrs. Boehlke, Kenny, Petty
and Tubergen, with Mr. Kenny serving as Chairman. The Compensation Committee:
(i) sets and approves the compensation (including salary, deferred compensation,
bonuses, incentive compensation and all other types of compensation or
remuneration) of the Company's executive officers; and (ii) administers the
Company's 1995 Incentive Compensation Plan (the "1995 Plan"). The Compensation
Committee met once in January 1997 but did not meet during 1996.
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EXECUTIVE OFFICERS
Set forth below are the names, ages (at June 1, 1997), positions and
offices held and a brief description of the business experience during the past
five years of each of the Company's executive officers who are not also
directors.
D. LEE FIELD (age 37) has served as Senior Vice President of the Company
since May 1996. Prior to joining the Company, he was employed from 1984 by
Crossings, where he held a succession of executive positions, including
Executive Vice President and Chief Operating Officer from 1993 until the
Crossings merger with the Company, and Vice President of Operations from 1989 to
1993. Mr. Field is a member of the Board of Directors for the American Senior
Housing Association and a member of the Task Force for Assisted Living of the
American Health Care Association.
DOUGLAS A. HENNIG (39) has served as Senior Vice President of the Company
since January 1996. From January 1993 to January 1996, Mr. Hennig served as the
President of Heartland Retirement Services, Inc., an assisted living company
that was acquired by the Company in January 1996. From 1991 to 1993, he was
President of Hennig & Associates, a consulting firm in Madison, Wisconsin
involved in retirement housing consulting and the development and management of
assisted living residences.
G. FAYE GODWIN (age 55) has served as Senior Vice President of the Company
since April 1996. From May 1995 to April 1996, Ms. Godwin served as the Vice
President of Operations of the Company. Previously, Ms. Godwin served as the
Chief Operating Officer of Standish Care, Inc., a publicly-held assisted living
company, from February 1994 to May 1995. From April 1989 to January 1994, Ms.
Godwin was Senior Vice President of Operations at Sunrise Assisted Living, an
assisted living company.
THOMAS E. KOMULA (age 41) has served as a Senior Vice President of the
Company since July 1996. In August 1996, he was appointed as Chief Financial
Officer, Treasurer and Assistant Secretary. Prior to joining the Company, he
served as the Chief Financial Officer of MedRehab, Inc., a privately-held
rehabilitation company, from March 1994 to April 1996. From September 1993 to
March 1994, he was a partner at Arthur Andersen & Co., and from September 1991
to September 1993, he was a Senior Manager with Arthur Andersen & Co. Mr. Komula
is a Certified Public Accountant.
JOHN W. KNEEN (age 44) has served as Vice President and Secretary of the
Company since December 1993. He served as Chief Financial Officer and Treasurer
of the Company from April 1996 through August 1996. He has served as a Managing
Director of Beecken, Petty & Company since September 1996. He served as Vice
President of Corporate Development and Assistant Secretary of Evergreen from
December 1993 to July 1995, and as Vice President and Chief Financial Officer of
Evergreen Housing Partners, Inc., a management company for congregate care
facilities, from 1991 to 1993.
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SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of the Record Date by: (i)
each person or entity known to the Company to own more than 5% of the
outstanding shares of the Common Stock; (ii) each of the Company's directors;
(iii) each of the Company's executive officers included in the Summary
Compensation Table elsewhere herein; and (iv) all of the Company's directors and
executive officers as a group. Except as otherwise noted, the person or entity
named has sole voting and investment power over the shares indicated.
SHARES OF
COMMON STOCK
BENEFICIALLY OWNED
--------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT
------------------------------------ ------ -------
Richard W. Boehlke+......................................... 781,711 6.0%
1201 Pacific Avenue, Suite 1800
Tacoma, Washington 98335
Peter H. Huizenga........................................... 743,718 5.7%
2215 York Road, Suite 500
Oakbrook, Illinois 60521
Jerry L. Tubergen(1)+....................................... 666,591 5.1%
500 Grand Bank Building
126 Ottawa Avenue, N.W.
Grand Rapids, Michigan 49503
William F. Lasky(2)+++...................................... 587,642 4.5%
Robert Haveman(3)+.......................................... 556,542 4.3%
William G. Petty, Jr.(4)+++................................. 152,889 1.2%
Douglas A. Hennig(5)++...................................... 112,666 *
Ronald G. Kenny(6)+......................................... 32,708 *
Gene E. Burleson(6)+........................................ 12,885 *
G. Faye Godwin(7)++......................................... 15,999 *
Thomas E. Komula++.......................................... 4,000 *
All Officers and Directors as a Group (17 Persons)(8)....... 3,258,127 24.6%
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+ Director of the Company
++ Executive Officer of the Company
* Less than 1%
(1) Includes (i) 415,532 shares held by trusts for which he serves as trustee
(the "Trusts") and (ii) options to acquire 11,885 shares exercisable within
60 days of the Record Date. The co-trustees of the Trusts also serve as
trustee of a trust holding 59,361 shares.
(2) Mr. Lasky's beneficial ownership includes shares held by CLC by virtue of
his position as an officer and majority shareholder of CLC and options to
acquire 91,535 shares within 60 days of the Record Date. CLC is a Wisconsin
corporation owned by Mr. Lasky and another individual.
(3) Includes (i) 437,082 shares held by two non-profit corporations (the
"Non-profit Corporations") of which Mr. Haveman serves as officer and (ii)
options to acquire 11,885 shares exercisable within 60 days of the Record
Date. Mr. Haveman disclaims beneficial ownership of the shares held by the
Non-profit Corporations.
(4) Represents 107,575 shares held by Petty, Kneen & Company, a company owned
and controlled by Mr. Petty and John W. Kneen, and options to acquire 45,314
shares exercisable within 60 days of the Record Date.
(5) Includes options to acquire 8,208 shares exercisable within 60 days of the
Record Date.
(6) Includes options to acquire 11,885 shares exercisable within 60 days of the
Record Date.
(7) Represents options to acquire 15,999 shares exercisable within 60 days of
the Record Date.
(8) Includes options to acquire 261,803 shares exercisable within 60 days of the
Record Date.
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COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION OF DIRECTORS
Directors of the Company who are not parties to services agreements with
the Company and are not employees of the Company are entitled to an annual
retainer of $12,000, payable in quarterly installments. In lieu of their
retainer for the twelve month period commencing June 1, 1995, each of Messrs.
Burleson, Haveman, Kenny and Tubergen were granted a non-qualified stock option
pursuant to the 1995 Plan to purchase up to 7,745 shares of the Common Stock at
an exercise price of $4.65 per share, such options becoming exercisable on June
1, 1996 and expiring on June 1, 2005. In lieu of their annual retainer for the
36 month period commencing June 1, 1996, each of Messrs. Burleson, Haveman,
Kenny and Tubergen were granted a non-qualified stock option pursuant to the
1995 Plan to purchase up to 12,422 shares of the Common Stock at an exercise
price of $8.69 per share, such options vesting one-third on June 1, 1997, one-
third on June 1, 1998 and one-third on June 1, 1999, and expiring on May 8,
2006. Directors are also entitled to reimbursement of reasonable out-of-pocket
expenses incurred by them in attending meetings of the Board of Directors. See
also "-- Employment and Services Agreement."
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and non-cash compensation awarded
or paid by the Company for services rendered during each of the years in the
three year period ended December 31, 1996 to its Chief Executive Officer and
other executive officers whose total salary and bonus exceeded $100,000 ("Named
Executives").
LONG-TERM
COMPENSATION
------------
AWARDS(4)
ANNUAL COMPENSATION ------------
------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION OPTIONS(#)
--------------------------- ---- --------- -------- ------------ ----------
William G. Petty, Jr.(1).................. 1996 -- -- -- --
Chairman of the Board 1995 -- -- $48,650 90,628
1994 -- -- -- --
---- ------- ------ ------ -------
William F. Lasky(2)....................... 1996 $231,459 $70,000 -- --
President and Chief Executive Officer 1995 166,600 30,000 -- 128,691
1994 115,000 60,000 -- 54,377
---- ------- ------ ------ -------
Thomas E. Komula(3)....................... 1996 82,306 21,250 -- 29,423
Chief Financial Officer 1995 -- -- -- --
1994 -- -- -- --
---- ------- ------ ------ -------
G. Faye Godwin............................ 1996 135,895 35,000 -- 28,475
Senior Vice President 1995 70,894 -- -- 17,763
1994 -- -- -- --
---- ------- ------ ------ -------
Douglas A. Hennig......................... 1996 136,776 26,000 -- 22,421
Senior Vice President 1995 -- -- -- 10,404
1994 -- -- -- --
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(1) Mr. Petty is not an employee and was not an employee of the Company during
1996. Mr. Petty served as the Company's Chief Executive Officer until May
1996. Other Annual Compensation represents amounts paid to Petty, Kneen &
Company pursuant to the terms of a services agreement pursuant to which Mr.
Petty provides certain services to the Company. See also "-- Employment and
Services Agreement -- Services Agreement with Petty, Kneen & Company".
(2) Mr. Lasky became the Company's Chief Executive Officer in April 1996.
(3) Mr. Komula joined the Company as an executive officer in July 1996.
(4) Represents options under the 1995 Plan. Generally, one-fourth of the options
become exercisable on each of the first through fourth anniversaries of the
grant date.
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OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding the grant of stock
options to the Named Executives during the year ended December 31, 1996.
INDIVIDUAL GRANTS
------------------------------------------------------------------
% TOTAL AVERAGE
NUMBER OF SECURITIES OPTIONS GRANTED EXERCISE
UNDERLYING OPTIONS TO EMPLOYEES PRICE PER EXPIRATION GRANT DATE
NAME GRANTED(1) IN FISCAL YEAR SHARE(2) DATE PRESENT VALUE(1)
---- -------------------- --------------- --------- ---------- ----------------
William G. Petty, Jr....... -- -- -- --
William F. Lasky........... -- -- -- --
Thomas E. Komula........... 29,423 10.5% $13.00 8/4/2006 $210,289
G. Faye Godwin............. 28,475 10.2% 8.69 5/8/2006 136,042
Douglas A. Hennig.......... 22,421 8.0% 8.69 5/8/2006 107,119
- - -------------------------
(1) The Grant Date Present Values were determined using the Black-Scholes option
pricing model. Estimated values under the model are based on assumptions as
to variables such as option term, interest rates, stock price volatility and
dividend yield. The actual value, if any, the option holder may realize will
depend on the excess of the market price of the Common Stock over the
exercise price on the date the option is exercised. The Grant Date Present
Value calculation is presented in accordance with disclosure requirements of
the Securities and Exchange Commission and the Company has no way to
determine whether the Black-Scholes model can properly determine the value
of an option. There is no assurance that the value that may be realized by
the option holder will be at or near the value estimated by the
Black-Scholes model. The model assumes: (a) an option term of 10 years which
represents the length of time between the grant date of options under the
1995 Plan and the latest possible exercise date by the named executive
officers; (b) an interest rate that represents the interest rate on a U.S.
Treasury Bond with a maturity date corresponding to that of the option's
term; (c) stock price volatility calculated using weekly stock prices since
the Common Stock became publicly traded; and (d) no dividends will be paid
in the foreseeable future.
1996 STOCK OPTION YEAR-END VALUES
The following table sets forth certain information with respect to options
held as of the end of the last year for each of the Named Executives. None of
the Named Executives exercised any options during the last fiscal year.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY(1)
OPTIONS AT 12-31-96 OPTIONS AT 12-31-96
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
William G. Petty, Jr. ......................... 22,657 67,971 $223,171 $ 669,514
William F. Lasky............................... 59,362 123,706 631,744 1,265,548
Thomas E. Komula............................... -- 29,423 -- 44,135
G. Faye Godwin................................. 4,441 41,797 43,741 296,664
Douglas A. Hennig.............................. -- 32,825 -- 206,007
- - -------------------------
(1) Calculated on the basis of the fair market value of the underlying
securities on December 31, 1996 ($14.50 per share) minus the exercise price.
EMPLOYMENT AND SERVICES AGREEMENTS
SERVICES AGREEMENT WITH PETTY, KNEEN & COMPANY. The Company has entered
into a services agreement with Petty, Kneen & Company ("PK & Co."), a limited
liability company controlled by Messrs. Petty and John W. Kneen, the Company's
Vice President and Secretary. Pursuant to the services agreement, PK & Co. has
agreed to provide management, financial and strategic planning services to the
Company on a fee basis, including without limitation, the services of Mr. Petty
as Chairman and the services of Mr. Kneen as Chief Financial Officer of the
Company. The Company has agreed to pay an annual fee of $320,000 to PK & Co. for
such services; provided, however, such fee shall be reduced to $200,000 if Mr.
Kneen is not called upon to
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serve as Chief Financial Officer of the Company. The annual fee was reduced to
$200,000 upon the appointment of Mr. Komula as Chief Financial Officer in August
1996. Pursuant to the services agreement, the Company also has agreed to
reimburse PK & Co. for certain out of pocket expenses. In consideration of this
service agreement, each of Messrs. Petty and Kneen have agreed to provide the
Company with a right of first refusal with respect to certain acquisition
opportunities relating to assisted living residences or operations which come to
their attention during the term of the services agreement. This services
agreement expires on April 30, 1998 and may be extended on a quarter to quarter
basis thereafter, subject to earlier termination at the election of the Company
upon 30 days notice. In consideration of this services agreement, PK & Co.
purchased 107,575 shares of Common Stock in May 1996 at a price per share of
$4.65.
SERVICES AGREEMENT WITH RICHARD W. BOEHLKE. As a condition of, and
effective upon, the merger of the Company and Crossings, the Company entered
into a services agreement with Mr. Boehlke, formerly Crossings' President and
Chief Executive Officer, pursuant to which he has agreed to provide general,
policy-making services to the Company and to undertake special projects
designated from time to time by the Board of Directors for the three year period
ending May 1999. In consideration of these services, the Company has agreed to
pay Mr. Boehlke $200,000 per year and has agreed to provide Mr. Boehlke certain
other benefits, including use of a company car and life and medical insurance
coverage similar to that provided to the Company's executive officers. During
the term of the agreement, the Company has agreed to nominate Mr. Boehlke to
serve as a director of the Company.
EMPLOYMENT AGREEMENT WITH WILLIAM F. LASKY. The Company has entered into an
employment agreement with Mr. Lasky with a term that expires on May 31, 1998,
unless earlier terminated pursuant to the terms thereof. The agreement is
automatically renewed for additional consecutive one-year terms unless timely
notice of nonrenewal is given by either the Company or Mr. Lasky. The employment
agreement provides that Mr. Lasky shall receive a base salary in an amount
determined by the Company's Board of Directors; provided, however, that in no
event may such base salary be less than $200,000. In addition, the employment
agreement provides that Mr. Lasky is entitled to receive incentive bonuses of up
to 35% of his base salary if the Company's earnings before interest, taxes and
depreciation are within ten percent of the earnings targeted in the Company's
annual business plan approved by the Board of Directors. The employment
agreement also provides for the granting of certain stock options described
above and certain other benefits typical in employment agreements with a senior
executive officer. Finally, the employment agreement provides that Mr. Lasky
will not disclose certain proprietary information belonging to the Company or
otherwise compete with the Company for a period of eighteen months following his
termination of employment except where such termination is by the Company
without "cause."
EMPLOYMENT AGREEMENT WITH G. FAYE GODWIN, DOUGLAS A. HENNIG AND THOMAS E.
KOMULA. The Company has entered into employment agreements with each of Ms.
Godwin and Messrs. Hennig and Komula. These employment agreements are annual
agreements that automatically renew for consecutive one year terms unless timely
notice of nonrenewal is given either by the Company or the applicable officer.
These agreements provide that these officers shall receive a base salary in an
amount determined by the Company's Board of Directors, provided, however, that
in no event may such base salary be less than $110,000 in the case of Ms.
Godwin, $130,000 in the case of Mr. Hennig and $170,000 in the case of Mr.
Komula. Pursuant to these agreements, Ms. Godwin and Messrs. Hennig and Komula
are entitled to receive incentive bonuses payable, at the sole discretion of the
Board of Directors, if certain target earnings are achieved. These employment
agreements also provide for the granting of certain stock options and certain
other benefits typical in employment agreements with senior executive officers.
Pursuant to these employment agreements, each of Ms. Godwin and Messrs. Hennig
and Komula have agreed not to disclose certain proprietary information belonging
to the Company or otherwise to compete with the Company for a period of 12
months in the cases of Ms. Godwin and Mr. Komula and 18 months in the case of
Mr. Hennig following their respective termination of employment, except where
such termination is by the Company without "cause."
The employment agreement with Mr. Hennig was entered into in connection
with the Company's acquisition of Heartland (of which Mr. Hennig was the founder
and president) and afforded Mr. Hennig the right to purchase 53,525 shares of
Common Stock at a per share price of $4.65 (the "Hennig Stock"). The Hennig
Stock is nontransferable and is subject to the Company's right to repurchase
such shares at the price
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paid by Mr. Hennig for the Hennig Stock until such time as such shares become
vested, with vesting occurring 50% on the first anniversary of Mr. Hennig's
employment by the Company, 30% on the second anniversary and 20% on the third
anniversary. Pursuant to the employment agreement with Mr. Hennig, Mr. Hennig
also had the right to purchase an additional 41,580 shares of Common Stock at a
per share price of $7.22 at any time during the 30 day period commencing
December 1, 1996, which he exercised in full on December 30, 1996.
In addition, pursuant to his employment agreement, Mr. Hennig was entitled
to borrow up to $100,000 from the Company during the initial annual term of the
agreement, which loan shall bear interest at the rate of 6% per annum and shall
be repayable on the third anniversary of the date of the loan. In addition, if
the employment agreement with Mr. Hennig is renewed for a second annual term,
Mr. Hennig was entitled to borrow an additional $100,000 from the Company on
similar terms. Pursuant to these provisions, Mr. Hennig borrowed $200,000 from
the Company in December 1996. This loan is secured by Mr. Hennig's pledge of
certain shares of Common Stock owned by Mr. Hennig. These loans were repaid in
full in May 1997.
EMPLOYMENT AGREEMENTS WITH D. LEE FIELD AND DAVID M. BOITANO. The Company
entered into employment agreements with each of Messrs. Field and Boitano. These
employment agreements are annual agreements that automatically renew for
consecutive one year terms unless timely notice of nonrenewal is given either by
the Company or the applicable officer. The employment agreements provide that
Messrs. Field and Boitano shall receive a base salary in an amount (not less
than $140,000) determined by the Company's Board of Directors or President.
Pursuant to these employment agreements, Messrs. Field and Boitano (are entitled
to receive incentive bonuses of up to 25% and 20% of their base salary,
respectively, payable at the discretion of the Board of Directors if certain
targeted earnings are achieved. The employment agreements also provide for the
granting of certain stock options and certain other benefits typical in
employment agreements with senior executive officers. Finally, pursuant to these
employment agreements, each of Messrs. Field and Boitano have agreed not to
disclose certain proprietary information belonging to the Company or otherwise
to compete with the Company for a period of twelve months following their
respective termination of employment, except where such termination is by the
Company without "cause."
1995 INCENTIVE COMPENSATION PLAN
The 1995 Plan provides key employees (who may also be directors) of the
Company and its subsidiaries performance incentives and also provides a means of
encouraging stock ownership in the Company by such persons. Under the 1995 Plan,
key employees of the Company or its affiliates are eligible to receive stock
options to purchase shares of the Company's Common Stock. The 1995 Plan allows a
maximum number of shares to be subject to options of 1,425,000. Options are
granted under the 1995 Plan on the basis of the optionee's contribution to the
Company, and no option may exceed a term of ten years. Options granted under the
1995 Plan may be either incentive stock options or options that do not qualify
as incentive stock options. The Company's Compensation Committee is authorized
to designate the recipients of options, the dates of grants, the number of
shares subject to options, the option price, the terms of payment on exercise of
the options, and the time during which the options may be exercised. The price
of incentive stock options granted under the 1995 Plan cannot be less than the
fair market value of the shares at the time the options are granted.
As of the Record Date, options to purchase an aggregate of 783,297 shares
of Common Stock were granted and outstanding at a weighted average exercise
price of $6.98 per share, of which options to purchase 213,381 shares were
exercisable at such date.
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COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee has furnished the following report on the
Company's executive compensation program. The report describes the Compensation
Committee's compensation policies applicable to the Company's executive officers
and the basis on which compensation is determined for the Company's Chief
Executive Officer and the other executive officers.
COMPENSATION PHILOSOPHY
In general, the compensation policies adopted by the Compensation Committee
are designed to (i) attract and retain executives capable of leading the Company
to meet its business objections and (ii) motivate the Company's executives to
enhance long-term stockholder value. Each year, the Compensation Committee
reviews the performance of the Company and compares such performance to
specified internal and external performance standards. The Compensation
Committee has developed the following compensation guidelines as the principles
upon which compensation decisions are made:
- Provide incentives to increase corporate performance and stockholder
value relative to those of other companies in the industry; and
- Provide a competitive total compensation package that enables the Company
to attract, motivate and retain key executives. In general, the Committee
seeks to maintain compensation at least at the median compensation
provided by its peer group competitors.
EXECUTIVE COMPENSATION COMPONENTS
The Company's executive compensation program is comprised of fixed and
performance-based compensation. The fixed component is the executive officer's
base salary, and the performance-based component is comprised of incentive
bonuses and, to a lesser extent, awards of stock options.
Base Salary. Subject to the terms of the employment agreements, base
salaries for the Company's executive officers are approved annually on a
calendar year basis with the objective that the salaries be generally consistent
with median salary rates for comparable positions in companies of similar size
within the assisted living industry. The companies included in the peer index in
the stock performance graph below generally are included in this salary survey
data. In determining competitive compensation levels, the Compensation Committee
obtains information such as compensation data from independent sources. An
evaluation of competitive base salary levels must take into account the extent
to which compensation paid by various companies is weighted between base salary
and incentive compensation. Individual performance over time is also taken into
account in determining base salaries. The base salary rate of the Company's
executive officers (other than the Chief Executive Officer) are reviewed and
approved by the Compensation Committee based on recommendations made by the
Chief Executive Officer and on industry salary information.
Incentive Bonuses. To date, the Company has not adopted a formal incentive
bonus plan, but the Compensation Committee has recommended that the Company's
executive officers receive cash bonuses for 1996 based on the Company's overall
performance, with the amount awarded to each executive based on the Compensation
Committee's evaluation of each such executive's performance and relative
contribution. In addition, those executive officers subject to employment
agreements with the Company receive bonuses pursuant to the terms of such
agreements, most of which provide for the payment of bonuses at the discretion
of the Board if certain targeted earnings are achieved. Based on the Company's
performance, the Compensation Committee recommended to the Board the payment of
bonuses to such executives consistent with such agreements.
Stock Options. The Compensation Committee periodically grants the Chief
Executive Officer and the executive officers stock options under the 1995 Plan.
The options are granted based on the optionee's contribution to the Company. In
1996, no stock options were granted to the Chief Executive Officer and an
aggregate of 80,319 options were granted to the Company's other executive
officers substantially in accord with past practices. The options were priced at
fair market value and vest at a rate of 25% per year from the date of grant.
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CHIEF EXECUTIVE OFFICER COMPENSATION
The Company's Chief Executive Officer compensation is paid pursuant to the
terms of his employment agreement which was originally entered into in December
1993. This agreement provides that Mr. Lasky's base salary shall not be less
than $200,000 and that he is entitled to an incentive bonus in an amount up to
35% of his base salary if the Company's earnings before interest, taxes and
depreciation are within ten percent of the earnings targeted in the Company's
annual business plan approved by the Board. As a result of the Company's
performance, Mr. Lasky received a bonus of $70,000 for 1996.
Submitted by the Compensation
Committee
Ronald G. Kenny, Chairman
Richard W. Boehlke
William G. Petty, Jr.
Jerry L. Tubergen
Pursuant to Securities and Exchange Commission ("SEC") regulations, this
report is not "soliciting material," is not deemed filed with the SEC and is not
to be incorporated by reference in any filing of the Company under the
Securities Act of 1933 (the "Securities Act") or the Securities Exchange Act of
1934 (the "Exchange Act").
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company consists of the four persons
named as signatories to the Compensation Committee report above. Mr. Petty
served as the Company's Chief Executive Officer from December 1993 until April
1996. There are no Compensation Committee Interlocks.
The Company leases an assisted living residence (in Tacoma, Washington)
from the 2010 Union L.P., of which Richard W. Boehlke, the Vice Chairman of the
Board of the Company, is the 99% general partner. Lease payments by the Company
to this partnership following the May 1996 merger with Crossings were $392,659.
In connection with the Heartland acquisition, the Company borrowed an
aggregate of $8.7 million from RDV Capital Management L.P. ("RDV Capital"), a
Delaware limited partnership, the general partner of which is RDV Corporation.
Jerry L. Tubergen, a director of the Company, is the President and Chief
Executive Officer of RDV Corporation. This loan was repaid with a portion of the
net proceeds from the Company's initial public offering.
In April 1997, to fund certain acquisition activity, the Company borrowed
$15 million from RDV Capital. This loan is unsecured, bears interest at prime
plus one percent and is repayable in April 1998.
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STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total return from August 6,
1996 (the date the Company's Common Stock began trading on the American Stock
Exchange) through May 31, 1997 with the cumulative total return of the Standard
and Poor's 500 Stock Index and a self-constructed Peer Group (as defined
below**). The return assumes reinvestment of dividends. The graph assumes an
investment of $100 on August 6, 1996 in the common stock of each of the subject
companies. The initial public offering price of the Company's Common Stock was
$13.00 per share.
COMPARISON OF 10 MONTH CUMULATIVE TOTAL RETURN*
AMONG ALTERNATIVE LIVING SERVICES, INC.,
THE S&P 500 INDEX AND A PEER GROUP
MEASUREMENT PERIOD ALTERNATIVE PEER S&P 500
(FISCAL YEAR COVERED) LIVING GROUP
SERVICES,
INC.
8/6/96 100 100 100
8/96 116 103 98
9/96 108 106 104
10/96 111 96 107
11/96 87 89 115
12/96 111 96 113
1/97 101 100 120
2/97 116 106 121
3/97 125 107 116
4/97 127 109 123
5/97 142 124 130
* $100 invested on 8/06/96 in stock or index -- including reinvestment of
dividends. Fiscal year ending December 31.
** The Peer Group is composed of selected assisted living companies selected by
the Company, consisting of: ARV Assisted Living, Inc., Assisted Living
Concepts, Inc., Atria Communities, Inc., CareMatrix Corporation, Emeritus
Corporation, Integrated Health Services, Inc., Kapson Senior Quarters Corp.,
Karrington Health, Inc., Sterling House Corporation and Sunrise Assisted
Living, Inc.
Pursuant to SEC regulations, this performance graph is not "soliciting
material," is not deemed filed with the SEC and is not to be incorporated by
reference in any filing of the Company under the Securities Act or the Exchange
Act.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company manages six dementia care residences in Wisconsin for the ALS
Partnership, which is 50% owned and controlled by Mr. Lasky, the Company's
President and Chief Executive Officer, pursuant to management agreements
providing for a management fee equal to 11% of gross operating revenues. The
management agreements expire in December 1998, but may be terminated by the
Company upon 90 days notice to the ALS Partnership. The ALS Partnership was
charged by the Company management fees of $194,000 in 1996. The Company also
manages a residence in Lodi, Wisconsin owned by a partnership of
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which Douglas A. Hennig, the Company's Senior Vice President, is a 23% limited
partner. The Company received management fees of $14,000 from this agreement in
1996.
The Company conducted site evaluations and market feasibility studies for
GranCare in 1996. The Company billed GranCare approximately $63,000 for fees
relating to these services in 1996.
For certain additional background information regarding transactions
involving the Company and its respective officers, directors and stockholders,
see "Employment and Services Agreements" and "Compensation Committee Interlocks
and Insider Participation."
The Company believes that each of the foregoing transactions was on terms
substantially similar to those that it could have obtained from unaffiliated
third parties. In the case of related party transactions, it is the Company's
policy to enter into such agreements on terms, which in the opinion of the
Company, are substantially similar to those that could otherwise be obtained
from unrelated third parties, and that all such transactions be approved by a
majority of the disinterested members of the Company's Board of Directors.
ACCOUNTANTS
The Board of Directors currently plans to appoint KPMG Peat Marwick LLP as
independent auditors for the Company for the fiscal year ending December 31,
1997. KPMG Peat Marwick LLP has examined the Company's financial statements
since 1993 and has no relationship with the Company other than that arising from
its appointment as independent auditors. Representatives of KPMG Peat Marwick
LLP are expected to be present at the Meeting, will have an opportunity to make
a statement if they desire to do so and will be available to respond to
appropriate questions from stockholders.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers, and persons who own beneficially more than 10% of a
registered class of the Company's equity securities, to file with the SEC
initial reports of ownership and reports of changes in ownership of such
securities of the Company. Directors, executive officers and greater than 10%
stockholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) reports they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and representations that no other reports were
required, all Section 16(a) filing requirements applicable to its directors,
executive officers and greater than 10% beneficial owners were complied with
during 1996, except that Mr. Komula did not report the acquisition of 4,000
shares of Common Stock in August 1996 in connection with the Company's initial
public offering until he filed his Report on Form 4 in June 1997.
ANNUAL REPORT
The Company will provide without charge, upon written request, a copy of
its Annual Report on Form 10-K, including the financial statements and the
financial statement schedules, required to be filed with the SEC for the year
ended December 31, 1996. All such requests should be directed to Alternative
Living Services, Inc.: 450 N. Sunnyslope Road, Suite 300; Brookfield, WI 53005,
Attention: Director of Corporate Communications.
OTHER MATTERS
The Board does not know of any other matters which may come before the
Meeting. If any other matters are properly presented to the Meeting, it is the
intention of the persons named in the accompanying proxy to vote, or otherwise
to act, in accordance with their best judgment on such matters.
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STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the Company's 1998
Annual Meeting of Stockholders must be received by the Company no later than
February 17, 1998, in order to be included in the proxy statement and proxy
relating to that annual meeting.
Whether or not you plan to attend, you are urged to complete, sign and
return the enclosed proxy in the accompanying envelope. A prompt response will
greatly facilitate arrangements for the Meeting, and your cooperation will be
appreciated. Stockholders who attend the Meeting may vote their shares
personally even though they have sent in their proxies.
By Order of the Board of Directors,
John W. Kneen
John W. Kneen
Secretary
Brookfield, Wisconsin
June 17, 1997
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PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 16, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
ALTERNATIVE LIVING SERVICES, INC.
The undersigned appoints William F. Lasky and Thomas E. Komula, and each
of them, with full power of substitution, the proxies and attorneys of the
undersigned, to vote as specified hereon at the Annual Meeting of Stockholders
(the "Annual Meeting") of Alternative Living Services, Inc. (the "Company") to
be held at The Milwaukee Marriott - Brookfield, Hospitality Suite 2, 375 South
Moorland Road, Brookfield, Wisconsin 53005, on Wednesday, July 16, 1997 at 10:00
a.m., Milwaukee time, and at any adjournments or postponements thereof, with all
powers (other than the power to revoke the proxy or vote the proxy in a manner
not authorized by the executed form of proxy) that the undersigned would have if
personally present at the Annual Meeting, to act in their discretion upon any
other matter or matters that may properly be brought before the Annual Meeting
and to appear and vote all the shares of Common Stock of the Company that the
undersigned may be entitled to vote. The undersigned hereby acknowledges
receipt of the accompanying Proxy Statement and Annual Report to Stockholders,
and hereby revokes any proxy or proxies heretofore given by the undersigned
relating to the Annual Meeting.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
[X] Please mark your
vote as in this
example
The Board recommends a vote FOR the following proposal:
FOR all WITHHOLD
nominees (except authority to vote NOMINEES:
1. To elect as marked below) for all nominees Richard W. Boehlke
the seven [ ] [ ] Gene E. Burleson
nominees Robert Haveman
listed at right to the Board of Directors of Ronald G. Kenny
Alternative Living Services, Inc. William F. Lasky
William G. Petty, Jr.
INSTRUCTIONS: To withhold authority to vote for any Jerry L. Tubergen
individual nominee, write that name in the space
provided below.
- - ------------------------------------------
This proxy may be revoked at any time prior to the voting thereof.
UNLESS OTHERWISE MARKED, THIS PROXY WILL BE VOTED AS IF MARKED FOR ALL NOMINEES
LISTED AT RIGHT.
PLEASE DATE, MARK, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ENVELOPE PROVIDED.
Signature Dated: 1997
------------------- -------------------------- ------------
SIGNATURE IF JOINTLY HELD
NOTE: Please date and sign as name appears hereon. When signing as executor,
administrator, trustee, guardian or attorney, please give full title as
such. If a corporation, please sign in full corporate name by president
or other authorized corporate officer. If a partnership, please sign in
partnership name by authorized person. Joint owners should each sign.