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TABLE OF CONTENTS
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrantý | ||
Filed by a Party other than the Registranto | ||
Check the appropriate box: | ||
o | Preliminary Proxy Statement | |
o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
ý | Definitive Proxy Statement | |
o | Definitive Additional Materials | |
o | Soliciting Material under §240.14a-12 |
LTC Properties, 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): | ||||
ý | No fee required. | |||
o | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | |||
(1) | Title of each class of securities to which transaction applies: | |||
(2) | Aggregate number of securities to which transaction applies: | |||
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | |||
(4) | Proposed maximum aggregate value of transaction: | |||
(5) | Total fee paid: | |||
o | Fee paid previously with preliminary materials. | |||
o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | |||
(1) | Amount Previously Paid: | |||
(2) | Form, Schedule or Registration Statement No.: | |||
(3) | Filing Party: | |||
(4) | Date Filed: |
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 1, 2011MAY 22, 2012
The 20112012 Annual Meeting of Stockholders of LTC Properties, Inc. will be held on Wednesday, June 1, 2011Tuesday, May 22, 2012 at 10:9:00 a.m., local time, at the Hyatt Westlake Plaza, 880Montage Laguna Beach, 30801 S. Westlake Blvd., Westlake Village,Coast Highway, Laguna Beach, California 9136192651 to conduct the following items of business:
Only stockholders whose names appear of record on our books at the close of business onApril 26, 20119, 2012 are entitled to notice of, and to vote at, such 20112012 Annual Meeting or any adjournments of such 20112012 Annual Meeting.
All stockholders are cordially invited to attend the meeting in person. However, to assure your representation at the meeting, you are urged to sign and return the enclosed proxy promptly in the postage-paid envelope enclosed for that purpose. Any stockholder attending the meeting may vote in person even if he or she has returned a proxy.
By Order of the Board of Directors | ||
PAMELA J. SHELLEY-KESSLER Executive Vice President, Chief Financial Officer and Corporate Secretary |
Westlake Village, California
April 29, 201120, 2012
IMPORTANT: | Whether or not you plan to attend the | ||
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to Be Held on May 22, 2012—the Proxy Statement and the Annual Report are available at
http://www.amstock.com/ProxyServices/ViewMaterial.asp?CoNumber=26002.
PROXY STATEMENT | 1 | ||
Solicitation | 1 | ||
Voting Rights | 1 | ||
Voting of Proxy | 1 | ||
Broker Non-Votes | |||
| 2 | ||
Revocability of Proxy | 2 | ||
CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS | 3 | ||
Code of Ethics | 3 | ||
Corporate Governance Policies | 3 | ||
Board Structure and Committee Composition | 3 | ||
Communications with the Board | 5 | ||
Consideration of Director Nominees | 5 | ||
Section 16(a) Beneficial Ownership Reporting Compliance | 6 | ||
| |||
PROPOSAL 1 ELECTION OF DIRECTORS | 7 | ||
PROPOSAL 2 RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 9 | ||
PROPOSAL 3 ADVISORY VOTE | 10 | ||
PROPOSAL 4 | 11 | ||
EXECUTIVE OFFICERS | |||
EXECUTIVE COMPENSATION DISCUSSION AND ANALYSIS | |||
Executive Compensation Program Philosophy and Objectives | |||
Executive Compensation Program Elements | |||
Compensation Committee | |||
Competitive Considerations | |||
Executive Compensation Practices | |||
Stock Ownership Guidelines | |||
Tax and Accounting Considerations | |||
SUMMARY COMPENSATION TABLE | |||
Description of Employment Agreements | |||
Grants of Plan Based Awards | |||
Outstanding Equity Awards at Year-End | 27 | ||
Option Exercises and Stock Vested During | 28 | ||
Potential Payments Upon Termination or Change In Control | 28 | ||
DIRECTOR COMPENSATION | 31 | ||
Director Compensation for the Year ended December 31, | 31 | ||
COMPENSATION COMMITTEE REPORT | 33 | ||
Compensation Committee Interlocks and Insider Participation | 33 | ||
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS | 34 | ||
Securities Authorized for Issuance under Equity Compensation Plans | 36 | ||
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE | 36 | ||
Review, Approval or Ratification of Transactions with Related Persons | 36 | ||
Transactions with Related Persons | 36 | ||
Director Independence | 37 | ||
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES AND SERVICES | 39 | ||
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS | 40 | ||
RISK OVERSIGHT | |||
OTHER MATTERS | |||
Stockholder Proposals | |||
Householding | 42 | ||
Directions | 43 | ||
APPENDIX A PROPOSED AMENDMENT TO SECTION 7.1 OF CHARTER | A-1 |
LTC PROPERTIES, INC.
This proxy statement is furnished to the stockholders of LTC Properties, Inc., a Maryland corporation, in connection with the solicitation of proxies by our Board of Directors for use at our 20112012 Annual Meeting of Stockholders to be held on Wednesday, June 1, 2011Tuesday, May 22, 2012 at 10:9:00 a.m., local time, at the Hyatt Westlake Plaza, 880Montage Laguna Beach, 30801 S. Westlake Blvd., Westlake Village,Coast Highway, Laguna Beach, California 9136192651 and at any and all adjournments of our 20112012 Annual Meeting. The approximate date on which this proxy statement and the form of proxy are first being sent to our stockholders is April 29, 2011.20, 2012.
The cost of the solicitation of proxies will be borne by us. In addition to solicitation by mail, our directors and officers, without receiving any additional compensation, may solicit proxies personally, by telephone, by facsimile or electronically. We will request brokerage houses,brokers, banks, and other custodians or nominees holding stock in their names for others to forward proxy materials to their customers or principals who are the beneficial owners of common shares and will reimburse them for their expenses in doing so. We have retained the services of Georgeson Shareholder, Inc. for a fee of $8,000 plus out-of-pocket expenses, to assist in the solicitation of proxies.
We will provide without charge to any person solicited hereby, upon the written request of any such person, a copy of our Annual Report on our Form 10-K for the year ended December 31, 20102011 filed with the Securities and Exchange Commission (or SEC). Such requests should be directed to our Investor Relations Department, at 2829 Townsgate Road, Suite 350, Westlake Village, CA 91361. Also, our Annual Report is available on our website at www.LTCproperties.com. We are not including the information contained on our website as part of, or incorporating it by reference into this proxy statement.
At the close of business on April 15, 2011,2, 2012, there were 30,334,57430,411,774 shares of common stock outstanding and eligible for voting at the 20112012 Annual Meeting. Only stockholders of record at the close of business on April 26, 2011,9, 2012, are entitled to notice of, and to vote at, the 20112012 Annual Meeting. The presence, in person or by proxy, of stockholders entitled to cast a majority of all the votes entitled to be cast constitutes a quorum for the transaction of business at the 20112012 Annual Meeting.
You may vote by attending the 2012 Annual Meeting and voting in person, or you may vote by submitting a proxy. The method of voting by proxy differs depending on whether (1) you are viewing this proxy statement on the internet or receiving a paper copy, and (2) you hold your shares as a record holder or in "street name".
If you are the record holder of your stock and you are receiving a paper copy of this proxy statement, you may vote by completing, dating and signing the proxy card that was included with the proxy statement and promptly returning it in the pre-addressed, postage paid envelope provided to you. If you do not have a postage-prepaid envelope, please mail your completed proxy card to the following address: American Stock Transfer and Trust Company, Proxy Department, 6201 15th Avenue, Brooklyn, NY 11219.
If you hold your shares of common stock in "street name", you will receive instructions from your broker, bank or other nominee on how to vote your shares. Your broker, bank or other nominee may allow you to deliver your voting instructions via the internet and may also permit you to submit your voting instructions by telephone. Please note that, if you hold your shares in "street name" and you
wish to vote in person at the 2012 Annual Meeting, you must obtain and present a proxy card issued in your name from your broker, bank or other nominee.
If you are a "street name" beneficial owner whose shares are held of record by a broker, the rules of the New York Stock Exchange (or NYSE) require your broker is required to ask you for instructions on how to vote. If you do not provide voting instructions to your shares will not be voted on any proposal on which the broker, does not havethen your broker may only exercise discretionary authority to vote.vote on routine matters. Of the items described in this proxy statement, routine matters consist of Proposal 2, ratification of independent registered public accounting firm, and Proposal 4, increase in the number of authorized shares of common stock. Your broker may not exercise discretionary authority to vote on non-routine matters. This lack of discretionary authority is called a "broker non-vote." In these cases,Of the items described in this proxy statement, non-routine matters consist of Proposal 1, election of directors, and Proposal 3, advisory vote to approve named executive officer compensation. The effect of broker non-votes is set forth in the description of each item in this proxy statement. Despite limitations impacting broker non-votes, your broker can register your shares as being present at the 20112012 Annual Meeting for purposes of determining the presence of a quorum but will not be able to vote on those matters for which specific authorization is required under the rules of the New York Stock Exchange (or NYSE). For the 2011 Annual Meeting, brokers are prohibited under NYSE rules from exercising discretionary authority with respect to Proposal 1 election of directors, Proposal 3 advisory vote on executive compensation, and Proposal 4 advisory vote on frequency of advisory vote on executive compensation. Brokers still are able to exercise discretionary voting authority with respect to the Proposal 2 ratification of the appointment of our independent registered public accounting firm.
Table of Contentsquorum.
VotingBoard of ProxiesDirector's Recommendations
Unless you give other instructions on your proxy card, the persons named as proxy holders on the proxy card will vote in accordance with the recommendations of the Board of Directors. The Board of Directors' recommendations are set forth together with the description of each item in this proxy statement. In summary, the Board of Directors recommends a vote:
The giving of the encloseda proxy does not preclude the right to revoke the proxy or vote in person should the stockholder giving the proxy so desire. A
If you are a stockholder of record, you have the power to revoke your proxy may be revoked at any time prior to its exercise byby: (a) delivering a written statement to our Investor Relations Department that the proxy is revoked,revoked; (b) by delivering to us a later-dated proxy executed by the person executing the prior proxy,proxy; or (c) by attending the 20112012 Annual Meeting and voting in person.
If you hold your shares in "street name" through a broker, bank or other nominee, you may change your vote by submitting new voting instructions to your broker, bank or other nominee. Please note that voting in person at the 2012 Annual Meeting will only act to revoke prior voting instructions if you have obtained and present a proxy card issued in your name from your broker, bank or other nominee.
ALL STOCKHOLDERS ARE URGED TO COMPLETE, SIGNVOTE AS PROMPTLY AS POSSIBLE VIA (A) THE INTERNET OR TELEPHONE, IF AND RETURNAS INSTRUCTED BY YOUR BROKER OR OTHER NOMINEE, OR (B) IF THIS PROXY STATEMENT WAS MAILED TO YOU, BY COMPLETING, DATING AND SIGNING THE ENCLOSED PROXY CARD AND MAILING IT IN THE ACCOMPANYING PROXY CARD IN THE ENCLOSEDPOSTAGE PAID ENVELOPE.
CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS
LTC Properties, Inc. (or LTC) is committed to having sound corporate governance principles. To that end, we have adopted a Code of Business Conduct, Ethics and Corporate Governance applicable to our Board of Directors, principal executive officer, principal financial officer, principal accounting officer or controller and other officers and employees. Our Code of Business Conduct, Ethics and Corporate Governance is available on our website (www.LTCproperties.com). If we amend or waive the Code of Business Conduct, Ethics and Corporate Governance with respect to our directors, principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, we will post the amendment or waiver on our website.
To guide us in director independence and other governance matters, we have adopted Corporate Governance Policies as required by the listing standardstandards of the NYSE. The matters addressed in our Corporate Governance Policies include Board composition, Board meetings, Board committees, management responsibility, and stock ownership guidelines. A copy of our Corporate Governance Policies is available on our website at www.LTCproperties.com.
Board Structure and Committee Composition
The business of LTC is managed under the direction of the Board of Directors (or Board), which is elected by our stockholders. The basic responsibility of the Board is to lead our company by exercising its business judgment to act in what each director reasonably believes to be the best interests of our company and its stockholders. Leadership is important to facilitate the Board acting effectively as a working group so that our company and its performance may benefit. Our Corporate Governance Policies contemplate that the Chief Executive Officer shall be nominated annually to serve on the Board.
Our Board currently separates the positions of Executive Chairman and Chief Executive Officer. Our Executive Chairman, Mr. Dimitriadis, founded LTC in 1992 and until March 2007 served as Chief Executive Officer. As Executive Chairman, he is able to make a time commitment to advise on our company's operations, has an extensive knowledge of our company, its challenges, and opportunities, and has a productive working relationship with the company's officers and employees. The role of Executive Chairman includes providing continuous feedback on the direction, performance and strategy of our company, serving as chairman of regular and executive sessions of the Board, setting the Board's agenda with the Chief Executive Officer, and leading the Board in anticipating and responding to key company developments. Separation of the positions of Chairman and Chief Executive Officer is not mandated by our company's articles, bylaws, or Corporate Governance Policies. The Board believes that the advisability of having a separate or combined Executive Chairman and Chief Executive Officer is dependent upon the strengths of the individuals that hold these positions and the most effective means of leveraging these strengths. At this time, given the composition of our Board, the effective interaction between Mr. Dimitriadis, as Executive Chairman, and Ms. Simpson, as Chief Executive Officer, the Board believes that separating the Chief Executive Officer and Executive Chairman positions provides our company with the right foundation to pursue strategic and operational objectives, while maintaining effective oversight and objective evaluation of the performance of our company.
Aside from Mr. Dimitriadis and Ms. Simpson, the four remaining members of our Board are independent directors. Our Corporate Governance Policies provide that, where the chairman is not independent, one independent director may be appointed "lead independent director." If no "lead independent director" has been appointed by the Board, the designation of the presiding director at independent directors' meetings will rotate among the Chairmen of each committee. The "lead
independent director" will periodically and no less frequently than annually, schedule and conduct separate meetings of the independent directors only. Currently, Mr. Hendrickson is designated "lead independent director." In accordance with our Corporate Governance Policies, the independent members of the Board meet separately without management directors at least once per year to discuss such matters as the independent directors consider appropriate.
As of the date of this proxy statement, our Board has six directors and the following three committees: (1) Audit; (2) Compensation; and (3) Nominating and Corporate Governance. On February 17, 2011,January 10, 2012, the Board nominated six incumbent directors for election at the Annual Meeting on June 1, 2011.May 22, 2012. Those nominated were Messrs. Dimitriadis, Hendrickson and King, Dr. Triche and Mses. Simpson and Shapiro. The function of each of the committees and the membership of the committees currently and during the last year are described below. Each of the committees operates under a written charter adopted by the Board. All of the committee charters are available on our website (www.LTCproperties.com). During fiscal 2010,2011, the Board held 10five meetings. Each Board member attended 100% of Board and Committee meetings in 2010 while he or she served as director.2011. Our policy is to schedule our annual meeting of stockholders after consulting with each director regarding their availability to help ensure their ability to attend. All Board members at that time attended our 20102011 Annual Meeting of Stockholders.
The following table reflects the current composition of each committee:
Director | Audit Committee | Compensation Committee | Nominating and Corporate Governance Committee | |||
---|---|---|---|---|---|---|
Andre C. Dimitriadis | ||||||
Boyd W. Hendrickson | * | * | ||||
Edmund C. King | • | * | * | |||
Devra G. Shapiro | * | * | • | |||
Wendy L. Simpson | ||||||
Timothy J. Triche, MD | * | • | * |
Audit Committee
The Audit Committee has oversight of all compliance related to financial matters, SEC reporting and auditing. The "Report of the Audit Committee of the Board of Directors" is contained herein on page 37.34. The Audit Committee Charter is available on our website (www.LTCproperties.com). The Audit Committee met sevenfive times during 2010.2011.
The Board has determined that each member of the Audit Committee is independent within the meaning of the Securities Exchange Act of 1934, as amended (or Exchange Act) and the listing standards of the NYSE. The Board also has determined that Mr. King, the current chair of the Audit Committee, and Ms. Shapiro are qualifiedeach qualify as an "audit committee financial expert" as defined by SEC rules and that they have accounting and related financial management expertise within the meaning of the listing standards of the NYSE.
Compensation Committee
The Compensation Committee is responsible for overseeing, reviewing, and administering our compensation and benefit practices. The Compensation Committee oversees our general compensation policies, reviews and approves compensation of our executive officers and administers all of our
employee benefit plans. The Compensation Committee Charter is available on our website (www.LTCproperties.com). The Compensation Committee met seventhree times during 2010.2011. The Board has
determined that each member of the Compensation Committee is independent within the meaning of the listing standards of the NYSE.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee is responsible for (i) identifying, screening and reviewing individuals qualified to serve as directors and recommending to the Board candidates for nomination for election at the 2011our Annual Meeting of Stockholders or to fill Board vacancies; (ii) overseeing our policies and procedures for the receipt of stockholder suggestions regarding Board composition and recommendations of candidates for nomination by the Board; (iii) developing, recommending to the Board and overseeing implementation of our Code of Business Conduct, Ethics and Corporate Governance; and (iv) reviewing on a regular basis our overall corporate governance policies and procedures and recommending improvements when necessary. The Nominating and Corporate Governance Committee Charter is available on our website (www.LTCproperties.com).
The Nominating and Corporate Governance Committee met fivetwo times during 2010.2011. The Board has determined that each member of the Nominating and Corporate Governance Committee is independent within the meaning of the listing standards of the NYSE.
Stockholders and all other parties interested in contacting the Board, its committees, the independent directors as a group, the presiding director, or individual directors may send written correspondence to the Audit Committee Chairman of LTC Properties, Inc. at 2829 Townsgate Road, Suite 350, Westlake Village, California 91361. All such communications will be forwarded to the relevant director(s), except for solicitations or other matters unrelated to our company.
Consideration of Director Nominees
The Board is responsible for the selection of candidates for the nomination or appointment of all Board members. The Nominating and Corporate Governance Committee, in consultation with the Chief Executive Officer, recommends candidates for election to our Board and considers recommendations for Board candidates submitted by stockholders using the same criteria it applies to recommendations from Nominating and Corporate Governance Committee members, directors and members of management. The Nominating and Corporate Governance Committee will also consider whether to nominate any person nominated by a stockholder pursuant to the provisions of our Bylaws relating to stockholder nominations as described immediately below. Since 2010,2011, there have been no material changes to the procedures by which stockholders may recommend nominees. Stockholders may submit recommendations in writing addressed to the Nominating and Corporate Governance Committee, LTC Properties, Inc., 2829 Townsgate Road, Suite 350, Westlake Village, CA 91361.
Stockholders may directly nominate persons for director only by complying with the procedure set forth in our Bylaws, which in summary requires that the stockholder submit the names of such persons in writing to our Corporate Secretary not less than 60 days nor more than 150 days prior to the first anniversary of the date of the preceding year's Annual Meeting. The nominations must set forth (i) as to each person whom the stockholder proposes to nominate for election or reelection as a director and as to the stockholder giving the notice (a) the name, age, business address and residence address of such person, (b) the principal occupation or employment of such person, (c) the class and number of shares of our capital stock which are beneficially owned by such person on the date of such stockholder notice, (d) such nominee's consent to serve as a director if elected and (ii) as to the stockholder giving the notice (a) the name and address, as they appear on our books, of such stockholder to be
supporting such nominees and (b) the class and number of shares of our capital stock which are beneficially owned by such stockholder on the date of such stockholder notice and by any other
stockholders known by such stockholder to be supporting such nominees on the date of such stockholder notice.
Once a prospective nominee has been identified, by either the Nominating and Corporate Governance Committee or proposed by the stockholders, the Nominating and Corporate Governance Committee makes an initial determination as to whether to conduct a full evaluation of the prospective candidate. This initial determination would include whatever information is provided with the recommendation of the prospective candidate and the Nominating and Corporate Governance Committee's own knowledge of the prospective candidate. The Nominating and Corporate Governance Committee may make inquiries of the person making the recommendation or of others regarding the qualifications of the prospective candidate. The preliminary determination is based primarily on the need for additional Board members to fill vacancies or expand the size of the Board. The Board's policy is to encourage selection of directors who will contribute to our overall corporate goals and to the discharge of the Board's responsibility to our stockholders. The Nominating and Corporate Governance Committee may, at the request of the Board from time to time, review the appropriate skills and characteristics required of Board members in the context of the current makeup of the Board. Board members are expected to prepare for, attend and participate in meetings of the Board and the committees on which they serve; therefore, a prospective candidate must have the ability to dedicate sufficient time, energy and attention to the diligent performance of his or her duties as a Board member.
The Nominating and Corporate Governance Committee may conduct interviews with prospective nominees in person or by telephone. After completing the evaluation and interviews, the Nominating and Corporate Governance Committee makes a recommendation to the full Board as to the persons who should be nominated by the Board, and the Board determines the nominees after considering the recommendation and report of the Nominating and Corporate Governance Committee.
The Nominating and Governance Committee does not have a specific policy with regard to the consideration of diversity in identifying director nominees. As part of its periodic review of the composition of the Board, the Nominating and Governance Committee considers whether the composition of the Board reflects the appropriate balance of independence, sound judgment, business specialization, technical skills, diversity, and other desired qualities. The Nominating and Governance Committee does not have formal objective criteria for determining the amount of diversity needed or present on the Board. Instead, the Nominating and Governance Committee seeks to have a Board with a diversity of background and experience.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than ten percent of a registered class of our equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of our company.
To our knowledge, based solely on review of the copies of such reports and written representations that no other reports were required, during the year ended December 31, 2010,2011 all directors, executive officers and persons who beneficially own more than 10% of our common stock have complied with the reporting requirements of Section 16(a); except that (i) one report, covering two transactions, was filed late by Mr. Hendrickson, (ii) one report, covering one transaction, was filed late by Mr. King;Triche, and National Health Investors, Inc. failed to file on a timely basis its initial statement of beneficial ownership on Form 3.(iii) one report, covering one gift transaction in 2006 and one gift transaction in 2007, was filed late by Mr. King.
PROPOSAL 1
ELECTION OF DIRECTORS
Six directors will be elected at the 20112012 Annual Meeting of Stockholders. Each person elected as director will hold office until the 2012 Annual Meeting of Stockholders and, in each case, until their respective successors have been duly elected and qualified. Each nominee listed below is currently a director of our company. The names of the six director nominees, their business experience, and specific qualifications, attributes, or skills to serve as director, are set forth below:
Andre C. Dimitriadis Director since 1992 Age | Mr. Dimitriadis founded LTC Properties, Inc. in 1992 and was our Chairman and Chief Executive Officer from inception through March 2007. In March 2007, Mr. Dimitriadis assumed the position of Executive Chairman. | |
As founder and former Chief Executive Officer, Mr. Dimitriadis brings to the Board of LTC Properties, Inc. a deep understanding of our company's business, a historical perspective on our company's strategy, and experience in long term care and capital markets. These factors, and Mr. Dimitriadis' prior service as director of LTC Properties, Inc., led the Board to conclude he should be nominated to serve another term as director. | ||
Boyd W. Hendrickson Director since 2005 Age | Mr. Hendrickson is Chief Executive Officer and Chairman and Member of the Board of Skilled Healthcare Group, Inc. (or SHG). Mr. Hendrickson has been the Chief Executive Officer of SHG since April 2002. SHG is located in Foothill Ranch, California and is a publicly-traded company with subsidiaries that own and operate skilled nursing and assisted living facilities. Since 2005, Mr. Hendrickson also has served as a managing member of Executive Search Solutions, LLC, a provider of recruiting services to the healthcare services industry. Previously, Mr. Hendrickson was the President and Chief Executive Officer of Evergreen Healthcare, LLC, an operator of long-term healthcare facilities, from January 2000 through April 2002. Mr. Hendrickson is a former member of senior management and the Boards of Directors of Beverly Enterprises, Inc. and Hallmark Health Services. | |
Mr. Hendrickson's prior service as an independent director of LTC Properties, Inc., current and past executive and director experience with other public companies, and his multi-decade involvement in the understanding of the health care industry led the Board to conclude he should be nominated to serve another term as director. | ||
Edmund C. King Director since 1992 Age | Mr. King has served as Chief Financial Officer and on the Board of Directors of Invisa, Inc., a publicly-held industrial instrument company, since February 2000, and serves as their Chief Executive Officer. He also has been the general partner of Trouver Capital Partners, an investment banking firm with locations in the Western United States, since 1997. Previously, Mr. King was Ernst & Young LLP's Southern California senior health care partner from 1973 through September 1991. He is on the Board of Directors of Accentia Biopharmaceuticals, Inc. and its subsidiary Biovest International, Inc., both publicly-traded biopharmaceutical companies. |
Mr. King's prior service as an independent director of LTC Properties, Inc., financial management background, history of working with public companies, knowledge of health care matters, and multi-decade experience with accounting-related reporting and controls led the Board to conclude he should be nominated to serve another term as director. | ||
Devra G. Shapiro Director since 2009 Age | Ms. Shapiro | |
Ms. Shapiro's prior service as an independent director of LTC Properties, Inc., her current position as | ||
Wendy L. Simpson Director since 1995 Age | Ms. Simpson was appointed Chief Executive Officer and President in March 2007. She also served as Chief Financial Officer from July 2000 through March 2007, Treasurer from January 2005 through March 2007, and President and Chief Operating Officer from October 2005 through March 2007. She also was Vice Chairman of the Board from April 2000 through October 2005. | |
Having served as a senior executive officer of LTC Properties, Inc. for more than a decade, including currently as President and Chief Executive Officer, Ms. Simpson brings a deep understanding of our company's historical and current business and financial operations. In addition, our Corporate Governance Policies contemplate that our Chief Executive Officer shall be nominated to serve on the Board of Directors. These factors, and Ms. Simpson's prior service as director of LTC Properties, Inc., led the Board to conclude that she should be nominated to serve another term as director. | ||
Timothy J. Triche, MD Director since 2000 Age | Dr. Triche has been the Director of the Center for Personalized Medicine at Children's Hospital Los Angeles since July 2010 and previously served as the Chairman of the Department of Pathology and Laboratory Medicine at Children's Hospital Los Angeles since 1988. He has also been a Professor of Pathology and Pediatrics at the University of Southern California Keck School of Medicine in Los Angeles, California since 1988. He also serves on the Board of Directors of Novelix Pharmaceuticals, Inc., a private California-based biotechnology company, |
Dr. Triche's prior service as an independent director of LTC Properties, Inc., current and past executive and director experience with other health care companies, and his overall background in the health care industry led the Board to conclude he should be nominated to serve another term as director. |
Unless authority to vote for the election of directors has been specifically withheld, the persons named in the accompanying proxy intend to vote for the election of the nominees named above to hold office as directors until the 2012 Annual Meeting of Stockholders and until their respective successors have been duly elected and qualified.
If any nominee becomes unavailable to serve as a director for any reason (which event is not anticipated), the shares of common stock represented by the enclosed proxy may (unless such proxy contains instructions to the contrary) be voted for such other person or persons as may be determined by the holders of such proxies.
Required Vote and Recommendations
The six nominees receiving the most votes (providing a quorum is present) will be elected as directors. For purposes of the vote on Proposal 1, abstentions and broker non-votes will not be counted as votes cast and will have no effect on the result of the vote, although they will count towards the presence of a quorum for Proposal 1. Properly executed and unrevoked proxies will be voted FOR the Board's nominees unless contrary instructions or an abstention are indicated in the proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF
THE BOARD OF DIRECTORS' NOMINEES FOR DIRECTOR.
PROPOSAL 2
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board has appointed Ernst & Young LLP as the independent registered public accounting firm to audit LTC Properties, Inc.'s consolidated financial statements for the year ended December 31, 2011.2012. During 2010,2011, Ernst & Young LLP served as our independent registered public accounting firm and also provided certain tax and other audit related services. See "Independent Registered Public Accounting Firm Fees and Services" on page 36.34. A representative of Ernst & Young LLP is expected to be present at the 20112012 Annual Meeting.
Although ratification is not required by our Bylaws or otherwise, the Board is submitting the selection of Ernst & Young LLP to our stockholders for ratification as a matter of good corporate practice. If the selection is not ratified, the Audit Committee will consider whether it is appropriate to select another registered public accounting firm. Even if the selection is ratified, the Audit Committee in its discretion may select a different registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the company and our stockholders.
Required Vote and Recommendation
Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 20112012 requires the affirmative vote of a majority of all the votes cast at a meeting at which a quorum is present. For purposes of the vote on Proposal 2, abstentions and broker non-votes will not be counted as votes cast and this will have no effect on the result of the vote although they will count towards the presence of a quorum for Proposal 2. Properly executed, unrevoked proxies will be voted FOR Proposal 2 unless a vote against Proposal 2 or abstention is specifically indicated in the proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS LTC PROPERTIES, INC.'S
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FOR THE YEAR ENDING DECEMBER 31, 2011.2012.
PROPOSAL 3
ADVISORY VOTE ONTO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (or Dodd-Frank Act) requires that we provide our stockholders with the opportunity to vote to approve, on a nonbinding, advisory basis, the compensation of our named executive officers as disclosed in this proxy statement in accordance with the compensation disclosure rules of the SEC. This proposal, commonly known as a "say-on-pay" proposal, gives stockholders the opportunity to express their views on our named executive officers' compensation. As previously reported in the Current Report on Form 8-K that we filed with the SEC on June 3, 2011, our Board of Directors has determined that LTC will hold a nonbinding, advisory "say-on-pay" vote every year to approve named executive officer compensation until the next required advisory vote on the frequency of such vote, which will occur no later than the 2017 Annual Meeting of Stockholders.
As described below under "Executive Compensation Discussion and AnalysisAnalysis" (or CD&A)," we seek to align compensation for executive management with our overall performance as well as the individual performance of each executive officer. Our compensation programs are designed to attract and retain key executives responsible for our company's success and are administered in the long-term interests of our company and our stockholders. During 2010,2011, approximately 53%38% of total namenamed executive officer compensation was in the form of long-term equity incentives.
As noted in the CD&A, our 20102011 financial performance was characterized by substantial growth in quality assets, significant growth in revenues, and increased dividends paid to our stockholders.liquidity. Please refer to CD&A and accompanying tables, and in particular the Executive Summary contained therein for details regarding how our compensation program for executive management is structured to support and reward for our annual and long-term financial performance as an organization.
Pursuant to the resolution below, we are asking our stockholders to indicate their support for our named executive officer compensation as described in this proxy statement. This proposal, commonly known as a "say-on-pay" proposal, gives stockholders the opportunity to express their views on our named executive officers' compensation. The vote on this resolution is not intended to address any specific element of compensation. Rather, the vote relates to the compensation of our named executive officers, as described in the CD&A and accompanying tables.
Accordingly, stockholders are being asked to vote on the following resolution at the 20112012 Annual Meeting:
"RESOLVED, that the stockholders of LTC Properties, Inc. approve, on an advisory basis, the compensation of the named executive officers, as disclosed in LTC Properties, Inc.'s Proxy Statement for the 20112012 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the compensation discussion and analysis, the summary compensation table, and the other related tables and disclosure."
Required Vote and Recommendation
Because the vote is advisory, it is not binding on our company, our Board of Directors, or the Compensation Committee of our Board of Directors. Our Board of Directors and the Compensation Committee will take into account the outcome of the vote, however, when designing future executive compensation programs.
For purposes of the vote on Proposal 3, abstentions and broker non-votes will not be counted as votes cast and this will have no effect on the result of the vote although they will count towards the presence of a quorum for Proposal 3. Properly executed, unrevoked proxies will be voted FOR Proposal 3 unless a vote against Proposal 3 or abstention is specifically indicated in the proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE
COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS,
AS DISCLOSED IN THIS PROXY STATEMENT.
PROPOSAL 4ADVISORY VOTE ON FREQUENCYAMENDMENT TO CHARTER
TO INCREASE NUMBER OF ADVISORY VOTE ON EXECUTIVE COMPENSATIONAUTHORIZED SHARES OF COMMON STOCK
The Dodd-Frank Act also requires that we provideAt the 2012 Annual Meeting, stockholders will be asked to approve an amendment to our stockholders withArticles of Amendment and Restatement, as amended and supplemented (or Charter) which would increase the opportunity to vote, on a non-binding, advisory basis, for their preference as to how frequently we should seek future advisory votes on the compensationnumber of authorized shares of our named executive officers as disclosed pursuantcommon stock, $0.01 par value per share, from 45,000,000 to the compensation disclosure rules of the SEC, such as Proposal 3 included in this proxy statement. By voting with respect to this Proposal 4, which we refer to as the advisory vote on executive compensation, stockholders may indicate whether they would prefer that we conduct future advisory votes on executive compensation once every one, two, or three years. Stockholders also may abstain from casting a vote on this proposal.
Our Board of Directors has determined that an advisory vote on executive compensation that occurs once every three years is the most appropriate alternative for our company and therefore our Board recommends that stockholders vote for a three-year interval for the advisory vote on executive compensation. In determining to recommend a vote for a frequency of once every three years, the Board considered how an advisory vote at this frequency will provide our stockholders with sufficient time to evaluate the effectiveness of our overall compensation philosophy, policies and practices in the context of our long-term business results, while avoiding over-emphasis on short term variations in compensation and business results. An advisory vote occurring once every three years also will permit our stockholders to observe and evaluate the impact of any changes to our executive compensation policies and practices which have occurred since the last advisory vote on executive compensation, including changes made in response to the outcome of a prior advisory vote on executive compensation.
Vote and Recommendation
The proxy card provides stockholders with the opportunity to choose among four options (every three, two, or one years, or abstaining) as to the frequency of the advisory vote on executive compensation. Stockholders therefore will not be voting to approve or disapprove the recommendation of the Board of Directors.
Because the vote is advisory, it is not binding on our company,60,000,000 shares. On January 10, 2012, our Board of Directors adopted a resolution setting forth this proposed amendment to our Charter and declaring it advisable, and directed that this proposed amendment be submitted to our stockholders for consideration at the 2012 Annual Meeting.
As of April 2, 2012, our company had 30,411,774 shares of common stock outstanding. As of April 2, 2012, our company also had 2,000,000 shares of Series C Cumulative Convertible Preferred Stock (or Series C Preferred Stock) outstanding, which is convertible into 2,000,000 shares of common stock based upon a conversion price of $19.25 per share as of April 2, 2012. Our company through subsidiaries has issued partnership units of such subsidiaries (or Units) that are convertible into, or exchangeable for, at our option, shares of common stock. As of April 2, 2012, Units convertible into, or exchangeable for, 23,294 shares of common stock at a price of $17.00 per share were outstanding. As of April 2, 2012, our company also had granted, and had outstanding, options to purchase 170,334 shares of common stock and had options available but not yet granted to purchase 271,221 shares of common stock. As a result, we have committed to the Compensation Committeepotential issuance of an additional 2,464,849 shares of common stock, in the aggregate, leaving 12,123,377 authorized shares of common stock uncommitted and available for future issuance.
Authorized and unissued shares of common stock and any additional shares of common stock to be authorized pursuant to the proposed amendment to our Charter may be issued from time to time as our Board of Directors. OurDirectors deems appropriate. The Board may authorize the issuance of shares of common stock, whether now or hereafter authorized, or securities or rights convertible into shares of common stock, for such consideration as the Board may deem advisable, subject to such restrictions or limitations, if any, as may be set forth in our Charter or Bylaws or Maryland law.
We believe the ability to issue additional shares of common stock provides our company with valuable financing options, including direct issuance, as part of an offering of convertible preferred stock or convertible bond, as acquisition consideration or as a stock dividend, among other possible financing structures. As of the date of this proxy statement, we have no present undisclosed plans to issue additional shares of common stock.
We believe that our company has a sufficient number of authorized but unissued shares of common stock to complete any potential new financing transaction that would include the issuance or contingent issuance of shares of common stock. However, if any such transaction should be completed, the remaining authorized but unissued shares of common stock available could be insufficient to permit our company to engage in certain future financing transactions. The Board of Directors and the Compensation Committee will take into account the outcome of the vote, however, when considering the frequency of future advisory votes on executive compensation. Our Board may decidetherefore believes that it is important to increase the number of authorized shares of common stock to provide our company with flexibility to act promptly with respect to any future transactions which the Board determines to be in the best interests of our stockholders.
The increase in the number of authorized shares of common stock could have an anti-takeover effect, although this is not the intent of the Board of Directors in proposing the amendment. For instance, our authorized but unissued capital stock could be issued in one or more transactions that would make more difficult or costly, and less likely, to execute a takeover of us. As of the date of this proxy statement, we are not aware of any attempt or plan to obtain control of us.
If the proposed amendment to our Charter is approved, any or all of the additional authorized shares of common stock may be issued without further action by the stockholders and without first
offering such shares to the stockholders. The issuance of additional shares of common stock otherwise than on a pro-rata basis to all current stockholders would have the effect of reducing the proportionate stock interest of our companycurrent stockholders.
The full text of the amendment to hold an advisory vote on executive compensation more or less frequently thanSection 7.1 of the frequency chosenCharter is set forth in Appendix A attached hereto, which assumes that Proposal 4 is approved by our stockholders.
If the proposed amendment to our Charter is approved by our stockholders, it will become effective upon filing, and acceptance for record, of articles of amendment as required by Maryland law.
Required Vote and Recommendation
The affirmative vote of the holders of two-thirds (2/3rds) of the outstanding shares of common stock of our company is required for approval of this proposed amendment to our Charter. For purposes of the vote on Proposal 4, abstentions and broker non-votes will not be counted as votes cast and this will have nothe effect on the result of the vote although they will count towards the presence of a quorum forvote AGAINST the Proposal. However, because Proposal 4.4 is a "routine" matter on which a broker is generally empowered to vote, it is unlikely that any broker non-votes will occur. Properly executed, unrevoked proxies will be voted FOR 3 yearsProposal 4 unless a vote for one of the other two optionsagainst Proposal 4 or abstention is specifically indicated in the proxy.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOUA VOTE FOR
APPROVAL OF THE OPTIONAMENDMENT TO THE CHARTER TO
INCREASE THE NUMBER OF ONCE EVERY THREE YEARS AS THE PREFERRED FREQUENCY FOR THE ADVISORY VOTE ON EXECUTIVE COMPENSATION.AUTHORIZED SHARES OF COMMON STOCK.
Andre C. Dimitriadis Executive Chairman Age | Andre C. Dimitriadis founded LTC Properties, Inc. in 1992 and was our Chairman and Chief Executive Officer from inception through March 2007. In March 2007, Mr. Dimitriadis assumed the position of Executive Chairman. | |
Wendy L. Simpson Chief Executive Officer and President Age | Wendy L. Simpson has been a director since 1995, Vice Chairman from April 2000 through October 2005, Chief Financial Officer from July 2000 through March 2007, Treasurer from January 2005 through March 2007, and President and Chief Operating Officer from October 2005 through March 2007. In March 2007, Ms. Simpson was appointed Chief Executive Officer and President. | |
Pamela Shelley-Kessler Executive Vice President, Chief Financial Officer and Corporate Secretary Age | Pamela Shelley-Kessler joined the company as Vice President and Controller in July 2000. In March 2007 she was appointed Senior Vice President and Chief Financial Officer. In December 2010 she was promoted to Executive Vice President. Prior to joining the company Ms. Kessler was the Corporate Controller for a privately held commercial and multifamily real estate developer and the Director of Financial Reporting for a Southern California apartment REIT. Formerly she was with Ernst &Young LLP. | |
Clint B. Malin Senior Vice President and Chief Investment Officer Age | Clint B. Malin joined the company as Vice President and Chief Investment Officer in May 2004. In December 2010 he was promoted to Senior Vice President. Mr. Malin was employed by Sun Healthcare Group, Inc., (or Sun) a nationwide operator of long-term health care facilities from 1997 through 2004. During his tenure at Sun, Mr. Malin was promoted to Vice President of Corporate Real Estate. | |
T. Andrew Stokes Senior Vice President, Marketing and Strategic Planning Age | T. Andrew Stokes joined the company in June 2007 as Vice President, Marketing and Strategic Planning. In December 2010 he was promoted to Senior Vice President. From December 2006 to June 2007, Mr. Stokes worked for Gudvi, Sussman and Oppenheim as a certified public accountant. From January 2003 through November 2006, Mr. Stokes worked as an individual investor and consultant in real estate and health care. Prior to 2003 Mr. Stokes was Senior Vice President of Corporate Development for Nationwide Health Properties, Inc. | |
Peter G. Lyew Vice President and Director of Tax Age | Peter G. Lyew joined the company in June 2000 as Director of Tax and was promoted to Vice President in December 2001. Prior to joining the company he held tax management positions with Sun America Affordable Housing, where he specialized in real estate partnerships, and Ernst & Young Kenneth Leventhal. Formerly he was with Arthur Andersen & Company. | |
Caroline Chikhale Vice President, Controller and Treasurer Age 35 | Caroline Chikhale joined the company as Accounting Manager in May 2002. In May 2005 she was appointed Assistant Controller and Assistant Treasurer and in March 2007, Ms. Chikhale was appointed Vice President, Controller and Treasurer. Prior to joining the company she was employed by Ernst & Young, LLP. |
EXECUTIVE COMPENSATION DISCUSSION AND ANALYSIS
20102011 Business Highlights
20102011 represented a year focused on capitalizing on opportunities for long-term growth for our company and stockholders.
We have adhered to a disciplined investment underwriting policy and made fewdo not make investments in assets believed by management to be overpriced. This disciplined investment policy allowed us to weather the current challenging economic environment and positioned us well to take advantage of investment opportunities going forward.
Also, we have continued our marketing strategy designed to enhance awareness of our company among local and regional operators of skilled nursing, assisted living, memory care and assistedindependent living properties in certain states. The marketing campaign highlightedhighlights our unleveredlow-levered balance sheet, our access to capital to invest, our ability and interest in doing small transactions, our strong but small management team and our many years in the industry.
As a direct result of these efforts, in 20102011 we grew substantially by purchasing approximately $94.6$106.5 million, including transaction fees, of assets comprised of skilled nursing properties, (or SNF), assisted living properties (or ALF) and properties providing combinations of independent living, skilled nursing or assisted living services and SNF or ALF services.
Other 2010 business highlights include:
In addition, we increased our liquidity during 20102011 by establishingentering into a new $210.0 million unsecured revolving credit relationship with Prudential Investment Management, Inc. underagreement which provides the opportunity to increase the availability up to a total of $250.0 million. Also, we have borrowed $50sold $50.0 million aggregate principal amount of 4.8% senior unsecured term notes and have access (under certain termsentered into an Amended and conditions)Restated Note Purchase and Private Shelf Agreement which provides the possible issuance of up to an additional $50$100.0 million unsecured fixed-rate term notes during a three-year issuance period.
During 2011, we sold 3,990,000 shares of common stock in an underwritten public offering for net proceeds of $103.6 million. The net proceeds were used to redeem all of our 8.0% Series F Cumulative Preferred Stock (or Series F preferred stock).
Finally, as the stock performance graph in our Form 10-K for 20102011 shows, $100 invested in LTC common stock on December 31, 20052006 would be worth $184.09$155.58 on December 31, 2010,2011, as compared to $116.13$93.11 from a like investment in the NAREIT Equity REIT Index, or $111.99$98.76 in the Standard & Poors 500 Stock Index.
20102011 Compensation Highlights
We seek to closely align the interests of our named executive officers (or NEOs) with those of our stockholders. Accordingly, we have structured our executive compensation program to support this alignment, with relatively lower base salaries and by delivering a greater proportion of total compensation through annual bonus and long-term equity incentive opportunities.
In recognition of the achievements highlighted above, during 2010 the Board promoted its Chief Financial Officer, Ms. Kessler to Executive Vice President; its Chief Investment Officer, Mr. Malin to Senior Vice President; and promoted Mr. Stokes to Senior Vice President of Marketing and Strategic Planning.
In view of thesetheir accomplishments and our financial performance during 2010,2011, the Compensation Committee recommended and the Board approved:
2011 "Say-On-Pay" Vote
At LTC's 2011 Annual bonuses for the NEOs with respect to 2010 performance consistent with our business results; and
20102011 Corporate Governance Highlights
We seek to maintain good governance standards, including with respect to the oversight of our compensation policies and practices. Following are highlights of the policies and practices in effect during 2010:2011:
We encourage you to read this Compensation Discussion and Analysis for a detailed discussion of our executive compensation program, including information about the fiscal 20102011 compensation of the NEOs.
Executive Compensation Program Philosophy and Objectives
We endeavor to ensure that the compensation programs for our executive officers are effective in attracting and retaining key executives responsible for our company's success and are administered in appropriate fashion in the long-term interests of our company and our stockholders. Through the oversight of the Compensation Committee, we seek to align total compensation for executive management with our overall performance as well as the individual performance of each executive officer.
Our executive compensation policies may be summarized as follows:
Executive Compensation Program Elements
We seek to achieve our compensation program objectives through the following key compensation elements: base salary, annual bonus opportunity, long-term equity incentive opportunity and severance upon termination of the executive officers' employment under certain conditions or change in control
of our company. We believe that each element of our executive compensation program helps us to achieve one or more of our compensation objectives as follows:
Base salary—attract, motivate, and retain qualified key executives. We believe the base salary should reflect job responsibilities, value to our company, individual performance/expertise and competitiveness of the market for the executive's services/salary norms for persons in comparable positions at comparable companies.
Annual bonuses—reward company performance and individual performance and effort. We believe the annual bonus should be linked to individual performance and to our company's performance as a whole, and where practicable, should be related to variables under our management's control.
Long-term equity incentives—align executives' financial interests with those of our stockholders. We believe that long-term compensation should motivate and reward the creation and preservation of long-term stockholder value.
Severance—attract, motivate and retain qualified key executives. We believe that providing our executives with severance and other benefits upon termination of employment or change in control is consistent with the severance protections offered by similar companies and is an integral part of total executive compensation.
Base salaries and severance are designed primarily to attract, motivate and retain qualified key executives. These are the elements of our executive compensation program where the value of the benefit in any given year is typically not variable. We believe that it is important to provide executives with predictable benefit amounts that reward the executive's continued service. Base salaries are paid out on a short-term basis and are intended to attract and motivate executives. Severance and other benefits are paid out on a longer-term basis such as upon termination of employment or change in control of our company and are designed to aid in retaining executives.
Annual bonuses are designed to reward performance, both at the company and individual level. Annual bonuses are paid out on a short-term basis and are designed to reward performance for that period.
Long-term equity incentives are intended to align executives' and stockholders' interests. Long-term equity incentives are typically earned and paid out on a longer-term basis and are designed to reward performance over one or more years.
The Compensation Committee reviews and approves the compensation of our executive officers and determines our general compensation policy. The Compensation Committee is also responsible for the administration of our Equity Participation Plans. During 2008, we adopted the 2008 Equity Participation Plan under which 600,000 shares of common stock have been reserved for awards, including nonqualified stock options grants and restricted common stock grants to officers, employees, non-employee directors and consultants. The Compensation Committee is authorized to determine the options and restricted common stock awards to be granted under such plan and the terms and provisions of such options and restricted common stock awards. The Compensation Committee determines the base salary, annual bonus and long-term equity incentives of our Chief Executive Officer. Wendy L. Simpson, our Chief Executive Officer and President, recommends to the Compensation Committee the base salary, annual bonus and long-term compensation levels for all of our other officers. None of the other executive officers had any role in determining or recommending the form or amount of the compensation of the other executive officers.
In determining the level and composition of compensation for the executive officers, the Compensation Committee considers various corporate performance measures, both in absolute terms and in relation to similar companies, and individual performance measures. Although the Compensation Committee considers funds from operations per share as an important measure of our performance, the Compensation Committee does not apply any specific quantitative formula in making compensation decisions. The Compensation Committee also may evaluate the following factors in establishing executive compensation: (a) comparative compensation surveys and other material concerning compensation levels and stock grants at similar companies; (b) our historical compensation levels and stock awards; (c) overall competitive environment for executives and the level of compensation necessary to attract and retain executive talent; (d) financial performance of other real estate investment trusts relative to market condition; and (e) from time to time, the Compensation Committee may seek the advice of an independent compensation consultant in assessing its overall compensation philosophy. The Compensation Committee assigns no specific weight to any of the factors discussed above in establishing executive compensation. In determining the appropriate levels of compensation to be paid to executive officers, we do not generally factor in amounts realized from prior compensation.
While the Compensation Committee may review broad-based third party compensation surveys in determining the reasonableness of our executive officers compensation, compensation levels are not set by reference to any percentile or benchmark within any peer group of companies or otherwise. Consistent with our compensation philosophies described above, our goal is to provide each executive officer with a current compensation package that is at market based upon the Compensation Committee's perception of comparable executives at comparable companies, including real estate investment trusts.
Pursuant to its charter, the Compensation Committee has the authority to engage independent compensation consultants and other professionals to assist in the design, formulation, analysis, and implementation of compensation programs for our executive officers. In November 2010, the Compensation Committee retained Pearl Meyer & Partners (or PM&P) as an independent compensation consultant to assist the Compensation Committee with its responsibilities related to our company's executive and Board of Director compensation programs. The scope of the consulting services provided by PM&P iswas limited to the services it providesprovided directly to the Compensation Committee on executive compensation matters. During the year ended December 31, 2010,2011, PM&P and its affiliates were not retained by the management of our company to provide services unrelatedrelated to executive compensation.
PM&P was engaged by the Compensation Committee to conduct a comprehensive review of our executive compensation programs. The initial phase of the review was conducted during November and December 2010 and included the following:
The competitive Peer Group included the following six health care REITs and nine apartment, office or diversified REITs:
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Due to the differences in total assets between LTC and the Peer Group companies, regression analysis was utilized to size-adjust the data and develop estimated market levels of compensation based on LTC's total asset size. The regressed Peer Group data was combined with data from selected compensation surveys to develop estimated market levels for our executives. The compensation surveys included real estate industry surveys (National Associates of Real Estate Investment Trusts Compensation Survey and National Real Estate Compensation & Benefits Survey) as well as general industry surveys (Mercer Executive Compensation Survey and Watson Wyatt Top Management Compensation Survey). PM&P compared LTC's 2010 total direct compensation (base salary, annual-annual and long-term incentives) for each executive position against the market compensation levels for similar executives in the Peer Group and the compensation surveys. LTC's aggregate total direct compensation was slightly below the market 50th percentile on a size adjusted basis.
The second phase of the engagement began in January 2011 and focused on providing the Compensation Committee with a more comprehensive review of LTC's compensation programs; the second phase is ongoing and consisted of the following activities:
The Compensation Committee anticipates utilizingutilized the findings from the PM&P review to provide some guidance with executive compensation decisions in 2011. During 2011, and beyond. Thethe Compensation Committee may also workworked with PM&P in 2011 to:
For further information as to the Compensation Committee's use of the findings from the PM&P engagement and other factors that were considered in determining 20102011 compensation levels, see the discussion below concerning fiscal 20102011 compensation.
Executive Compensation Practices
Base Salaries
Base salaries are reviewed and adjusted by the Compensation Committee on an annual basis. We typically pay base salaries in cash at regular intervals throughout the year. The Compensation Committee seeks to ensure that the base salaries are established at levels considered appropriate in light of responsibilities and duties of our executive officers as well as at levels competitive to amounts paid to executive officers of other real estate investment trusts. In determining an individual executive's actual base salary, the Compensation Committee also considers other factors, which may include the executive's past performance and contributions to our success.
Our named executive officers each have an employment agreement (see "Description of Employment Agreements" below) granting them the contractual right to receive a fixed base salary as disclosed in the "Summary Compensation Table" below.
Based on the findings from the PM&P review and recommendations received from the Chief Executive Officer, the Compensation Committee approved the following increases to base salaries for the named executive officers (excluding the Chief Executive Officer). to more closely align the executives' compensation with compensation in the peer group. Base salary increases were effective June 1, 2010.2011. In approving the salary increases, the Compensation Committee took into consideration the company's performance and cost of living increases since 2008, the last year that base salaries to the namedPM&P's 2010 executive officers were last adjusted.compensation review. The following table summarizes salary adjustments approved by the Compensation Committee for 2010.2011.
Named Executive Officer | 2010 Base Salary | 2009 Base Salary | Year over Year Increase | 2011 Base Salary | 2010 Base Salary | Year over Year Increase | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Wendy L. Simpson | $ | 416,000 | $ | 416,000 | 0 | % | $ | 500,000 | $ | 416,000 | 20 | % | ||||||||
Pamela Shelley-Kessler | $ | 215,000 | $ | 197,600 | 8.8 | % | $ | 275,000 | $ | 215,000 | 28 | % | ||||||||
Clint B. Malin | $ | 180,000 | $ | 166,400 | 8.2 | % | $ | 275,000 | $ | 180,000 | 53 | % | ||||||||
T. Andrew Stokes | $ | 180,000 | $ | 166,400 | 8.2 | % | $ | 240,000 | $ | 180,000 | 33 | % |
Annual Bonuses
Bonuses are awarded based on our overall performance and individual performance of each executive officer. We typically pay annual cash bonuses; however, bonuses may be awarded in other forms, such as stock awards, in lieu of cash payments. Bonus amounts awarded may vary from year to year and are typically paid, or awarded, at the end of the period for which performance is being rewarded. Annual bonuses for executive officers are awarded by the Compensation Committee after considering the Chief Executive Officer's recommendations.
In formulating bonus recommendations, the Chief Executive Officer took into consideration the company's performance (as summarized below), individual executive performance, the competitive market findings in the PM&P report, and the executive's total compensation package including base salary, equity awards and annual dividends earned on outstanding unvested equity awards.
In determining bonuses, the Compensation Committee evaluates the performance of our company for the year compared to other real estate investment trusts and the overall market. Accomplishments during 20102011 included the acquisition of 10following:
The Compensation Committee does not rely upon any specific
performance targets or measurements related to our company.company when determining bonuses. Overall company performance is evaluated relative to stockholder value and return over the year, revenue growth, new investment levels relative to market constraints and external factors outside the control of our company.
In considering the Chief Executive Officer's bonus recommendations, the Compensation Committee seeks to ensure that bonuses are established at levels considered appropriate in light of responsibilities and duties of our executive officers as well as at levels competitive to amounts paid to executive officers of other real estate investment trusts. In determining the individual bonus amounts the Compensation Committee considered the responsibilities and duties of our executive officers, the executive officers total compensation package including raises and equity awards, competitive amounts paid to executive officers at other real estate investment trusts, and the executive's performance and contributions to our success.
There are no specific performance targets or measurements for our executive officers that impact their bonuses. None of our executive officers have a contractual right to receive a fixed actual or target bonus for any given year. However, Ms. Simpson's employment agreement provides for an annual target bonus equal to 100% of her base salary awarded at the sole discretion of the Board of Directors. The following table shows the aggregate 20102011 bonuses awarded to our Named Executive Officers for services provided in 2010,2011, which amounts are reflected in the "Summary Compensation Table" below. BonusesDiscretionary cash bonuses awarded for 20102011 performance, successes detailed by bullet points above, were paid in 2011.2012. Ms. Simpson's entire 2011 bonus was in the form of a long-term bonus in a grant of restricted common shares, as detailed in the schedule below.
Named Executive Officer | Discretionary Bonus | |||
---|---|---|---|---|
Wendy L. Simpson | $ | 416,000 | ||
Pamela Shelley-Kessler | 135,000 | |||
Clint B. Malin | 210,000 | |||
T. Andrew Stokes | 110,000 |
Named Executive Officer | Discretionary Cash Bonus | |||
---|---|---|---|---|
Wendy L. Simpson | $ | — | ||
Pamela Shelley-Kessler | 275,000 | |||
Clint B. Malin | 275,000 | |||
T. Andrew Stokes | 180,000 |
Long-Term Equity Incentives
Long-term incentives are designed to align the executives' financial interests with those of our stockholders. Therefore, our long-term incentive compensation for our executive officers has historically taken the form of a mix of restricted common stock and stock option awards. The Compensation Committee does not have a formula for determining the mix of restricted common stock and/or stock options awarded. Awards are made on an individual basis and are not granted at any pre-determined time during the year. Restricted common stock and stock option awards typically vest ratably over a three to five-year period and are generally subject to the individual executive officer's continued employment. The level of long-term incentive compensation is determined by the Compensation Committee based on an evaluation of competitive factors in conjunction with total compensation provided to each individual executive officer. The relevant weight given to each of these factors varies from individual to individual. Stock price performance has not been a factor in determining annual compensation because the price of our common stock is subject to a variety of factors outside of our control. We do not have an exact formula for allocating between cash and non-cash compensation. Nor do we have a policy for allocating between long-term and currently paid out compensation.
The grant date of an equity award is typically the date the Compensation Committee approves the equity award. The grant date may also be a future date from the date of approval as specified by the board resolution. In no instances has the grant date been retroactive or prior to the date the Compensation Committee approved the equity award. For long-term incentive awards in the form of stock options, the exercise price is the closing price of our company's stock as reported by the NYSE on the grant date. The Compensation Committee has not and does not time the granting of equity awards with any favorable or unfavorable news released by us.
During 2008, we adopted the 2008 Equity Participation Plan (or the 2008 Plan) under which awards may be granted including stock options (incentive or non-qualified), stock appreciation rights, restricted common stock, deferred stock and dividend equivalents. We reserved 600,000 shares of common stock for issuance under this plan. As of December 31, 2010,2011, there were 333,421327,421 shares of common stock reserved for issuance under Thethe 2008 Plan. The 2008 Plan is administered by the Compensation Committee which sets the terms and provisions of the awards granted under the plan. Incentive stock options, stock appreciation rights, restricted common stock, deferred stock and dividend equivalents may only be awarded to officers and other full-time employees to promote our long-term performance and specifically, to retain and motivate senior management to achieve a sustained increase in stockholder value. Non-qualified stock options, stock appreciation rights, restricted common stock, deferred stock and dividend equivalents may be awarded to non-employee directors, officers, employees, consultants and other key persons who provide services to us. The Compensation Committee reviews and evaluates the overall compensation package of the executive officers and determines the awards based on our overall performance and the individual performance of the executive officers.
During 2011, no restricted common shares were awarded to the Named Executive Officers. In March 2010,January 2012, the Compensation Committee approved an award of restricted common stockshares to the Chief Executive Officer. In December 2010,January 2012, the Chief Executive Officer recommended and the Compensation Committee approved an award of restricted common stockshares to Ms. Shelley-Kessler and
Mr. Malin. The following table shows the newly promotedawards, which reflect the aggregate long-term equity incentives awarded to our Named Executive Officers (excludingto date in 2012.
Named Executive Officer | Restricted Stock Value | Number of Restricted Stock | |||||
---|---|---|---|---|---|---|---|
Wendy L. Simpson | $ | 953,100 | (1) | 30,000 | |||
Pamela Shelley-Kessler | 193,797 | (2) | 6,100 | ||||
Clint B. Malin | 193,797 | (2) | 6,100 |
In approving the restricted common stock awards, the Compensation Committee took into consideration the executive's historical performance and contributions, total ownership levels and the value of equity delivered historically, the below-market positioning of the executives' base salaries the executives' recent promotions, and the company's desire to retain the executives by providing a meaningful long-term incentive award to each executive which is aligned with shareholderstockholder interests. The magnitude of the awards combined with a five-yearfuture vesting perioddate effectively serveserves as a retention vehicle.
The following table shows the aggregate long-term equity incentives awarded to our Named Executive Officers in 2010.
Named Executive Officer | Restricted Stock Value | Number of Restricted Stock | |||||
---|---|---|---|---|---|---|---|
Wendy L. Simpson | $ | 2,644,006 | (1) | 99,661 | |||
Pamela Shelley-Kessler | 913,283 | (2) | 34,356 | ||||
Clint B. Malin | 900,681 | (2) | 33,881 | ||||
T. Andrew Stokes | 875,690 | (2) | 32,939 |
stock as part of their promotion. These shares vest ratably over a five-year period from the grant date.
Severance and Other Benefits Upon Termination of Employment or Change in Control
As discussed in greater detail in the section "Employment Agreements" below, we have provided our executive officers with severance and other benefits upon termination of employment or a change in control of our company. We believe that we need to provide our executive officers with severance protections that are competitive with severance protections offered by companies similar to ours. We believe the severance protections we have provided our executive officers are consistent with our compensation objective to attract, motivate and retain qualified key executives.
We believe that severance should be payable to our executive officers if their employment is terminated for any reason, except for a termination for cause or a voluntary resignation. The amount of cash severance we willhave agreed to pay and other severance benefits we extend to our executive officers upon such an occurrence is intended to help them avoid financial hardship during the period of time when the executive officer is likely to be unemployed and seeking new employment. If the executive officer's employment is terminated for any reason, except for a termination for cause or a voluntary resignation without a good reason, then we willhave agreed to pay the officer a lump sum severance payment equal to the following:
Executive Chairman | Four times base salary | |
Chief Executive Officer | Four times base salary | |
Chief Financial Officer | One times base salary | |
Senior Vice Presidents | One times base salary | |
Vice Presidents | One times base salary |
Additionally, we have agreed to extend medical and dental insurance coverage will be extended for up to 18 months at our expense to the executive officer. We have agreed to provide Ms. Simpson with health insurance benefits for life if Ms. Simpson's employment terminates for any reason except for a termination for cause or a voluntary resignation without good reason. We may elect to pay Ms. Simpson a one-time cash payment of $250,000 in lieu of continuing health insurance benefits.
We believe that severance should be payable to our executive officers upon a change of control because a change of control transaction creates uncertainty regarding the continued employment of the executive officers. The amount of cash severance we willhave agreed to pay and other severance benefits
we extend to our executive officers upon a change of control is intended to encourage the executive officers to remain employed by us during an important time when their prospects for continued employment following the change of control transaction are often uncertain. Upon a change in control of our company whether or not the officer's employment is terminated, we willhave agreed to pay the officer a severance payment in cash equal to the following:
Executive Chairman | $5,000,000 | |
Chief Executive Officer | $3,000,000 | |
Chief Financial Officer | Two times base salary | |
Senior Vice Presidents | Two times base salary | |
Vice Presidents | Two times base salary |
Further, upon a change of control all stock options and/or restricted common stock automatically vest. We have agreed to provide Ms. Simpson with health insurance benefits for life upon change of control of our company whether or not Ms. Simpson's employment is terminated. We may elect to pay Ms. Simpson a one-time cash payment of $250,000 in lieu of continuing health insurance benefits. The Compensation Committee believes that a change of control typically results in a constructive
termination of the executive officersofficer's employment and therefore designed severance protection effective upon a change of control, rather than actual termination in the event of a change of control of our company.
If any payment or benefit received by Mr. Dimitriadis or Ms. Simpson from us subjects them to excise taxes under the "golden parachute" rules on payments and benefits, then they will be entitled to receive an additional amount (a "gross-up payment" to make the officer whole for these excise taxes and for all taxes on the gross-up payment). We have agreed to provide Mr. Dimitriadis with health insurance benefits for life and Mr. Dimitriadis' two dependents with health insurance benefits until they reach the age of 22. However, we may elect to pay Mr. Dimitriadis a one-time cash payment of $250,000 in lieu of continuing health insurance benefits for Mr. Dimitriadis and his two dependents.
The Compensation Committee believes that there are several situations that could result in continuing health care coverage not being available to these executives as a result of an action taken by us or a transaction involving our company. The provision of continuing health insurance benefits was included in the evaluation of the overall compensation package we have provided to our top two executive officers. The buyout clause was designed to limit our exposure to increasing health insurance costs.
If any payment or benefit received by Mr. Dimitriadis or Ms. Simpson from us subjects them to excise taxes under the "golden parachute" rules on payments and benefits, then they will be entitled to receive an additional amount (a "gross-up payment" to make the officer whole for these excise taxes and for all taxes on the gross-up payment). Notwithstanding the foregoing, we will have no liability if an executive officer's employment is terminated for cause or by voluntary resignation without a good reason.
401(k) Savings Plan
We have a 401(k) Savings Plan which is a defined contribution plan covering all of our employees. Each year participants may contribute up to 15% of pre-tax annual compensation. In 20102011 the contributions may not exceed $16,500, or $22,000 if the employee is 50 years or older. We match up to 3% of salaries for our vice presidents and contribute 3% of the individual's salary for staff that open an account. We will not contribute any amount, nor match contributions for our executive officers at the senior vice president level and higher.
Benefits
With limited exceptions, the Compensation Committee's policy is to provide benefits to executive officers that are substantially the same as those offered to other officers of our company at or above the level of vice president. Except for the lifetime health insurance benefits described in "Severance
and Other Benefits Upon Termination of Employment or Change in Control" above and the supplemental medical insurance discussed below, the employee benefits programs in which our executive officers participate (which provide benefits such as medical, dental and vision benefits coverage, life insurance protection, and 401(k) savings plan) are generally the same programs offered to all of our full-time employees. Our officers at the level of vice president and above are eligible to participate in a supplemental medical insurance program which provides participants with reimbursements for eligible out-of-pocket medical expenses such as primary insurance co-payments, deductibles, and certain elective medical procedures not covered by the employee's primary insurance policy. Amounts reimbursed to our executive officers during 20102011 are included in the "Summary Compensation Table" below. We have agreed to provide Ms. Simpson and Mr. Dimitriadis with health insurance benefits for life and Mr. Dimitriadis' two dependents with health insurance benefits until they reach the age of 22. However, we may elect to pay Ms. Simpson and Mr. Dimitriadis a one-time cash payment of $250,000 each in lieu of continuing health insurance benefits for Ms. Simpson, Mr. Dimitriadis and Mr. Dimitriadis' two dependents. The Compensation Committee believes that there are several situations that could result in continuing health care coverage not being available to these executives as a result of an action taken by us or a transaction involving our company. The provision of continuing health insurance benefits was included in the evaluation of the overall compensation package we have provided to our top two executive officers. The buyout clause was designed to limit our exposure to increasing health insurance costs.
We encourage our executives to hold our company's stock on a long-term basis. The following table represents the company's stock ownership guidelines for our executive officers and independent directors:
Executive Chairman | Three times base salary | |
Chief Executive Officer | Three times base salary | |
Chief Financial Officer | Two times base salary | |
Senior Vice Presidents | Two times base salary | |
Vice Presidents | One times base salary | |
Independent Directors | One times annual fee |
The company's stock ownership guidelines recommend that the Executive Chairman, Chief Executive Officer, Chief Financial Officer, Senior Vice Presidents and Vice Presidents achieve the targeted level of ownership within three years from the date of hire, promotion or appointment. Also, the stock ownership guidelines recommend that the independent directors achieve the targeted level of ownership within three years from date of election. At this time all of our executive officers and independent directors hold at least the full amount of the guideline. The Nominating and Governance Committee has requested and will receivereceives from the company a quarterly report on executive and independent director stock ownership of company stock. Additionally, we do not have any policies regarding the ability of executives to hedge the economic risk of ownership in our company's stock.
Tax and Accounting Considerations
Policy with Respect to Section 162(m)
Section 162(m) of the Code denies deduction for Federal income tax purposes for certain compensation in excess of $1,000,000 paid to certain executive officers, unless certain performance, disclosure, stockholder approval and other requirements are met. The Compensation Committee will continue to reviewperiodically reviews the effects of its compensation programs with regard to Code Section 162(m). We will continue toperiodically evaluate alternatives to ensure executive compensation is reasonable, performance-based, and consistent with our overall compensation objectives. The Compensation Committee reserves the right to design programs that recognize a full range of performance criteria important to our success, even where the compensation paid under such programs may not be deductible.
Interpretations of and changes in the tax laws and other factors beyond the Compensation Committee's control may affect the deductibility of certain compensation payments. The Compensation Committee willmay consider various alternatives to preserve the deductibility of compensation payments and benefits to the extent reasonably practicable and to the extent consistent with its other compensation objectives.
This table presents information regarding compensation of our Named Executive Officers for services provided in 2011, 2010 2009 and 2008.2009.
Name and Principal Position | Name and Principal Position | Year | Salary | Bonus(1) | Stock Awards(2) | Options Awards(2) | All other Compensation(3) | Total | Year | Salary | Bonus(1) | Stock Awards(2) | Options Awards(2) | All other Compensation(3) | Total | ||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Andre C. Dimitriadis | Andre C. Dimitriadis | 2010 | $ | 240,000 | $ | — | $ | — | $ | — | $ | 6,548 | $ | 246,548 | 2011 | $ | 240,000 | $ | — | $ | — | $ | — | $ | 4,240 | $ | 244,240 | ||||||||||||||||||
Executive Chairman | 2009 | 240,000 | — | — | — | 28,088 | 268,088 | ||||||||||||||||||||||||||||||||||||||
Executive Chairman | 2010 | 240,000 | — | — | — | 6,548 | 246,548 | ||||||||||||||||||||||||||||||||||||||
2008 | 240,000 | — | — | — | 18,204 | 258,204 | 2009 | 240,000 | — | — | — | 28,088 | 268,088 | ||||||||||||||||||||||||||||||||
Wendy L. Simpson | Wendy L. Simpson | 2010 | 416,000 | 416,000 | — | — | 5,149 | 837,149 | 2011 | 465,000 | — | 953,100 | (4) | — | 7,946 | 1,426,046 | |||||||||||||||||||||||||||||
Chief Executive Officer | 2009 | 416,000 | 416,000 | (8) | 2,644,006 | (8) | — | 5,245 | 3,481,251 | ||||||||||||||||||||||||||||||||||||
and President | 2008 | 408,012 | — | (6) | 416,008 | (6) | — | 6,054 | 830,074 | ||||||||||||||||||||||||||||||||||||
Chief Executive Officer | 2010 | 416,000 | 416,000 | — | — | 5,149 | 837,149 | ||||||||||||||||||||||||||||||||||||||
and President | 2009 | 416,000 | 416,000 | (6) | 2,644,006 | (6) | — | 5,245 | 3,481,251 | ||||||||||||||||||||||||||||||||||||
Pamela Shelley-Kessler | Pamela Shelley-Kessler | 2010 | 207,750 | 135,000 | 805,677 | (4) | — | 13,256 | 1,161,683 | 2011 | 250,000 | 275,000 | (4) | 193,797 | (4) | — | 12,696 | 731,493 | |||||||||||||||||||||||||||
Executive Vice President, | 2009 | 197,600 | 90,000 | (8) | 107,606 | (8) | — | 12,339 | 407,545 | ||||||||||||||||||||||||||||||||||||
Chief Financial Officer | 2008 | 193,800 | 75,000 | (7) | 95,997 | (7) | — | 5,026 | 369,823 | ||||||||||||||||||||||||||||||||||||
and Corporate Secretary | |||||||||||||||||||||||||||||||||||||||||||||
Executive Vice President, | 2010 | 207,750 | 135,000 | 805,677 | (5) | — | 13,256 | 1,161,683 | |||||||||||||||||||||||||||||||||||||
Chief Financial Officer and | 2009 | 197,600 | 90,000 | (6) | 107,606 | (6) | — | 12,339 | 407,545 | ||||||||||||||||||||||||||||||||||||
Corporate Secretary | |||||||||||||||||||||||||||||||||||||||||||||
Clint B. Malin | Clint B. Malin | 2010 | 174,333 | 210,000 | 805,677 | (4) | — | 8,367 | 1,198,377 | 2011 | 235,417 | 275,000 | (4) | 193,797 | (4) | — | 5,983 | 710,197 | |||||||||||||||||||||||||||
Senior Vice President | 2009 | 166,400 | 90,000 | (8) | 95,004 | (8) | — | 13,097 | 364,501 | ||||||||||||||||||||||||||||||||||||
and Chief Investment Officer | 2008 | 163,200 | 75,000 | (7) | 63,003 | (7) | — | 7,188 | 308,391 | ||||||||||||||||||||||||||||||||||||
Senior Vice President | 2010 | 174,333 | 210,000 | 805,677 | (5) | — | 8,367 | 1,198,377 | |||||||||||||||||||||||||||||||||||||
and Chief Investment Officer | 2009 | 166,400 | 90,000 | (6) | 95,004 | (6) | — | 13,097 | 364,501 | ||||||||||||||||||||||||||||||||||||
T. Andrew Stokes | T. Andrew Stokes | 2010 | 174,333 | 110,000 | 805,677 | (4) | — | 15,870 | 1,105,880 | 2011 | 215,000 | 180,000 | — | — | 16,117 | 411,117 | |||||||||||||||||||||||||||||
Senior Vice President, | 2009 | 166,400 | 80,000 | (8) | 70,013 | (8) | — | 18,547 | 334,960 | ||||||||||||||||||||||||||||||||||||
Marketing and | 2008 | 163,200 | 70,000 | (7) | 56,008 | (7) | — | 15,571 | 304,779 | ||||||||||||||||||||||||||||||||||||
Strategic Planning | |||||||||||||||||||||||||||||||||||||||||||||
Senior Vice President, | 2010 | 174,333 | 110,000 | 805,677 | (5) | — | 15,870 | 1,105,880 | |||||||||||||||||||||||||||||||||||||
Marketing and | 2009 | 166,400 | 80,000 | (6) | 70,013 | (6) | — | 18,547 | 334,960 | ||||||||||||||||||||||||||||||||||||
Strategic Planning |
Named Executive Officer | | 401(k) Matching | Supplemental Insurance Plan | Total All Other Compensation | Year | 401(k) Matching | Supplemental Insurance Plan | Total All Other Compensation | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Andre C. Dimitriadis | 2010 | $ | — | $ | 6,548 | $ | 6,548 | 2011 | $ | — | $ | 4,240 | $ | 4,240 | ||||||||||||
2009 | — | 28,088 | 28,088 | 2010 | — | 6,548 | 6,548 | |||||||||||||||||||
2008 | — | 18,204 | 18,204 | 2009 | — | 28,088 | 28,088 | |||||||||||||||||||
Wendy L. Simpson | 2010 | — | 5,149 | 5,149 | 2011 | — | 7,946 | 7,946 | ||||||||||||||||||
2009 | — | 5,245 | 5,245 | 2010 | — | 5,149 | 5,149 | |||||||||||||||||||
2008 | — | 6,054 | 6,054 | 2009 | — | 5,245 | 5,245 | |||||||||||||||||||
Pamela Shelley-Kessler | 2010 | — | 13,256 | 13,256 | 2011 | — | 12,696 | 12,696 | ||||||||||||||||||
2009 | — | 12,339 | 12,339 | 2010 | — | 13,256 | 13,256 | |||||||||||||||||||
2008 | — | 5,026 | 5,026 | 2009 | — | 12,339 | 12,339 | |||||||||||||||||||
Clint B. Malin | 2010 | 5,230 | 3,137 | 8,367 | 2011 | — | 5,983 | 5,983 | ||||||||||||||||||
2009 | 4,992 | 8,105 | 13,097 | 2010 | 5,230 | 3,137 | 8,367 | |||||||||||||||||||
2008 | 4,896 | 2,292 | 7,188 | 2009 | 4,992 | 8,105 | 13,097 | |||||||||||||||||||
T. Andrew Stokes | 2010 | 5,230 | 10,640 | 15,870 | 2011 | — | 16,117 | 16,117 | ||||||||||||||||||
2009 | 4,992 | 13,555 | 18,547 | 2010 | 5,230 | 10,640 | 15,870 | |||||||||||||||||||
2008 | 4,896 | 10,675 | 15,571 | 2009 | 4,992 | 13,555 | 18,547 |
The shares granted to Ms. Shelley-Kessler and Mr. Malin will all vest on January 10, 2016. The shares granted to Ms. Simpson will all vest on June 15, 2015.
Named Executive Officer | Restricted Stock Value | Number of Restricted Stock | |||||
---|---|---|---|---|---|---|---|
Wendy L. Simpson | $ | 953,100 | 30,000 | ||||
Pamela Shelley-Kessler | 193,797 | 6,100 | |||||
Clint B. Malin | 193,797 | 6,100 |
Named Executive Officer | Restricted Stock Value | Number of Restricted Stock | |||||
---|---|---|---|---|---|---|---|
Wendy L. Simpson | $ | 416,008 | 24,385 | ||||
Pamela Shelley-Kessler | 95,997 | 5,627 | |||||
Clint B. Malin | 63,003 | 3,693 | |||||
T. Andrew Stokes | 56,008 | 3,283 |
Named Executive Officer | Restricted Stock Value | Number of Restricted Stock | |||||
---|---|---|---|---|---|---|---|
Wendy L. Simpson | $ | 2,644,006 | 99,661 | ||||
Pamela Shelley-Kessler | 107,606 | 4,056 | |||||
Clint B. Malin | 95,004 | 3,581 | |||||
T. Andrew Stokes | 70,013 | �� | 2,639 |
Description of Employment Agreements
The following table provides details regarding the employment agreements for our Named Executive Officers during the year ended December 31, 2010:2011:
Named Executive Officer | Agreement Date | Agreement Term | Salary | Change of Control Severance | Termination Severance | Agreement Date | Agreement Term | Salary | Change of Control Severance | Termination Severance | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Andre C. Dimitriadis(1) | 7/1/07 | 4-year evergreen | $ | 240,000 | $5,000,000 | Four times base salary | 7/1/07 | 4-year evergreen | $ | 240,000 | $5,000,000 | Four times base salary | ||||||||||||
Wendy L. Simpson(2) | 12/4/07 | 3-year evergreen | 416,000 | $3,000,000 | Four times base salary | 12/4/07 | 3-year evergreen | 500,000 | $3,000,000 | Four times base salary | ||||||||||||||
Pamela Shelley-Kessler | 12/4/07 | 1-year evergreen | 215,000 | Two times base salary | One times base salary | 12/4/07 | 1-year evergreen | 275,000 | Two times base salary | One times base salary | ||||||||||||||
Clint B. Malin | 12/4/07 | 1-year evergreen | 180,000 | Two times base salary | One times base salary | 12/4/07 | 1-year evergreen | 275,000 | Two times base salary | One times base salary | ||||||||||||||
T. Andrew Stokes | 12/4/07 | 1-year evergreen | 180,000 | Two times base salary | One times base salary | 12/4/07 | 1-year evergreen | 240,000 | Two times base salary | One times base salary |
The employment agreements provide that the base salaries may be increased at the discretion of our Board. Any increase in base salary will automatically amend each executive's respective employment agreement to provide that thereafter the executive's annual base salary will not be less than the increased base salary approved by our Board. During the term of his employment by us, each officer will devote the time necessary to provide the services reasonably required by our Board and will not, without the express approval of our Board, engage for his own account or for the account of any other person or entity, in a business which competes with us.
During the year ended December 31, 2010,2011, our Compensation Committee awardeddid not award restricted common stock or stock options under our 2008 Equity Participation Plan to our Named Executive Officers, except for Mr. Dimitriadis. The following table provides detail regarding these restricted stock awards.Officers.
Name | Grant Date | Number of Shares of Stock | Grant Date Fair Value of Stock Awards | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Wendy Simpson | 3/1/2010 | 99,661 | (1) | $ | 2,644,006 | |||||
Pamela Shelley-Kessler | 3/1/2010 | 4,056 | (1) | 107,606 | ||||||
12/14/2010 | 30,300 | (2) | 805,677 | |||||||
Clint Malin | 3/1/2010 | 3,581 | (1) | 95,004 | ||||||
12/14/2010 | 30,300 | (2) | 805,677 | |||||||
T. Andrew Stokes | 3/1/2010 | 2,639 | (1) | 70,013 | ||||||
12/14/2010 | 30,300 | (2) | 805,677 |
Outstanding Equity Awards at Year-End
The following table presents information regarding the outstanding equity awards held by each Named Executive Officer as of December 31, 2010.2011.
| Option awards | Stock awards | Option awards | Stock awards | ||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Named Executive Officer | Number of securities underlying unexercised options exercisable | Number of securities underlying unexercised options unexercisable | Option exercise price | Option expiration date | Number of shares or units of stock that have not vested | Market value of shares or units of stock that have not vested(1) | Number of securities underlying unexercised options exercisable | Number of securities underlying unexercised options unexercisable | Option exercise price | Option expiration date | Number of shares or units of stock that have not vested | Market value of shares or units of stock that have not vested(1) | ||||||||||||||||||||||||||
Andre C. Dimitriadis | — | — | $ | — | — | — | $ | — | — | — | $ | — | — | — | $ | — | ||||||||||||||||||||||
Wendy L. Simpson | — | — | — | — | 95,985 | (6) | 2,695,259 | — | — | — | — | 67,925 | (6) | 2,096,166 | ||||||||||||||||||||||||
Pamela Shelley-Kessler | 10,000 | (2) | — | 23.79 | 05/15/17 | 38,107 | (7) | 1,070,045 | 10,000 | (2) | — | 23.79 | 05/15/17 | 28,819 | (7) | 889,354 | ||||||||||||||||||||||
Clint B. Malin | 30,000 | (3) | — | 23.79 | 05/15/17 | 36,343 | (8) | 1,020,511 | 30,000 | (3) | — | 23.79 | 05/15/17 | 27,858 | (8) | 859,698 | ||||||||||||||||||||||
10,000 | (4) | — | 15.13 | 05/10/14 | — | 10,000 | (4) | — | 15.13 | 05/10/14 | — | — | ||||||||||||||||||||||||||
T. Andrew Stokes | 30,000 | (5) | — | 23.47 | 06/08/17 | 35,127 | (9) | 986,366 | 30,000 | (5) | — | 23.47 | 06/08/17 | 27,093 | (9) | 836,090 |
Option Exercises and Stock Vested During 20102011
The following table shows the number and value of stock options exercised and the number of shares and value of restricted common stock that vested related to each of our Named Executive Officers during the year ended December 31, 2010.2011.
| Option awards | Stock awards | Option awards | Stock awards | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Number of shares acquired on exercise | Value realized on exercise(1) | Number of shares acquired on vesting | Value realized on vesting(2) | Number of shares acquired on exercise | Value realized on exercise(1) | Number of shares acquired on vesting | Value realized on vesting(2) | ||||||||||||||||||
Andre C. Dimitriadis | — | $ | — | — | $ | — | — | $ | — | — | $ | — | ||||||||||||||
Wendy L. Simpson | — | — | 39,248 | 1,072,144 | — | — | 28,060 | 858,781 | ||||||||||||||||||
Pamela Shelley-Kessler | — | — | 5,876 | 154,570 | — | — | 9,288 | 269,641 | ||||||||||||||||||
Clint B. Malin | — | — | 5,231 | 137,458 | — | — | 8,485 | 246,297 | ||||||||||||||||||
T. Andrew Stokes | — | — | 5,095 | 133,850 | — | — | 8,034 | 233,357 |
Potential Payments Upon Termination or Change In Control
We have provided our executive officers with employment contracts that provide certain benefits depending on the circumstances surrounding their termination of employment with us. In addition to the benefits described below, upon termination of employment with us, the executive officer is generally entitled to amounts or benefits earned or accrued during the term of employment, including earned but unpaid salary. We have calculated the amount of any potential payments as if the termination or change of control occurred on December 31, 20102011 and therefore used the closing price of our common stock as reported by the NYSE on December 31, 2010,30, 2011, the last trading day of 2010.2011.
Severance and Other Benefits Upon Termination of Employment
As described above under "Description of Employment Agreements" the employment agreements we have with our executive officers provide for payments of severance and other benefits upon termination of employment. If the executive officer's employment is terminated for any reason, except for a termination for cause or a voluntary resignation without a good reason, then we willhave agreed to pay the officer a lump sum severance payment equal to four times base salary for Mr. Dimitriadis and Ms. Simpson and one times base salary for Ms. Shelley-Kessler, Messrs. Malin, and Stokes. Additionally, we have agreed to extend medical and dental insurance coverage will be extended for up to 18 months, at our expense, to the executive officer. Further, we have agreed to provide Mr. Dimitriadis and Ms. Simpson with health insurance benefits for life and Mr. Dimitriadis' two dependents with health insurance benefits until they reach the age of 22. However, we may elect to pay Ms. Simpson and Mr. Dimitriadis a one-time cash payment of $250,000 each in lieu of continuing health insurance benefits for Ms. Simpson, Mr. Dimitriadis and Mr. Dimitriadis' two dependents. If any payment or benefit received by Mr. Dimitriadis or Ms. Simpson from us subjects them to excise taxes under the "golden parachute" rules on payments and benefits, then they will be entitledwe have agreed to receiveprovide them an additional amount (a "gross-up payment" to make the officer whole for these excise taxes and for all taxes on the gross-up payment).
Table of Contentspayment.
The following table lists the Named Executive Officers and the estimated amounts they would have received under their respective employment agreements if their employment with us terminated for any
reason, except for a termination for cause or a voluntary resignation without a good reason on December 31, 2010:2011:
Name | Estimated Total Value of Cash Payments- Base Salary(1) | Estimated Total Value of Health Coverage Continuation(2) | Estimated Total Value of Equity Acceleration | Estimated Total Value of Excise Tax "Gross-Up" | Estimated Total Value of Cash Payments- Base Salary(1) | Estimated Total Value of Health Coverage Continuation(2) | Estimated Total Value of Equity Acceleration | Estimated Total Value of Excise Tax "Gross-Up" | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Andre C. Dimitriadis | $ | 960,000 | $ | 250,000 | $ | — | $ | — | $ | 960,000 | $ | 250,000 | $ | — | $ | — | ||||||||||
Wendy L. Simpson | 1,664,000 | 250,000 | — | — | 2,000,000 | 250,000 | — | — | ||||||||||||||||||
Pamela Shelley-Kessler | 215,000 | 36,000 | — | — | 275,000 | 36,000 | — | — | ||||||||||||||||||
Clint B. Malin | 180,000 | 16,000 | — | — | 275,000 | 21,000 | — | — | ||||||||||||||||||
T. Andrew Stokes | 180,000 | 39,000 | — | — | 240,000 | 49,000 | — | — |
Severance and Other Benefits Upon Change of Control
As described above under "Description of Employment Agreements" the employment agreements we have with our Named Executive Officers provide for payments of severance and other benefits upon a change of control of our company. Upon a change in control of our company whether or not the Named Executive Officer's employment is terminated, we willhave agreed to pay the Named Executive Officer a severance payment in cash equal to $5,000,000 for Mr. Dimitriadis, $3,000,000 for Ms. Simpson and two times base salary for Ms. Shelley-Kessler, Messrs. Malin and Stokes. If any payment or benefit received by Mr. Dimitriadis or Ms. Simpson from us subjects them to excise taxes under the "golden parachute" rules on payments and benefits, then they will be entitledwe have agreed to receiveprovide them an additional amount (a "gross-up payment" to make the officer whole for these excise taxes and for all taxes on the gross-up payment).payment. Further, upon a change of control all stock options and/or restricted common stock automatically vest.
A "Change in Control" occurs if:
(a) Any Person or related group of Persons (other than Executive and her Related Persons, our company or a Person that directly or indirectly controls, is controlled by, or is under common control with, our company) is or becomes the Beneficial Owner, directly or indirectly, of securities of our company representing 30% or more of the combined voting power of our company's then outstanding securities;
(b) The stockholders of our company approve a merger or consolidation of our company with any other corporation (or other entity), other than a merger or consolidation which would result in the voting securities of our company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 662/3% of the combined voting power of the voting securities of the company or such surviving entity outstanding immediately after such merger or consolidation; provided,
however, that a merger or consolidation effected to implement a recapitalization of our company (or similar transaction) in which no Person acquires 30% or more of the combined voting power of our company's then outstanding securities shall not constitute a Change in Control;
(c) The stockholders of our company approve a plan of complete liquidation of the company or an agreement for the sale or disposition by our company of all or substantially all of our company's assets; or
(d) A majority of the members of the Board of Directors of our company cease to be Continuing Directors.
The following table lists the Named Executive Officers and the estimated amounts they would have received under their respective employment agreements if there had been a change of control of our company on December 31, 20102011 whether or not the Named Executive Officer's employment is terminated:
Name | Estimated Total Value of Cash Payments- Base Salary(1) | Estimated Total Value of Health Coverage Continuation(2) | Estimated Total Value of Equity Acceleration(3) | Estimated Total Value of Excise Tax "Gross-Up" | Estimated Total Value of Cash Payments- Base Salary(1) | Estimated Total Value of Health Coverage Continuation(2) | Estimated Total Value of Equity Acceleration(3) | Estimated Total Value of Excise Tax "Gross-Up" | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Andre C. Dimitriadis | $ | 5,000,000 | $ | 250,000 | $ | — | $ | 2,158,000 | $ | 5,000,000 | $ | 250,000 | $ | — | $ | 2,272,000 | ||||||||||
Wendy L. Simpson | 3,000,000 | 250,000 | 2,695,259 | 1,695,000 | 3,000,000 | 250,000 | 2,096,166 | 1,378,000 | ||||||||||||||||||
Pamela Shelley-Kessler | 430,000 | — | 1,112,945 | — | 550,000 | — | 960,054 | — | ||||||||||||||||||
Clint B. Malin | 360,000 | — | 1,278,711 | — | 550,000 | — | 1,229,098 | — | ||||||||||||||||||
T. Andrew Stokes | 360,000 | — | 1,124,666 | — | 480,000 | — | 1,057,790 | — |
Compensation for our Board of Directors typically consists of quarterly board fees, fees for attending meetings whether in-person or by telephone, and periodic equity awards. The following table presents information regarding the compensation weduring 2011 earned by or paid during 2010 to non-employee members of our independent Board of Directors. Two members of our Board are also employed by us and therefore are not entitled to receive additional compensation for their services as directors. Compensation information related to our two employee directors is included in the previous discussion and tables related to executive compensation.
Director Compensation for the Year ended December 31, 20102011
Name | Fees Earned or Paid in Cash | Stock Awards(1) | Option Awards(1) | Total | Fees Earned or Paid in Cash | Stock Awards(1) | Option Awards(1) | Total | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Boyd W. Hendrickson | $ | 51,900 | $ | 25,950 | $ | — | $ | 77,850 | $ | 49,850 | $ | 43,050 | $ | — | $ | 92,900 | ||||||||||
Edmund C. King | 54,000 | 25,950 | — | 79,950 | 52,050 | 43,050 | — | 95,100 | ||||||||||||||||||
Devra G. Shapiro | 48,000 | 25,950 | — | 73,950 | 47,800 | 43,050 | — | 90,850 | ||||||||||||||||||
Timothy J. Triche | 52,000 | 25,950 | — | 77,950 | 47,800 | 43,050 | — | 90,850 |
Quarterly Board and Meeting Fees
The following table represents the schedule of meeting fees and quarterly fees for each independentnon-employee director in effect during 2010:2011:
Type of Fee(1) | January to June | July to December | January to May | June to December | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Quarterly Fee | $ | 6,500 | $ | 6,750 | $ | 6,750 | $ | 6,750 | ||||||
Quarterly Lead Director Fee | — | 2,500 | 2,500 | 3,750 | ||||||||||
Quarterly Audit Committee Chairman Fee | 2,500 | 2,500 | 2,500 | 3,750 | ||||||||||
Quarterly Compensation Committee Chairman Fee | 2,000 | 2,000 | 2,000 | 2,500 | ||||||||||
Quarterly Nominating Committee Chairman Fee | 2,000 | 2,000 | 2,000 | 2,500 | ||||||||||
Meeting Fee(2) | 1,500 | 1,600 | 1,600 | 1,600 | ||||||||||
Committee Meeting Fee(2) | 1,000 | 1,100 | 1,100 | 1,100 |
meeting is held on a day on which a meeting of the Board of Directors is held, there is no fee paid for the committee meeting.
Equity Awards
Directors participate in our 2008 Equity Participation Plan (or the 2008 Plan) which permits the Compensation Committee to grant nonqualified stock options or restricted common shares to directors from time-to-time. In 2010,2011, the Compensation Committee granted 1,0001,500 shares of restricted common stock to Ms. Shapiro, Messrs. Hendrickson and King and Dr. Triche at $25.95$28.70 per share. These shares vest ratably over a three-year period.period from the grant date. The following table presents the number of
outstanding and unexercised option awards and the number of unvested shares of restricted common stock held by each of our independentnon-employee directors at December 31, 2010.2011.
Name | Number of options outstanding | Number of unvested shares of restricted common stock outstanding | Number of options outstanding | Number of unvested shares of restricted common stock outstanding | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Boyd W. Hendrickson | 10,000 | (1) | 1,667 | (4) | 10,000 | (1) | 2,501 | (4) | ||||||
Edmund C. King | 3,334 | (2) | 1,667 | (4) | 3,334 | (2) | 2,501 | (4) | ||||||
Devra G. Shapiro | 15,000 | (3) | 3,000 | (5) | 15,000 | (3) | 3,167 | (5) | ||||||
Timothy J. Triche | 10,000 | (1) | 1,667 | (4) | 10,000 | (1) | 2,501 | (4) |
The Compensation Committee Report shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such Acts.
The Compensation Committee of the Board of Directors has reviewed and discussed with management the Executive Compensation Discussion and Analysis for 2010.2011. Based on the review and discussions, the Committee recommended to the Board, and the Board has approved, that the Executive Compensation Discussion and Analysis be included in this Proxy Statement.
Compensation Committee | ||
Timothy J. Triche, M.D., Chair Edmund C. King Devra G. Shapiro |
Compensation Committee Interlocks and Insider Participation
During 2010,2011, the Compensation Committee consisted of Timothy J. Triche, MD, Edmund C. King and Devra G. Shapiro, all of whom are independent directors. None of the members of the Compensation Committee are, or have been, officers or employees of the company. There are no "interlocks" (as defined by the rules of the SEC) with respect to any member of the Compensation Committee of the Board of Directors other than Mr. Hendrickson's relationship to Skilled Healthcare Group, Inc. (or SHG).
Since the beginning of 2007 and including any currently proposed, the only transactions within the scope of Item 404 of Regulation S-K involved Boyd W. Hendrickson, one of our independent directors. His interest in these transactions arises indirectly and as a result of serving as Chief Executive Officer of SHG.
In December 2005, we purchased, on the open market, $10,000,000 face value of SHG Senior Subordinate Notes with a face rate of 11.0% and an effective yield of 11.1%. Our Board of Directors, with Mr. Hendrickson abstaining, ratified the purchase of SHG Senior Subordinated Notes. As a result of early redemptions by SHG in 2007, at December 31, 2010, we had a remaining investment in $6,500,000 face value of SHG Senior Subordinated Notes. During 2010, we recognized approximately $720,000 of interest income related to the SHG Senior Subordinated Notes and expect to recognize approximately $721,000 of interest income in 2011 assuming no further redemptions by SHG. Interest on the notes is payable semi-annually in arrears and the notes mature on January 15, 2014.
In addition, during September 2007, SHG purchased the assets of Laurel Healthcare (or Laurel). One of the assets SHG purchased was Laurel's leasehold interests in the skilled nursing properties Laurel leased from us under a 15-year master lease agreement dated in February 2006. Our Board of Directors, with Mr. Hendrickson abstaining, ratified our consent to the assignment of Laurel's master lease to subsidiaries of SHG. The economic terms of the master lease agreement did not change as a result of our assignment of the master lease to subsidiaries of SHG. During 2010, subsidiaries of SHG paid us approximately $4,160,000 in rent and are expected to pay approximately $4,264,000 in rent to us during 2011. During 2010, we recorded approximately $342,000 of straight-line rental income from subsidiaries of SHG and expect to record approximately $238,000 of straight-line rental income from subsidiaries of SHG in 2011. At December 31, 2010, the straight-line rent receivable from subsidiaries of SHG was $2,822,000.Directors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
This table shows information as of April 15, 20112, 2012 with respect to the beneficial ownership of our common stock by (1) each person who is known by us to own beneficially more than 5% of our common shares based on the most recent Schedule 13D or 13G filings made by such person with the Securities and Exchange Commission pursuant to rules and regulations promulgated under the Exchange, (2) each director and director nominee, (3) each Named Executive Officer identified in the Summary Compensation Table above, and (4) the current directors and executive officers as a group.
Name and Address of Beneficial Owner | Title of Class | Amount and Nature of Beneficial Ownership(1) | Percent of Outstanding Shares in Class(2) | Title of Class | Amount and Nature of Beneficial Ownership(1) | Percent of Outstanding Shares in Class(2) | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Principal Stockholders: | ||||||||||||||||||
Deutsche Bank AG | Common Stock | 3,335,537 | (3) | 11.0 | % | |||||||||||||
The Vanguard Group, Inc. | Common Stock | 3,092,044 | (3) | 10.2 | % | Common Stock | 3,194,262 | (4) | 10.5 | % | ||||||||
Deutsche Bank AG | Common Stock | 2,956,455 | (4) | 9.7 | % | |||||||||||||
BlackRock, Inc. | Common Stock | 2,661,347 | (5) | 8.8 | % | |||||||||||||
National Health Investors, Inc. | Common Stock | 2,674,800 | (5) | 8.3 | % | Common Stock | 2,293,800 | (6) | 7.1 | % | ||||||||
BlackRock, Inc. | Common Stock | 2,258,631 | (6) | 7.4 | % | |||||||||||||
Vanguard Specialized Funds—Vanguard REIT Index Fund | Common Stock | 1,681,439 | (7) | 5.5 | % | |||||||||||||
Named Executive Officers: | ||||||||||||||||||
Andre C. Dimitriadis | Common Stock | 181,679 | * | Common Stock | 174,679 | * | ||||||||||||
Wendy L. Simpson | Common Stock | 281,500 | * | Common Stock | 281,500 | * | ||||||||||||
Pamela Shelley-Kessler | Common Stock | 81,552 | (7)(8) | * | Common Stock | 83,822 | (8)(9) | * | ||||||||||
Clint B. Malin | Common Stock | 90,574 | (7) | * | Common Stock | 82,413 | (8) | * | ||||||||||
T. Andrew Stokes | Common Stock | 72,422 | (7) | * | Common Stock | 70,422 | (8) | * | ||||||||||
Directors and Director Nominees:+ | ||||||||||||||||||
Directors and Director Nominees: + | ||||||||||||||||||
Boyd W. Hendrickson | Common Stock | 22,217 | (7)(9) | * | Common Stock | 20,717 | (8)(10) | * | ||||||||||
Edmund C. King | Common Stock | 63,985 | (7)(10)(11) | * | Common Stock | 61,985 | (8)(11)(12) | * | ||||||||||
Devra G. Shapiro | Common Stock | 9,000 | (7) | * | Common Stock | 15,500 | (8) | * | ||||||||||
Timothy J. Triche, M.D. | Common Stock | 39,102 | (7) | * | Common Stock | 38,102 | (8) | * | ||||||||||
All directors and executive officers as a group (11 persons) | Common Stock | 890,958 | (7)(8)(9)(10)(11) | 2.9 | % | Common Stock | 884,067 | (8)(9)(10)(11)(12) | 2.9 | % |
| Exercisable Outstanding Options | |||
---|---|---|---|---|
Named Executive Officer: | ||||
Pamela Shelley-Kessler | 10,000 | |||
Clint B. Malin | ||||
T. Andrew Stokes | 30,000 | |||
Director and Director Nominees: | ||||
Boyd W. Hendrickson | 10,000 | |||
Edmund C. King | 3,334 | |||
Devra G. Shapiro | ||||
Timothy J. Triche, M.D. | 10,000 |
Securities Authorized for Issuance under Equity Compensation Plans
Securities authorized for issuance under equity compensation plans as of December 31, 20102011 is as follows: