UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934
Filed by the Registrant x
Check the appropriate box:
¨ | Preliminary proxy statement | |||
¨ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |||
x | Definitive proxy statement | |||
¨ | Definitive Additional Materials | |||
¨ | Soliciting Material pursuant to § 240.14a-12 | |||
Advocat Inc. | ||||
(Name of Registrant as Specified in Its charter) | ||||
(Name of Person(s) Filing proxy statement, if other than the Registrant) | ||||
Payment of Filing Fee (Check the appropriate box): | ||||
x | No fee required. | |||
¨ | Fee computed on table below per Exchange Act Rules 14a-6(i)(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: |
¨ | Fee paid previously with preliminary materials. | |||
¨ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
(1) | Amount Previously Paid: |
(2) | Form, Schedule or Registration Statement No.: |
(3) | Filing Party: |
(4) | Date Filed: | |||
1621 Galleria Boulevard Brentwood, Tennessee 37027
Dear Fellow Shareholder:
You are cordially invited to attend the 20092012 annual meeting of shareholders of Advocat Inc. (the “Company”), to be held at the Company’s offices, 1621 Galleria Boulevard, Brentwood, Tennessee 37027 on May 29, 2009,June 7, 2012, at 9:00 a.m. (Central Daylight Time).
The attached notice of annual meeting and proxy statement describe the formal business to be transacted at the meeting. Following the formal business portion of the annual meeting, there will be a report on the operations of the Company and shareholders will be given the opportunity to ask questions. At your earliest convenience, please vote using the telephone or Internet voting instructions found on the enclosed proxy card or mark, sign and return the accompanying proxy card in the enclosed postage pre-paid envelope. We hope you will be able to attend the annual meeting.
Whether or not you plan to attend the annual meeting, please vote using the telephone or Internet voting instructions found on the enclosed proxy card or complete, sign, date and mail the enclosed proxy card promptly. If you attend the annual meeting, you may revoke such proxy and vote in person if you wish, even if you have previously returned your proxy card. If you do not attend the annual meeting, you may still revoke such proxy at any time prior to the annual meeting by providing written notice of such revocation to L. Glynn Riddle, Jr., Chief Financial Officer andMatthew J. Weishaar, Assistant Secretary of the Company. YOUR PROMPT COOPERATION WILL BE GREATLY APPRECIATED.
Kelly J. Gill |
Chief Executive Officer |
Brentwood, TennesseeMay 7, 2009
April 30, 2012
1621 Galleria Boulevard Brentwood, Tennessee 37027
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of Advocat Inc.:
The annual meeting of shareholders of Advocat Inc., a Delaware corporation (the “Company”), will be held at the Company’s offices, 1621 Galleria Boulevard, Brentwood, Tennessee 37027 on Friday, May 29, 2009,June 7, 2012, at 9:00 a.m. (Central Daylight Time) for the following purposes:
(1) | To elect two (2) Class 3 directors, to hold office for a three (3) year term and until their successors have been duly elected and qualified; | |||
(2) | To ratify the appointment of BDO USA, LLP as our independent registered public accounting firm for 2012; |
(3) | To transact such other business as may properly come before the meeting, or any adjournment or postponement thereof. |
The proxy statement and form of proxy accompanying this notice are being mailed to shareholders on or about May 7, 2009.April 30, 2012. Only shareholders of record at the close of business on April 15, 2009,19, 2012, are entitled to notice of and to vote at the meeting and any adjournment thereof.
Your attention is directed to the proxy statement accompanying this notice for a more complete statement regarding the matters to be acted upon at the meeting.
We hope very much that you will be able to be with us. The Company’s Boardboard of Directorsdirectors urges all shareholders of record to exercise their right to vote at the annual meeting of shareholders personally or by proxy. Accordingly, we are sending you the accompanying proxy statement and the enclosed proxy card.
Your representation at the annual meeting of shareholders is important. To ensure your representation, whether or not you plan to attend the annual meeting, please vote using the telephone or Internet voting instructions found on the enclosed proxy card or complete, date, sign and return the enclosed proxy card in the postage-paid envelope provided. Should you desire to revoke your proxy, you may do so at any time before it is voted in the manner provided in the accompanying proxy statement.
By Order of the Board of Directors, |
Matthew J. Weishaar, Assistant Secretary |
Brentwood, TennesseeMay 7, 2009
April 30, 2012
PROXY STATEMENT | 1 | ||||||
PROPOSAL 1 ELECTION OF DIRECTORS | 7 | ||||||
EXECUTIVE COMPENSATION | 15 | ||||||
AUDIT COMMITTEE REPORT | 32 | ||||||
FEES TO BDO USA, LLP | 33 | ||||||
MISCELLANEOUS | |||||||
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1621 Galleria Boulevard
Brentwood, Tennessee 37027
The Boardboard of Directorsdirectors of Advocat Inc. (“Advocat” or the “Company”) is soliciting proxies for this year’s annual meeting of shareholders. This proxy statement contains important information for you to consider when deciding how to vote on matters brought before the meeting. Please read it carefully.
The Boardboard has set April 15, 200919, 2012 as the record date for the meeting. Shareholders who owned Advocat Inc. common stock on that date are entitled to receive notice of and vote at the meeting. On the record date there were 5,675,9875,883,588 shares of Advocat common stock outstanding. Holders of the Company’s common stock are entitled to one vote per share owned of record. Cumulative voting is not permitted. The Company has 5,000 shares of Series C Redeemable Preferred Stock outstanding, but such preferred stock is not entitled to vote at the annual meeting of shareholders. The Company has the authority to issue additional shares of preferred stock in one or more series, although no additional series of preferred stock has been issued.
This proxy statement and enclosed proxy were initially mailed or delivered to shareholders on or about May 7, 2009.April 30, 2012. The Company’s Annual Report for the fiscal year ended December 31, 2008,2011, is being concurrently mailed or delivered with this proxy statement to shareholders entitled to vote at the annual meeting. The Annual Report is not to be regarded as proxy soliciting material. In addition, this proxy statement and the Annual Report are available on our website at www.irinfo.com/AVC.
Why am I receiving this proxy statement and proxy form?
You are receiving this proxy statement and proxy form because you own shares of Advocat common stock. This proxy statement describes issues on which you are entitled to vote. If your shares are registered in your name with Advocat’sthe Company’s transfer agent, you are considered to be the owner of record of those shares and these proxy materials are being sent to you directly. When you sign the proxy form, you appoint William R. Council III,Kelly J. Gill, the Company’s Chief Executive Officer, and L. Glynn Riddle, Jr.,Matthew J. Weishaar, the Company’s Chief Financial Officer andAssistant Secretary, or either of them, as your representative at the meeting. Mr. CouncilGill and Mr. RiddleWeishaar will vote your shares at the meeting as you have instructed on the proxy form. This way, your shares will be voted even if you cannot attend the meeting.
If your shares are not voted in person or by telephone or on the Internet, they cannot be voted on your behalf unless you provide our corporateassistant secretary with a signed proxy authorizing another person to vote on your behalf. Even if you expect to attend the meeting in person, in order to ensure that your shares are represented, please vote using the telephone or Internet voting instructions found on the enclosed proxy card or complete, sign and date the enclosed proxy form and return it promptly.
If your shares are held in a brokerage account or in the name of another nominee, you are considered the beneficial owner of shares held in street name, and these proxy materials are being forwarded to you together with a voting instruction form. As the beneficial owner, you have the right to direct your broker, trustee or nominee how to vote your shares. Since a beneficial owner is not the owner of record, you may not vote these shares in person at the meeting unless you obtain a “legal proxy” from the broker, trustee or nominee that holds your shares, giving you the right to vote the shares at the annual meeting. Your broker, trustee or nominee has enclosed or provided voting instructions for you to use in directing the broker, trustee or nominee how to vote your shares.
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The Company’s Boardboard of Directorsdirectors is sending you this proxy statement in connection with its solicitation of proxies for use at the 20092012 annual meeting. Certain of our directors, officers and employees may solicit proxies by mail, telephone, facsimile or in person. The Company will pay for the costs of solicitation. Although no precise estimate can be made at this time, we anticipate that the aggregate amount we will spend in connection with the solicitation of proxies will be $175,000 (exclusive of costs we would ordinarily expend in solicitation of proxies in the absence of an election contest and salaries and expenses of our officers, directors and employees). To date, approximately $33,000 has been incurred. The Company will conduct the solicitation by mail, personally, telephonically, through the Internet or by facsimile through its officers, directors and employees identified on Appendix A, none of whom will receive additional compensation for assisting with the solicitation. The Company may also solicit shareholders through press releases issued by the Company, advertisements in periodicals and postings on the Company’s website. Advocat has decided to engage D.F. King & Co., Inc. to assist in the solicitation of proxies on behalfAs of the Boarddate of Directors. We expect to pay D.F. King a customary fee of approximately $50,000 to $100,000 for its assistance (which amount is included in the estimate above). D.F. King expects that approximately 30 of its employees will assist in the solicitation. Wethis proxy statement, we do not expect to pay any other compensation for the solicitation of proxies, except to brokers, nominees and similar recordholdersrecord holders for reasonable expenses in mailing proxy materials to beneficial owners of Advocatthe Company’s common stock.
What am I voting on?
At the annual meeting you will be asked to vote on two proposals. The first proposal is the election of two “Class 3 Directors” to serve a three year term on the Company’s Boardboard of Directors.
Who is entitled to vote?
Only shareholders who owned Advocat Inc. common stock as of the close of business on the record date, April 15, 2009,19, 2012, are entitled to receive notice of the annual meeting and to vote the shares that they held on that date at the meeting, or at any postponement or adjournment of the meeting.
How do I vote?
You may vote your shares either in person at the annual meeting, by telephone or on the Internet or by proxy. To vote by proxy, you should mark, date, sign and mail the enclosed proxy in the prepaid envelope provided. Instructions for voting on the Internet or by telephone may be found in the Proxy Voting Instructions accompanying the Proxy Card. If your shares are registered in your own name and you attend the meeting, you may deliver your completed proxy in person. “Street name” shareholders, that is, those shareholders whose shares are held in the name of and through a broker or nominee, who wish to vote at the meeting will need to obtain a proxy form from the institution that holds their shares if they did not receive one directly. Shares held in street name may also be eligible for Internet or telephone voting in certain circumstances if youthe owner did not receive a proxy form directly.
Can I change my vote after I return my proxy form?
Yes. You may revoke your proxy and change your vote at any time before the proxy is exercised by filing with Mr. Riddle,Weishaar, either a written notice of revocation or another signed proxy bearing a later date. The powers of the proxy holders will be suspended if you attend the meeting in person and inform the corporateassistant secretary that you wish to revoke or replace your proxy. Your attendance at the meeting will not by itself revoke a previously granted proxy. If you hold your shares in “street name”street name through a broker, bank or other nominee, you may revoke your proxy by following instructions provided by your broker, bank or nominee. No notice of revocation or later-dated proxy will be effective until received by Mr. RiddleWeishaar at or prior to the annual meeting.
What is the Board’sboard’s recommendation and how will my shares be voted?
The Boardboard recommends a vote FOR the election of the nominated Class 3 directors listed in this proxy statement under Proposal No. 1.both proposals. If properly signed and returned in time for the annual meeting, the enclosed proxy will be voted in accordance with the choices specified thereon. If any other matters are properly considered at the meeting, Mr. CouncilGill and
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Will my shares be voted if I do not sign and return my proxy form?
If your shares are registered in your name and you do not return your proxy form or do not vote in person at the annual meeting, your shares will not be voted. If your shares are held in street name and you do not submit voting instructions to your broker, your broker may vote your shares for you. Brokers normally have discretion to vote on routine matters, such as uncontested director elections,ratification of auditors, but not on non-routine matters, such as contestedshareholder proposals. The New York Stock Exchange has changed its rules so that uncontested director elections or stockholder proposals. If Bristol solicits proxies for the election of directors at the annual meeting, the election of directors at the annual meeting will beare no longer considered contested,routine matters and your broker will notbrokers no longer have discretion to vote your street name shares without instructions.
How many votes are needed to hold the annual meeting?
The Company currently has a total of 5,675,9875,883,588 shares of outstanding common stock. A majority of the Company’s outstanding shares as of the record date (a quorum) must be present at the annual meeting in order to hold the meeting and conduct business. Shares are counted as present at the meeting if: (a) a shareholder is present and votes in person at the meeting; (b) a shareholder has properly submitted a proxy form, even if the shareholder marks abstentions on the proxy form; or (c) a broker or nominee has properly submitted a proxy form, even if the broker does not vote because the beneficial owner of the shares has not given the broker or
nominee specific voting instructions and the broker or nominee does not have voting discretion (a “broker non-vote”). A share, once represented for any purpose at the meeting, is deemed present for purposes of determining a quorum for the meeting (unless the meeting is adjourned and a new record date is set for the adjourned meeting), even if the holder of the share abstains from voting with respect to any matter brought before the meeting.
What vote is required to adopt the Proposals?
The nominees for director who receive the highest number of FOR votes cast will be elected. Withheld votes and broker non-votes, if any, are not treated as votes cast and, therefore, will have no effect on the proposal to elect directors.
Approval of Proposal 2 requires the affirmative vote of the holders of at least a majority of shares present in person or represented by proxy at the meeting and entitled to vote on the proposal. Abstentions are shares that are present and entitled to vote, so abstentions have the same effect as a vote against Proposal 2. Broker non-votes are not considered shares that are entitled to vote and thus will have no effect on the outcome of the vote.
Can I vote on other matters or submit a proposal to be considered at the meeting?
The Company has not received timely notice of any other shareholder proposals to be considered at the annual meeting pursuant to Rule 14a-8 under the Securities Exchange Act of 1934 to be considered at the annual meeting.1934. Shareholders may submit matters for a vote without inclusion in this proxy statement only in accordance with Rule 14a-4(c) or the Company’s bylaws. The Board of Directors has received notice from Bristol that it may solicit proxies for an alternate slate of directors. In that event, you may receive a separate proxy solicitation from Bristol. OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF ALL OF THE BOARD’S NOMINEES ON THE ENCLOSED PROXY CARD AND URGES YOU NOT TO SIGN OR RETURN ANY PROXY CARD SENT TO YOU BY BRISTOL. The Company does not intend to present any other business at the annual meeting and does not know of any other business intended to be presented other than as discussed or referred to in this proxy statement (the date specified in the Company’s bylaws for advance notice of proposals by stockholdersshareholders has passed). If any other matters properly come before the annual meeting, the persons named in the accompanying proxy card will vote the shares represented by the proxy in the manner as the Boardboard of Directorsdirectors may recommend, or in their discretion.
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Are there any dissenters’ rights or appraisal rights with respect to any of the proposals described in this proxy statement?
There are no appraisal rights or similar rights of dissenters with respect to the matters to be voted upon.
How do I communicate with directors?
The Boardboard has established a process for shareholders to send communications to the Boardboard or any of the directors. Shareholders may send communications to the Boardboard or any of the directors by sending such communication addressed to the Boardboard of Directorsdirectors or any individual director c/o Advocat Inc., 1621 Galleria Boulevard, Brentwood, Tennessee 37027. All communications will be compiled and submitted to the Boardboard or the individual directors on a monthly basis.
OWNERS AND MANAGEMENT
How much stock do each of the Company’s directors, executive officers, and principal shareholders own?
The Company is authorized to issue 20,000,000 shares of common stock and 1,000,000 shares of preferred stock. As of April 15, 2009,19, 2012, there were 5,675,9875,883,588 shares of common stock and 5,000 shares of Series C Preferred Stock outstanding. The following table shows, as of April 15, 2009,19, 2012, the amount of Advocat common stock beneficially owned (unless otherwise indicated) by (a) each director and director nominee; (b) each of the Named Executive Officers (as defined in “Executive Compensation”,Compensation,” below); (c) all of the Company’s directors and Named Executive Officersexecutive officers as a groupgroup; and (d) all shareholders known by the Company to be the beneficial owners of more than 5% of the outstanding shares of Advocat common stock. Based on information furnished by the owners and except as otherwise noted, the Company believes that the beneficial owners of the shares listed below, have, or share with a spouse, voting and investment power with respect to the shares. The address for all of the persons listed below is 1621 Galleria Boulevard, Brentwood, Tennessee 37027, except as otherwise listed in the table below.
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Shares Beneficially Owned | ||||||||
Name | Number(1) | Percent(2) | ||||||
Chad A. McCurdy(3) | 1,159,063 | 19.6 | % | |||||
Wallace E. Olson(4) | 558,463 | 9.5 | % | |||||
FMR LLC(5) 82 Devonshire St. Boston, MA 02109 | 351,269 | 6.0 | % | |||||
Altrinsic Global Advisors, LLC(6) 100 First Stamford Place, 6th Floor Stamford, CT 06902 | 443,952 | 7.5 | % | |||||
Covington Health Group, LLC(7) 1175 Peachtree Street, Suite 1230 Atlanta, GA 30361 | 859,004 | 14.6 | % |
Name William C. O’Neil, Jr.(8) Richard M. Brame(9) Robert Z. Hensley(10) Kelly J. Gill(11) William R. Council, III(12) L. Glynn Riddle, Jr.(13) W. David Houghton(14) All directors and executive officers as a group (9 persons)(15) Shares Beneficially Owned Number(1) Percent(2) 30,263 * 33,263 * 25,263 * 51,884 * 15,218 * 116,536 2.0 % — * 1,989,954 32.9 %
Shares Beneficially Owned (1) | ||||||||
Name | Number (1) | Percent(2) | ||||||
Chad A. McCurdy(3) | 632,300 | 11.1 | % | |||||
1621 Galleria Blvd. Brentwood, TN 37027 | ||||||||
Wallace E. Olson(4) | 555,199 | 9.8 | % | |||||
1621 Galleria Blvd. Brentwood, TN 37027 | ||||||||
Ameriprise Financial, Inc.(5) | 491,400 | 8.7 | % | |||||
RiverSource Investments, LLC c/o Ameriprise Financial, Inc. 145 Ameriprise Financial Center Minneapolis, MN 55474 | ||||||||
Altrinsic Global Advisors, LLC(6) | 435,000 | 7.7 | % | |||||
100 First Stamford Place, 6th Floor Stamford, CT 06902 | ||||||||
Bristol Investment Fund, LTD(7) | 393,450 | 6.9 | % | |||||
c/o Bristol Capital Advisors, LLC 10990 Wilshire Blvd., Suite 1410 Los Angeles, CA 90024 | ||||||||
FMR LLC(8) | 345,254 | 6.1 | % | |||||
82 Devonshire St. Boston, MA 02109 | ||||||||
Wellington Management Company, LLP(9) | 315,248 | 5.6 | % | |||||
75 State Street Boston, MA 02109 | ||||||||
William R. Council, III(10) | 180,219 | 3.1 | % | |||||
William C. O’Neil, Jr.(11) | 26,999 | * | ||||||
Richard M. Brame(12) | 29,999 | * | ||||||
Robert Z. Hensley(13) | 21,999 | * | ||||||
Raymond L. Tyler, Jr.(14) | 68,230 | 1.2 | % | |||||
L. Glynn Riddle, Jr.(15) | 74,949 | 1.3 | % | |||||
All directors and executive officers as a group (8 persons)(16) | 1,589,894 | 26.5 | % | |||||
* less than 1% | ||||||||
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* | less than 1% |
(1) | Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to community property laws, where applicable. |
(2) | The percentages shown are based on |
(3) | Mr. McCurdy’s shares include |
(4) | Mr. Olson’s shares include 1,300 shares owned jointly with his daughter and 548,900 owned by a partnership controlled by Mr. Olson. Includes |
(5) | Based solely on a |
(6) | Based solely on a |
(7) | Based solely on | |
(8) | Includes 9,066 shares purchasable upon exercise of options and SOSARs, 500 shares of restricted stock and 11 dividend equivalent shares accumulated on the restricted stock. |
(9) | Includes 6,666 shares purchasable upon exercise of options and SOSARs, 500 shares of restricted stock and 11 dividend equivalent shares accumulated on |
(10) | Includes 18,666 shares purchasable upon exercise of options and SOSARs, 500 shares of restricted stock and 11 dividend equivalent shares accumulated on the restricted stock. |
(11) | Includes |
(12) | Mr. Council resigned his position with the Company effective September 30, 2011. |
(13) | Includes 92,000 shares purchasable upon exercise of options and SOSARs. Ownership does not include |
(14) | Mr. Houghton left the Company effective February 3, 2012. Ownership does not include 1,159 restricted share units (including dividend equivalents) purchased in March 2011 in lieu of cash bonus. Restricted |
Includes | ||
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ELECTION OF DIRECTORS
How many directors are nominated?
The Company’s certificate of incorporation provides that the number of directors to be elected by the shareholders shall be at least three and not more than 15, as established by the Boardboard of Directorsdirectors from time to time. The number of directors is currently set at six.
The certificate of incorporation requires that the Company’s Boardboard of Directorsdirectors be divided into three classes which are as nearly equal in number as possible. The directors in each class will serve staggered three-year terms or until a successor is elected and qualified. Class 3 directors, if reelected, will serve until the 20122015 annual meeting; Class 2 directors are currently serving until the 2014 annual meeting and Class 1 directors are currently serving until the 20102013 annual meeting and the Class 2 directors will serve until the 2011 annual meeting.
What happens if a nominee refuses or is unable to stand for election?
The Boardboard may reduce the number of seats on the Boardboard or designate a replacement nominee. If the Boardboard designates a replacement nominee, we will file and deliver an amended proxy statement that, (1) identifies the replacement nominee, (2) discloses that such nominee has consented to being named in the revised proxy statement and to serve if elected and (3) includes the information with respect to the replacement nominee that is required to be disclosed by the Securities and Exchange Commission’s proxy solicitation rules of the Exchange Act. Only after such supplemental disclosure will the shares represented by proxy be voted FOR the replacement nominee. The Boardboard presently has no knowledge that any nominee will refuse, or be unable, to serve.
Must director nominees attend our annual meeting?
It is the Company’s policy that all of its directors attend the annual meeting, if possible. All directors attended the 20082011 annual meeting of shareholders. All directors and all nominees are expected to be in attendance at the 20092012 meeting.
Who are the Boardboard nominees?
Information regarding the nominees is provided below, including name, age, principal occupation during the past five years, the year first elected as a director of Advocatthe Company and the expiration date of each such director’s term. Each of the Class 3 nominees for director is presently a director of the Company.
The following directors have been nominated to continue in office for a new term or until the election and qualification of his respective successors in office:
Information about Class 3 Director Nominees - Current Term Ending 2009
Name of Nominee | Age | Director Since | ||||||
Principal Occupation Last Five Years | ||||||||
2011 | Member of the Board of Directors of the Company since |
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Richard M. Brame | 58 | December 2002 | Member of the Board of Directors of the Company since December 2002; |
Who are the Continuing Directors?
The following directors will continue in office for the remainder of their respective terms or until the election and qualification of their respective successors in office:
Information Aboutabout Class 1 Continuing Directors -– Current Term Ending 2010
Name of Director | Age | Director Since | |||||||||
Principal Occupation Last Five Years | |||||||||||
William C. O’Neil, Jr. | 77 | Inception | Member of the Board of Directors of the Company since 1994; Private Investor; director of Healthways, Inc., a specialty health care service company; director of American HomePatient, Inc., a provider of home health care products and | ||||||||
Robert Z. Hensley | 54 | July 2005 | Member of the Board of Directors of the Company since July 2005; director, Capella Healthcare Inc. from January 2009 to present; director, Greenway Medical Technologies from 2011 to present; director, Insight Global, Inc. from 2010 to present; director, Document Technologies Inc. from 2011 to present; Senior Advisor to Alvarez & Marsal Transaction Advisory Group from June 2008 to present; |
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Name of Director | Age | Director Since | |||||||||
Principal Occupation Last Five Years | |||||||||||
Wallace E. Olson | 65 | March 2002 | Chairman of the Board of Directors of the Company from October 2002 to present; Member of the Board of Directors of the Company since March 2002. He has been a private investor, managing his personal finances, since May 1996. The board believes that Mr. Olson’s leadership experience, financial experience, and knowledge of the Company derived from his years of service on our board qualify him to continue to serve in that position. | ||||||||
Chad A. McCurdy | 43 | March 2008 | Vice Chairman of the Board of Directors since July 2011; Member of the Board of Directors of the Company since March 2008; Managing Partner of Marlin Capital Partners, LLC from 2004 to present; Broker with First Dallas Securities from 2003 through 2004. Mr. McCurdy is a graduate of Southern Methodist University, Cox School of Business. | ||||||||
The board believes that Mr. McCurdy’s leadership experience, financial industry experience, and knowledge of the Company qualify him to continue to serve in that position. |
Is the Boardboard independent?
The Boardboard of Directorsdirectors has determined that five of the Company’s current six directors, i.e., all of the non-management directors, are independent as NASDAQ defines independence under NASDAQ Rule 4200(a)(15)5605(a)(2). The Company’s non-management directors meet in executive sessions, without management present, on a regular basis.
What is our board structure?
The board does not have a policy regarding the separation of the roles of chief executive officer and chairman of the board as the board believes it is in the best interests of the Company to make that determination based on the current membership of the board and position of the Company. The board has determined that having an independent director serve as chairman is in the best interest of the Company’s shareholders at this time. This structure ensures a greater role for the independent directors in the oversight of the Company and active participation of the independent directors in setting agendas and establishing board priorities and procedures. Further, this structure permits the chief executive officer to focus on the management of the Company’s day-to-day operations.
How does the board manage the Company’s risks?
Management of risk is the direct responsibility of the Company’s CEO and the senior leadership team. The board of directors oversees and reviews certain aspects of the Company’s risk management efforts. Our full board regularly engages in discussions of risk management and receives reports on risk management from members of management. Each of our board committees also considers the risk within its areas of responsibility. We believe this structure provides effective oversight of the risk management function.
What committees has the Boardboard established?
The Boardboard of Directorsdirectors has established an audit committee, a compensation committee and a nominating and corporate governance committee.
Nominating and Corporate Governance Committee. The nominating and corporate governance committee, which considers director nominations, was established during 2006. The entire Boardboard has adopted Corporate Governance Guidelines, which include guidelines on the composition, selection and performance of the Boardboard and a nominating and corporate governance committee charter. In addition to recommending nominees for directors of the Company, the nominating and corporate governance committee: (1) reviews the corporate governance guidelines at least annually and, when necessary or appropriate, recommends changes to the board; (2) reviews at least annually the charters of the committees of the board and, when necessary or appropriate, recommends changes in such charters to the board; and (3) oversees the annual evaluation by the board of itself and its committees. The Company’s Corporate Governance Guidelines and nominating and corporate governance committee charter are posted on the Company’s website at www.irinfo.com/AVC.
The nominating and corporate governance committee believes that any nominee that it recommends for a position on the Company’s Boardboard of Directorsdirectors must possess high standards of personal and professional integrity, and have demonstrated business judgment and such other characteristics as it deems appropriate to demonstrate that he or she would be effective, in conjunction with the other directors and nominees for director, in serving the best interest of the Company’s shareholders. The nominating and corporate governance committee’s assessment of existing directors and new director nominees includes issues of diversity, age, contribution to the meetings, the ability to work with other directors and skills such as understanding of long-term health care, health care background, and the perceived needs of the Boardboard at that point in time. The nominating and corporate governance committee may solicit recommendations for director nominees from other directors, the Company’s executive officers or any other source that it deems appropriate. To evaluate any potential nominee, the nominating and corporate governance committee will review and evaluate the qualifications of any proposed director candidate and conduct inquiries into his or her background to the extent that it deems appropriate under the circumstances.
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The secretary of the Company will forward all recommendations to the nominating and corporate governance committee. The shareholder’s recommendation must include information about the shareholder making the recommendation and about the proposed director candidate. All proposed director candidates will be evaluated in the same manner, regardless of the source of the initial recommendation.
The nominating and corporate governance committee is composed of Mr. Hensley as chairman, Mr. Olson and Mr. McCurdy.O’Neil. The Boardboard believes that each member of the nominating and corporate governance committee is independent under the NASDAQ rules. The nominating and corporate governance committee held fivetwo meetings during 2008, three of which were telephonic meetings.
Audit Committee.The Company has a separately designated standing audit committee that is established in accordance with Section 3(a)(58)(A) of the Exchange Act. The audit committee supervises matters relating to the audit function, reviews the Company’s quarterly reports, and reviews and approves the annual report of the Company’s independent registered public accounting firm. The audit committee also has oversight with respect to the Company’s financial reporting, including the annual and other reports to the Securities and Exchange Commission and the annual report to the shareholders. The audit committee is composed of Mr. O’Neil as chairman, Mr. Brame, Mr. Hensley and Mr. McCurdy. The Boardboard of Directorsdirectors in its business judgment, has determined that all members of the audit committee are independent directors, qualified to serve on the audit committee pursuant to Rule 4200(a)(15)5605(a)(2) under NASDAQ’s Rule 4350(d)5605(c)(2)(A) regarding heightened independence standards for audit committee members. The Boardboard has determined that Mr. Hensley qualifies as an “audit committee financial expert” as described in Regulation S-K Item 407(d). There were four meetings of the audit committee during 2008.2011. The audit committee has adopted a written charter, a copy of which is posted on our web site at www.irinfo.com/AVC.
Compensation Committee.The compensation committee presently is composed of Mr. Brame as chairman, Mr. O’NeilMcCurdy and Mr. Olson. The Boardboard believes that each member of the compensation committee is independent under the NASDAQ rules. Responsibilities of this committee include approval of remuneration arrangements for executive officers of the Company, review of compensation plans relating to executive officers and directors, including benefits under the Company’s compensation plans and general review of the Company’s employee compensation policies. The compensation committee has adopted a written charter, a copy of which is posted on our website atwww.irinfo.com/AVCwww.advocat-inc.com. During 2008,2011, the compensation committee held three meetings, one of which was telephonic.
How often did the Boardboard of Directorsdirectors meet during 2008?
During fiscal 2008,2011, the Boardboard of Directorsdirectors held fifteenfourteen meetings, tenfive of which were telephonic. Each director attended at least 75% of the aggregate of (i) the total number of meetings of the Boardboard of Directorsdirectors and (ii) the total number of meetings held by all committees on which the individual director served.
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The directors who are not officers, employees or consultants of the Company (currently directors Brame, Hensley, McCurdy, O’Neil and Olson) receivedreceive a director’s fee of $36,000 annually, $3,500$30,000 annually; $2,500 per board meeting attended, in person, $1,000 perand $2,000 for each planned committee meeting attended (except when held on the same day as board meetings), and $500 per telephonic meeting.
The Chairmen of the Board, audit committee compensation committeehas four planned meetings each year, and the nominating and corporate governance committee wereand the compensation committee each have two planned meetings during the year. Board and committee chair annual retainers consist of $20,000 for the board chair, $10,000 for the Board vice-chair, $15,000 for the audit chair, and $7,500 each for the nominating and corporate governance chair and the compensation chair, with each retainer paid $2,500 per meeting for serving as meeting chairperson. Such directorsin quarterly installments. Additional telephonic board and committee meetings and non-planned committee meetings on the day of other meetings are paid at $500 each. Directors are also entitled to participate in the Company’s health care plan. Directors who are officers or employees of the Company or its affiliates have not been compensated separately for services as a director. Directors are reimbursed for expenses incurred in connection with attendance at board and committee meetings.
In March 9, 2009, Mr. McCurdy received a grant of a non-qualified stock option to purchase 15,000 shares of common stock at an exercise price of $10.80 per share. Mr. McCurdy’s award represents the initial option grant that is typically awarded to new directors as they join the Board. The award was priced based on the share price as of March 12, 2008, the date Mr. McCurdy joined the board, and vests 1/3 on date of grant, 1/3 on March 12, 2009, and 1/3 on March 12, 2010, consistent with the vesting pattern of previous initial director grants. In addition to Mr. McCurdy’s grant,2011, each non-employee director received awas granted 250 shares of restricted stock. This restricted stock vests one-third on each of the first, second and third anniversaries of the grant date. In March 2012, each non-employee director was granted 333 shares of restricted stock. This restricted stock only stock appreciation rights (“SOSARs”) on March 13, 2009 for 1,000 shares at a base value of $2.37 per share. The SOSARs vestvests one-third on each of the first, second and third anniversaries of the grant date. These grants were made in 20092012 and therefore are not included in the table below.
Non-Employee Director Compensation | ||||||||||||||||||||
For the Year Ended December 31, 2008 | ||||||||||||||||||||
Fees Earned or Paid in Cash | ||||||||||||||||||||
Regular | Supplemental | Option | All Other | |||||||||||||||||
Director | Fees ($)(1) | Fees ($)(2) | Awards ($)(7) | Compensation ($)(8) | Total ($) | |||||||||||||||
Wallace E. Olson | 33,000 | 44,000 | (3) | 7,790 | 12,103 | 96,893 | ||||||||||||||
William C. O’Neil, Jr. | 33,000 | 42,500 | (4) | 7,790 | - | 83,290 | ||||||||||||||
Richard M. Brame | 33,000 | 36,250 | (5) | 7,790 | - | 77,040 | ||||||||||||||
Robert Z. Hensley | 33,000 | 36,750 | (6) | 7,790 | - | 77,540 | ||||||||||||||
Chad A. McCurdy(9) | 24,000 | 27,500 | - | - | 51,500 |
Non-Employee Director Compensation For the Year Ended December 31, 2011 | ||||||||||||||||||||
Fees Earned or Paid in Cash | ||||||||||||||||||||
Director | Regular Fees ($)(1) | Supplemental Fees ($)(2) | Equity Awards ($)(3) | All Other Compensation ($)(4) | Total ($) | |||||||||||||||
Wallace E. Olson | 30,000 | 51,500 | (5) | 1,700 | 16,815 | 100,015 | ||||||||||||||
Chad A. McCurdy | 30,000 | 39,000 | (6) | 1,700 | — | 70,700 | ||||||||||||||
William C. O’Neil | 30,000 | 54,000 | (7) | 1,700 | — | 85,700 | ||||||||||||||
Richard M. Brame | 30,000 | 42,500 | (8) | 1,700 | 12,610 | 86,810 | ||||||||||||||
Robert Z. Hensley | 30,000 | 44,500 | (9) | 1,700 | — | 76,200 |
(1) | “Regular fees” represent an annual |
(2) | “Supplemental fees” are paid to directors for attendance at board meetings and committee meetings. |
(3) | ||
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The compensation | ||
Includes insurance premiums paid by the Company for non-employee directors. |
(5) | Mr. Olson received $20,000 for serving as chair of the board meetings. |
(6) | Mr. McCurdy received $5,000 for serving as vice-chair of the board meetings effective third quarter 2011. |
(7) | Mr. O’Neil received $15,000 for serving as chair of the audit committee meetings. |
(8) | Mr. Brame received $7,500 for serving as chair of the compensation committee meetings. |
(9) | Mr. |
What is the Board’sboard’s recommendation with respect to the election of the Class 3 Directors?
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” the nominees listed above.
Who are the Company’s executive officers?
The following table sets forth certain information concerning the executive officers of the Company as of March 31, 2009.
Name of Officer | Age | Officer Since | |||||||||
Position with the Company | |||||||||||
Kelly J. Gill | 2010 | Member of the Board of Directors of the Company since November 2011; President and Chief Executive Officer | |||||||||
L. Glynn Riddle, Jr. | 52 | December 9, 2002 | Executive Vice President and Chief Financial Officer |
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The following section describes the compensation that the Company pays its chief executive officer, chief operating officerChief Executive Officer, Chief Operating Officer, Chief Financial Officer and chief financial officerChief Information Officer at December 31, 20082011 or Chief Executive Officer at any time during the 20082011 fiscal year (collectively, the “Named Executive Officers”).
Compensation Discussion and Analysis
Decisions on compensation of our senior executivesexecutive officers are made by the compensation committee of our Boardboard of Directors.directors. The compensation committee consists of Mr. Brame, Mr. Olson and Mr. O’Neil.McCurdy. The Boardboard of Directorsdirectors has determined that each member of the compensation committee is an independent director. It is the responsibility of the compensation committee to assure the Boardboard that the executive compensation programs are reasonable and appropriate, meet their stated purpose and effectively serve our needs and the needs of our shareholders.
We believe that the executive compensation program should align the interests of shareholders and executives. Our primary objective is to provide high quality patient care while maximizing shareholder value. The compensation committee seeks to forge a strong link between our strategic business goals and our compensation goals. We believe our executive compensation program is consistent with this overall philosophy for all management levels. We believe that the more employees are aligned with our strategic objectives, the greater our success on both a short-term and long-term basis.
Our executive compensation program has been designed to support the overall strategy and objective of creating shareholder value by:
• | Performance based. Emphasizing pay for performance by having a significant portion of executive compensation “at risk.” | ||
• | Retention. Providing compensation opportunities that attract and retain talented and committed executives on a long-term basis. | ||
• | Balance. Appropriately balancing the Company’s short-term and long-term business, financial and strategic goals. |
In connection with this overall strategy, we also strive to give assurance of fair treatment and financial protection so that an executive will be able to identify and consider transactions that would be beneficial to the long term interests of shareholders but which might have a negative impact on the executive, without undue concern for his personal circumstances. A further consideration is to safeguard the business of the Company, including protection from competition and other adverse activities by the executive during and after employment.
The Company’s strategic goals are:
• | Profitability. To maximize financial returns to its shareholders, in the context of providing high quality service. | ||
• | Quality. To achieve leadership in the provision of relevant and high quality health services. | ||
• | Stability. To be a desirable employer and a responsible corporate citizen. |
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Elements of Our Compensation Program for Named Executive Officers
As a result, we have generally established the following elements of compensation for our Named Executive Officers:
Base Salary.
We pay base salaries to our Named Executive Officers which are intended to be at or near the market median for base salaries of similar companies. These amounts are evaluated annually. We believe that such base salaries are necessary to attract and retain executive talent.
In evaluating appropriate pay levels and salary increases for our Named Executive Officers, the compensation committee considers achievement of our strategic goals, level of responsibility, individual performance, internal equity and external pay practices. Regarding external pay practices, the compensation committee reviews compensation practices of the peer companies, as determined from information gathered by our compensation consultants. As a result of general business and economic conditions, effective January 1, 2009 we instituted a wage freeze for all of our senior management employees. This wage freeze will be
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Name | Position | 2011 Salary | ||||
William R. Council, III | Chief Executive Officer | $ | 442,000 | |||
Kelly J. Gill | Chief Executive Officer | $ | 450,000 | |||
Kelly J. Gill | Chief Operating Officer | $ | 300,000 | |||
L. Glynn Riddle, Jr. | Chief Financial Officer | $ | 229,000 | |||
W. David Houghton | Chief Information Officer | $ | 200,000 |
Mr. Council’s employment terminated on September 30, 2011, and no salary payments were made after that date. Mr. Gill was employed as Chief Operating Officer through September 30, 2011, and became Chief Executive Officer effective October 1, 2011, and received salary in accordance with the above annual rates for each respective period.
2011 Annual Incentive Plan.
On March 11, 2011, the compensation committee of the board of directors of the Company approved the 2011 Annual Incentive Plan for the Company’s executive officers. The 2011 Annual Incentive Plan provides the following Targets:
Named Executive Officer | Position | Bonus Target | ||||
William R. Council, III | Chief Executive Officer | |||||
Kelly J. Gill(1) | Chief Operating Officer | |||||
L. Glynn Riddle, Jr. | Chief Financial Officer |
W. David Houghton | Chief | |||
(1) | For 3/4ths of the year, Mr. Gill was Chief Operating Officer and had a total bonus target equal to 75% of his salary and for 1/4th of the year, Mr. Gill was Chief Executive Officer and had a total bonus target of 100% of his salary. His actual bonus was prorated based on these two targets. |
The following categories make up the potential bonus target is based on achieving 100% of budget on the net operating income category. Therefore, if the Company achieves over 100% of budget in this category, the bonus percentage could be higher than the bonus target disclosed above.
Net Operating Income (as defined) | 40 | % | ||
Operating | % | |||
Implementation Initiatives | 30 | % | ||
Discretionary | 20 | % | ||
Total | 100 | % |
Net Operating Income.For 2008, 70%Income: 40% of the available bonus percentage for each executive was tied to Company profitability.based on operating income performance. This metric was measured using budgeted operating income/loss,income, adjusted for the non-cash impact of professional liability expense. The budgeted operating income, as adjusted, for 2011 was $11,556,000. In addition, the compensation committeeboard had the discretion to make other adjustments for unusual/unusual or unbudgeted items.
The portion of thepotential bonus under Net Operating Income wasavailable would be adjusted based on actual performance, as follows:
less than 80% of budget – executive would earn 0% of the target bonus for this category;
80% of budget – executive would earn 25% of the target bonus for this category;
81% to 100% of budget – executive would earn an additional 3.75% of the target bonus for this category for each 1% of budget achieved above 80%;
Above 100% – additional amounts may be awarded at the discretion of the board of directors.
Operating Milestones: 10% of the target bonus was based on the Company achieving specified goals by the end of the fourth quarter. These goals were:
• | Medicare rates (PPD) of | |||||
least $463.37 | % | |||||
• | Texas Medicaid rate of | 25 | % | |||
• | Occupancy of at least 85.6% (based on | 25 | % | |||
• | Skilled mix (Medicare and Managed Care ADC as a percent of | 25 | % |
Implementation Initiatives: 30% of the budgeted operating income, and the executives did not receive anytarget bonus was based on net operating income and were only eligible forthe implementation of certain initiatives from the Company’s strategic plan. These initiatives include:
• | Completion of back office reviews | 10 | % | |||
• | Completion of Key IT initiatives | 10 | % | |||
• | Marketing implementation strategy | 10 | % | |||
• | 24 hour RN implementation | 10 | % | |||
• | EMR implementation | 10 | % | |||
• | Therapy strategy | 10 | % | |||
• | Acquisition and development | 10 | % | |||
• | Renovations | 10 | % | |||
• | Corporate affairs | 10 | % | |||
• | Increase licensed beds | 5 | % | |||
• | Increase ratio of available beds to licensed beds | 5 | % | |||
Total | 100 | % |
Discretionary: 20% of the bonus was based on subjective matters of performance to be awarded at the discretion of the board. In establishing the discretionary portion of the bonus for 2011, the compensation committee considers, among other items, the individual officer’s contribution to the strategic plan and the goals of the organization.
In addition, the 2011 Annual Incentive Plan allows the compensation committee, in its sole discretion, to pay all or part of the bonus earned under the 2011 Annual Incentive Plan in shares of common stock of the Company. The number of shares that would be issued in the discretion of the compensation committee would be such number of shares with a fair market value on the date of award equal to the amount of the bonus being paid in common stock.
Mr. Council did not serve in the position listed below for the entire 2011 year, so his bonus was prorated based on the percentage of the year in which he worked for the Company. The Company did not meet its Net Operating Income goal, so employees with bonuses based on a full year’s performance were only entitled to receive up to 60% of their target bonus. As a result, the Named Executive Officers were paid a bonus
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Percent of | ||||||||||
Name | Position | 2008 Bonus | Base Salary | |||||||
William R. Council, III | Chief Executive Officer | $ | 53,000 | 12.0 | % | |||||
Raymond L. Tyler, Jr. | Chief Operating Officer | $ | 20,000 | 6.5 | % | |||||
L. Glynn Riddle, Jr. | Chief Financial Officer | $ | 25,000 | 10.9 | % |
Name | Position | 2011 Bonus | Percent of Base Salary | |||||||
William R. Council, III | Chief Executive Officer | 331,500 | (1) | 75 | %(1) | |||||
Kelly J. Gill | Chief Operating Officer | 136,688 | (2) | (2) | ||||||
L. Glynn Riddle, Jr. | Chief Financial Officer | 78,866 | 34.5 | % | ||||||
W. David Houghton | Chief Information Officer | 72,900 | 36.5 | % |
(1) | Mr. Council’s bonus for 2011 was based on his negotiated separation agreement. |
(2) | $82,013 of this bonus related to Mr. Gill’s performance as Chief Operating Officer and represented, on a prorated basis, 36.5% of his COO salary and $54,675 of this bonus related to his performance as Chief Executive Officer and represented, on a prorated basis, 48.6% of his CEO salary. |
In accordance with its terms, the Key Personnel Plan expired in May 2004. Accordingly, no further grants can be made under that plan.
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Name | Bonus Used to Purchase RSUs | Number of RSUs Purchased | ||||||
Kelly J. Gill | $ | 41,006 | 8,318 | |||||
L. Glynn Riddle, Jr. | $ | 39,433 | 7,999 |
Long-Term Incentives.
Our long-term incentive compensation program has historically consisted of nonqualified stock options and SOSARs, the intrinsic value of which is the amount purchased byrelated to improvement in long-term shareholder value. Prior to 2011, each of the Named Executive Officers:
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Amount of 2008 Bonus | Number of RSUs | |||||||
Name | Used to Purchase RSUs | Purchased | ||||||
William R. Council, III | $ | 26,500 | 12,801.93 | |||||
Raymond L. Tyler, Jr. | $ | 10,000 | 4,830.92 | |||||
L. Glynn Riddle, Jr. | $ | 12,500 | 6,038.65 |
The grant of restricted stock or other equity award is recommended to the compensation committee by the Chief Executive Officer excluding grants to himself. The compensation committee considers the recommendations along with a review of the group of individuals recommended. While we do not currently have written policies for the issuance of awards, we have never relied upon either the release of material information or the non-release of material information when issuing the grants. Generally, equity grants have been made at least three business days after the earnings release for the previous fiscal year.
Retirement and Post Employment Compensation.
We have long sponsored a qualified defined contribution plan (the “401(k) Plan”), which is available to all employees, including our Named Executive Officers. Qualified plans such as the 401(k) Plan carry with them a limit on the amount of compensation that employees can defer. Each of our Named Executive Officers is considered highly compensated and their contributions to the 401(k) Plan are limited. The Company maintains a non-qualified Executive Incentive Retirement Plan (“EIRP”). The EIRP provides a Company matching contribution for eligible employees’ retirement savings on a dollar for dollar basis. For 2011, the EIRP match was equal to 6% of their salary. The Company makes a cash payment to each participating employee on a quarterly basis. All of the Company’s Named Executive Officers participated in the Executive Incentive Retirement Plan in 2011 and the amounts of the Company contribution are included in the Summary Compensation Table under Other Annual Compensation. As this is paid to the executive in cash, the executive is free to invest or not invest the money as he sees fit.
Each of our Named Executive Officers has an employment agreement with the Company as described in more detail under “Potential Payments upon Termination or Change-in-Control” below. These agreements formalize the terms of the employment relationship, and assure the executive of fair treatment during employment and in the event of termination as well as requiring compliance with certain restrictions on competition. Employment agreements promote careful and complete documentation and understanding of employment terms, including strong protections for our business, and avoid frequent renegotiation of the terms of employment. Conversely, employment agreements can limit our ability to change certain employment and compensation terms. We provide severance protection to our senior executives in these employment agreements. This includes protection in the event of outright job termination not for Cause (“Cause” being limited to specified actions that are directly and significantly harmful to Advocat)the Company) or in the event we change the executive’s compensation opportunities, working conditions or responsibilities in a way adverse to the executive such that it is deemed a Constructive Discharge. We believe that this protection is designed to be fair and competitive to aid in attracting and retaining experienced executives. We believe that the protection we provide, including the level of severance payments and post-termination benefits, is appropriate and within the range of competitive practices. These employment agreementsdo not provide forrequire any type of gross-up payment for tax obligations of the executive as a result of such severance payments.
We also provide severance payments and benefits if the executive should resign or be terminated without Cause within six months after a change in control. This protection permits an executive to evaluate a potential change in control without concern for his or her own situation or the need to seek employment elsewhere. Change in control transactions take time to unfold, and a stable management team can help to preserve our operations either to enhance the value delivered to a buyer in the transaction or, if no transaction is consummated, to ensure that our business will continue without undue disruption and retain its value. Finally, we believe that the change in control protections in place encourage management to consider on an ongoing basis whether a strategic transaction might be advantageous to our shareholders, even one that would vest control of Advocatthe Company in a third party. The compensation committee believes that the potential cost of executive change in control severance benefits are well within the range of reasonableness relative to general industry practice, and represents an appropriate cost relative to its benefits to Advocatthe Company and its shareholders.
The employment agreements also subject our executive officers to significant contractual restrictions intended to prevent actions that potentially could harm our business, particularly after termination of employment. These business protections include obligations not to compete, not to hire away our employees, not to interfere with our relationships with suppliers and customers, not to disparage us, not to reveal confidential information, and to cooperate with us in litigation. Business protection provisions are included in agreements and equity awards. In addition, we have adopted an Employee Standards and Code of Conduct that require all of our employees, including our executive officers, to adhere to high standards of conduct. Failure to comply with this Code of Conduct or our Corporate Compliance Program or applicable laws will subject the executive to disciplinary measures, which may include loss of compensation, stock, and benefits, and termination of employment for cause.
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The compensation committee makes all final determinations with respect to executive officers’ compensation, based on information provided by management and an appraisal of the Company’s financial status. Advocat’sThe Company’s Chief Executive Officer does makemakes recommendations to the compensation committee relating to the compensation of executive officers who directly report to him, but the compensation committee has full autonomy in determining executive compensation.
Tax and Accounting Considerations
Section 162(m) of the Internal Revenue Code of 1986, as amended, (the “Code”) generally disallows a tax deduction to public companies for executive compensation in excess of $1.0 million. We have not historically paid any of our Named Executive Officers compensation in excess of $1.0 million and it is not anticipated that we will pay any of our Named Executive Officers compensation in excess of $1.0 million in 2009,2012, and, accordingly, to date we have not adopted a policy in this regard.
20092012 Annual Incentive Plan and Base Salary
On March 3, 2009,9, 2012, the compensation committee of the Boardboard of Directorsdirectors of Advocatthe Company approved the 20092012 Annual Incentive Plan for the Company’s Executive Officers.executive officers. The 2009 Plan is similar to the 2008 plan. The 20092012 Annual Incentive Plan provides the following Targets:
Position | Bonus Target | |||
Chief Executive Officer | ||||
Chief Operating Officer | ||||
Chief Financial Officer |
The following categories make up the potential bonus amounts:
Net Operating Income (as defined) | 40 | % | ||
Strategic Imperatives | % | |||
Discretionary | % | |||
Total | 100 | |||
% |
Net Operating IncomeIncome:. 70% 40% of the bonus is based on operating income performance. This metric will be measured using budgeted operating income/loss,income, adjusted for the non-cash impact of professional liability expense. The budgeted operating income, as adjusted, for 2012 is $9,299,000. In addition, the Boardboard will have the discretion to make other adjustments for unusual/unusual or unbudgeted items.
The potential bonus available would be adjusted based on actual performance, as follows:
less than 80% of budget – executive would earn 0% of the target bonus for this category;
80% of budget – executive would earn 25% of the target bonus for this category;
81% to 100% of budget – executive would earn an additional 3.75% of the target bonus for this category for each 1% of budget achieved above 80%;
Above 100% – additional amounts may be awarded at the discretion of the board of directors.
Strategic Imperatives: 40% of the target bonus is based on the achievement of certain goals from the Company’s strategic plan. These include:
• | Acquisitions (increase licensed beds by 10%) | 25 | % | |||||||
• | Complete 2012 planned facility renovations | 5 | % | |||||||
• | Risk Management | |||||||||
• | Survey Improvements | 5 | % | |||||||
• | Reduction of CNA turnover | 5 | % | |||||||
• | Deployment of Risk Management Plan | 15 | % | |||||||
• | All risk management targets achieved | 15 | % | |||||||
• | Financial Control | 5 | % | |||||||
• | Accounts receivable management | |||||||||
• | Capital expenditures management | 5 | % | |||||||
• | Cost Controls | 5 | % | |||||||
• | Shareholder relations | 15 | % | |||||||
Total | 100 | % | ||||||||
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In addition, the 20092012 Annual Incentive Plan allows the compensation committee, in its sole discretion, to pay all or part of the bonus earned under the 20092012 Annual Incentive Plan in shares of common stock of the Company. The number of shares that would be issued in the discretion of the compensation committee would be such number of shares with a fair market value on the date of award equal to the amount of the bonus being paid in common stock.
2012 Base Salary.
The base salaries of our Named Executive Officers for 20092012 are as follows:
Mr. Riddle’s base salary was increased from $229,000 to $300,000 effective March 15, 2012, pursuant to terms of his amended and restated retention agreement as discussed below.
| ||||||||||||||||||||||||||||||||||||||||||||||
The compensation committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management of the Company and, based on such review and discussions, the compensation committee recommended to the Boardboard of Directorsdirectors of the Company that the Compensation Discussion and Analysis be included in this proxy statement.
Compensation Committee: | Richard M. Brame, Chair | |
Chad A. McCurdy | ||
Wallace E. Olson |
This report of the compensation committee shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under these acts.
How much compensation did the Company pay the Named Executive Officers during 2008, 20072011, 2010 and 2006?
The following table sets forth the compensation paid to the Named Executive Officers for their services in all capacities to the Company for the 2008, 20072011, 2010 and 20062009 fiscal years.
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Name and Principal Position | Year | Salary($) | Bonus($)(1) | Stock Awards($)(2) | Option Awards($)(2) | All Other Compensation($) | Total ($) | |||||||||||||||||||||
William R. Council, III Prior President and Chief Executive Officer(3) | 2011 | 331,500 | 331,500 | 42,500 | — | 1,516,184 | (3) | 2,221,684 | ||||||||||||||||||||
2010 | 442,000 | 211,055 | — | 61,367 | 19,507 | (3) | 733,929 | |||||||||||||||||||||
2009 | 442,000 | 47,000 | — | 48,203 | 37,251 | (3) | 574,454 | |||||||||||||||||||||
Kelly J. Gill President and Chief Executive Officer(4) | 2011 | 337,500 | 136,688 | 32,300 | 109,500 | 20,417 | (4) | 636,405 | ||||||||||||||||||||
2010 | 215,000 | 117,000 | — | 146,922 | 88,758 | (4) | 567,680 | |||||||||||||||||||||
L. Glynn Riddle, Jr. Executive Vice President and Chief Financial Officer(5) | 2011 | 229,000 | 78,866 | 22,100 | — | 15,805 | (5) | 345,771 | ||||||||||||||||||||
2010 | 229,000 | 76,408 | — | 29,456 | 11,015 | (5) | 345,879 | |||||||||||||||||||||
2009 | 229,000 | 19,000 | — | 19,281 | 20,111 | (5) | 287,392 | |||||||||||||||||||||
W. David Houghton | 2011 | 200,000 | 72,900 | 22,100 | — | 12,408 | (6) | 307,408 | ||||||||||||||||||||
Vice President and | 2010 | 115,000 | 42,700 | — | 24,547 | 6,221 | (6) | 188,468 | ||||||||||||||||||||
Chief Information Officer(6) |
Summary Compensation Table | ||||||||||||||||||||||||||||
Name and Principal | Option | Other Annual | All Other | |||||||||||||||||||||||||
Position | Year | Salary($) | Bonus($)(1) | Awards(2) | Compensation($)(3) | Compensation($)(4) | Total ($) | |||||||||||||||||||||
(a) | (b) | (c) | (d) | (e) | (f) | (g) | ||||||||||||||||||||||
William R. Council, III | 2008 | 442,000 | 53,000 | 194,752 | 35,360 | 1,839 | 726,951 | |||||||||||||||||||||
President and | 2007 | 425,000 | 298,835 | 126,192 | 34,000 | 1,647 | 885,674 | |||||||||||||||||||||
Chief Executive Officer | 2006 | 389,000 | 264,041 | 1,191,000 | (5) | 31,098 | 1,555 | 1,876,694 | ||||||||||||||||||||
Raymond L. Tyler, Jr. | 2008 | 308,000 | 20,000 | 116,851 | 24,652 | 1,784 | 471,287 | |||||||||||||||||||||
Executive Vice President and | 2007 | 296,000 | 156,923 | 75,715 | 23,704 | 2,616 | 554.958 | |||||||||||||||||||||
Chief Operating Officer(6) | 2006 | 285,000 | 150,628 | 397,000 | (5) | 22,805 | 2,834 | 858,267 | ||||||||||||||||||||
L. Glynn Riddle, Jr. | 2008 | 229,000 | 25,000 | 77,901 | 18,288 | 1,716 | 351,905 | |||||||||||||||||||||
Executive Vice President and | 2007 | 220,000 | 111,792 | 50,477 | 17,854 | 1,858 | 401,981 | |||||||||||||||||||||
Chief Financial Officer | 2006 | 211,000 | 100,547 | 794,000 | (5) | 16,917 | 1,516 | 1,123,980 |
(1) | Includes annual incentive bonus amounts which were expensed during |
(2) | The compensation included in this table represents the |
(3) | Mr. Council’s employment with the | ||
(4) | Mr. Gill became Chief Executive Officer in November 2011. Prior to that time he was Chief Operating Officer. All other compensation for Mr. Gill for 2011 includes Company contributions to EIRP, matching contributions under the Company’s 401(k) plan and holiday bonus payments. All other compensation for Mr. Gill for 2010 includes a $75,000 cash signing bonus, $20,077 Company contributions to the EIRP and matching contributions under the Company’s 401(k) plan, continuance of |
(5) | Mr. Riddle informed the Company of his intent to resign in December | ||
(6) | Mr. | ||
health insurance benefits, matching contribution under the Company’s 401(k) plan and holiday bonus payments. |
What plan based awards did the Company grant to the Named Executive Officers in 20082011 and under what terms?terms
The following table describes non-equity incentive awards granted to our Named Executive Officers in 2008.
Grants of Plan-Based Awards | ||||||||||||||||||||||||||||||||||||||||||||
All Other | ||||||||||||||||||||||||||||||||||||||||||||
Option | ||||||||||||||||||||||||||||||||||||||||||||
All Other | Awards: | |||||||||||||||||||||||||||||||||||||||||||
Stock | Number of | |||||||||||||||||||||||||||||||||||||||||||
Awards: | Securities | Exercise or | Grant Date | |||||||||||||||||||||||||||||||||||||||||
Estimated Future Payouts Under Non- | Estimated Future Payouts Under | Number | Underlying | Base Price | Fair Value | |||||||||||||||||||||||||||||||||||||||
Equity Incentive Plan Awards(1) | Equity Incentive Plan Awards | of Shares | Option | of Option | of Stock | |||||||||||||||||||||||||||||||||||||||
Grant | Threshold | Target | Maximum | Threshold | Target | Maximum | of Stock | Grants (#) | Awards | and Option | ||||||||||||||||||||||||||||||||||
Name | Date | ($) | ($) | ($) | ($) | ($) | ($) | (#) | (2)(3) | ($/sh)(4) | Awards | |||||||||||||||||||||||||||||||||
William R. Council III | N/A | - | 221,000 | N/A | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||
Raymond L. Tyler, Jr. | N/A | - | 154,000 | N/A | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||
L. Glynn Riddle, Jr. | N/A | - | 115,000 | N/A | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||
William R. Council III | 03/14/08 | - | - | - | - | - | - | - | 25,000 | $ | 10.88 | $ | 235,000 | |||||||||||||||||||||||||||||||
Raymond L. Tyler, Jr. | 03/14/08 | - | - | - | - | - | - | - | 15,000 | $ | 10.88 | $ | 141,000 | |||||||||||||||||||||||||||||||
L. Glynn Riddle, Jr. | 03/14/08 | - | - | - | - | - | - | - | 10,000 | $ | 10.88 | $ | 94,000 |
21
All Other Stock Awards: Number of Shares of Stock (#)(2)(3) | All Other Option Awards: Number of Securities Underlying Option Grants (#) (3) | Exercise or Base Price of Option Awards ($/sh) (4) | Grant Date Fair Value of Stock and Option Awards | |||||||||||||||||||||||||||||||||||||||||
Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | |||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Threshold ($) | Target ($) (1) | Maximum ($) | Threshold ($) | Target ($) | Maximum ($) | |||||||||||||||||||||||||||||||||||||
William R. Council, III | N/A | — |
| 442,000 |
| N/A | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Kelly J. Gill | N/A | — |
| 225,000 |
| N/A | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
L. Glynn Riddle, Jr. | N/A | — |
| 172,000 |
| N/A | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
W. David Houghton | N/A | — |
| 150,000 |
| N/A | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
William R. Council, III | 3/11/11 | — | — | — | — | — | — | 6,250 | — | — | $ | 42,500 | ||||||||||||||||||||||||||||||||
Kelly J. Gill | 3/11/11 | — | — | — | — | — | — | 4,750 | — | — | $ | 32,300 | ||||||||||||||||||||||||||||||||
Kelly J. Gill | 11/10/11 | — | — | — | — | — | — | — | 50,000 | $ | 5.60 | $ | 109,500 | |||||||||||||||||||||||||||||||
L. Glynn Riddle, Jr. | 3/11/11 | — | — | — | — | — | — | 3,250 | — | — | $ | 22,100 | ||||||||||||||||||||||||||||||||
W. David Houghton | 3/11/11 | — | — | — | — | — | — | 3,250 | — | — | $ | 22,100 |
(1) | Amounts represent target bonus |
(2) | These |
(3) | These awards are also included in the Summary Compensation Table |
(4) | Base price of SOSAR awards is based on the average of the high and low price on the date of |
On March 11, 2011, Mr. Council was granted 6,250 shares of restricted stock, Mr. Gill was granted 4,750 shares of restricted stock, Mr. Riddle was granted 3,250 shares of restricted stock and Analysis, the Named Executive Officers received a grantMr. Houghton was granted 3,250 shares of stock only stock appreciation rights in March 2009.restricted stock. These grants vest one-third on each of the first, second and third anniversariesanniversary of the date of grant and have a base price of $2.37 per share which equals the average high and low price of our stock on the date of grant. Mr. Council received 25,000 shares, Mr. Tyler received 15,000 shares and Mr. Riddle received 10,000 shares. SuchThese grants were based on the performance of the Named Executive Officer in 2008;2010; however, thethis grant of equity awards is required to be included in the table for the year(s) when recognizedgranted and are therefore included in these compensation tables or equity award tables. On November 10, 2011, in connection with his promotion to CEO, Mr. Gill was granted 50,000 SOSARs. On March 12, 2012, Mr. Gill was granted 25,000 shares of restricted stock. These shares vest one-third on each of the first, second and third anniversary of the date of grant provided the executive remains with the Company on such date. These grants were based on the performance of the Named Executive Officer in 2011. These grants were awarded in 2012 and are required to be included in the table for financial statement purposesthe year(s) when granted and are therefore not included in any of these compensation tables or equity award tables.
How many equity awards are currently held by the Named Executive Officers?
Outstanding Equity Awards at Year End December 31, 2011
Outstanding Equity Awards at Year End December 31, 2008 | ||||||||||||||||||||||||||||||||||||
SOSAR and Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
Equity | ||||||||||||||||||||||||||||||||||||
Equity | Incentive | |||||||||||||||||||||||||||||||||||
Equity | Incentive | Plan Awards: | ||||||||||||||||||||||||||||||||||
Incentive Plan | Market | Plan Awards: | Market or | |||||||||||||||||||||||||||||||||
Awards: | Number | Value of | Number of | Payout Value | ||||||||||||||||||||||||||||||||
Number of | Number of | Number of | of Shares | Shares or | Unearned | of Unearned | ||||||||||||||||||||||||||||||
Securities | Securities | Securities | or Units | Units of | Shares, Units | Shares Units | ||||||||||||||||||||||||||||||
Underlying | Underlying | Underlying | of Stock | Stock | or Other | or Other | ||||||||||||||||||||||||||||||
Unexercised | Unexercised | Unexercised | Option | Option | That | That Have | Rights That | Rights That | ||||||||||||||||||||||||||||
Options (#) | Options (#) | Unearned | Exercise | Expiration | Have Not | Not | Have Not | Have Not | ||||||||||||||||||||||||||||
Name | Exercisable(1) | Unexercisable(1) | Options (#) | Price ($) | Date | Vested | Vested (#) | Vested (#) | Vested (#) | |||||||||||||||||||||||||||
William R. Council III | 50,000 | - | - | $0.35 | 04/09/2011 | - | - | - | - | |||||||||||||||||||||||||||
William R. Council III | 75,000 | - | - | $5.44 | 12/13/2015 | - | - | - | - | |||||||||||||||||||||||||||
William R. Council III | 8,333 | 16,667 | - | $11.59 | 03/07/2017 | - | - | - | - | |||||||||||||||||||||||||||
William R. Council III | - | 25,000 | - | $10.88 | 03/14/2018 | - | - | - | - | |||||||||||||||||||||||||||
Raymond L. Tyler, Jr. | 25,000 | - | - | $0.35 | 04/09/2011 | - | - | - | - | |||||||||||||||||||||||||||
Raymond L. Tyler, Jr. | 25,000 | - | - | $5.44 | 12/13/2015 | - | - | - | - | |||||||||||||||||||||||||||
Raymond L. Tyler, Jr. | 5,000 | 10,000 | - | $11.59 | 03/07/2017 | - | - | - | - | |||||||||||||||||||||||||||
Raymond L. Tyler, Jr. | - | 15,000 | - | $10.88 | 03/14/2018 | - | - | - | - | |||||||||||||||||||||||||||
L. Glynn Riddle, Jr. | 50,000 | - | - | $5.44 | 12/13/2015 | - | - | - | - | |||||||||||||||||||||||||||
L. Glynn Riddle, Jr. | 3,333 | 6,667 | - | $11.59 | 03/07/2017 | - | - | - | - | |||||||||||||||||||||||||||
L. Glynn Riddle, Jr. | - | 10,000 | - | $10.88 | 03/14/2018 | - | - | - | - |
SOSAR and Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable (1) | Number of Securities Underlying Unexercised Options (#) Unexercisable (1) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | 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 ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares Units or Other Rights That Have Not Vested (#) | |||||||||||||||||||||||||||
William R. Council, III | — | — | — | — | — | 23,695.26 | (3) | 131,509 | — | — | ||||||||||||||||||||||||||
Kelly J. Gill | — | — | — | — | — | 4,916.65 | (2) | 27,287 | — | — | ||||||||||||||||||||||||||
Kelly J. Gill | — | — | — | — | — | 6,285.73 | (3) | 34,886 | — | — | ||||||||||||||||||||||||||
Kelly J. Gill | 11,666 | 23,334 | — | 6.21 | 04/05/2020 | — | — | — | — | |||||||||||||||||||||||||||
Kelly J. Gill | 5,000 | 10,000 | — | 5.45 | 06/18/2020 | — | — | — | — | |||||||||||||||||||||||||||
Kelly J. Gill | — | 50,000 | — | 5.60 | 11/10/2021 | — | — | — | — | |||||||||||||||||||||||||||
L. Glynn Riddle, Jr. | — | — | — | — | — | 3,364.04 | (2) | 18,670 | — | — | ||||||||||||||||||||||||||
L. Glynn Riddle, Jr. | — | — | — | — | — | 8,780.98 | (3) | 48,734 | — | — | ||||||||||||||||||||||||||
L. Glynn Riddle, Jr. | 50,000 | — | — | 5.44 | 12/13/2015 | — | — | — | — | |||||||||||||||||||||||||||
L. Glynn Riddle, Jr. | 10,000 | — | — | 11.59 | 03/07/2017 | — | — | — | — | |||||||||||||||||||||||||||
L. Glynn Riddle, Jr. | 10,000 | — | — | 10.88 | 03/14/2018 | — | — | — | — | |||||||||||||||||||||||||||
L. Glynn Riddle, Jr. | 6,666 | 3,334 | — | 2.37 | 03/13/2019 | — | — | — | — | |||||||||||||||||||||||||||
L. Glynn Riddle, Jr. | 4,000 | 8,000 | — | 5.45 | 06/18/2020 | — | — | — | — | |||||||||||||||||||||||||||
W. David Houghton | 3,333 | 6,667 | — | 5.45 | 06/18/2020 | — | — | — | — | |||||||||||||||||||||||||||
W. David Houghton | — | — | — | — | — | 3,364.04 | (2) | 18,670 | — | — | ||||||||||||||||||||||||||
W. David Houghton | — | — | — | — | — | 1,147.02 | (3) | 6,366 | — | — |
(1) | Each option and SOSAR grant vests one-third on each of the first, second and third anniversary of the date of grant. |
(2) | Represents shares of restricted stock granted by the Company as well as dividend equivalent rights accrued on such shares. Each grant of restricted stock vests one-third on each of the first, second and third anniversary of the date of grant. |
(3) | Represents RSUs purchased by executive in lieu of bonus. Mr. Council’s RSUs vested on September 30, 2011, his date of termination, but were not distributed until March 31, 2012. Mr. Gill’s RSU’s vest in March 2013. Mr. Riddle’s RSU’s vested on March 31, 2012 under his Retention Agreement. Mr. Houghton’s RSUs vested on February 8, 2012 under his separation agreement. |
Option Exercises and Stock Vested during 2008.
22
Option awards | Stock awards | |||||||||||||||
Name | Number of shares acquired on exercise (#) | Value realized on exercise ($) | Number of shares acquired on vesting (#) | Value realized on vesting ($) | ||||||||||||
William R. Council, III | 175,000 | (1) | 150,250 | 43,499 | (2) | 273,482.03 | ||||||||||
L. Glynn Riddle, Jr. | — | — | 6,430 | (3) | 44,045.50 |
(1) | Mr. Council resigned from the Company effective September 30, 2011. Under his employment agreement, all unexercised options and SOSARs vested and the Company had an obligation to repurchase such shares at the request of Mr. Council for the spread between the market value on the date of termination and the exercise price. As a result Mr. Council received $150,250 in cash and did not receive any shares of stock. |
(2) | Includes 13,632 restricted stock units that vested on March 14, 2011. Mr. Council received 10,026 shares of common stock and 3,606 shares were withheld to cover his tax withholding. In addition, upon Mr. Council’s resignation, 6,405 shares of restricted stock and dividend equivalents vested and were issued to Mr. Council. Mr. Council’s RSU’s also vested, resulting in 23,462 shares vesting, but such shares were not delivered to Mr. Council until six months following his termination or March 31, 2012. |
(3) | Represents restricted stock units that vested on March 14, 2011. Mr. Riddle received 4,637 shares of common stock and 1,793 shares were withheld to cover his tax withholding. |
Yes. Effective March 31, 2006, theThe Company entered into an employment agreementsagreement (the “Employment Agreements”Agreement”) effective April 5, 2010 with Mr. CouncilGill. Mr. Gill’s agreement was amended in November 2011 and amended and restated in March 2012 to serve asreflect his promotion to Chief Executive Officer, Mr. Tyler to serve as Chief Operating Officer and Mr. Riddle to serve as Chief Financial Officer. The Employment Agreements each haveAgreement had an initial term of one year. Thereafter, the Employment Agreements renewAgreement renews automatically for one-year periods unless 30 daysdays’ notice is given by either the Company or the employee. The Employment AgreementsAgreement may be terminated by the Company without cause at any time and by the employee as a result of “constructive discharge” (e.g., a reduction in compensation or a material change in responsibilities) or a “change in control” (e.g., certain tender offers, mergers, sales of substantially all of the assets or sales of a majority of the voting securities). In the event of a termination by the Company without cause, or at the election of the employee upon a constructive discharge or change in control or upon the Company giving notice of its intent not to renew his employment agreement, Mr. CouncilGill is entitled to receive a lump sum severance payment in an amount equal to 3012 months of his monthly base salary,salary. In the event there is a change in control of the Company, and Mr. Tyler and Mr. Riddle are eachGill is terminated due to either a Without Cause Termination or a Constructive Discharge, he is entitled to receivea lump sum severance payments in an amountpayment equal to 12 months200% of monthly base salary. In addition, with respect to eachhis Base Salary as in effect at the time of the Named Executive Officers, thesuch termination or resignation. Following a termination without cause or a constructive discharge Mr. Gill’s benefits and perquisites as in effect at the date of termination of employment will be continued for eighteen (18) months, or if the termination is as a result of a change in control, the benefits and perquisites will be continued for twenty-four (24) months. Furthermore, upon such termination, the employeeshe may elect to require the Company to repurchase options granted under the Company’s stock option plans for a purchase price equal to the difference between the fair market value of the common stock at the date of termination and the stated option exercise price, provided that such fair market value is above the stated option price. In the event anthe Employment Agreement is terminated earlier by the Company for cause (as defined therein), or by an employeeMr. Gill other than upon a constructive discharge or a change in control, the employeeshe will not be entitled to any compensation following the date of such termination other than the pro rata
amount of theirhis then current base salary through such date. Upon termination of employment, other than in the case of termination by the Company without cause or at the election of the employee upon a constructive discharge or upon a change in control, the employees areMr. Gill is prohibited from competing with the Company for 12 months.
The Company entered into an employment agreement effective March 9, 2009,31, 2006 with Mr. Riddle, however, Mr. Riddle’s employment agreement has been modified by his retention agreement. In December 2011, Mr. Riddle informed the Company that he intended to resign his position as Chief Financial Officer of the Company. In connection with Mr. Riddle’s resignation, and as consideration for him agreeing to remain with the Company for a transitional period, on December 20, 2011, the Company and Raymond L. TylerMr. Riddle entered into a Retention Agreement to provide for the smooth transition of management, the material terms of which are as follows:
Mr. Riddle will continue to receive his current rate of compensation until he formally resigns from his position as CFO to be effective March 31, 2012 (the “Transitional Period”);
Provided Mr. Riddle remains with the Company until it files its Annual Report on Form 10-K and Mr. Riddle signs the CFO certification required to be filed with the Form 10-K, Mr. Riddle will receive a bonus of Fifty Thousand Dollars ($50,000);
Provided Mr. Riddle remains with the Company through the Transitional Period and otherwise complies with the provisions of the Retention Agreement, Mr. Riddle will continue to receive his base salary through December 31, 2012 and all of his unvested options, stock appreciation rights, restricted stock units and restricted stock will become fully vested on March 31, 2012.
In March 2012, Sam Daniel, the anticipated successor CFO, notified the Company that he was resigning his position with the Company. As a result, the Company requested that Mr. Riddle extend his retention period beyond March 31, 2012. Mr. Riddle has agreed to remain as Chief Financial Officer of the Company on an interim basis and to help with the transition once a new Chief Financial Officer is identified. As a result, Mr. Riddle’s Retention Agreement was amended and restated to provide that (1) his base salary be increased to $300,000 effective March 15, 2012, (2) that the Transitional Period be extended until the earlier of (i) the date the new Chief Financial Officer is hired by and begins working for the Company or (ii) December 31, 2012, and (3) upon termination of employment, the Company will pay Mr. Riddle a lump sum payment equal to nine months of his base salary instead of continuing his salary through December 31, 2012.
Effective June 28, 2010, the Company entered into an Amendment No. 1employment agreement with Mr. Houghton to Amended and Restated Employment Agreement (the “Amendment”). Pursuant to the Amendment, Mr. Tyler will serve as Senior Vice President of Nursing Home OperationsChief Information Officer, which agreement was amended March 9, 2011. The employment agreement with Mr. Houghton had an annualinitial term until March 31, 2012, and renewed automatically for one-year periods unless 30 days’ notice is given by either the Company or Mr. Houghton. The agreement with Mr. Houghton provided for a base salary of $250,000. The Base Salary shall be reviewed annually and shall be$200,000 per year, subject to increase accordingchange by the compensation committee. Mr. Houghton’s agreement was similar to the policies and practices adoptedMr. Gill’s Employment Agreement summarized above, except that upon a termination by the Company from time to time.
severance payment in an amount equal to the greater of (i) 100%12 months of his Base Salarymonthly base salary and the benefits and perquisites as in effect at the timedate of the termination or (ii) $308,000. The definition of constructive discharge is expanded in the Amendment to include the hiring of a new Chief Operating Officer; providedemployment will be continued for 12 months. Mr. Tyler providesHoughton’s employment with the Company was terminated effective February 3, 2012 and the Company entered into a separation agreement with written notice within 45 days of the commencement of employment of the new COO, andMr. Houghton. As a result, Mr. Houghton was paid $200,000 in severance, plus other benefits as provided further that this right shall extend to only the first such new COO hired.
23
The following tables estimate the amountspayments and benefits that would be paid toreceived by each of the Named Executive Officers in the event of a termination as of December 31, 20082011 under each potential reason for termination.
William R. Council, IIIKelly J. Gill
Termination | Change in | |||||||||||||||||||||||||||
without | Control | Change in | ||||||||||||||||||||||||||
Cause or | Resulting in | Control Not | ||||||||||||||||||||||||||
Voluntary | Termination | Constructive | Termination or | Resulting in | ||||||||||||||||||||||||
Estimated Payments | Termination | for Cause | Discharge | Resignation | Termination | Death | Disability | |||||||||||||||||||||
Severance—Salary | — | — | $ | 1,105,000 | $ | 1,105,000 | — | — | — | |||||||||||||||||||
Severance—Bonus | — | — | $ | 53,000 | (1) | $ | 53,000 | (1) | — | — | — | |||||||||||||||||
Vesting of unvested equity awards | — | — | — | (2) | — | (2) | — | (2) | — | — | ||||||||||||||||||
Repurchase of outstanding options | — | — | $ | 132,000 | (3) | $ | 132,000 | (3) | — | — | ||||||||||||||||||
Benefits/Perquisites | — | — | $ | 63,202 | (4) | $ | 63,202 | (4) | — | — | — | |||||||||||||||||
TOTAL | — | — | $ | 1,353,202 | $ | 1,353,202 | — | — | — | |||||||||||||||||||
Estimated Payments | Voluntary Termination | Termination for Cause | Termination without Cause or Constructive Discharge | Change in Control Resulting in Termination or Resignation | Change in Control Not Resulting in Termination | Death | Disability | |||||||||||||||||||||
Severance – Salary | — | — | $ | 450,000 | $ | 450,000 | — | — | — | |||||||||||||||||||
Severance – Bonus | — | — | 136,688 | (1) | 136,688 | (1) | — | $ | 136,688 | (1) | $ | 136,688 | (1) | |||||||||||||||
Vesting of unvested equity awards | $ | 35,100 | (2) | $ | 35,100 | (2) | 61,173 | (3) | 61,173 | (3) | $ | 61,173 | (3) | 61,173 | (3) | 61,173 | (3) | |||||||||||
Repurchase of out-standing vested options | — | — | 500 | (4) | 500 | (4) | — | — | — | |||||||||||||||||||
Benefits/Perquisites | — | — | 53,359 | (5) | 53,359 | (5) | — | — | — | |||||||||||||||||||
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TOTAL | $ | 35,100 | $ | 35,100 | $ | 701,720 | $ | 701,720 | $ | 61,173 | $ | 197,861 | $ | 197,861 | ||||||||||||||
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(1) | Based on the annual incentive earned by Mr. |
(2) | Includes the amount of bonus used to purchase unvested restricted share units. |
(3) | Includes 4,916.65 unvested restricted stock with dividend equivalent rights and 6,285.73 unvested restricted share units valued at $5.55 per share/unit, the closing price of |
Based on |
Based on estimated cost of continued health insurance, disability insurance, 401(k) Company match and EIRP amounts for 18 months following termination. |
Raymond L. Tyler,Glynn Riddle, Jr.
Termination | Change in | |||||||||||||||||||||||||||
without | Control | Change in | ||||||||||||||||||||||||||
Cause or | Resulting in | Control Not | ||||||||||||||||||||||||||
Voluntary | Termination | Constructive | Termination or | Resulting in | ||||||||||||||||||||||||
Estimated Payments | Termination | for Cause | Discharge | Resignation | Termination | Death | Disability | |||||||||||||||||||||
Severance—Salary | — | — | $ | 308,148 | $ | 308,148 | — | — | — | |||||||||||||||||||
Severance—Bonus | — | — | $ | 20,000 | (1) | $ | 20,000 | (1) | — | — | — | |||||||||||||||||
Vesting of unvested equity awards | — | — | — | (2) | — | (2) | — | (2) | — | — | ||||||||||||||||||
Repurchase of outstanding options | — | — | $ | 66,000 | (3) | $ | 66,000 | (3) | — | — | ||||||||||||||||||
Benefits/Perquisites | — | — | $ | 53,264 | (4) | $ | 53,264 | (4) | — | — | — | |||||||||||||||||
TOTAL | — | — | $ | 447,412 | $ | 447,412 | — | — | — | |||||||||||||||||||
Estimated Payments | Voluntary Termination | Termination for Cause | Termination without Cause or Constructive Discharge | Change in Control Resulting in Termination or Resignation | Change in Control Not Resulting in Termination | Death | Disability | |||||||||||||||||||||
Severance – Salary | — | — | $ | 229,000 | $ | 229,000 | — | — | — | |||||||||||||||||||
Severance – Bonus | — | — | 78,866 | (1) | 78,866 | (1) | — | $ | 78,866 | (1) | $ | 78,866 | (1) | |||||||||||||||
Vesting of unvested equity awards | $ | 60,204 | (2) | $ | 60,204 | (2) | 78,407 | (3) | 78,407 | (3) | $ | 78,407 | (3) | 78,407 | (3) | 78,407 | (3) | |||||||||||
Repurchase of out-standing vested options | — | — | 27,498 | (4) | 27,498 | (4) | — | — | — | |||||||||||||||||||
Benefits/Perquisites | — | — | 47,722 | (5) | 47,722 | (5) | — | — | — | |||||||||||||||||||
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TOTAL | $ | 60,204 | $ | 60,204 | $ | 461,493 | $ | 461,493 | $ | 78,407 | $ | 157,273 | $ | 157,273 | ||||||||||||||
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(1) | Based on the annual incentive earned by Mr. |
(2) | Includes the amount of bonus used to purchase unvested restricted share units. |
(3) | Includes 3,364.04 shares of |
Based on |
Based on estimated cost of continued health insurance, disability insurance, 401(k) Company match and EIRP amounts for 18 months following termination. |
24
Estimated Payments | Voluntary Termination | Termination for Cause | Termination without Cause or Constructive Discharge | Change in Control Resulting in Termination or Resignation | Change in Control Not Resulting in Termination | Death | Disability | |||||||||||||||||||||
Severance – Salary | — | — | $ | 200,000 | $ | 200,000 | — | — | — | |||||||||||||||||||
Severance – Bonus | — | — | 72,900 | (1) | 72,900 | (1) | — | $ | 72,900 | (1) | $ | 72,900 | (1) | |||||||||||||||
Vesting of unvested equity awards | $ | 6,405 | (2) | $ | 6,405 | (2) | 25,703 | (3) | 25,703 | (3) | $ | 25,703 | 25,703 | 25,703 | ||||||||||||||
Repurchase of out-standing vested options | — | — | 333 | (4) | 333 | (4) | — | — | — | |||||||||||||||||||
Benefits/Perquisites | — | — | 8,984 | (5) | 17,967 | (5) | — | — | — | |||||||||||||||||||
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TOTAL | $ | 6,405 | $ | 6,405 | $ | 307,920 | $ | 316,903 | $ | 25,703 | $ | 98,603 | $ | 98,603 | ||||||||||||||
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Termination | Change in | |||||||||||||||||||||||||||
without | Control | Change in | ||||||||||||||||||||||||||
Cause or | Resulting in | Control Not | ||||||||||||||||||||||||||
Voluntary | Termination | Constructive | Termination or | Resulting in | ||||||||||||||||||||||||
Estimated Payments | Termination | for Cause | Discharge | Resignation | Termination | Death | Disability | |||||||||||||||||||||
Severance—Salary | — | — | $ | 228,596 | $ | 228,596 | — | — | — | |||||||||||||||||||
Severance—Bonus | — | — | $ | 25,000 | (1) | $ | 25,000 | (1) | — | — | — | |||||||||||||||||
Vesting of unvested equity awards | — | — | — | (2) | — | (2) | — | (2) | — | — | ||||||||||||||||||
Repurchase of outstanding options | — | — | — | (3) | — | (3) | — | — | ||||||||||||||||||||
Benefits/Perquisites | — | — | $ | 51,590 | (4) | $ | 51,590 | (4) | — | — | — | |||||||||||||||||
TOTAL | — | — | $ | 305,186 | $ | 305,186 | — | — | — | |||||||||||||||||||
(1) | Based on the annual incentive earned by Mr. |
(2) | Includes the amount of | |
(3) | Includes 3,364.04 shares of |
(4) | Based on the Company’s obligation to purchase equity awards of 3,333 shares of common stock held by Mr. Houghton times $5.55, the closing price of the Company’s stock on the last trading date of the year, less the exercise price of the options. Excludes out-of-the money vested equity awards. |
(5) | Based on estimated cost of continued health insurance, disability insurance, 401(k) Company match and EIRP amounts for |
Does the Company have a code of ethics for executive officers?
The Company has a code of ethics for our executive officers. A copy of the code of ethics can be found on the Company’s website at www.irinfo.com/AVC.
Equity Compensation Plan Information
The following table provides aggregate information as of December 31, 2011, with respect to shares of our common stock that may be issued under our existing equity compensation plans:
Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Available for Future Issuance Under Equity Compensation Plans (excluding Securities Reflected in Column (a)) | |||||||||
(a) | (b) | (c)(1) | ||||||||||
Equity Compensation Plans Approved by Security Holders | 451,000 | $ | 6.68 | 533,000 | ||||||||
Equity Compensation Plans Not Approved by Security Holders | None | None | None | |||||||||
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Total | 451,000 | $ | 6.68 | 533,000 | ||||||||
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(1) | Includes 139,000 shares available for issuance under the 2005 Long-Term Incentive Plan, 100,000 shares reserved for issuance under the Advocat Inc. 2008 Stock Purchase Plan for Key Personnel and 294,000 shares available under the 2010 Long-Term Incentive Plan. |
The Company’s compensation committee currently consists of directors Olson, Brame and O’Neil.McCurdy. No interlocking relationship exists between the members of the Company’s Boardboard of Directorsdirectors or compensation committee and the board of directors or compensation committee of any other company.
The Company does not currently have any related party transactions in effect.
Does the Company have a policy in place with respect to contracts between the Company and persons affiliated with the Company?
The Company has a policy that any transactions between Advocatthe Company and its officers, directors and affiliates will be on terms as favorable to Advocatthe Company as can be obtained from unaffiliated third parties. Such transactions with such persons will be subject to approval by the audit committee of the Board.
25board.
The audit committee provides assistance to the Boardboard in fulfilling its obligations with respect to matters involving the accounting, auditing, financial reporting and internal control functions of Advocat.the Company. Among other things, the audit committee reviews and discusses with management and with Advocat’sthe Company’s independent registered public accounting firm (or “independent auditors”) the results of the year end audit of Advocat,the Company, including the audit report and audited financial statements. The Boardboard of Directors,directors, in its business judgment, has determined that all members of the audit committee are independent directors, qualified to serve on the audit committee pursuant to Rules 4200(a)(15)5605(a)(2) and 4350(d)5605(c)(2)(A) of the NASDAQ’s listing standards. As set forth in the audit committee charter, management of the Company is responsible for the preparation, presentation and integrity of the Company’s controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The independent auditors are responsible for auditing the Company’s financial statements and expressing an opinion as to their conformity with generally accepted accounting principles in the United States of America.
In connection with its review of Advocat’sthe Company’s audited financial statements for the fiscal year ended December 31, 2008,2011, the audit committee reviewed and discussed the audited financial statements with management and the independent auditors, and discussed with the Company’s auditors the matters required to be discussed by SAS 61 (Codification of Statements on Auditing Standards, AU 380), as currently in effect. In addition, the audit committee received the written disclosures and the letter from BDO Seidman,USA, LLP (“BDO”) required by applicable requirements of the Public Company Accounting Oversight Board regarding BDO’s communications with the audit committee concerning independence and has discussed with BDO their independence from Advocat.the Company. The audit committee has determined that the provision of non-audit services rendered by BDO to Advocatthe Company is compatible with maintaining the independence of BDO from Advocat,the Company, but the audit committee will periodically review the non-audit services rendered by BDO.
The members of the audit committee are not professionally engaged in the practice of auditing or accounting and are not experts in the fields of accounting or auditing, including in respect of auditor independence. Members of the audit committee rely without independent verification on the information provided to them and on the representations made by management and the independent auditors. Accordingly, the audit committee’s oversight does not provide an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or appropriate internal control and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, the audit committee’s considerations and discussions referred to above do not assure that the audit of the Company’s financial statements has been carried out in accordance with the standards of the Public Company Accounting Oversight Board (United States), that the financial statements are presented in accordance with generally accepted accounting principles in the United States of America or that the Company’s auditors are in fact “independent.”
Based on the review and discussions referred to above and subject to the limitations on the role and responsibilities of the audit committee referred to above and in the charter, the audit committee recommended to Advocat’s Boardthe Company’s board of Directorsdirectors that the audited financial statements be included in Advocat’sthe Company’s annual report on Form 10-K for its fiscal year ended December 31, 2008,2011, for filing with the Securities and Exchange Commission.
Audit Committee: | William C. O’Neil, Jr., Chair | |
Richard M. Brame | ||
Robert Z. Hensley | ||
Chad A. McCurdy |
26
The board of directors has ratified the Company’saudit committee’s selection of BDO USA, LLP to serve as our independent registered public accounting firm?
We are asking our shareholders to ratify the 2002 fiscal year. Representatives fromselection of BDO are expectedUSA, LLP as our independent registered public accounting firm. Although ratification is not required by our By-laws or otherwise, the board is submitting the selection of BDO USA, LLP to our shareholders for ratification because we believe it is a matter of good corporate practice. If the shareholders do not ratify the selection of BDO, the selection of the independent registered public accounting firm will be presentreconsidered by the audit committee, although the audit committee would not be required to select a different independent registered public accounting firm for the Company. Even if the selection is ratified, the audit committee may in its discretion select a different independent registered public accounting firm at any time during the annual meetingyear if it determines that such a change would be in the best interests of the Company and will have an opportunity to make a statement if they desire to do so. BDO representatives are expected to be available to respond to appropriate questions.
What fees were paid to the Company’s independent auditors during fiscal 2008?
For the fiscal years ended December 31, 20082011 and 2007,2010, the total fees paid to our independent auditors, BDO, were as follows:
2008 | 2007 | |||||||
Audit Fees(1) | $ | 637,000 | $ | 610,000 | ||||
Audit-Related Fees(2) | 10,000 | 11,000 | ||||||
Tax Fees(3) | 100,000 | 113,000 | ||||||
Total Fees for Services Provided | $ | 747,000 | $ | 734,000 | ||||
2011 | 2010 | |||||||
Audit Fees(1) | $ | 366,000 | $ | 394,000 | ||||
Audit-Related Fees(2) | 12,000 | 12,000 | ||||||
Tax Fees(3) | 160,000 | 84,000 | ||||||
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Total Fees for Services Provided | $ | 538,000 | $ | 490,000 | ||||
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(1) | Audit Fees include fees billed for professional services rendered in connection with the audit of the Company’s financial statements |
(2) | Audit Related Fees consist of audits of the Company’s savings plan and trust. |
(3) | Tax Fees include those charged for tax advice, planning and compliance. |
In accordance with the charter of our audit committee and consistent with the policies of the Securities and Exchange Commission, all auditing services and all non-audit services to be provided by any independent auditor of the Company shall be pre-approved by the audit committee. All of the services above were pre-approved by our audit committee. In assessing
requests for services by the independent auditor, the audit committee considers whether such services are consistent with the auditor’s independence, whether the independent auditor is likely to provide the most effective and efficient service based upon their familiarity with the Company, and whether the service could enhance the Company’s ability to manage or control risk or improve audit quality.
The audit committee has considered whether the provision of these services is compatible with maintaining the principal accountant’s independence.
Representatives of BDO USA, LLP, will be present at the Annual Meeting to answer questions. They also will have the opportunity to make a statement if they desire to do so.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” PROPOSAL 2. THE AFFIRMATIVE VOTE OF A MAJORITY OF THE VOTES CAST BY THE SHARES ENTITLED TO VOTE IS NECESSARY FOR THE APPROVAL OF PROPOSAL 2.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s executive officers and directors, and persons who own more than 10% of the registered class of the Company’s equity
27
It is important that proxies be returned promptly to avoid unnecessary expense. Therefore, shareholders who do not expect to attend in person are urged, regardless of the number of shares of stock owned, to date, sign and return the enclosed proxy promptly.
28
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Electronic Voting Instructions Available 24 hours a day, 7 days a week! Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy. VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. Proxies submitted by the Internet or telephone must be received by 11:59 p.m., Central Time, on June 6, 2012. | ||||||||
![]() | Vote by Internet • Go towww.investorvote.com/AVCA • Or scan the QR code with your smartphone • Follow the steps outlined on the secured website | |||||||
Vote by telephone • Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone • Follow the instructions provided by the recorded message | ||||||||
A-1
Name | Date | Number of Shares | Transaction Type | |||||||||
Richard M. Brame | 3/14/2008 | 1,000 | (1 | ) | ||||||||
8/13/2008 | 2,000 | (2 | ) | |||||||||
11/12/2008 | 2,000 | (2 | ) | |||||||||
11/13/2008 | 2,000 | (2 | ) | |||||||||
11/20/2008 | 1,000 | (2 | ) | |||||||||
3/13/2009 | 1,000 | (1 | ) | |||||||||
3/30/2009 | 4,000 | (2 | ) | |||||||||
William R. Council, III | 8/15/2007 | 4,800 | (2 | ) | ||||||||
3/14/2008 | 6,870 | (2 | ) | |||||||||
3/14/2008 | 25,000 | (1 | ) | |||||||||
8/12/2008 | 3,650 | (2 | ) | |||||||||
11/12/2008 | 8,000 | (2 | ) | |||||||||
3/13/2009 | 25,000 | (1 | ) | |||||||||
3/13/2009 | 12,801.93 | (3 | ) | |||||||||
Robert Z. Hensley | 3/14/2008 | 1,000 | (1 | ) | ||||||||
11/14/2008 | 4,000 | (2 | ) | |||||||||
3/13/2009 | 1,000 | (1 | ) | |||||||||
3/16/2009 | 2,000 | (2 | ) |
A-2
Name | Date | Number of Shares | Transaction Type | |||||||||
Chad A. McCurdy | 5/2/2007 | 17,600 | (2 | ) | ||||||||
5/3/2007 | 15,000 | (2 | ) | |||||||||
5/4/2007 | 27,400 | (2 | ) | |||||||||
5/18/2007 | 2,000 | (2 | ) | |||||||||
5/23/2007 | 18,000 | (2 | ) | |||||||||
5/24/2007 | 8,080 | (2 | ) | |||||||||
5/25/2007 | 800 | (2 | ) | |||||||||
5/29/2007 | 3,800 | (2 | ) | |||||||||
5/31/2007 | 2,500 | (2 | ) | |||||||||
6/1/2007 | 9,500 | (2 | ) | |||||||||
6/4/2007 | 10,000 | (2 | ) | |||||||||
6/5/2007 | 1,000 | (2 | ) | |||||||||
6/5/2007 | 10,000 | (2 | ) | |||||||||
6/8/2007 | 1,100 | (2 | ) | |||||||||
6/11/2007 | 400 | (2 | ) | |||||||||
6/12/2007 | 1,600 | (2 | ) | |||||||||
6/22/2007 | 3,100 | (2 | ) | |||||||||
6/25/2007 | 25,000 | (2 | ) | |||||||||
6/26/2007 | 9,220 | (2 | ) | |||||||||
6/27/2007 | 2,000 | (2 | ) | |||||||||
6/27/2007 | 500 | (2 | ) | |||||||||
6/28/2007 | 2,000 | (2 | ) | |||||||||
7/5/2007 | 5,000 | (2 | ) | |||||||||
7/20/2007 | 8,500 | (2 | ) | |||||||||
7/24/2007 | 13,000 | (2 | ) | |||||||||
2/8/2008 | 1,000 | (2 | ) | |||||||||
7/25/2007 | 1,500 | (2 | ) | |||||||||
5/14/2008 | 10,000 | (2 | ) | |||||||||
8/12/2008 | 12,000 | (2 | ) | |||||||||
8/13/2008 | 5,000 | (2 | ) | |||||||||
11/14/2008 | 25,000 | (2 | ) | |||||||||
11/20/2008 | 5,000 | (2 | ) | |||||||||
11/21/2008 | 5,200 | (2 | ) | |||||||||
11/25/2008 | 2,500 | (2 | ) | |||||||||
3/3/2009 | 15,000 | (6 | ) | |||||||||
3/13/2009 | 1,000 | (1 | ) | |||||||||
3/18/2009 | 257,500 | (2 | ) | |||||||||
Wallace E. Olson | 5/15/2007 | (5,000 | ) | (4 | ) | |||||||
8/24/2007 | (50,000 | ) | (5 | ) | ||||||||
9/19/2007 | (50,000 | ) | (5 | ) | ||||||||
3/14/2008 | 1,000 | (1 | ) | |||||||||
8/12/2008 | 5,000 | (2 | ) | |||||||||
8/18/2008 | 5,000 | (2 | ) | |||||||||
11/18/2008 | 10,000 | (2 | ) | |||||||||
3/13/2009 | 1,000 | (1 | ) |
A-3
Name | Date | Number of Shares | Transaction Type | |||||||||
William C. O’Neil, Jr. | 3/14/2008 | 1,000 | (1 | ) | ||||||||
12/11/2008 | 4,000 | (2 | ) | |||||||||
3/13/2009 | 1,000 | (1 | ) | |||||||||
L. Glynn Riddle, Jr. | 8/15/2007 | 2,500 | (2 | ) | ||||||||
3/14/2008 | 2,800 | (2 | ) | |||||||||
3/14/2008 | 10,000 | (1 | ) | |||||||||
8/12/2008 | 2,000 | (2 | ) | |||||||||
11/13/2008 | 3,650 | (2 | ) | |||||||||
3/13/2009 | 6,038.65 | (3 | ) | |||||||||
3/13/2009 | 10,000 | (1 | ) |
A-4
Using ablack inkpen, mark your votes with anXas shown in this example. Please do not write outside the designated areas. | x |
![]() | ||||||||
qIF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q |
A | Proposals — The Board of Directors recommends a vote FOR Proposals 1, 2 and 3. |
1. | Proposal to elect as directors of the Company the following persons to hold office until the annual meeting of stockholders to be held in | |||||||||||||||||||||||
For | For | Withhold | ||||||||||||||||||||||
01 - Kelly J. Gill | ¨ | |||||||||||||||||||||||
¨ | 02 | ¨ | ¨ |
Abstain | ||||||||||
2. | Ratify the appointment of BDO USA, LLP as our independent registered public accounting firm for 2012. | ¨ | ¨ | ¨ | ||||||
3. | In their discretion, the proxies are | ¨ | ¨ | ¨ | ||||||
B | Non-Voting Items |
Change of Address— Please print new address below. |
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C | Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below |
Signatures of Shareholder(s) should correspond exactly with the name printed hereon. Joint owners should each sign personally. Executors, administrators, trustees, etc., should give full title and authority. |
Date (mm/dd/yyyy) | Signature 1 | Signature 2 | ||||||||||
/ / |
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+ |
01H0AB
Regardless of whether you plan to attend the Annual Meeting
of Shareholders, you can be sure your shares are represented
at the meeting by promptly returning your proxy in the
enclosed envelope.
qIF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE
BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
Proxy — Advocat Inc.
Annual Meeting of Shareholders, May 29, 2009
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints William R. Council, IIIKelly J. Gill and L. Glynn Riddle, Jr.Matthew J. Weishaar and each of them, as proxies, each with power of substitution, to vote all shares of the undersigned at the annual meeting of the shareholders of Advocat Inc., to be held on Friday, May 29, 2009,Thursday, June 7, 2012, at 9:00 a.m. Central Daylight Time, at the Company’s offices, 1621 Galleria Boulevard, Brentwood, Tennessee 37027 and at any adjournments or postponements thereof, in accordance with the instructions on the reverse.
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THE SHARES WILL BE VOTED FOR PROPOSAL 1.
PLEASE SIGN AND DATE ON THE REVERSE SIDE AND RETURN PROMPTLY