UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant x☒ Filed by a Party other than the Registrant ¨☐
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Preliminary Proxy Statement | ||
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | ||
Definitive Proxy Statement | ||
Definitive Additional Materials | ||
Soliciting Material Pursuant to |
CapitalSonida Senior Living, CorporationInc.
(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):
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Fee paid previously with preliminary materials. | ||||
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CAPITALSONIDA SENIOR LIVING, CORPORATIONINC.
14160 DALLAS PARKWAY,14755 PRESTON ROAD, SUITE 300810
DALLAS, TEXAS 75254
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 19, 2016June 4, 2024
To the Stockholders of CapitalSonida Senior Living, Corporation:Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the “Annual Meeting”) of CapitalSonida Senior Living, Corporation,Inc., a Delaware corporation (the “Company”), will be held at the New York Palace Hotel, 455 Madison Avenue, New York, New York 10022,Company’s Corporate Office at 14755 Preston Road, Suite 810, Dallas, Texas 75254, on the 19th4th day of May, 2016June, 2024 at 10:9:00 a.m. EasternCentral Time, for the following purposes:
1. To elect three directors of the Company to hold office until the Annual Meeting to be held in 20192027 or until their respective successors are duly qualified and elected;
2. To ratify the Audit Committee’s appointment of Ernst & YoungRSM US LLP, independent accountants, as the Company’s independent auditors for the fiscal year ending December 31, 2016;2024;
3. To cast an advisory vote on executive compensation;
4. To approve an amendment to the Company’s 2019 Omnibus Stock and Incentive Plan, as amended (the “2019 Plan”), to increase the number of shares of common stock that the Company may issue under the 2019 Plan from 1,297,600 shares to 1,797,600 shares; and
4.5. To transact any and all other business that may properly come before the Annual Meeting or any adjournment(s) or postponement(s) thereof.
These proposals are described in more detail in the Company’s Proxy Statement. The Board of Directors has fixed the close of business on March 23, 2016,April 19, 2024 as the record date (the “Record Date”) for the determination of stockholders entitled to notice of and to vote at the Annual Meeting or any adjournment(s) or postponement(s) thereof. Only stockholdersholders of record at the close of business on the Record Date of shares of the Company’s common stock and Series A Convertible Preferred Stock are entitled to notice of and to vote at the Annual Meeting. The stock transfer books will not be closed. A list of stockholders entitled to vote at the Annual Meeting will be available for examination at the Company’s principal executive offices for ten days prior to the Annual Meeting.
Important Notice Regarding Availability of Proxy Materials for the Stockholders Meeting to be held on May19, 2016: The Proxy Statement and the 2015 Annual Report to Stockholders are also available atwww.proxydocs.com/csu.
You are cordially invited to attend the Annual Meeting; however, whether or not you expect to attend the Annual Meeting in person, you are urged to mark, sign, date and mail the enclosed proxy card promptly so that your shares of stock may be represented and voted in accordance with your preferences and in order to help establish the presence of a quorum at the Annual Meeting. If you attend the Annual Meeting and would like to vote in person, you may do so even if you have already dated, signed and returned your proxy card.
Pursuant to the rules of the New York Stock Exchange, if you hold your shares in street name, brokers, banks or other nominees will not have discretion to vote your shares on the election of directors, or the advisory vote on executive compensation.compensation and the amendment to the 2019 Plan. We encourage you to provide voting instructions to your broker, bank or other nominee if you hold your shares in street name so that your voice is heard on such matters.
Important Notice Regarding Availability of Proxy Materials for the Stockholders Meeting to be held on June 4, 2024: The Company’s Proxy Statement and the 2023 Annual Report to Stockholders are also available atwww.proxydocs.com/snda.
By Order of the Board of Directors
Chairman of the Board |
President and Chief Executive Officer |
April 15, 201626, 2024
Dallas, Texas
CAPITALSONIDA SENIOR LIVING, CORPORATIONINC.
14160 Dallas Parkway,14755 Preston Road, Suite 300810
Dallas, Texas 75254
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 21, 2015June 4, 2024
Solicitation and Revocability of Proxies
The Board of Directors (the “Board of Directors” or the “Board”) of CapitalSonida Senior Living, CorporationInc. (the “Company”“Company,” “Sonida,” “we,” “our” or “Capital Senior”“us”) is soliciting your proxy for voting on the proposals to be presented at our annual meeting of our stockholders to be held on May 19, 2016June 4, 2024 (the “Annual Meeting”). The Annual Meeting will be held at the New York Palace Hotel, 455 Madison Avenue, New York, New York 10022,Company’s Corporate Office at 14755 Preston Road, Suite 810, Dallas, Texas 75254 on the 19th4th day of May, 2016June, 2024 at 10:9:00 a.m. EasternCentral Time for the purposes set forth in the accompanying notice and described in this proxy statement.Proxy Statement. When proxies in the accompanying form are properly executed and received, the shares represented thereby will be voted at the Annual Meeting in accordance with the directions noted thereon, unless the proxy is subsequently revoked.
Any stockholder giving a proxy has the unconditional right to revoke his or her proxy at any time prior to the voting thereof eitherby attending the Annual Meeting and voting in person at the Annual Meeting, by delivering a duly executed proxy bearing a later date or by giving written notice of revocation to us addressed to David R. Brickman, Senior Vice President, General Counsel and Secretary, 14160 Dallas Parkway,14755 Preston Road, Suite 300,810, Dallas, Texas 75254. However, no such revocation will be effective unless such notice of revocation has been received by us at or prior to the Annual Meeting.
Our principal executive offices are located at, and our mailing address is, 14160 Dallas Parkway,14755 Preston Road, Suite 300,810, Dallas, Texas 75254.
Our management does not intend to present any business at the Annual Meeting for a vote other than the matters set forth in the accompanying notice and described in this Proxy Statement and has no knowledge that others will do so. If other matters requiring a vote of our stockholders properly come before the Annual Meeting, then it is the intention of the persons named in the accompanying form of proxy to vote the shares represented by the proxies held by them in accordance with their judgment on such matters.
This proxy statementProxy Statement and accompanying form of proxy are being mailed on or about April 15, 2016. The annual report26, 2024. Our Annual Report to our stockholders covering our fiscal year ended December 31, 2015,2023, which was mailed to our stockholders on or about April 15, 2016,26, 2024, does not form any part of the materials for solicitation of proxies.
In addition to the solicitation of proxies by mail, our officers, directors and employees may solicit proxies by telephone, telecopy, email or through personal contact. Such officers, directors and employees will not be additionally compensated by us but will be reimbursed for any out-of-pocket expenses. We have retained Georgeson Shareholder Communications Inc.LLC (“Georgeson”) to assist in the solicitation of proxies for a fee of $30,000.$8,500. This amount includes fees payable to Georgeson, but excludes salaries and expenses of our officers, directors and employees. Brokerage houses and other custodians, nominees and fiduciaries will, in connection with shares of our common stock registered in their names, be requested to forward solicitation material to the beneficial owners of such shares of our common stock.
The cost of preparing, printing, assembling and mailing theour annual report, the accompanying notice, this proxy statementProxy Statement and the enclosed form of proxy, as well as the reasonable cost of forwarding solicitation materials to the beneficial owners of shares of our common stock, and other costs of solicitation, will be exclusively borne by us.
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Some banks, brokers and other record holders have begun the practice of “householding” proxy statements and annual reports. “Householding” is the term used to describe the practice of delivering a single copy of this
proxy statement Proxy Statement and the annual reportour Annual Report to any household at which two or more stockholders share an address. This procedure would reduce the volume of duplicative information and our printing and mailing costs. We will deliver promptly, upon written or oral request, a separate copy of this proxy statementProxy Statement and the annual reportour Annual Report to aany stockholder at a shared address to which a single copy of such documents was delivered. Any stockholder who would like to receive a separate copy of the proxy statementthis Proxy Statement and annual report,our Annual Report, now or in the future, should submit this request to David R. Brickman, Senior Vice President, General Counsel and Secretary, at our principal executive offices, 14160 Dallas Parkway,14755 Preston Road, Suite 300,810, Dallas, Texas 75254, or by calling (972) 770-5600. Beneficial owners sharing an address who receive multiple copies of proxy materialsthis Proxy Statement and annual reportsour Annual Report and who would like to receive a single copy of such proxy materials in the future will need to contact their broker, bank or other nominee to request that only a single copy of each document be mailed to all stockholders at the shared address in the future.
Date for Receipt of Stockholder Proposals
Stockholder proposals to be included in the proxy statement for the 20172025 annual meeting of our stockholders must be received by us at our principal executive offices on or before December 16, 201627, 2024 for inclusion in the proxy statement relating to that meeting.
Our Amended and Restated Certificate of Incorporation, as amended (the “Certificate of Incorporation”), establishes an advance notice procedure with regard to certain matters, including stockholder proposals and nominations of individuals for election to the Board, to be proposed at an annual meeting of our stockholders. Notice of a stockholder proposal or a director nomination to be brought at an annual meeting of our stockholders must be delivered to, or mailed and received at, our principal executive offices not less than 60 but not more than 90 days before the scheduled date of the meeting, regardless of any postponement, deferral or adjournment of that meeting to a later date; provided, however, that if less than 70 days’ notice or prior public disclosure of the date of the meeting is given or made to stockholders, the notice must be delivered or received no later than the close of business on the tenth day following the earlier of (1) the day on which such notice of the date of meeting was mailed or (2) the day on which such public disclosure was made. The notice of a stockholder proposal or a director nomination must also contain specified information and conform to certain requirements set forth in our Certificate of Incorporation. The chairman of the meeting may disregard the introduction of any such proposal or nomination if it is not made in compliance with the foregoing procedures or the applicable provisions of our Certificate of Incorporation.
Quorum and Voting
TheOnly holders of record date forat the determinationclose of business on April 19, 2024 (the “Record Date”) of shares of our stockholderscommon stock and Series A Convertible Preferred Stock are entitled to notice of and to vote at the Annual Meeting wasMeeting. As of the close of business on March 23, 2016. At such time,Record Date, there were 29,940,296(1) 13,854,737 shares of our common stock issued and outstanding.outstanding, and (2) 41,250 shares of Series A Convertible Preferred Stock issued and outstanding, which were convertible into 1,254,074 shares of our common stock and are entitled to an aggregate of 1,254,074 votes on the proposals described in this Proxy Statement.
Each holder of our common stock is entitled to one vote per share on all matters to be acted upon at the Annual Meeting. Each holder of our Series A Convertible Preferred Stock is entitled to the number of votes equal to the number of shares of our common stock into which the Series A Convertible Preferred Stock owned by such holder are convertible as of the Record Date on all matters to be acted upon at the Annual Meeting, and neithervoting together with the holders of our common stock as a single class. Neither our Certificate of Incorporation nor our Second Amended and Restated Bylaws, as amended (the “Bylaws”) allow, allows for cumulative voting rights. Each proposal is tabulated separately. The holders of a majority of the outstanding shares of our common stock entitled to vote, present in
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person or represented by proxy, is necessary to constitute a quorum at the Annual Meeting. If a quorum is not present or represented at the Annual Meeting, a majority of the stockholders entitled to vote at the Annual Meeting, present in person or represented by proxy, may adjourn the Annual Meeting, from time to time, without notice or other announcement at the Annual Meeting until a quorum is present or represented.
Pursuant to our Bylaws, assuming the presence of a quorum, the affirmative vote of the holders of a majority of the outstanding shares of our common stock entitled to vote, present in person or represented by proxy, at the Annual Meeting is required to (i) ratify the appointment of the independent auditorsauditors; and (ii) approve, on an advisory basis, the Company’s executive compensation. Abstentions and “broker non-votes” (as described
below), if any, will not be counted as votes cast “FOR” such proposals, but may be treated as votes “AGAINST” such proposals. With respect to an uncontested election of directors, assuming the presence of a quorum, each director nominee will be elected to the Board if the number of shares voted “FOR” the election of such director nominee exceeds the number of shares voted “WITHHOLD” for such director nominee (with abstentions and broker non-votes“broker non-votes” not counted as votes cast either “FOR” or “WITHHOLD” for such director nominee’s election).
Pursuant to rules of the New York Stock Exchange (“NYSE”), assuming the presence of a quorum, the approval of the amendment to the Company’s 2019 Omnibus Stock and Incentive Plan, as amended (the “2019 Plan”), to increase the number of shares of common stock that the Company may issue under the 2019 Plan from 1,297,600 shares to 1,797,600 shares requires the affirmative vote of a majority of the votes cast on the proposal. Abstentions and “broker non-votes,” if any, will not be counted as votes cast on this proposal.
The Board of Directors unanimously recommends that you vote (1) “FOR” the election of each director nominee named in this proxy statement,Proxy Statement, (2) “FOR” the ratification of the appointment of Ernst & YoungRSM US LLP as our independent auditors for the fiscal year ending December 31, 2016, and2024, (3) “FOR” the approval, on an advisory basis, of the Company’s executive compensation.compensation, and (4) “FOR” the approval of the amendment to the 2019 Plan. The Board of Directors also recommends that you vote “FOR” the ability of the proxy holders to vote the proxy in their discretion with respect to any other matters that properly come before the Annual Meeting.
If you hold shares registered directly in your name and you sign and return a proxy card without giving specific voting instructions, the persons named as proxy holders will vote your proxy (1) in favor of the election of each director nominee named in this proxy statement,Proxy Statement, (2) in favor of the ratification of the appointment of Ernst & YoungRSM US LLP as our independent auditors for the fiscal year ending December 31, 2016,2024, (3) in favor of the approval, on an advisory basis, of the Company’s executive compensation, (4) in favor of the approval of the amendment to the 2019 Plan, and (4)(5) as the proxy holders may determine in their discretion with respect to any other matters that properly come before the Annual Meeting.
If you hold shares in “street name” and do not submit specific voting instructions to your broker, bank or other nominee, the organization that holds your shares may generally vote your shares with respect to “discretionary” items, but not with respect to “non-discretionary”“non-discretionary” items. Discretionary items are proposals considered to be routine under the rules of the New York Stock Exchange (“NYSE”),NYSE, and in the absence of voting instructions, your broker, bank or other nominee may vote the shares it holds in street name on such items. On non-discretionary items for which you do not submit specific voting instructions to your broker, bank, or other nominee, the shares will be treated as “broker non-votes.” Broker non-votes will be considered present at the Annual Meeting for purposes of determining a quorum at the Annual Meeting. The proposal to ratify the appointment of Ernst & YoungRSM US LLP as our independent auditors for the fiscal year ending December 31, 20162024 (Proposal 2) is considered to be routine, and therefore, may be voted upon by your broker, bank or other nominee if you do not provide instructions to such broker, bank or other nominee. However, pursuant to the NYSE’s rules, brokers, banks or other nominees will not have discretion to vote your shares on the election of directors (Proposal 1) and, the advisory vote on executive compensation (Proposal 3), and the proposal to amend the 2019 Plan (Proposal 4), as such proposals are considered to be “non-routine”“non-routine” items. We encourage you to provide voting instructions to your broker, bank or other nominee if you hold your shares in street name so that your voice is heard on such matters.
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Requests for Written Copies of Annual Report
We will provide, without charge, a copy of our annual reportAnnual Report upon the written request of any registered or beneficial owner of our commoncapital stock entitled to vote at the Annual Meeting. Requests should be made by mailing David R. Brickman, Senior Vice President, General Counsel and Secretary, at our principal executive offices, 14160 Dallas Parkway,14755 Preston Road, Suite 300,810, Dallas, Texas 75254, or by calling (972) 770-5600. The SEC also maintains a website atwww.sec.govwhich contains reports, proxy statements and other information regarding registrants, including us.
Forward-Looking Statements
Certain information contained in this proxy statementProxy Statement constitutes “Forward-Looking Statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which can be identified by the use of forward-looking terminology such as “may,” “will,” “would,” “intend,” “could,” “believe,” “expect,” “anticipate,” “estimate” or “continue” or the negative thereof or other variations thereon or comparable terminology. We caution readers that forward-
lookingExamples of forward-looking statements, including,include, without limitation, those relating to ourthe Company’s future business prospects revenues,and strategies, financial results, working capital, liquidity, capital needs and expenditures, interest costs, insurance availability and income,contingent liabilities. Forward-looking statements are subject to certain risks and uncertainties that could cause the Company’s actual results and financial condition to differ materially from those indicated in the forward-looking statements, including, but not limited to: the Company’s ability to generate sufficient cash flows from operations, additional proceeds from debt financings or refinancings, and proceeds from the sale of assets to satisfy its short-and long-term debt obligations and to fund the Company’s capital improvement projects to expand, redevelop, and/or reposition its senior living communities; increases in market interest rates that increase the cost of certain of the Company’s debt obligations; increased competition for, or a shortage of, skilled workers, including due to several important factors herein identified. These factors include ourgeneral labor market conditions, along with wage pressures resulting from such increased competition, low unemployment levels, use of contract labor, minimum wage increases and/or changes in overtime laws; the Company’s ability to find suitable acquisition properties atobtain additional capital on terms acceptable to it; the Company’s ability to extend or refinance its existing debt as such debt matures; the Company’s compliance with its debt agreements, including certain financial covenants, and the risk of cross-default in the event such non-compliance occurs; the Company’s ability to complete acquisitions and dispositions upon favorable terms financing, licensingor at all; the risk of oversupply and business conditions,increased competition in the markets which the Company operates; the Company’s ability to improve and maintain controls over financial reporting; the cost and difficulty of complying with applicable licensure, legislative oversight, or regulatory changes; risks of downturn inassociated with current global economic conditions generally, satisfaction of closing conditionsand general economic factors such as those pertaining to licensure,inflation, the availabilityconsumer price index, commodity costs, fuel and other energy costs, competition in the labor market, costs of salaries, wages, benefits, and insurance, at commercially reasonableinterest rates, and tax rates; the future course and impact of COVID-19, or the potential emergence and effects of a future epidemic, pandemic, outbreak of infectious disease or other health crisis; changes in accounting principles and interpretations, among others,interpretations; and the other risks and factors identified from time to time in ourthe Company’s reports filed with the SEC.
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PRINCIPAL STOCKHOLDERS AND STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth certain information with respect to the beneficial ownership of our commoncapital stock as of March 23, 2016April 19, 2024 by: (i) each person known by us to be the beneficial owner of more than five percent of our commoncapital stock; (ii) each of our directors and director nominees; (iii) each of our “named executive officers” set forth in the Summary Compensation Table below; and (iv) all of our current executive officers and directors as a group. Except as otherwise indicated, the address of each person listed below is 14160 Dallas Parkway,14755 Preston Road, Suite 300,810, Dallas, Texas 75254.
Shares Beneficially Owned(1)(2) | ||||||||
Name of Beneficial Owner | Number | Percent of Class | ||||||
Arbiter Partners Capital Management LLC | 2,294,950 | (3) | 7.7 | % | ||||
HCRE Special Investment LLC | 1,878,829 | (4) | 6.3 | % | ||||
BlackRock, Inc. | 1,824,553 | (5) | 6.1 | % | ||||
Lawrence A. Cohen | 960,934 | (6) | 3.2 | % | ||||
Keith N. Johannessen | 543,195 | (7) | 1.8 | % | ||||
Carey P. Hendrickson | 154,540 | (8) | * | |||||
David R. Brickman | 134,262 | (9) | * | |||||
James A. Moore | 69,180 | (10) | * | |||||
Jill M. Krueger | 41,460 | (11) | * | |||||
Joseph G. Solari | 41,180 | (12) | * | |||||
Philip A. Brooks | 39,468 | (13) | * | |||||
Ronald A. Malone | 30,060 | (14) | * | |||||
Michael W. Reid | 24,060 | (15) | * | |||||
E. Rodney Hornbake | 18,560 | (16) | * | |||||
Kimberly S. Lody | 6,690 | (17) | * | |||||
Ed Grier (new director nominee) | 0 | * | ||||||
All directors and executive officers as a group (17 persons) | 2,139,555 | (18) | 7.1 | % |
Shares Beneficially Owned(1) | ||||||||
Name of Beneficial Owner | Number | Percent of Class | ||||||
5% or More Stockholder | ||||||||
Conversant Capital LLC(2) | 9,846,200 | 59.6 | % | |||||
Seymour Pluchenik(3) | 2,449,593 | 14.8 | % | |||||
Named Executive Officers and Directors | ||||||||
Brandon M. Ribar(4) | 308,055 | 1.9 | % | |||||
Kevin J. Detz(5) | 189,197 | 1.1 | % | |||||
David R. Brickman(6) | 115,969 | * | ||||||
Jill M. Krueger(7) | 13,047 | * | ||||||
Noah R. Beren(8) | 10,276 | * | ||||||
Benjamin P. Harris(9) | 8,987 | * | ||||||
Shmuel S.Z. Lieberman(10) | 6,913 | * | ||||||
David W. Johnson(11) | 5,913 | * | ||||||
Elliot R. Zibel(12) | 5,913 | * | ||||||
Max J. Levy | 0 | — | ||||||
All directors and executive officers as a group (14 persons)(13) | 823,368 | 5.0 | % |
* | Less than one percent. |
(1) |
The percentages indicated are based on |
The address of |
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common stock issuable upon draws by the Company under the Conversant Equity Commitment, in each case, held in the aggregate by the Conversant Investors and |
The address of |
Includes shares held by Mr. |
Includes shares held by Mr. |
Includes shares held by Mr. |
Consists of |
(8) | Consists of |
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(9) | Consists of 3,074 shares held by Mr. Harris directly, 3,000 unvested shares of restricted stock and 2,913 shares of common stock underlying vested restricted stock units. |
(10) | Consists of |
(11) | Consists of |
(12) | Consists of |
(13) | Consists of |
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(PROPOSAL 1)
Nominees and Continuing Directors
Unless otherwise directed in the enclosed proxy, it is the intention of the persons named in such proxy to vote the shares represented by such proxy for the election of each of the following nominees as a member of the Board of Directors, each to hold office until the annual meeting of our stockholders to be held in 20192027 and until his or her successor is duly qualified and elected or until his or her earlier resignation or removal. Mr. BrooksMs. Krueger and Mr. MaloneMessrs. Levy and Zibel are presently members of the Board of Directors.
Our Board is divided into three classes: Class I (terms expire at 2025 annual meeting), Class II (terms expire at 2026 annual meeting) and Class III (terms expire at 2024 annual meeting). The Board currently consists of eight directors with three directors in Class II and Class III and two directors and one vacancy in Class I.
As further discussed below under “Board of Directors and Committees—Investor Rights Agreement,” in November 2021 we entered into an agreement (the “Investor Rights Agreement”) with Conversant Dallas Parkway (A) LP (“Conversant Fund A”), Conversant Dallas Parkway (B) LP, affiliates of Conversant Capital LLC (“Conversant Fund B” and, together with Conversant Fund A, the “Conversant Investors”), and Silk Partners, LP (“Silk”) pertaining to, among other things, the appointment of a certain number of designees of Conversant Fund A and Silk, respectively, to the Board. Pursuant to the terms of the Investor Rights Agreement, Conversant Fund A is entitled to designate four individuals to be appointed to the Board and the Chairman of the Board and Silk is entitled to designate two individuals to be appointed to the Board. Conversant Fund A designated Benjamin P. Harris, David W. Johnson, Max J. Levy, and Elliot R. Zibel as its director designees with Mr. Grier is not presentlyJohnson as Chairman of the Board and Silk designated Noah R. Beren and Shmuel S.Z. Lieberman as its director designees, and such individuals were appointed to the Board in November 2021.
In addition, as discussed below under “Executive Compensation Tables—Employment Agreements,” we entered into an amendment to Brandon M. Ribar’s employment agreement in August 2022 in connection with his appointment as our President and Chief Executive Officer and as a member of our Board, which provides that our Board will nominate Mr. Ribar for reelection to the Board at the expiration of Directors.each term of office, and that Mr. Ribar will serve as a member of our Board for each period for which he is so elected.
Name | Age | Position(s) | Director’s Term Expires | |||||||
Nominees: | ||||||||||
Philip A. Brooks | 57 | Director | 2019 | |||||||
Ronald A. Malone | 61 | Director | 2019 | |||||||
Ed Grier | 61 | Director Nominee | 2019 | |||||||
Continuing Directors: | ||||||||||
Lawrence A. Cohen | 62 | Vice Chairman of the Board and Chief Executive Officer | 2017 | |||||||
E. Rodney Hornbake | 65 | Director | 2017 | |||||||
Kimberly S. Lody | 50 | Director | 2017 | |||||||
Keith N. Johannessen | 59 | President and Chief Operating Officer and Director | 2018 | |||||||
Jill M. Krueger | 56 | Director | 2018 | |||||||
Michael W. Reid | 62 | Director | 2018 |
Name | Age | Position(s) | Class | Director’s Term Expires | ||||||||||
Nominees: | ||||||||||||||
Jill M. Krueger | 64 | Director | III | 2024 | ||||||||||
Max J. Levy | 33 | Director | III | 2024 | ||||||||||
Elliot R. Zibel | 43 | Director | III | 2024 | ||||||||||
Continuing Directors: | ||||||||||||||
Benjamin P. Harris | 49 | Director | I | 2025 | ||||||||||
David W. Johnson | 62 | Director | I | 2025 | ||||||||||
Brandon M. Ribar | 43 | Chief Executive Officer, President and Director | II | 2026 | ||||||||||
Noah R. Beren | 42 | Director | II | 2026 | ||||||||||
Shmuel S.Z. Lieberman | 39 | Director | II | 2026 |
The following is a brief biography of each nominee and each current director, including each director whose term will continue after the Annual Meeting.
Nominees for Election for Three-Year Terms Expiring at the 20192027 Annual Meeting:
Philip A. Brooks has been a director since 2010. Mr. Brooks is a principal investor and managing partner of Select Living, LLC, a seniors housing business focused on defined affinity groups, and is an agent for a large fund manager investing in the seniors housing space. Previously, Mr. Brooks served as a Senior Vice President, Loan Production for Walker & Dunlop, LLC, a NYSE-listed provider of financial services for owners and developers of commercial real estate throughout the United States. Prior to Walker & Dunlop, LLC, from February 2011, Mr. Brooks served as Senior Vice President, Loan Production for CWCapital, LLC, a mortgage finance company, which was acquired by Walker & Dunlop, LLC in September 2012. From 1996 to October 2010, Mr. Brooks served in various senior executive positions with Berkadia Commercial Mortgage, LLC, a national mortgage bank, which was previously known as Capmark Finance Inc. and GMAC Commercial Mortgage. He has closed over $5 billion of seniors housing and healthcare financings and has been on multi-disciplinary teams in sourcing, underwriting and syndicating $15 billion in committed financings in North America and Europe. Mr. Brooks has 30 years of experience in the commercial real estate finance industry. He was a founding member of the American Seniors Housing Association, a leading trade association promoting seniors housing, and was on the Board of Directors of the National Investment Center for the Seniors Housing & Care Industry, a leading trade association promoting the industry to the capital markets. On October 25, 2009, Capmark Financial Group Inc. and certain of its subsidiaries filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code.
Ronald A. Malone has been a director since 2010. Mr. Malone served as a member of the Board of Directors of Gentiva Health Services, Inc. (“Gentiva”), a provider of comprehensive home health services that was acquired by Kindred Healthcare, Inc. in 2015, from June 2002 until May 2012, having served as Chairman from June 2002 to December 2010. He served as Chief Executive Officer of Gentiva from June 2002 until
December 2008, as Executive Vice President of such company from March 2000 until June 2002, and as President of Gentiva’s home health services division from January 2001 to June 2002. Prior to joining Gentiva, Mr. Malone served in various positions with The Olsten Corporation, including Executive Vice President of The Olsten Corporation and President, Olsten Staffing Services, United States and Canada. Mr. Malone has been a director of Hill-Rom Holdings, Inc. since July 2007. He is a former director of the National Association for Home Care & Hospice and a former director, chairman and founding member of the Alliance for Home Health Quality and Innovation.
Ed Grier is nominated for election as a new director to the Board. Mr. Grier has been the Dean of the Virginia Commonwealth University (“VCU”) School of Business since March 2010. Prior to joining VCU, Mr. Grier spent approximately 29 years with the Walt Disney Company (“Disney”) beginning in 1981. He served as the President of the Disneyland Resort from 2006 until 2010 and held various senior financial and operational roles during his career with Disney. Mr. Grier serves as a director of NVR, Inc., a NYSE-listed residential homebuilding company which operates in two business segments: homebuilding and mortgage banking (“NVR”), and as a member of the audit and qualified legal compliance committees of NVR’s board of directors. He is also a director of the Middleburg Trust Company, a provider of wealth management services and a wholly-owned subsidiary of Middleburg Financial Corporation. In addition, Mr. Grier serves on the boards of the Greater Richmond Chamber of Commerce, The Colonial Williamsburg Foundation and ChildFund International and serves as a trustee for Brandman University. Mr. Grier is also a Certified Public Accountant. As noted below under “Board of Directors and Committees — Stockholder Agreement,” the Board’s nomination of Mr. Grier as a director satisfies the Company’s obligations under the Stockholder Agreement (as defined below).
Directors Continuing in Office Until the 2017 Annual Meeting:
Lawrence A. Cohen has served as one of our directors since November 1996 and as Vice Chairman of the Board since November 1996. He has served as our Chief Executive Officer since May 1999 and was our Chief Financial Officer from November 1996 to May 1999. From 1991 to 1996, Mr. Cohen served as President and Chief Executive Officer of Paine Webber Properties Incorporated. Mr. Cohen serves on the boards of various charitable organizations and is active in several industry associations. Mr. Cohen was a founding member and is Chairman of the Board of Directors of the American Seniors Housing Association, and serves on the Operator Advisory Board of the National Investment Center for the Seniors Housing & Care Industry. He received an LL.M. in Taxation from New York University School of Law, a JD from St. John’s University School of Law, and a BBA in Accounting from The George Washington University. Mr. Cohen is a licensed attorney and is also a Certified Public Accountant (currently inactive). Mr. Cohen has had positions with businesses involved in senior living for 31 years.
E. Rodney Hornbake, M.D. has been a director since 2011. Dr. Hornbake serves as the Managing Partner of Essex Internal Medicine, a private practice of internal medicine and geriatrics, that he formed in 2002. Dr. Hornbake served as Senior Vice President and Chief Medical Officer of Gentiva from March 2000 to April 2002, and he has continued to serve in a consulting role to Gentiva since April 2002. Gentiva was spun-off from Olsten Corporation, a staffing services company, that Dr. Hornbake joined as part of its management team in 1999. Dr. Hornbake also served as Medical Director of Care Centrix, a home care benefits management company, from November 1999 until 2002, and he continued to serve in a consulting role to Care Centrix from 2002 to 2010. Dr. Hornbake previously served as Vice President and Medical Director of the North Shore-LIJ Health System in New York from 1996 to 1999, as Chief Medical Officer for Aetna Professional Management Corporation from 1994 to 1996, and as Chief of Medicine for the Park Medical Group/Park Ridge Health System in New York from 1993 to 1994. Dr. Hornbake served as Clinical Assistant Professor of Medicine at the University of Connecticut from August 2002 to 2010 and as an Associate Professor (Adjunct) of Hofstra University from 1998 to 2004. Dr. Hornbake served on the board of Equity Health Partners, a privately-held start-up technology company, from 2008 until 2012, and he served on the Commission on Office Laboratory Accreditation for ten years, including two years as its Chairman.
Kimberly S. Lody has been a director since 2014. Ms. Lody has served as the President of GN ReSound, an international manufacturer of hearing aids, since September 2011. Prior to joining GN ReSound, from August 2009 until April 2011, Ms. Lody held various positions at Coloplast Corp., a global provider of ostomy care, urology and continence care, and wound and skin care, including serving as President, Chronic Care (from 2010 to 2011), Vice President of Marketing (from 2009 to 2010), and Interim Vice President of Marketing (during 2009). Prior to joining Coloplast Corp., from July 2004 until August 2009, Ms. Lody was an independent consultant focusing on providing interim leadership and strategic revenue enhancement to clients in a variety of industries, including healthcare, consumer products, automotive and insurance services. From January 2003 until July 2004, Ms. Lody served as the Executive Vice President and Chief Operating Officer of Senior Homecare, Inc., a home healthcare provider, and from May 1997 until February 2003, she held various positions at Gentiva, including serving as Senior Vice President and Chief Marketing Officer (from 2001 to 2003), Vice President — Marketing and Communications (from 1998 to 2000), and Vice President — Strategic Planning (from 1997 to 1998). Ms. Lody received a Master of Business Administration degree from Wake Forest University and a Bachelor of Arts degree in business administration from Hiram College.
Directors Continuing in Office Until the 2018 Annual Meeting:
Keith N. Johannessen has been a director since 1999. Mr. Johannessen has served as our President since 1994 and our Chief Operating Officer since 1999. He previously served as our Executive Vice President from May 1993 to February 1994. Mr. Johannessen has more than 37 years of operational experience in seniors housing. He began his senior housing career in 1978 with Life Care Services Corporation and then joined Oxford Retirement Services, Inc. as Executive Vice President. Mr. Johannessen later served as Senior Manager in the health care practice of Ernst & Young LLP prior to joining the Company in 1993. He has served on the State of the Industry and Model Assisted Living Regulations Committees of the American Seniors Housing Association. Mr. Johannessen holds a Bachelor of Arts degree.
Jill M. Krueger has been a director since February 2004. Ms. KruegerShe is the founding President and Chief Executive Officer of Symbria, Inc., a company that provides integrated ancillary services to nursing and senior living providers that
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include therapy, pharmacy and well-being. She also serves on the Board of Directors of Legacy IMBDS, Inc. (formerly Health Resources Alliance,iMedia Brands, Inc.) and its affiliates, a national developer and provider of innovative, outcome-driven programs that enhance the lives(NASDAQ: IMBI), where she is Chairperson of the geriatric population.Audit Committee, and is a member of the Board of Directors of the Ebix, Inc. and the Board of Directors of the Senior Care Pharmacy Coalition. Before joiningshe joined Symbria, Inc., Ms. Krueger was a partner at KPMG LLP responsible for overseeing the firm’s national Long-termLong-Term Care and Retirement Housing Practice. Ms. Krueger served asShe received a public commissioner for the Continuing Care Accreditation Commission and as a member of its financial advisory boardB.S. from 1987 to 2001.Northern Illinois University. She is also on the Fifth Third Bank — Illinois Affiliate Board of Directors.a Certified Public Accountant and a Certified Management Accountant.
Michael W. ReidMax J. Levy has been a director since October 2009.November 2021. Mr. Reid has served asLevy is a partnerPrincipal at Herald Square Properties, aConversant Capital LLC. From 2015-2020, Mr. Levy was an investment analyst at The Baupost Group where he focused on real estate investmentinvestments in North America and management company that manages two office buildings totaling nearly 1.0 million square feet in Midtown Manhattan and recently purchased and sold two office buildings in Times Square South with the Davis Companies, since 2009.Europe. During this time, Mr. Reid is also a member of the Board of Directors and the Chairman of the Audit Committee of Inland Residential Properties Trust, Inc., a real estate investment trust formed in December 2013 to acquire multifamily properties located in metropolitan areas throughout the United States. Mr. Reid has nearly 35 years of investment banking and real estate experience, including heading Lehman Brothers REIT equity practice for nine years (from 1992 to 2001) as Managing Director in the Global Real Estate Department. In that capacity, heLevy was responsible for developingsourcing and implementingevaluating equity and debt investments in all property types in both private real estate and public securities. Before joining Baupost, Mr. Levy began his career as an investment banking analyst for Hentschel & Company, a boutique real estate advisory firm, where he assisted public REITs and private real estate companies on mergers, acquisitions, and capital raising. Mr. Levy also serves as a Director of Crossroads Impact Corp., an impact focused specialty finance company. He received a B.A. in Intellectual History from the business strategyUniversity of Pennsylvania where he graduated summa cum laude and was elected to Phi Beta Kappa.
Elliot R. Zibel, CFA, has been a director since November 2021. He is the Co-Founder of Select Dental Management, where he is responsible for its REITstrategy, partnerships and providing non-clinical support services for 38 practice Dental Support Organizations. Since Select Dental Management was established in 2018, Mr. Zibel has helped it complete 30 acquisitions and raise more than $70 million of equity underwriting business.and debt capital from institutional investors. Previously, he worked in the financial sector at multi-billion-dollar firms including Hitchwood Capital Management L.P., Folger Hill Asset Management, Pennant Capital Management, Breeden Partners L.P. and Matrix Asset Advisors LLC. Mr. Reid also served as Chief Operating Officer at SL Green Realty Corp.Zibel received a Bachelor of Economics and Political Science from 2001-2004, where someUnion College.
Directors Continuing in Office Until the 2025 Annual Meeting:
Benjamin P. Harris, CFA, has been a director since November 2021. He is the founder and CEO of his responsibilities included strategic planning, finance and reporting, capital markets, operations and budgeting forPinedale Capital Partners, a $4 billion publicly-traded REIT. From 2004-2006,dedicated industrial real estate operating platform based in New York. Previously, Mr. Harris was the CEO of Link Logistics (Blackstone’s U.S. Industrial Real Estate platform). Before that, he served as President of Ophir Energy Corp.Gramercy Property Trust (NYSE: GPT), the Head of Net Lease Investments of Northcliffe/Annaly Capital Management and the Head of U.S. Investments of W. P. Carey & Co. LLC (NYSE: WPC). Mr. Harris received a company that investedJoint BSc in Economics from the University of Kings College/Dalhousie University, Canada.
David W. Johnson has been a director since November 2021. He is Co-Founder & Managing Director of Horizon Capital, a land acquisition and land development company. Prior to Horizon Capital, he founded Aimbridge Hospitality and served as its CEO. Mr. Johnson previously spent 17 years at Wyndham International, where he helped add over 400 hotels to the Wyndham portfolio. Additionally, he served as President of Wyndham Hotels, overseeing approximately 15,000 employees and $3 billion in annual revenue. Mr. Johnson serves as a Director on the Board of Hilton Grand Vacations Inc. (NYSE: HGV) and sits on the Audit and Compensation Committees. Previously, he served on the Strategic Hotels (NYSE: BEE) Board as a member of the Audit and Corporate Governance Committees, and as a Director of Gaylord Entertainment (NYSE: GET). He is also on the U.S. Travel Association (USTA) board as a member of the Chairman’s Circle and as a member of USTA’s CEO Roundtable. Mr. Johnson received a bachelor’s degree in Business Economics from Northeastern Illinois University.
Directors Continuing in Office Until the 2026 Annual Meeting:
Brandon M. Ribar has been the Chief Executive Officer and President and a director of Sonida Senior Living, Inc. since September 2022. Mr. Ribar joined the Company in September 2019 as its Executive Vice
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President and Chief Operating Officer. Prior to joining the Company, Mr. Ribar served as an executive healthcare consultant primarily focused on improving existing operations and expanding continuing care retirement communities for multiple investment platforms and operators since 2018. From 2014 through 2018, he served as the Senior Vice President, Operations of Golden Living, a post-acute healthcare provider. Prior to serving in such capacity, Mr. Ribar served Golden Living in various roles including Senior Vice President, Operational Finance and Strategy and Senior Vice President, Corporate Strategy and Business Development. Prior to Golden Living, Mr. Ribar served as Vice President of Fillmore Capital Partners from 2004 through 2009. Mr. Ribar received a BSC in Operations and Management Information Systems from Santa Clara University.
Noah R. Beren has been a director since November 2021. He joined GF Investments in 2014 and is currently Head of Asset Management for the firm. His responsibilities include overseeing an extensive real estate portfolio of office, multi-family and land assets. Previously he served as a Vice President focusing on deal execution and portfolio management. From 2012 to 2014, Mr. Beren served as a Vice President at a private independent oil and gas production in Oklahoma. From 2006-2008, he served as Chief Operating Officercompany. Mr. Beren received a First Talmudic Degree from Talmudical Yeshiva of Twining Properties,Philadelphia.
Shmuel S.Z. Lieberman has been a real estate company specializing in high rise development in Cambridge, Massachusetts.director since November 2021. He is a senior member of the investment team at GF Investments. Mr. Reid holdsLieberman oversees the investment process for public and private investments across a wide range of industries, strategies and asset classes. He is a former board member of TradAir Ltd and has been an observer to a number of portfolio companies. Mr. Lieberman received a Master of Business Administration degree from Baruch College and a Bachelor of Arts and MasterRabbinic Studies degree from the Rabbinical College of Divinity, both from Yale University.America.
When considering whether directors and nominees have the experience, qualifications, attributes and skills, taken as a whole, to enable the Board to satisfy its oversight responsibilities effectively in light of the Company’s
business and structure, the Board and the Nominating and Corporate Governance Committee of the Board (the “Nominating and Corporate Governance Committee”) focused primarily on the information discussed in each of the Directors’ individual biographies set forth above. In particular, with regardrespect to Messrs. Cohen and Johannessen,Mr. Beren, the Board considered their strong backgroundhis substantial experience in the senior living industry — over 31 yearsreal estate industry. With regard to Mr. Harris, the Board considered his significant experience in real estate investments, development, leasing and operation, including serving as President a publicly-traded REIT. With respect to Mr. Johnson, the Board considered his extensive experience in the casehospitality industry, including serving as CEO of Mr. Cohen and over 37 years in the case of Mr. Johannessen — in addition to the many years of experiencea leading hotel management company, along with the Company represented by Messrs. Cohen and Johannessen, our Chief Executive Officer and President and Chief Operating Officer, respectively.his prior service as a director for several public companies. With respect to Ms. Krueger, the Board considered her significant experience, expertise and background with regard to accounting matters, which includes specialization in health care, and rehabilitative and wellness services for elderly persons. With regardrespect to Mr. Reid,Levy, the Board considered his nearly 36 years ofsubstantial experience in investment banking and real estate including heading Lehman Brothers REIT equity practice for nine years as Managing Director in the Global Real Estate Department, and his senior level public company experiences, which experiences will help the Company identify and capitalize on opportunities to build its business as well as bring fresh insights that will benefit both the Board and the Company.investment banking. With respect to Mr. Malone,Lieberman, the Board considered his executive level and board experience with public companies and his extensive senior level operational experiences, particularly in health care and wellness services. Mr. Malone has an intimate knowledge of the home health industry and expertise in the legislative and regulatory landscape affecting healthcare companies.significant investment experience. With respect to Mr. Brooks,Ribar, in addition to his position as the Company’s President and Chief Executive Officer, the Board considered Mr. Ribar’s experience in improving operational performance and expanding continuing care retirement communities for companies in the healthcare industry. With respect to Mr. Zibel, the Board considered his extensivesignificant management experience in the healthcare industry, including his experience with a large national service provider to senior living industrycommunities. In addition, with respect to Messrs. Levy, Beren and strong background in senior housing financing. With regard to Dr. Hornbake,Lieberman, the Board considered his position as a practicing physician specializing in geriatrics, his strong understandingthat such individuals could bring to the Board an important perspective of emerging needssignificant stockholders of the aging population, his serviceCompany. As noted below under “Board of Directors and Committees—Investor Rights Agreement,” the Company is obligated to nominate Messrs. Beren, Harris, Johnson, Levy, Lieberman and Zibel as Chief Medical Officer for a large health services organization, and his involvement in public policy as it affects seniors. With regarddirectors pursuant to Ms. Lody, the Board considered her executive level experiences in marketing services and products to seniors as well as successfully managing, growing and branding companies within the healthcare industry. With regard to Mr. Grier, the Board considered his operational expertise from operating a multi-billion dollar business for Disney, his brand marketing and customer-experience expertise obtained while managing oneterms of the world’s most recognized brands and his financial expertise.Investor Rights Agreement.
The Board does not anticipate that any of the aforementioned nominees for director will refuse or be unable to accept election as a director, or be unable to serve as a director. Should any of them become unavailable for nomination or election or refuse to be nominated or to accept election as a director, then the persons named in the enclosed form of proxy intend to vote the shares represented in such proxy for the election of such other person or persons as may be nominated or designated by the Board.
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There are no family relationships among any of our directors, director nominees or executive officers.
The Board of Directors unanimously recommends a vote “FOR” the election of each of the individuals nominated for election as a director.
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BOARD OF DIRECTORS AND COMMITTEES
General
Our Board of Directors currently consists of nine directors.eight directors and is expected to consist of eight directors following the Annual Meeting. The Board has determined that Philip A. Brooks, Kimberly S. Lody, Dr. E. Rodney Hornbake,Noah R. Beren, Benjamin P. Harris, David W. Johnson, Jill M. Krueger, Ronald A. Malone, James A. MooreMax J. Levy, Shmuel S.Z. Lieberman and Michael W. Reid,Elliot R. Zibel, each an existing director, and Ed Grier, a nominee for election at the Annual Meeting as a new director, are “independent” within the meaning of the corporate governance rules of the NYSE and no such individual has any relationship with us, except as a director, stockholder and/or director nominee, as applicable. In addition, we have adopted a Director Independence Policy, as described in greater detail below under the heading “Director“—Director Independence Policy,” which establishes guidelines for the Board to follow in making the determination as to which of our directors is “independent.” Our Director Independence Policy is available on our website athttp://www.capitalsenior.comwww.sonidaseniorliving.com in the Investor Relations section and is available in print to any stockholder who requests it. The Board has determined that Messrs. Brooks, Hornbake, Malone, MooreBeren, Harris, Johnson, Levy, Lieberman and Reid and Ms. LodyZibel and Ms. Krueger, each an existing director, and Mr. Grier, a nominee for election at the Annual Meeting as a new director, are “independent” in accordance with our Director Independence Policy.
During 2015,2023, the Board held nineseven board meetings, including regularly scheduled and special meetings. During 2015,2023, no incumbent director attended fewer than 75% of the aggregate of (i) the total number of meetings of the Board and (ii) the total number of meetings held by all committees of the Board on which such director served.served (during the periods that he or she served), and (ii) the total number of meetings of the Board (held during the period for which he or she has been a director). Under our Corporate Governance Guidelines, each of our directors is expected to attend all meetings of the Board, the annual stockholders meeting and meetings of the committees of the Board on which they serve. Messrs. Cohen, Johannessen, Brooks, Hornbake, Malone, Moore and Reid and Ms. LodyEach of our directors attended our 20152023 annual meeting of stockholders. Our independent directors meet in executive sessions without any management directors, and Mr. Moore, the independent Chairman of the Board presided over these meetings during 2015.2023.
Advance Resignation Policy
Under our Corporate Governance Guidelines, for uncontested director elections, as a condition to nomination by the Board of an incumbent director, such nominee must submit an irrevocable resignation to the Board. Any such nominee who receives a greater number of votes “withholding authority” for or “against” such nominee’s election than votes “for” such nominee’s election (with abstentions and broker non-votes not counted as votes cast either “for” or “withhold authority” for or “against” such nominee’s election), and who remains on the Board as a holdover director, will have his or her irrevocable resignation considered by the Nominating and Corporate Governance Committee. Following the certification of the voting results in an uncontested election of directors, the Nominating and Corporate Governance Committee will make a recommendation to the Board as to the treatment of any such nominee that did not receive the requisite majority vote, including whether to accept or reject any such tendered resignation. Thereafter, the Board will determine whether to accept the Nominating and Corporate Governance Committee’s recommendation. If such nominee’s resignation is accepted by the Board, then such director will immediately cease to be a member of the Board upon the date of such acceptance.
Director Independence Policy
The Board undertakes an annual review of the independence of all non-management directors. In advance of the meeting at which this review occurs, each non-management director is asked to provide the Board with full information regarding the director’s business and other relationships with us in order to enable the Board to evaluate the director’s independence. Directors have an affirmative obligation to inform the Board of any material changes in their circumstances or relationships that may impact their designation by the Board as “independent.” This obligation includes all business relationships between, on the one hand, directors or members of their immediate family, and, on the other hand, us, whether or not such business relationships are described above.
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No director qualifies as “independent” unless the Board affirmatively determines that the director has no material relationship with us. The following guidelines are considered in making this determination:
a director who is, or has been within the last three years, employed by us, or whose immediate family member is, or has been within the last three years, one of our executive officers, is not “independent”;
a director who received, or whose immediate family member received, during any twelve-month period within the last three years, more than $120,000 in direct compensation from us, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service), is not “independent”;
a director (a) who is or whose immediate family member is a current partner of a firm that is our internal or external auditor, (b) who is a current employee of such a firm, (c) whose immediately family member is a current employee of such a firm and participates in the firm’s audit, assurance or tax compliance (but not tax planning) practice, or (d) who is, or whose immediate family member was within the last three years (but is no longer), a partner or employee of such a firm and personally worked on our audit within that time, is not “independent”;
a director who is, or whose immediate family member is, or has been within the last three years, employed as an executive officer of another company where any of our present executive officers at the same time serves or served on that other company’s compensation committee, is not “independent”;
a director who is a current employee, or whose immediate family member is a current executive officer, of a company that has made payments to, or received payments from, us for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million or 2% of such other company’s consolidated gross revenues, is not “independent”;
a director who serves as an executive officer, or whose immediate family member serves as an executive officer, of a tax exempt organization that, within the preceding three years, received contributions from us, in any single fiscal year, of an amount equal to the greater of $1 million or 2% of such organization’s consolidated gross revenue, is not “independent”; and
a director who has a beneficial ownership interest of 10% or more in a company which has received remuneration from us in any single fiscal year in an amount equal to the greater of $1 million or 2% of such company’s consolidated gross revenue is not “independent” until three years after falling below such threshold.
In addition, members of the Compensation Committee must not have any relationship or affiliation with us that would materially affect the director’s ability to be independent from management as a Compensation Committee member and must otherwise be “independent” under our Director Independence Policy. Members of the Audit Committee may not accept any consulting, advisory or other compensatory fee from us or any of our subsidiaries or affiliates other than directors’ compensation.
The terms “us,” “we” and “our” refer to CapitalSonida Senior Living, CorporationInc. and any direct or indirect subsidiary of CapitalSonida Senior Living, Corporation,Inc., which is part of the consolidated group. An “immediate family member” includes a person’s spouse, parents, children, siblings, mothers and fathers-in-law, sons and daughters-in-law, brothers and sisters-in-law and anyone (other than domestic employees) who shares such person’s home.
Committees
Committees of the Board include the Audit Committee, the Nominating and Corporate Governance Committee, and the Compensation Committee.
Audit Committee
The Audit Committee consists of Messrs. Brooks and Reid and Ms. Krueger (chair) and Messrs. Harris and Johnson, each of whom is “independent” as defined by the listing standards of the NYSE in effect as of the date of this proxy statement. Proxy Statement.
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The Board has determined that Ms. Krueger qualifies as an “audit committee financial expert” within the meaning of SEC regulations. The Board has adopted an amended and restated Audit Committee Charter, which is available on our website athttp://www.capitalsenior.comwww.sonidaseniorliving.com in the Investor Relations section and is also available in print to any stockholder who requests a copy. Pursuant to its charter, the Audit Committee:
oversees our financial reporting process and internal control system;
appoints, replaces, provides for compensation of and oversees our independent accountants;
provides an open avenue of communication among our independent accountants, senior management and the Board; and
conducts an annual review of the adequacy of its charter and recommends any proposed changes to the Board for its approval.
During 2015,2023, the Audit Committee held sevenfive meetings, including regularly scheduled and special meetings.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee consists of Messrs. Malone, BrooksHarris (chair), Beren and HornbakeZibel and Ms. Lody,Krueger, each of whom is “independent” as defined by the listing standards of the NYSE in effect as of the date of this proxy statement.Proxy Statement. The Board has adopted an amended and restated Nominating and Corporate Governance Committee Charter, which is available on our website athttp://www.capitalsenior.comwww.sonidaseniorliving.com in the Investor Relations section and is also available in print to any stockholder who requests a copy. Pursuant to its charter, the Nominating and Corporate Governance Committee:
identifies individuals qualified to become directors;
recommends director nominees to the Board;
develops, and recommends for Board’s approval, our Corporate Governance Guidelines;
reviews with management and assists and advises the Board with respect to resident care and services;
oversees the evaluation of the Board and management; and
conducts an annual review of the adequacy of its charter and recommends any proposed changes to the Board for its approval.
During 2015,2023, the Nominating and Corporate Governance Committee held four meetings, including regularly scheduled and special meetings.
Compensation Committee
Composition, Charter and Meetings
The Compensation Committee consists of Messrs. Moore, MaloneLieberman (chair) and Reid,Levy and Ms. Krueger, each of whom is “independent” as defined by the listing standards of the New York Stock ExchangeNYSE in effect as of the date of this proxy statement.Proxy Statement. The Board has adopted an amended and restated Compensation Committee Charter, which is available on our website athttp://www.capitalsenior.comwww.sonidaseniorliving.com in the Investor Relations section and is also available in print to any stockholder who requests a copy. Pursuant to its charter, the Compensation Committee’s responsibilities include, among other things, the responsibility to:
review and approve, on an annual basis, the corporate goals and objectives, and any amendments to those goals and objectives, relevant to the compensation of our Chief Executive Officer and our other executive officers, evaluate each such individual’s performance in light of such objectives and, either as a committee or together with other independent directors (as directed by the Board), determine and approve the compensation for each such individual based on such evaluation (including base salary, bonus, incentive and equity compensation);
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review director compensation levels and practices, and recommend, from time to time, changes in such compensation levels and practices;
review our compensation, incentive compensation and equity-based plans and recommend, from time to time, changes in such compensation levels and practices to the Board;
review and discuss with our management the Compensation Discussion and Analysis to be included in our annual proxy statement, annual report on Form 10-K or information statement, as applicable, and make a recommendation as to whether it should be included therein;
conduct an annual review of the adequacy of its charter and recommend any proposed changes to the Board for its approval; and
perform any other activities consistent with our Certificate of Incorporation, Bylaws and governing law as the Compensation Committee or the Board deems appropriate.
During 2015,2023, the Compensation Committee held eightsix meetings, including regularly scheduled and special meetings.
The Compensation Committee’s processes for fulfilling its responsibilitiesRole and duties with respect to executive compensation and the role of our executive officers and management in the compensation process are each described under “Compensation Discussion and Analysis — Overview of Compensation Process” beginning on page 20 of this proxy statement.
In fulfilling its responsibilities and duties with respect to the compensation of our directors, the Compensation Committee periodically reviews the compensation paid to the non-employee directors of the companies in our peer group, and may recommend to the Board adjustments to our director compensation levels and practices so as to remain competitive with the companies in our peer group.
Pursuant to its charter, the Compensation Committee may retain such compensation consultants, outside counsel and other advisors as it may deem appropriate in its sole discretion and it has the sole authority to approve related fees and other retention terms. From time to time, the Compensation Committee has engaged third parties to compile statistical information with respect to the executive compensation practices of other comparable public companies and has retained independent compensation consultants to review the Company’s compensation arrangements for certain of its named executive officers and its independent directors. As described in greater detail in “Compensation Discussion and Analysis — Compensation Consultant,” the Compensation Committee engaged Axiom Talent & Rewards (the “Compensation Consultant”), to review the Company’s 2015 compensation arrangements for certain of its named executive officers and its independent directors, including an analysis of both the competitive market and the design of the compensation arrangements. As part of its reports to the Compensation Committee, the Compensation Consultant evaluated the compensation arrangements of both our self-selected peer group companies and a broader group of industry peer companies selected by the Compensation Consultant, and provided competitive compensation data and analysis relating to the compensation of our Chief Executive Officer, President and Chief Operating Officer, Senior Vice President and Chief Financial Officer, and Senior Vice President, General Counsel and Secretary and our independent directors. The fees payable by the Company to the Compensation Consultant for such services were approximately $35,000. The Compensation Committee evaluated the independence of the Compensation Consultant and concluded that the Compensation Consultant was independent and presented no conflict of interest.
Board of Director’s Leadership Structure
Our Board separated the roles of Chairman of the Board and Chief Executive Officer by electing James A. Moore, a non-executive, independent director, as Chairman of the Board in 2010. The separation of the roles was implemented to allow Mr. Cohen, our Chief Executive Officer, to continue to focus his efforts on the successful management of the Company while allowing Mr. Moore, our independent Chairman, to focus his efforts on the continued development of a high-performing Board, including (1) ensuring the Board remains focused on the Company’s long-term strategic plans, (2) working with Company management to ensure the Board continues to receive timely and adequate information, (3) coordinating activities of the committees of the Board, and (4) ensuring effective stakeholder communications. The Board believes, due to the continued leadership and experience provided by these two individuals, that having separate positions is the appropriate leadership structure for the Company at this time and demonstrates our commitment to good corporate governance.
Board of Director’s Role in Risk Oversight
Our Company, like others, faces a variety of enterprise risks, including credit risk, liquidity risk, and operational risk. In fulfilling its risk oversight role, the Board focuses on the adequacy of the Company’s risk management process and overall risk management system. The Board believes an effective risk management system will (1) adequately identify the material risks that the Company faces in a timely manner, (2) implement appropriate risk management strategies that are responsive to the Company’s risk profile and specific material risk exposures, (3) integrate consideration of risk and risk management into business decision-making throughout the Company, and (4) include policies and procedures that adequately transmit necessary information with respect to material risks to senior executives and, as appropriate, to the Board or relevant committee.
The Audit Committee has been designated to take the lead in overseeing risk management at the Board level. Accordingly, the Audit Committee schedules time for periodic reviews of risk management, in addition to its other duties. In this role, the Audit Committee receives information from management and other advisors, and strives to generate serious and thoughtful attention to the Company’s risk management process and system, the nature of the material risks the Company faces, and the adequacy of the Company’s policies and procedures designed to respond to and mitigate these risks.
In addition, the Nominating and Corporate Governance Committee is responsible under its charter for reviewing with management and assisting and advising the Board with respect to resident care and services. This risk management and risk assessment includes management compliance with regulatory requirements related to resident care and services and other related matters, including meeting the Company’s expectations for providing quality care and services to its residents.
Although the Board’s primary risk oversight has been assigned to the Audit Committee, the full Board also periodically receives information about the Company’s risk management system and the most significant risks that the Company faces. This is principally accomplished through the Audit Committee’s discussions with the full Board and summary versions of the briefings provided by management and advisors to the Audit Committee.
In addition to the formal compliance program, the Board and the Audit Committee encourage management to promote a corporate culture that understands risk management and incorporates it into the overall corporate strategy and day-to-day business operations. The Company’s risk management structure also includes an ongoing effort to assess and analyze the most likely areas of future risk for the Company. As a result, the Board and Audit Committee periodically ask the Company’s executives to discuss the most likely sources of material future risks and how the Company is addressing any significant potential vulnerability.
Director Nominations
The Nominating and Corporate Governance Committee is responsible under its charter for identifying and recommending qualified candidates for election to the Board. In addition, stockholders who would like to
recommend a candidate for election to the Board may submit the recommendation to the chairman of the Nominating and Corporate Governance Committee, in care of David R. Brickman, our Senior Vice President, General Counsel and Secretary. Any recommendation must include name, contact information, background, experience and other pertinent information on the proposed candidate and must be received in writing by November 15, 2016 for consideration by the Nominating and Corporate Governance Committee for the 2017 annual meeting of our stockholders.
Although the Nominating and Corporate Governance Committee is willing to consider candidates recommended by our stockholders, it has not adopted a formal policy with regard to the consideration of any director candidates recommended by our stockholders. The Nominating and Corporate Governance Committee believes that a formal policy is not necessary or appropriate because of the small size of the Board and because the current Board already has a diversity of business background and industry experience.
The Nominating and Corporate Governance Committee does not have specific minimum qualifications that must be met by a candidate for election to the Board in order to be considered for nomination by the Nominating and Corporate Governance Committee. In identifying and evaluating nominees for director, the Nominating and Corporate Governance Committee considers each candidate’s qualities, experience, background and skills, as well as any other factors that the candidate may be able to bring to the Board. The process is the same whether the candidate is recommended by a stockholder, another director, management or otherwise. Although the Nominating and Corporate Governance Committee does not have a formal diversity policy in place for the director nomination process, an important factor in the Nominating and Corporate Governance Committee’s consideration and assessment of a candidate is the diversity of the candidate’s viewpoints, professional experience, education and skill set. The Nominating and Corporate Governance Committee does not pay a fee to any third party for the identification of candidates, but it has paid fees in the past to third parties for background checks on candidates.
With respect to this year’s nominees for director, Mr. Brooks and Mr. Malone currently serve as directors of the Company and Mr. Grier does not currently serve as a director of the Company.
Stockholder Agreement
On March 18, 2016, we entered into an agreement (the “Stockholder Agreement”) with Lucus Advisors LLC, Radix Partners LLC, HCRE Special Investment LLC, Schuster Tanger and Joshua Packwood (collectively, the “Lucus Group”). Under the terms of the Stockholder Agreement, we agreed to identify and nominate a new independent director (the “New Director”) to the Board at the Annual Meeting. We agreed to permit the Lucus Group to propose up to two candidates for inclusion in our New Director selection process and to give due consideration to any such candidate as the Board exercises its discretion in selecting such New Director. The Board has nominated Ed Grier as the New Director.
Pursuant to the Stockholder Agreement, the Lucus Group agreed to certain customary standstill and voting provisions. Among other things, the standstill restricts the Lucus Group from engaging in certain activities, including (without limitation): (i) engaging in certain proxy contest activities, (ii) entering into voting agreements, (iii) seeking to effect any Extraordinary Transactions (as defined in the Stockholder Agreement) or (iv) taking actions in support of: (a) changing or influencing the Board or management, or (b) any material change in the Company’s business, corporate strategy or corporate structure, in each case, until the Expiration Date (as defined in the Stockholder Agreement). The Lucus Group also agreed to vote its shares of common stock in favor of certain of the Board’s proposals at the Annual Meeting, as well as in favor of all nominees recommended by the Board for election to the Board at the Annual Meeting.
The foregoing description of the Stockholder Agreement is qualified in its entirety by reference to the full text of the Stockholder Agreement, a copy of which the Company filed with the SEC as Exhibit 99.1 to a Current Report on Form 8-K on March 21, 2016.
Code of Business Conduct and Ethics
The Board has adopted a Code of Business Conduct and Ethics governing all of our employees, including our Chief Executive Officer, Chief Financial Officer, our principal accounting officer and corporate controller. A copy of this Code of Business Conduct and Ethics is available in the “Corporate Governance Documents” section of the “Investor Relations” section of our website atwww.capitalsenior.comResponsibilities. We intend to make all required disclosures concerning any amendments to, or waivers from, this Code of Business Conduct and Ethics on our website.
Website
Our Internet website,www.capitalsenior.com, contains an Investor Relations section, which provides links to our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, SEC stock ownership reports, amendments to those reports and filings, Code of Business Conduct and Ethics, Corporate Governance Guidelines, Director Independence Policy and charters of the Nominating and Corporate Governance, Compensation and Audit Committees of the Board. These documents are available in print, free of charge, to any stockholder who requests a copy as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. The materials on our website are not incorporated by reference into this proxy statement and do not form any part of the materials for solicitation of proxies.
Communication with Directors
Correspondence from stockholders and other interested parties may be sent to our directors, including our non-management directors, individually or as a group, in care of James A. Moore, the independent Chairman of our Board, with a copy to David R. Brickman, Senior Vice President, General Counsel and Secretary, at our principal executive offices, 14160 Dallas Parkway, Suite 300, Dallas, Texas 75254.
All communications received as set forth above will be opened by the Chairman and Senior Vice President, General Counsel and Secretary for the sole purpose of determining whether the contents represent a message to our directors. Appropriate communications other than advertising, promotions of a product or service, or patently offensive material will be forwarded promptly to the addressee.
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis focuses on the compensation of our executive officers, including our “named executive officers” who are the individuals included in the Summary Compensation Table on page 38 of this proxy statement. This section summarizes our executive compensation program and objectives and provides an overview of how and why the Compensation Committee, which is responsible for the oversight of our executive compensation program, made specific decisions involving the compensation of our named executive officers. We also refer you to our Annual Report on Form 10-K for the year ended December 31, 2015 for additional information regarding our 2015 financial results discussed below.
Executive Summary
Our executive compensation program is designed to meet three principal objectives:
employ, retain and reward executives who are capable of leading us in executing our differentiated business strategy to enhance shareholder value, which includes maximizing the value of our operations, growing our cash flow, preserving a strong financial position, increasing our geographic concentration, maximizing our competitive strengths in each of our markets and capitalizing on near and long-term growth opportunities;
a significant amount of total compensation should be in the form of short-term and long-term incentive awards to align compensation with our financial and operational performance goals as well as individual performance goals; and
incentive awards should be tied to and vary with our financial and operational performance as well individual performance.
We believe these objectives collectively link compensation to overall Company performance and directly link compensation to the objectives set forth in our 2015 business plan that was developed with our Board of Directors. These objectives help ensure that the interests of our named executive officers are closely aligned with the interests of our shareholders. We believe that Capital Senior Living has successfully achieved these objectives as demonstrated by our strong financial results during 2015, which exceeded our business plan targets. As described in “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” in our Annual Report on Form 10-K, our fiscal 2015 financial results, based upon various measures, increased significantly relative to our fiscal 2014 financial results. The following table highlights the year-over-year comparison of some of the key financial metrics that the Compensation Committee uses in evaluating our performance for purposes of making compensation decisions.
Performance Measures | Fiscal Year 2015 | Fiscal Year 2014 | % Increase | |||||
Revenue | $412.2 million | $383.9 million | 7.4 | % | ||||
Adjusted EBITDAR | $144.5 million | $132.6 million | 9.0 | % | ||||
Adjusted EBITDAR Margin | 36.6% | 35.9% | 1.9 | % | ||||
Adjusted CFFO | $47.0 million | $40.9 million | 14.9 | %(1) | ||||
Adjusted CFFO per Share | $1.64 per share | $1.45 per share | 13.1 | %(1) |
The above table utilizes non-GAAP financial measures such as adjusted CFFO, adjusted CFFO per share, adjusted EBITDAR and adjusted EBITDAR margin. We believe these non-GAAP measures are useful in identifying trends in day-to-day performance because they exclude items that are of little or no significance to operations and provide indicators to management of progress in achieving optimal operating performance. In
addition, these non-GAAP measures are used by many research analysts and investors to evaluate the performance and valuations of companies in our industry. Please refer to Appendix A to this proxy statement for important information concerning such non-GAAP financial measures, including a reconciliation of such measures to GAAP.
For fiscal 2015, we believe our compensation programs, which are designed to reward our named executive officers for the achievement of short-term and long-term strategic and operational goals and the achievement of increased shareholder value, delivered payments commensurate with our strong financial performance. Below are the highlights of our executive compensation program for 2015.
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For 2015, a significant portion of the total compensation opportunity available to our named executive officers who were eligible to participate in our Incentive Compensation Plan was linked to the achievement of certain corporate and individual goals. As discussed in more detail below, in 2015 our Chief Executive Officer, President and Chief Operating Officer, and Senior Vice President and Chief Financial Officer were eligible to receive incentive bonuses of up to a maximum of 150%, 105% and 90%, respectively, of their base salaries for 2015, subject to the achievement of various performance criteria under our Incentive Compensation Plan for 2015.
Adjusted CFFO per share and adjusted EBITDAR were the key performance metrics for corporate goals under our Incentive Compensation Plan for 2015. We believe these metrics provide for a balanced approach to measuring annual Company performance. In addition, these measures are used by many research analysts and investors to evaluate the performance and valuations of companies in our industry. Another performance metric for corporate goals under our Incentive Compensation Plan for 2015 was the aggregate transaction value of the senior housing communities we acquired during such year. This performance metric was designed to reward our eligible named executive officers for their efforts in helping us identify and complete such strategic acquisitions, which we expect will increase our ownership of high-quality senior living communities in geographically concentrated regions and generate meaningful increases in our CFFO and earnings, and accordingly, increase shareholder value.
Another way that we try to link compensation and performance is through periodically granting performance-based equity awards to our named executive officers. During 2015, we granted 50,000, 40,000, 25,000 and 15,000 shares of performance-based restricted stock to our Chief Executive Officer, President and Chief Operating Officer, Senior Vice President and Chief Financial Officer, and Senior Vice President, General Counsel and Secretary, respectively. The periodic vesting of these awards is subject to our achievement of certain performance targets over a three-year period, which is primarily designed to encourage our named executive officers to focus on our long-term performance.
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2015 “Say-on-Pay” Advisory Vote on Executive Compensation
We provided our stockholders with a “say on pay” advisory vote in 2015 on our executive compensation pursuant Section 14A of the Securities Exchange Act of 1934, as amended. At our 2015 Annual Meeting of Stockholders, our stockholders expressed overwhelming support for the compensation of our named executive officers, with approximately 98.8% of the votes cast for the approval of the “say on pay” advisory vote on executive compensation (assuming abstentions and broker non-votes do not constitute votes “cast”). In evaluating our executive compensation programs, the Compensation Committee considered the results of the 2015 advisory vote along with the many other factors discussed in this Compensation Discussion and Analysis, including the Compensation Committee’s assessment of the interaction of our compensation programs with our corporate business objectives, input received from our senior management, the analysis, reports and recommendations of the Compensation Consultant, and the Compensation Committee’s own judgment. While each of these factors impacted the Compensation Committee’s decisions regarding our named executive officers’ compensation, the Compensation Committee did not make any changes to our executive compensation program and policies as a result of the 2015 “say on pay” advisory vote.
Overview of Compensation Process
The Compensation Committee is ultimately responsible for reviewing and approving the base salary increases (other than any annual base salary increases contemplated by existing employment agreements) and bonus levels of our executive officers, including our named executive officers, evaluating the performance of such executives and reviewing any related matters. Equity and other forms of compensation for our executive officers, including our named executive officers, are also considered by the Compensation Committee. In applying the above-described objectives forconsidering and determining our executive compensation program, the Compensation Committee primarily relies upon the following factors:
Input Received from our Senior Management. As discussed in greater detail below, the Compensation Committee has historically relied in part upon the input and recommendations of our senior management, which currently consists of Messrs. Cohen, Johannessen and Hendrickson and whom we refer to in this section as our
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Peer Group Data. The Compensation Committee has consistently sought to structure our executive compensation program to provide amounts and forms of compensation to our |
• | Third Party Industry Surveys and Compensation Consultants. As part of its ongoing efforts to provide independent oversight and review of our executive compensation programs, the Compensation Committee periodically reviews information compiled by third parties with respect to the executive compensation practices of other companies in our industry. The Compensation Committee reviews such information for purposes of obtaining a general understanding of current compensation practices of companies in our peer group and
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• | Other Factors. |
• | Role of Management. The Compensation Committee has
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our other executive officers, the annual establishment of our
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In fulfilling its responsibilities and duties with respect to the compensation of our directors, the Compensation Committee periodically reviews the compensation paid to the non-employee directors of the companies in our peer group, and may recommend to the Board adjustments to our director compensation levels and practices so as to remain competitive with the companies in our peer group.
Role of Independent Compensation Consultant
Pursuant to its charter, the Compensation Committee may retain such compensation consultants, outside counsel and other advisors as it may deem appropriate in its sole discretion and it has the sole authority to approve related fees and other retention terms. From time to time, the Compensation Committee has engaged third parties to compile statistical information with respect to the executive compensation practices of other comparable public companies and has retained independent compensation consultants to review the Company’s compensation arrangements for certain of its named executive officers and its independent directors.
The Compensation Committee engaged Meridian Compensation Partners, LLC (“Meridian”) as its independent consultant to review the Company’s 2023 compensation arrangements for certain of its executive officers and its independent directors, including an analysis of both the competitive market and the design of the compensation arrangements. Meridian also assisted the Compensation Committee with a variety of matters, including the design of the annual and long-term incentive program and its impact on officer retention, and an annual risk assessment of our compensation policies and practices applicable to our executive officers and other employees. Meridian reported its findings to the Compensation Committee to help inform the Compensation Committee’s decision-making on executive officer compensation for 2023. The Compensation Committee recognizes that it is essential to receive objective advice from its external advisors. Consequently, the Compensation Committee is solely responsible for retaining and terminating its consultants, Meridian reported directly to the Compensation Committee, and Meridian did not provide any other services to the Company during fiscal 2023.
The fees payable by the Company to Meridian for its services as of December 31, 2023 were approximately $70,697. The Compensation Committee evaluated the independence of Meridian and concluded that Meridian was independent and presented no conflict of interest.
Board of Directors’ Leadership Structure
In 2010, our Board separated the roles of Chairman of the Board and Chief Executive Officer by electing a non-executive, independent director as Chairman of the Board. Since November 2021, Mr. Johnson has served as non-executive Chairman of the Board. The separation of the roles was implemented to allow our Chief Executive Officer to continue to focus his or her efforts on the successful management of the Company while allowing our independent Chairman to focus his efforts on the continued development of a high-performing Board, including (1) ensuring the Board remains focused on the Company’s long-term strategic plans, (2) working with Company management to ensure the Board continues to receive timely and adequate information, (3) coordinating activities of the committees of the Board, and (4) ensuring effective stakeholder communications. The Board believes, due to the continued leadership and experience provided by these two individuals, that having separate positions is the appropriate leadership structure for the Company at this time and demonstrates our commitment to good corporate governance.
Board of Directors’ Role in Risk Oversight
Our Company, like others, faces a variety of enterprise risks, including credit risk, liquidity risk, and operational risk. In fulfilling its risk oversight role, the Board focuses on the adequacy of the Company’s risk
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management process and overall risk management system. The Board believes an effective risk management system will (1) adequately identify the material risks that the Company faces in a timely manner, (2) implement appropriate risk management strategies that are responsive to the Company’s risk profile and specific material risk exposures, (3) integrate consideration of risk and risk management into business decision-making throughout the Company, and (4) include policies and procedures that adequately transmit necessary information with respect to material risks to senior executives and, as appropriate, to the Board or relevant committee.
The Audit Committee has been designated to take the lead in overseeing risk management at the Board level. Accordingly, the Audit Committee schedules time for periodic reviews of risk management, in addition to its other duties. In this role, the Audit Committee receives information from management and other advisors, and strives to generate serious and thoughtful attention to the Company’s risk management process and system, the nature of the material risks the Company faces, and the adequacy of the Company’s policies and procedures designed to respond to and mitigate these risks.
In addition, the Nominating and Corporate Governance Committee is responsible under its charter for reviewing with management and assisting and advising the Board with respect to resident care and services. This risk management and risk assessment includes management compliance with regulatory requirements related to resident care and services and other related matters, including meeting the Company’s expectations for providing quality care and services to its residents.
Although the Board’s primary risk oversight has been assigned to the Audit Committee, the full Board also periodically receives information about the Company’s risk management system and the most significant risks that the Company faces. This is principally accomplished through the Audit Committee’s discussions with the full Board and summary versions of the briefings provided by management and advisors to the Audit Committee.
In addition to the formal compliance program, the Board and the Audit Committee encourage management to promote a corporate culture that understands risk management and incorporates it into the overall corporate strategy and day-to-day business operations. The Company’s risk management structure also includes an ongoing effort to assess and analyze the most likely areas of future risk for the Company. As a result, the Board and Audit Committee periodically ask the Company’s executives to discuss the most likely sources of material future risks and how the Company is addressing any significant potential vulnerability.
Director Nominations
The Nominating and Corporate Governance Committee is responsible under its charter for identifying and recommending qualified candidates for election to the Board. In addition, stockholders who would like to recommend a candidate for election to the Board may submit the recommendation to the chairman of the Nominating and Corporate Governance Committee, in care of David R. Brickman, our Senior Vice President, General Counsel and Secretary. Any recommendation must include name, contact information, background, experience and other pertinent information on the proposed candidate and must be received in writing by November 15th of a calendar year for consideration by the Nominating and Corporate Governance Committee for the annual meeting of our stockholders in the immediately following calendar year.
Although the Nominating and Corporate Governance Committee is willing to consider candidates recommended by our stockholders, it has not adopted a formal policy with regard to the consideration of any director candidates recommended by our stockholders. The Nominating and Corporate Governance Committee believes that a formal policy is not necessary or appropriate because of the small size of the Board and because the current Board already has a diversity of business background and industry experience.
The Nominating and Corporate Governance Committee does not have specific minimum qualifications that must be met by a candidate for election to the Board in order to be considered for nomination by the Nominating and Corporate Governance Committee. In identifying and evaluating nominees for director, the Nominating and
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Corporate Governance Committee considers each candidate’s qualities, experience, background and skills, as well as any other factors that the candidate may be able to bring to the Board. The process is the same whether the candidate is recommended by a stockholder, another director, management or otherwise. Although the Nominating and Corporate Governance Committee does not have a formal diversity policy in place for the director nomination process, an important factor in the Nominating and Corporate Governance Committee’s consideration and assessment of a candidate is the diversity of the candidate’s viewpoints, professional experience, education and skill set. The Nominating and Corporate Governance Committee does not pay a fee to any third party for the identification of candidates, but it has paid fees in the past to third parties for background checks on candidates.
With respect to this year’s nominees for director, Ms. Krueger and Messrs. Levy and Zibel currently serve as directors of the Company.
Investor Rights Agreement
In November 2021, we entered into the Investor Rights Agreement with the Conversant Investors and Silk, which Investor Rights Agreement pertains to, among other things, the appointment of (i) a certain number of directors nominated by Conversant Fund A (“Conversant Representatives”) to the Board based upon the ownership percentage in the Company of the Conversant Investors and their affiliates and permitted transferees, and (ii) two directors nominated by Silk (the “Silk Representatives”) for so long as Silk and its affiliates beneficially own at least five percent of the outstanding shares of common stock of the Company on an as-converted basis. Additionally, pursuant to the Investor Rights Agreement, for so long as the Conversant Investors and their affiliates and permitted transferees collectively satisfy a certain percentage of beneficial ownership in the Company, Conversant Fund A will be entitled to designate the chairperson of the Board. Pursuant to the terms of the Investor Rights Agreement, Conversant Fund A is entitled to designate four individuals to be appointed to the Board and the Chairman of the Board and Silk is entitled to designate two individuals to be appointed to the Board. Conversant Fund A designated Benjamin P. Harris, David W. Johnson, Max J. Levy, and Elliot R. Zibel as the Conversant Representatives with Mr. Johnson as the Chairman of the Board and Silk designated Noah R. Beren and Shmuel S.Z. Lieberman as the Silk Representatives, and such individuals were appointed to the Board in November 2021.
The foregoing description of the Investor Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Investor Rights Agreement, a copy of which the Company filed with the SEC as Exhibit 10.1 to a Current Report on Form 8-K on November 4, 2021.
Code of Business Conduct and Ethics
The Board has adopted a Code of Business Conduct and Ethics governing all of our employees, including our Chief Executive Officer, Chief Financial Officer, our principal accounting officer and corporate controller. A copy of this Code of Business Conduct and Ethics is available in the “Corporate Governance Documents” section of the “Investor Relations” section of our website at www.sonidaseniorliving.com. We intend to make all required disclosures concerning any amendments to, or waivers from, this Code of Business Conduct and Ethics on our website.
Anti-Hedging and Anti-Pledging Policies
As part of our Policy on Insider Trading, directors, officers and employees are prohibited from engaging in hedging transactions with respect to our securities. In addition, directors, officers and other employees are prohibited from holding our securities in a margin account and are also prohibited from pledging our securities as collateral for a loan unless such pledging has been disclosed to, and pre-approved by, the Board.
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Website
Our Internet website, www.sonidaseniorliving.com, contains an Investor Relations section, which provides links to our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, SEC stock ownership reports, amendments to those reports and filings, Code of Business Conduct and Ethics, Corporate Governance Guidelines, Director Independence Policy and charters of the Nominating and Corporate Governance Committee, Compensation Committee and Audit Committee of the Board. These documents are available in print, free of charge, to any stockholder who requests a copy as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. The materials on our website are not incorporated by reference into this Proxy Statement and do not form any part of the materials for solicitation of proxies.
Communication with Directors
Correspondence from stockholders and other interested parties may be sent to our directors, including our non-management directors, individually or as a group, in care of David W. Johnson, the Chairman of our Board, with a copy to David R. Brickman, Senior Vice President, General Counsel and Secretary, at our principal executive offices, 14755 Preston Road, Suite 810, Dallas, Texas 75254.
All communications received as set forth above will be opened by the Chairman and Senior Vice President, General Counsel and Secretary for the sole purpose of determining whether the contents represent a message to our directors. Appropriate communications other than advertising, promotions of a product or service, or patently offensive material will be forwarded promptly to the addressee.
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The following table sets forth certain information concerning each of the Company’s executive officers, other than Mr. Ribar. Information concerning Mr. Ribar is set forth above under “Election of Directors—Nominees for Election for Three-Year Terms Expiring at the 2027 Annual Meeting.”
Name | Age | Position(s) with the Company | |||||||||||||||||||||||||||||||||||||||||||||||||
Kevin J. Detz | 44 | Executive Vice President and Chief Financial Officer | |||||||||||||||||||||||||||||||||||||||||||||||||
David R. Brickman | 66 | Senior Vice President, Secretary and | |||||||||||||||||||||||||||||||||||||||||||||||||
Michael C. Fryar
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Timothy J. Cober | 41 |
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Michael R. Karicher | 55 | Vice President and | |||||||||||||||||||||||||||||||||||||||||||||||||
R. Reanae Clark | 40 | Vice President of |
Kevin J. Detz joined the Company in May 2022 as Executive Vice President and Chief Financial Officer. Prior to joining the Company, Mr. Detz served as Executive Vice President and Operational Chief Financial Officer for Aimbridge Hospitality, a global third-party hotel management company, since January 2020. Prior to serving in such capacity, Mr. Detz was Ambridge Hospitality’s Senior Vice President and Chief Accounting Officer from October 2016 to December 2019, and he served as Aimbridge Hospitality’s Senior Vice President and Controller from March 2014 to September 2016. Prior to joining Aimbridge Hospitality, Mr. Detz served as Vice President and Controller of Goldman Sachs & Co.’s Real Estate Management Division from December 2007 to March 2014. Mr. Detz began his career in Ernst & Young LLP’s audit practice in 2002. Mr. Detz graduated magna cum laude with a degree in business administration from Duquesne University and is a Certified Public Accountant. He is a member of the AICPA and American Hotel & Lodging Association Global Finance Committee.
David R. Brickman is currently the Senior Vice President, Secretary, and General Counsel of the Company. He served as Vice President and General Counsel of the Company and its predecessors since July 1992 and has served as Secretary of the Company since May 2007. From 1989 to 1992, Mr. Brickman served as in-house counsel with LifeCo Travel Management Company, a corporation that provided travel services to U.S. corporations. Mr. Brickman earned a Juris Doctor and Masters of Business Administration from the University of South Carolina and a Masters in Health Administration from Duke University. He currently serves as a member of the National Center for Assisted Living In-house Counsel Roundtable Task Force, as well as the Long-Term Care Risk Legal Forum. He also serves on the board of the Dallas Hebrew Free Loan Association. Mr. Brickman has either practiced law or performed in-house counsel functions for 35 years.
Michael C. Fryar joined the Company as Chief Revenue Officer in February 2019. His 20 years of experience focusing on brands in complex, multi-channel environments includes leadership positions in medical device and marketing agency settings, with the majority of his career focused in senior healthcare. Prior to joining the Company, Mr. Fryar served as Vice President of GN Hearing North America, where he was part of a leadership team responsible for seven consecutive years of above-market growth and expansion across multiple channels and brands. Prior to GN Hearing, Mr. Fryar served as Senior Director, Marketing at Starkey Hearing Technologies from 2006 to 2012. From 1998 to 2006, he served as an account director at marketing agency Colle McVoy, specializing in digital and traditional marketing, advertising and public relations. Mr. Fryar received a BA in Communications Studies with a minor in Economics Management from Gustavus Adolphus College.
Timothy J. Cober joined the Company as Vice President and Chief Accounting Officer in July 2022. Mr. Cober’s experience has focused on leading accounting teams in both the real estate and healthcare industries. Prior to joining the Company, Mr. Cober served as Vice President of Accounting for Spire Hospitality, L.L.C., a national third-party hotel management company. Prior to joining Spire Hospitality, L.L.C. in 2021, Mr. Cober served as Vice President and Corporate Controller for HealthTrackRx, Inc., an infectious disease laboratory, and as Vice President of Accounting Operations for U.S. Anesthesia Partners, Inc., a single-specialty anesthesia
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practice. Prior to these roles, Mr. Cober served as Vice President of Central Accounting for Aimbridge Hospitality, L.L.C., a global hotel management firm, where he spent approximately 4.5 years and built a professional services platform to help support the company’s rapid organic and M&A growth activity. Mr. Cober began his career in public accounting, most recently practicing assurance with Ernst & Young, L.L.P. Mr. Cober is a Certified Public Accountant and a Certified Fraud Examiner and holds a Bachelor of Science in Accounting from the University of Texas, Arlington.
Michael R. Karicher joined the Company as Vice President and Chief People Officer in January 2023. Prior to joining the Company, Mr. Karicher served as consultant to companies in the healthcare industry. Prior to serving as a consultant, Mr. Karicher served as Executive Vice President with Remington Hotels from July 2015 through May 2022 where he was responsible for Human Resources and Administration of an organization with over 80 hotels and oversight of Human Resources for seven other subsidiaries of Ashford Inc. (NYSE American: AINC) employing more than 8,000 people. Prior to such role, Mr. Karicher served as Senior Vice President and Chief Human Resources Officer for Golden Living in Plano, Texas, from March 2006 to July 2015 and he held various other positions with Golden Living since 2004. Mr. Karicher received a Bachelor of Science in Business and Economics from Lehigh University and is a Certified Public Accountant.
R. Reanae Clark joined the Company as Vice President of Business Development and Acquisitions in May 2023. Prior to joining the Company, Ms. Clark served as an Associate Director in ORIX Corp. USA’s Municipal and Infrastructure group since 2019 as an Associate Director, leading debt originations for the company’s senior housing municipal portfolio. Prior to that, Ms. Clark served as an Associate Vice President of Chicago-based Ziegler Investment Bank, which she joined as an Associate in 2015, in the senior living finance practice. While working at Ziegler, she assisted senior living borrowers in the Midwest and Southeast access nearly $1 billion in capital through municipal bonds and bank direct placements to fund new developments, expansions, refundings and restructurings. Before that, Ms. Clark spent 6 years at Greystone Communities, most recently serving as a Manager at the senior living development and management company based in Dallas, Texas. She began her career in audit at KPMG in 2006. Ms. Clark earned her bachelor’s degree in accounting from Southern Methodist University in Dallas, graduating with honors and CPA eligible.
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Summary Compensation Table
The following table summarizes the compensation earned by our named executive officers in 2023 and 2022. Please note that total compensation, as reported in the Summary Compensation Table below and calculated under SEC rules, reflects pre-tax amounts and several items that are driven by accounting assumptions on incentive awards that have not yet been earned, including awards that vest over a period of time and/or are subject to the satisfaction of various performance targets. Therefore, it is not necessarily reflective of the compensation our named executive officers actually realized for such years.
Name and Principal Position | Year | Salary | Bonus | Stock Awards(1) | Option Awards | Non-Equity Incentive Plan Compensation(2) | All Other Compensation(3) | Total | ||||||||||||||||||||||||
Brandon M. Ribar, | 2023 | $ | 461,854 | — | $ | 967,769 | — | $ | 339,232 | — | $ | 1,768,234 | ||||||||||||||||||||
President and Chief Executive Officer | 2022 | $ | 424,569 | $ | 300,000 | $ | 1,088,258 | — | $ | 99,760 | $ | 600 | $ | 1,913,187 | ||||||||||||||||||
Kevin J. Detz, | 2023 | $ | 405,233 | $ | 75,000 | (3) | $ | 713,608 | — | $ | 275,918 | — | $ | 1,469,759 | ||||||||||||||||||
Executive Vice President and Chief Financial Officer | 2022 | $ | 266,687 | — | $ | 1,056,540 | — | $ | 54,242 | $ | 350 | $ | 1,377,819 | |||||||||||||||||||
David R. Brickman, | 2023 | $ | 358,389 | — | $ | 261,835 | — | $ | 171,448 | — | $ | 791,672 | ||||||||||||||||||||
Senior Vice President, General Counsel and Secretary | 2022 | $ | 351,404 | $ | 170,581 | $ | 323,771 | — | $ | 51,430 | $ | 600 | $ | 897,786 |
(1) | Amounts for |
(2) | Amounts in this
|
CFFO Per Share | % of CFFO Per Share Target | Bonus as % of Base Salary | Amount | |||||||||||
$1.47 | 90.0 | % | 30.6 | % | $ | 227,268 | ||||||||
$1.63 | 100.0 | % | 34.0 | % | $ | 252,520 |
(3) | Represents a
|
Employment Agreements
Brandon M. Ribar
We entered into an employment agreement with Mr. Ribar in September 2019, which was amended on August 2, 2022 in connection with Mr. Ribar’s appointment as our President and Chief Executive Officer and as a member of our Board. Mr. Ribar’s amended employment agreement provides for an initial term of one year and automatically renews for additional one-year periods in the event that we do not, or Mr. Ribar does not, provide written notice to the other party of their intent not to renew such term at least 30 days prior to the expiration of the then-current term. Mr. Ribar’s amended employment agreement provides that our Board will nominate Mr. Ribar for reelection to the Board at the expiration of each term of office, and that Mr. Ribar will serve as a member of our Board for each period for which he is so elected.
Pursuant to Mr. Ribar’s amended employment agreement, he receives an annual base salary of not less than $450,000 and is eligible to receive an annual performance bonus targeted at 75% of his base salary. Mr. Ribar’s
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amended employment agreement also entitles him to certain severance payments and benefits in the event his employment is terminated by us without “Cause” or by Mr. Ribar for “Good Reason” (including in connection with a “Fundamental Change”), as described more fully in Mr. Ribar’s employment agreement.
The foregoing description of Mr. Ribar’s amended employment agreement does not purport to be complete and is qualified in its entirety by the reference to the full text of Mr. Ribar’s employment agreement and employment agreement amendment, which are included as Exhibits 10.1 to the Company’s Current Reports on Form 8-K filed with the SEC on September 10, 2019 and August 5, 2022, respectively.
Kevin J. Detz
We entered into an employment agreement with Mr. Detz in April 2022 in connection with Mr. Detz’s appointment as our Executive Vice President and Chief Financial Officer. Pursuant to Mr. Detz’s employment agreement, Mr. Detz receives an annual base salary of not less than $400,000, and Mr. Detz is eligible to receive an annual performance bonus targeted at 70% of his annual base salary. In connection with his employment with the Company, Mr. Detz also received a sign-on bonus of $75,000, which was paid in March 2023, and 30,000 shares of performance-based restricted stock. Mr. Detz’s employment agreement also entitles him to certain severance payments and benefits in the event his employment is terminated by us without “Cause” or by Mr. Detz for “Good Reason” (including in connection with a “Change in Control”), as described more fully in Mr. Detz’s employment agreement.
The foregoing description of Mr. Detz’s employment agreement does not purport to be complete and is qualified in its entirety by the reference to the full text of Mr. Detz’s employment agreement, which is included as Exhibit 10.01 to the Company’s Current Report on Form 8-K filed with the SEC on April 19, 2022.
David R. Brickman
In March 2021, we entered into a new employment agreement with Mr. Brickman that terminated and replaced his then-existing employment agreement. Pursuant to Mr. Brickman’s employment agreement, Mr. Brickman serves as our Senior Vice President, General Counsel and Secretary, he receives an annual base salary of not less than $335,000 and he is eligible to receive an annual performance bonus targeted at 50% of his base salary. Mr. Brickman’s employment agreement also entitles him to certain severance payments and benefits in the event his employment is terminated by us without “Cause” or by Mr. Brickman for “Good Reason” (including in connection with a “Change in Control”), as described more fully in Mr. Brickman’s employment agreement.
The foregoing description of Mr. Brickman’s employment agreement does not purport to be complete and is qualified in its entirety by the reference to the full text of Mr. Brickman’s employment agreement, which is included as Exhibit 10.28 to the Company’s Annual Report on Form 10-K filed with the SEC on March 31, 2021.
2023 Long-Term Equity Incentive Awards
On April 4, 2023, the portion of the award subject to such performance target being earned by our eligible named executive officers. If this threshold level of adjusted EBITDAR performance was attained but the target level was not attained, the earned portion of the award subject to adjusted EBITDAR performance would be prorated between 90% and 100% based upon our actual adjusted EBITDAR results reported for 2015. If we did not achieve 90% of the target level of adjusted EBITDAR, no amounts would be paid to the eligible named executive officers with respect to this bonus opportunity.
The following tables set forth the cash performance bonus opportunities of our eligible named executive officers under the Incentive Compensation Committee approved long-term incentive compensation awards under our 2019 Plan for 2015 with respect to the adjusted EBITDAR performance target. As our adjusted EBITDAR for 2015 was $144,461,000, the targeted level of adjusted EBITDAR performance was attained, and as a result, the amounts listed below at the 100% level were awarded to Messrs. Cohen, Johannessen and Hendrickson.
Lawrence A. Cohen
Adjusted EBITDAR | % of Adjusted EBITDAR Target | Bonus as % of Base Salary | Amount | |||||||||||
$127,370,700 | 90.0 | % | 25.2 | % | $ | 187,162 | ||||||||
$141,523,000 | 100.0 | % | 28.0 | % | $ | 207,958 |
Keith N. Johannessen
Adjusted EBITDAR | % of Adjusted EBITDAR Target | Bonus as % of Base Salary | Amount | |||||||||||
$127,370,700 | 90.0 | % | 16.2 | % | $ | 71,034 | ||||||||
$141,523,000 | 100.0 | % | 18.0 | % | $ | 78,927 |
Carey P. Hendrickson
Adjusted EBITDAR | % of Adjusted EBITDAR Target | Bonus as % of Base Salary | Amount | |||||||||||
$127,370,700 | 90.0 | % | 13.5 | % | $ | 54,675 | ||||||||
$141,523,000 | 100.0 | % | 15.0 | % | $ | 60,750 |
Aggregate Value of Transactions. Third, of the target bonus percentage attributable to the achievement of corporate goals, 13%, 9% and 7% for our Chief Executive Officer, President and Chief Operating Officer and Senior Vice President and Chief Financial Officer, respectively, was based upon our achievement of an aggregate transaction value target with respect to our acquisitions of senior housing communities during 2015, which was viewed as a challenging performance target. For purposes of the Incentive Compensation Plan for 2015, an “acquisition” included direct acquisitions, acquisitions made in joint ventures and long-term management contracts and leases with a term of three years or longer, but excluded any acquisition of our wholly-owned communities.
The target level of performance under the aggregate value of transactions portion of the Incentive Compensation Plan for 2015 was $100,000,000, which was based on our internal business plan. 33% of such award would be earned upon our acquisition of an aggregate of $50,000,000 of senior housing communities during 2015, and 66% of such award would be earned upon our acquisition of an aggregate of $75,000,000 of senior housing communities during 2015. If we did not acquire senior housing communities with an aggregate value of at least $50,000,000 during 2015, no amounts would be paid to our eligible named executive officers with respect to this bonus opportunity.
The following tables set forth the cash performance bonus opportunities of our eligible named executive officers under the Incentive Compensation Plan for 2015 with respect to the aggregate transaction value
performance target. As we acquired senior housing communities with an aggregate transaction value of $162,460,000 during 2015, the target was achieved and the amounts listed below at the 100% level were awarded to Messrs. Cohen, Johannessen and Hendrickson.
Lawrence A. Cohen
Aggregate Transaction Value | % of Target Bonus | Bonus as a % of Base Salary | Amount | |||||||||||
$50,000,000 | 33.0 | % | 4.3 | % | $ | 31,862 | ||||||||
$75,000,000 | 66.0 | % | 8.6 | % | $ | 63,724 | ||||||||
$100,000,000 | 100.0 | % | 13.0 | % | $ | 96,552 |
Keith N. Johannessen
Aggregate Transaction Value | % of Target Bonus | Bonus as a % of Base Salary | Amount | |||||||||||
$50,000,000 | 33.0 | % | 3.0 | % | $ | 13,023 | ||||||||
$75,000,000 | 66.0 | % | 5.9 | % | $ | 26,046 | ||||||||
$100,000,000 | 100.0 | % | 9.0 | % | $ | 39,464 |
Carey P. Hendrickson
Aggregate Transaction Value | % of Target Bonus | Bonus as a % of Base Salary | Amount | |||||||||||
$50,000,000 | 33.0 | % | 2.3 | % | $ | 9,356 | ||||||||
$75,000,000 | 66.0 | % | 4.6 | % | $ | 18,711 | ||||||||
$100,000,000 | 100.0 | % | 7.0 | % | $ | 28,350 |
Excess CFFO Per Share. Under the Incentive Compensation Plan for 2015, our Chief Executive Officer, President and Chief Operating Officer and Senior Vice President and Chief Financial Officer were also eligible to receive an additional cash bonus in excess of the target bonus amounts of up to 50%, 35% and 30%, respectively, of their base salaries for 2015 to the extent our CFFO per share for 2015 exceeded the target amount of $1.63 per share by at least 5% (i.e., CFFO per share of $1.71 or more). If our actual CFFO per share did not exceed the target CFFO per share amount by 5%, no amounts would be paid to the eligible named executive officers with respect to this additional bonus opportunity.
The following tables set forth the cash performance bonus opportunities of our eligible named executive officers under the Incentive Compensation Plan for 2015 with respect to the excess CFFO per share additional bonus opportunity. As our CFFO per share for 2015 was $1.64, which was approximately 100.6% of the target amount, the excess CFFO per share targets were not achieved and no amounts were awarded to Messrs. Cohen, Johannessen and Hendrickson with respect to this additional bonus opportunity.
Lawrence A. Cohen
CFFO Per Share | CFFO Per Share Excess of Target | Bonus as % of Base Salary | Amount | |||||||||||
$1.71 | 105.0 | % | 10 | % | $ | 74,271 | ||||||||
$1.79 | 110.0 | % | 20 | % | $ | 148,541 | ||||||||
$1.87 | 115.0 | % | 30 | % | $ | 222,812 | ||||||||
$1.96 | 120.0 | % | 40 | % | $ | 297,083 | ||||||||
$2.04 | 125.0 | % | 50.0 | % | $ | 371,353 |
Keith N. Johannessen
CFFO Per Share | CFFO Per Share Excess | Bonus as % of Base Salary | Amount | |||||||||||
$1.71 | 105.0 | % | 7.0 | % | $ | 30,694 | ||||||||
$1.79 | 110.0 | % | 14.0 | % | $ | 61,388 | ||||||||
$1.87 | 115.0 | % | 21.0 | % | $ | 92,082 | ||||||||
$1.96 | 120.0 | % | 28.0 | % | $ | 122,775 | ||||||||
$2.04 | 125.0 | % | 35.0 | % | $ | 153,470 |
Carey P. Hendrickson
CFFO Per Share | CFFO Per Share Excess | Bonus as % of Base Salary | Amount | |||||||||||
$1.71 | 105.0 | % | 6.0 | % | $ | 24,280 | ||||||||
$1.79 | 110.0 | % | 12.0 | % | $ | 48,560 | ||||||||
$1.87 | 115.0 | % | 18.0 | % | $ | 72,840 | ||||||||
$1.96 | 120.0 | % | 24.0 | % | $ | 97,120 | ||||||||
$2.04 | 125.0 | % | 30.0 | % | $ | 121,400 |
Individual Goals. Of the performance bonus amount that an eligible named executive officer may earn pursuant to the Incentive Compensation Plan, a pre-determined percentage of that amount is typically contingent upon the eligible named executive officer’s achievement of certain objectively verifiable individual goals within such named executive officer’s sphere of influence for the applicable year. These individual goals are typically approved by the Compensation Committee in the first quarter of each fiscal year based upon the recommendations of our senior management regarding certain initiatives and the corresponding measures therefor that our senior management believes are directly related to the achievement of our business plan for that year. Typically, several distinct individual goals are established for each eligible named executive officer, and of the percentage of the performance bonus amount that is contingent upon the achievement of such individual goals, varying percentages of such amount are allocated by the Compensation Committee to each individual goal based upon the recommendations of our senior management.
Under the Incentive Compensation Plan for 2015, our Chief Executive Officer, President and Chief Operating Officer and Senior Vice President and Chief Financial Officer were eligible to receive a target cash performance bonus equal to 25%, 17% and 15%, respectively, of their base salaries for 2015 based upon the achievement of individual goals. The table below sets forth the target performance bonus opportunities of our eligible named executive officers under the Incentive Compensation Plan for 2015 with respect to the achievement of individual goals.
Named Executive Officer | % of Base Salary | Amount | ||||||
Lawrence A. Cohen | 25.0 | % | $ | 185,677 | ||||
Keith N. Johannessen | 17.0 | % | $ | 74,542 | ||||
Carey P. Hendrickson | 15.0 | % | $ | 60,750 |
Lawrence A. Cohen
CFFO Per Share. With respect to our Chief Executive Officer, the entire target bonus percentage attributable to the achievement of individual goals was based upon our achievement of a CFFO per outstanding share target during 2015, upon the same terms and conditions as described above regarding the corporate goals portion of the Incentive Compensation Plan for 2015. The Compensation Committee determined to establish a separate individual CFFO per share bonus opportunity for our Chief Executive Officer based upon its belief that our Chief Executive Officer, by virtue of his position with us, exerts a more significant influence as compared to the other eligible named executive officers over this important performance metric.
Achievement of the target level of CFFO per share under the Incentive Compensation Plan for 2015, or CFFO per share of $1.63, would result in our Chief Executive Officer receiving a bonus equal to 25% of his base salary for 2015. Achievement of 90% of the target level of CFFO per share would result in 90% of the portion of the award subject to such individual performance target being earned by our Chief Executive Officer. If this threshold level of CFFO per share performance was attained but the target level was not attained, the earned portion of the award subject to individual CFFO per share performance would be prorated between 90% and 100% based upon our actual CFFO per share results reported for 2015. If we did not achieve 90% of the target level of CFFO per share, no amounts would be paid to our Chief Executive Officer with respect to this bonus opportunity.
The following table sets forth the cash performance bonus opportunities of our Chief Executive Officer under the Incentive Compensation Plan for 2015 with respect to his individual CFFO per share performance target. As our CFFO per share for 2015 was $1.64, the targeted level of CFFO per share performance was attained, and as a result, the amount listed below at the 100% level was awarded to our Chief Executive Officer.
CFFO Per Share | % of CFFO Per Share Target | Bonus as % of Base Salary | Amount | |||||||||||
$1.47 | 90.0 | % | 22.5 | % | $ | 167,109 | ||||||||
$1.63 | 100.0 | % | 25.0 | % | $ | 185,677 |
Keith N. Johannessen
Facility NOI. First, with respect to our President and Chief Operating Officer, of the target bonus percentage attributable to the achievement of individual goals, 8.5% was based upon facility net operating income, or Facility NOI. Facility NOI was defined as facility resident revenue less facility operating expenses, not including provision for bad debts, management fees, taxes, insurance, health insurance and casualty losses.
The target level of performance under the Facility NOI portion of the Incentive Compensation Plan for 2015 was $193,607,000, which was based on our internal business plan. Achievement of the target level of Facility NOI under the Incentive Compensation Plan for 2015 would result in our President and Chief Operating Officer receiving a bonus equal to 8.5% of his base salary for 2015. Achievement of 90% of the target level of Facility NOI would result in 90% of the portion of the award subject to such individual performance target being earned by our President and Chief Operating Officer. If this threshold level of Facility NOI was attained but the target level was not attained, the earned portion of the award subject to Facility NOI would be prorated between 90% and 100% based upon our actual Facility NOI results reported for 2015. If we did not achieve 90% of the target level of Facility NOI, no amounts would be paid to our President and Chief Operating Officer with respect to this bonus opportunity.
The following table sets forth the cash performance bonus opportunities of our President and Chief Operating Officer under the Incentive Compensation Plan for 2015 with respect to his individual Facility NOI performance target. As our Facility NOI for 2015 was $196,350,000, the target was achieved and the amount listed below at the 100% level was awarded to our President and Chief Operating Officer.
Facility NOI | % of Facility NOI Target | Bonus as % of Base Salary | Amount | |||||||||||
$174,246,300 | 90.0 | % | 7.6 | % | $ | 33,544 | ||||||||
$193,607,000 | 100.0 | % | 8.5 | % | $ | 37,271 |
Resident Satisfaction. Second, with respect to our President and Chief Operating Officer, of the target bonus percentage attributable to the achievement of individual goals, 8.5% was based upon our resident satisfaction, which is surveyed each year in our communities by an independent third party. The receipt of a 93% or higher favorable rating in such survey on all properties would result in our President and Chief Operating Officer receiving a bonus equal to 8.5% of his base salary for 2015. If we did not achieve at least a 93% favorable rating on such survey, no amounts would be paid to our President and Chief Operating Officer with respect to this bonus opportunity.
The following table sets forth the cash performance bonus opportunity of our President and Chief Operating Officer under the Incentive Compensation Plan for 2015 with respect to the resident satisfaction performance target. As our resident satisfaction for 2015 was 95.0%, the target was achieved and the amount listed below was awarded to our President and Chief Operating Officer.
Resident Satisfaction | Bonus as % of Base Salary | Amount | ||||||||
93.0% | 8.5 | % | $ | 37,271 |
Carey P. Hendrickson
Controllable G&A. First, with respect to our Senior Vice President and Chief Financial Officer, of the target bonus percentage attributable to the achievement of individual goals, 7.5% was based upon our controllable general and administrative expenses — accounting, finance, information systems, investor relations and administration, or the Controllable G&A Expenses. The target budget for Controllable G&A Expenses for 2015 was 2.5% of the Company’s total revenue target, excluding bonus accruals, which was based on our internal business plan, as modified as discussed above. If our Controllable G&A Expenses did not exceed the target budget under the Incentive Compensation Plan for 2015, then our Senior Vice President and Chief Financial Officer would receive a bonus equal to 7.5% of his base salary for 2015. Achievement of 90% of the target level of Controllable G&A Expenses would result in 90% of the portion of the award subject to such individual performance target being earned by our Senior Vice President and Chief Financial Officer. If this threshold level of Controllable G&A Expenses was attained but the target level was not attained, the earned portion of the award subject to Controllable G&A Expenses would be prorated between 90% and 100% based upon our actual Controllable G&A Expenses results reported for 2015.
The following table sets forth the cash performance bonus opportunity of our Senior Vice President and Chief Financial Officer under the Incentive Compensation Plan for 2015 with respect to his individual Controllable G&A Expenses performance target. Our Controllable G&A Expenses were 2.28% of Company’s total revenue for 2015, which was less than the target budget, the performance target was achieved and the amount listed below at the 2.5% Controllable G&A level was awarded to our Senior Vice President and Chief Financial Officer.
Controllable G&A | Bonus as % of Base Salary | Amount | ||||||
2.8% | 6.8 | % | $ | 27,338 | ||||
2.5% | 7.5 | % | $ | 30,375 |
Aggregate Acquisitions With Financing. Second, with respect to our Senior Vice President and Chief Financial Officer, of the target bonus percentage attributable to the achievement of individual goals, 7.5% was based upon our ability to secure mortgage financing for acquisitions of senior housing communities in 2015. Upon our acquisition of $100,000,000 or more of senior housing communities with mortgage financing in 2015, 100% of the portion of the award subject to acquisition financing target would be earned by our Senior Vice President and Chief Financial Officer. 33% of such award would be earned upon our acquisition of $50,000,000 or more of senior housing communities with mortgage financing in 2015, and 66% of such award would be earned upon our acquisition of $75,000,000 or more of senior housing communities with mortgage financing in 2015. If we did not obtain mortgage financing related to acquisitions of at least $50,000,000 of senior housing communities in 2015, no amounts would be paid to our Senior Vice President and Chief Financial Officer with respect to this bonus opportunity.
The following table sets forth the cash performance bonus opportunities of our Senior Vice President and Chief Financial Officer under the Incentive Compensation Plan for 2015 with respect to the acquisition financing target. As we acquired $162,460,000 of senior housing communities with acquisition financing in 2015, the target was achieved and the amount listed below at the 100% level was awarded to our Senior Vice President and Chief Financial Officer.
Aggregate Acquisitions With Financing | % of Target Bonus | Bonus as a % of Base Salary | Amount | |||||||||
$50,000,000 | 33.0 | % | 2.5 | % | $ | 10,024 | ||||||
$75,000,000 | 66.0 | % | 5.0 | % | $ | 20,048 | ||||||
$100,000,000 | 100.0 | % | 7.5 | % | $ | 30,375 |
Other Named Executive Officers. The Compensation Committee does not believe that the Incentive Compensation Plan is an appropriate method to determine the cash performance bonus that Messrs. Brickman and Solari are entitled to receive each year since the Incentive Compensation Plan has historically been heavily dependent upon measures that are related to the achievement of our overall business plan. The Compensation Committee does not believe that Messrs. Brickman and Solari, in their capacities as our Senior Vice President, General Counsel and Secretary and Vice President — Corporate Development, respectively, are in positions to influence the achievement of our overall business plan each year to the same extent as our other named executive officers. Although Messrs. Brickman and Solari do not participate in the Incentive Compensation Plan, the Compensation Committee has the ability to award annual cash performance bonuses to such named executive officers in its discretion pursuant to the terms of their respective employment agreements.
David R. Brickman
The determination as to whether Mr. Brickman will receive a cash performance bonus with respect to a particular year is typically made by the Compensation Committee in the first quarter of the following year. In determining whether Mr. Brickman is entitled to receive a cash performance bonus, and if so, in what amount, the Compensation Committee typically reviews peer group data, the reports of any compensation consultant engaged by the Compensation Committee for such year, our financial performance for the relevant fiscal year, the past performance of Mr. Brickman, the total cash compensation necessary to retain top executive talent, and the budget for Mr. Brickman’s internal department. Based upon such review, our senior management recommended, and the Compensation Committee approved, that Mr. Brickman receive a cash performance bonus of $125,000 for 2015.
Joseph G. Solari
For 2015, the Compensation Committee determined that Mr. Solari would be eligible to receive a cash performance bonus based upon the aggregate value of our completed “qualified acquisitions.” Qualified acquisitions include wholly-owned acquisitions, acquisitions made in joint ventures, long-term management contracts and leases with a term of three or more years but exclude acquisitions of communities we currently operate. The Compensation Committee selected this performance metric based upon the recommendations of our senior management regarding certain strategic initiatives and the corresponding measures therefor that our senior management believed were directly related to the achievement of our business plan for 2015 and were within Mr. Solari’s sphere of influence. These initiatives consisted of helping us identify and complete certain strategic acquisitions that our senior management believed would increase our ownership of high-quality senior living communities in geographically concentrated regions and generate meaningful increases in our CFFO and earnings, and accordingly, increase shareholder value. There were no minimum nor target amounts with respect to this performance bonus opportunity, but rather the performance bonus was awardable in increments of $9,283 per $10,000,000 of completed qualified acquisitions. In addition, the amount of performance bonuses that Mr. Solari was eligible to receive during the term of his bonus opportunity (which begins on September 1 and ends on August 31 of each year) was subject to a cap of 75% of his annual base salary. As we completed qualified acquisitions with an aggregate value of $162,450,000 in 2015, Mr. Solari was awarded $148,528 with respect to this performance bonus opportunity.
For a further description of the cash performance bonuses paid to our named executive officers for 2015, please refer to the Summary Compensation Table on page 38 of this proxy statement.
LONG-TERM INCENTIVES
In May 2007, our stockholders approved the Company’s 2007 Omnibus Stock and Incentive Plan, as amended, which we refer to as the “2007 Stock Incentive Plan.” Upon approval of the 2007 Stock Incentive Plan, the Company’s 1997 Omnibus Stock and Incentive Plan terminated and no additional awards will be granted under that plan. Awards granted under the 2007 Stock Incentive Plan may be made at times and upon vesting and other conditions as determined by the Compensation Committee, and may be made in the form of stock options, restricted share awards, stock appreciation rights, cash awards and performance-based equity and cash awards. Pursuant to the terms of the 2007 Stock Incentive Plan, our Chief Executive Officer and each of our four highest paid employees as of December 31, 2015 are not eligible to receive awards under the 2007 Stock Option Plan in any fiscal year exceeding 250,000 shares per such employee.
In determining the amount and types of long-term incentive awards to be granted to our named executive officers, the Compensation Committee primarily relies upon:
objective data with respect to the size and/or the financial impact of the transaction(s), if any, giving rise to such long-term incentive award;
its own judgment with respect to the contributions of our named executive officers to such transaction(s) giving rise to the long-term incentive award, if any, which may involve input from members of our senior management;
publicly-available information with respect to long-term incentive awards paid to named executive officers at companies in our peer group;
reports and analysis provided by any compensation consultants engaged by the Compensation Committee during such year;
the amount of equity held by each named executive officer, including the amount of any unvested equity awards; and
the amount of cash compensation, in the form of base salary and cash performance bonus, that each named executive officer is eligible to earn for the relevant fiscal year.
2015 Long-Term Incentive Awards
On February 26, 2015, the Compensation Committee, after taking into account the foregoing factors, granted the following named executive officers consisting of performance-based restricted stock awards (“PSAs”) and time-based restricted stock awards (“RSAs”). The Compensation Committee used (i) a targeted mix that placed greater weighting on PSAs (70% of the long-term equity incentive award) and (ii) cumulative three-year performance periods instead of three annual performance periods based on actual Return on Equity versus targeted Return on Equity. When determining the number of RSAs and PSAs to grant to each of our named executive officers, the Compensation Committee also emphasized managing share usage under our 2019 Plan and stockholder dilution.
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The following table shows the number of PSAs and RSAs granted to each of our named executive officers in April 2023.
NEO | RSAs(1) | PSAs(2) | ||||||
Brandon M. Ribar | 13,200 | 30,800 | ||||||
Kevin J. Detz | 8,400 | 19,600 | ||||||
David R. Brickman | 4,080 | 9,520 |
(1) | Represents shares of restricted stock
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(2) |
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2023 Shareholder Alignment Awards
On January 26, 2023, the Compensation Committee also approved long-term performance share awards under our 2019 Plan for our named executive officers designed to further align the interests of our executive officers with those of the Company’s stockholders, which will vest subject to such individual’s continued employment with the Company and the attainment of specified volume weighted average price (the “VWAP”) targets in respect of the Company’s common stock during the five year period following the grant date.
The following table shows the number of long-term performance share awards granted to each of our named executive officers in January 2023.
NEO | Performance Shares(1) | |||
Brandon M. Ribar | 76,450 | |||
Kevin J. Detz | 60,000 | |||
David R. Brickman | 19,300 |
(1) | Represents shares of performance-based restricted stock granted under our 2019 Plan, which will vest subject to the achievement of the following VWAP performance targets for the Company’s common stock on or prior to January 26, 2028: |
if the VWAP of a share of the Company’s common stock exceeds $40.00 per share for any ninety (90) calendar day trading period, forty-three percent (43%) of the target award restricted shares will vest;
if the VWAP of a share of the Company’s common stock exceeds $50.00 per share for any ninety (90) calendar day trading period, fifty percent (50%) of the target award restricted shares will vest;
if the VWAP of a share of the Company’s common stock exceeds $60.00 per share for any ninety (90) calendar day trading period, seventy-five percent (75%) of the target award restricted shares will vest; and
if the VWAP of a share of the Company’s common stock exceeds $70.00 per share for any ninety (90) calendar day trading period, one hundred percent (100%) of the target award restricted shares will vest.
Fiscal 2023 Executive Short-Term Incentive Compensation Plan
In April 2023, the Compensation Committee approved the 2023 STI Plan pursuant to which our named executive officers and certain other executive officers (each, a “Participant” and, collectively, the “Participants”) had the opportunity to earn cash performance bonuses (the “Performance Bonuses”) based upon the Company’s achievement of four corporate goals established by the Compensation Committee for the year ending December 31, 2023.
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Each Participant was eligible to earn a target Performance Bonus equal to a percentage of their annual base salary for fiscal year 2023. Pursuant to the terms of their respective employment agreements, the targeted Performance Bonus for our President and Chief Executive Officer, our Executive Vice President and Chief Financial Officer, and our Senior Vice President, Secretary and General Counsel was equal to 75%, 70% and 50%, respectively, of their annual base salary for fiscal 2023. With respect to the Performance Bonuses, 30%, 35%, 30% and 5% of the target bonus under the 2023 STI Plan is based on the Company’s achievement of a total revenue target, an operating margin target, an adjusted funds from operations per share year-over-year growth target and an employee retention target, respectively.
The table below shows the threshold, target and maximum performance targets and related payout percentages for Performance Bonuses under our 2023 STI Plan. Performance below threshold level would result in no payout for the applicable performance metric and payouts were capped at the maximum level for performance that exceeds maximum goals. Payouts for any performance between threshold, target and maximum levels were interpolated.
Corporate Goal | Payout as a Percentage of Target | Performance Target | ||
Revenue | Threshold (50%) | $223,108,450 | ||
Target (100%) | $234,857,000 | |||
Max (200%) | $246,593,550 | |||
Operating Margin | Threshold (50%) | 23.0% | ||
Target (100%) | 25.86% | |||
Max (200%) | 32.0% | |||
AFFO per share YoY Growth | Threshold (50%) | $2.20 | ||
Target (100%) | $2.55 | |||
Max (200%) | $3.88 | |||
Employee Retention Index | Threshold (50%) | 104.3 | ||
Target (100%) | 107.3 | |||
Max (200%) | 110.3 |
The table below shows our actual results with respect the Performance Bonuses under 2023 STI Plan and the corresponding payout factors, if any, relating to each corporate goal.
Corporate Goal | Result | Payout Factor | ||||||
Revenue | $ | 234,223,906 | 29.2 | % | ||||
Operating Margin | 25.86 | % | 35.0 | % | ||||
AFFO per share YoY Growth(1) | $ | 2.37 | 22.4 | % | ||||
Employee Retention Index | 111.34 | 10.0 | % |
(1) | Adjusted Funds from Operations is a financial valuation and performance measure that is not calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). Please refer to Appendix A to this Proxy Statement for important information concerning such non-GAAP financial measure, including the Company’s definition of such measure and reconciliation of such measure to the most directly comparable GAAP measure. |
Based upon the foregoing, the table below summarizes the Performance Bonuses earned by each of our named executive officers under our 2023 STI Plan. The payout amounts relate to our achievement of the revenue performance target discussed above.
Named Executive Officer | Payout Factor | Total Amount | ||||||
Brandon M. Ribar | 96.61 | % | $ | 339,232 | ||||
Kevin J. Detz | 96.61 | % | $ | 275,918 | ||||
David R. Brickman | 96.61 | % | $ | 171,448 |
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Equity Compensation Arrangements
In addition to the employment agreements described above, our named executive officers are entitled to receive payments under the terms of our equity compensation plans and equity award agreements upon a “change in control” and the termination of the named executive officer’s employment due to death or disability.
2019 Omnibus Stock and Incentive Plan
In the event of a “change in control,” our 2019 Plan provides for the following treatment of awards unless otherwise provided in an award agreement:
Unless converted, assumed, or replaced by a successor or survivor corporation, or a parent or subsidiary thereof, all awards will become fully exercisable, all forfeiture restrictions will lapse, and, following the consummation of such change in control, all such awards will terminate and cease to be outstanding.
The number or value of any performance-based award or other award that is based on performance criteria or performance goals that will become fully earned, vested, exercisable and free of forfeiture restrictions will not exceed the greater of (i) such number or value determined by the actual performance attained during the applicable performance period to the time of the change in control or (ii) such number or value that would be fully earned, vested, exercisable and free of forfeiture restrictions had 100% of the target level of performance been attained for the entire applicable performance period without regard to the change in control.
If awards are assumed or continued after a change in control, the Compensation Committee may provide that all or a portion of such awards will become fully exercisable and all forfeiture restrictions will lapse immediately upon the involuntary termination of the participant’s employment or service within a designated period (not to exceed 24 months) following the effective date of such change in control.
Upon a change in control, the Compensation Committee may cause any and all awards outstanding to terminate at a specific time in the future, and will give each participant the right to exercise such awards during a period of time as the Compensation Committee, in its sole and absolute discretion, will determine.
The portion of any incentive stock option accelerated in connection with a change in control will remain exercisable as an incentive stock option only to the extent the applicable $100,000 limitation is not exceeded. To the extent such dollar limitation is exceeded, the accelerated portion of such option will be exercisable as a non-qualified stock option under the U.S. federal tax laws.
2007 Omnibus Stock and Incentive Plan
In the event of a “change in control,” our 2007 Omnibus Stock and Incentive Plan, as amended, provides for the following treatment of awards unless otherwise provided under the terms of an award or by the Compensation Committee prior to such transaction:
all outstanding awards (except performance awards which will be governed by their express terms) will become fully exercisable, nonforfeitable, or the restricted period will terminate, as the case may be; and
the Compensation Committee will have the right to cash out some or all outstanding non-qualified stock options, stock appreciation rights and shares of restricted stock on the basis of the highest price per share paid in any transaction reported on the NYSE or paid or offered in any bona fide transaction related to a “change in control” during the immediately preceding 60-day period, in each case as determined by the Compensation Committee (except that the cash out for stock appreciation rights related to incentive stock options will be based on transaction reported for the date on which the holder exercises the stock appreciation rights or, if applicable, the date on which the cash out occurs).
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Time-Based Restricted Stock Award Agreements
When our named executive officers are awarded shares of restricted stock with time-based vesting provisions, each of them enters into a restricted stock award agreement with us. These restricted stock award agreements generally provide that, if the holder’s employment with us is terminated for any reason before the vesting date for the restricted shares, the restricted shares that have not previously vested will, automatically and without notice, terminate and be permanently forfeited as of such date, except that all unvested shares will vest if the holder’s employment terminates on or after the first anniversary of the grant date due to the holder’s death or disability.
In the event of a change in control, shares of time-based restricted stock will not automatically vest; provided, however, that (i) if the Compensation Committee has made a provision for the substitution, assumption, exchange or other continuation of such award in connection with the change in control, then in the event that the holder’s employment is terminated (A) by us due to death, disability or retirement following the change in control, then the unvested portion of the award will immediately fully vest, or (B) by us other than for “Cause” or by the holder for “Good Reason,” in each case within one year following the change in control, the unvested portion of the award will immediately fully vest; or (ii) if the Compensation Committee has not made a provision for the substitution, assumption, exchange or other continuation of such award in connection with the change in control, the unvested portion of the award will fully vest immediately prior to the change in control.
Performance-Based Restricted Stock Award Agreements
When our named executive officers are awarded shares of performance-based restricted stock, each of them enters into a performance award agreement with us. These performance award agreements generally provide that, (1) if the holder’s employment with us is terminated for any reason before the vesting date for the performance shares, the performance shares that have not previously vested will, automatically and without notice, terminate and be permanently forfeited as of such date, and (2) the holder’s right to receive the specified percentage of performance shares that do not vest as a result of our failure to achieve the applicable performance measures will be automatically terminated and permanently forfeited; provided, that if a named executive officer’s continuous service is terminated by the Company due to death or disability, the unvested performance shares will remain outstanding and a pro-rated portion thereof will vest if the applicable performance target is satisfied during the performance period.
In the event of a change in control or an event which results in our common stock no longer being readily tradeable on an established securities market and provided the named executive officer remains in continuous service with the Company as of the date of such transaction, all or a portion of the performance shares may vest upon the closing of such transaction depending on the value of the consideration received by our shareholders in connection with the transaction.
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2023 Outstanding Equity Awards at Fiscal Year-End
The following table sets forth certain information with respect to our named executive officers’ outstanding stock options and restricted stock awards as of December 31, 2023.
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
Name | Number of | Number of Securities Underlying Unexercised Options (#) Unexercisable | 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 ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | |||||||||||||||||||||||||||
Brandon M. | — | — | — | — | — | 13,560 | (a) | 130,990 | — | — | ||||||||||||||||||||||||||
— | — | — | — | — | 4,835 | (b) | 46,706 | — | — | |||||||||||||||||||||||||||
— | — | — | — | — | 6,547 | (c) | 63,244 | — | — | |||||||||||||||||||||||||||
13,200 | (d) | 127,512 | ||||||||||||||||||||||||||||||||||
— | — | — | — | — | 38,550 | (e) | 372,393 | |||||||||||||||||||||||||||||
— | — | — | — | — | 10,824 | (f) | 104,560 | |||||||||||||||||||||||||||||
— | — | — | — | — | 14,657 | (g) | 141,587 | |||||||||||||||||||||||||||||
30,800 | (h) | |||||||||||||||||||||||||||||||||||
76,450 | (i) | |||||||||||||||||||||||||||||||||||
Kevin J. | — | — | — | — | — | 5,374 | (j) | 51,913 | — | — | ||||||||||||||||||||||||||
8,400 | (d) | 81,144 | ||||||||||||||||||||||||||||||||||
— | — | — | — | — | — | — | 12,092 | (k) | 116,809 | |||||||||||||||||||||||||||
— | — | — | — | — | — | — | 30,000 | (l) | 289,800 | |||||||||||||||||||||||||||
19,600 | (h) | |||||||||||||||||||||||||||||||||||
60,000 | (i) | |||||||||||||||||||||||||||||||||||
David R. | — | — | — | — | — | 7,557 | (a) | 73,001 | — | — | ||||||||||||||||||||||||||
— | — | — | — | — | 2,695 | (b) | 26,034 | — | — | |||||||||||||||||||||||||||
4,080 | (d) | 39,413 | ||||||||||||||||||||||||||||||||||
— | — | — | — | — | — | — | 25,700 | (e) | 248,262 | |||||||||||||||||||||||||||
— | — | — | — | — | — | — | 6,033 | (f) | 58,279 | |||||||||||||||||||||||||||
9,520 | (h) | |||||||||||||||||||||||||||||||||||
19,300 | (i) |
(1) | Calculated by reference to the closing price for shares of our common stock on the NYSE on December 29, 2023, which was $9.66 per share. |
(a) | Represents the remaining shares of restricted stock (third tranche) granted on March 24, 2021, which vested in installments of 33%, 33% and 34% on March 24, 2022, March 24, 2023 and March 24, 2024, respectively, and shares of performance-based restricted stock granted on March 24, 2021 that were |
(b) | Represents the shares of restricted stock granted on April 5, 2022, which vest in installments of 33%, 33% and 34% on |
(c) | Represents the shares of restricted stock granted on September 7, 2022, which vest in installments of 33%, 33% and 34% on September 7, 2023, September 7, 2024 and September 7, 2025, respectively. |
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(d) | Represents the shares of restricted stock granted on April 4, 2023, which vest in installments of 33%, 33% and 34% on April 4, 2024, April 4, 2025 and April 4, 2026, respectively. |
(e) | Represents shares of performance-based restricted stock granted on November 15, 2021, which vest subject to the
|
(f) | Represents shares of |
(g) | Represents shares of performance-based restricted stock granted on September 7, 2022, which vest subject to |
(h) | Represents the
|
(i) | Represents the shares of performance-based restricted stock granted on January 26, 2023, which vest subject to the satisfaction of the target performance objective. |
(j) | Represents the shares of restricted stock granted on May 12, 2022, which vest in installments of 33%, 33% and 34% on May 12, 2023, May 12, 2024 and May 12, 2025, respectively. |
(k) | Represents shares of performance-based restricted stock granted on May 12, 2022, which vest subject to the satisfaction of the target performance objective. |
(l) | Represents shares of performance-based restricted stock granted on May 12, 2022, which vest subject to the satisfaction of the target performance objective. |
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PAY VERSUS PERFORMANCE
As required by Item 402(v) of Regulation S-K, we are providing the following information about the relationship between executive compensation actually paid and certain financial performance of the Company for each of the last two completed calendar years. In determining the “compensation actually paid” to our named executive officers (NEOs), we are required to make various adjustments to amounts that have been previously reported in the Summary Compensation Table in previous years, as the SEC’s valuation methods for this section differ from those required in the Summary Compensation Table. The table below summarizes compensation values both previously reported in our Summary Compensation Table, as well as the adjusted values required in this section for the 2023 and 2022 calendar years. Note that for our NEOs other than our principal executive officer (the PEO), compensation is reported as an average.
The following table sets forth information concerning the compensation of our NEOs for each of the fiscal years ended December 31, 2023 and 2022, and our financial performance for each such fiscal year:
Year | Summary Compensation Table Total for Current PEO(1) | Summary Compensation Table Total for Former PEO(2) | Compensation Actually Paid to Current PEO(4) | Compensation Actually Paid to Former PEO(2) | Average Summary Compensation Table Total for non-PEO Named Executive Officers(3) | Average Compensation Actually Paid to non-PEO Named Executive Officers(4) | Value of Initial Fixed $100 Investment Based on Total Shareholder Return | Net Income (Loss) (in thousands) | ||||||||||||||||||||||||
2023 | $ | 1,768,234 | N/A | $ | 954,926 | N/A | $ | 1,130,716 | $ | 689,461 | $ | 78.28 | $ | (21,107 | ) | |||||||||||||||||
2022 | $ | 1,913,187 | $ | 3,395,827 | $ | 128,635 | $ | (418,597 | ) | $ | 1,137,803 | $ | 376,574 | $ | 101.30 | $ | (54,401 | ) | ||||||||||||||
2021 | N/A | $ | 4,816,780 | N/A | $ | 4,528,517 | $ | 2,322,073 | $ | 2,298,800 | $ | 130.88 | $ | 125,607 |
(1) | Brandon M. Ribar was appointed the Company’s President and Chief Executive Officer, effective September 2, 2022. |
(2) | Kimberly S. Lody resigned as the Company’s President and Chief Executive Officer, effective September 2, 2022. |
(3) | During 2023 and 2022, our non-PEO NEOs consisted of Kevin J. Detz and David R. Brickman. During 2021, our non-PEO NEOs consisted of Messrs. Ribar and Brickman. |
(4) | In order to calculate the average compensation “actually paid” (CAP) to our |
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SCT Total | Stock Awards Deducted | Stock Awards Added(a) | Options Deducted | Options Added | Total CAP | |||||||||||||||||||
A | B | C | D | E | A - (B + D) + (C + E) | |||||||||||||||||||
PEO | ||||||||||||||||||||||||
2023 (Ribar) | $ | 1,768,234 | $ | 967,769 | $ | 154,461 | — | — | $ | 954,926 | ||||||||||||||
2022 (Ribar) | $ | 1,913,187 | $ | 1,088,258 | $ | (696,294 | ) | — | — | $ | 128,635 | |||||||||||||
2022 (Lody) | $ | 3,395,827 | $ | 2,073,590 | $ | (1,624,712 | ) | — | $ | (116,123 | ) | $ | (418,598 | ) | ||||||||||
2021 (Lody) | $ | 4,816,780 | $ | 2,101,772 | $ | 1,726,637 | — | $ | 86,872 | $ | 4,528,517 | |||||||||||||
Average Non-PEO NEOs | ||||||||||||||||||||||||
2023 | $ | 1,130,716 | $ | 487,722 | $ | 46,467 | — | — | $ | 689,461 | ||||||||||||||
2022 | $ | 1,137,803 | $ | 690,156 | $ | (71,073 | ) | — | — | $ | 376,574 | |||||||||||||
2021 | $ | 2,322,073 | $ | 1,208,281 | $ | 1,185,008 | — | — | $ | 2,298,800 |
Relationship Between “Compensation Actually Paid” and Performance
As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between executive compensation and certain financial performance of the Company. For further information regarding our executive compensation programs, the metrics the Compensation Committee used to set executive compensation for 2023 (which are different than the financial metrics we are required to include in the tables and discussion below) and our pay versus performance philosophy, please refer to “Executive Compensation Tables” and the related narrative disclosures above and “Proposal 3—Advisory Vote on Executive Compensation” below.
The following graphs address the relationship between “compensation actually paid” as disclosed in the Pay Versus Performance Table above and the Company’s cumulative Total Shareholder Return and Net Income (Loss). With respect to fiscal 2022, the compensation data for the Company’s PEOs for such year has been aggregated.
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The following table summarizes the compensation earned by our non-employee directors in 2023.
Name* | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2)1 | Option Awards ($) | All Other Compensation ($) | Total ($) | |||||||||||||||
Noah R. Beren | $ | 60,000 | $ | 26,400 | — | — | $ | 86,400 | ||||||||||||
Benjamin P. Harris | $ | 75,000 | $ | 26,400 | — | — | $ | 101,400 | ||||||||||||
David W. Johnson | $ | 115,000 | $ | 26,400 | — | — | $ | 141,400 | ||||||||||||
Jill M. Krueger | $ | 87,500 | $ | 26,400 | — | — | $ | 113,900 | ||||||||||||
Max J. Levy(3) | — | — | — | — | — | |||||||||||||||
Shmuel S.Z. Lieberman | $ | 70,000 | $ | 26,400 | — | — | $ | 96,400 | ||||||||||||
Elliot R. Zibel | $ | 60,000 | $ | 26,400 | — | — | $ | 86,400 |
During 2023, we did not maintain any pension or deferred compensation arrangements for our directors.
(1) |
|
(2) |
|
(3) | Mr. Levy does not receive fees for
|
Compensation of Directors During 2023
For their services to us, our non-employee directors in 2023 each received an annual retainer of $55,000 (in addition to the committee retainers discussed below). In addition, the independent Chairman of our Board, the
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Chairman of the Audit Committee, the Chairman of the Nominating and Corporate Governance Committee, and the Chairman of the Compensation Committee, each received an additional annual retainer of $50,000, $20,000, $10,000, and $15,000, respectively, for serving as the Chairpersons or Vice Chairpersons, as applicable, of the Board or such committees in 2023. Our non-employee directors on the Audit Committee, Nominating and Corporate Governance Committee, and Compensation Committee also each received an annual retainer of $10,000, $5,000 and $7,500, respectively, for serving on such committees in 2023. The Board and committee annual retainers are payable on a quarterly basis at the end of each quarter. Our non-employee directors were also reimbursed for their expenses in attending Board and committee meetings in 2023.
Report of the Audit Committee
The Audit Committee oversees the Company’s financial reporting process on behalf of the Board of Directors. Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal controls. In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed the audited financial statements in the Annual Report on Form 10-K with management, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements.
The Audit Committee reviewed with the independent auditors, who are responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles, their judgments as to the quality, not just the acceptability, of the Company’s accounting principles and such other matters as are required to be discussed with the Audit Committee under generally accepted auditing standards. The Audit Committee also discussed with the independent auditors the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board and the SEC. The Company’s independent auditors also provided to the Audit Committee the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence, and the Audit Committee discussed with the independent auditors their independence and the compatibility of non-audit services with such independence.
The Audit Committee discussed with the independent auditors the overall scope and plans for their respective audits. The Audit Committee meets with the independent auditors, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors (and the Board of Directors has approved) that the audited financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 2023 for filing with the SEC.
Compensation Committee
JAMES A. MOORE, CHAIRMAN
RONALD A. MALONE
MICHAEL W. REID
Summary Compensation Table
The following table summarizes the compensation earned by our named executive officers in 2015, 2014 and 2013, except that Mr. Hendrickson was not one of our named executive officers for 2013, and accordingly, information with respect to Mr. Hendrickson’s compensation for such year is not provided.
Name and Principal Position | Year | Salary | Bonus | Stock Awards(1) | Non-Equity Incentive Plan Compensation(2) | All Other Compensation(3) | Total | |||||||||||||||||||||
Lawrence A. Cohen, | 2015 | $ | 742,707 | — | $ | 2,427,000 | (4) | $ | 742,706 | $ | 6,000 | $ | 3,918,413 | |||||||||||||||
Vice Chairman of the Board and Chief Executive Officer | 2014 | $ | 725,232 | — | $ | 2,630,000 | $ | 721,221 | $ | 6,000 | $ | 4,082,453 | ||||||||||||||||
2013 | $ | 704,109 | — | $ | 2,407,000 | $ | 768,816 | $ | 6,000 | $ | 3,885,925 | |||||||||||||||||
Keith N. Johannessen, | 2015 | $ | 433,384 | — | $ | 1,941,600 | (4) | $ | 306,939 | $ | 4,900 | $ | 2,686,823 | |||||||||||||||
President and Chief Operating Officer | 2014 | $ | 427,847 | — | $ | 2,104,000 | $ | 298,330 | $ | 4,900 | $ | 2,835,077 | ||||||||||||||||
2013 | $ | 414,938 | — | $ | 1,925,600 | $ | 317,137 | $ | 4,900 | $ | 2,662,575 | |||||||||||||||||
Carey P. Hendrickson, | 2015 | $ | 405,000 | — | $ | 1,213,500 | (4) | $ | 243,000 | $ | 3,740 | $ | 1,865,240 | |||||||||||||||
Senior Vice President and Chief Financial Officer | 2014 | $ | 260,770 | — | $ | 828,683 | $ | 157,188 | — | $ | 1,246,641 | |||||||||||||||||
David R. Brickman, | 2015 | $ | 315,180 | $ | 125,000 | $ | 728,100 | (4) | — | $ | 4,623 | $ | 1,172,903 | |||||||||||||||
Senior Vice President, General Counsel and Secretary | 2014 | $ | 309,000 | $ | 114,000 | $ | 789,000 | — | $ | 4,378 | $ | 1,216,378 | ||||||||||||||||
2013 | $ | 292,755 | $ | 110,000 | $ | 722,100 | — | $ | 4,384 | $ | 1,129,239 | |||||||||||||||||
Joseph G. Solari, | 2015 | $ | 196,352 | — | $ | 121,350 | (4) | $ | 148,528 | $ | 3,927 | $ | 470,157 | |||||||||||||||
Vice President — Corporate Development | 2014 | $ | 192,502 | — | $ | 131,500 | $ | 55,698 | $ | 3,525 | $ | 383,225 | ||||||||||||||||
2013 | $ | 187,514 | — | $ | 120,350 | $ | 129,962 | $ | 3,750 | $ | 441,576 |
2015 Grants of Plan-Based Awards
The following table sets forth certain information with respect to grants of plan-based awards to the named executive officers in 2015. The estimated possible payouts under non-equity incentive plan awards represent the bonus award opportunities granted to our eligible named executive officers in 2015 under the Incentive Compensation Plan.
Name (a) | Grant Date (b) | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of Stock or Units(3) (#) (i) | All Other Option Awards: Number of Securities Underlying Options (#) (j) | Exercise or Base Price of Option Awards ($/Sh) (k) | Grant Date Fair Value of Stock and Option Awards(4) ($) (l) | |||||||||||||||||||||||||||||||||||||
Threshold ($) (c) | Target ($) (d) | Maximum ($) (e) | Threshold (#) (f) | Target (#) (g) | Maximum (#) (h) | |||||||||||||||||||||||||||||||||||||||
Lawrence A. Cohen | 2/24/15 | $ | 613,401 | $ | 742,707 | $ | 1,114,061 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
2/26/15 | — | — | — | — | — | — | 50,000 | — | — | $ | 1,213,500 | |||||||||||||||||||||||||||||||||
2/26/15 | — | — | — | 45,000 | 50,000 | — | — | — | — | $ | 1,213,500 | |||||||||||||||||||||||||||||||||
Keith N. Johannessen | 2/24/15 | $ | 220,206 | $ | 306,939 | $ | 460,408 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
2/26/15 | — | — | — | — | — | — | 40,000 | — | — | $ | 970,800 | |||||||||||||||||||||||||||||||||
2/26/15 | — | — | — | 36,000 | 40,000 | — | — | — | — | $ | 970,800 | |||||||||||||||||||||||||||||||||
Carey P. Hendrickson | 2/24/15 | $ | 185,228 | $ | 243,000 | $ | 364,500 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
2/26/15 | — | — | — | — | — | — | 25,000 | — | — | $ | 606,750 | |||||||||||||||||||||||||||||||||
2/26/15 | — | — | — | 22,500 | 25,000 | — | — | — | — | $ | 606,750 | |||||||||||||||||||||||||||||||||
David R. Brickman | 2/26/15 | — | — | — | — | — | — | 15,000 | — | — | $ | 364,050 | ||||||||||||||||||||||||||||||||
2/26/15 | — | — | — | 13,500 | 15,000 | — | — | — | — | $ | 364,050 | |||||||||||||||||||||||||||||||||
Joseph G. Solari | 2/26/15 | — | — | — | — | — | — | 5,000 | — | — | $ | 121,350 |
Employment Agreements
We entered into an employment agreement with Mr. Cohen in November 1996, which was subsequently amended in May 1999, August 2002, January 2003, February 2004 and April 2010. Mr. Cohen’s employment agreement is for a term of three years and automatically extends for a two-year term on a consecutive basis, and his compensation thereunder generally consists of (i) a minimum annual base salary of $636,366, subject to annual adjustments, (ii) an annual bonus as determined by the Compensation Committee, and (iii) participation in our employee benefit plans for senior executive officers.
We entered into an employment agreement with Mr. Johannessen in November 1996, which was subsequently amended in June 1999, January 2003 and April 2010. Mr. Johannessen’s employment agreement is for a term of three years and automatically extends for a two-year term on a consecutive basis, and his compensation thereunder generally consists of (i) an annual base salary of $375,006, subject to annual adjustments, (ii) an annual bonus as determined by the Compensation Committee, and (iii) participation in our employee benefit plans for senior executive officers.
We entered into an employment agreement with Mr. Hendrickson in April 2014 (effective May 2014). Mr. Hendrickson’s employment agreement was initially for a one-year term, subject to extension upon mutual consent of Mr. Hendrickson and the Company. The Company and Mr. Hendrickson have agreed to extend the term of Mr. Hendrickson’s employment until May 6, 2017. The compensation payable under Mr. Hendrickson’s employment agreement generally consists of (i) an annual base salary of not less than $400,000, (ii) an annual bonus as determined by the Compensation Committee, and (iii) participation in our employee benefit plans for senior executive officers.
We entered into an employment agreement with Mr. Brickman in December 1996, which was subsequently amended in December 2000 and January 2003. Mr. Brickman’s employment agreement is for a term of three years and automatically extends for a two-year term on a consecutive basis, and the compensation thereunder generally consists of (i) an annual base salary of $146,584, subject to annual adjustments, (ii) an annual bonus as determined by the Compensation Committee, and (iii) participation in our employee benefit plans for senior executive officers.
We entered into an employment agreement with Mr. Solari in July 2010 (effective September 2010), which was subsequently amended in August 2013. Mr. Solari’s employment agreement was initially for a two-year term, subject to extension upon mutual consent of Mr. Solari and the Company. The Company and Mr. Solari have agreed to extend the term of Mr. Solari’s employment agreement until August 31, 2017. The compensation payable under Mr. Solari’s employment agreement generally consists of (i) an annual base salary of $175,000, subject to annual adjustments, (ii) an annual bonus as determined by the Compensation Committee, and (iii) participation in our employee benefit plans for senior executive officers.
For a description of the process by which the annual base salary adjustments and the cash performance bonuses are determined, please refer to “Compensation Discussion and Analysis” beginning on page 18 of this proxy statement.
In addition, each of the above-described employment agreements contains severance provisions which provide for certain payments to be made by us to the named executive officers upon the occurrence of certain events that result in termination of employment, including upon a “fundamental change.” Each employment agreement also includes a covenant by the employee not to compete with us during the term of his employment and for a period of one year thereafter. For a description of the severance provisions contained in the employment agreements, please refer to “Termination of Employment and Change in Control Arrangements” beginning on page 43 of this proxy statement.
2015 Outstanding Equity Awards at Fiscal Year-End
The following table sets forth certain information with respect to the named executive officers’ outstanding stock options and restricted stock awards as of December 31, 2015.
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | 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 (#)(1) | 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 ($)(1) | |||||||||||||||||||||||||||
Lawrence A. Cohen | — | — | — | — | — | 50,000 | (2) | $ | 1,043,000 | — | — | |||||||||||||||||||||||||
— | — | — | — | — | 33,500 | (3) | $ | 698,810 | — | — | ||||||||||||||||||||||||||
— | — | — | — | — | 17,000 | (4) | $ | 354,620 | — | — | ||||||||||||||||||||||||||
— | — | — | — | — | — | — | 50,000 | (5) | $ | 1,043,000 | ||||||||||||||||||||||||||
— | — | — | — | — | — | — | 33,500 | (6) | $ | 698,810 | ||||||||||||||||||||||||||
— | — | — | — | — | — | — | 17,000 | (7) | $ | 354,620 | ||||||||||||||||||||||||||
Keith N. Johannessen | — | — | — | — | — | 40,000 | (2) | $ | 834,400 | — | — | |||||||||||||||||||||||||
— | — | — | — | — | 26,800 | (3) | $ | 559,048 | — | — | ||||||||||||||||||||||||||
— | — | — | — | — | 13,600 | (4) | $ | 283,696 | — | — | ||||||||||||||||||||||||||
— | — | — | — | — | — | — | 40,000 | (5) | $ | 834,400 | ||||||||||||||||||||||||||
— | — | — | — | — | — | — | 26,800 | (6) | $ | 559,048 | ||||||||||||||||||||||||||
— | — | — | — | — | — | — | 13,600 | (7) | $ | 283,696 | ||||||||||||||||||||||||||
Carey P. Hendrickson | — | — | — | — | — | 25,000 | (2) | $ | 521,500 | — | — | |||||||||||||||||||||||||
— | — | — | — | — | 11,167 | (3) | $ | 232,944 | — | — | ||||||||||||||||||||||||||
— | — | — | — | — | — | — | 25,000 | (5) | $ | 521,500 | ||||||||||||||||||||||||||
— | — | — | — | — | — | — | 11,167 | (6) | $ | 232,944 | ||||||||||||||||||||||||||
David R. Brickman | — | — | — | — | — | 15,000 | (2) | $ | 312,900 | — | — | |||||||||||||||||||||||||
— | — | — | — | — | 10,050 | (3) | $ | 209,643 | — | — | ||||||||||||||||||||||||||
5,100 | (4) | $ | 106,386 | — | — | |||||||||||||||||||||||||||||||
— | — | — | — | — | — | — | 15,000 | (5) | $ | 312,900 | ||||||||||||||||||||||||||
— | — | — | — | — | — | — | 10,050 | (6) | $ | 209,643 | ||||||||||||||||||||||||||
— | — | — | — | — | — | — | 5,100 | (7) | $ | 106,386 | ||||||||||||||||||||||||||
Joseph G. Solari | — | — | — | — | — | 5,000 | (2) | $ | 104,300 | — | — | |||||||||||||||||||||||||
— | — | — | — | — | 3,350 | (3) | $ | 69,881 | — | — | ||||||||||||||||||||||||||
— | — | — | — | — | 1,700 | (4) | $ | 35,462 | — | — |
2015 Option Exercises and Stock Vested
The following table presents the amounts each named executive officer received in 2015 upon the exercise of options and the value realized upon the vesting of restricted stock awards. The value realized on the exercise of options and vesting of restricted stock does not account for the personal tax liability incurred by our named executive officers.
Option Awards | Stock Awards | |||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | ||||||||||||
Lawrence A. Cohen | — | — | 102,937 | $ | 2,588,404 | |||||||||||
Keith N. Johannessen | — | — | 84,619 | $ | 2,126,134 | |||||||||||
Carey P. Hendrickson | — | — | 11,029 | $ | 279,695 | |||||||||||
David R. Brickman | — | — | 31,675 | $ | 795,584 | |||||||||||
Joseph G. Solari | — | — | 3,300 | $ | 83,655 |
Termination of Employment and Change in Control Arrangements
Employment Agreements
As previously discussed, we have entered into an employment agreement with each of our named executive officers, which, among other things, provides for severance benefits to be paid upon an involuntary termination of the named executive officer’s employment or the occurrence of certain other events that may affect the named executive officer, with the amounts of such benefits varying based upon such individual’s position with us. Each employment agreement contains a non-competition provision. In addition, pursuant to such employment agreements, each named executive officer has agreed that he will not, either during the term of his employment with us or at any time thereafter, divulge, communicate, use to our detriment or for the benefit of another, or make or remove any copies of, our confidential information or proprietary data or information. Such confidentiality obligations do not apply to information which is or becomes generally available to the public other than as a result of disclosure by the named executive officer, is known to him prior to his employment with us from other sources, or is required to be disclosed by law or regulatory or judicial process.
Lawrence A. Cohen
Termination Not in Conjunction with a Fundamental Change. If we terminate Mr. Cohen’s employment because of death or disability or for any reason other than for “cause,” or if Mr. Cohen voluntarily resigns for “good reason,” then Mr. Cohen will be entitled to:
receive his base salary plus his annual bonus paid at the rate during the previous 12 months for the balance of the term of his employment agreement, but not less than two years from the date of the notice of termination;
retain all of his stock options that have vested; and
receive payment of all accrued but unpaid or unused vacation, sick pay and expense reimbursement.
A resignation by Mr. Cohen will be deemed to be a resignation for “good reason” if the resignation is based on (i) a material diminution in Mr. Cohen’s duties, which is not part of an overall diminution for all of our executive officers, or (ii) our material breach of our obligations to Mr. Cohen under his employment agreement or under our stock incentive plan.
A termination of Mr. Cohen’s employment by us will be deemed to be “for cause” if it is based upon (i) a final, nonappealable conviction of Mr. Cohen for commission of a felony involving moral turpitude, (ii) Mr. Cohen’s willful gross misconduct that causes us material economic harm or that brings substantial discredit to our reputation, or (iii) Mr. Cohen’s material failure or refusal to perform his duties in accordance with his employment agreement, if Mr. Cohen has failed to cure such failure or refusal to perform within 30 days after we notify him in writing of such failure or refusal to perform.
If the employment of Mr. Cohen is terminated for any other reason, then we are to promptly pay Mr. Cohen his base salary and pro-rated annual bonus up to and through the date of termination as well as all accrued but unpaid or unused vacation, sick pay and expense reimbursement.
Termination in Conjunction with a Fundamental Change. If the Mr. Cohen’s employment is terminated in conjunction with a “fundamental change” of us, Mr. Cohen will be entitled to receive the same severance payments and benefits described above (not in conjunction with a “fundamental change”), except that Mr. Cohen will be entitled to receive his base salary plus his annual bonus at the rate paid during the previous 12 months for three years from the date of the notice of termination.
Pursuant to his employment agreement, the term “fundamental change” generally means:
a merger, consolidation, statutory share exchange or sale, lease, exchange or other transfer of all or substantially all of our assets requiring the consent or vote of our stockholders, other than one in which our stockholders have the same proportionate ownership of the surviving corporation immediately after such transaction;
the approval by our stockholders of any plan or proposal for our liquidation or dissolution;
the cessation of control (by virtue of their not constituting a majority of directors) of the Board of Directors by the individuals who (i) at the date of the employment agreement were directors, or (ii) became directors after such date and whose election or nomination was approved by at least two-thirds of the directors then in office who were directors at such date, or whose election or nomination for election was previously so approved; or
the acquisition of 20% or more of the voting power of our common stock by any person or group who owned less than 15% of the voting power on the date of the employment agreement, or the acquisition of an additional five percent of the voting power by any person or group who owned at least 15% of such voting power on the date of such employment agreement.
Non-Competition. Pursuant to his employment agreement, Mr. Cohen has agreed that during the term of his employment with us and for one year thereafter, he will not, directly or indirectly, acquire, develop or operate senior living facilities anywhere in the United States, other than through us and except as otherwise requested by us. Notwithstanding the foregoing, Mr. Cohen’s ownership by of a class of securities listed on a stock exchange or traded on the over-the-counter market that represents five percent or less of the number of shares of such class of securities then issued and outstanding is permitted.
Keith N. Johannessen
Termination Not in Conjunction with a Fundamental Change. If we terminate Mr. Johannessen’s employment because of death or disability or for any reason other than for “cause,” or if Mr. Johannessen voluntarily resigns for “good reason,” then Mr. Johannessen will be entitled to:
receive his base salary plus his annual bonus paid at the rate during the previous 12 months for the balance of the term of his employment agreement, but not less than two years from the date of the notice of termination;
retain all of his stock options that have vested; and
payment of all accrued but unpaid or unused vacation, sick pay and expense reimbursement.
A resignation by Mr. Johannessen will not be deemed to be voluntary and will be deemed to be a resignation for “good reason” if it is based upon (i) a material diminution in Mr. Johannessen’s base salary which is not part of an overall diminution for all of our executive officers, or (ii) our material breach of our obligations to Mr. Johannessen under his employment agreement or under our stock incentive plan.
A termination of Mr. Johannessen’s employment by us will be deemed to be “for cause” if it is based upon (i) Mr. Johannessen being charged with and then convicted of any misdemeanor or any felony involving personal dishonesty, (ii) disloyalty by Mr. Johannessen to us, including but not limited to embezzlement, or (iii) Mr. Johannessen’s failure or refusal to perform their duties in accordance with their respective employment agreements based on a standard of reasonableness.
If Mr. Johannessen’s employment is terminated for any other reason, then we are to promptly pay Mr. Johannessen his base salary and annual bonus paid in the past 12 months up to and through the date of termination as well as all accrued but unpaid or unused vacation, sick pay and expense reimbursement.
Termination in Conjunction with a Fundamental Change. If Mr. Johannessen’s employment is terminated in conjunction with a “fundamental change” of us, Mr. Johannessen will be entitled to receive the same severance payments and benefits described above (not in conjunction with a “fundamental change”), except that Mr. Johannessen will be entitled to receive his base salary plus his annual bonus at the rate paid during the previous 12 months for three years from the date of the notice of termination. Under Mr. Johannessen’s employment agreement, the term “fundamental change” means a merger, consolidation or any sale of all or substantially all of our assets that requires the consent or vote of our stockholders where we are not the survivor or in control.
Non-Competition. Pursuant to Mr. Johannessen’s employment agreement, Mr. Johannessen agreed that for one year after termination of his employment and receipt of the last payment pursuant to his employment agreement, Mr. Johannessen will not, directly or indirectly, commence doing business, in any manner whatsoever, which is in competition with all or any portion of our business in any state in which we then operate, own, asset manage, or are in the process of developing more than two facilities. Notwithstanding the foregoing, Mr. Johannessen’s ownership of a class of securities listed on a stock exchange or traded on the over-the-counter market that represents five percent or less of the number of shares of such class of securities then issued and outstanding is permitted. In addition, pursuant to his employment agreement, if Mr. Johannessen’s employment with us is terminated “for cause” or he voluntarily resigns, he will not be deemed to violate the foregoing restrictions if he accepts and works within the one year period at a position as an on-site administrator or on-site executive director at a nursing or retirement facility for a salary equal to or less than a comparable position at a comparable facility in the area.
Carey P. Hendrickson
Termination Not in Conjunction with a Fundamental Change. If we terminate the employment of Mr. Hendrickson because of death or disability or for any reason other than for “cause,” or if Mr. Hendrickson voluntarily resigns for “good reason,” then Mr. Hendrickson will be entitled to:
receive his base salary for the balance of the term of the agreement and any earned bonus up to and through the date of termination;
retain all stock awards that have vested; and
payment of all accrued but unpaid or unused vacation, sick pay and expense reimbursement.
A resignation by Mr. Hendrickson will not be deemed to be voluntary and will be deemed to be a resignation for “good reason” if it is based upon (i) a material diminution in Mr. Hendrickson’s duties or base salary, which is not part of an overall diminution for all of our executive officers, or (ii) our material breach of our obligations to Mr. Hendrickson under his employment agreement.
A termination of Mr. Hendrickson’s employment by us will be deemed to be “for cause” if it is based upon (i) Mr. Hendrickson being charged with and then convicted of any misdemeanor or any felony involving personal dishonesty, (ii) disloyalty by Mr. Hendrickson to us, including, but not limited to, embezzlement, or (iii) Mr. Hendrickson’s failure or refusal to perform his duties in accordance with his employment agreement.
If Mr. Hendrickson’s employment is terminated for any other reason, then we are to pay Mr. Hendrickson his base salary and earned bonus up to and through the date of termination as well as all accrued but unpaid or unused vacation, sick pay and expense reimbursement.
Termination in Conjunction with a Fundamental Change. If Mr. Hendrickson’s employment is terminated in conjunction with a “fundamental change” of us, Mr. Hendrickson will be entitled to receive the same severance payments and benefits described above (not in conjunction with a “fundamental change”), except that Mr. Hendrickson will be entitled to receive his base salary plus his annual bonus paid during the term of his
employment agreement in the past 12 months for two years. Under Mr. Hendrickson’s employment agreement, the term “fundamental change” means a merger, consolidation or any sale of all or substantially all of our assets that requires the consent or vote of our stockholders where we are not the survivor or in control.
Non-Competition. Pursuant to his employment agreement, Mr. Hendrickson agreed that for a period of one year after any termination of his employment and after receipt of the last payment pursuant to his employment agreement, he will not, directly or indirectly, commence doing business which is in competition with all or any portion of our business in any state in which we then operate, own, or are in the process of developing more than three facilities. Mr. Hendrickson’s ownership of a class of securities listed on a stock exchange or traded on the over-the-counter market that represents five percent or less of the number of shares of such class of securities then issued and outstanding will not constitute a violation of these restrictions.
David R. Brickman
If we terminate Mr. Brickman’s employment because of death or disability or for any reason other than for “cause,” including a “fundamental change,” or if Mr. Brickman voluntarily resigns for “good reason,” then Mr. Brickman will be entitled to:
receive his base salary and annual bonus paid during the past 12 month period for two years from the date of the notice of termination;
retain all of his stock options that have vested; and
payment of all accrued but unpaid or unused vacation, sick pay and expense reimbursement.
A resignation by Mr. Brickman will not be deemed to be voluntary and will be deemed to be a resignation for “good reason” if it is based upon (i) a material diminution in Mr. Brickman’s base salary, which is not part of an overall diminution for all of our executive officers, or (ii) our material breach of our obligations to Mr. Brickman under his employment agreement or under our stock incentive plan.
A termination of Mr. Brickman’s employment by us will be deemed to be “for cause” if it is based upon (i) Mr. Brickman being charged with and then convicted of any misdemeanor or any felony involving personal dishonesty, (ii) disloyalty by Mr. Brickman to us, including, but not limited to, embezzlement, or (iii) Mr. Brickman’s failure or refusal to perform his duties in accordance with his employment agreement based on a standard of reasonableness.
If Mr. Brickman’s employment is terminated for any other reason, then we are to pay Mr. Brickman his base salary up to and through the date of termination as well as all accrued but unpaid or unused vacation, sick pay and expense reimbursement. Pursuant to Mr. Brickman’s employment agreement, the term “fundamental change” means a merger, consolidation or any sale of all or substantially all of our assets that requires the consent or vote of our stockholders where we are not the survivor or in control.
Non-Competition. Pursuant to his employment agreement, Mr. Brickman agreed that for one year after termination of his employment and receipt of the last payment pursuant to his employment agreement, he will not, directly or indirectly, commence doing business which is in competition with all or any portion of our business in any state in which we then operate, own, asset manage, or are in the process of developing more than two facilities. Mr. Brickman’s ownership of a class of securities listed on a stock exchange or traded on the over-the-counter market that represents five percent or less of the number of shares of such class of securities then issued and outstanding will not constitute a violation of these restrictions.
Joseph G. Solari
If we terminate the employment of Mr. Solari because of death or disability or for any reason other than for “cause,” or if Mr. Solari voluntarily resigns for “good reason,” then Mr. Solari will be entitled to:
receive his base salary for two years from the date of termination plus any earned bonus up to and through the date of termination;
retain all stock awards that have vested; and
payment of all accrued but unpaid or unused vacation, sick pay and expense reimbursement.
A resignation by Mr. Solari will not be deemed to be voluntary and will be deemed to be a resignation for “good reason” if it is based upon (i) a material diminution in Mr. Solari’s duties or base salary, which is not part of an overall diminution for all of our executive officers, or (ii) our material breach of our obligations to Mr. Solari under his employment agreement.
A termination of Mr. Solari’s employment by us will be deemed to be “for cause” if it is based upon (i) Mr. Solari being charged with and then convicted of any misdemeanor or any felony involving personal dishonesty, (ii) disloyalty by Mr. Solari to us, including, but not limited to, embezzlement, or (iii) Mr. Solari’s failure or refusal to perform his duties in accordance with his employment agreement.
If the employment of Mr. Solari is terminated for any other reason, then we are to pay Mr. Solari his base salary and earned bonus up to and through the date of termination as well as all accrued but unpaid or unused vacation, sick pay and expense reimbursement.
Non-Competition. Pursuant to his employment agreement, Mr. Solari agreed that for a period of one year after any termination of his employment and after receipt of the last payment pursuant to his employment agreement, he will not, directly or indirectly, commence doing business which is in competition with all or any portion of our business in any state in which we then operate, own, or are in the process of developing more than three facilities. Mr. Solari’s ownership of a class of securities listed on a stock exchange or traded on the over-the-counter market that represents five percent or less of the number of shares of such class of securities then issued and outstanding will not constitute a violation of these restrictions.
The 2007 Stock Incentive Plan
Pursuant to the 2007 Stock Incentive Plan, in the event of a “change in control” transaction, unless otherwise expressly provided under the terms of an award or by the Compensation Committee prior to such transaction:
all outstanding awards (except performance awards which will be governed by their express terms) will become fully exercisable, nonforfeitable, or the restricted period will terminate, as the case may be; and
the Compensation Committee will have the right to cash out some or all outstanding non-qualified stock options, stock appreciation rights and shares of restricted stock on the basis of the highest price per share paid in any transaction reported on the NYSE or paid or offered in any bona fide transaction related to a “change in control” during the immediately preceding 60-day period, in each case as determined by the Compensation Committee (except that the cash out for stock appreciation rights related to incentive stock options will be based on transaction reported for the date on which the holder exercises the stock appreciation rights or, if applicable, the date on which the cash out occurs).
For purposes of the 2007 Stock Incentive Plan, a “change in control” generally means the first to occur of:
the consummation of a merger, consolidation, statutory share exchange or sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of our assets that
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our stockholders approve any plan or proposal for our liquidation or dissolution;
the cessation of control (by virtue of their not constituting a majority of our directors) of our by the individuals who (i) on the effective date of such transaction were our directors or (ii) subsequently become our directors and whose election or nomination by our stockholders was approved by at least two-thirds of our directors then in office who were our directors at the effective date of such transaction or whose election or nomination was previously so approved;
the acquisition of beneficial ownership of 20% or more of the voting power of our outstanding voting securities by any person or group who beneficially owned less than 15% of such voting power on the effective date of such transaction, or the acquisition of beneficial ownership of an additional five percent of such voting power by any person or group who beneficially owned at least 15% of such voting power on the effective date of the transaction; provided, however, there is no “change in control” for acquisitions where the acquiror is (i) a trustee or other fiduciary holding securities under our employee benefit plan, (i) our wholly-owned subsidiary or a corporation owned, directly or indirectly, by our stockholders in the same proportions as their ownership of our voting securities; or
in a Title 11 bankruptcy proceeding, the appointment of a trustee or the conversion of a case involving us to a case under Chapter 7.
Restricted Stock Award Agreements and Performance Award Agreements
When our named executive officers are awarded shares of restricted stock under the 2007 Stock Incentive Plan with time-based vesting provisions, each of them enters into a restricted stock award agreement with us. These restricted stock award agreements generally provide that, if the holder’s employment with us is terminated for any reason before the vesting date for the restricted shares, the restricted shares that have not previously vested will, automatically and without notice, terminate and be permanently forfeited as of such date, except that all unvested shares will vest in connection with the holder’s death or disability or in the event of a change in control.
In addition, when our eligible named executive officers are awarded shares of performance-based restricted stock under the 2007 Stock Incentive Plan, each of them enters into a performance award agreement with us. These performance award agreements generally provide that (1) if the holder’s employment with us is terminated for any reason before the vesting date for the performance shares, the performance shares that have not previously vested will, automatically and without notice, terminate and be permanently forfeited as of such date, and (2) the holder’s right to receive the specified percentage of performance shares that do not vest as a result of our failure to achieve the applicable performance measures will be automatically terminated and permanently forfeited; provided, that any performance shares that have not been forfeited pursuant to clause (2) above, will vest in connection with the holder’s death or disability or in the event of a change in control.
Potential Realizable Value of Equity Awards Upon a Change in Control Without Termination
Under the 2007 Stock Incentive Plan, in the event of a “change in control” the vesting of outstanding awards may be accelerated regardless of whether the employment of the holder of such an award is terminated in connection therewith. The following table provides quantitative disclosure of the potential realizable value of outstanding awards granted to our named executive officers pursuant to the 2007 Stock Incentive Plan, assuming that:
an event which constituted a “change in control” under the 2007 Stock Incentive, as described above, was consummated on December 31, 2015, the last business day of our fiscal 2015, and the Compensation Committee has not determined that it is effective as of any other date;
the Compensation Committee has not expressly provided that the acceleration and cash-out provisions of the 2007 Stock Incentive Plan, each as described above, are not applicable to such “change in control” prior to its consummation; and
the portion of any award that is accelerated and cashed-out pursuant to the 2007 Stock Incentive Plan is not limited by Section 280G of the Code.
Potential Realizable Value(1) | ||||
Lawrence A. Cohen | $ | 4,192,860 | ||
Keith N. Johannessen | $ | 3,354,288 | ||
Carey P. Hendrickson | $ | 1,508,887 | ||
David R. Brickman | $ | 1,257,858 | ||
Joseph G. Solari | $ | 209,643 |
Payments Upon Termination Without a Fundamental Change or Change in Control.
The following table provides quantitative disclosure of the estimated payments and benefits that would be provided to our named executive officers assuming that:
each named executive officer’s employment with us was terminated on December 31, 2015, the last business day of our fiscal 2015;
the base salary and annual bonus earned by each named executive officer for his services to us for the period from January 1, 2015 through December 31, 2015 has been fully paid to such named executive officer; and
such termination was not in connection with an event that constituted a “change in control” under the 2007 Stock Incentive Plan or a “fundamental change” under any named executive officer’s employment agreement.
Total Termination Benefits ($) | ||||
Lawrence A. Cohen | ||||
• Termination by us because of Mr. Cohen’s disability or death or for any reason other than for “cause,” or termination by Mr. Cohen for “good reason”(1) | $ | 2,970,826 | ||
• Termination for “cause” | $ | 0 | ||
Keith N. Johannessen | ||||
• Termination by us because of Mr. Johannessen’s disability or death or for any reason other than for “cause,” or termination by Mr. Johannessen for “good reason”(2) | $ | 1,480,646 | ||
• Termination for “cause” | $ | 0 | ||
Carey P. Hendrickson | ||||
• Termination by us because of Mr. Hendrickson’s disability or death or for any reason other than for “cause,” or termination by Mr. Hendrickson for “good reason”(3) | $ | 791,209 | ||
• Termination for “cause”(4) | $ | 2,291 | ||
David R. Brickman | ||||
• Termination by us because of Mr. Brickman’s disability or death or for any reason other than for “cause,” or termination by Mr. Brickman for “good reason”(5) | $ | 925,749 | ||
• Termination for “cause”(6) | $ | 45,389 | ||
Joseph G. Solari | ||||
• Termination by us because of Mr. Solari’s disability or death or for any reason other than for “cause,” or termination by Mr. Solari for “good reason”(7) | $ | 558,066 | ||
• Termination for “cause”(8) | $ | 16,834 |
Payments Upon Termination in Connection with a Fundamental Change and Change in Control.
The following table provides quantitative disclosure of the estimated payments and benefits that would be provided to our named executive officers assuming that:
each named executive officer’s employment with us was terminated on December 31, 2015, the last business day of our fiscal 2015;
the base salary and annual bonus earned by each named executive officer for his services to us for the period from January 1, 2015 through December 31, 2015 has been fully paid to such named executive officer;
such termination was in connection with an event that constituted a “change in control” under the 2007 Stock Incentive Plan and a “fundamental change” under each named executive officer’s employment agreement, which was consummated on December 31, 2015, the last business day of our fiscal 2015, and the Compensation Committee has not determined that it is effective as of any other date;
the Compensation Committee has not expressly provided that the acceleration and cash-out provisions of the 2007 Stock Incentive Plan, as described above, are not applicable to such event prior to its consummation; and
the portion of any award that is accelerated and cashed-out pursuant to the 2007 Stock Incentive Plan is not limited by Section 280G of the Code.
Cash Severance Payment ($) | Acceleration and Cash-Out of Equity Awards ($)(1) | Total Termination Benefits ($) | ||||||||||
Lawrence A. Cohen | $ | 4,456,239 | (2) | $ | 4,192,860 | $ | 8,649,099 | |||||
Keith N. Johannessen | $ | 2,220,969 | (3) | $ | 3,354,288 | $ | 5,575,257 | |||||
Carey P. Hendrickson | $ | 1,298,291 | (4) | $ | 1,508,887 | $ | 2,807,178 | |||||
David R. Brickman | $ | 925,749 | (5) | $ | 1,257,858 | $ | 2,183,607 | |||||
Joseph G. Solari | $ | 558,066 | (6) | $ | 209,643 | $ | 767,709 |
The following table summarizes the compensation earned by our non-employee directors in 2015. Messrs. Cohen and Johannessen did not receive any compensation for their services as directors during 2015. Please refer to the Summary Compensation Table above for the compensation received by Messrs. Cohen and Johannessen for their services as executive officers during 2015.
Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | Option Awards ($) | All Other Compensation ($) | Total ($) | |||||||||||||||
Philip A. Brooks | $ | 64,500 | $ | 75,003 | — | — | $ | 139,503 | ||||||||||||
Kimberly S. Lody | $ | 54,000 | $ | 75,003 | — | — | $ | 129,003 | ||||||||||||
E. Rodney Hornbake | $ | 54,000 | $ | 75,003 | — | — | $ | 129,003 | ||||||||||||
Jill M. Krueger | $ | 58,500 | $ | 75,003 | — | — | $ | 133,503 | ||||||||||||
Ronald A. Malone | $ | 76,000 | $ | 75,003 | — | — | $ | 151,003 | ||||||||||||
James A. Moore | $ | 115,000 | $ | 75,003 | — | — | $ | 190,003 | ||||||||||||
Michael W. Reid | $ | 85,500 | $ | 75,003 | — | — | $ | 160,503 |
During 2015, we did not maintain any pension or deferred compensation arrangements for our directors.
Compensation of Directors During 2015
Pursuant to its charter, the Compensation Committee periodically reviews the compensation levels and practices for our non-employee directors. As part of its review for 2015, the Compensation Committee engaged Axiom Talent and Rewards as its independent compensation consultant to provide competitive market data and advice regarding our director compensation program. The Compensation Consultant conducted a competitive market study of our director compensation program by evaluating the director compensation programs of both our self-selected peer group companies and a broader group of industry peer companies selected by the Compensation Consultant. See “Compensation Discussion and Analysis — Compensation Consultant” above for a listing of the companies evaluated and the reasons the companies were selected. Based on the results of its competitive market analysis, the Compensation Consultant recommended, and the Compensation Committee and Board approved, (i) increasing the annual cash retainer for each of our non-employee directors from $30,000 to $50,000 and (ii) eliminating the Board meeting fee of $1,500 per meeting, except directors would receive a fee of $1,000 for any Board meeting they attend in excess of ten Board meetings per year. These changes to director compensation program became effective immediately after the 2015 Annual Meeting of Stockholders.
The key elements of the compensation payable to our non-employee directors are as follows:
Cash Compensation
For their services to us from the 2014 Annual Meeting of Stockholders until the 2015 Annual Meeting of Stockholders, our non-employee directors each received an annual retainer of $30,000 and a fee of $1,500 for each Board meeting they attended (in addition to the committee retainers and meeting fees discussed below). As discussed above, effective immediately after the 2015 Annual Meeting of Stockholders, the annual retainer was
increased to $50,000 and the Board meeting fee of $1,500 per meeting was eliminated. In addition, the independent Chairman of our Board (Mr. Moore), the Chairman of the Audit Committee (Mr. Reid), the Chairman of the Nominating and Corporate Governance Committee (Mr. Malone), and the Chairman of the Compensation Committee (Mr. Moore), each received at additional annual retainer of $45,000, $15,000, $10,000 and $10,000, respectively, for serving as the Chairpersons of such committees in 2015. The board and committee annual retainers are paid on a quarterly basis at the end of each quarter. During 2015, our non-employee directors also each received $1,500 for each committee meeting they attended and were reimbursed for their expenses in attending Board and committee meetings. Messrs. Cohen and Johannessen did not receive any compensation for serving as directors during 2015.
Equity Compensation
On May 21, 2015, the Compensation Committee granted each of our non-employee directors 2,939 shares of restricted stock pursuant to the 2007 Stock Incentive Plan, which vest in full on May 21, 2016; provided,however, that, in lieu of receiving such award, Ms. Lody, Ms. Krueger, Mr. Malone and Mr. Moore each elected to receive 2,939 restricted stock units, with each unit representing the right to receive one share of the Company’s common stock, which also vest in full on May 21, 2016. Messrs. Cohen and Johannessen were not granted any restricted shares for serving as members of the Board during 2015.
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee is or has been one of our officers or employees or has or had any relationship requiring disclosure pursuant to SEC rules. In addition, during 2015, none of our executive officers served as:
a member of the compensation committee (or other board committee performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served on the Compensation Committee;
a director of another entity, one of whose executive officers served on the Compensation Committee; or
a member of the compensation committee (or other board committee performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served as one of our directors.
Report of the Audit Committee
The Audit Committee oversees the Company’s financial reporting process on behalf of the Board of Directors. Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal controls. In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed the audited financial statements in the Annual Report on Form 10-K with management, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements.
The Audit Committee reviewed with the independent auditors, who are responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles, their judgments as to the quality, not just the acceptability, of the Company’s accounting principles and such other matters as are required to be discussed with the Audit Committee under generally accepted auditing standards. The Audit Committee also discussed with the independent auditors matters required to be discussed by the statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol.1.AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T. The Company’s independent auditors also provided to the Audit Committee the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent
accountant’s communications with the Audit Committee concerning independence, and the Audit Committee discussed with the independent auditors their independence and the compatibility of non-audit services with such independence.
The Audit Committee discussed with the independent auditors the overall scope and plans for their respective audits. The Audit Committee meets with the independent auditors, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors (and the Board of Directors has approved) that the audited financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 2015 for filing with the SEC. The Audit Committee has also appointed, subject to stockholder ratification, Ernst & Young LLP as the Company’s independent auditors for the fiscal year ending December 31, 2016.
Audit Committee
MICHAELJILL M. KRUEGER, CHAIRPERSON
BENJAMIN P. HARRIS
DAVID W. REID, CHAIRMANJOHNSON
PHILIP A. BROOKS
JILL M. KRUEGER33
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Conversant Equity Commitment
On June 29, 2023, we entered into a $13.5 million equity commitment agreement (“Equity Commitment”) with our largest shareholder, Conversant, for a term of 18 months. The Equity Commitment had a commitment fee of $675,000, which was paid through the issuance of 67,500 shares of common stock of the Company. Subject to certain conditions, the Company has the right, but not the obligation, to utilize Conversant’s equity commitment and may draw on the commitment in whole or in part. We made total equity draws of $10.0 million during 2023 and issued 1,000,000 shares of common stock to Conversant. As of December 31, 2023, $3.5 million remains available under the Equity Commitment. The Equity Commitment was approved by our Audit Committee in accordance with the Company’s related person transactions policy.
2024 Private Placement Transaction
On February 1, 2024, we entered into a securities purchase agreement with certain of our largest stockholders, including the Conversant Investors (the “Investors”), pursuant to which the Investors agreed to purchase from us, and we agreed to sell to the Investors, in a private placement transaction (the “2024 Private Placement”) pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), an aggregate of 5,026,318 shares (the “Shares”) of our common stock at a price of $9.50 per share. The 2024 Private Placement occurred in two tranches. The closing of the first tranche occurred on February 1, 2024, in which 3,350,878 Shares were issued and sold to the Investors for a total of approximately $31.8 million. The closing of the second tranche occurred on March 22, 2024, in which 1,675,440 Shares were issued and sold to the Investors for a total of approximately $15.9 million. The 2024 Private Placement was approved by our Audit Committee in accordance with the Company’s related person transactions policy.
Policy of the Board of Directors
The Board has adopted a statement of policy with respect to transactions involving us and “related persons” (generally our senior officers, directors, nominees for director, persons owning five percent or more of our outstanding common stock, immediate family members of any of the foregoing, or any entity which is owned or controlled by any of the foregoing persons or an entity in which any of the foregoing persons has a substantial ownership interest or control). The policy generally covers any related person transaction involving amounts greater than $25,000 in which a related person has a direct or indirect material interest.
Under the policy, each related person transaction must be entered into on terms that are comparable to those that could be obtained as a result of arm’s length dealings with an unrelated third party and must be approved by the Audit Committee. Pursuant to the policy, at the first regularly scheduled meeting of the Audit Committee each calendar year, members of our management will recommend related person transactions to be entered into by us for that year, including the proposed aggregate value of any such transaction. After review, the Audit Committee will approve or disapprove each such related person transaction. No member of the Audit Committee will participate in any discussion or approval of a related person transaction for which he or she is a related person, except that such member will provide all material information concerning the related person transaction. At each subsequently scheduled meeting of the Audit Committee, members of our management will update the Audit Committee as to any material change with respect to each approved related person transaction.
In the event that our management recommends any further related person transactions subsequent to the first meeting of the Audit Committee in a particular calendar year, such transactions may be presented to the Audit Committee for approval or disapproval, or preliminarily entered into by members of our management subject to ratification by the Audit Committee. However, if the Audit Committee ultimately declines to ratify any such related person transaction, our management will make all reasonable efforts to cancel or annul the transaction.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on a review of reports filed by our directors, executive officers and beneficial holders of 10% or more of shares of our common stock, and upon representations from those persons, we believe that all SEC stock ownership reports required to be filed by those reporting persons during 2015 were timely made.34
PROPOSAL TO RATIFY APPOINTMENT OF INDEPENDENT AUDITORS
(PROPOSAL 2)
The Audit Committee has appointed Ernst & YoungRSM US LLP (“RSM”), independent auditors, to be our principal independent auditors and to audit our consolidated financial statements for the fiscal year ending December 31, 2016. Ernst & Young LLP has2024. RSM served as our independent registered public accounting firm since October 3, 2006.for the fiscal year ended December 31, 2023.
Representatives of the firm of Ernst & Young LLPRSM are expected to be present at the Annual Meeting and will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.
The Audit Committee has the responsibility for the selection of our independent auditors. Although stockholder ratification is not required for the selection of Ernst & Young LLP,RSM, and although such ratification will not obligate us to continue the services of such firm, the Board is submitting the selection for ratification with a view towards soliciting our stockholders’ opinion thereon, which may be taken into consideration in future deliberations. If the appointment is not ratified, the Audit Committee must then determine whether to appoint other auditors before the end of the current fiscal year and, in such case, our stockholders’ opinions would be taken into consideration.
The Board of Directors unanimously recommends a vote “FOR” the ratification of Ernst & YoungRSM US LLP as our independent auditors for the fiscal year ending December 31, 2016.2024.
FEES PAID TO INDEPENDENT AUDITORS
The aggregate fees billed by Ernst & Young LLPthe Company’s independent registered public accounting firm for fiscal years 20152023 and 20142022 were as follows:
Fees | ||||||||
Services Rendered | 2015 | 2014 | ||||||
Audit fees(1) | $ | 978,000 | $ | 999,500 | ||||
Audit-Related fees(2) | 31,000 | 20,000 | ||||||
Tax fees(3) | — | — | ||||||
All other fees | — | — | ||||||
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Total | $ | 1,009,000 | $ | 1,019,500 | ||||
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Services Rendered | 2023 | 2022 | ||||||
Audit Fees(1) | $ | 837,000 | $ | 743,250 | ||||
Audit-Related Fees(2) | — | — | ||||||
Tax Fees(3) | — | — | ||||||
All Other Fees | — | — | ||||||
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Total | $ | 837,000 | $ | 743,250 | ||||
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(1) | Includes professional services for the audit of our annual financial statements, reviews of the financial statements included in our Form 10-Q filings, and services that are normally provided in connection with statutory and regulatory filings or |
(2) | Includes fees associated with assurance and related services that are reasonably related to the performance of the audit or review of our financial statements. |
(3) | Includes fees associated with tax compliance, tax advice and tax planning. |
The Audit Committee has considered whether the provision of the above services other than audit services is compatible with maintaining Ernst & Young LLP’sthe independence of the Company’s independent registered public accounting firm and has concluded that it is.
Audit Committee Pre-Approval of Services Performed by Independent Auditors
The Audit Committee has the sole authority to appoint or replace the independent auditor and is directly responsible for the compensation and oversight of the work of the independent auditor. The Audit Committee is responsible for the engagement of the independent auditor to provide permissible non-audit services, which require pre-approval by the Audit Committee (other than with respect tode minimis exceptions described in the rules of the NYSE or the SEC that are approved by the Audit Committee). The Audit Committee ensures that approval of non-audit services by the independent auditor are disclosed to investors in periodic reports filed with the SEC.
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ADVISORY VOTE ON EXECUTIVE COMPENSATION
(PROPOSAL 3)
At our 2011 Annual Meeting of Stockholders, pursuant to Section 14A of the Exchange Act we submitted a non-binding proposal to our stockholders as to the frequency on which we should hold advisory votes on the compensation paid to our named executive officers (an “Advisory Vote on Compensation”). At the meeting, our stockholders supported an annual Advisory Vote on Compensation, and our Board determined to submit such vote to our stockholders every year at our annual meeting. As a result, we will submitWe are submitting an Advisory Vote on Compensation to our stockholders at each annual meeting until westockholders. For more information about our executive compensation objectives and practices, please see “Compensation of Executive Officers” above.
We seek to maintain high standards with respect to the governance of executive compensation. Key features of our executive compensation policies and practices that aim to drive performance and align with stockholder interests are required to submit to our stockholders another proposal on the frequency of such vote within the next two years.highlighted below:
As described
Our Compensation Practices (What we do) | Our Prohibited Compensation Practices (What we don’t do) | |||
✓ Align Pay with Performance: A significant portion of officer compensation is at risk and earned through short- and long-term incentives to align pay outcomes with company performance objectives and shareholder value creation. ✓ Double Trigger Vesting: We provide for double-trigger cash severance and equity vesting for termination of employment following a change-of-control. ✓ Stock Ownership Guidelines: We have Stock Ownership Guidelines for both executives and directors. ✓ Clawback Policies: Our named executive officers are subject to a robust recoupment policy that applies to cash and equity-based incentive compensation in ✓ Annual Review: We conduct an annual review of our executive compensation program to ensure it rewards executives for strong performance, aligns with stockholder interests, retains top talent, and discourages unnecessary risk taking by our executives. | × No Guaranteed Increases: We do not guarantee salary increases or annual incentives for our named executive officers. × No Hedging: We prohibit the hedging of the Company’s stock by directors, officers, or employees of the Company. × No Pledging: We prohibit the pledging of the Company’s stock by directors and officers of the Company. × No Repricing Without Stockholder Approval: We do not reprice underwater stock options without stockholder approval. × No Discount Option Grants: We do not provide for grants of stock options below fair market value. × No Excessive Perquisites or Special Benefits: Our named executive officers are only eligible to participant in benefit plans that are generally available to all of our employees. × No Excise Tax Gross-Ups: We do not provide any gross-up payments for so called “golden parachute” payments in the event of a change in control. |
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Our Compensation Practices (What we do) | Our Prohibited Compensation Practices (What we don’t do) | |||
✓ Caps on Incentive Payout: We cap incentive payouts for each named executive officer at a specified percentage of base pay for such officer. | ||||
✓ Shareholder Engagement: We engage with our shareholders regarding their most important compensation concerns, and, as described herein, implement practices to address such concerns. | ||||
✓ Independent Consultant: We use an independent compensation consultant retained by the Compensation Committee, in its sole discretion, who performs no consulting or other services for the Company’s management. |
The following key objectives are the cornerstone of our executive compensation program:
employ, retain and reward executives who are capable of leading usestablish competitive target pay in executing our differentiated business strategy to enhance shareholder value, which includes maximizing the value of our operations, growing our cash flow, preserving a strong financial position, increasing our geographic concentration, maximizing our competitive strengths in each of our markets and capitalizing on near and long-term growth opportunities;line with those with whom we compete for executive-level talent;
retain talented individuals;
designs revolving around a significant amount of totalstrong link between executive pay and Company performance;
prudent risk taking by executives;
aligning our goals, efforts and results through a comprehensive executive compensation should be in the form of short-termdesign, process and long-term incentive awards to align compensation with our financial and operational performance goals as well as individual performance goals;overall package; and
incentive awards should be tied to and vary with our financial and operational performance, as well individual performance.continually engaging stockholders in the overall process.
We believe these objectives collectively link compensation to overall Company performance and directly link compensation to the objectives set forth in our 20152022 business plan that was developed with our Board of Directors. These objectives help ensure that the interests of our named executive officers are closely aligned with the interests of our shareholders. We believe that Capital Senior Living has successfully achieved these objectives as demonstrated by our strong financial results during 2015, which exceeded our business plan targets. As described in “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” in our Annual Report on Form 10-K, our fiscal 2015 financial results, based upon various measures, increased significantly relative to our fiscal 2014 financial results. The following table highlights the year-over-year comparison of some of the key financial metrics that the Compensation Committee uses in evaluating our performance for purposes of making compensation decisions.stockholders.
Performance Measures | Fiscal Year 2015 | Fiscal Year 2014 | % Increase | |||||
Revenue | $412.2 million | $383.9 million | 7.4 | % | ||||
Adjusted EBITDAR | $144.5 million | $132.6 million | 9.0 | % | ||||
Adjusted EBITDAR Margin | 36.6% | 35.9% | 1.9 | % | ||||
Adjusted CFFO | $47.0 million | $40.9 million | 14.9 | %(1) | ||||
Adjusted CFFO per Share | $1.64 per share | $1.45 per share | 13.1 | %(1) |
The above table utilizes non-GAAP financial measures such as adjusted CFFO, adjusted CFFO per share, adjusted EBITDAR and adjusted EBITDAR margin. We believe these non-GAAP measures are useful in identifying trends in day-to-day performance because they exclude items that are of little or no significance to operations and provide indicators to management of progress in achieving optimal operating performance. In
addition, these non-GAAP measures are used by many research analysts and investors to evaluate the performance and valuations of companies in our industry. Please refer to Appendix A to this proxy statement for important information concerning such non-GAAP financial measures, including a reconciliation of such measures to GAAP.
For fiscal 2015, we believe our compensation programs, which are designed to reward our named executive officers for the achievement of short-term and long-term strategic and operational goals and the achievement of increased shareholder value, delivered payments commensurate with our strong financial performance. Below are the highlights of our executive compensation program for 2015.
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For 2015, a significant portion of the total compensation opportunity available to our named executive officers who were eligible to participate in our Incentive Compensation Plan was linked to the achievement of certain corporate and individual goals. As discussed in more detail above, in 2015 our Chief Executive Officer, President and Chief Operating Officer, and Senior Vice President and Chief Financial Officer were eligible to receive incentive bonuses of up to a maximum of 150%, 105% and 90%, respectively, of their base salaries for 2015, subject to the achievement of various performance criteria under our Incentive Compensation Plan for 2015.
Adjusted CFFO per share and adjusted EBITDAR were the key performance metrics for corporate goals under our Incentive Compensation Plan for 2015. We believe these metrics provide for a balanced approach to measuring annual Company performance. In addition, these measures are used by many research analysts and investors to evaluate the performance and valuations of companies in our industry. Another performance metric for corporate goals under our Incentive Compensation Plan for 2015 was the aggregate transaction value of the senior housing communities we acquired during such year. This performance metric was designed to reward our eligible named executive officers for their efforts in helping us identify and complete such strategic acquisitions, which we expect will increase our ownership of high-quality senior living communities in geographically concentrated regions and generate meaningful increases in our CFFO and earnings, and accordingly, increase shareholder value.
Another way that we try to link compensation and performance is through periodically granting performance-based equity awards to our named executive officers. During 2015, we granted 50,000, 40,000, 25,000 and 15,000 shares of performance-based restricted stock to our Chief Executive Officer, President and Chief Operating Officer, Senior Vice President and Chief Financial Officer, and Senior Vice President, General Counsel and Secretary, respectively. The periodic vesting of these awards is subject to our achievement of certain performance targets over a three-year period, which is primarily designed to encourage our named executive officers to focus on our long-term performance.
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The vote on this resolution is not intended to address any specific element of compensation, but rather relates to the compensation of our named executive officers, as described in this proxy statementProxy Statement in accordance with the compensation disclosure rules of the SEC. The vote is advisory, which means that it is not binding on us, our Board or the Compensation Committee. The SEC rules adopted in response to the matters pertaining to executive compensation in the Dodd-Frank Act did not specify a voting standard for this proposal. As a result, pursuant to our Bylaws, assuming the presence of a quorum, the affirmative vote of the holders of a majority of the outstanding shares of our common stock entitled to vote, present in person or represented by proxy, at the Annual Meeting is required to approve, on an advisory basis, this Proposal 3.
Accordingly, we ask our stockholders to vote on the following resolution at the Annual Meeting:
“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including Compensation Discussion and Analysis,the compensation tables and narrative discussion, is herebyAPPROVED.”
The Board of Directors unanimously recommends a vote “FOR” the approval of the compensation of our named executive officers, as disclosed in this Proxy Statement.
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AMENDMENT TO THE COMPANY’S 2019 OMNIBUS STOCK AND INCENTIVE PLAN
(PROPOSAL 4)
The Board has unanimously approved and is recommending to the stockholders for approval at the Annual Meeting an amendment (the “Amendment”) to the 2019 Plan to increase the number of shares of our common stock available for issuance under the 2019 Plan to 1,797,600 shares, with such amount subject to adjustment, including under the share counting provisions of the 2019 Plan. Our common stock is listed on the NYSE and we are subject to NYSE rules and regulations. NYSE rules require stockholder approval for any material revision to an equity compensation plan. We are seeking stockholder approval of the Amendment because it is deemed a material revision to the Plan. Further, the terms of the 2019 Plan require stockholder approval of any amendment to the 2019 Plan that increases the number of shares available for issuance under the 2019 Plan. The Amendment is attached to this Proxy Statement as Appendix B.
The 2019 Plan was originally approved by our stockholders at the Company’s 2019 annual meeting of stockholders and was re-approved by our stockholders at the Company’s 2021 special meeting of stockholders. The Amendment will become effective on the date it is approved by our stockholders. If this Proposal is approved by our stockholders, we intend to file with the SEC a registration statement on Form S-8 covering the additional 500,000 shares of our common stock issuable under the 2019 Plan.
If our stockholders do not approve this Proposal, the Amendment will not become effective, and the current 2019 Plan will continue in full force and effect subject to the limitations set forth therein. However, as a result of the limited number of shares remaining available for issuance under the 2019 Plan, our projections show that the current share reserve will not likely be sufficient to cover anticipated new equity grants needed beyond early 2025. To have an adequate supply of shares available for future equity awards to attract, retain and motivate the team responsible for executing our business strategy and objectives, the Board unanimously recommends that the stockholders approve the Amendment to the 2019 Plan providing for a reserve of an additional 500,000 new shares for future stock-based incentives. We currently expect that this reserve will be sufficient for approximately two to three years. Our share usage may vary from our historical practice depending on a number of factors, including the size of our workforce, our hiring needs, our incentive and retention objectives, and our stock price.
The material features of the 2019 Plan and Amendment are described below, but the description is subject to, and is qualified in its entirety by, the full text of the 2019 Plan, included as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2020, Amendment No. 1 to the 2019 Plan, included as an exhibit to the Form 8-K filed on November 4, 2021, Amendment No. 2 to the 2019 Plan, included as an exhibit to the Form 8-K filed on January 28, 2022, Amendment No. 3 to the 2019 Plan, included as an exhibit to the Form 8-K filed on June 16, 2023 and the Amendment (attached hereto as Appendix B).
If our stockholders do not approve this Proposal, this Amendment will not become effective, and the current 2019 Plan will continue in full force and effect subject to the limitations set forth therein.
2019 Plan Key Governance Features
The 2019 Plan includes the following key features that are designed to serve our stockholders’ interests, including the following:
All award types are subject to a minimum vesting period of one year (with limited exceptions);
Dividends and dividend equivalents will only be paid or settled on shares that ultimately vest;
Shares subject to stock options or stock appreciation rights (“SARs”) that are tendered or withheld to satisfy tax withholding obligations or that are not issued as a result of a cashless exercise are prohibited from returning to the share pool for reissuance;
Granting of discounted stock options or SARs is prohibited;
Repricing, modifying or cash buy-out of outstanding stock options or SARs is prohibited without stockholder approval;
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Equity awards are subject to a double-trigger requirement for accelerating vesting upon a change in control unless awards are not converted, assumed or replaced by a successor or survivor corporation or parent;
Equity awards granted under the 2019 Plan are subject to recoupment in accordance with the terms of the Company’s compensation recoupment policies;
Non-employee director compensation (cash plus equity) is limited to $600,000 per non-employee director per annum; and
The 2019 Plan does not provide for any tax gross-ups.
Overview of 2019 Plan
Purpose
The purpose of the 2019 Plan is to advance the interests of the Company and increase stockholder value by providing additional incentives to attract, retain and motivate those qualified and competent employees, directors, and consultants upon whose efforts and judgment its success is largely dependent.
Administration
The 2019 Plan is administered by the Compensation Committee (or if not otherwise delegated, by the Board) (as applicable, the “Administrator”). The Administrator has the authority to interpret and adopt rules and regulations for carrying out the 2019 Plan. All decisions and acts of the Administrator will be final and binding on all participants under the 2019 Plan.
The Administrator will have the full power and authority to administer the 2019 Plan.
Eligibility
Awards may be granted pursuant to the 2019 Plan to any of our present or future employees, consultants and non-employee directors. The approximate number of employees, consultants and outside directors eligible to participate in the 2019 Plan as of April 19, 2024 was 3,952, 0 and 7, respectively. Actual selection of any eligible individual to receive an award pursuant to the 2019 Plan is within the sole discretion of the Administrator. “Incentive stock options” may be granted only to employees, and all other awards may be granted to employees, consultants or non-employee directors.
Types of Awards
The 2019 Plan authorizes the granting of “incentive stock options” and “non-qualified stock options” to purchase shares of our common stock. Unless the context otherwise requires, the term “options” includes both incentive stock options and non-qualified stock options. All shares of common stock reserved for issuance under the Plan may be (but are not required to be) issued pursuant to incentive stock options.
The 2019 Plan also authorizes awards of restricted stock. A restricted stock award is the grant of shares of our common stock that are nontransferable and may be subject to substantial risk of forfeiture until specific conditions are met. The vesting and number of shares of a restricted stock award may be selected by the Administrator. Except as otherwise provided in the agreement granting the restricted stock award, the recipient of restricted stock will have all of the rights of a stockholder, including with respect to voting rights and the right to receive dividends.
The 2019 Plan also authorizes awards intended to be performance-based awards that are payable in stock, cash, or a combination of stock and cash. Any performance-based awards granted will vest upon the achievement of performance objectives. The Administrator will establish the performance measure as well as the length of the performance period.
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The 2019 Plan also authorizes the granting of stock appreciation rights, or SARs. A SAR is the right to receive payment of an amount equal to the excess of the fair market value of a share of our common stock on the date of exercise of the SAR over the fair market value of a share of our common stock on the date of grant of the SAR. SARs may be granted under the 2019 Plan in tandem with other awards.
The 2019 Plan also authorizes awards of restricted stock units that, once vested (based on the criteria the Administrator establishes, which may be based on the passage of time or the attainment of performance-based conditions), may be settled in a number of shares of our common stock equal to the number of units earned, or in cash equal to the fair market value of the number of shares of our common stock (or a combination of stock and cash), earned in respect of such restricted stock unit award of units earned. At the discretion of the Administrator, each restricted stock unit may be credited with dividends paid in respect of each share of stock to which the restricted stock unit relates.
Shares of Common Stock Subject to the 2019 Plan
The authorized number of shares of our common under the 2019 Plan prior to the approval of the Amendment is 1,297,600 shares, of which approximately 350,000 shares remained available for issuance as of April 19, 2024. Approximately 850,000 shares of our common stock (an additional 500,000 shares) will be available for issuance under the 2019 Plan if the Amendment is approved. To the extent that any share-based award under the 2019 Plan terminates, expires, is cancelled or is paid in cash, the available shares subject to such award will remain available shares. Further, any shares tendered by a participant or withheld to satisfy the tax withholding obligation related to any award other than an option or SAR will remain available shares. Shares tendered by a participant or withheld to satisfy the exercise price or tax withholding obligation related to an option or SAR (including pursuant to a “net exercise” or “net withholding”) will not be available for re-issuance under the 2019 Plan.
Granting of Awards
The Administrator may from time to time grant awards in its discretion. In granting awards, the Administrator must take into consideration the contribution the eligible person has made or may be reasonably expected to make to our success and such other factors as the Administrator determines. The number of discretionary grants to be made under the 2019 Plan in the future to our non-employee directors and executive officers, including our named executive officers, and the dollar values of such grants, are not determinable.
Minimum Vesting Periods
Awards granted under the 2019 Plan will generally vest no earlier than the first anniversary of applicable grant date, except that the following awards will not be subject to the minimum vesting requirement: (a) awards granted in connection with awards that are assumed, converted or substituted in connection with certain transactions; (b) awards that may only be settled in cash; (c) awards that vest upon a change in control because they are not converted, assumed, or replaced by a successor or survivor corporation or a parent or subsidiary thereof; (d) awards the Administrator may grant, up to a maximum of five 5% of the aggregate number of shares authorized for issuance under the 2019 Plan; or (e) the 257,000 shares added to the 2019 Plan’s share reserve on November 1, 2021.
Exercise Price of Options
The exercise price of options granted under the 2019 Plan will be any price determined by the Administrator, but may not be less than the par value of our common stock, or in the case of incentive stock options, the exercise price may not be less than the fair market value of our common stock on the date of grant. The exercise price of incentive stock options will not be less than 110% of the fair market value on the date of grant if the optionee owns, directly or indirectly, stock possessing more than 10% of the total combined voting power of all classes of our stock.
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Price of Restricted Stock
The price, if any, to be paid by a recipient for restricted stock awarded under the 2019 Plan is determined by the Administrator. As a condition to the grant of a restricted stock award, if required by applicable law, the Administrator will require the person receiving the award to pay to us an amount equal to the par value of the restricted stock granted under the award.
Payment of Exercise Price
Unless further limited by the Administrator, the exercise price of an option will be paid solely in cash, by certified or cashier’s check, by wire transfer, by money order, by personal check, by delivery of shares of our common stock if expressly permitted by the terms of the option, by promissory note bearing interest at no less than such rate as will then preclude the imputation of interest under the Internal Revenue Code of 1986, as amended (the “Code”), other property acceptable to the Administrator, or by a combination of the foregoing. If the exercise price is paid in whole or in part with shares of our common stock, the value of the shares surrendered will be their fair market value on the date surrendered.
Restrictions on Transfer of Awards
No award granted under the 2019 Plan is transferable otherwise than by will or by the laws of descent and distribution. However, the Administrator by express provision in the award or an amendment thereto may permit awards to be transferred (without consideration) to, exercised by and paid to certain persons or entities related to the participant, including, but not limited to, members of the participant’s family, charitable institutions, or trusts or other entities whose beneficiaries or beneficial owners are members of the participant’s family and/or charitable institutions, or to such other persons or entities as may be expressly approved by the Administrator, pursuant to such conditions and procedures as the Administrator may establish.
During the lifetime of a participant, each award will be exercisable only by the participant or the guardian or legal representative of the participant.
Restrictions on Transfer of Restricted Stock
A participant may not sell, transfer, assign or pledge shares of restricted stock until the shares have vested. Stock certificates representing the restricted stock will be held by us bearing a legend to restrict transfer of the certificate until the restricted stock has vested. At the time the restricted stock vests, a certificate for the vested shares will be delivered to the participant.
Exercisability of Options
Each option will become exercisable in whole or in part and cumulatively, and will expire according to the terms of the option to the extent not inconsistent with the express provisions of the 2019 Plan. In addition, in the case of the grant of an option to an officer, the Administrator may provide that no shares acquired on the exercise of such option will be transferable during such six-month period following the date of grant of such option. The Administrator, in its sole discretion, may accelerate the date on which all or any portion of an otherwise unexercisable option may be exercised or a restriction will lapse.
Vesting of Restricted Stock and Restricted Stock Units
In granting awards of restricted stock and restricted stock units, the Administrator, in its sole discretion, may determine the terms and conditions under which the awards will vest subject to the one-year minimum vesting requirement discussed above. The Administrator also has the right, exercisable in its sole discretion, to accelerate the date on which restricted stock or restricted stock units may vest or otherwise waive or amend any conditions in respect of a grant of restricted stock or restricted stock units.
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Terms of Performance Awards
The Administrator may grant performance awards to any person who is eligible to receive an award pursuant to the 2019 Plan that are conditioned on the satisfaction of performance objectives, including those comprising one or more of the performance measures under a performance-based award, as the Administrator, in its sole discretion, may select.
Performance-based awards, in the sole discretion of the Administrator, may be made in the form of:
Shares or unit equivalents to shares of our common stock (including, without limitation, shares of restricted stock subject to restrictions that will lapse on the basis of the satisfaction of the selected performance measure(s));
cash; or
a combination of shares of our common stock and cash.
The Administrator will establish the performance measures that will be required to be satisfied during the performance period in order to earn the amounts specified in a performance-based award, as well as the duration of any performance period, each of which may differ with respect to each covered person, or with respect to separate performance-based awards issued to the same covered person. The performance measures may be one or more (or a combination) of the following:
earnings, including one or more of operating income, earnings before or after taxes, earnings before or after interest, depreciation, amortization, rent (or restructuring) costs, adjusted EBITDA, adjusted EBITDAR, economic earnings, or extraordinary or special items or book value per share (which may exclude nonrecurring items);
pre-tax income, after-tax income or adjusted net income;
earnings per share (basic or diluted);
operating profit;
revenue, revenue growth or rate of revenue growth;
return on assets (gross or net), return on investment, return on capital, or return on equity;
returns on sales or revenues;
operating expenses;
stock price appreciation;
cash flow, free cash flow, cash flow return on investment (discounted or otherwise), net cash provided by operations, or cash flow in excess of cost of capital;
cash flow from facility operations;
facility net operating income;
implementation or completion of critical projects or processes;
acquisition financing;
cumulative earnings per share growth;
operating margin or profit margin;
containment of Company expenses,
expense targets, reductions and savings, productivity and efficiencies;
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strategic business criteria, consisting of one or more objectives based on meeting specified market penetration, geographic business expansion, employee satisfaction, resident satisfaction, human resources management, supervision of litigation and/or information technology goals, goals relating to acquisitions, divestitures, joint ventures and/or similar transactions and/or goals relating to budget comparisons;
personal professional objectives, including, without limitation, any of the foregoing performance goals, the implementation of policies and plans, the negotiation of transactions, the development of long-term business goals, formation of joint ventures, research or development collaborations, and the completion of other corporate transactions;
any combination of, or a specified increase or decrease in, any of the foregoing; and
any other criteria as determined by the Administrator in its sole discretion, any of which may be measured either in absolute terms or as compared to any incremental increase or as compared to results of a peer group or securities or stock market index.
Expiration of Options
The expiration date of an option will be determined by the Administrator at the time of the grant. However, unless the terms of the option expressly provide for a different date of termination, the unexercised portion of the option will automatically and without notice terminate and become null and void on the earlier of:
the date that the holder ceases to be employed by us, if such cessation is for “Cause,” as defined in the 2019 Plan;
the 90th day following the date on which the holder ceases to be employed by us for any reason other than because of the holder’s death or disability or for Cause (however, the holder will not be considered to have ceased to be employed by us while the holder is on sick leave, military leave, or any other leave of absence approved by us, if the period of such leave does not exceed 90 days, or, if longer, so long as the holder’s right to reemployment with us is guaranteed either by statute or by contract);
the first anniversary of the date on which the holder ceased to be employed by us by reason of the holder’s death or disability; or
the tenth anniversary of the date of grant.
Change in Control
In the event of a change in control, the 2019 Plan provides for the following treatment of awards unless otherwise provided in an award agreement:
Unless converted, assumed, or replaced by a successor or survivor corporation, or a parent or subsidiary thereof, all awards will become fully exercisable, all forfeiture restrictions will lapse, and, following the consummation of such change in control, all such awards will terminate and cease to be outstanding.
The number or value of any performance-based award or other award that is based on performance criteria or performance goals that will become fully earned, vested, exercisable and free of forfeiture restrictions will not exceed the greater of (i) such number or value determined by the actual performance attained during the applicable performance period to the time of the change in control or (ii) such number or value that would be fully earned, vested, exercisable and free of forfeiture restrictions had 100% of the target level of performance been attained for the entire applicable performance period without regard to the change in control.
If awards are assumed or continued after a change in control, the Administrator may provide that all or a portion of such awards will become fully exercisable and all forfeiture restrictions will lapse immediately upon the involuntary termination of the participant’s employment or service within a designated period (not to exceed 24 months) following the effective date of such change in control.
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Upon a change in control, the Administrator may cause any and all awards outstanding to terminate at a specific time in the future, and will give each participant the right to exercise such awards during a period of time as the Administrator, in its sole and absolute discretion, will determine.
The portion of any incentive stock option accelerated in connection with a change in control will remain exercisable as an incentive stock option only to the extent the applicable $100,000 limitation is not exceeded. To the extent such dollar limitation is exceeded, the accelerated portion of such option will be exercisable as a non-qualified stock option under the U.S. federal tax laws.
Clawback / Recovery
All awards granted under the 2019 Plan will be subject to recoupment in accordance with the Company’s compensation recoupment policies. In addition, the Administrator may impose such other clawback, recovery or recoupment provisions on an award as the Administrator determines necessary or appropriate in view of applicable laws, governance requirements or best practices, including, but not limited to, a reacquisition right in respect of previously acquired shares or other cash or property upon the occurrence of cause (as determined by the Administrator).
Expiration of the 2019 Plan
Unless terminated sooner by the Board, the 2019 Plan will terminate on March 26, 2029.
Adjustments
The 2019 Plan provides for (a) adjustments to the aggregate number and kind of shares that may be issued under the 2019 Plan; (b) the terms and conditions of any outstanding awards (including any applicable performance targets or criteria with respect thereto); and (c) the grant or exercise price per share for any outstanding awards under the 2019 Plan, in the event of any stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of our assets to stockholders, or any other change affecting the shares or the price of the shares other than an equity restructuring.
Amendments
The Board or the Compensation Committee (with the approval of the Board) may amend or modify the 2019 Plan at any time, provided that no amendment may, without the approval of our stockholders:
increase the number of shares available for issuance under the 2019 Plan; or
permit the extension of the exercise period for an option beyond 10 years from the date of grant.
Notwithstanding any provision in the 2019 Plan to the contrary, absent approval of the stockholders of the Company, no option or SAR may be amended to reduce the per share exercise price of the shares subject to such option or SAR below the per share exercise price as of the date of grant and, except as otherwise permitted in the award agreement, (a) no option or SAR may be granted in exchange for, or in connection with, the cancellation, surrender or substitution of an option or SAR having a higher per share exercise price and (b) no option or SAR may be cancelled in exchange for, or in connection with, the payment of a cash amount or another award at a time when the option or SAR has a per share exercise price that is higher than the fair market value of a share.
In addition, no amendment will adversely affect in any material way any award previously granted pursuant to the 2019 Plan without the prior written consent of the participant; provided, however, that an amendment or modification that may cause an incentive stock option to become a non-qualified stock option will not be treated as adversely affecting the rights of the participant.
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Federal Income Tax Consequences
The following is a brief summary of the U.S. Federal income tax consequences applicable to awards granted under the 2019 Plan, based upon current law as of the date of these proxy statement.
No later than the date as of which an amount first becomes includible in the gross income of a participant for federal, state, local or foreign income or employment or other tax purposes with respect to any award under the 2019 Plan, such participant will be required to pay to us, or make arrangements satisfactory to us regarding the payment of, any federal, state, local or foreign taxes of any kind required by law to be withheld with respect to such amount, at the withholding rate determined applicable by us (up to the participant’s maximum required tax withholding rate). The Administrator may establish such procedures as it deems appropriate, including making irrevocable elections, for the settlement of withholding obligations with common stock. For purposes of calculating compensation income and withholding for transactions that settle in common shares, we will use the closing price of a share of common stock on the NYSE (or such other exchange as maybe the principal market our common stock) on the trading date immediately preceding the distribution date of the common stock.
Incentive Stock Options
Neither the grant nor the exercise of an incentive stock option results in taxable income to the optionee for regular U.S. federal income tax purposes. However, an amount equal to: (a) the fair market value on the exercise date minus the exercise price at the time of grant; multiplied by (b) the number of shares with respect to which the incentive stock option is being exercised, will count as “alternative minimum taxable income” which, depending on the particular facts, could result in liability for the “alternative minimum tax” or AMT. If the optionee does not dispose of the common stock issued pursuant to the exercise of an incentive stock option until the later of the two-year anniversary of the date of grant of the incentive stock option and the one-year anniversary of the date of the acquisition thereof, then: (x) upon a later sale or taxable exchange of the shares, any recognized gain or loss would be treated for tax purposes as a long-term capital gain or loss; and (y) we would not be permitted to take a deduction with respect to that incentive stock option for federal income tax purposes.
If common stock acquired upon the exercise of an incentive stock option were disposed of prior to the expiration of the two-year and one-year holding periods described above (a “disqualifying disposition”), generally the optionee would realize ordinary income in the year of disposition in an amount equal to the lesser of: (a) any excess of the fair market value of the shares at the time of exercise of the incentive stock option over the amount paid for the shares; or (b) the excess of the amount realized on the disposition of the shares over the participant’s aggregate tax basis in the shares (generally, the exercise price). A deduction would be available to us equal to the amount of ordinary income recognized by the optionee, except to the extent that the limitations on deductibility under Section 162(m) of the Code apply. Any further gain realized by the optionee would be taxed as short-term or long-term capital gain and would not result in any deduction by us. A disqualifying disposition occurring in the same calendar year as the year of exercise would eliminate the alternative minimum tax effect of the exercise of the incentive stock option.
Special rules may apply where all or a portion of the exercise price of an incentive stock option is paid by tendering common stock, or if the shares acquired upon exercise of an incentive stock option are subject to substantial forfeiture restrictions. The foregoing summary of tax consequences associated with the exercise of an incentive stock option and the disposition of shares acquired upon exercise of an incentive stock option assumes
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that the incentive stock option is exercised during employment or within three months following termination of employment. The exercise of an incentive stock option more than three months following termination of employment will result in the tax consequences described below for non-qualified stock options, except that special rules apply in the case of disability or death.
An individual’s options otherwise qualifying as incentive stock options will be treated for tax purposes as non-qualified stock options (and not as incentive stock options) to the extent that, in the aggregate, they first become exercisable in any calendar year for stock having a fair market value in excess of $100,000.
Non-Qualified Stock Options
A non-qualified stock option (that is, an option that does not qualify as an incentive stock option) would result in no taxable income to the optionee or deduction to us at the time that such non-qualified stock option is granted. An optionee exercising a non-qualified stock option would, at the time of exercise, realize taxable compensation equal to: (a) the fair market value on the exercise date minus the exercise price at the time of grant, multiplied by (b) the number of shares with respect to which the option is being exercised. If the non-qualified stock option were granted in connection with employment, this taxable income would also constitute “wages” subject to withholding and employment taxes. A corresponding deduction would be available to us, except to the extent that the limitations on deductibility under Section 162(m) of the Code apply. The foregoing summary assumes that the shares acquired upon exercise of a non-qualified are not subject to a substantial risk of forfeiture.
SARs
No income generally will be recognized by a participant in connection with the grant of a SAR. When the SAR is exercised, the participant generally will be required to include as ordinary income in the year of exercise an amount equal to the excess of the fair market value of the common stock subject to the SAR on the date of exercise over the aggregate exercise price of the SAR. A participant who is an employee will be subject to income tax withholding on ordinary income recognized upon exercise of a SAR. We generally will be entitled to a deduction equal to the amount of ordinary income recognized by the participant at the time the SAR is exercised, except to the extent that the limitations on deductibility under Section 162(m) of the Code apply. A 2019 Plan participant’s aggregate tax basis for resale purposes in any common stock received upon exercise of a SAR is the amount taxed as ordinary income upon receipt of such common stock (generally equal to the fair market value of such common stock on the date of receipt). Any gain or loss on a sale of such common stock will be treated as capital gain or loss and will be long-term capital gain or loss if such common stock is held for more than one year after the date of issuance.
Restricted Stock
No income generally will be recognized by a participant in connection with the grant of restricted stock. The participant generally will be subject to tax at ordinary income rates on the fair market value of the common stock held at the time the restricted stock is no longer subject to a substantial risk of forfeiture or restrictions on transfer for purposes of Section 83 of the Code (the “Vesting Date”), reduced by the amount, if any, paid by the participant for the restricted stock (and, with respect to an employee, will be subject to income tax withholding on the amount of such ordinary income). When a participant sells the common stock held upon vesting of the restricted stock, he or she generally will recognize capital gain or loss in an amount equal to the difference between the amount realized upon the sale of the shares and his or her tax basis in the shares (generally equal to the amount, if any, paid for the restricted stock and any ordinary income recognized on the Vesting Date). If the participant’s holding period for the shares, which begins on the Vesting Date, exceeds one year, such gain or loss will constitute long-term capital gain or loss.
A participant who so elects, under Section 83(b) of the Code within thirty days of the date of transfer of the restricted stock to the participant will have taxable ordinary income on the date of transfer of the restricted stock
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(the “Transfer Date”) equal to the excess of the fair market value of the restricted stock on the Transfer Date (determined without regard to the risk of forfeiture or restrictions on transfer) over the amount, if any, paid for the restricted stock (and, with respect to an employee, will be subject to income tax withholding on the amount of such ordinary income). If the Vesting Date occurs, the participant will not recognize any additional income on such date, and the gain or loss to the participant on a subsequent sale of the common stock (calculated as the difference between the fair market value of the shares on the date of sale and the participant’s tax basis in the shares, generally equal to the amount, if any, paid for the restricted stock and any ordinary income recognized on the Transfer Date) generally will be treated as capital gain or loss to the participant. If the participant’s holding period for the common stock, which begins on the Transfer Date, exceeds one year, such gain or loss will constitute long-term capital gain or loss.
Restricted Stock Units
No income generally will be recognized by a participant in connection with the grant of a restricted stock unit (“RSU”). A participant is generally subject to withholding of Social Security and Medicare taxes on the value of an RSU at the time that the participant’s rights with respect to the RSU become vested. Although not free from doubt, under the Internal Revenue Code, if the participant’s employer determines the time at which a vested RSU will be settled, a participant generally should not be subject to income taxes with respect to such RSU until the participant has received shares and/or cash in settlement of the RSU. The fair market value of those shares at the time of settlement and/or any cash received generally should be taxable to the participant as ordinary income at the time of settlement (and, with respect to an employee, will be subject to income tax withholding on the amount of such ordinary income). The amount of ordinary income recognized by the participant generally will be deductible by us, except to the extent that the limitations on deductibility under Section 162(m) of the Code apply. The participant’s aggregate tax basis for resale purposes in any common stock received is the amount taxed as ordinary income upon receipt of the common stock. Any gain or loss on a sale of common stock will be treated as capital gain or loss and will be long-term capital gain or loss if such common stock is held for more than one year after the date of issuance.
Performance Awards
No income generally will be recognized by a participant in connection with the grant of an award otherwise subject to performance goals. Upon settlement of any such award, the participant generally will be required to include as ordinary income in the year of payment an amount equal to the amount of any cash, and the fair market value of any non-restricted shares, actually or constructively received (and, with respect to an employee, will be subject to income tax withholding on the amount of such ordinary income). The amount of ordinary income recognized by the participant generally will be deductible by us, except to the extent that the limitations on deductibility under Section 162(m) of the Code apply.
Tax Effect for Us
Our ability to realize the benefit of any tax deductions described above depends on our generation of taxable income as well as, among other things, the requirements that the compensation paid is reasonable (within the meaning of Section 162(a) of the Code), not disallowed by Section 162(m) of the Code, and not an “excess parachute payment” within the meaning of Section 280G of the Code.
Section 162(m) of the Code may limit the deductibility of compensation paid to our Chief Executive Officer and to each of our other “covered employees” under Section 162(m) of the Code. Under Section 162(m) of the Code, the annual compensation paid to any of these specified executives will be deductible by us only to the extent that it does not exceed $1,000,000 or an exemption from such deduction limitation is applicable and available. The exemption from the deduction limitation of Section 162(m) of the Code for performance-based compensation was repealed, generally effective for taxable years beginning after December 31, 2017, such that any awards granted such date are not eligible to qualify for any exemption from such deduction limitation. The
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Administrator reserves the right to grant awards under the 2019 Plan that result in compensation to our covered employees in excess of the $1,000,000 deduction limitation under Section 162(m) of the Code.
Additionally, under the so-called “golden parachute” provisions of Section 280G of the Code, the accelerated vesting of awards in connection with a change of control may be required to be valued and taken into account in determining whether participants have received compensatory payments contingent on the change of control, in excess of certain limits. If these limits are exceeded, a portion of the amounts payable to the participant may be subject to an additional 20% federal tax and may be nondeductible by us.
Equity Compensation Plan Information
The following table presents information relating to our equity compensation plans as of December 31, 2023:
Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted-Average Exercise Price of the Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in First Column) | |||||||||
Equity compensation plans approved by security holders | — | $ | — | 601,617 | ||||||||
Equity compensation plans not approved by security holders | — | — | — | |||||||||
Total | — | $ | — | 601,617 | ||||||||
The Board of Directors unanimously recommends a vote “FOR” the approval of the Amendment to the 2019 Plan.
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(PROPOSAL 4)5)
The Board of Directors knows of no other business to be brought before the Annual Meeting. If, however, any other business should properly come before the Annual Meeting, the persons named in the accompanying proxy will vote the proxy in their discretion as they may deem appropriate, unless directed by the proxy to do otherwise.
The cost of any solicitation of proxies by mail will be borne exclusively by us. Arrangements may be made with brokerage firms and other custodians, nominees and fiduciaries for the forwarding of material to and solicitation of proxies from the beneficial owners of shares of our common stock held of record by such persons, and we will reimburse such brokerage firms, custodians, nominees and fiduciaries for reasonable out of pocket expenses incurred by them in connection therewith. Brokerage houses and other custodians, nominees and fiduciaries, in connection with shares of our common stock registered in their names, will be requested to forward solicitation material to the beneficial owners of such shares and to secure their voting instructions. We have retained Georgeson to assist in soliciting proxies for the Annual Meeting for a fee of $30,000.$8,500. The cost of such solicitation will be borne exclusively by us.
By Order of the Board of Directors
Chairman of the Board |
President and Chief Executive Officer |
April 15, 201626, 2024
Dallas, Texas
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Certain Information With Respect to Non-GAAP Financial Measures Used in This Proxy Statement
In the attached proxy statement,Adjusted Funds from Operations (AFFO) is a non-GAAP liquidity measure that the Company utilizes certain financial measuresdefines as net income (loss) excluding depreciation and amortization expense, stock-based compensation expense, gain on extinguishment of operating performance, such as adjusted EBITDAR, adjusted EBITDAR margin, adjusted CFFOdebt, other non-cash charges, long-lived asset impairment, fines and adjusted CFFO per share, that are not calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). Non-GAAP financial measures may have material limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP. As a result, these non-GAAP financial measures should not be considered a substitute for, nor superior to, financial resultspenalties, transaction and measures determined or calculated in accordance with GAAP. conversion costs, other (income) expense, net, non-cash interest expense, and recurring capital expenditures.
The Company believes that these non-GAAPpresentation of AFFO as liquidity measures areis useful in identifying trends in day-to-day performanceto investors because they exclude items that are one of little or no significance to operations and provide indicators to management of progress in achieving optimal operating performance. In addition, these measures arethe metrics used by many research analyststhe Company’s management for budgeting and investors to evaluate the performance and the value of companies in the senior living industry. The Company strongly urges youother planning purposes, to review the following reconciliationCompany’s historic and prospective sources of net income from operationsoperating liquidity, and to adjusted EBITDAR and the reconciliation of net loss to adjusted CFFO, along withreview the Company’s consolidated balance sheets, statementsability to service its outstanding indebtedness and make capital expenditures.
AFFO has material limitations as a liquidity measure, including: (i) they do not represent cash available for discretionary expenditures since certain non-discretionary expenditures, including mandatory debt principal payments, are not reflected in this measure; and (ii) the cash portion of operations, and statementsnon-recurring charges generally represent charges/gains that may significantly affect the Company’s liquidity limits the usefulness of cash flows, which are includedthe measure for short-term comparisons.
Year ended December 31, 2023 | ||||
Adjusted Funds from Operations (AFFO) | ||||
Net loss | $ | (21,107 | ) | |
Depreciation and amortization expense | 39,888 | |||
Stock-based compensation expense | 2,749 | |||
Gain on extinguishment of debt, net | (36,339 | ) | ||
Other non-cash charges, net (1) | 1,552 | |||
Long-lived asset impairment | 5,965 | |||
Fines and penalties | 584 | |||
Transaction and conversion costs (2) | 4,294 | |||
Capital Expenditures (maintenance/ recurring only) | (12,657 | ) | ||
Non-cash interest expense | 6,898 | |||
Other (income) expense, net | 532 | |||
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AFFO | $ | (7,641 | ) | |
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(1) | Other non-cash charges, net includes amortization of deferred loan costs. |
(2) | Transaction and conversion costs relate to legal and professional fees incurred for transactions, restructuring projects or related projects. |
A-1
AMENDMENT NO. 4 TO THE
SONIDA SENIOR LIVING, INC.
2019 OMNIBUS STOCK AND INCENTIVE PLAN
THIS AMENDMENT NO. 4 TO THE SONIDA SENIOR LIVING, INC. 2019 OMNIBUS STOCK AND INCENTIVE PLAN (this “Amendment”), is made effective upon the approval of the stockholders of the Company of this Amendment (the “Effective Date”). All capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to such terms in the Company’s Annual Report on Form 10-K filed withPlan (as defined below).
RECITALS
WHEREAS, Sonida Senior Living, Inc. (the “Company”) maintains the SEC on February 26, 2016.
CAPITAL SENIOR LIVING CORPORATIONWHEREAS, pursuant to the Plan, the Board of Directors of the Company (the “Board”) has the authority to amend the Plan from time to time; and
NON-GAAP RECONCILIATIONSWHEREAS, the Board approved this Amendment pursuant to a resolution of the Board.
(In thousands, except per share data)NOW, THEREFORE, BE IT RESOLVED, that the Plan is hereby amended as follows, effective as of the Effective Date:
AMENDMENT
Fiscal Year Ended December 31, | ||||||||
2015 | 2014 | |||||||
Adjusted EBITDAR | ||||||||
Net income from operations | $ | 18,835 | $ | 13,900 | ||||
Depreciation and amortization expense | 53,017 | 49,487 | ||||||
Stock-based compensation expense | 8,833 | 7,262 | ||||||
Facility lease expense | 61,213 | 59,332 | ||||||
Provision for bad debts | 1,192 | 717 | ||||||
Casualty losses | 1,250 | 748 | ||||||
Transaction and conversion costs | 3,262 | 2,648 | ||||||
Communities being repositioned/leased up | (3,141 | ) | (1,494 | ) | ||||
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Adjusted EBITDAR | $ | 144,461 | $ | 132,600 | ||||
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Adjusted EBITDAR Margin | ||||||||
Adjusted EBITDAR | $ | 144,461 | $ | 132,600 | ||||
Total revenues | $ | 412,177 | $ | 383,925 | ||||
Communities being repositioned/leased up | (17,848 | ) | (14,381 | ) | ||||
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Adjusted revenues | $ | 394,329 | $ | 369,544 | ||||
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Adjusted EBITDAR margin | 36.6 | % | 35.9 | % | ||||
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Adjusted CFFO and Adjusted CFFO per share | ||||||||
Net loss | $ | (14,284 | ) | $ | (24,126 | ) | ||
Non-cash charges, net | 63,820 | 65,562 | ||||||
Lease incentives | (2,464 | ) | — | |||||
Recurring capital expenditures | (4,413 | ) | (4,257 | ) | ||||
Casualty losses | 1,250 | 748 | ||||||
Transaction and conversion costs | 3,262 | 2,648 | ||||||
Tax impact of 4 property sale | 351 | — | ||||||
Tax impact of Spring Meadows Transaction | (424 | ) | (424 | ) | ||||
Communities being repositioned/leased up, net of tax | (101 | ) | 746 | |||||
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Adjusted CFFO | $ | 46,997 | $ | 40,897 | ||||
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Basic shares outstanding | 28,688 | 28,301 | ||||||
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Adjusted CFFO per share | $ | 1.64 | $ | 1.45 | ||||
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1. | The first sentence of Section 3.1 of the Plan is hereby deleted and replaced in its entirety with the following: |
“Subject to Article 10, the aggregate number of Shares which may be issued or transferred pursuant to Awards under the Plan shall be 1,797,600 Shares (the “Share Pool”) plus (a) any reserved Shares not issued or subject to outstanding awards under the 2007 Omnibus Stock and Incentive Plan For the Company, as amended (the “Prior Plan”) on the Effective Date, and (b) any Shares that are subject to an award granted under the Prior Plan that is outstanding on the Effective Date, but that ceases to be subject to the award due to the award’s forfeiture, cancelation, or expiration, or because the award is paid or settled in cash.”
2. | This Amendment shall be and is hereby incorporated into and forms a part of the Plan. |
3. | Except as expressly provided herein, all terms and conditions of the Plan shall remain in full force and effect. |
SONIDA SENIOR LIVING, INC. | ||
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Name: | Brandon M. Ribar | |
Title: | President and Chief Executive Officer |
B-1
Using ablack inkpen, mark your votes with anXas shown in this example. Please do not write outside the designated areas. |
Annual Meeting Proxy Card |
IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
A | Proposals |
1. Proposal to elect as directors of the Company the following persons to hold office until the annual meeting of stockholders of the Company to be held in | ||||||||||||||||||
Abstain | For | Against | Abstain | For | Against | Abstain | ||||||||||||||||||||
01 - Jill M. Krueger | ☐ | ☐ | ☐ | 02 - Max J. Levy | ☐ | ☐ | ☐ | 03 - Elliot R. Zibel | ☐ | ☐ | ☐ | |||||||||||||||
For | Against | Abstain | ||||||||||||||||
2. Proposal to ratify the Audit Committee’s appointment of | This proxy will be voted as directed herein by the undersigned stockholder. | |||||||||||||||||
For | Against | Abstain | ||||||||||||||||
3. Proposal to approve the Company’s executive compensation. | ☐ | ☐ | ☐ | If no direction is made, this proxy will be voted as indicated below:
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For | Against | Abstain | ||||||||||||||||
| ☐ | PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE. | ||||||||||||||||
For | Against | Abstain | ||||||||||||||||
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☐ |
1 U P X |
03ZI5C
IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
Proxy – Sonida Senior Living, Inc. |
14755 Preston Road, Suite 810
Dallas, Texas 75254
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Brandon M. Ribar and David R. Brickman, and each of them, as proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and vote, as designated hereon, all the shares of the common stock of Sonida Senior Living, Inc. (the “Company”), held of record by the undersigned on April 19, 2024, at the Annual Meeting of Stockholders of the Company to be held at the Company’s Corporate Office at 14755 Preston Road, Suite 810, Dallas, Texas 75254 on June 4, 2024 at 9:00 AM Central Time, and any postponement(s) or adjournment(s) thereof.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING AND WISH FOR THEIR STOCK TO BE VOTED ARE URGED TO DATE, SIGN AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED SELF-ADDRESSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
(Continued and to be marked, dated and signed, on the other side)
B | Authorized Signatures |
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such.
| Signature 1 – Please keep signature within the box. | Signature 2 – Please keep signature within the box. | ||||||
/ / |
C | Non-Voting Items |
IF VOTING BY MAIL, YOUMUST COMPLETE SECTIONS A - C ON BOTH SIDES OF THIS CARD.
q PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q
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Change of Address | Comments |