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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 | ||
Filed by a Party other than the Registrant | ||
Check the appropriate box: | ||
☐ | Preliminary Proxy Statement | |
☐ | Confidential, for Use of the Commission Only (as permitted by Rule | |
☒ | Definitive Proxy Statement | |
☐ | Definitive Additional Materials | |
☐ | Soliciting Material under |
LTC Properties, Inc. | |||||
(Name of Registrant as Specified In Its Charter) | |||||
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) | |||||
Payment of Filing Fee (Check the appropriate box): | |||||
☒ | No fee required. | ||||
☐ | Fee computed on table below per Exchange Act Rules | ||||
(1) | Title of each class of securities to which transaction applies: | ||||
(2) | Aggregate number of securities to which transaction applies: | ||||
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule | ||||
(4) | Proposed maximum aggregate value of transaction: | ||||
(5) | Total fee paid: | ||||
☐ | Fee paid previously with preliminary materials. | ||||
☐ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | ||||
(1) | Amount Previously Paid: | ||||
(2) | Form, Schedule or Registration Statement No.: | ||||
(3) | Filing Party: | ||||
(4) | Date Filed: |
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 10, 20141, 2017
The 20142017 Annual Meeting of Stockholders of LTC Properties, Inc. will be held on Tuesday,Thursday, June 10, 20141, 2017 at 9:5:00 a.m.p.m., local time, at the Hyatt Westlake Plaza, 880 S. Westlake Blvd., Westlake Village, CaliforniaCA 91361, to conduct the following items of business:
(1) | To elect five directors to serve on the Board of Directors for the ensuing year and until the election and qualification of their respective successors; |
(2) | To ratify the appointment of Ernst & Young LLP as independent registered public accounting firm for fiscal 2017; |
(3) | To approve, on an advisory basis, the compensation of the named executive officers; |
(4) | To approve, on an advisory basis, the frequency of the advisory vote on executive compensation; and |
(5) | To transact such other business as may properly come before the meeting. |
Only stockholders whose names appear of record on our books at the close of business onApril 15, 201417, 2017 are entitled to notice of, and to vote at, such 20142017 Annual Meeting or any adjournments of such 20142017 Annual Meeting.
By Order of the Board of Directors | ||
PAMELA J. |
Westlake Village, California
April 28, 201426, 2017
IMPORTANT: | Whether or not you plan to attend the |
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to Be Held on June 1, 2017—the Proxy Statement and the Annual Report are available at http://www.astproxyportal.com/ast/26002/. |
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to Be Held on June 10, 2014—the Proxy Statement and the Annual Report are available athttp://www.astproxyportal.com/ast/26002/.
PROXY STATEMENT | 1 | |
| 1 | |
Voting Rights | 1 | |
Voting of Proxy | 1 | |
Broker | 2 | |
2 | ||
2 | ||
Revocability of Proxy | 2 | |
CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS | 3 | |
Code of Ethics | 3 | |
Corporate Governance Guidelines | 3 | |
Board Structure and Committee Composition | 3 | |
Communications with the Board | 5 | |
Consideration of Director Nominees | 5 | |
Section 16(a) Beneficial Ownership Reporting Compliance | 6 | |
PROPOSAL 1 ELECTION OF DIRECTORS | 7 | |
PROPOSAL 2 RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 10 | |
PROPOSAL 3 ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION | 11 | |
PROPOSAL 4 ADVISORY VOTE ON THE FREQUENCY OF ADVISORY VOTE ON EXECUTIVE | 12 | |
13 | ||
14 | ||
Executive Compensation Program Elements | ||
Compensation Committee | ||
Competitive Considerations | 16 | |
17 | ||
17 | ||
Stock Ownership Guidelines | ||
Prohibition on Pledging and Hedging Stock | ||
Tax and Accounting Considerations | ||
Clawback Policy | ||
Compensation Risk Assessment | ||
| ||
| ||
26 | ||
Outstanding Equity Awards at | ||
Option Exercises and Stock Vested | ||
Potential Payments Upon Termination or Change In Control | ||
DIRECTOR COMPENSATION | ||
Director Compensation for the Year ended December 31, | ||
COMPENSATION COMMITTEE REPORT | ||
Compensation Committee Interlocks and Insider Participation | ||
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS | ||
33 | ||
Securities Authorized for Issuance under Equity Compensation Plans | ||
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE | ||
Review, Approval or Ratification of Transactions with Related Persons | ||
Transactions with Related Persons | ||
Director Independence | ||
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES AND SERVICES | ||
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS | ||
RISK OVERSIGHT | ||
OTHER MATTERS | ||
Stockholder Proposals | ||
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| 39 | |
A-1 |
LTC PROPERTIES, INC.
This proxy statement is furnished to the stockholders of LTC Properties, Inc., a Maryland corporation (“LTC”), in connection with the solicitation of proxies by ourthe Board of Directors (“Board”) for use at our 20142017 Annual Meeting of Stockholders to be held on Tuesday,Thursday, June 10, 20141, 2017 at 9:5:00 a.m.p.m., local time, at the Hyatt Westlake Plaza, 880 S. Westlake Blvd., Westlake Village, CaliforniaCA 91361 and at any and all adjournments of our 20142017 Annual Meeting. The approximate date on which this proxy statement and the form of proxy are first being sent to our stockholders is April 28, 2014.26, 2017.
The cost of the solicitation of proxies will be borne by us. In addition to solicitation by mail, our directors and officers, without receiving any additional compensation, may solicit proxies personally, by telephone, by facsimile or electronically. We will request brokers, banks, and other nominees holding stock in their names for others to forward proxy materials to their customers or principals who are the beneficial owners of common shares and will reimburse them for their expenses in doing so. We have retained the services of Georgeson Shareholder, Inc.LLC for a fee of $8,000 plus out-of-pocketout‑of‑pocket expenses, to assist in the solicitation of proxies.
We will provide without charge to any person solicited hereby, upon the written request of any such person, a copy of our Annual Report on our Form 10-K10‑K for the year ended December 31, 20132016 filed with the Securities and Exchange Commission (or SEC)(“SEC”). Such requests should be directed to ourLTC Properties, Inc., Attn: Investor Relations, Department, at 2829 Townsgate Road, Suite 350, Westlake Village, CA 91361. Also, ourOur Annual Report also is available on our website at www.LTCproperties.com.www.LTCreit.com. We are not including the information contained on our website as part of, or incorporating it by reference into, this proxy statement.
At the close of business on April 15, 2014,17, 2017, there were 34,817,38539,573,448 shares of common stock outstanding and eligible for voting at the 20142017 Annual Meeting. Only stockholders of record at the close of business on April 15, 2014,17, 2017, are entitled to notice of, and to vote at, the 20142017 Annual Meeting. The presence, in person or by proxy, of stockholders entitled to cast a majority of all the votes entitled to be cast constitutes a quorum for the transaction of business at the 20142017 Annual Meeting.
You may vote by attending the 20142017 Annual Meeting and voting in person, or you may vote by submitting a proxy. The method of voting by proxy differs depending on whether (1) you are viewing this proxy statement on the internet or receiving a paper copy, and (2) you hold your shares as a record holder or in "street name".“street name.”
If you are the record holder of your stock and you are receiving a paper copy of this proxy statement, you may vote by completing, dating and signing the proxy card that was included with the proxy statement and promptly returning it in the pre-addressed,pre‑addressed, postage paid envelope provided to you. If you do not have a postage-prepaidpostage‑prepaid envelope, please mail your completed proxy card to the following address: American Stock Transfer and Trust Company, Proxy Department, 6201 15th Avenue, Brooklyn, NY 11219.
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If you hold your shares of common stock in "street name",“street name,” you will receive instructions from your broker, bank or other nominee on how to vote your shares. Your broker, bank or other nominee may allow you to deliver your voting instructions via the internet and may also permit you to submit your voting instructions by telephone. Please note that, if you hold your shares in "street name"“street name” and you
wish to vote in person at the 20142017 Annual Meeting, you must obtain and present a proxy card issued in your name from your broker, bank or other nominee.
If you are a "street name"“street name” beneficial owner whose shares are held of record by a broker, the rules of the New York Stock Exchange (or NYSE)(“NYSE”) require your broker to ask you for instructions on how to vote. If you do not provide voting instructions to your broker, then your broker may only exercise discretionary authority to vote on routine matters. Of the items described in this proxy statement, routine matters consist only of Proposal 2 ratification of independent registered public accounting firm. Your broker may not exercise discretionary authority to vote on non-routine matters. This lack of discretionary authority is called a "broker“broker non-vote."” Of the items described in this proxy statement, non-routine matters consist of Proposal 1 election of directors, and Proposal 3 advisory vote to approve named executive officer compensation, and Proposal 4 advisory vote on the frequency of advisory vote on executive compensation. The effect of broker non-votes is set forth in the description of each item in this proxy statement. Despite limitations impacting broker non-votes, your broker can register your shares as being present at the 20142017 Annual Meeting for purposes of determining the presence of a quorum.
The Bylaws of our company provide for a majority voting standard for the election of directors. Under this voting standard, once a quorum has been established with respect to an election that is not contested, directors are elected by a majority of the votes cast. This means that the number of shares voted for a director nominee must exceed the number of shares voted against that director nominee. Abstentions and broker non‑votes are not counted as a vote cast either for or against a director nominee. If a director standing for reelection is not elected by the requisite majority of the votes cast in an uncontested election, that director must tender his or her resignation, subject to acceptance by the Board. The Nominating and Corporate Governance Committee will then make a recommendation to the Board as to whether to accept or reject the tendered resignation or whether other action should be taken. Within 90 days of certification of the stockholder vote, the Board will publicly disclose its decision and rationale regarding whether it accepted or rejected the resignation or describe what other action it took in response to the tendered resignation. In a contested election, where the number of nominees exceeds the number of directors to be elected, directors will be elected by a plurality of the votes cast. The election of directors at the 2017 Annual Meeting is uncontested and, therefore, the majority voting standard will apply.
Board of Director'sDirectors’ Recommendations
The Board of Directors'Directors’ recommendations are set forth together with the description of each item in this proxy statement. In summary, the Board of Directors recommends a vote:
· | For the election of each of the Board of Directors’ nominees for director; |
· | For the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for fiscal 2017; |
· | For the approval of the compensation of the named executive officers, as disclosed in this proxy statement; and |
· | For the option of every year as the preferred frequency for the advisory vote on executive compensation. |
The giving of a proxy does not preclude the right to revoke the proxy or vote in person should the stockholder giving the proxy so desire.
If you are a stockholder of record, you have the power to revoke your proxy at any time prior to its exercise by: (a) delivering a written statement to our Investor Relations Department that the proxy is revoked; (b) by delivering to us
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a later-datedlater‑dated proxy executed by the person executing the prior proxy; or (c) by attending the 20142017 Annual Meeting and voting in person.
If you hold your shares in "street name"“street name” through a broker, bank or other nominee, you may change your vote by submitting new voting instructions to your broker, bank or other nominee. Please note that voting in person at the 20142017 Annual Meeting will only act to revoke prior voting instructions if you have obtained and present a proxy card issued in your name from your broker, bank or other nominee.
ALL STOCKHOLDERS ARE URGED TO VOTE AS PROMPTLY AS POSSIBLE VIA (A) THE INTERNET OR TELEPHONE, IF AND AS INSTRUCTED BY YOUR BROKER OR OTHER NOMINEE, OR (B) IF THIS PROXY STATEMENT WAS MAILED TO YOU, BY COMPLETING, DATING AND SIGNING THE ENCLOSED PROXY CARD AND MAILING IT IN THE ACCOMPANYING POSTAGE PAID ENVELOPE.
CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS
LTC Properties, Inc. (or LTC) is committed to having sound corporate governance principles. To that end, we have adopted a Code of Business Conduct and Ethics applicable to ourthe members of the Board of Directors and all of the company’s employees, including the principal executive officer, principal financial officer, principal accounting officer or controller, and other officers and employees.persons providing similar functions. Our Code of Business Conduct and Ethics is available on our website (www.LTCproperties.com).at www.LTCreit.com. If we amend or waive the Code of Business Conduct and Ethics with respect to any of our directors principalor executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions,officers, we will post the amendment or waiver on our website.
Corporate Governance Guidelines
To guide us in director independence and other governance matters, we have adopted Corporate Governance Guidelines as required by the NYSE listing standards of the NYSE.standards. The matters addressed in our Corporate Governance Guidelines include Board composition, Board meetings, Board committees, management responsibility, and stock ownership guidelines. A copy of our Corporate Governance Guidelines is available on our website at www.LTCproperties.com.www.LTCreit.com.
Board Structure and Committee Composition
The business of LTC is managedconducted under the direction of the Board of Directors, (or Board), which is elected by our stockholders. The basic responsibility of the Board is to lead our company by exercising its business judgment to act in what each director reasonably believes to be the best interests of our company and its stockholders. Leadership is important to facilitate the Board acting effectively as a working group so that our company and its performance may benefit. Our Corporate Governance Guidelines contemplate that the Chief Executive Officer shall be nominated annually to serve on the Board.
Our Boardcompany currently combines the positions of Chairman of the Board and Chief Executive Officer. Separation of the positions of Chairman and Chief Executive Officer is not mandated by our company's articles, bylaws,company’s Articles, Bylaws, or Corporate Governance Guidelines. The Board believes that the advisability of having a separate or combined Chairman and Chief Executive Officer is dependent upon the strength(s)strengths of the individual(s) holding these positions. Ms.Wendy L. Simpson, our Chairman and Chief Executive Officer, has served as a senior executive officer and director of our company for more than a decade. She has a deep understanding of our company'scompany’s historical and current business and financial operations and is able to lead the Board in anticipating and responding to key company developments, challenges, and opportunities. At this time, theThe Board believes that combining the Chairman and Chief Executive Officer and Chairman positions provides our company with the right foundation to pursue strategic and operational objectives, while maintaining effective oversight and objective evaluation of the performance of our company. Ms. Simpson does not serve on any outside boards of directors other than LTC, so that she is able to devote her full attention to our company.
Aside from Ms. Simpson, all members of ourthe Board are independent directors. Our Corporate Governance Guidelines provide that one independent director may be appointed lead independent director. Currently, Mr.Boyd W. Hendrickson is the lead independent director. Particularly given that our Boardcompany combines the positions of Chairman and Chief Executive Officer, the lead independent director serves an important role in our leadership structure. The positionBoard has adopted a Lead Independent Director Charter governing the responsibilities and duties of the lead independent director. A copy of our Lead Independent Director Charter is available on our website at www.LTCreit.com. As set forth in the Lead Independent Director Charter, the lead independent director enhancesposition serves to enhance Board effectiveness, by serving
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oversee Board matters, and act as a liaison between the independent directors and the Chairman, and by ensuringChairman. The lead independent director position also serves to ensure the independent directors have adequate resources in making decisions. The lead independent director is empowered to approve meeting agendas, meeting schedules and information sent to the Board. The lead independent director also has the authority to call meetings of the independent directors and presides at executive sessions of the independent directors.
Effective March 1, 2014, ourThe Board elected James J. Pieczynski asannually conducts a new memberself‑evaluation to determine whether it and its committees are functioning effectively. This annual performance evaluation is a component of our Board of Directors. As a result, our total number of directors increased from fiveCorporate Governance Guidelines. The evaluation includes discussions to six and total independent directors increased from fourdetermine what, if any, actions should be taken to five.improve the Board’s effectiveness.
OurThe Board has the following three committees: (1) Audit; (2) Compensation; and (3) Nominating and Corporate Governance. The function of each of the committeescommittee and the membership of the committees currently and during the last year are described below. Each of the committeescommittee operates under a written charter adopted by the Board. All of the committee charters are available on our website (www.LTCproperties.com).at www.LTCreit.com.
During fiscal 2013, theThe Board held five meetings.six meetings in 2016. Each Board member attended 100% of Board and Committee meetings in 2013.2016. Our policy is to schedule our annual meeting of stockholders after consulting with each director regarding their availability to help ensure their ability to attend. All Board members attended our 20132016 Annual Meeting of Stockholders.
The following table reflects the current composition of each committee:
Nominating and | |||||||
Audit | Compensation | Corporate Governance | |||||
Director | Committee | Committee | Committee | ||||
Boyd W. Hendrickson+ | * | * | * | ||||
James J. Pieczynski | * | * | • | ||||
Devra G. Shapiro | • | * | * | ||||
Wendy L. Simpson | |||||||
Timothy J. Triche, MD | * | • | * |
+ Lead Independent Director
* Member
• Chairman
Audit Committee
The Audit Committee has oversight of all compliance related to financial matters, SEC reporting and auditing. The "ReportReport of the Audit Committee of the Board of Directors"Directors is contained herein on page 22.37 of this proxy statement. The Audit Committee Charter is available on our website (www.LTCproperties.com).at www.LTCreit.com. The Audit Committee met fivesix times during 2013.in 2016.
The Board has determined that each member of the Audit Committee is independent within the meaning of the Securities Exchange Act of 1934, as amended (or (“Exchange Act)Act”), and theNYSE listing standards of the NYSE.standards. The Board also has determined that Ms. Shapiro the current chair of the Audit Committee, Mr. King, and Mr. Pieczynski each qualify as an "audit“audit committee financial expert"expert” as defined by SEC rules and that they each have accounting and related financial management expertise within the meaning of theNYSE listing standards of the NYSE.standards. Ms. Shapiro has servedserves as Chairman of the Audit Committee since May 2013. Prior to May 2013, Mr. Kingand served as Chairman of the Audit Committee.in that role throughout 2016.
Compensation Committee
The Compensation Committee is responsible for overseeing, reviewing, and administering our compensation and benefit practices. The Compensation Committee oversees our general compensation policies, reviews and approves compensation of our executive officers and administers all of our employee benefit plans. The Compensation Committee Charter is available on our website (www.LTCproperties.com).at www.LTCreit.com. The Compensation Committee met fourthree times during 2013.
Table of Contentsin 2016.
The Board has determined that each member of the Compensation Committee is independent within the meaning of theNYSE listing standards of the NYSE.standards. Dr. Triche serves as Chairman of the Compensation Committee and served in that role throughout 2013.2016.
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Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee is responsible for (i) identifying, screening and reviewing individuals qualified to serve as directors and recommending to the Board candidates for nomination for election at our Annual Meeting of Stockholders or to fill Board vacancies; (ii) overseeing our policies and procedures for the receipt of stockholder suggestions regarding Board composition and recommendations of candidates for nomination by the Board; (iii) developing, recommending to the Board and overseeing implementation of our Corporate Governance Guidelines and our Code of Business Conduct and Ethics; and (iv) reviewing on a regular basis our overall corporate governance guidelines and recommending improvements when necessary. The Nominating and Corporate Governance Committee Charter is available on our website (www.LTCproperties.com).at www.LTCreit.com. The Nominating and Corporate Governance Committee met once during 2013.three times in 2016.
The Board has determined that each member of the Nominating and Corporate Governance Committee is independent within the meaning of theNYSE listing standards of the NYSE.standards. Mr. Pieczynski has servedserves as Chairman of the Nominating and Corporate Governance Committee since April 2014. Previously since May 2013, Mr. Kingand served as Chairman of the Nominating and Corporate Governance Committee. Prior to May 2013, Ms Shapiro served as Chairman of the Nominating and Corporate Governance Committee.in that role throughout 2016.
Stockholders and all other parties interested in contacting the Board, its committees, the independent directors as a group, the presidinglead independent director, or individual directors may send written correspondence to the Audit Committee Chairman of LTC Properties, Inc. at 2829 Townsgate Road, Suite 350, Westlake Village, California 91361. All such communications will be forwarded to the relevant director(s), except for solicitations or other matters unrelated to our company.
Consideration of Director Nominees
The Board is responsible for the selection of candidates for the nomination or appointment of all Board members. The Nominating and Corporate Governance Committee, in consultation with the Chief Executive Officer, recommends candidates for election to ourthe Board and considers recommendations for Board candidates submitted by stockholders using the same criteria it applies to recommendations from Nominating and Corporate Governance Committee members, directors and members of management. The Nominating and Corporate Governance Committee will also consider whether to nominate any person nominated by a stockholder pursuant to the provisions of our company’s Bylaws relating to stockholder nominations as described immediately below. Since 2013,2016, there have been no material changes to the procedures by which stockholders may recommend nominees. Stockholders may submit recommendations in writing addressed to the Nominating and Corporate Governance Committee, LTC Properties, Inc., 2829 Townsgate Road, Suite 350, Westlake Village, CA 91361.
Stockholders may directly nominate persons for director only by complying with the procedure set forth in our company’s Bylaws, which in summary requires that the stockholder submit the names of such persons in writing to our Corporate Secretary not less than 60 days nor more than 150 days prior to the first anniversary of the date of the preceding year'syear’s Annual Meeting. The nominations must set forth (i) as to each person whom the stockholder proposes to nominate for election or reelection as a director and as to the stockholder giving the notice (a) the name, age, business address and residence address of such person, (b) the principal occupation or employment of such person, (c) the class and number of
shares of our capital stock which are beneficially owned by such person on the date of such stockholder notice, (d) such nominee'snominee’s consent to serve as a director if elected and (ii) as to the stockholder giving the notice (a) the name and address, as they appear on our books, of such stockholder to be supporting such nominees and (b) the class and number of shares of our capital stock which are beneficially owned by such stockholder on the date of such stockholder notice and by any other stockholders known by such stockholder to be supporting such nominees on the date of such stockholder notice.
Once a prospective nominee has been identified, by either the Nominating and Corporate Governance Committee or proposed by the stockholders,a stockholder, the Nominating and Corporate Governance Committee makes an initial determination as to whether to conduct a full evaluation of the prospective candidate. This initial determination would include whatever information is provided with the recommendation of the prospective candidate and the Nominating and Corporate Governance Committee'sCommittee’s own knowledge of the prospective candidate. The Nominating and Corporate Governance Committee may make inquiries of the person making the recommendation or of others regarding the qualifications of the prospective candidate. The preliminary determination is based primarily on the need for additional
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Board members to fill vacancies or expand the size of the Board. The Board'sBoard’s policy is to encourage selection of directors who will contribute to our overall corporate goals and to the discharge of the Board'sBoard’s responsibility to our stockholders. The Nominating and Corporate Governance Committee may, at the request of the Board from time to time, review the appropriate skills and characteristics required of Board members in the context of the current makeup of the Board. Board members are expected to prepare for, attend and participate in meetings of the Board and the committees on which they serve; therefore, a prospective candidate must have the ability to dedicate sufficient time, energy and attention to the diligent performance of his or her duties as a Board member.
The Nominating and Corporate Governance Committee may conduct interviews with prospective nominees in person or by telephone. After completing the evaluation and interviews, the Nominating and Corporate Governance Committee makes a recommendation to the full Board as to the persons who should be nominated by the Board, and the Board determines the nominees after considering the recommendation and report of the Nominating and Corporate Governance Committee.
The Nominating and Corporate Governance Committee does not have a specific policy with regard to the consideration of diversity in identifying director nominees. As part of its periodic review of the composition of the Board, the Nominating and Corporate Governance Committee considers whether the composition of the Board reflects the appropriate balance of independence, sound judgment, business specialization, technical skills, diversity, and other desired qualities. The Nominating and Corporate Governance Committee does not have formal objective criteria for determining the amount of diversity needed or present on the Board. Instead, the Nominating and Corporate Governance Committee seeks to have a Board with a diversity of background and experience.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than ten percent of a registered class of our equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of our company.
To our knowledge, based solely on review of the copies of such reports and written representations that no other reports were required, duringfor the year ended December 31, 20132016 all directors, executive officers and persons who beneficially own more than 10% of our common stock have complied with the reporting requirements of Section 16(a); except that one report, covering one transaction, was filed late for Mr. King..
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ELECTION OF DIRECTORS
SixFive directors will be elected at the 20142017 Annual Meeting of Stockholders. Each person elected as director will hold office until the 20152018 Annual Meeting of Stockholders and, in each case, until their respective successors have been duly elected and qualified.
In accordance with the recommendation of the Nominating and Corporate Governance Committee, the Board of Directors has nominated Boyd W. Hendrickson, James J. Pieczynski, Devra G. Shapiro, Wendy L. Simpson, and Timothy J. Triche for election as director. Each nominee listed below is currently a director of our company. The names of the sixfive director nominees, their business experience, and specific qualifications, attributes, or skills to serve as director, are set forth below:
Boyd W. Hendrickson Director since 2005 Age | Mr. Hendrickson | |
Mr. | ||
James J. Pieczynski Director since Age | Mr. Pieczynski is currently the President of the CapitalSource division of Pacific Western Bank and is a member of the board of directors of Pacific Western Bank and PacWest Bancorp. Prior to that he was a member of the Board of Directors of CapitalSource, Inc. | |
Mr. | ||
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Devra G. Shapiro Director since 2009 Age | Ms. Shapiro served as Chief Financial Officer of IPC | |
Ms. |
Wendy L. Simpson Director since 1995 Age | Ms. Simpson was appointed Chairman of | |
Having served as a senior executive officer of LTC | ||
Timothy J. Triche, MD Director since 2000 Age | Dr. Triche has been the Director of the Center for Personalized Medicine at | |
Dr. |
If any nominee becomes unavailable to serve as a director for any reason (which event is not anticipated), the shares of common stock represented by proxy may (unless such proxy contains instructions to the contrary) be voted for such other person or persons as may be determined by the holders of such proxies.
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Required Vote and Recommendations
The six nominees receivingAs described under “Majority Voting” on page 2 of this proxy statement, a majority of the most votes (providingcast is required for the election of each director in an uncontested election, which is the case at the 2017 Annual Meeting. A majority of the votes cast means that the number of votes cast FOR a quorum is present) will be elected as directors.nominee must exceed the number of votes cast AGAINST that nominee. For purposes of the vote on Proposal 1, abstentions and broker non-votesnon‑votes will not be counted as votes cast and will have no effect on the result of the vote, although they will count towards the presence of a quorum for Proposal 1. Properly executed and unrevoked proxies will be voted FOR the Board'sBoard’s nominees unless contrary instructions or an abstention are indicated in the proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF
THE BOARD OF DIRECTORS'DIRECTORS’ NOMINEES FOR DIRECTOR.
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board of Directors has appointed Ernst & Young LLP as the independent registered public accounting firm to audit LTC Properties, Inc.'sLTC’s consolidated financial statements for the year endedending December 31, 2014. During 2013,2017. Ernst & Young LLP served as our independent registered public accounting firm during 2016 and also provided certain tax and other audit related services. Seeservices as described in the "IndependentIndependent Registered Public Accounting Firm Fees and Services" on page 38.Services section of this proxy statement. A representative of Ernst & Young LLP is expected to be present at the 20142017 Annual Meeting.
Although ratification is not required by our company’s Bylaws or otherwise, the Board is submitting the selection of Ernst & Young LLP to our stockholders for ratification as a matter of good corporate practice. If the selection is not ratified, the Audit Committee will consider whether it is appropriate to select another registered public accounting firm. Even if the selection is ratified, the Audit Committee in its discretion may select a different registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of theour company and our stockholders.
Required Vote and Recommendation
Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 20142017 requires the affirmative vote of a majority of all the votes cast at a meeting at which a quorum is present. For purposes of the vote on Proposal 2, abstentions and broker non-votesnon‑votes will not be counted as votes cast and this will have no effect on the result of the vote although they will count towards the presence of a quorum for Proposal 2. Properly executed, unrevoked proxies will be voted FOR Proposal 2 unless a vote against Proposal 2 or abstention is specifically indicated in the proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS LTC PROPERTIES, INC.'S
LTC’S
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FOR THE YEAR ENDING DECEMBER 31, 2014.2017.
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ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION
The Dodd-FrankDodd‑Frank Wall Street Reform and Consumer Protection Act of 2010 (or Dodd-Frank Act)(“Dodd‑Frank Act”) requires that we provide our stockholders with the opportunity to vote to approve, on a nonbinding, advisory basis, the compensation of ourthe named executive officers as disclosed in this proxy statement in accordance with the compensation disclosure rules of the SEC. This proposal, commonly known as a "say-on-pay"“say‑on‑pay” proposal, gives stockholders the opportunity to express their views on our named executive officers'officer compensation. As previously reported in the Current Report on Form 8-K8‑K that we filed with the SEC on June 3, 2011, ourthe Board of Directors has determined that LTC will hold a nonbinding, advisory "say-on-pay"“say‑on‑pay” vote every year to approve named executive officer compensation until the next required advisory vote on the frequency of such vote, which will occur no later than the 2017 Annual Meeting of Stockholders.compensation.
As described below under "Executivein the Executive Compensation Discussion and Analysis" (or Analysis (“CD&A),&A”) section of this proxy statement, we seek to align compensation for executive managementof our executives with our overall performance as well as the individual performance of each executive officer. executive. As noted in the CD&A section, our 2016 financial performance was characterized by growth in assets, revenues, and normalized funds from operations, as well as, increased liquidity. As also described in the CD&A section, our Annual Cash Bonus Incentive Plan provides for 50% of the bonus opportunity for participating executives to be based on achievement of performance goals.
Our compensation programs are designed to attract and retain key executives responsible for our company'scompany’s success and are administered in the long-term interests of our company and our stockholders. In connection with services provided in 2013,2016, approximately 38%36% of total named executive officer compensation was in the form of long-term equity incentives.incentive awards.
As noted inPlease see the CD&A our 2013 financial performance was characterized by growth in assets, growth in revenues, and increased liquidity. Please refer to CD&A and accompanying tables, and(and in particular its “Executive Summary” on page 14) and the Executive Summary contained thereinCompensation Table sections of this proxy statement for further details regarding our executive compensation decisions for 2016 and how our compensation program for executive managementexecutives is structured to support and reward our annual and long-termlong‑term financial performance as an organization.
Pursuant to the resolution below, we are asking our stockholders to indicate their support for our named executive officer compensation as described in this proxy statement.compensation. The vote on this resolution is not intended to address any specific element of compensation. Rather, the vote relates to the compensation of ourthe named executive officers, as described in the CD&A and accompanying tables.
Accordingly, stockholders are being asked to vote on the following resolution at the 20142017 Annual Meeting:
"“RESOLVED, that the stockholders of LTC Properties, Inc. approve, on an advisory basis, the compensation of the named executive officers, as disclosed in LTC Properties, Inc.'s’s Proxy Statement for the 20142017 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the compensation discussion and analysis, the summary compensation table, and the other related tables and disclosure."”
Required Vote and Recommendation
Because the vote is advisory, it is not binding on our company, ourthe Board of Directors, or the Compensation Committee of ourthe Board of Directors. OurThe Board of Directors and the Compensation Committee will take into account the outcome of the vote, however, when designing future executive compensation programs.
For purposes of the vote on Proposal 3, abstentions and broker non-votesnon‑votes will not be counted as votes cast and this will have no effect on the result of the vote although they will count towards the presence of a quorum for Proposal 3. Properly executed, unrevoked proxies will be voted FOR Proposal 3 unless a vote against Proposal 3 or abstention is specifically indicated in the proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE
COMPENSATION OF OURTHE NAMED EXECUTIVE OFFICERS,
AS DISCLOSED IN THIS PROXY STATEMENT.
ADVISORY VOTE ON FREQUENCY OF ADVISORY VOTE ON EXECUTIVE OFFICERS
COMPENSATION
The Dodd-Frank Act also requires that we provide our stockholders with the opportunity to vote, on a non-binding, advisory basis, for their preference as to how frequently we should seek future advisory votes on the compensation of our named executive officers as disclosed pursuant to the compensation disclosure rules of the SEC, such as Proposal 3 included in this proxy statement. By voting with respect to this Proposal 4, which we refer to as the advisory vote on executive compensation, stockholders may indicate whether they would prefer that we conduct future advisory votes on executive compensation once every one, two, or three years. Stockholders also may abstain from casting a vote on this proposal.
As previously reported in the Current Report on Form 8‑K that we filed with the SEC on June 3, 2011, the Board of Directors has determined that an advisory vote on executive compensation that occurs every year is the most appropriate alternative for our company and therefore our Board recommends that stockholders vote for a one-year interval for the advisory vote on executive compensation. In determining to recommend a vote for a frequency of every year, the Board considered that a one-year frequency has become the standard frequency for public companies and that an annual vote affords our stockholder greater opportunity to provide feedback to the management team of our company and the Board.
Vote and Recommendation
The proxy card provides stockholders with the opportunity to choose among four options (every three, two, or one years, or abstaining) as to the frequency of the advisory vote on executive compensation. Stockholders therefore will not be voting to approve or disapprove the recommendation of the Board of Directors.
Because the vote is advisory, it is not binding on our company, our Board of Directors, or the Compensation Committee of our Board of Directors. Our Board of Directors and the Compensation Committee will take into account the outcome of the vote, however, when considering the frequency of future advisory votes on executive compensation. Our Board may decide that it is in the best interests of our stockholders and our company to hold an advisory vote on executive compensation more or less frequently than the frequency chosen by our stockholders.
For purposes of the vote on Proposal 4, abstentions and broker non-votes will not be counted as votes cast and this will have no effect on the result of the vote although they will count towards the presence of a quorum for Proposal 4. Properly executed, unrevoked proxies will be voted FOR one year unless a vote for one of the other two options or abstention is specifically indicated in the proxy.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE OPTION OF EVERY
ONE YEAR AS THE PREFERRED FREQUENCY FOR THE ADVISORY VOTE ON
EXECUTIVE COMPENSATION.
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The Board of Directors has determined that Wendy L. Simpson, Pamela J. Shelley-Kessler, and Clint B. Malin are our company’s “executive officers” as that term is defined in Rule 3b-7 under the Exchange Act. The biographies of our three current executive officers are as follows:
Wendy L. Simpson Chief Executive Officer and President Age | Wendy L. Simpson has been a director of our company since 1995, Vice Chairman from April 2000 through October 2005, Chief Financial Officer from July 2000 through March 2007, Treasurer from January 2005 through March 2007, President and Chief Operating Officer from October 2005 through March 2007 and Chief Executive Officer and President from March 2007 through August 2013. In August 2013, Ms. Simpson was appointed Chairman of | |
Pamela Executive Vice President, Financial Officer and Age | Pamela | |
Clint B. Malin Executive Vice President and Chief Investment Officer Age | Clint B. Malin joined | |
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EXECUTIVE COMPENSATION DISCUSSION AND ANALYSIS
20132016 Business Highlights
2013 represented a yearIn 2016 we focused on capitalizing on opportunities forcapturing long-term growth opportunities for our company and stockholders.
We have adheredadhere to a disciplined investment underwriting policy and do not make investments in assets believed bythat management believes may be mispriced relative to be overpriced.the value of the assets to our operator and to the company. This disciplined investment policy has allowed us to weather the challenging economic environmentenvironments and positioned us well to take advantage of new investment opportunities.
Also, In addition to real estate acquisitions, mortgage originations, mezzanine loan originations and joint venture investments, in certain circumstances, we have continued ourfocused on developing new properties at costs significantly below current per unit/bed market values.
We also conduct marketing strategy designedactivities to enhance awareness of our company among local and regional operators of skilled nursing, assisted living, independent living and memory care properties, particularly in certain states. The marketing campaign highlights our low-leveredsupport and commitment to provide financing to operators in these property classes, our strong balance sheet, our access to capital, to invest, our ability and interest in doing smallfocus on smaller size off-market transactions, our strong but small management team and our many years in the industry.
As a result of these efforts, in 20132016, we grew substantially by funding aunderwrote $141.7 million in new investments consisting of $69.6 million in real estate acquisitions, $16.2 million in mortgage loan of approximately $124.4originations, $17.1 million purchasing real estate assets of approximately $15.6in mezzanine loan originations, and $38.8 million excluding transaction fees, and provided $45.0 million of investmentin development commitments, including the purchase of land. Also during 2013,in 2016, we completed and opened a 120-bed skilled nursing property in Texas, a 60-unitfour memory care property in Coloradocommunities, one independent living community and a 77-unitone combination assisted living and memory care propertycommunity and we completed the renovation of a skilled nursing center. We believe new investments are important for our continued growth and future profitability.
During 2016, we sold $40.0 million and $37.5 million of 10-year senior unsecured notes at fixed rates of 3.99% and 4.15%, respectively. Additionally, we sold 1,643,017 shares of common stock under our equity distribution agreements resulting in Kansas. net proceeds of $78.6 million. At December 31, 2016, we had cash on hand of $8.0 million, $492.9 million available for borrowing under our unsecured revolving line of credit, $22.5 million available under our shelf agreement with Prudential Investment Management, Inc. and $200.0 million available under our equity distribution agreement.
Our 20132016 year-over-year revenue growth was 13.5%18.6% and our year-over-year normalized funds from operations growth was 14.8%15.3%.
In addition, we sold 4,025,000 shares Funds from operations (“FFO”) is used by the company as a supplemental measure of common stock inoperating performance and normalized FFO allows our management to compare the company’s operating performance against other REITs and across time periods on a public offering at a price of $44.50 per share, before fees and costs of $7.7 million, and received net proceeds of $171.4 million.consistent basis. We also sold 8-year 3.99% senior unsecured term notescontinue to maintain a conservative capital structure with low debt evidenced by our debt to enterprise value of 24.9% and debt to annualized normalized EBITDA of 4.1x at December 31, 2016. Additionally, as an added measure of conservatism, we seek to match our debt maturities to our annual projected free cash flow thereby minimizing our exposure to refinancing risk. We believe our low debt levels and ample liquidity provides us with financing flexibility and allows us to opportunistically access the capital markets at favorable rates. For more information about normalized FFO, debt to enterprise value, and annualized normalized EBITDA, refer to the non-GAAP reconciliation in the amount of $70.0 million.Appendix to this proxy statement.
Finally, as the stock performance graph in our 2016 Annual Report on Form 10-K for 2013 shows, $100 invested in LTC common stock on December 31, 20082011 would be worth $234.75$195.28 on December 31, 2013,2016, as compared to $214.56$176.30 from a like investment in the NAREIT Equity REIT Index, or $228.19 in the Standard & Poors 500 Stock Index.
20132016 Compensation Highlights
We seek to closely align the interests of our named executive officers (or NEOs) with those of our stockholders. Accordingly, weWe have structured our executive compensation program to support this alignment, with relatively lowermodest base salaries and by delivering a greater proportion of total compensation delivered through annual bonus, and long-term equity incentive opportunities.opportunities and equity participation.
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In 2016, the Compensation Committee introduced performance contingent equity in the form of performance-based stock units (“PSUs”) as a key form of long-term equity incentive awards for our executive officers to balance our historical practice of granting restricted common stock awards (“RSAs”). As a result of the introduction of PSUs, approximately 50% of the equity awards granted to our executive officers in 2016 was performance contingent.
In view of their accomplishments and our financial performance during 2013,2016, the Compensation Committee and the Board approved:
· | Base salary increases for executives and other members of the management team; and |
· | Annual bonuses and equity grants for the named executive officers. |
2014 Cash Bonus Incentive Plan and Employment Agreements2016 “Say‑On‑Pay” Vote
For 2014 we are implementing a new Cash Bonus Incentive Plan applicable to the Chief Executive Officer, Executive Vice President and Chief Financial Officer and Executive Vice President and Chief Investment Officer. The new plan has defined incentive opportunities for each executive based on achievement of funds from operations (or FFO) and new investments goals. The Cash Bonus Incentive
Plan is described in further detail under "Executive Compensation Practices" of this Executive Compensation Discussion and Analysis.
In addition, for 2014 the Compensation Committee intends to propose amendments to the employment agreements for the NEOs to, among other provisions, (i) replace single trigger with double trigger change-in-control benefits; (ii) remove tax gross-up benefits; and (iii) remove lifetime health benefits.
2013 "Say-On-Pay" Vote
At LTC's 2013LTC’s 2016 Annual Meeting of Stockholders, approximately 94%95% of the votes cast in the advisory "say-on-pay"“say‑on‑pay” vote were voted for approval of the named executive officer compensation as disclosed in the 2013 proxy statement.compensation. The Board of Directors and Compensation Committee have considered the results of the 2013 "say-on-pay"2016 “say‑on‑pay” vote and believe that the overwhelming support by ourit indicates that stockholders indicates they generally are supportive of our approach tothe executive compensation. This support was one of the factors the Board of Directors and Compensation Committee took into account in not making material changes to our compensation philosophy for executive officers or the components of executive compensation.program. The Board of Directors and Compensation Committee will continue to consider "say-on-pay"“say‑on‑pay” votes in formulating future executive compensation policies and decisions.
Corporate Governance Highlights
We seek to maintain good governance standards, including with respect to the oversight of our compensation policies and practices. Following are highlightsHighlights of the policies and practices in effect during 2013:
· | Our Insider Trading Policy, which covers all employees and directors, includes prohibitions on hedging and pledging of our common stock; |
· | We have a cash incentive compensation Clawback Policy in the event of an accounting restatement; |
· | We maintain a separate “lead independent director” role in our leadership structure for the Board; |
· | Each committee of the Board is comprised solely of independent directors; and |
· | We have stock ownership guidelines in place for our executives and independent directors, and all executives and directors are in compliance. |
Executive Compensation Program Philosophy and Objectives
We endeavor to ensure that the compensation programs for our executive officersexecutives are effective inat attracting and retaining the key executives responsible for our company's success and are administered in appropriate fashion into support the long-termlong‑term interests of our company and our stockholders. Through the oversight of the Compensation Committee, we seek to align total compensation for executive management with our overall performance as well as the individual performance and role of each executive officer.executive.
Our executive compensation policiesprogram may be summarized as follows:
· | An executive’s salary, bonuses, incentive compensation and other benefit programs should reflect their role, our company’s performance, and the executive’s individual performance and effort; and |
· | Compensation should provide a financial interest in our company that parallels the financial interests of our stockholders. |
We encourage you to read this Executive Compensation Discussion and Analysis (“CD&A”) for a detailed discussionfurther details about of our executive compensation program, including information about the fiscal 20132016 compensation of the NEOs.named executive officers.
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Executive Compensation Program Elements
We seek to achieve our compensation program objectives through the following key compensation elements: base salary, annual bonus opportunity, long-termlong‑term equity incentive opportunity and severance upon termination of the executive officers' employment under certain conditions or change in control of our company. We believe that each element of our executive compensation program helps us to achieve one or more of our compensation objectives as follows:
Base salary—attract, motivate, and retain qualified key executives. We believe the base salary should reflect job responsibilities, value to our company, individual performance/expertise and competitiveness of the market for the executive'sexecutive’s services/salary norms for persons in comparable positions at comparable companies. We believe that it is important to provide executives with predictable benefit amounts that reward the executive’s continued service.
Annual bonuses—reward company performance and individual performance and effort. We believe the annual bonus should be linked to individual performance and to our company'scompany’s performance as a whole, and where practicable, should be related to variables under our management'smanagement’s control. Annual bonuses are paid out on a short-term basis and are designed to reward performance for that period.
Long-termLong‑term equity incentives—align executives'executives’ financial interests with those of our stockholders. We believe that long-termlong‑term compensation should motivate and reward the creation and preservation of long-termlong‑term stockholder value. Long-termvalue through both price increases and dividends. Long‑term equity incentives are typically earned and paid out on a longer-term basis and are designedvest over multiple years to reward performance over one or more years.years or based on achieving certain performance targets.
Severance—attract, motivate and retain qualified key executives. We believe that providing our executives with severance and other benefits upon termination of employment or change in control is consistent with the severance protections offered by similar companies and is an integral part of total executive compensation.
Base salaries and severance are designed primarily to attract, motivate and retain qualified key executives. These are the elements of our executive compensation program where the value of the benefit in any given year is typically not variable. We believe that it is important to provide executives with predictable benefit amounts that reward the executive's continued service. Base salaries are paid out on a short-term basis and are intended to attract and motivate executives. Severance and other benefits are paid out on a longer-term basis such as upon termination of employment or change in control of our company and are designed to aid in retaining executives.
The Compensation Committee reviews and approves the compensation of our executive officers and determines our general compensation policy. The Compensation Committee considers risk in making thewhether compensation decisions. decisions create incentives to take risks that could materially harm our company and does not believe that such incentives exist.
The Compensation Committee is also responsible for the administration of our Equity Participation Plans. We have a 2008equity compensation plans. Under the 2015 Equity Participation Plan under which 600,000of LTC Properties, Inc. (“2015 Equity Participation Plan” or “2015 Plan”), 1,400,000 shares of common stock have been reserved for awards, including nonqualified stock options
grants and restricted common stockequity grants to officers, employees, non-employee directors and consultants. The Compensation Committee is authorized to determine the options and restricted common stockequity awards to be granted under such planequity compensation plans and the terms and provisions of such options and restricted common stockequity awards. The Compensation Committee determines the base salary, annual bonus and long-term equity incentives of our Chief Executive Officer. Wendy L.Ms. Simpson, our Chairman, Chief Executive Officer and President, recommends to the Compensation Committee the base salary, annual bonus and long-term compensation levels for all of our other officers. None of the other senior executive officersexecutives had any role in determining or recommending the form or amount of the compensation of the other senior executive officers.executives.
In determining the level and composition of compensation for theour executive officers, the Compensation Committee considers various corporate performance measures, both in absolute terms and in relation to similar companies, and individual performance measures. Although theThe Compensation Committee considers FFO per share as an important measure of our performance, the Compensation Committee in 2013 did not apply any specific quantitative formula in making compensation decisions. However, effective for 2014, the Compensation Committee has establishedestablishes specific quantitative measurements and targets based upon our company'scompany’s FFO and new investments to determine the annual bonus awards for our senior executive officersexecutives as described in "Cashunder “Annual Cash Bonus Incentive Plan"Plan” below. The Compensation Committee also may evaluate the following factors in establishing executive compensation: (a) comparative compensation surveys and other material concerning compensation levels and stock grants at similar companies; (b) our historical compensation levels and stock awards; (c) overall competitive environment for executives and the level of compensation necessary to attract and retain executive talent; (d) financial performance of other real estate investment trusts relative to market condition; and (e) from time to time, the Compensation Committee may seek the advice of an independent compensation consultant in assessing its overall compensation philosophy. The Compensation Committee assigns no
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specific weight to any of the factors discusseddescribed above in establishing executive compensation. In determining the appropriate levels of compensation to be paid to our executive officers, we dothe Compensation Committee does not generally factor in amounts realized from prior compensation.
While the Compensation Committee may review broad-based third party compensation surveyscompetitive market data in determining the reasonableness of the compensation of our executive officers, compensation, compensation levels are not set by reference to any percentile or benchmark within any peer group of companies or otherwise. Consistent with our compensation philosophies described above, our goal is to provide each executive officer with a current compensation package that is at market based upon the Compensation Committee'sCommittee’s perception of comparable executives at comparable companies, including real estate investment trusts.
Pursuant to its charter, the Compensation Committee has the authority to engage independent compensation consultants and other professionals to assist in the design, formulation, analysis, and implementation of compensation programs for our executive officers. The Compensation Committee's practice has been to retain an independent compensation consultant approximately every three years to assist the Compensation Committee with its responsibilities related to our executive officer and director compensation.
In November 2010,September 2015, the Compensation Committee retained Pearl MeyerFrederic W. Cook & Partners, LLC (or PM&P)Co., Inc. (“Cook”), as anits independent compensation consultant, to conductevaluate new programs and compensation methodologies for 2016. Cook conducted a comprehensive review of our company'scompany’s executive compensation programs. PM&Pprograms and provided a report of its review to the Compensation Committee in February 2011.as described under “Executive Compensation Review” below. The Compensation Committee continued to referencereferenced the
2011 PM&P Cook report in making executive compensation decisions for 2012 and 2013. A discussion of the 2011 PM&P report is contained in the Executive Compensation Discussion and Analysis of our definitive proxy statement for the 2012 Annual Meeting of Stockholders.2016.
In December 2013, the Compensation Committee again retained PM&P as an independent compensation consultant to conduct a comprehensive review of our company's executive compensation programs. PM&P provided a report of its review to the Compensation Committee in February 2014; see "Executive Compensation Review" below for further details. The Compensation Committee referenced the comprehensive 2014 PM&P report in making bonus determinations for 2013 and broader executive compensation decisions for 2014.
After review and consultation with PM&P,Cook, the Compensation Committee has determined that PM&PCook is and was an independent advisor and there is and was no conflict of interest resulting from retaining PM&P exists currently or existed during the year ended December 31, 2013. In reaching these conclusions, the Compensation Committee considered NYSE listing standards and the factors listed below:
PM&P consults with the company's management only with the Compensation Committee's knowledge and approval, as necessary to obtain compensation, performance and other data for the executives and the company so that it can effectively support the Compensation Committee with appropriate competitive market information and relevant analyses.2016.
As discusseddescribed above, in December 2013 PM&PCook was engaged by the Compensation Committee to conduct a comprehensive review of our executive compensation programs. The Cook review was completed in February 2014included:
· | assisting with the development of a peer group for compensation comparisons; consisting of publicly-traded real estate investment trusts (“REITs”) with total assets, enterprise value, and funds from operations (“FFO”) generally similar to our company, and with a broad focus on healthcare REITs or REITs that have a triple-net business orientation and/or tenants that are commercial businesses; |
· | conducting a review of the competitiveness of current compensation levels, programs and arrangements provided to our executives, including the named executive officers; and |
· | conducting a competitive assessment of our non‑employee director compensation program. |
The Cook peer group included the following:
· | American Assets Trust, Inc. |
· | Cedar Realty Trust, Inc. |
· | Cousins Properties Incorporated |
· | EastGroup Properties, Inc. |
· | EPR Properties |
· | First Potomac Realty Trust |
· | Healthcare Realty Trust Incorporated |
· | Healthcare Trust of America, Inc. |
· | Hersha Hospitality Trust |
· | Hudson Pacific Properties, Inc. |
· | Medical Properties Trust Inc. |
· | National Health Investors Inc. |
· | Omega Healthcare Investors Inc. |
· | Parkway Properties, Inc. |
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In evaluating and selecting companies for inclusion in the peer group, the Compensation Committee considered REITs with a healthcare focus and/or primary operations in California, recognizing that business model differences may have an impact on size comparisons. The Peer Group includes the following sixteen REITs with assets ranging from $500 million to $4 billion:
The table below summarizes the company's total assets and market capitalization relative to the Peer REITS:
· | Physicians Realty Trust |
($ millions) | Total Assets as of 12/31/13 | Market Cap. as of 12/31/13 | |||||
---|---|---|---|---|---|---|---|
25th Percentile | $ | 1,303 | $ | 965 | |||
Median | $ | 1,982 | $ | 1,563 | |||
75th Percentile | $ | 2,790 | $ | 2,115 | |||
LTC Properties Inc. | $ | 931 | $ | 1,230 | |||
LTC Percent Rank | 10 | 40 |
· | PS Business Parks Inc. |
· | Retail Opportunity Investments Corp. |
· | Sabra Health Care REIT, Inc. |
· | STAG Industrial, Inc. |
· | Terreno Realty Corp. |
· | Care Capital Properties (2016 addition) |
· | CareTrust (2016 addition) |
· | Seritage (2016 addition) |
Source: SNL Financial
In developing market levels of compensation PM&P supplemented data from the Peer REITs with data from selected compensation surveys to develop estimated market levels for the company's executives. The compensation surveys included real estate industry surveys as well as additional general industry surveys. Among the compensation surveys, positions were matched to organizations of similar revenue or asset size.
PM&PCook compared the Company's 2013our company’s total direct compensation (base salary, annual and long-termlong‑term incentives) for each executive position against the market compensation levels for similar
executives in the Peer Group andconsultant’s respective peer group. The review by Cook showed that the compensation surveys. The company's aggregatetarget total direct compensation opportunity of the named executive officers was somewhat below the 50th percentilemedian in 2015, and that it was slightly above the median following the addition of the market.
PSUs to the 2016 equity program. The Compensation Committee usedCook review of total compensation in 2016 showed that the resultsbase salary, target cash, target equity value, and target total compensation of our Chief Executive Officer was slightly below the median of the review to inform 2013 bonus determinations and 2014 compensation decisions.2016 peer group.
Executive Compensation Practices
Base Salaries
The named executive officers each have an employment agreement granting them the contractual right to receive a fixed base salary as described under “Employment Agreements” on page 26 of this proxy statement.
Base salaries are reviewed and adjusted by the Compensation Committee on an annual basis. We typically pay base salaries in cash at regular intervals throughout the year. The Compensation Committee seeks to ensure that the base salaries are established at levels considered appropriate in light of the responsibilities and duties of our executive officersexecutives as well as at levels which are competitive towith amounts paid to executive officersexecutives of other real estate investment trusts.trusts, including our peer group companies. In determining an individual executive'sexecutive’s actual base salary, the Compensation Committee also considers other factors, which may include the executive'sexecutive’s past performance and contributions to our success.
Our named executive officers each have an employment agreement (see "Description of Employment Agreements" below) granting them the contractual right to receive a fixed base salary as disclosed in the "Summary Compensation Table" below.
Based on the recommendations received from the Chief Executive Officer (except with respect to the Chief Executive Officer'sOfficer’s own salary) and taking into account our company’s performance as well as the company's performance andfindings from the 2011 PM&PCook report, the Compensation Committee approved the following increases to base salaries for the named executive officers. Base salary increases were effective JuneJanuary 1, 2013.2016. The following table summarizes salary adjustments approved by the Compensation Committee for 2013.2016:
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Named Executive Officer | 2013 Base Salary | 2012 Base Salary | Year over Year Increase |
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| Year Increase |
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Wendy L. Simpson | $ | 600,000 | $ | 525,000 | 14.3 | % |
| $ | 655,000 |
| $ | 635,000 |
| 3.1 | % | ||||
Pamela Shelley-Kessler | $ | 360,000 | $ | 300,000 | 20.0 | % | |||||||||||||
Pamela J. Shelley-Kessler |
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Clint B. Malin | $ | 360,000 | $ | 300,000 | 20.0 | % |
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| 390,000 |
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| 2.6 | % | ||||
Peter G. Lyew | $ | 180,000 | $ | 165,000 | 9.1 | % | |||||||||||||
Caroline L. Chikhale | $ | 170,000 | $ | 150,000 | 13.3 | % |
Bonuses are awarded based on our overall performance and individual performance of each executive officer. We typically pay annual cash bonuses; however, bonuses may be awarded in other forms, such as stock awards, in lieu of cash payments. Bonus amounts awarded may vary from year to year and are typically paid, or awarded, at the end of the period for which performance is being rewarded. Annual bonuses for executive officers are awarded by the Compensation Committee within its discretion and after considering the Chief Executive Officer's recommendations.
In formulating bonus recommendations, the Chief Executive Officer takes into consideration the company's performance, individual executive performance, and the executive's total compensation package including base salary, equity awards and annual dividends earned on outstanding unvested equity awards.
In determining bonuses, the Compensation Committee evaluates the performance of our company for the year compared to other real estate investment trusts and the overall market. Accomplishments during 2013 included the following:
The Compensation Committee did not rely upon any specific performance targets or measurements related to our company when determining bonuses. Overall company performance was evaluated relative to stockholder value and return over the year, revenue growth, new investment levels relative to market constraints and external factors outside the control of our company.
In considering the Chief Executive Officer's bonus recommendations, the Compensation Committee seeks to ensure that bonuses are established at levels considered appropriate in light of responsibilities and duties of our executive officers as well as at levels competitive to amounts paid to executive officers of other real estate investment trusts. In determining the individual bonus amounts the Compensation Committee considered the responsibilities and duties of our executive officers, the executive officers total compensation package including raises and equity awards, competitive amounts paid to executive officers at other real estate investment trusts, and the executive's performance and contributions to our success.
For 2013, there were no specific performance targets or measurements for our executive officers that impact their bonuses. None of our executive officers have a contractual right to receive a fixed actual or target bonus for any given year. However, Ms. Simpson's employment agreement provides for an annual target bonus equal to 100% of her base salary awarded at the sole discretion of the Board of Directors. The following table shows the aggregate 2013 bonuses awarded to our Named Executive Officers for services provided in 2013, which amounts are reflected in the "Summary Compensation Table" below. Discretionary cash bonuses awarded for 2013 performance were paid in 2014.
Named Executive Officer | Discretionary Cash Bonus | |||
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Wendy L. Simpson | $ | 580,000 | ||
Pamela Shelley-Kessler | 250,000 | |||
Clint B. Malin | 250,000 | |||
Caroline L. Chikhale | 70,000 | |||
Peter G. Lyew | 50,000 |
Cash Bonus Incentive Plan
Effective for 2014, the Compensation Committee approved and the company is implementing aOur Annual Cash Bonus Incentive Plan to provideprovides an annual incentive bonus for selected executive officers. Under the plan,executives whereby each participating executive will havehas a range of bonus opportunitiesincentive opportunity (threshold, target and maximum) defined as a percentage of base salary. Annually, the Compensation Committee will select the participants in the plan and establish its performance goals.
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For 2014,2016, the Compensation Committee selected senior executives Ms. Simpson, Ms. Shelley-Kessler,Shelley‑Kessler and Mr. Malin will participateas participants in the Annual Cash Bonus Incentive Plan, with the following range of bonus opportunities:
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| 93.8 | % | 125.0 | % | 218.8 | % |
Pamela J. Shelley-Kessler |
| 45.0 | % | 90.0 | % | 135.0 | % |
Clint B. Malin |
| 45.0 | % | 90.0 | % | 135.0 | % |
For 2014,Bonuses under the following2016 bonus program were earned based 50% on the financial performance measuresof our company and weightings will be utilized for50% on the plan:
FFO, as defined by the National Association of Real Estate Investment Trusts (or NAREIT), means net income available to common stockholders and "Normalized FFO" adjusted for non-cash interest related to earn-out liabilities and non-recurring one-time items. The company's "Diluted Normalized FFO", including the means of calculating it, is disclosed in our annual earnings release. The Board may adjust the Diluted Normalized FFO component to reflect the pro forma impact of changes to the company's capital structure, strategic changes and other items, at the Board's discretion, that were not contemplated at the time of adoption of the Cash Bonus Incentive Plan.
Threshold, target and stretch (maximum)company performance. Financial performance goals for 2014 have been established forwas measured using Diluted Normalized FFO per share and new investments. Sinceinvestments, with 40% of the target goals represent a significant increase relativebonus plan tied to our 2013 actual results for these metrics, the Compensation Committee believes the goalsFFO per share and 10% tied to be sufficiently challenging and difficult to achieve. Actual 2014 performance relative to the goals will determine the actual bonus amounts earned, with payouts interpolated for performance between threshold and target or between target and maximum.
new investments. The subjective component of the bonus includesin 2016 included factors such as individual performance, capital structure management, credit ratings, dividend growth and total stockholder return relative to peers. Performance achievement and payouts for the subjective component will beis determined at the discretion of the Compensation Committee. The factors used for qualitatively determining the score for the subjective factors are discussed below.
For purposes of the Annual Cash Bonus Incentive Plan, Diluted Normalized FFO, including the means of calculating it, is disclosed in our annual earnings release and in the Appendix to this proxy statement. The Board may adjust the Diluted Normalized FFO component to reflect the pro forma impact of changes to our company’s capital structure, strategic changes and other named executive officers continue to be eligible to receive cashitems, at the Board’s discretion, that were not contemplated at the time of adoption of the performance goals. New investments include acquisitions, loan originations, equity investments and total commitments underwritten for developments, redevelopments, expansions and renovations.
The following table summarizes each metric and its relative weighting, the approved 2016 performance goals at threshold, target and maximum levels, and actual performance achieved. For 2016, actual performance versus the Diluted Normalized FFO per share goal was achieved at 104% of the objective, and new investments was achieved at 95% of the performance objective. The subjective assessment was scored at the 150% maximum based on the factors described below. Based on the degree of goal achievement, the bonus formula for the year resulted in a payout of 167% of target for Ms. Simpson and 144% of target for Ms. Shelley-Kessler and Mr. Malin.
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| 2016 Performance Goals |
| Performance |
| Target |
| ||||||||
Metric |
| Weight |
| Threshold |
| Target |
| Maximum |
| Achieved |
| Achieved |
| |||||
Diluted Normalized FFO per share |
| 40 | % |
|
| $ 2.85 |
|
| $ 2.94 |
|
| $ 3.02 |
|
| $ 3.06 |
| 104 | % |
New Investments ($ in millions) |
| 10 | % |
|
| $ 100 |
|
| $ 150 |
|
| $ 200 |
|
| $ 142 |
| 95 | % |
Subjective Performance |
| 50 | % |
| Compensation Committee Determination |
|
| Maximum |
| 150 | % |
In determining the subjective component of the annual bonuses, for 2014 within the discretion of the Compensation Committee inevaluated the same mannerperformance of our company for the year compared to other real estate investment trusts and the overall market. The maximum bonus allowed under the subjective component was awarded as prior years and as described abovea result of the following 2016 accomplishments:
· | Purchased three memory care communities, one combination assisted living and memory care community, and one skilled nursing center for a total of $69.6 million and committed a total of $38.8 million, including the purchase of land and bed rights, for the development a 66-unit memory care community and a 143-bed skilled nursing center; |
· | Completed and opened four memory care communities, one combination assisted living and memory care community and one independent living community and completed the renovation of one skilled nursing center; |
· | Originated $16.3 million under new and existing mortgage loans; |
19
· | Entered into $17.3 million of mezzanine loan commitments on two skilled nursing centers, a portfolio of 64 skilled nursing centers and the development of a 127-unit senior housing community which will provide a combination of assisted living, memory care and independent living services; |
· | Raised $40.0 million and $37.5 million through the sale of 10-year senior unsecured notes at fixed rates of 3.99% and 4.15%, respectively; and |
· | Raised net proceeds of $78.6 million under our equity distribution agreement. |
Based on the performance achieved, the Compensation Committee approved the following payouts under "Annual Bonuses".the Annual Cash Bonus Incentive Plan:
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| Wendy L. |
| Pamela J. Shelley- |
| Clint B. |
| |||
Metric |
| Simpson |
| Kessler |
| Malin |
| |||
Diluted Normalized FFO per share |
| $ | 573,125 |
| $ | 210,600 |
| $ | 210,600 |
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New Investments ($ in millions) |
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| 78,600 |
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| 32,292 |
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| 32,292 |
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Subjective Performance |
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| 716,406 |
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| 263,250 |
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| 263,250 |
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Total Bonus Earned |
| $ | 1,368,131 |
| $ | 506,142 |
| $ | 506,142 |
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Long-Term
Long‑Term Equity Incentives
Long-termLong‑term incentives are designedgranted to align the executives'executives’ financial interests with those of our stockholders. Therefore, our long-term incentive compensation for our executive officers hasstockholders and are historically takenin the form of a mix of restricted common stockRSAs, and stock option awards. The Compensation
Committee does not have a formula for determining the mix of restricted common stock and/or stock options awarded.options. Awards are made on an individual basis and are not granted at any pre-determinedpre‑determined time during the year. Restricted common stock and stock optionIn 2016, the Compensation Committee used the new addition of performance-contingent equity in the form of PSU as the key form of long-term equity incentive awards provided to our executive officers.
RSAs typically vest ratably over a threethree- to five-yearfive‑year period and are generally subject to the individual executive officer'sofficer’s continued employment. The PSU awards are earned over a four-year performance period, subject to the ability to accelerate earnout if three-year performance is high enough, with the number of shares earned dependent on our total stockholder return (“TSR”) over the applicable performance period. The level of long-termlong‑term incentive compensation is determined by the Compensation Committee based on an evaluation of competitive factors in conjunction with total compensation provided to each individual executive officer. The relevant weight given to each of these factors varies from individual to individual. Stock price performance has not been a factor in determining annual compensation because the price of our common stock is subject to a variety of factors outside of our control. We do not have an exact formula for allocating between cash and non-cash compensation. Nornon‑cash compensation, nor do we have a policy for allocating between long-termlong‑term and currently paid out compensation.
The grant date of an equity award is typically the date the Compensation Committee approves the equity award. The grant date may also be a future date from the date of approval as specified by the board resolution. In no instances has the grant date been retroactive or prior to the date the Compensation Committee approved the equity award. For long-termlong‑term incentive awards in the form of stock options, the exercise price is the closing price of our company'scompany’s stock as reported by the NYSE on the grant date. The Compensation Committee has not and does not time the granting of equity awards with any favorable or unfavorable news released by us.
Under our 2008the 2015 Equity Participation Plan, (or 2008 Plan), awards that may be granted includinginclude stock options (incentive or non-qualified)non‑qualified), stock appreciation rights, restricted common stock,RSAs, PSUs, deferred stock and dividend equivalents. We reserved 600,000 shares of common stock for issuance under this plan. As of December 31, 2013, there were 202,521 shares of common stock reserved for issuance under the 2008 Plan. The 20082015 Plan is administered by the Compensation Committee which sets the terms and provisions of the awards granted under the plan. Incentive stock options, stock appreciation rights, restricted common stock,RSAs, PSUs, deferred stock and dividend equivalents may only be awarded to officers and other full-timefull‑time employees to promote our long-termlong‑term performance and specifically, to retain and motivate senior management to achieve a sustained increase in stockholder value. Non-qualifiedNon‑qualified stock options, stock appreciation rights, restricted common stock,RSAs, PSUs deferred stock and dividend equivalents may be awarded to non-employeenon‑employee directors, officers, employees, consultants and other key persons who provide services to us.
The Compensation Committee reviews and evaluates the overall compensation package of the executive officers and determines theapproved equity awards based on our overall performance and the individual performance of the executive officers.
During 2013, the Compensation Committee approved an award of 20,000 restricted common shares to Ms. Simpson as part of bonuses but related to services provided in 2012. These shares will vest on June 1, 2016. In February 2014, the Compensation Committee approved an award of restricted common shares to the Chief Executive Officer and the Chief Executive Officer recommended and the Compensation Committee approved an award of restricted common sharesequity awards to Mses. Shelley-Kessler
Ms. Shelley‑Kessler and Chikhale and Messrs.Mr. Malin and Lyew. The following table shows the awards, which reflect the aggregate long-term equity incentives awarded to our Named Executive Officers to datefor their service in 2014.
Named Executive Officer | Restricted Stock Value(1) | Number of Restricted Stock | |||||
---|---|---|---|---|---|---|---|
Wendy L. Simpson | $ | 736,200 | 20,000 | ||||
Pamela Shelley-Kessler | 588,960 | 16,000 | |||||
Clint B. Malin | 588,960 | 16,000 | |||||
Caroline L. Chikhale | 73,620 | 2,000 | |||||
Peter G. Lyew | 36,810 | 1,000 |
2016. In approving the restricted common stockequity awards, the Compensation Committee took into consideration the executive'sexecutive’s historical performance and contributions, total ownership levels and the value of equity delivered historically, the below-marketmarket positioning of the executives' base salariesexecutives’ pay and the company'sour company’s desire to retain the executives by providing
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a meaningful long-termlong‑term incentive award to each executive which is aligned with stockholder interests. The magnitudeCook study showed LTC’s 2015 grant values were below the peer group median level and similarly, total compensation for all named executive officers fell below the peer group median.
Therefore, in 2016, PSUs were added to the long-term incentive program to address the below median position of executives’ 2015 pay opportunity in a manner that only rewards the creation of long-term shareholder value. The Compensation Committee approved specific dollar values to be awarded to the named executive officers and the number of shares was determined by dividing the Committee approved target dollar value by the accounting fair value per share on the date of grant. The following table sets forth the grant values of PSUs granted on June 1, 2016:
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| PSU |
| Number of |
| |
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| Award |
| PSU |
| |
Named Executive Officer |
| Value |
| Award |
| |
Wendy L. Simpson |
| $ | 950,000 |
| 19,808 |
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Pamela J. Shelley-Kessler |
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| 500,000 |
| 10,425 |
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Clint B. Malin |
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| 500,000 |
| 10,425 |
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PSUs granted in 2016 can be earned between 0-200% based on LTC’s cumulative TSR performance through February 28, 2020 (3.74-year performance period), and have an opportunity to be earned early if TSR through February 28, 2019 (2.74-year performance period) is at least 3%. The Compensation Committee intended for the PSUs to have a 4-year and 3-year performance period; however, the 2016 PSU grant was delayed from the typical February timing of granting long-term equity incentives to June due to considerations related to implementation of the PSU plan which resulted in a 3.74-year and 2.74-year performance period. The four-year performance period may be shortened to three years if three-year TSR performance is high enough to fund the maximum PSU earnout after three years. The share price at the grant date is used as the starting point for the TSR calculation, and a trailing 20 trading-day average share price is used to calculate the share price at the end of the performance period. Dividends for outstanding PSUs are accrued in the form of additional stock units during the restriction period, and are distributed if and when the underlying shares are earned (dividends accrued on unearned/forfeited PSU shares are not paid).
Under the 2016 PSU design, payouts range from 0% to 200% of target, based on the schedule below:
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| Cumulative |
| Accelerated |
| Payout % |
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| 3.74-year |
| Cumulative |
| of Target |
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Growth Requirements |
| TSR |
| 2.74-year TSR |
| Share Granted |
|
Below Threshold |
| Less than 4.1% |
| Less than 3.0% |
| — |
|
Threshold |
| 4.1% |
| 3.0% |
| 50.0% |
|
Target |
| 21.6% |
| 15.8% |
| 100.0% |
|
Maximum |
| 46.4% |
| 33.1% |
| 200.0% |
|
The 2016 PSUs are earned based on 3.74-year cumulative TSR. The program has several features to minimize the impact of daily volatility and point-to-point variation. A 20 trading-day average price is used to measure performance at the end of the period.
In connection with the introduction of PSU awards, combinedthe Compensation Committee determined that RSAs should be attributable as an award for the year in which granted rather than the prior practice of being attributable to services for the preceding year. Attributing RSAs to the year in which granted better reflects the long-term incentive nature of the RSAs and aligns with a future vesting date effectively servesstandard practice prevalent in our industry and among our peer group. Accordingly, the long-term incentive compensation awarded to the named executive officers with respect to their 2016 performance was solely PSUs. For details regarding RSAs granted in 2016 to the named executive officers for their 2015 services, please refer to the summary compensation table on page 25 of this proxy statement. Information regarding RSAs granted in 2017 as a retention vehicle.long-term equity incentives will be disclosed in next year’s proxy statement discussing 2017 compensation.
Severance and Other Benefits Upon Termination of Employment or Change in Control
As discussed in greater detail in the section "Employment Agreements" below, we have provided ourThe employment agreements with certain executive officers withof our company provide severance and other benefits upon termination of employment or a change in control of our company. We believe that we need to provide our executive officerskey executives with severance protections that are competitive with severance protectionsthose offered by companies similar to ours. We believe the The
21
severance protections we have provided ourthe named executive officers are consistent with our compensation objective to attract, motivate and retain qualified key executives.
We believe that severance should be payable to our executive officerskey executives if their employment is terminated for any reason, except for a termination for cause or a voluntary resignation.resignation without a good reason. The amount of severance we have agreed to pay and other severance benefits we extend to our executive officers upon such an occurrence is intended to help compensate them during a period of expected unemployment in the event of a termination without cause.
We also believe that severance should be payable to our key executives in connection with a change in control transaction. A change in control creates uncertainty regarding the continued employment of the executives. We provide severance in the event of a change-in-control to make our key executives indifferent about their own job security if the Board determines that it is in the best interests of shareholders to sell the company. The amount of cash severance we have agreed to pay and other severance benefits we extend to our executive officers upon such an occurrence is intended to help them avoid financial hardshipencourage the executives to remain employed by us during the period ofan important time when their prospects for continued employment following the executive officer is likely to be unemployedchange in control transaction are often uncertain. Our current practice for change in control severance follows a “double‑trigger” approach. Ms. Simpson’s, Ms. Shelley‑Kessler’s, and seeking new employment. IfMr. Malin’s 2014 employment agreements contain double‑trigger change in control provisions. Under a double‑trigger approach, a severance payment obligation arises only if a change in control occurs and the executive officer'sexecutive’s employment is terminated for any reason, except for a termination for cause or a voluntary resignation without a good reason, thenwithin a 24-month period after the change in control.
Additionally, upon the circumstances described above regarding termination of employment or change in control, we have agreed to pay the officer a lump sum severance payment equal to the following:
Additionally, we have agreed to extend medical and dental insurance coverage for up to 18 months at our expense to the executive officer. We also have agreed to provide Ms. Simpson with health insurance benefits for life if Ms. Simpson's employment terminates for any reason exceptto each named executive officer for a termination for cause or a voluntary resignation without good reason. We may elect to pay Ms. Simpson a one-time cash paymentperiod of $250,000 in lieu18 months. None of continuing health insurance benefits.
Further, under the standard terms of our equity award agreements, unvested options, restricted stock, and other equity awards will accelerate and vest if the employment of a grantee terminates for any reason, such as, death, disability, termination without cause, or a resignationagreements with good reason.
We believe that severance should be payable to our executive officers upon a change of control because a change of control transaction creates uncertainty regarding the continued employmentprovide for lifetime benefits.
None of the executive officers. The amount of cash severance we have agreed to pay and other severance benefits we extend toemployment agreements with our executive officers provide for “gross‑up payments” to offset taxes due for severance or other benefits upon a changetermination of control is intended to encourage the executive officers to remain employed by us during an important time when their prospects for continued employment following the change of control transaction are often uncertain.
Upon aor change in control of our company whether or not the officer's employment is terminated, we have agreed to pay the officer a severance payment in cash equal to the following:
Further, upon a change of control all stock options and/or restricted common stock automatically vest. We have agreed to provide Ms. Simpson with health insurance benefits for life upon change of control of our company whether or not Ms. Simpson's employment is terminated. We may elect to pay Ms. Simpson a one-time cash payment of $250,000 in lieu of continuing health insurance benefits. The Compensation Committee believes that a change of control typically results in a constructive termination of the executive officer's employment and therefore designed severance protection effective upon a change of control, rather than actual termination in the event of a change of control of our company.control.
The Compensation Committee believes that there are several situations that could result in equivalent continuing health care coverage not being available to these executives as a result of an action taken by us or a transaction involving our company. The provision of continuing health insurance benefits was included in the evaluation of the overall compensation package we have provided to our Chief Executive Officer. The buyout clause was designed to limit our exposure to increasing health insurance costs.
If any payment or benefit received by Ms. Simpson from us subjects her to excise taxes under the "golden parachute" rules on payments and benefits, then she will be entitled to receive an additional amount (a "gross-up payment" to make her whole for these excise taxes and for all taxes on the gross-up payment). Notwithstanding the foregoing, we will have no liability if an executive officer's employment is terminated for cause or by voluntary resignation without a good reason.
401(k) Savings Plan
We have a 401(k) Savings Plan which is a defined contribution plan covering all of our employees. Each year participants may contribute up to 15% of pre-taxpre‑tax annual compensation. In 2014,2016, the contributions may not exceed $17,500,$18,000, or $23,000$24,000 if the employee is 50 years or older. We match up to 3% of salaries for our vice presidents and contribute 3% of the individual'sindividual’s salary for staff that open an account. We will not contribute any amount, nor match contributions for our executive officers at the senior vice president level and higher.
Benefits
With limited exceptions, the Compensation Committee'sCommittee’s policy is to provide benefits to executive officers that are substantially the same as those offered to other officers of our company at or above the level of vice president. Except for the lifetime health insurance benefits described in "Severance“Severance and Other Benefits Upon Termination of Employment or Change in Control"Control” above and the supplemental medical insurance discusseddescribed below, the employee benefits programs in which our executive officers participate (which provide benefits such as medical, dental and vision benefits
coverage, life insurance protection, and 401(k) savings plan) are generally the same programs offered to all of our full-timefull‑time employees. Our officers at the level of vice president and above are eligible to participate in a supplemental medical insurance program which providesreimburses participants with reimbursementsup to a maximum of $10,000 per year for eligible out-of-pocketout‑of‑pocket medical expenses such as primary insurance co-payments,co‑payments, deductibles, and certain elective medical procedures not covered by the employee'semployee’s primary insurance policy. Amounts reimbursed to our executive officers during 2013 are included in the "Summary Compensation Table" below.
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We encourage our executives to hold our company'scompany’s stock on a long-termlong‑term basis. The following table represents the company'sour company’s stock ownership guidelines for our executive officersexecutives and independent directors (reflects the increased requirements adopted in February 2014):directors:
Chief Executive Officer | Six times base salary | |
Executive Vice Presidents | Three times base salary | |
Independent Directors | Five times annual fee |
The company'sOur company’s stock ownership guidelines recommend that the Chief Executive Officer Chief Financial Officer,and Executive Vice Presidents and Vice Presidents achieve the targeted level of ownership within three years from the date of hire, promotion or appointment. Also, theThe stock ownership guidelines recommend that the independent directors achieve the targeted level of ownership within five years from date of election. At this time all of our executive officers and independent directors except for Mr. Pieczynski, hold at least the full amount of the guideline. The Nominating and Corporate Governance Committee receives from the company a quarterly report on executive and independent director stock ownership of company stock.
Prohibition on Pledging and Hedging Stock
Pursuant to the company'sour company’s Insider Trading Policy, as amended in May 2013, we prohibit our executivesemployees and directors from (i) pledging their shares in our company'scompany’s stock, and (ii) purchasing financial instruments or otherwise engaging in transactions that are designed to or have the effect of hedging the economic risk of ownership in our company'scompany’s stock. All of our executive officers and directors are in compliance with these anti-pledginganti‑pledging and anti-hedginganti‑hedging provisions.
Tax and Accounting Considerations
Policy with Respect to Section 162(m)
Section 162(m) of the Code denies deduction for Federal income tax purposes for certain compensation in excess of $1,000,000 paid to certain executive officers, unless certain performance, disclosure, stockholder approval and other requirements are met. The Compensation Committee periodically reviews the effects of its compensation programs with regard to Code Section 162(m). We periodically evaluate and evaluates alternatives to ensure executive compensation is reasonable, performance-based,performance‑based, and consistent with our overall compensation objectives. The Compensation Committee reserves the right to design programs that recognize a full range of performance criteria important to our success, even where the compensation paid under such programs may not be deductible. Interpretations of and changes in the tax laws and other factors beyond the Compensation Committee'sCommittee’s control may affect the deductibility of certain compensation payments. The Compensation Committee may consider various alternatives to preserve the deductibility of compensation payments and benefits to the extent reasonably practicable and to the extent consistent with its other compensation objectives.
Tax Withholding
We permit our employees and directors to elect to withhold shares of stock to satisfy their tax withholding requirements upon the vesting of restricted stock.
We have adopted a policy grantingClawback Policy that grants the companyBoard the discretion to recoup from Section 16executive officers, including each currently serving NEO,named executive officer, all cash bonuses paid that would not have been paid if performance had been measured in accordance with restated financials, for the periods covering any of the three fiscal years preceding a restatement (other than to comply with changes in applicable accounting principles).
The Board of Directors is responsible for the interpretation and enforcement of this Clawback Policy. We plan to amend this policy as needed to comply
Each of the senior executive employment agreements we entered into in 2014 with Ms. Simpson, Ms. Shelley‑Kessler and Mr. Malin contains a clawback provision. In particular, the employment agreements provide the
23
Board of the Directors with the additional requirementscontractual ability to clawback a cash or share grant bonus in the event of the Dodd-Frank Act after the SEC adopts new regulations implementing those requirements.a restatement of our financial results if:
· | the restatement is attributable to misconduct or wrongdoing by the executive; |
· | the bonus was issued within three years preceding the restatement; |
· | the bonus was calculated and awarded pursuant to a specific financial formula; and |
· | the bonus would have been diminished based on the restated financial results. |
We have reviewed our compensation policies and practices to determine whether risks arising from our compensation policies and practices for employees are reasonably likely to have a material adverse effect on our company. The review included assessment of our various compensation programs and consideration of risk mitigating factors. We believe that our compensation policies and practices for employees do not present risks that are reasonably likely to have a material adverse effect on our company. We generally take a conservative approach to managing our business. Although some risk takingrisk-taking is necessary to manage and grow any business, we believe our compensation policies and practices do not encourage unnecessary or excessive risk takingrisk-taking and do not promote short term rewards for management decisions that could pose long-termlong‑term risks to our company. With particular respect to compensation of our executive officers:
· | the Compensation Committee exercises discretion in determining cash bonuses and equity awards to executive officers; |
· | awards of restricted stock with long‑term vesting periods provides executive officers with an incentive to make decisions that contribute to long‑term performance of our company; |
· | our Clawback Policy and provisions in our senior executive employment agreements provides our company with recourse in the event of material non‑compliance with any financial reporting requirement that leads to a material or significant restatement; and |
· | stock ownership guidelines for executive officers further aligns their personal wealth with the long‑term performance of our company. |
24
EXECUTIVE COMPENSATION TABLESSUMMARY COMPENSATION TABLE
ThisSummary Compensation Table
The following table presents information regarding compensation of our Named Executive Officersthe named executive officers for services provided in 2013, 20122016, 2015 and 2011.2014:
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Name and Principal Position |
| Year |
| Salary |
| Awards(1) |
| Compensation |
| Compensation(2) |
| Total |
| |||||
Wendy L. Simpson |
| 2016 |
| $ | 655,000 |
| $ | 950,000 | (3) | $ | 1,368,131 | (4) | $ | 711 |
| $ | 2,973,842 |
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Chairman, Chief |
| 2015 |
|
| 627,917 |
|
| 977,224 | (5) |
| 952,500 | (4) |
| 1,653 |
|
| 2,559,294 |
|
Executive Officer and |
| 2014 |
|
| 610,500 |
|
| 664,440 | (6)(7) |
| 661,260 | (8) |
| 1,067 |
|
| 1,937,267 |
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President |
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Pamela J. Shelley-Kessler |
| 2016 |
|
| 390,000 |
|
| 500,000 | (3) |
| 506,142 | (4) |
| 4,572 |
|
| 1,400,714 |
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Executive Vice President, |
| 2015 |
|
| 375,833 |
|
| 514,556 | (5) |
| 427,500 | (4) |
| 4,955 |
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| 1,322,844 |
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Chief Financial Officer and |
| 2014 |
|
| 365,833 |
|
| 607,625 | (6)(7) |
| 296,925 | (8) |
| 10,000 |
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| 1,280,383 |
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Corporate Secretary |
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Clint B. Malin |
| 2016 |
|
| 390,000 |
|
| 500,000 | (3) |
| 506,142 | (4) |
| 3,444 |
|
| 1,399,586 |
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Executive Vice President |
| 2015 |
|
| 375,833 |
|
| 514,556 | (5) |
| 427,500 | (4) |
| 3,481 |
|
| 1,321,370 |
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and Chief Investment Officer |
| 2014 |
|
| 365,833 |
|
| 607,625 | (6)(7) |
| 296,925 | (8) |
| 467 |
|
| 1,270,850 |
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(1) | Represents the fair value on the grant date of the stock awards, as required by SEC rules. Under U.S. generally accepted accounting principles, compensation expense with respect to stock awards granted is generally recognized over the vesting periods applicable to the awards. For a discussion of the assumptions and methodologies used to value the stock awards granted refer to Note 9. Equity of Notes to Consolidated Financial Statements included in our company’s 2016 Annual Report on Form 10-K. |
(2) | Represents supplemental health insurance benefits. |
(3) | Named executive officers were awarded the following performance-based stock units during 2016 with the number of shares to be earned depending on our TSR over the applicable performance period. These PSUs require a minimum threshold of 4.1% cumulative annual TSR performance, before threshold shares are earned, and they require 21.6% cumulative TSR performance before target shares are earned, each as measured over a 3.74-year performance period, with opportunity to earn the awards after 2.74 years if cumulative TSR performance is at least 3.0% at the end of 2.74 years: |
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|
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|
|
| PSU |
| Number of |
| |
|
| Award |
| PSU |
| |
Named Executive Officer |
| Value |
| Award |
| |
Wendy L. Simpson |
| $ | 950,000 |
| 19,808 |
|
Pamela J. Shelley-Kessler |
|
| 500,000 |
| 10,425 |
|
Clint B. Malin |
|
| 500,000 |
| 10,425 |
|
(4) | Represents amounts earned in cash under the Annual Cash Bonus Incentive Plan for performance in 2016 and 2015 which were paid in 2017 and 2016. |
(5) | Named executive officers received the following restricted common stock awards on February 18, 2016 for services provided in the preceding 2015 year. Subsequent to this grant, the Compensation Committee determined that RSAs should be attributable to the year in which the award is granted as compared to the approach of awarding RSAs to the named executive officer for performance in the preceding year. The February 18, 2016 awards vest ratably over a three-year period from the grant date: |
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| Number of |
|
|
| Restricted |
| Restricted |
| |
Named Executive Officer |
| Stock Value |
| Stock |
| |
Wendy L. Simpson |
| $ | 977,224 |
| 22,600 |
|
Pamela J. Shelley-Kessler |
|
| 514,556 |
| 11,900 |
|
Clint B. Malin |
|
| 514,556 |
| 11,900 |
|
Name and Principal Position | Year | Salary | Bonus(1) | Stock Awards(2) | Options Awards(2) | All other Compensation(3) | Total | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Wendy L. Simpson | 2013 | $ | 568,750 | $ | 580,000 | $ | 736,200 | (4) | $ | — | $ | 2,157 | $ | 1,887,107 | ||||||||
Chairman, Chief | 2012 | 514,583 | 650,000 | 725,200 | (5) | — | 2,366 | 1,892,149 | ||||||||||||||
Executive Officer and | 2011 | 465,000 | — | 953,100 | (7) | — | 7,946 | 1,426,046 | ||||||||||||||
President | ||||||||||||||||||||||
Pamela Shelley-Kessler | 2013 | 335,000 | 250,000 | 588,960 | (4) | — | 10,771 | 1,184,731 | ||||||||||||||
Executive Vice President, | 2012 | 289,583 | 300,000 | 349,000 | (6) | — | 7,605 | 946,188 | ||||||||||||||
Chief Financial Officer and | 2011 | 250,000 | 275,000 | 193,797 | (7) | — | 12,696 | 731,493 | ||||||||||||||
Corporate Secretary | ||||||||||||||||||||||
Clint B. Malin | 2013 | 335,000 | 250,000 | 588,960 | (4) | — | 2,584 | 1,176,544 | ||||||||||||||
Executive Vice President | 2012 | 289,583 | 300,000 | 349,000 | (6) | — | 5,766 | 944,349 | ||||||||||||||
and Chief Investment Officer | 2011 | 235,417 | 275,000 | 193,797 | (7) | — | 5,983 | 710,197 | ||||||||||||||
Caroline L. Chikhale | 2013 | 161,667 | 70,000 | 73,620 | (4) | — | 16,196 | 321,483 | ||||||||||||||
Vice President, Controller | 2012 | 143,750 | 85,000 | 69,800 | (6) | — | 18,640 | 317,190 | ||||||||||||||
and Treasurer | 2011 | 127,686 | 80,000 | 127,080 | (7) | — | 12,942 | 347,708 | ||||||||||||||
Peter G. Lyew | 2013 | 173,750 | 50,000 | 36,810 | (4) | — | 8,229 | 268,789 | ||||||||||||||
Vice President and | 2012 | 158,750 | 60,000 | 34,900 | (6) | — | 5,407 | 259,057 | ||||||||||||||
Director of Taxes | 2011 | 147,500 | 70,000 | 63,540 | (7) | — | 4,966 | 286,006 | ||||||||||||||
T. Andrew Stokes(8) | 2013 | 62,500 | — | — | — | 260,438 | 322,938 | |||||||||||||||
Former Senior Vice | 2012 | 245,833 | 75,000 | — | — | 7,998 | 328,831 | |||||||||||||||
President, Marketing and | 2011 | 215,000 | 180,000 | — | — | 16,117 | 411,117 | |||||||||||||||
Strategic Planning |
25
Named Executive Officer | Year | 401(k) Matching | Supplemental Insurance Plan | Severance | Total All Other Compensation | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Caroline L. Chikhale | 2013 | $ | 4,850 | $ | 11,346 | $ | — | $ | 16,196 | |||||||
2012 | 4,313 | 14,328 | — | 18,640 | ||||||||||||
2011 | 3,844 | 9,098 | — | 12,942 | ||||||||||||
Peter G. Lyew | 2013 | 5,213 | 3,016 | — | 8,229 | |||||||||||
2012 | 4,763 | 645 | — | 5,407 | ||||||||||||
2011 | 4,439 | 527 | — | 4,966 | ||||||||||||
T. Andrew Stokes | 2013 | — | 10,438 | 250,000 | 260,438 | |||||||||||
2012 | — | 7,998 | — | 7,998 | ||||||||||||
2011 | — | 16,117 | — | 16,117 |
(6) | Named executive officers received the following restricted common stock awards on February 10, 2015 for services provided in the preceding 2014 year. These stock awards vest ratably over a three-year period from the grant date: |
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| |||||||
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|
| Number of |
| |||||||
| Restricted |
| Restricted |
| |||||||||
Named Executive Officer | Restricted Stock Value | Number of Restricted Stock |
| Stock Value |
| Stock |
| ||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Wendy L. Simpson | $ | 736,200 | 20,000 |
| $ | 561,090 |
| 12,623 |
| ||||
Pamela Shelley-Kessler | 588,960 | 16,000 | |||||||||||
Pamela J. Shelley-Kessler |
|
| 504,275 |
| 11,345 |
| |||||||
Clint B. Malin | 588,960 | 16,000 |
|
| 504,275 |
| 11,345 |
| |||||
Caroline L. Chikhale | 73,620 | 2,000 | |||||||||||
Peter G. Lyew | 36,810 | 1,000 |
(7) | Ms. Simpson, Ms. Shelley-Kessler and Mr. Malin were each granted 2,500 shares of restricted common stock at $41.34 per share on November 12, 2014 in accordance with and upon entering into their 2014 executive employment agreements. These shares vest ratably over a one-year period from the grant date. |
(8) | Represents amounts earned in cash and shares of restricted stock under the Annual Cash Bonus Incentive Plan for performance in 2014. The Compensation Committee exercised its discretion to award shares of restricted stock in lieu of cash for the subjective component of the Annual Cash Bonus Incentive Plan. The named executive officers who participated in the Annual Cash Bonus Incentive Plan received the following cash and restricted stock awards on February 10, 2015. The restricted shares vest ratably over a three-year period from the grant date. The amount shown in the “Non-Equity Incentive Plan Compensation” column corresponding to this footnote includes the fair value of the restricted stock in this table and was determined in accordance with footnote (1) to this summary compensation table. |
Named Executive Officer | Restricted Stock Value | Number of Restricted Stock | |||||
---|---|---|---|---|---|---|---|
Pamela Shelley-Kessler | $ | 349,000 | 10,000 | ||||
Clint B. Malin | 349,000 | 10,000 | |||||
Caroline L. Chikhale | 69,800 | 2,000 | |||||
Peter G. Lyew | 34,900 | 1,000 |
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|
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|
|
| Restricted Stock Award |
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|
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|
|
| |||
|
| Number |
| Stock |
| Cash |
|
| Total |
| ||
Named Executive Officer |
| of Stock |
| Value |
| Award |
|
| Award |
| ||
Wendy L. Simpson |
| 10,377 |
| $ | 461,260 |
| $ | 200,000 |
| $ | 661,260 |
|
Pamela J. Shelley-Kessler |
| 4,655 |
|
| 206,925 |
|
| 90,000 |
|
| 296,925 |
|
Clint B. Malin |
| 4,655 |
|
| 206,925 |
|
| 90,000 |
|
| 296,925 |
|
Named Executive Officer | Restricted Stock Value | Number of Restricted Stock | |||||
---|---|---|---|---|---|---|---|
Wendy L. Simpson | $ | 953,100 | 30,000 | ||||
Pamela Shelley-Kessler | 193,797 | 6,100 | |||||
Clint B. Malin | 193,797 | 6,100 | |||||
Caroline L. Chikhale | 127,080 | 4,000 | |||||
Peter G. Lyew | 63,540 | 2,000 |
(6) |
Employment AgreementsDescription
Our company has entered into employment agreements with each of Employment Agreements
the named executive officers. The following table provides detailspresents information regarding the employment agreements with the named executive officers for our Named Executive Officers during the year ended December 31, 2013:2016:
Named Executive Officer | Agreement Date | Agreement Term | Salary | Change of Control Severance | Termination Severance | |||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Wendy L. Simpson(1) | 12/4/07 | 3-year evergreen | $ | 600,000 | $3,000,000 | Four times base salary | ||||||
Pamela Shelley-Kessler | 12/4/07 | 1-year evergreen | 360,000 | Two times base salary | One times base salary | |||||||
Clint B. Malin | 12/4/07 | 1-year evergreen | 360,000 | Two times base salary | One times base salary | |||||||
Caroline L. Chikhale | 6/10/08 | 1-year evergreen | 170,000 | Two times base salary | One times base salary | |||||||
Peter G. Lyew | 12/4/07 | 1-year evergreen | 180,000 | Two times base salary | One times base salary |
|
|
|
|
|
|
|
|
|
Named Executive Officer |
| Agreement Date |
| Agreement Term |
| Salary |
| |
Wendy L. Simpson |
| 11/12/14 |
| 3-year evergreen |
| $ | 655,000 |
|
Pamela J. Shelley-Kessler |
| 11/12/14 |
| 2-year evergreen |
|
| 390,000 |
|
Clint B. Malin |
| 11/12/14 |
| 2-year evergreen |
|
| 390,000 |
|
The employment agreements provide that the base salaries may be increased at the discretion of ourthe Board. Any increase in base salary will automatically amend each executive'sexecutive’s respective employment agreement to provide that thereafter the executive'sexecutive’s annual base salary will not be less than the increased base salary approved by ourthe Board. During the term of his or her employment by us, each officer will devote the time necessary to provide the services reasonably required by ourthe Board and will not, without the express approval of ourthe Board, engage for his or her own account or for the account of any other person or entity, in a business which competes with us.
The employment agreements contain standard provisions regarding bonuses and benefits, as described in the CD&A section of this proxy statement. Additionally, the employment agreements with the named executive officers provide payments for severance upon termination of employment, including in connection with a change in control, as described under “Severance and Other Benefits Upon Termination of Employment or Change in Control” on page 21 of this proxy statement and under “Potential Payments Upon Termination or Change in Control” below.
26
During the year ended December 31, 2013, our Compensation Committee did not award stock options under our 2008 Equity Participation Plan to our Named Executive Officers. During 2013, our Compensation Committee awarded 20,000 restricted common shares under our 2008 Equity Participation Plan to Ms. Simpson as part of 2012 bonuses for services provided in 2012.
The following table presents information regarding plan-based awards made in 2016 and as of December 31, 2016 to the named executive officers and is intended to supplement the summary compensation table above:
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| All Other |
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| |
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| Estimated Possible |
| Stock |
| Grant Date |
| ||||||
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|
| Estimated Possible Payouts Under | Payouts Under Equity |
| Awards: |
| Fair Value |
| |||||||||||||
|
| Grant |
| Grant |
| Non-Equity Incentive Plan Awards | Incentive Plan Awards |
| Number |
| of Stock |
| |||||||||||||
Named Executive Officer |
| Date |
| Type |
| Threshold |
| Target |
| Max |
| Threshold |
| Target |
| Max |
| of RSAs |
| Awards |
| ||||
Wendy L. Simpson |
| 2/18/16 | (1) | RSA |
| $ | — |
| $ | — |
| $ | — |
| — |
| — |
| — |
| 22,600 |
| $ | 977,224 |
|
|
| 6/1/16 | (2) | PSU |
|
| — |
|
| — |
|
| — |
| 9,904 |
| 19,808 |
| 39,616 |
| — |
|
| 950,000 |
|
|
| — | (3) | — |
|
| 614,063 |
|
| 818,750 |
|
| 1,432,813 |
| — |
| — |
| — |
| — |
|
| — |
|
Pamela J. Shelley-Kessler |
| 2/18/16 | (1) | RSA |
|
| — |
|
| — |
|
| — |
| — |
| — |
|
|
| 11,900 |
|
| 514,556 |
|
|
| 6/1/16 | (2) | PSU |
|
| — |
|
| — |
|
| — |
| 5,213 |
| 10,425 |
| 20,850 |
| — |
|
| 500,000 |
|
|
| — | (3) | — |
|
| 175,500 |
|
| 351,000 |
|
| 526,500 |
| — |
| — |
| — |
| — |
|
| — |
|
Clint B. Malin |
| 2/18/16 | (1) | RSA |
|
| — |
|
| — |
|
| — |
| — |
| — |
|
|
| 11,900 |
|
| 514,556 |
|
|
| 6/1/16 | (2) | PSU |
|
| — |
|
| — |
|
| — |
| 5,213 |
| 10,425 |
| 20,850 |
| — |
|
| 500,000 |
|
|
| — | (3) | — |
|
| 175,500 |
|
| 351,000 |
|
| 526,500 |
| — |
| — |
| — |
| — |
|
| — |
|
(1) | Awarded under the 2015 Equity Participation Plan in 2016 for 2015 performance. These shares vest ratably over a three-year period from the grant date. |
(2) | Performance stock unit awards were granted in fiscal year 2016 under our 2015 Equity Plan, to be earned based on our absolute TSR performance over a 3.74-year period starting on the grant date (with an opportunity for an early payout after 2.74 years). Threshold amounts shown are 50% of the PSUs granted, target amounts are 100% of the PSUs granted, and maximum amounts are 200% of the PSUs granted. No PSUs are earned for performance below threshold. |
(3) | The amounts shown represents bonus opportunities for 2016 performance under the Annual Cash Bonus Incentive Plan as approved by the Compensation Committee on February 18, 2016. The actual amount awarded was based on the achievement of certain performance measures as described under “Annual Cash Bonus Incentive Plan” on page 18 of this proxy statement. The awards earned for such performance in 2016 were granted on February 14, 2017 as shown in the “Non-Equity Incentive Plan Compensation” column of the summary compensation table above. |
27
Outstanding Equity Awards at Year-End
The following table presents information regarding the outstanding equity awards held by each Named Executive Officerthe named executive officers as of December 31, 2013.2016:
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| ||||||||
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| Option awards |
| Stock awards | ||||||||||||||||||||||||
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| Equity |
| Equity |
| ||||||||||
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| Incentive |
| Incentive |
| ||||||||||
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| Plan awards: |
| Plan awards: |
| ||||||||||
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| Number of |
| Number of |
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|
| Number of |
| Market value |
| Number of |
| Market value |
| |||||||||||
|
| securities |
| securities |
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|
| shares or |
| of shares |
| shares or |
| of shares |
| |||||||||||
|
| underlying |
| underlying |
|
|
|
|
| units of |
| or units of |
| units of |
| or units of |
| |||||||||||
|
| unexercised |
| unexercised |
| Option |
| Option |
| stock that |
| stock that |
| stock that |
| stock that |
| |||||||||||
|
| options |
| options |
| exercise |
| expiration |
| have not |
| have not |
| have not |
| have not |
| |||||||||||
Named Executive Officer |
| exercisable |
| unexercisable |
| price |
| date |
| vested |
| vested(1) |
| vested |
| vested(1) |
| |||||||||||
Wendy L. Simpson |
| — |
| — |
| $ | — |
| — |
| 44,601 | (2) | $ | 2,095,355 |
| 19,808 | (4) | $ | 930,580 |
| ||||||||
Pamela J. Shelley-Kessler |
| — |
| — |
|
| — |
| — |
| 27,901 | (3) |
| 1,310,789 |
| 10,425 | (4) |
| 489,767 |
| ||||||||
Clint B. Malin |
| — |
| — |
|
| — |
| — |
| 27,901 | (3) |
| 1,310,789 |
| 10,425 | (4) |
| 489,767 |
|
| Option awards | Stock awards | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Named Executive Officer | Number of securities underlying unexercised options exercisable | Number of securities underlying unexercised options unexercisable | Option exercise price | Option expiration date | Number of shares or units of stock that have not vested | Market value of shares or units of stock that have not vested(1) | |||||||||||||
Wendy L. Simpson | — | — | $ | — | — | 69,933 | (4) | $ | 2,474,929 | ||||||||||
Pamela Shelley-Kessler | 10,000 | (2) | — | 23.79 | 05/15/17 | 28,220 | (5) | 998,706 | |||||||||||
Clint B. Malin | 10,000 | (3) | — | 23.79 | 05/15/15 | 28,220 | (5) | 998,706 | |||||||||||
10,000 | (3) | — | 23.79 | 05/15/16 | |||||||||||||||
10,000 | (3) | — | 23.79 | 05/15/17 | |||||||||||||||
Caroline L. Chikhale | — | — | — | — | 4,800 | (6) | 169,872 | ||||||||||||
Peter G. Lyew | — | — | — | — | 2,400 | (7) | 84,936 |
(1) | The market value is the number of shares that have not vested multiplied by the closing market price of our common stock as reported by the NYSE on December 30, 2016, last trading day of 2016. |
(2) | Represents number of outstanding unvested RSAs which vests as follows: 7,667 on February 10, 2017 and 2018; 6,667 on February 12, 2017; 7,533 on February 18, 2017 and 2018; 7,534 on February 18, 2019. |
(3) | Represents number of outstanding unvested RSAs which vests as follows: 5,333 on February 10, 2017; 5,334 on February 12, 2017 and February 10, 2018; 3,966 on February 18, 2017; 3,967 on February 18, 2018 and 2019. |
(4) | Represents PSUs that are eligible for vesting following the end of a four-year performance period, subject to acceleration, depending on TSR over the applicable performance period. The amounts listed are at 100% of the target PSU granted, representing the PSUs that would be earned with target performance. However, our TSR performance over the interim performance period from June 1, 2016, through December 31, 2016, would be 52.3% of target. |
Option Exercises and Stock Vested During 2013
The following table shows the number and value of stock options exercised and the number of shares and value of restricted common stock that vested related to each of our Named Executive Officers duringthe named executive officers for the year ended December 31, 2013.2016:
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|
|
| Option awards |
| Stock awards |
| ||||||
|
| Number of |
|
|
| Number of |
|
|
| ||
|
| shares |
| Value |
| shares |
| Value |
| ||
|
| acquired |
| realized |
| acquired |
| realized |
| ||
Named Executive Officer |
| on exercise |
| on exercise |
| on vesting |
| on vesting(1) |
| ||
Wendy L. Simpson |
| — |
| $ | — |
| 34,333 |
| $ | 1,540,033 |
|
Pamela J. Shelley-Kessler |
| — |
|
| — |
| 16,766 |
|
| 713,878 |
|
Clint B. Malin |
| — |
|
| — |
| 16,766 |
|
| 713,878 |
|
(1) | The value realized is the number of shares that vested multiplied by the closing market price of our common stock as reported by the NYSE on the vesting date. This differs from the compensation expense in the summary compensation table above which is determined using the fair value on the grant date of the stock award. |
28
| Option awards | Stock awards | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Number of shares acquired on exercise | Value realized on exercise(1) | Number of shares acquired on vesting | Value realized on vesting(2) | |||||||||
Wendy L. Simpson | — | $ | — | 19,932 | $ | 705,393 | |||||||
Pamela Shelley-Kessler | — | — | 7,412 | 271,804 | |||||||||
Clint B. Malin | — | — | 7,253 | 265,595 | |||||||||
Caroline L. Chikhale | — | — | 1,325 | 48,049 | |||||||||
Peter G. Lyew | — | — | 725 | 26,465 | |||||||||
T. Andrew Stokes | — | — | 19,059 | (3) | 775,524 |
(1)
Potential Payments Upon Termination or Change In Control
WeAs described under “Severance and Other Benefits Upon Termination of Employment or Change in Control” on page 21 of this proxy statement, we have provided ourthe named executive officers with employment contractsagreements that provide certain severance and other benefits depending on the circumstances surrounding their termination of employment with us.us, including upon a change in control of our company. In addition to the benefits describedreferenced below, upon termination of employment with us, the executive officer is generally entitled to amounts or benefits earned or accrued during the term of employment, including earned but unpaid salary. We have calculated the amount of any potential payments as if the termination or change of control occurred on December 31, 2013 and therefore used the closing price of our common stock as reported by the NYSE on December 31, 2013, the last trading day of 2013.
Severance and Other Benefits Upon Termination of Employment
As described above under "Description of Employment Agreements" the employment agreements we have with ourIf a named executive officers provide for payments of severance and other benefits upon termination of employment. If the executive officer'sofficer’s employment is terminated, for any reason, except for a termination for cause or a voluntary resignation without a good reason, then we have agreed to pay the officer a lump sum severance payment equal to four times base salary for Ms. Simpson and one times base salary for Mses. Shelley-Kessler and Chikhale and Messrs. Malin and Lyew. Additionally, we have agreed to extend medical and dental insurance coverage for up to 18 months, at our expense, to the executive officer. Further, we have agreed to provide Ms. Simpson with health insurance benefits for life. However, we may elect to pay Ms. Simpson a one-time cash payment of $250,000 in lieu of continuing health insurance benefits. If any payment or benefit received by Ms. Simpson from us subjects her to excise taxes under the "golden parachute" rules on payments and benefits, then we have agreed to provide her an additional "gross-up payment" to make her whole for these excise taxes and for all taxes on the gross-up payment.
The following table lists the Named Executive Officers and the estimated amounts they would have received under their respective employment agreements if their employment with us terminated for any
reason, except for a termination for cause or a voluntary resignation without a good reason on December 31, 2013:
Name | Estimated Total Value of Cash Payments-Base Salary(1) | Estimated Total Value of Health Coverage Continuation(2) | Estimated Total Value of Equity Acceleration(3)(4) | Estimated Total Value of Excise Tax "Gross-Up" | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Wendy L. Simpson | $ | 2,400,000 | $ | 250,000 | $ | 2,474,929 | $ | — | |||||
Pamela Shelley-Kessler | 360,000 | 35,000 | 1,114,706 | — | |||||||||
Clint B. Malin | 360,000 | 19,000 | 1,346,706 | — | |||||||||
Caroline L. Chikhale | 170,000 | 34,000 | 169,872 | — | |||||||||
Peter G. Lyew | 180,000 | 20,000 | 84,936 | — |
Wendy L. Simpson | Four times base salary |
Pamela J. Shelley-Kessler | Three times base salary |
Clint B. Malin | Three times base salary |
Upon such a termination of employment, we also have agreed to continue health insurance coverage for up to 18 months,benefits at our expense up to an 18-month period for the named executive officer. Estimates provided in this table areFurther, all stock options and restricted common stock automatically vest for the named executive officer and all performance-based stock units vest at the conclusion of the performance period based on amounts we paid for medicala prorated basis and dental insurance for our Named Executive Officersthe truncated service period ending at the termination.
Additionally, the provisions of the Annual Cash Bonus Incentive Plan, in 2013. As described above under "Descriptionwhich each of Employment Agreements," we agreedthe named executive officers participate, provide that the participant is eligible to provide Ms. Simpson with health insurance benefits for lifereceive a pro-rated award if Ms. Simpson'sher or his employment with us is terminated for any reason,terminates, except for a termination for cause or a voluntary resignation without a good reason. However, we may elect to pay Ms. Simpson a one-time cash payment of $250,000 in lieu of continuing health insurance benefits.
The following table lists the standard terms of our option and restricted stock award agreements, the term of any unvested option or restricted stock will accelerate if the employmentestimated amounts each of the named executive officer terminates for any reason, such as, death, disability, termination without cause, or a resignationofficers would have received under their respective employment agreements if their employment with good reason.
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| Cash |
| Maximum |
| Health Benefits |
| Equity |
| ||||
Name |
| Severance(1) |
| Bonus(2) |
| Continuation(3) |
| Acceleration(4) |
| ||||
Wendy L. Simpson(5) |
| $ | 2,620,000 |
| $ | 1,432,813 |
| $ | 27,100 |
| $ | 2,198,664 |
|
Pamela J. Shelley-Kessler(5) |
|
| 1,170,000 |
|
| 526,500 |
|
| 34,700 |
|
| 1,365,145 |
|
Clint B. Malin(5) |
|
| 1,170,000 |
|
| 526,500 |
|
| 23,300 |
|
| 1,365,145 |
|
(1) | Represents base salaries and termination provisions in effect at December 31, 2016. |
(2) | Represents the maximum payable to participants in the Annual Cash Bonus Incentive Plan for 2016. The actual amount for 2016 performance was less, as shown in the “Non-Equity Incentive Plan Compensation” column of the summary compensation table above. |
(3) | Assumes the value of benefits for an 18-month period required by the named executive officer’s employment agreement is at the same monthly amount paid for her or his medical, dental and vision insurance in 2016. |
(4) | For unvested restricted common stock, this amount represents the closing market price as reported by the NYSE on December 30, 2016, last trading date in 2016. For unvested performance-based stock units, this amount is based on interim TSR performance measured as of December 30, 2016, last trading date in 2016, the prorated service term from the grant date to December 31, 2016, and the closing market price as reported by the NYSE on December 30, 2016, last trading date in 2016. |
(5) | The employment agreements for each of the named executive officers contain “cut back” provisions to reduce severance benefits if an excise tax otherwise would be due and payable by them. We have assumed that no severance benefits would be cut back under the named executive officer’s employment agreement. The actual severance benefits payable to the named executive officers may be less than the amounts shown above as a result of the application of the cut back. |
29
Severance and Other Benefits Upon Change ofin Control
As described above under "Description“Severance and Other Benefits Upon Termination of Employment Agreements" the employment agreementsor Change in Control” on page 21 of this proxy statement, we have with our Named Executive Officers provide for payments ofagreed to pay severance and other benefits to the named executive officers upon our company’s change in control as defined in each named executive officer’s employment agreement. The employment agreements with each of the named executive officers are triggered if (i) her or his employment is terminated, except for a change of control of our company. Upontermination for cause or a voluntary resignation without a good reason, and (ii) such termination occurs within 24 months following a change in control or in contemplation of our company whether or not the Named Executive Officer's employment is terminated,a change in control which actually occurs.
Upon such an occurrence, we have agreed to pay the Named Executive Officernamed executive officer a severance payment in cash equal to $3,000,000 for Ms. Simpson and two times base salary for Mses. Shelley-Kessler and Chikhale and Messrs. Malin and Lyew. If any payment or benefit received by Ms. Simpson from us subjects her to excise taxes under the "golden parachute" rules on payments and benefits, thenfollowing:
Wendy L. Simpson | Greater of $3,000,000 or 300% of 5-year average annual compensation |
Pamela J. Shelley-Kessler | 250% of 5-year average annual compensation |
Clint B. Malin | 250% of 5-year average annual compensation |
Upon such an occurrence, we also have agreed to provide hercontinue health insurance benefits at our expense up to an additional "gross-up payment" to make her whole18-month period for these excise taxes and for all taxes on the gross-up payment.named executive officers. Further, upon a changeunder the standard provisions of controlour equity compensation plan award agreements, all stock options and/orand restricted common stock automatically vest.
A "Changevest upon a change in Control" occurs if:
(a) Any Person or related group of Persons (other than Executivecontrol for the named executive officers and her Related Persons, our company or a Person that directly or indirectly controls, is controlled by, or is under common control with, our company) is or becomesall the Beneficial Owner, directly or indirectly, of securities of our company representing 30% or moreperformance-based stock units deemed earned as of the combined voting powerdate of our company's then outstanding securities;the change of control, will vest upon termination within 24 months following a change in control.
(b) The stockholdersAdditionally, the provisions of our company approvethe Annual Cash Bonus Incentive Plan, in which each of the named executive officers participate, provide that the participant is eligible to receive a merger or consolidationportion of our company with any other corporation (or other entity), other than a merger or consolidation which would resultthe target amount of the award based upon the number of days remaining in the voting securities of our company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities ofperformance period upon the surviving entity) more than 662/3% of the combined voting power of the voting securities of the company or such surviving entity outstanding immediately after such merger or consolidation; provided,
however, that a merger or consolidation effected to implement a recapitalization of our company (or similar transaction)change in which no Person acquires 30% or more of the combined voting power of our company's then outstanding securities shall not constitute a Change in Control;control.
(c) The stockholders of our company approve a plan of complete liquidation of the company or an agreement for the sale or disposition by our company of all or substantially all of our company's assets; or
(d) A majority of the members of the Board of Directors of our company cease to be Continuing Directors.
The following table lists the Named Executive Officers and the estimated amounts theyeach of the named executive officers would have received under their respective employment agreements if there had been a change of control of our company on December 31, 2013 whether or not the Named Executive Officer's employment is terminated:
Name | Estimated Total Value of Cash Payments- Base Salary(1) | Estimated Total Value of Health Coverage Continuation(2) | Estimated Total Value of Equity Acceleration(3) | Estimated Total Value of Excise Tax "Gross-Up" | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Wendy L. Simpson | $ | 3,000,000 | $ | 250,000 | $ | 2,474,929 | $ | — | |||||
Pamela Shelley-Kessler | 720,000 | — | 1,114,706 | — | |||||||||
Clint B. Malin | 720,000 | — | 1,346,706 | — | |||||||||
Caroline L. Chikhale | 340,000 | — | 169,872 | — | |||||||||
Peter G. Lyew | 360,000 | — | 84,936 | — |
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| Cash |
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| Health Benefits |
| Equity |
| |||
Name |
| Severance(1) |
| Target Bonus(2) |
| Continuation(3) |
| Acceleration(4) |
| ||||
Wendy L. Simpson(5) |
| $ | 6,280,298 |
| $ | 818,750 |
| $ | 27,100 |
| $ | 2,582,350 |
|
Pamela J. Shelley-Kessler(5) |
|
| 2,657,105 |
|
| 351,000 |
|
| 34,700 |
|
| 1,567,065 |
|
Clint B. Malin(5) |
|
| 2,898,444 |
|
| 351,000 |
|
| 23,300 |
|
| 1,567,065 |
|
(1) | Represents base salaries and change in control provisions in effect at December 31, 2016. |
(2) | Represents the target amount payable to participants in the Annual Cash Bonus Incentive Plan for 2016. |
(3) | Assumes the value of benefits for a period required by the named executive officer’s employment agreement is at the same monthly amount paid for her or his medical, dental and vision insurance in 2016. |
(4) | For unvested restricted common stock, this amount represents the closing market price as reported by the NYSE on December 30, 2016, last trading day in 2016. For unvested performance-based stock units, this amount is based on interim TSR performance measured as of December 30, 2016, last trading date in 2016, and the closing market price as reported by the NYSE on December 30, 2016, last trading date in 2016. |
(5) | The employment agreements for each of the named executive officers contain “cut back” provisions to reduce severance benefits if an excise tax otherwise would be due and payable by them. We have assumed that no severance benefits would be cut back under the named executive officer’s employment agreement. The actual severance benefits payable to the named executive officer may be less than the amounts shown above as a result of the application of the cut back. |
30
Compensation for ourthe Board of Directors typicallycurrently consists of quarterly board fees fees for attending meetings whether in-person or by telephone, and periodic equity awards. The following table presents information regarding the compensation during 2013 earned by or paid to non-employee members of our Board of Directors. One member of ourthe Board, Ms. Simpson, is also employed by us and therefore is not entitled to receive additional compensation for her services as director. Compensation information related to our employee directorMs. Simpson is included in the previous discussion and tables related to executive compensation.
Director Compensation for the Year ended December 31, 2013
2016
Name | Fees Earned or Paid in Cash | Stock Awards(1) | Option Awards(1) | Total | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Boyd W. Hendrickson | $ | 53,700 | $ | 97,734 | $ | — | $ | 151,434 | |||||
Edmund C. King | 52,300 | 97,734 | — | 150,034 | |||||||||
Devra G. Shapiro | 50,900 | 97,734 | — | 148,634 | |||||||||
Timothy J. Triche | 53,400 | 97,734 | — | 151,134 |
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| Fees Earned or |
| Stock |
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| ||
Name |
| Paid in Cash |
| Awards(1) |
| Total |
| |||
Boyd W. Hendrickson |
| $ | 100,000 |
| $ | 130,823 |
| $ | 230,823 |
|
James J. Pieczynski |
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| 85,000 |
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| 143,580 |
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| 228,580 |
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Devra G. Shapiro |
|
| 90,000 |
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| 130,823 |
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| 220,823 |
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Timothy J. Triche |
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| 90,000 |
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| 130,823 |
|
| 220,823 |
|
(1) | Please see “Equity Awards” below for the aggregate number of stock awards and option awards outstanding at year end. Represents the fair value on the grant date of the stock awards and option awards granted. Under U.S. generally accepted accounting principles, compensation expense with respect to stock awards and option awards granted is generally recognized over the vesting periods applicable to the awards. For a discussion of the assumptions and methodologies used to value the stock awards and option awards granted refer to Note 9. Equity of Notes to Consolidated Financial Statements included in our company’s 2016 Annual Report on Form 10-K. |
Quarterly Board and Meeting Fees
The following table represents the schedule of meeting fees and quarterly fees for each non-employee director in effect during 2013:2016:
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Type of Fee(1) |
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| |
Quarterly Fee |
| $ | 15,000 |
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Quarterly Lead Independent Director Fee |
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| 6,250 |
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Quarterly Audit Committee Chairman Fee |
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| 5,000 |
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Quarterly Compensation Committee Chairman Fee |
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| 5,000 |
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Quarterly Nominating Committee Chairman Fee |
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| 3,750 |
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Quarterly Committee Membership Fee |
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| 3,750 |
|
(1) | Additionally, we reimburse non-employee directors for travel expenses incurred in connection with their duties as our director. Travel expense reimbursements are not included in this table. |
31
Type of Fee(1) | January to June | July to December | |||||
---|---|---|---|---|---|---|---|
Quarterly Fee | $ | 6,750 | $ | 7,000 | |||
Quarterly Lead Director Fee | 3,750 | 4,000 | |||||
Quarterly Audit Committee Chairman Fee | 3,750 | 4,000 | |||||
Quarterly Compensation Committee Chairman Fee | 2,500 | 2,750 | |||||
Quarterly Nominating Committee Chairman Fee | 2,500 | 2,750 | |||||
Meeting Fee(2) | 1,600 | 1,600 | |||||
Committee Meeting Fee(2) | 1,100 | 1,100 |
(1)
Equity Awards
Directors participate in ourthe 2015 and 2008 Equity Participation Plan which permits the Compensation Committee to grant nonqualified stock options or restricted common shares to directors from time-to-time. In 2013,2016, the Compensation Committee granted 2,1001,920 shares of restricted common stock at $46.87 per share to Ms. Shapiro, Messrs. Hendrickson and King and Dr. Triche at $46.54 per share.each non-employee director. These shares vest ratably over a three-yearone-year period from the grant date. The following table presents the number of
outstanding and unexercised option awards and the number of unvested shares of restricted common stock held by each of our non-employee directors at December 31, 2013.2016:
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| Number of unvested |
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| shares of restricted |
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| Number of options |
| common stock |
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Name |
| outstanding |
| outstanding |
|
Boyd W. Hendrickson |
| — |
| 1,920 | (4) |
James J. Pieczynski |
| 15,000 | (1) | 2,920 | (5) |
Devra G. Shapiro |
| 15,000 | (2) | 1,920 | (4) |
Timothy J. Triche |
| 3,334 | (3) | 1,920 | (4) |
Name | Number of options outstanding | Number of unvested shares of restricted common stock outstanding | |||||
---|---|---|---|---|---|---|---|
Boyd W. Hendrickson | — | 3,934 | (4) | ||||
Edmund C. King | 3,334 | (1) | 3,934 | (4) | |||
Devra G. Shapiro | 15,000 | (2) | 3,934 | (4) | |||
Timothy J. Triche | 10,000 | (3) | 3,934 | (4) |
(1) | 5,000 vested on March 1, 2015 and 2016; 5,000 vests on March 1, 2017 |
(2) | 5,000 vested on July 30, 2010, 2011 and 2012 |
(3) | 3,334 vested on May 15, 2010 |
(4) | Vests as follows: 1,920 on June 1, 2017 |
(5) | Vests as follows: 1,000 on March 1, 2017; 1,920 on June 1, 2017 |
TheThis Compensation Committee Report shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statementproxy statement into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that weLTC specifically incorporate this information by reference, and shall not otherwise be deemed filed under such Acts.
The Compensation Committee of the Board of Directors has reviewed and discussed with management the Executive Compensation Discussion and Analysis for 2013.2016. Based on the review and discussions, the Compensation Committee recommended to the Board, and the Board has approved, that the Executive Compensation Discussion and Analysis be included in this Proxy Statement.proxy statement.
Compensation | ||
Timothy J. Triche, |
Compensation Committee Interlocks and Insider Participation
During 2013, theThe Compensation Committee in 2016 consisted of Timothy J. Triche, MD, Edmund C. KingBoyd W. Hendrickson, James J. Pieczynski and Devra G. Shapiro, all of whom are independent directors. None of the members of the Compensation Committee are, or have been, officers or employees of theour company. There are no "interlocks" (as“interlocks” as defined by theSEC rules of the SEC) with respect to any member of the Compensation Committee of the Board of Directors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
ThisThe following table showspresents information as of April 8, 201414, 2017 with respect to the beneficial ownership of our common stock by (1) each person who is known by us to own beneficially more than 5% of our common shares based on the most recent Schedule 13D or 13G filings made by such person with the Securities and Exchange CommissionSEC pursuant to SEC rules and regulations, promulgated under the Exchange, (2) each director and director nominee, (3) each Named Executive Officernamed executive officer identified in the Summary Compensation Table above,summary compensation table on page 25 of this proxy statement, and (4) the current directors and executive officers as a group.group:
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| Percent of |
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| Amount and Nature of |
| Outstanding |
|
Beneficial Owner |
| Title of Class | Beneficial Ownership(1) |
| Shares in Class(2) |
| |
Principal Stockholders: |
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The Vanguard Group, Inc. |
| Common Stock |
| 6,251,414 | (3) | 15.8 | % |
100 Vanguard Boulevard |
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Malvern, PA 19355 |
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BlackRock, Inc. |
| Common Stock |
| 5,668,050 | (4) | 14.3 | % |
55 East 52nd Street |
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New York, NY 10055 |
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Vanguard Specialized Funds—Vanguard REIT Index Fund |
| Common Stock |
| 2,896,798 | (5) | 7.3 | % |
100 Vanguard Boulevard |
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Malvern, PA 19355 |
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Franklin Resources, Inc. |
| Common Stock |
| 2,411,731 | (6) | 6.1 | % |
One Franklin Parkway |
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San Mateo, CA 94403 |
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Named Executive Officers: |
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|
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Wendy L. Simpson |
| Common Stock |
| 337,778 |
| * |
|
Pamela J. Shelley-Kessler |
| Common Stock |
| 86,534 | (7) | * |
|
Clint B. Malin |
| Common Stock |
| 76,002 |
| * |
|
Directors and Director Nominees: + |
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|
Boyd W. Hendrickson |
| Common Stock |
| 15,743 |
| * |
|
James J. Pieczynski |
| Common Stock |
| 29,120 | (8) | * |
|
Devra G. Shapiro |
| Common Stock |
| 30,720 | (8) | * |
|
Timothy J. Triche |
| Common Stock |
| 35,522 | (8) | * |
|
All current directors and executive officers as a group (7 persons) |
| Common Stock |
| 611,419 | (7)(8) | 1.5 | % |
Beneficial Owner | Title of Class | Amount and Nature of Beneficial Ownership(1) | Percent of Outstanding Shares in Class(2) | ||||||
---|---|---|---|---|---|---|---|---|---|
Principal Stockholders: | |||||||||
The Vanguard Group, Inc. | Common Stock | 4,494,013 | (3) | 12.9 | % | ||||
BlackRock, Inc. | Common Stock | 3,789,827 | (4) | 10.9 | % | ||||
AllianceBernstein LP | Common Stock | 2,618,818 | (5) | 7.5 | % | ||||
Vanguard Specialized Funds—Vanguard REIT Index Fund | Common Stock | 2,349,456 | (6) | 6.7 | % | ||||
100 Vanguard Boulevard | |||||||||
Malvern, PA 19355 | |||||||||
National Health Investors, Inc. | Common Stock | 2,293,800 | (7) | 6.2 | % | ||||
222 Robert Rose Drive | |||||||||
Murfreesboro, TN 37129 | |||||||||
Named Executive Officers: | |||||||||
Wendy L. Simpson | Common Stock | 402,479 | (8) | 1.2 | % | ||||
Pamela Shelley-Kessler | Common Stock | 97,022 | (9)(10) | * | |||||
Clint B. Malin | Common Stock | 92,513 | (9) | * | |||||
Caroline L. Chikhale | Common Stock | 13,381 | * | ||||||
Peter G. Lyew | Common Stock | 9,546 | * | ||||||
T. Andrew Stokes | Common Stock | 26,219 | (11) | * | |||||
Directors and Director Nominees: + | |||||||||
Boyd W. Hendrickson | Common Stock | 7,267 | * | ||||||
Edmund C. King | Common Stock | 46,335 | (9)(12) | * | |||||
James J. Pieczynski | Common Stock | 3,000 | * | ||||||
Devra G. Shapiro | Common Stock | 24,600 | (9) | * | |||||
Timothy J. Triche, M.D. | Common Stock | 42,202 | (9) | * | |||||
All current directors and executive officers as a group (10 persons) | Common Stock | 738,345 | (8)(9)(10)(12) | 2.1 | % |
+ Does not include information concerning Ms. Simpson, for whom information is provided under the Named Executive Officers heading above.
(1) | Except as otherwise noted below, all shares are owned beneficially by the individual or entity listed with sole voting and/or investment power. |
(2) | For purposes of computing the percentages, the number of shares outstanding on April 14, 2017 was 39,573,448. |
(3) | Based upon information contained in a Schedule 13G/A filed with the SEC on February 10, 2017 by The Vanguard Group, Inc. (“VGI”) with respect to the ownership of our common stock as of December 31, 2016, VGI beneficially owns 6,251,414 shares. VGI has the sole power to vote or to direct the vote of 121,471 shares and sole power to dispose of or to direct the disposition of 6,135,373 shares. Vanguard Fiduciary Trust Company (“VFTC”), a wholly-owned subsidiary of VGI, is the beneficial owner of 69,257 shares of our common stock outstanding as a result of its serving as investment manager of collective trust accounts. Vanguard Investments Australia, Ltd. (“VIA”), a wholly-owned subsidiary of VGI, is the beneficial owner of 98,998 shares of our common stock outstanding as a result of its serving as investment manager of Australian investment offerings. |
(4) | Based upon information contained in a Schedule 13G/A filed with the SEC on January 12, 2017 by BlackRock, Inc. (“BlackRock”) with respect to the ownership of our common stock as of December 31, 2016, BlackRock |
33
beneficially owns 5,668,050 shares. BlackRock has the sole power to vote or to direct the vote of 5,578,737 shares and sole power to dispose or to direct the disposition of 5,668,050 shares. |
(5) | Based upon information contained in a Schedule 13G/A filed with the SEC on February 13, 2017 by Vanguard Specialized Funds—Vanguard REIT Index (“Vanguard REIT”) with respect to ownership of our common stock as of December 31, 2016, Vanguard REIT beneficially owns and has sole power to vote or to direct the vote over 2,896,798 shares. | |||
| (6) | Based upon information contained in Schedule 13G filed with the SEC on February 7, 2017 by Franklin Resources, Inc. (“FRI”), with respect to the ownership of our common stock as of December 31, 2016, FRI, Charles B. Johnson, Rupert H. Johnson, Jr., and Franklin Advisory Services, Inc. (“FAS”) beneficially own 2,411,731 shares. FAS has the sole power to vote or to direct the vote of 2,164,931 shares and sole power to dispose or to direct the disposition of 2,411,731 shares. |
(7) | Includes 1,000 shares of common stock held by spouse in an individual retirement account. |
(8) | Includes shares purchasable by such individual upon exercise of outstanding options that are presently exercisable or will become exercisable within 60 days of April 14, 2017 as follows: |
| Exercisable | |||
| Outstanding | |||
Director and Director Nominees: | Options | |||
| 15,000 | |||
Devra G. Shapiro | 15,000 | |||
Timothy J. Triche | 3,334 |
Securities Authorized for Issuance under Equity Compensation Plans
Securities authorized for issuance under equity compensation plans as of December 31, 20132016 is as follows:
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Equity Compensation Plan Information | Equity Compensation Plan Information | Equity Compensation Plan Information |
| |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
| (a) |
| (b) |
| (c) |
| |||||||||||
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|
| Number of securities remaining |
| |||||||||||
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| Number of securities to |
| Weighted-average |
| available for future issuance |
| |||||||||||
|
| be issued upon exercise |
| exercise price of |
| under equity compensation |
| |||||||||||
| (a) | (b) | (c) |
| of outstanding options |
| outstanding options, |
| plans (excluding securities |
| ||||||||
Plan Category | Number of securities to be issued upon exercise of outstanding options warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
| warrants and rights |
| warrants and rights |
| reflected in column (a)) |
| ||||||||
Equity compensation plans approved by security holders | 73,334 | $ | 23.97 | 202,521 |
| 33,334 |
| $ | 30.76 |
| 1,218,806 |
| ||||||
Equity compensation plans not approved by security holders | — | — | — |
| — |
|
| — |
| — |
| |||||||
| | | | | | | ||||||||||||
Total | 73,334 | $ | 23.97 | 202,521 |
| 33,334 |
| $ | 30.76 |
| 1,218,806 |
| ||||||
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| | | | | | |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Review, Approval or Ratification of Transactions with Related Persons
We have adopted a written policy that addresses related person transactions requiring disclosure under Item 404 of Regulation S-K under the Securities Act. AUnder our Related Person Transaction Policy, a related person of our company includes a director, a director nominee, an executive officer, a stockholder beneficially owning a 5% voting interest in our company, or an immediate family member of any of the foregoing. Under the policy, any transaction in which a related person has a direct or indirect material interest and where the amount exceeds $120,000 must be approved by disinterested members of ourthe Board of Directors.
In determining whether to approve or ratify a related person transaction, ourthe Board of Directors will take into account, whether (i) the terms are fair to our company and on the same basis generally available to an unrelated person, (ii) there are business reasons for our company to enter into the transaction, (iii) it would impair independence of an outside director, and (iv) it would present an improper conflict of interest, taking into account factors that ourthe Board deems relevant.
34
Transactions with Related Persons
During 2013, the only relationshipThere were no transactions within the scope of Item 404our Related Person Transactions Policy since the beginning of Regulation S-K involved Boyd W. Hendrickson, one of our independent directors. His interest arose indirectly and as a result of previously serving as Chief Executive Officer of SHG. Mr. Hendrickson retired as Chief Executive Officer of SHG and stepped down from SHG's board of directors on November 20, 2013.
During September 2007, SHG purchased the assets of Laurel Healthcare (or Laurel). One of the assets SHG purchased was Laurel's leasehold interests in the skilled nursing properties Laurel leased from us under a 15-year master lease agreement dated in February 2006. Our Board of Directors, with Mr. Hendrickson abstaining, ratified our consent to the assignment of Laurel's master lease to subsidiaries of SHG. The economic terms of the master lease agreement did not change as a result of our assignment of the master lease to subsidiaries of SHG. During 2013, subsidiaries of SHG paid us approximately $4,479,000 in rent and2016 nor are expected to pay approximately $4,591,000 in rent to us during 2014. During 2013, we recorded approximately $22,000 of straight-line rental income from subsidiaries of SHG and expect to reduce straight-line rental income from subsidiaries of SHG by approximately $90,000 in 2014. At December 31, 2013, the straight-line rent receivable from subsidiaries of SHG was $3,213,000.any currently proposed.
In accordance with theNYSE listing standards, of the NYSE, our Corporate Governance Guidelines provide that:
· | A director who is, or has been within the last three years, an employee of our company, or whose immediate family member is, or has been within the last three years, an executive officer of our company, may not be deemed independent. Employment as an interim Chairman or Chief Executive Officer will not disqualify a director from being considered independent following that employment. |
· | A director who has received, or who has an immediate family member who has received, during any twelve-month period within the last three years, more than $120,000 in direct compensation from our company, 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), may not be deemed independent. Compensation received by a director for former service as an interim Chairman or Chief Executive Officer and compensation received by an immediate family member for service as a non-executive employee of our company will not be considered in determining independence under this test. |
· | A director who is, or whose immediate family member is, a current partner of a firm that is our company’s external auditor; a director who is a current employee of such a firm; a director who has an immediate family member who is a current employee of such a firm and who participates in the firm’s audit, assurance or tax compliance (but not tax planning) practice; or a director who was, 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 company’s audit within that time may not be deemed 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 company’s present executive officers at the time serves or served on that company’s compensation committee may not be deemed 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, our company for property or services in an amount which, in any of the last three years, exceeds the greater of $1 million or 2% of such other company’s consolidated gross revenues, may not be deemed independent. |
Pursuant to our Corporate Governance Guidelines, on Director Independence, the Board undertook its annual review of director independence in 2013.2016. During this review, the Board considered transactions and relationships between each director or any member of his or her immediate family and our company and its subsidiaries and affiliates, including those within the scope of "Transactions with Related Persons" above.affiliates. The Board also considered whether there were any transactions or relationships between directors or any member of their immediate family (or any entity of which a director or an immediate family member is an executive officer, general partner or significant equity holder) and members of our senior management or their affiliates. The purpose of this review was to determine whether any such relationships or transactions existed that were inconsistent with a determination that the director is independent.
The Board has affirmatively determined that each of the current directors standing is independent within the meaning of our director independence standards, which reflect the NYSE director independence standards, except for Ms. Simpson. Ms. Simpson is considered an inside director because of her employment as a senior executive officer of our company. In determining that each of the other directors is independent, the Board considered that Boyd W. Hendrickson, one of our independent directors, did serve as the chief executive officer of SHG. During 2007, SHG purchased the assets of one of our operators and now operates skilled nursing properties under a master lease with us. The payments received from SHG did not exceed 2% of SHG's consolidated gross revenues. Mr. Hendrickson does not have a direct material interest in these transactions and his only interest arises solely from his former position as Chief Executive Officer of SHG. On November 20, 2013, Mr. Hendrickson retired as Chief Executive Officer of SHG and stepped down from SHG's board of directors. The Board determined that this former relationship did not impair Mr. Hendrickson's independence.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES AND SERVICES
Ernst & Young LLP audited our financial statements during year ended December 31, 20132016 and have been our auditors since our organization in May 1992. Their fees for the last two fiscal years were:
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| 2013 | 2012 |
| 2016 |
| 2015 |
| |||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Audit Fees | $ | 496,045 | $ | 483,385 |
| $ | 637,500 |
| $ | 628,000 |
| |||
Audit-Related Fees | — | — |
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| — |
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| — |
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Tax Fees | 54,680 | 51,330 |
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| 67,214 |
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| 80,855 |
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All Other Fees | — | — |
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| — |
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| — |
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Audit Fees
For 20132016 and 2012,2015, these fees represent aggregate fees billed for professional services rendered for the audit of our annual financial statements and internal control over financial reporting, the review of the financial statements included in our Quarterly Reports on Form 10-Q, advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements and work on securities and other filings with the SEC, including comfort letters and consents.
Tax Fees
These fees represent aggregate fees billed for services rendered for tax compliance and consultation, including REIT qualification matters during 20132016 and 2012.2015.
All audit, audit related and tax services were pre-approved by the Audit Committee. On an annual basis the Audit Committee pre-approves specifically described audit, audit-related and tax services to be performed by Ernst & Young LLP. The Audit Committee has delegated to the Chair of the Audit Committee Chairman the authority to pre-approve non-audit services to be performed by Ernst & Young LLP, provided that the ChairChairman shall report any decision to pre-approve such non-audit services to the full Audit Committee at its next regular meeting.
In accordance with Section III, Item 6 of the Audit Committee Charter, the Audit Committee reviewed the effectiveness of Ernst & Young LLP'sLLP’s audit effort, including approval of the scope of, and fees charged in connection with, the annual audit, quarterly reviews and any non-audit services provided. The Audit Committee concluded that the provision of the non-audit services by Ernst & Young��Young LLP was compatible with the maintenance of that firm'sfirm’s independence in the conduct of its auditing functions.
36
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
TheThis Audit Committee Report of LTC Properties, Inc. (or company) shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statementproxy statement into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such Acts.
The Audit Committee of the Board of Directors has oversight of all compliance related to financial matters, Securities and Exchange Commission reporting and auditing. Additionally, it is the Audit Committee'sCommittee’s duty to review annually the Audit Committee Charter and recommend any changes to the Board.
The Audit Committee is appointed by the Board to assist the Board in its oversight function by monitoring, among other things, the integrity of the company'sLTC’s financial statements, the company'sLTC’s financial reporting process and the independence and performance of the independent registered public accounting firm. It is the responsibility of LTC’s management of the company to prepare financial statements in accordance with U.S. generally accepted accounting principles and of the company'sLTC’s independent registered public accounting firm to audit those financial statements. The Audit Committee has the sole authority and responsibility to select, appoint, evaluate, compensate and retain, approve significant non-audit services, confirm the independence of the independent registered public accounting firm and, where appropriate, replace the independent registered public accounting firm. Additionally, the Audit Committee determines the extent of funding that the companyLTC must provide to it.
Management is responsible for the company'sLTC’s internal controls and the financial reporting process. The independent registered public accounting firm is responsible for performing an independent audit of the company'sLTC’s consolidated financial statements and internal control over financial reporting in accordance with standards of the Public Company Accounting Oversight Board (United States) and to issue a report thereon. The Audit Committee'sCommittee’s responsibility is to monitor and oversee these processes.
In this context, the Audit Committee has met and held discussions with management and Ernst & Young LLP, the company'sLTC’s independent registered public accounting firm. Management represented to the Audit Committee that the company'sLTC’s consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles, and the Audit Committee has reviewed and discussed the audited consolidated financial statements with management and Ernst & Young LLP. The Audit Committee discussed with Ernst & Young LLP matters required to be discussed by Auditing Standard No. 16, as adopted by the Public Company Accounting Oversight Board.
In addition,Additionally, the Audit Committee has received the written disclosures and the letter required by the Public Company Accounting Oversight Board'sBoard’s Ethic and Independence Rule 3526 (Communications with Audit Committees Concerning Independence), as amended, from Ernst & Young LLP and has discussed with Ernst & Young LLP its independence from the companyLTC and its management. Further, theThe Audit Committee also has considered whether the non-audit services provided by Ernst & Young LLP are compatible with maintaining its independence.
Further, the Audit Committee periodically meets with Ernst & Young LLP, without management present, to discuss the results of their examinations, the evaluations of the company'sLTC’s internal controls and the overall quality of the company'sLTC’s financial reporting.
During the past year, the Audit Committee met with Ernst & Young LLP sevensix times in total and without management present once.twice.
Based on the reviews and discussions referred to above, and subject to the limitations on the role and responsibilities of the Audit Committee referred to above and set forth in the Charter, the Audit
Committee recommended to the Board that the audited financial statements be included in the company's 2013LTC’s 2016 Annual Report on Form 10-K10‑K for filing with the Securities and Exchange Commission.
Audit | ||
Devra G. Shapiro, |
37
Management continually monitors the material risks facing our company, including financial risk, strategic risk, operational risk, and legal and compliance risk. The Board of Directors is responsible for exercising oversight of management'smanagement’s identification of, planning for, and managing those risks. The Board may delegate to its committees oversight responsibility for those risks that are directly related to their area of focus. Pursuant to its charter, the Audit Committee has the responsibility and duty to review the financial, investment and risk management policies followed by our company in operating its business activities. The full Board reviews risks that may be material to our company, including those detailed in the Audit Committee'sCommittee’s reports and as disclosed in our quarterly and annual reports filed with the SEC. We believe that our leadership structure also enhances the Board'sBoard’s risk oversight function. Due to her role as Chief Executive Officer, and President, and knowledge of our company and industry, our ChairmanMs. Simpson is well-positioned to lead Board discussions on risk areas. Our ChairmanMs. Simpson regularly discusses with management the material risks facing our company and is also expected to report candidly to her fellow directors on her assessment of those material risks. This structure fosters greater communication between management and the Board on matters including with respect risk.
Other business may properly come before the 20142017 Annual Meeting of Stockholders, and in that event, the proxy holders will vote as recommended by the Board of Directors or, if no recommendation is given, in their own discretion. However, we have not received timely and proper notice from any stockholder of any other matter to be prepared at the 20142017 Annual Meeting. Our management and Board of Directors know of no matters to be brought before the 20142017 Annual Meeting other than as set forth herein.described in this proxy statement.
Stockholder proposals intended to be presented at the 20152018 Annual Meeting of Stockholders must be received by us for inclusion in our proxy statement by December 29, 201426, 2017 and otherwise comply with theSEC rules and regulations of the SEC governing inclusion of such proposals. Any proposal received after December 26, 2017 will be untimely, in accordance with SEC rules and regulations.
Matters (other than nominations of candidates for election as directors) may be brought before the meeting by stockholders only by complying with the procedure set forth in our company’s Bylaws, which in summary requires that notice be delivered to our principal executive offices not less than 60 days nor more than 150 days prior to the anniversary of the 20142017 Annual Meeting of Stockholders. Each such stockholder notice shall set forth (i) as to each matter the stockholder proposes to bring before the 20152018 Annual Meeting, (a) a brief description of the matter desired to be brought before the 20152018 Annual Meeting and the reasons for bringing such matter before the 20152018 Annual Meeting and (b) any material interest of the stockholder in such matter; and (ii) as to the stockholder giving the notice (a) the name and address, as they appear on our books, of such stockholder and any other stockholders known by such stockholder to be supporting the bringing of such matter before the 20152018 Annual Meeting as of the date of such stockholder notice and (b) the class and number of shares of our capital stock which are beneficially owned by such stockholder on the date of such stockholder notice and by any other stockholder known by such stockholder to be supporting the bringing of such matter before the 20152018 Annual Meeting as of the date of such stockholder notice.
For information regarding nominating candidates for election as directors, please refer to "Considerationsee “Consideration of Director Nominees" in the Corporate Governance Principles and Board Matters section above.Nominees” on page 5 of this proxy statement.
We have adopted a procedure permitted by SEC rules called "householding."“householding.” Under this procedure, stockholders of record who have the same address and last name will receive only one copy
of our Notice of Annual Meeting of Stockholders, Proxy Statement, and Annual Report, unless one or more of these stockholders notifies us that they wish to continue receiving individual copies. This procedure will reduce our printing costs and postage fees.
Stockholders who participate in householding will continue to receive separate proxy cards. Also, householdingHouseholding will not in any way affect dividend check mailings.
38
If you are eligible for householding, but you and other stockholders of record with whom you share an address currently receive multiple copies of the Notice of Annual Meeting of Stockholders and Proxy Statement and the accompanying documents, or if you hold stock in more than one account, and in either case you wish to receive only a single copy of each of these documents for your household, please contact our transfer agent, American Stock Transfer & Trust Company, at 866-708-5586.
If you participate in householding and wish to receive a separate copy of this Notice of Annual Meeting of Stockholders, Proxy Statement and the accompanying documents, or if you do not wish to participate in householding and prefer to receive separate copies of these documents in the future, please also contact our transfer agent, American Stock Transfer & Trust Company, at 866-708-5586.
"Street name"“Street name” beneficial owners can request information about householding from their banks, brokers, or other nominee holders of record.
Directions to the Hyatt Westlake Plaza, 880 S. Westlake Blvd., Westlake Village, CaliforniaCA 91361.
| US-101 South | ||
•Exit Westlake Blvd. |
•Exit Westlake Blvd. | ||
•
|
Turn left onto Westlake Blvd. | •Continue straight through at the traffic light | |
•Turn left at the first traffic light | •First right will take you directly to the Hyatt |
| |
•First right will take you directly to the Hyatt |
By Order of the Board of Directors | ||
PAMELA J. SHELLEY-KESSLER | ||
Westlake Village, California April | Executive Vice President, Chief Financial Officer and Corporate Secretary |
39
RECONCILIATIONS OF NON-GAAP
FINANCIAL MEASURES
NORMALIZED FUNDS FROM OPERATIONS(1)
(Unaudited, amounts in thousands, except per share amounts)
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| Year Ended |
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| December 31, 2016 |
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GAAP Net income available to common stockholders |
| $ | 84,730 |
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Add: Depreciation and amortization |
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| 35,932 |
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Add: Impairment on real estate for sale |
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| 766 |
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Less: Gain on sale of real estate, net |
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| (3,582) |
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NAREIT FFO attributable to common stockholders(1) |
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| 117,846 |
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Add: Non-recurring one-time items |
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| — |
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Normalized FFO attributable to common stockholders |
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| 117,846 |
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Effect of dilutive securities: |
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Participating securities |
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| 385 |
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Convertible preferred stock |
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| — |
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Diluted normalized FFO attributable to common stockholders |
| $ | 118,231 |
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Shares for basic FFO per share |
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| 38,388 |
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Effect of dilutive securities: |
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Stock options |
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| 13 |
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Performance based stock units |
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| 27 |
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Participating securities |
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| 169 |
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Convertible preferred securities |
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| — |
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Shares for diluted FFO per share |
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| 38,597 |
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Basic normalized FFO per share |
| $ | 3.07 |
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Diluted normalized FFO per share |
| $ | 3.06 |
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(1) | Funds From Operations (“FFO”) is a supplemental measure of a real estate investment trust’s (“REIT”) financial performance that is not defined by U.S. generally accepted accounting principles (“GAAP”). Investors, analysts and our management and board of directors use FFO as a supplemental measure of operating performance. We believe FFO is helpful in evaluating the operating performance of a REIT. Real estate values historically rise and fall with market conditions, but cost accounting for real estate assets in accordance with GAAP assumes that the value of real estate assets diminishes predictably over time. We believe that by excluding the effect of historical cost depreciation, which may be of limited relevance in evaluating current performance, FFO facilitates like comparisons of operating performance between periods. Additionally, we believe that normalized FFO provides useful information because it allows investors, analysts, our management and the Board of Directors to compare our company’s operating performance on a consistent basis without having to account for differences caused by unanticipated items. FFO, as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), means net income available to common stockholders (computed in accordance with GAAP) excluding gains or losses on the sale of real estate and impairment write-downs of depreciable real estate plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Normalized FFO represents FFO adjusted for certain items detailed in the reconciliation. Our company’s computation of FFO may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or have a different interpretation of the current NAREIT definition from that of our company; therefore, caution should be exercised when comparing our company’s FFO to that of other REITs. |
A-1
DEBT TO ANNUALIZED NORMALIZED EBITDA(1)
(Unaudited, amounts in thousands)
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| Year Ended |
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| December 31, 2016 |
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Bank borrowings |
| $ | 107,100 |
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Senior unsecured notes |
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| 502,291 |
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Total debt |
| $ | 609,391 |
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Net income(2) |
| $ | 84,962 |
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Add: Impairment on real estate for sale (2) |
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| 766 |
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Add: Interest expense |
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| 27,424 |
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Add: Depreciation and amortization |
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| 37,236 |
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Annualized Adjusted EBITDA |
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| 150,388 |
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Add: Non-recurring one-time items |
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| — |
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Annualized Normalized EBITDA |
| $ | 150,388 |
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Debt to Annualized Normalized EBITDA |
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| 4.1x |
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(1) | Annualized Adjusted EBITDA, Annualized Normalized EBITDA, and Debt to Annualized Normalized EBITDA are supplemental measures of a REIT’s financial performance that are not derived in accordance with GAAP. Annualized Adjusted EBITDA is calculated as net income before interest, taxes, depreciation and amortization for the three months ended December 31, 2016 multiplied by 4, but excluding gains or losses from real estate dispositions and impairment on real estate for sale for the year ended December 31, 2016. Annualized Normalized EBITDA is Annualized Adjusted EBITDA excluding non-recurring, one-time items. Debt to Annualized Normalized EBITDA is our company’s total debt as a percentage of Annualized Normalized EBITDA. Our management and board of directors measure operating performance, liquidity, and credit strength in terms of coverage ratios such as Debt to Annualized Normalized EBITDA. Coverage ratios are widely used by investors, analysts and rating agencies in the valuation, comparison, rating and investment recommendations of REITs. Annualized Adjusted EBITDA, Annualized Normalized EBITDA, and Debt to Annualized Normalized EBITDA are not alternatives to net income, operating income, income from continuing operations or cash flows from operating activities as calculated and presented in accordance with GAAP. You should not rely on Annualized Adjusted EBITDA, Annualized Normalized EBITDA, and Debt to Annualized Normalized EBITDA as substitutes for any GAAP financial measures. You should not consider these non-GAAP numbers in isolation, for the purpose of analyzing our financial performance, financial position or cash flows. Our company’s computation of Annualized Adjusted EBITDA, Annualized Normalized EBITDA and Debt to Annualized Normalized EBITDA may not be comparable to non-GAAP measures reported by other REITs that do not use, or have different interpretations of Annualized Adjusted EBITDA, Annualize Normalized EBITDA and Debt to Annualized Normalized EBITDA; therefore, caution should be exercised when comparing our company’s non-GAAP measures to that of other REITs. |
(2) | Annualized for the three months ended December 31, 2016 except for impairment on real estate held for sale. |
A-2
ANNUAL MEETING OF STOCKHOLDERS OFDEBT TO ENTERPRISE VALUE(1)
(Unaudited, amounts in thousands)
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| Year Ended |
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| December 31, 2016 |
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Bank borrowings |
| $ | 107,100 |
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Senior unsecured notes |
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| 502,291 |
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Total debt |
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| 609,391 |
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Common stock market value(2) |
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| 1,842,620 |
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Total equity |
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| 1,842,620 |
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Total market value |
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| 2,452,011 |
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Less: Cash and cash equivalents |
| �� | (7,991) |
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Enterprise value |
| $ | 2,444,020 |
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Debt to Enterprise Value |
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| 24.9 | % |
(1) | Enterprise Value is calculated as the sum of our company’s total debt and market value of outstanding securities, less cash and cash equivalents. Debt to Enterprise Value is our company’s total debt as a percentage of Enterprise Value. Our management and board of directors measure operating performance, liquidity, and credit strength in terms of leverage ratios such as Debt to Enterprise Value. Leverage ratios are widely used by investors, analysts and rating agencies in the valuation, comparison, rating and investment recommendations of REITs. Enterprise Value and Debt to Enterprise Value are not alternatives to net income, operating income, income from continuing operations or cash flows from operating activities as calculated and presented in accordance with GAAP. You should not rely on Enterprise Value and Debt to Enterprise Value as substitutes for any GAAP financial measures. You should not consider these non-GAAP numbers in isolation, for the purpose of analyzing our financial performance, financial position or cash flows. Our company’s computation of Enterprise Value and Debt to Enterprise Value may not be comparable to non-GAAP measures reported by other REITs that do not use, or have different interpretations of, Enterprise Value and Debt to Enterprise Value; therefore, caution should be exercised when comparing our company’s non-GAAP measures to that of other REITs. |
(2) | At December 31, 2016, we had 39,221,370 shares outstanding. Closing price of our common shares as reported on the New York Stock Exchange on December 30, 2016, last trading day of 2016, was $46.98 per share. |
LTC PROPERTIES, INC.
A-3
June 10, 2014
GO GREEN
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NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL:The NoticeTable of Meeting, proxy statement and proxy card are available at http://www.astproxyportal.com/ast/26002/Contents
Please sign, date and mail your proxy card in the envelope provided as soon as possible.
| ANNUAL MEETING OF STOCKHOLDERS OF LTC PROPERTIES, INC. June 1, 2017 GO GREEN e-Consent makes it easy to go paperless. With e-Consent, you can quickly access your proxy material, statements and other eligible documents online, while reducing costs, clutter and paper waste. Enroll today via www.astfinancial.com to enjoy online access. NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL: The Notice of Meeting, proxy statement and proxy card are available at http://www.astproxyportal.com/ast/26002/ Please sign, date and mail your proxy card in the envelope provided as soon as possible. Please detach along perforated line and mail in the envelope provided. |
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00000333330303040100 4 060117 of Stockholders and, in each case, until their respective successors have been duly elected and Boyd W. Hendrickson changes to the registered name(s) on the account may not be submitted via Note: Please sign exactly as your name or names appear on this proxy card. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x | |||||||||
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If you would like to receive future shareholder communications over the Internet exclusively, and no longer receive any material by mail please visit http:// | |||||||||
This proxy, when properly executed, will be voted as directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of | |||||||||
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES FOR DIRECTOR 1. Election of Directors: Five directors will be elected to hold office until the 2018 Annual Meeting qualified. FOR AGAINST ABSTAIN James J. Pieczynski Devra G. Shapiro Wendy L. Simpson Timothy J. Triche, M.D. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2 FOR AGAINST ABSTAIN 2. Ratification of independent registered public accounting firm. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 3 FOR AGAINST ABSTAIN 3. Advisory vote to approve named executive officer compensation. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR 1 YEAR ON PROPOSAL 4 1 YEAR 2 YEARS 3 YEARS ABSTAIN 4. Advisory vote on the frequency of the advisory vote on executive compensation. Please check here if you would like to receive future documents electronically. To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that this method. Signature of Stockholder Date: Signature of StockholderDate: |
- 0 PROXY LTC PROPERTIES, INC. THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS - JUNE 1, 2017 The undersigned acknowledges receipt of the Notice of Annual Meeting of Stockholders of LTC Properties, Inc. dated April 26, 2017 and a related Proxy Statement furnished by the Board of Directors, and revoking all prior proxies, hereby appoints: Wendy L. Simpson and Pamela Shelley-Kessler, or either of them, each with the power of substitution, as proxies, and hereby authorizes each of them to represent and vote, as indicated on the reverse side, the shares the undersigned is entitled to vote at the Annual Meeting of Stockholders to be held at the Hyatt Westlake Plaza, 880 S. Westlake Blvd., Westlake Village, CA 91361, on Thursday, June 1, 2017, or any adjournments or postponements thereof, and in their discretion, the proxies are authorized to vote upon such other business as may properly come before the Annual Meeting of Stockholders or any adjournments or postponements thereof. (Continued and to be signed on the reverse side) 14475 1.1 |
ANNUAL MEETING OF STOCKOLDERS OF LTC PROPERTIES, June 1, 2017 INC. INTERNET - Access “www.voteproxy.com” and follow the on-screen instructions or scan the QR code with your smartphone. Have your proxy card available when you access the web page. Vote online until 11:59 PM EST the day before the meeting. MAIL - Sign, date and mail your proxy card in the envelope provided as soon as possible. IN PERSON - You may vote your shares in person by attending the Annual Meeting. GO GREEN - e-Consent makes it easy to go paperless. With e-Consent, you can quickly access your proxy material, statements and other eligible documents online, while reducing costs, clutter and paper waste. Enroll today via www.astfinancial.com to enjoy online access. Please detach along perforated line and mail in the envelope provided IF you are not voting via the Internet. 00000333330303040100 4 060117 of Stockholders and, in each case, until their respective successors have been duly elected and Boyd W. Hendrickson changes to the registered name(s) on the account may not be submitted via Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x ELECTRONIC ACCESS TO FUTURE DOCUMENTS If you would like to receive future shareholder communications over the Internet exclusively, and no longer receive any material by mail please visit http://www.astfinancial.com. Click on Shareholder Account Access to enroll. Please enter your account number and tax identification number to log in, then select Receive Company Mailings via E-Mail and provide your e-mail address. This proxy, when properly executed, will be voted as directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors' recommendations, and in the discretion of the proxy holder on any other business as may properly come before the Annual Meeting of Stockholders. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES FOR DIRECTOR 1. Election of Directors: Five directors will be elected to hold office until the 2018 Annual Meeting qualified. FOR AGAINST ABSTAIN James J. Pieczynski Devra G. Shapiro Wendy L. Simpson Timothy J. Triche, M.D. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2 FOR AGAINST ABSTAIN 2. Ratification of independent registered public accounting firm. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 3 FOR AGAINST ABSTAIN 3. Advisory vote to approve named executive officer compensation. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR 1 YEAR ON PROPOSAL 4 1 YEAR 2 YEARS 3 YEARS ABSTAIN 4. Advisory vote on the frequency of the advisory vote on executive compensation. Please check here if you would like to receive future documents electronically. To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that this method. | |||||||||
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Note: Please sign exactly as your name or names appear on this proxy card. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.
PROXY
LTC PROPERTIES, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS - JUNE 10, 2014
The undersigned acknowledges receipt of the Notice of Annual Meeting of Stockholders of LTC Properties, Inc. dated April 15, 2014 and a related Proxy Statement furnished by the Board of Directors, and revoking all prior proxies, hereby appoints: Wendy L. Simpson and Pamela Shelley- Kessler, or either of them, each with the power of substitution, as proxies, and hereby authorizes each of them to represent and vote, as indicated on the reverse side, the shares the undersigned is entitled to vote at the Annual Meeting of Stockholders to be held at the Hyatt Westlake Plaza, 880 S. Westlake Blvd., Westlake Village, CA 91361, on Tuesday, June 10, 2014, or any adjournments or postponements thereof, and in their discretion, the proxies are authorized to vote upon such other business as may properly come before the Annual Meeting of Stockholders or any adjournments or postponements thereof.
(Continued and to be signed on the reverse side)
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