<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
LTC HEALTHCARE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE>
LTC HEALTHCARE, INC.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 25, 1999
Our 1999 annual meeting of stockholders will be held on Tuesday, May 25,
1999, at 2:00 p.m., local time, at the Silverado Room of the Marriott Residence
Inn, Oxnard, California 93030, for the following purposes:
(1) To elect a board of four directors for the ensuing year or until the
election and qualification of their respective successors;
(2) 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 on MARCH 31, 1999 are entitled to notice of, and to vote at, such
annual meeting or any adjournments of such annual meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to sign and
return the enclosed proxy as promptly as possible in the postage-paid envelope
enclosed for that purpose. Any stockholder attending the meeting may vote in
person even if he or she has returned a proxy.
By Order of the Board of Directors
[LOGO]
James J. Pieczynski
President and Chief Financial Officer
Oxnard, California
April 23, 1999
IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED STAMPED
ENVELOPE.
<PAGE>
LTC HEALTHCARE, INC.
------------------------
PROXY STATEMENT
SOLICITATION
This proxy statement is furnished to our stockholders in connection with the
solicitation of proxies by our Board of Directors for use at our annual meeting
of stockholders to be held on May 25, 1999 and at any and all adjournments of
our annual meeting. The approximate date on which this proxy statement and the
form of proxy solicited on behalf of our Board of Directors will be sent to our
stockholders is April 23, 1999.
VOTING RIGHTS
On March 31, 1999, the record date for the determination of stockholders
entitled to notice of, and to vote at, our annual meeting, we had 2,709,382
shares of common stock outstanding. Each share of common stock is entitled to
one vote on all matters properly brought before the 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 annual meeting.
VOTING OF PROXIES
Shares of common stock represented by all properly executed proxies received
in time for the annual meeting will be voted in accordance with the choices
specified in the proxy. Unless contrary instructions are indicated on the proxy,
the shares will be voted FOR the election of the nominees named in this Proxy
Statement as Directors.
Our management and Board of Directors know of no matters to be brought
before the annual meeting other than as set forth herein; no stockholder
proposals were received by us within a reasonable time prior to the date of this
proxy statement. Other business may properly come before the annual meeting, and
in that event, it is the intention of the persons named in the accompanying
proxy to vote in accordance with their judgment on such matters.
REVOCABILITY OF PROXY
The giving of the enclosed proxy does not preclude the right to vote in
person should the stockholder giving the proxy so desire. A proxy may be revoked
at any time prior to its exercise by delivering a written statement to our
Corporate Secretary that the proxy is revoked, by delivering to us a later-dated
proxy executed by the person executing the prior proxy, or by attending the
annual meeting and voting in person.
Our principal executive offices are located at 300 Esplanade Drive, Suite
1860, Oxnard, California, 93030.
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
At the annual meeting, four directors will be elected to hold office until
the 2000 annual meeting of stockholders and, in each case, until their
respective successors have been duly elected and qualified.
The nominees for election as directors at the annual meeting are Andre C.
Dimitriadis, James J. Pieczynski, Steven Stuart and Bary G. Bailey, each of whom
is presently serving as a director of our company. Unless authority to vote for
the election of directors has been specifically withheld, the persons named in
the accompanying proxy intend to vote for the election of the nominees named
above to hold office as directors until the 2000 annual meeting of stockholders
and until their respective successors have been duly elected and qualified.
If any nominee becomes unavailable to serve as a director for any reason
(which event is not anticipated), the shares of common stock represented by the
enclosed proxy may (unless such proxy contains instructions to the contrary) be
voted for such other person or persons as may be determined by the holders of
such proxies.
DIRECTORS AND EXECUTIVE OFFICERS
This table shows information concerning our directors and executive
officers. Each executive officer is elected by the directors, serves at the
pleasure of the Board of Directors and holds office until a successor is elected
or until resignation or removal. The information concerning our directors and
executive officers is given as of March 31, 1999.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Andre C. Dimitriadis................................. 58 Chairman, Chief Executive Officer and Director
James J. Pieczynski.................................. 36 President, Chief Financial Officer and Director
Christopher T. Ishikawa.............................. 35 Senior Vice President and Chief Investment Officer
Steven Stuart........................................ 35 Director
Bary G. Bailey....................................... 40 Director
</TABLE>
Andre C. Dimitriadis has been the Chairman, Chief Executive Officer and
Director of our company since its formation in 1998. Mr Dimitriadis founded LTC
Properties, Inc. in 1992 and has been its Chairman and Chief Executive officer
since its inception. Mr. Dimitriadis is also a member of the board of Magellan
Health Services.
James J. Pieczynski has been the President, Chief Financial Officer and
Director of our company since its formation in 1998. He has served as President
and Director of LTC Properties since September 1997 and Chief Financial Officer
of LTC Properties since May 1994. From May 1994 to September 1997, he also
served as Senior Vice President of LTC Properties. He joined LTC Properties in
December 1993 as Vice President and Treasurer.
Christopher T. Ishikawa has been the Senior Vice President and Chief
Investment Officer of our company since its formation in 1998. He has served as
Senior Vice President and Chief Investment Officer of LTC Properties since
September 1997. Prior to that, he served as Vice President and Treasurer of LTC
Properties since April 1995. Prior to joining LTC Properties, he was employed by
MetroBank from December 1991 to March 1995, where he served as First Vice
President and Controller.
2
<PAGE>
Steven Stuart has recently formed a private investment fund and advisory
business focused on the commercial real estate market. Prior to that he was
employed as a Director in the real estate finance group of Deutsche Morgan
Grenfell (a subsidiary of Deutsche Bank), an investment banking firm, from
January 1997 until December 1998. From 1986 to 1997, Mr. Stuart was employed by
Goldman, Sachs & Co. where he focused on capital markets activities relating to
real estate.
Bary G. Bailey is Executive Vice President, Finance of Premier, Inc.
(formerly American Healthcare Systems). Prior to joining American Healthcare
Systems in July 1995, Mr. Bailey was employed by American Medical International,
Inc., an owner/operator of hospitals, from 1987 to 1995.
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
During 1998, the Board of Directors met three times and each of the
incumbent directors attended 100% of the total number of meetings of the Board
of Directors and committees on which the director served. The Board of Directors
has an Audit Committee and a Compensation Committee. There is no standing
Nominating Committee.
The Audit Committee is comprised of Messrs. Stuart and Bailey. The Audit
Committee held no meetings during 1998. The Audit Committee is authorized to
select and recommend to the Board of Directors the independent auditors to serve
us for the ensuing year, review with the independent accountants the scope and
results of the audit, review management's evaluation of our system of internal
controls, and review non-audit professional services provided by the independent
accountants and the range of audit and non-audit fees. To ensure independence of
the audit, the Audit Committee consults separately and jointly with the
independent accountants and management.
The Compensation Committee is comprised of Messrs. Stuart and Bailey. The
Compensation Committee held one meeting during 1998. The Compensation Committee
is responsible for the administration of our 1998 Equity Participation Plan and
is authorized to determine the options and restricted stock to be granted under
such plans and the terms and provisions of such options. We contract with LTC
Properties to provide administrative and management services. Since it is LTC
Properties' responsibility to employ and compensate all of our officers and
employees under an administrative services agreement, our Compensation Committee
currently has no responsibilities with respect to reviewing and approving the
compensation of our executive officers or determining our general compensation
policies.
Each director, excluding Mr. Dimitriadis and Mr. Pieczynski, receives a fee
of $10,000 per year for services as a director plus $500 for attendance in
person at each meeting of the Board of Directors or of any committee meeting
held on a day on which the Board of Directors does not meet. In addition, we
reimburse the directors for travel expenses incurred in connection with their
duties as directors of our company. Since our company was formed during 1998,
Messrs. Stuart and Bailey received a partial fee of $5,000 each for serving on
our board during 1998. Directors participate in our 1998 Equity Participation
Plan under which the Compensation Committee may grant nonqualified stock options
or restricted shares to directors from time-to-time. In May 1998, Messrs. Stuart
and Bailey were each granted nonqualified stock options to purchase 10,000
shares of our common stock at a purchase price of $4.69 per share. In November
1998, the 10,000 options granted in May 1998 to Messrs. Stuart and Bailey were
re-priced from $4.69 per share to $2.50 per share and Messrs. Stuart and Bailey
were each granted an additional 10,000 options at a purchase price of $2.50 per
share. The options vest in equal installments on May 19, 1999, May 19, 2000 and
May 19, 2001. No restricted shares were granted to any directors during 1998.
REQUIRED VOTE AND RECOMMENDATIONS
The affirmative vote of a plurality of all the votes cast at a meeting at
which a quorum is present is necessary for the election of directors as set
forth in this Proposal 1. For purposes of this Proposal 1, abstentions and
broker non-votes will not be counted as votes cast and will have no effect on
the result of the vote, although they will count towards the presence of a
quorum for Proposal 1. Properly executed and
3
<PAGE>
unrevoked proxies will be voted FOR the nominees set forth in Proposal 1 unless
contrary instructions or an abstention are indicated in the proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL THE NOMINEES SET FORTH IN
PROPOSAL 1.
PRINCIPAL STOCKHOLDERS AND MANAGEMENT OWNERSHIP
The following table shows information as of March 31, 1999 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 copies
received by us of the most recent Schedule 13D or 13G filings with the
Securities and Exchange Commission pursuant to rules and regulations promulgated
under the Securities Exchange Act of 1934, as amended (2) each director, (3)
each executive officer and (4) the directors and executive officers as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
---------------------------------------------
<S> <C> <C>
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK (1)(2)(3) PERCENT OF CLASS (3)
- --------------------------------------------------------------------- ---------------------- ---------------------
LTC PROPERTIES, INC.................................................. 264,900(4) 9.8%
300 Esplanade, Suite 1860
Oxnard, CA 93030
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA.......................... 283,316(5) 10.5%
751 Broad Street
Newark, NJ 07102
FRANKLIN RESOURCES, INC.............................................. 184,222(6) 6.8%
777 Mariners Island Blvd.
San Mateo, CA 94404
ANDRE C. DIMITRIADIS................................................. 150,374 5.5%
JAMES J. PIECZYNSKI.................................................. 88,879 3.3%
CHRISTOPHER T. ISHIKAWA.............................................. 19,863 *
STEVEN STUART........................................................ 6,666 *
BARY G. BAILEY....................................................... 6,666 *
All directors and executive officers as a group (5 persons).......... 272,448 9.8%
</TABLE>
- ------------------------
* Less than 1%
(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) Includes the following options to acquire shares of our common stock that
are exercisable at March 31, 1999 or within 60 days of March 31, 1999: Mr
Dimitriadis--25,000, Mr. Pieczynski--18,667, Mr. Ishikawa--12,334, Mr.
Stuart--6,666 and Mr. Bailey--6,666, all directors and officers as a group
(5 persons)--69,333.
(3) For purposes of computing the percentages, the number of shares outstanding
includes shares that may be acquired upon exercise of stock options that are
exercisable within 60 days of March 31, 1999.
(4) Based solely upon information contained in a Schedule 13D/A provided to us,
LTC Properties, Inc. had sole voting and dispositive power with respect to
264,900 shares.
4
<PAGE>
(5) Based solely upon information contained in a Schedule 13G provided to us,
The Prudential Insurance Company of America had sole voting and dispositive
power with respect to 51,220 shares and shared voting and dispositive power
with respect to 232,096 shares.
(6) Based solely upon information contained in a Schedule 13G provided to us,
Templeton Global Advisors Limited had sole voting and sole dispositive power
with respect to 143,300 shares; Templeton Investment Management Limited had
sole voting and sole dispositive power with respect to 36,750 shares; and
Templeton Investment Counsel, Inc. had sole voting and sole dispositive
power with respect to 4,172 shares.
5
<PAGE>
EXECUTIVE COMPENSATION
This table shows the compensation paid by us to our Chief Executive Officer
and our other three most highly paid executive officers for the period ended
December 31, 1998.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-----------
<S> <C> <C> <C> <C> <C>
SECURITIES
NAME & OTHER UNDERLYING
PRINCIPAL POSITION YEAR SALARY (1) BONUS COMPENSATION OPTIONS (#)
- -------------------------------------------------- --------- ------------- ----------- ------------- -----------
Andre C. Dimitriadis.............................. 1998 $ -- $ -- $ -- 75,000
Chairman & Chief Executive Officer
James J. Pieczynski............................... 1998 -- -- -- 56,000
President & Chief Financial Officer
Christopher T. Ishikawa........................... 1998 -- -- -- 37,000
Senior Vice President & Chief Investment Officer
Pamela J. Privett (2)............................. 1998 -- -- -- 37,000
Senior Vice President & General Counsel
<CAPTION>
<S> <C>
OTHER LONG
NAME & TERM INCENTIVE
PRINCIPAL POSITION AWARDS
- -------------------------------------------------- -----------------
Andre C. Dimitriadis.............................. $ --
Chairman & Chief Executive Officer
James J. Pieczynski............................... --
President & Chief Financial Officer
Christopher T. Ishikawa........................... --
Senior Vice President & Chief Investment Officer
Pamela J. Privett (2)............................. --
Senior Vice President & General Counsel
</TABLE>
- ------------------------
(1) All of our executive officers are also employees of LTC Properties. LTC
Properties provides management and administrative services to us under an
administrative services agreement. For services received under the
administrative services agreement, we pay LTC Properties a monthly fee based
on salaries as well as certain other overhead expenses paid by LTC
Properties. During 1998, LTC Properties charged us an administrative fee of
approximately $350,000. Since all of our executive officers provide services
to us under the administrative services agreement, their salaries are
determined solely by LTC Properties and are paid by LTC Properties.
(2) Effective February 26, 1999, Ms. Privett resigned from our employment and
from the employment of LTC Properties.
6
<PAGE>
AGGREGATED OPTION EXERCISES IN 1998 AND OPTION VALUES AT DECEMBER 31, 1998
This table shows the number of stock options granted during the period ended
December 31, 1998 to each of our executive officers and the value of unexercised
options held as of December 31, 1998.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED RATES
OF STOCK PRICE
NUMBER OF PERCENT OF APPRECIATION FOR
SECURITIES TOTAL OPTIONS EXERCISE OR OPTION TERM
UNDERLYING GRANTED TO BASE PRICE EXPIRATION ----------------------
NAME OPTIONS GRANTED EMPLOYEES PER SHARE (2) DATE 5% (1) 10% (1)
- --------------------- --------------- --------------- --------------- --------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Andre C.
Dimitriadis........ 75,000 25.3% $ 2.50 May 19, 2008 $ 117,750 $ 298,500
James J.
Pieczynski......... 56,000 18.9% $ 2.50 May 19, 2008 87,920 222,800
Christopher T.
Ishikawa........... 37,000 12.5% $ 2.50 May 19, 2008 58,090 147,260
Pamela J. Privett.... 37,000 12.5% $ 2.50 May 19, 2008 58,090 147,260
</TABLE>
- ------------------------
(1) An assumed annual rate of appreciation of 5% would result in the price of
our common stock increasing to $4.07 at the expiration date of the options.
An assumed annual rate of appreciation of 10% would result in the price of
our common stock increasing to $6.48 at the expiration date of the options.
(2) In May 1998, Messrs. Dimitriadis, Pieczynski and Ishikawa and Ms. Privett
were granted options to purchase 40,000, 35,000, 22,500 and 22,500 shares,
respectively, of our common stock at a purchase price of $4.69 per share. In
November 1998, the options granted in May 1998 to Messrs. Dimitriadis,
Pieczynski and Ishikawa and Ms. Privett were re-priced from $4.69 per share
to $2.50 per share and Messrs. Dimitriadis, Pieczynski and Ishikawa and Ms.
Privett were granted an additional 35,000, 21,000, 14,500 and 14,500
options, respectively, at a purchase price of $2.50 per share. The options
vest in equal installments on May 19, 1999, May 19, 2000 and May 19, 2001.
During 1998, no options were exercised by any of our executive officers.
This table shows the number of stock options held by each of our executive
officers as of December 31, 1998 and the value of their unexercised options
based on our closing stock price on December 31, 1998.
<TABLE>
<CAPTION>
SECURITIES UNDERLYING
UNEXERCISED VALUE OF
OPTIONS AT DECEMBER 31, 1998 UNEXERCISED
SHARES OPTIONS
ACQUIRED ON VALUE ------------------------------ ---------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE
- ------------------------------------- ----------------- ----------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Andre C. Dimitriadis................. -- $ -- -- 75,000 --
James J. Pieczynski.................. -- -- -- 56,000 --
Christopher T. Ishikawa.............. -- -- -- 37,000 --
Pamela J. Privett.................... -- -- -- 37,000 --
<CAPTION>
NAME UNEXERCISABLE
- ------------------------------------- -------------
<S> <C>
Andre C. Dimitriadis................. $ 9,375
James J. Pieczynski.................. 7,000
Christopher T. Ishikawa.............. 4,625
Pamela J. Privett.................... 4,625
</TABLE>
CERTAIN TRANSACTIONS
TRANSACTIONS WITH LTC PROPERTIES, INC.--During 1998, LTC Properties acquired
40,002 shares of our non-voting common stock and a receivable from us of
$21,396,000 under an unsecured line of credit provided by LTC Properties for
$2,001,000 in cash and the contribution of certain assets and liabilities with a
net book value of $29,619,000. Subsequent to the contribution of the above
assets and liabilities by LTC Properties to us, we obtained mortgage financing
of $17,400,000 from a third-party lender on four unencumbered properties. We
utilized the proceeds from the mortgage debt and cash on hand to repay
borrowings of $17,668,000 under the unsecured line of credit provided by LTC
Properties. During 1998, we borrowed an additional $12,800,000 under the
unsecured line of credit provided by LTC Properties.
7
<PAGE>
On September 30, 1998, the 40,002 shares of our non-voting common stock held
by LTC Properties were converted into 3,335,882 shares of our voting common
stock. Concurrently, LTC Properties completed the spin-off of all our voting
common stock through a taxable dividend distribution to the holders of its
common stock, Series C Convertible Preferred Stock and convertible subordinated
debentures. One share of our common stock was distributed to each holder of LTC
Properties' common stock, Series C Preferred Stock and subordinated debentures
for each ten shares of LTC Properties' common stock owned and for each ten
shares of LTC Properties' common stock that would have been issued upon
conversion of the subordinated debentures and Series C Preferred Stock. For book
purposes, the net assets and liabilities transferred to us by LTC Properties
were transferred at their book value of approximately $10,224,000. The
distribution was a taxable dividend distribution and accordingly, for tax
purposes, the net assets and liabilities were transferred at their net fair
market value of approximately $15,650,000 ($4.69 per share of our common stock).
Upon completion of the distribution, we began operating as a separate public
company. Messrs. Dimitriadis and Pieczynski serve as members of the Board of
Directors of LTC Properties.
We have entered into various agreements with LTC Properties which, among
other things, provide for a sharing of corporate overhead under an
administrative services agreement. During 1998, LTC Properties charged us an
administrative services fee of approximately $350,000. In addition, LTC
Properties provided us with a $20,000,000 unsecured line of credit that bears
interest at 10% and matures in March 2008. As of December 31, 1998 approximately
$16,528,000 was outstanding under the line of credit. During 1998, we recorded
interest expense related to the unsecured line of credit of $711,000.
During 1998, we purchased for investment purposes 194,100 shares of LTC
Properties common stock for an aggregate cost of approximately $3,308,000. We
acquired all of the shares of LTC Properties common stock in the open market
subsequent to their distribution of their investment in us.
8
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There are no "interlocks" (as defined by the rules of the Securities and
Exchange Commission) with respect to any member of the Compensation and Option
Committee of the Board of Directors, and this Committee consists entirely of
independent, non-employee directors.
COMPENSATION AND OPTION COMMITTEE REPORT
The compensation committee report shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933 or the Securities and
Exchange Act of 1934, except to the extent that we specifically incorporate this
information by reference, and shall not otherwise be deemed filed under such
Acts.
The compensation committee is comprised of Messrs. Stuart and Bailey. The
compensation committee is responsible for the administration of our 1998 Equity
Participation Plan and is authorized to determine the options and restricted
stock to be granted under such plans and the terms and provisions of such
grants. We contract with LTC Properties to provide administrative and management
services. Since it is LTC Properties' responsibility to employ and compensate
all officers and employees under the administrative services agreement, the
compensation committee currently has no responsibilities with respect to
reviewing and approving the compensation of our executive officers or
determining our general compensation policies.
Effective May 19, 1998, we adopted the 1998 Equity Participation Plan under
which awards may be granted including stock options (incentive or
non-qualified), stock appreciation rights, restricted stock, deferred stock and
dividend equivalents. We reserved 500,000 shares of common stock for issuance
under the Equity Participation Plan which is administered by the compensation
committee which sets the terms and provisions of the awards granted. Incentive
stock options, stock appreciation rights, restricted stock, deferred stock and
dividend equivalents may only be awarded to officers and other full-time
employees to promote our long-term performance of and specifically, to retain
and motivate senior management in achieving a sustained increase in stockholder
value. Non-qualified stock options, stock appreciation rights, restricted stock,
deferred stock and dividend equivalents may be awarded to non-employee
directors, officers, other employees, consultants and other key persons who
provide services to us. Currently, the plans have no pre-set formula or criteria
for determining the number of options that may be granted. The compensation
committee reviews and evaluates the overall compensation package of the
executive officers and determines the awards based on our overall performance
and the individual performance of our executive officers.
During 1998, in connection with and prior to the spin-off of our company by
LTC Properties to its common stockholders, debenture holders and holders of its
Series C Convertible Preferred Stock, Messrs. Dimitriadis, Pieczynski, Ishikawa
and Ms. Privett were granted 40,000, 35,000, 22,500 and 22,500 options,
respectively, to acquire shares of our common stock. In November 1998, Messrs.
Dimitriadis, Pieczynski, Ishikawa and Ms. Privett received an additional grant
of 35,000, 21,000, 14,500 and 14,500 options, respectively. The options vest in
equal installments on May 19, 1999, May 19, 2000 and May 19, 2001.
April 23, 1999
Compensation Committee
Steven Stuart, Chair
Bary G. Bailey
Re: LTC Healthcare
9
<PAGE>
STOCK PERFORMANCE GRAPH
This graph compares the cumulative total stockholder return on our common
stock from the date we began operating as a publicly traded company (September
30, 1998) to December 31, 1998 with the cumulative stockholder total return of
(1) the Standard & Poor's 500 Stock Index and (2) the Russell 2000 Index. The
comparison assumes $100 was invested on September 30, 1998 in our common stock
and in each of the foregoing indices.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
LTC STANDARD & POOR'S RUSSELL 2000
<S> <C> <C> <C>
Healthcare 500 Stock Index Index
September 1998 $100 $100 $100
October 1998 $51 $105 $104
November 1998 $61 $114 $109
December 1998 $56 $118 $116
</TABLE>
The stock performance depicted in the above graph is not necessarily
indicative of future performance. The stock performance graph and compensation
committee report shall not be deemed incorporated by reference into any filing
by us under the Securities Act or the Exchange Act except to the extent that we
specifically incorporate such information by reference, and shall not otherwise
be deemed filed under such Acts.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
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 Securities and Exchange Commission and the
Pacific Exchange initial reports of ownership and reports of changes in
ownership of common stock and other equity securities of our Company. Officers,
directors and greater than ten percent stockholders are required by Securities
and Exchange Commission regulations to furnish us with copies of all Section
16(a) forms they file.
To our knowledge, based solely on review of the copies of such reports
furnished to us and written representations that no other reports were required,
during the fiscal year ended December 31, 1998, 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).
10
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
Ernst & Young LLP audited our financial statements for the year ended
December 31, 1998 and have been our auditors since our organization in March
1998. The directors have selected the firm of Ernst & Young LLP as our
independent accountants for the fiscal year ending December 31, 1999. A
representative of Ernst & Young LLP is expected to be present at the May 25,
1999 Annual Meeting and will have an opportunity to make a statement if he
desires to do so, and such representative is expected to be available to respond
to appropriate questions.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
FOR NEXT YEAR'S ANNUAL MEETING
The proxy rules adopted by the Securities and Exchange Commission provide
that certain stockholder proposals must be included in the proxy statement for
our annual meeting. For a proposal to be considered for inclusion in next year's
proxy statement, it must be received by us no later than December 24, 1999.
OTHER MATTERS
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 or
telegraph. We will request brokerage houses, banks, and other custodians or
nominees holding stock in their names for others to forward proxy materials to
their customers or principals who are the beneficial owners of common shares and
will reimburse them for their expenses in doing so. We have retained the
services of Corporate Investor Communications, Inc. for a fee of $4,500 plus
out-of-pocket expenses, to assist in the solicitation of proxies.
Our Annual Report to Stockholders, including our audited financial
statements for the year ended December 31, 1998, is being mailed herewith to all
stockholders of record. 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 FORM 10-K (WITHOUT EXHIBITS) FOR THE YEAR ENDED DECEMBER 31, 1998 FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. SUCH REQUESTS SHOULD BE DIRECTED TO OUR
CORPORATE SECRETARY, AT 300 ESPLANADE DRIVE SUITE 1860, OXNARD, CA 93030.
ALL STOCKHOLDERS ARE URGED TO COMPLETE, SIGN AND RETURN THE ACCOMPANYING
PROXY CARD IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors
[LOGO]
James J. Pieczynski
President and Chief Financial Officer
Oxnard, California
April 23, 1999
11
<PAGE>
LTC HEALTHCARE, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. / /
For Withheld For All
All All Except
1. ELECTION OF DIRECTORS Nominees:
Andre C. Dimitriadis, James J. Pieczynski,
Steven Stuart, and Bary G. Bailey. / / / / / /
-------------------------------
Nominee Exception
In accordance with the judgments of the Proxies, upon any other matter that
may properly come before the Annual Meeting of Stockholders or any
adjournment thereof.
This Proxy will be voted as directed. If no contrary direction is made, this
Proxy will be voted "FOR" all nominees listed under Item (1).
Dated: , 1999
------------------
Signature(s)
--------------------------
---------------------------------------
IMPORTANT: PLEASE SIGN YOUR NAME
EXACTLY AS IT APPEARS HEREON. WHEN
SIGNING AS AN ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN,
ADD SUCH TITLE IN YOUR SIGNATURE.
NOTE: IF YOU RECEIVE MORE THAN ONE
PROXY CARD, PLEASE DATE AND SIGN EACH
CARD AND RETURN ALL PROXY CARDS IN THE
ENCLOSED ENVELOPE.
- -------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
LTC HEALTHCARE, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS--MAY 25, 1999
The undersigned hereby appoints: Andre C. Dimitriadis and James J.
Pieczynski, or either of them, each with the power of substitution, as
Proxies, and hereby authorizes each of them to represent and vote, as
designated below, the shares held of record by the undersigned at the annual
meeting of stockholders of LTC Healthcare, Inc. to be held at the Marriott
Residence Inn, Oxnard, California, on Tuesday, May 25, 1999 at 2:00 P.M.
(PDT), or any adjournments or postponements thereof, as designated below, and
in their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
