<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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 Section 240.14a-11(c) or Section
240.14a-12
LTC Properties, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
LTC PROPERTIES, INC.
-------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 19, 1998
The 1998 Annual Meeting of Stockholders of LTC Properties, Inc. (the
"Company") will be held on Tuesday, May 19, 1998, at 11:00 a.m., local time, at
the Silverado Room of the Residence Inn by Marriott at River Ridge, Oxnard,
California 93030, for the following purposes:
(1) To elect a board of five directors for the ensuing year or until the
election and qualification of their respective successors;
(2) To adopt the Company's 1998 Equity Participation Plan; and
(3) To transact such other business as may properly come before the
meeting.
Only stockholders whose names appear of record on the books of the Company
at the close of business on MARCH 31, 1998 are entitled to notice of, and to
vote at, such Annual Meeting or any adjournments thereof.
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
Pamela J. Privett
CORPORATE SECRETARY
Oxnard, California
April 17, 1998
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 PROPERTIES, INC.
________________
PROXY STATEMENT
SOLICITATION
This proxy statement is furnished to the stockholders of LTC Properties,
Inc., a Maryland corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company for use at the
Annual Meeting of Stockholders to be held on May 19, 1998 at 11:00 a.m., local
time, and at any and all adjournments thereof (the "Annual Meeting"). The
approximate date on which this proxy statement and the form of proxy solicited
on behalf of the Board of Directors will be sent to the Company's stockholders
is April 17, 1998.
VOTING RIGHTS
On March 31, 1998, the record date for the determination of stockholders
entitled to notice of, and to vote at, the Annual Meeting, the Company had
26,723,955 shares of common stock, par value $0.01 per share (the "Shares" or
the "Common Stock"), outstanding. Each such Share 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. Abstentions and broker non-votes will count toward the presence
of a quorum for the transaction of business. Depending upon the proposal at
issue, an abstention or a broker non-vote will be deemed either a vote against a
proposal or will be deemed to have no effect. The effect of an abstention or
broker non-vote is stated at the conclusion of each of proposals 1 and 2 under
the heading "Required Vote and Recommendations."
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 and FOR the Company's 1998 Equity
Participation Plan.
The management and Board of Directors of the Company know of no matters to
be brought before the Annual Meeting other than as set forth herein; no
stockholder proposals were received by the Company on or before December 16,
1997, the deadline for inclusion of such proposals in 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
the Secretary of the Company that the proxy is revoked, by presenting to the
Company a later-dated proxy executed by the person executing the prior proxy, or
by attending the Annual Meeting and voting in person.
The principal executive offices of the Company are located at 300 Esplanade
Drive, Suite 1860, Oxnard, California, 93030.
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting, five directors will be elected to hold office until
the 1999 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, Edmund C. King, Wendy L. Simpson and Sam
Yellen, each of whom is presently serving as a director of the 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 1999 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 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
The following table sets forth information concerning the directors and
executive officers of the Company. Each executive officer of the Company 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 the directors and executive officers of the Company is
given as of March 1, 1998.
<TABLE>
<CAPTION>
Name Age Position
- ------------------------ ------------------------------------------------
<S> <C> <C>
Andre C. Dimitriadis 57 Chairman, Chief Executive Officer and
Director
James J. Pieczynski 35 President, Chief Financial Officer and
Director
Christopher T. Ishikawa 34 Senior Vice President and Chief Investment
Officer
Pamela J. Privett 40 Senior Vice President and General Counsel
Edmund C. King 63 Director
Wendy L. Simpson 48 Director
Sam Yellen 67 Director
</TABLE>
Andre C. Dimitriadis founded the Company and was employed by Beverly
Enterprises, Inc., an owner/operator of long-term care facilities, retirement
living facilities and pharmacies, from October 1989 to May 1992, where he served
as Executive Vice President and Chief Financial Officer. Mr. Dimitriadis is a
member of the board of directors of Magellan Health Services.
James J. Pieczynski has served as President and Director since September 8,
1997 and Chief Financial Officer since May 1994. From May 1994 to September
1997, he also served as Senior Vice President of the Company. He joined the
Company in December 1993 as Vice President and Treasurer. Prior to joining LTC,
he was employed by American Medical International, Inc., an owner/operator of
hospitals, from May 1990 to December 1993, where he served as Assistant
Controller and Director of Development.
Christopher T. Ishikawa has served as Senior Vice President and Chief
Investment Officer since September 8, 1997. Prior to that, he served as the
Vice President and Treasurer of the Company since April 1995. Prior to joining
the Company, he was employed by Metrobank from December 1991 to March 1995,
where he served as First Vice President and Controller.
Pamela J. Privett has held the position of Senior Vice President and
General Counsel of the Company since September 8, 1997. Prior to that, Ms.
Privett was the sole owner, officer and director of Pamela J. Privett, A
Professional
2
<PAGE>
Law Corporation, which served as outside General Counsel to the Company
beginning in August 1994. Ms. Privett was a shareholder in the Santa Monica,
California law firm of Stern, Neubauer, Greenwald & Pauly from 1990 to August
1994.
Edmund C. King is a general partner of Trouver Capital Partners, an
investment banking firm located in Los Angeles, California and Provo, Utah.
Prior to joining Trouver as of January 1, 1992, Mr. King was a partner in Ernst
& Young LLP, an international accounting and consulting firm, from 1973 through
September 30, 1991. While at Ernst & Young, Mr. King was its Southern
California senior health care partner and prior to that directed the Southern
California health care practice for Arthur Young & Company, one of the
predecessors of Ernst & Young.
Wendy L. Simpson is Executive Vice President and Chief Financial Officer of
Coram Healthcare Corporation (Coram), a healthcare organization. Prior to
joining Coram, Ms. Simpson was Executive Vice President, Chief Financial
Officer, Chief Operating Officer and director of Transitional Hospitals
Corporation, formerly Community Psychiatric Centers (CPC), a healthcare
organization, from December 1994 to August 1997. Transitional Hospitals
Corporation recently merged with Vencor, Inc. Prior to that, Ms. Simpson served
as Senior Vice President and Chief Financial Officer from July 1994 to December
1994 of Transitional Hospitals Corporation, which was a wholly-owned subsidiary
of CPC. From 1992 to July 1994, Ms. Simpson served as Chief Financial Officer
of Weisman Taylor Simpson & Sabatino, a management consulting firm.
Sam Yellen has been self-employed as a consultant since his retirement from
KPMG Peat Marwick LLP, an international accounting firm, in December 1990. He
served KPMG Peat Marwick LLP and its predecessors as a partner since 1968.
Currently, he serves as a member of the board of directors of Beverly Funding
Corporation, Del Webb Corporation, Downey Financial Corporation, and E*Capital
Corporation (formerly Wedbush Corporation.)
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
During 1997, the Board of Directors met 17 times and each of the incumbent
directors attended more than 75% of the total number of meetings of the Board of
Directors and of the 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 Mr. Yellen, Chairman, Ms. Simpson and
Mr. King. The Audit Committee held one meeting during fiscal 1997. The Audit
Committee is authorized to select and recommend to the Board of Directors the
independent auditors to serve the Company for the ensuing year, review with the
independent accountants the scope and results of the audit, review management's
evaluation of the Company's 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 Ms. Simpson, Chair and Messrs.
King and Yellen. The Compensation Committee held three meetings during 1997.
The Compensation Committee reviews and approves the compensation of the
Company's executive officers and determines the general compensation policy for
the Company. The Compensation Committee also is responsible for the
administration of the Company's Amended and Restated 1992 Stock Option Plan and
the Company's 1998 Equity Participation Plan if adopted and is authorized to
determine the options and restricted stock to be granted under such plans and
the terms and provisions of such options.
Each director, other than 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, the
Company reimburses the directors for travel expenses incurred in connection with
their duties as directors of the Company.
Directors participate in the Company's Amended and Restated 1992 Stock
Option Plan and may participate in the Company's 1998 Equity Participation Plan
if adopted. Both plans permit the Compensation Committee to grant nonqualified
stock options or restricted shares to directors from time-to-time. During 1997,
the Company granted each of the non-employee directors 10,000 restricted shares
and Ms. Simpson was granted 15,000 nonqualified stock options. In addition,
directors are eligible to participate in the Company's Amended Deferred
Compensation Plan whereby non-employee directors are entitled to receive annual
deferred compensation from the Company equal to a minimum of
3
<PAGE>
$10,000 per year. In 1997, the Company contributed $10,000 to the deferred
compensation account for the benefit of each of non-employee directors.
Executive officers of the Company are elected or appointed by the Board of
Directors and hold office until their successors are elected, or until the
earliest of their death, resignation or removal.
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 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.
4
<PAGE>
PRINCIPAL STOCKHOLDERS AND MANAGEMENT OWNERSHIP
The following table sets forth information as of March 31, 1998 with
respect to the beneficial ownership of the Common Stock of the Company by (1)
each person who is known by the Company to own beneficially more than 5% of its
Shares based on copies received by the Company 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
(the "Exchange Act") (2) each director of the Company, (3) the Named Executive
Officers (as defined below) and (4) the Company's directors and Named Executive
Officers as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
---------------------------------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK (1)(2)(3) PERCENT OF CLASS (3)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FMR CORPORATION 2,046,400 (4) 7.7%
82 Devonshire Street
Boston, MA 02109
WADDELL & REED, INC. 1,754,031 (5) 6.4%
6300 Lamar Avenue
Overland, KS 66202
PALISADE CAPITAL MANAGEMENT, LLC 1,573,406 (6) 5.7%
1 Bridge Plaza, Suite 695
Fort Lee, NJ 07024
BRINSON PARTNERS, INC. 1,423,200 (7) 5.3%
209 South LaSalle Street
Chicago, IL 60604
FRANKLIN RESOURCES, INC. 1,331,820 (8) 5.0%
777 Mariners Island Blvd.
San Mateo, CA 94404
ANDRE C. DIMITRIADIS 719,180 2.7%
JAMES J. PIECZYNSKI 139,981 *
PAMELA J. PRIVETT 93,403 *
CHRISTOPHER T. ISHIKAWA 75,251 (9) *
EDMUND C. KING 64,603 (10) *
WENDY L. SIMPSON 40,764 (11) *
SAM YELLEN 63,703 *
All directors and Named Executive Officers
as a group (7 persons) 1,196,885 4.5%
</TABLE>
FOOTNOTES TO TABLE APPEAR ON FOLLOWING PAGE.
5
<PAGE>
FOOTNOTES TO TABLE ON PREVIOUS PAGE.
* 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) No options to acquire shares of Common Stock were exercisable at March
31, 1998 or were exercisable within 60 days of March 31, 1998.
(3) For purposes of computing the percentages, the number of Shares
outstanding includes Shares purchasable by such individual or entity
within 60 days upon exercise of outstanding stock options or conversion
rights.
(4) Based solely upon information contained in a Schedule 13G/A provided to
the Company, FMR Corporation had sole voting power with respect to 1,100
Shares and sole dispositive power with respect to 2,046,400 Shares.
(5) Based solely upon information contained in a Schedule 13G/A provided to
the Company, Waddell & Reed, Inc. had sole voting and sole dispositive
power with respect to 1,754,031 Shares. The number of shares includes
716,031 Shares of which Waddell & Reed, Inc. has the right to acquire
within 60 days upon exercise of conversion rights.
(6) Based solely upon information contained in a Schedule 13G/A provided to
the Company, Palisade Capital Management, LLC had sole voting and sole
dispositive power with respect to 1,573,406 Shares. The number of
shares includes 812,406 Shares of which Palisade Capital Management, LLC
has the right to acquire within 60 days upon exercise of conversion
rights.
(7) Based solely upon information contained in a Schedule 13G provided to
the Company, Brinson Partners, Inc. had shared voting and shared
dispositive power with respect to 1,423,200 Shares.
(8) Based solely upon information contained in a Schedule 13G provided to
the Company, Franklin Resources, Inc. had sole voting and sole
dispositive power with respect to 1,331,820 Shares.
(9) Includes 2,000 Shares owned jointly with spouse.
(10) Includes 900 Shares held by spouse in an individual retirement account.
(11) Includes 5,350 Shares owned jointly with spouse and 2,215 Shares held by
spouse.
6
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
paid to the Company's Chief Executive Officer and the other three most highly
compensated executive officers of the Company during the fiscal year ended
December 31, 1997 who served as executive officers of the Company on December
31, 1997 (collectively, the "Named Executive Officers") and to the other most
highly compensated executive officer of the Company who served as an executive
officer during the fiscal year ended December 31, 1997 but who did not serve in
such capacity on December 31, 1997. No other individuals served as executive
officers during 1997.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
---------------------------------- -----------------------------------------
RESTRICTED STOCK SECURITIES ALL OTHER
NAME & AWARDS UNDERLYING OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($)(1) (2) (#) ($)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Andre C. Dimitriadis 1997 $400,000 $400,000 $1,580,000 - $62,400 (3)
Chairman & Chief 1996 400,000 800,000 710,875 - 62,400 (3)
Executive Officer 1995 300,000 330,000 - - 52,374 (3)
James J. Pieczynski 1997 190,000 265,000 948,000 - 17,700 (3)
President & Chief 1996 165,000 200,000 287,375 - 17,700 (3)
Financial Officer 1995 150,000 110,000 - - 1,196 (3)
Pamela J. Privett 1997 55,208 150,000 711,000 - 1,100 (3)
Senior Vice President &
General Counsel
Christopher T. Ishikawa 1997 112,500 150,000 711,000 - 1,000 (3)
Senior Vice President &
Chief Investment Officer
William McBride III (4) 1997 198,750 225,000 - - 28,200 (3)
Former Executive 1996 265,000 600,000 423,500 - 28,200 (3)
Officer 1995 200,000 220,000 - - 1,643 (3)
</TABLE>
- -------------------
(1) Restricted stock awards are valued in the table above at their fair
market value based on the per share closing price of the Company's
Common Stock on the New York Stock Exchange on the date of grant.
Messrs. Dimitriadis and Pieczynski, Ms. Privett and Mr. Ishikawa were
granted 80,000, 48,000, 36,000 and 36,000 shares of restricted stock in
1997. Messrs. Dimitriadis, Pieczynski and Mr. McBride were granted
47,000, 19,000 and 28,000 shares of restricted stock in 1996.
Restricted stock holdings as of December 31, 1997 and their fair market
value based on the per share closing price of $20.75 on December 31,
1997 were as follows:
<TABLE>
<CAPTION>
NUMBER OF VALUE ON
NAME RESTRICTED SHARES December 31, 1997
---- ----------------- -----------------
<S> <C> <C>
Andre C. Dimitriadis 108,200 $2,245,150
James J. Pieczynski 59,400 1,232,550
Pamela J. Privett 45,000 933,750
Christopher T. Ishikawa 42,000 871,500
</TABLE>
Dividends are payable on the restricted shares to the extent and on the
same date as dividends are paid on Company's Common Stock. Shares of
restricted stock granted in 1997 vest in equal installments over four
years beginning January 2000. During 1997, the Board of Directors
authorized the accelerated vesting of 18,800, 7,600, 6,000, 4,000 and
11,200 shares of restricted stock granted in 1996 for Messrs.
Dimitriadis and Pieczynski, Ms. Privett and Messrs. Ishikawa and
McBride, respectively. The remaining 16,800 shares of restricted stock
granted to Mr. McBride in 1996 vested upon his resignation of employment
with the Company. The remaining restricted shares granted in 1996 vest
in equal installments over three years beginning January 2000.
(2) There were no stock options granted to executive officers during the
year ended December 31, 1997, 1996 or 1995.
(3) Such amounts represent the Company's contribution to the Named Executive
Officer's and Mr. McBride's deferred compensation plan account.
(4) Effective September 8, 1997, Mr. McBride resigned from the Company's
employment and Board of Directors.
7
<PAGE>
The following table provides information related to the exercise of stock
options during fiscal year 1997 by each of the Named Executive Officers and Mr.
McBride and the value of unexercised stock options held as of December 31, 1997.
During 1997, no options were granted to any of the Named Executive Officers or
Mr. McBride.
AGGREGATED OPTION EXERCISES IN 1997 AND OPTION VALUES
AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING
SHARES ACQUIRED UNEXERCISED OPTIONS AT VALUE OF UNEXERCISED IN-THE-MONEY
ON VALUE DECEMBER 31, 1997 (#) OPTIONS AT FY-END($)(2)
NAME EXERCISE (#)(1) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------- ---------------- ------------- ------------- ------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Andre C. Dimitriadis 233,500 $2,624,125 - 100,000 - $1,075,000
James J. Pieczynski 54,500 690,125 - 8,000 - 68,000
Pamela J. Privett 40,000 480,000 - - - -
Christopher T. Ishikawa 16,000 196,000 - 8,000 - 68,000
William McBride III 188,500 2,076,625 - - - -
</TABLE>
- ------------------
(1) In March 1997, the Board of Directors adopted a loan program designed to
encourage executives, key employees, consultants and directors to
acquire Common Stock through the exercise of options. Under the
program, the Company will make full recourse, secured loans to
participants equal to the exercise price of vested options plus up to
50% of the taxable income resulting from the exercise of options. Such
loans will bear interest at the then current Applicable Federal Rate
(the minimum rate necessary to avoid "unstated interest" under
Section 483 of the Internal Revenue Code) and be payable in installments
over nine years. For the first five-years of such loans, interest and
principal will be payable quarterly. The amount of principal due each
quarter will be equal to 50% of the difference between the cash
dividends received on the shares purchased and the quarterly interest
that is due. In addition, 25% of any cash bonuses and 50% of any
dividends on restricted stock granted in 1997 received by the borrower
must be used to reduce the principal balance of any such loan. At the
end of five years, such loans will convert to fully amortizing loans
with 16 quarterly payments beginning in year six. Unless the Board of
Directors approves otherwise, the loans must be repaid within 90 days
after termination of employment for any reason, other than in connection
with a change in control of the Company. The Board of Directors has
permitted Mr. McBride's loan of $2,705,436 to remain outstanding
following Mr. McBride's termination of employment. On December 31, 1997
the loans outstanding under such program, which bear interest at a
weighted average rate of 6.33% per annum, and the market value of Common
Stock securing such loans were as follows:
<TABLE>
<CAPTION>
SHARES ACQUIRED UPON EXERCISE BALANCE MARKET VALUE OF COMMON
NAME OF OPTIONS OUTSTANDING STOCK SECURING LOAN
- ------------------------- ----------------------------- ----------- ----------------------
<S> <C> <C> <C>
Andre C. Dimitriadis 233,500 $3,171,419 $4,845,125
James J. Pieczynski 54,500 732,046 1,130,875
Pamela J. Privett 40,000 599,422 830,000
Christopher T. Ishikawa 16,000 191,647 332,000
William McBride III 188,500 2,705,436 3,911,375
</TABLE>
(2) Market value of the underlying securities at year-end less the exercise
price.
8
<PAGE>
EMPLOYMENT AGREEMENTS
The Compensation Committee approved certain key terms of the employment
arrangements with each of the Named Executive Officers in September 1997,
providing for their services to the Company. Mr. Dimitriadis, as Chairman and
Chief Executive Officer, will be provided with a four-year "ever-green"
employment contract. He is currently being paid compensation at an annual rate
of $400,000. Mr. Pieczynski, as President and Chief Financial Officer, will be
provided with a three-year "ever-green" employment contract. He is currently
being paid compensation at an annual rate of $265,000. Ms. Privett, as Senior
Vice President, General Counsel and Secretary will be provided with a two-year
"ever-green" employment contract. She is currently being paid compensation at
an annual rate of $250,000. Mr. Ishikawa, as Senior Vice President and Chief
Investment Officer, will be provided with a two-year "ever-green" employment
contract. He is currently being paid compensation at an annual rate of
$150,000. Each Named Executive Officer has been providing services to the
Company under such terms since September 8, 1997.
PROPOSED TERMS OF EMPLOYMENT AGREEMENTS - The Compensation Committee is
currently negotiating the final forms of the employment agreements to reflect
these arrangements with each of the Named Executive Officers and anticipates
that the final forms of the employment agreements will be executed during the
second quarter of 1998. The Company anticipates that the employment agreements
will contain the provisions described in the following paragraphs. No assurance
can be given, however, that the final forms of such employment agreements will
contain the terms described herein or that such employment agreements will not
contain additional terms that are materially different from the proposed terms
described herein.
If a Named Executive Officer's employment by the Company terminates for
any reason, except for a termination for Cause (as defined below) or a voluntary
resignation by Named Executive Officer without a Good Reason (as defined below)
then the Company will pay such Named Executive Officer a lump sum severance
payment equal to four times his base salary for Mr. Dimitriadis, three times his
base salary for Mr. Pieczynski and two times her/his base salary for Ms. Privett
and Mr. Ishikawa (the "Severance Payment") Upon a Change in Control, the
Company will pay such Named Executive Officer a severance payment in cash equal
to the above mentioned Severance Payment plus an additional sum equal to four
times his most recent annual bonus for Mr. Dimitriadis, three times his most
recent annual bonus for Mr. Pieczynski and two times her/his most recent annual
bonus for Ms. Privett and Mr. Ishikawa. Notwithstanding the foregoing, the
Company will have no liability if a Named Executive Officer's employment is
terminated by the Company for Cause or by a Named Executive Officer voluntarily
resigning without a Good Reason. During the term of his or her employment by
the Company, each Named Executive Officer will devote the time necessary to
provide the services reasonably required by the Board of Directors and will not,
without the express approval of the Board of Directors of the Company, engage
for his or her own account or for the account of any other person or entity, in
a business which competes with the Company.
CERTAIN DEFINITIONS - A termination of a Named Executive Officer's
employment by the Company will be deemed for "Cause" if, and only if, it is
based upon (i) conviction of a felony; (ii) material disloyalty to the Company
such as embezzlement, misappropriation of corporate assets, fraud against the
company or breach of such Named Executive Officer's agreement not to engage in
business for another enterprise of the type engaged in by the Company without
the express approval of the Board of Directors; or (iii) the engaging in
unethical or illegal behavior which is of a public nature, brings the Company
into disrepute, and results in material damage to the Company.
A resignation by a Named Executive Officer will not be deemed to be
voluntary and will be deemed to be a resignation with "Good Reason" if it is
based upon (i) a diminution in such Named Executive Officer's title, duties, or
salary; (ii) a reduction in benefits which is not part of an across-the-board
reduction in benefits of all senior executive personnel; or (iii) a direction by
the Board of Directors that such Named Executive Officer report to any person or
group other than the Board of Directors (with respect to Mr. Dimitriadis) or the
Chief Executive Officer (with respect to the other Named Executive Officers). It
will also constitute Good Reason for each of Messrs. Dimitriadis and Pieczynski
to resign his employment if the stockholders of the Company fail to elect or
reelect him to the Board of Directors of the Company, unless he declines to be
elected to such Board of Directors.
A "Change in Control" occurs if: (i) any person (other a than Named
Executive Officer and his or her related persons) is or becomes the beneficial
owner, directly or indirectly, of securities of the Company representing 40% or
more of the combined voting power of the Company's then outstanding securities;
or (ii) the stockholders of the Company
9
<PAGE>
approve a merger or consolidation of the Company with any other corporation (or
other entity) and such merger or consolidation is consummated, other than a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 66-2/3% 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 the Company (or similar transaction)
in which no person acquires more than 40% of the combined voting power of the
Company's then outstanding securities shall not constitute a Change in Control;
or (iii) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets and such plan of
complete liquidation or agreement for sale or disposition is consummated; or
(iv) a majority of the members of the Board of Directors of the Company cease
to be Continuing Directors (as defined in each employment agreement).
The Bylaws of the Company provide for indemnification of the officers,
directors, employees and agents of the Company pursuant to the Maryland General
Corporation Law. The Maryland General Corporation Law permits the
indemnification of any officer, director, employee or agent of the Company
against expenses and liabilities in any action arising out of such person's
activities on behalf of the Company, if such person acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interest of
the Company or in a manner he had no reasonable cause to believe was unlawful.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Securities Act") may be permitted to directors and officers of the
Company pursuant to the foregoing provisions or otherwise, the Company has been
advised that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
CERTAIN TRANSACTIONS
TRANSACTIONS WITH ASSISTED LIVING CONCEPTS, INC. - Mr. Dimitriadis
served as a director of Assisted Living Concepts, Inc., an owner, operator and
developer of assisted living facilities ("ALC"), from July 1994 until September
1997. During 1997, the Company provided ALC with $14,510,000 of mortgage
financing, with initial rates ranging from 9.9% to 10.4% per annum, on seven
assisted living residences and entered into sale-leaseback transactions with ALC
on 25 assisted living facilities. The Company purchased such facilities for an
aggregate purchase price of $62,576,000 and leased such facilities back to ALC
over initial terms ranging from 12 to 20 years. Prior to December 31, 1997, ALC
repaid all outstanding mortgage loans. In November 1997, the Company entered
into a commitment with ALC to complete sale-leaseback transactions for 11
assisted living residences totaling $29,864,000. As of December 31, 1997 two
transactions totaling $4,585,000 had been completed under this commitment and
the remaining transactions are scheduled to be completed by the end of the third
quarter of 1998. In connection with the above agreement, the Company sold 12
properties back to ALC for $27,690,000 and terminated a commitment of
$13,070,000 that was scheduled to expire on December 31, 1997. Additional
sale-leaseback financing commitments of $100,000,000 with ALC and its affiliates
remained outstanding at December 31, 1997 of which $50,000,000 expire on
December 31, 1999 and $50,000,000 expire on December 31, 2000. As of December
31, 1997, ALC and its affiliates leased 36 facilities from the Company
representing 10.9% ($85,292,000) of the Company's adjusted gross real estate
investment portfolio (adjusted to include mortgage loans to third parties
underlying the investment in REMIC certificates). During 1997, the Company
received rental income and interest income of $6,775,000 and $1,277,000,
respectively from ALC.
In early 1997, the Company acquired 2,000,000 shares of nonvoting common
stock (approximately 41.2% of the outstanding capital stock) of Home and
Community Care, Inc. ("HCI"), an owner, operator and developer of assisted
living residences, for $5,000,000. In December 1997, the Company received a
distribution of $5,000,000 representing a return of investment with respect to
its HCI capital stock. Following payment of the distribution, ALC acquired all
of the outstanding capital stock of HCI for which the Company received gross
proceeds of $2,000,000. The Company may receive additional future payments of
approximately $3,000 for each unit in each assisted living residence which was
under development by HCI on the date of ALC's acquisition of HCI and is
developed by ALC within the two-year period following said acquisition date or
which ALC has indicated that it intends to develop following such two-year
period (for up to 543 units). See "-Transactions Involving the Named Executive
Officers."
On July 25, 1996, the Company acquired 990 shares of voting common stock
(or approximately 9.9% of the outstanding capital stock) of Carriage House
Assisted Living, Inc. (formerly known as Health Care Equity Investments, Inc.),
a developer, owner and operator of assisted living facilities in the State of
Nebraska ("Carriage House"). The Company acquired its shares of voting common
stock in Carriage House in exchange for the Company's commitment to
10
<PAGE>
Carriage House to provide 100% construction financing for five facilities in
Nebraska and to "take out" the construction financing with sale/leaseback
transactions when the construction of each facility was completed and an
unconditional certificate of occupancy was issued. In October, 1997, ALC
acquired all of the outstanding capital stock of Carriage House (not already
owned by ALC) in a reverse triangular subsidiary merger as a result of which the
Company received 30,847 shares of voting common stock of ALC.
During 1997, ALC also acquired certain non-operating assets and assumed
certain liabilities of LTC Development Company, Inc., a preferred stock
subsidiary of the Company that provides development services to assisted living
companies.
TRANSACTIONS INVOLVING NAMED EXECUTIVE OFFICERS -In early 1997, Messrs.
Dimitriadis, Pieczynski and Ishikawa and Ms. Privett acquired 675,723, 293,931,
129,287 and 129,287 shares of voting common stock, respectively (or
approximately 13.9%, 6.1%, 2.7% and 2.7%, respectively, of the outstanding
capital stock) of HCI. Messrs. Dimitriadis, Pieczynski and Ishikawa and Ms.
Privett acquired 500,000, 250,000, 100,000 and 100,000 of said shares (the
"Original HCI Shares"), respectively, for demand notes in the amounts of
$1,250,000, $625,000, $250,000 and $250,000, respectively, and 175,723, 43,931,
29,287 and 29,287 of said shares (the "Pacesetter Shares"), respectively, in
exchange for shares of the capital stock of Pacesetter Home Care Group, Inc. and
Pacesetter Hospice, Inc. In December 1997, Messrs. Dimitriadis, Pieczynski and
Ishikawa and Ms. Privett received a distribution of $1,689,307, $734,827,
$323,217, and $323,217, respectively, representing a return of investment with
respect to the HCI capital stock held by such investors. Such distribution to
each of the Named Executive Officers was effected by (i) with respect to the
Original HCI Shares, canceling the demand note owed by each Named Executive
Officer to HCI and (ii) with respect to the Pacesetter Shares, by paying Messrs.
Dimitriadis, Pieczynski and Ishikawa and Ms. Privett $439,307, $109,827, $73,217
and $73,217, respectively, in cash. Following payment of the distribution, ALC
acquired all of the outstanding capital stock of HCI for which Messrs.
Dimitriadis, Pieczynski and Ishikawa and Ms. Privett received proceeds of
$675,723, $293,931, $129,287 and $129,287, respectively. Messrs. Dimitriadis,
Pieczynski and Ishikawa and Ms. Privett may receive additional future payments
of approximately $1,000, $450, $200, and $200, respectively, for each unit in
each assisted living residence which was under development by HCI on the date of
ALC's acquisition of HCI and is developed by ALC within the two-year period
following said acquisition date or whcih ALC has indicated that it intends to
develop following such two-year period (for up to 543 units).
TRANSACTIONS WITH NON-EMPLOYEE DIRECTORS - During 1997, the Company made
loans to non-employee directors for the exercise of stock options under
identical terms to such loans made to executive officers as described in note 1
to the Aggregated Option Exercises and Option Values Table. On December 31,
1997 the loans outstanding under such program, which bear interest at a weighted
average rate of 6.33% per annum and the market value of Common Stock securing
such loans, were as follows:
<TABLE>
<CAPTION>
MARKET VALUE
SHARES ACQUIRED OF COMMON
UPON EXERCISE OF BALANCE STOCK SECURING
NAME OPTIONS OUTSTANDING LOAN
- ------------------ ----- --------- ----------- --------------
<S> <C> <C> <C> <C>
Edmund C. King 37,500 $511,773 $778,125
Wendy L. Simpson 5,000 83,666 103,750
Sam Yellen 37,500 511,773 778,125
</TABLE>
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 such Committee consists entirely of
independent, non-employee directors.
11
<PAGE>
COMPENSATION AND OPTION COMMITTEE REPORT
The Compensation and Option 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 or the Exchange
Act, except to the extent that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
The Compensation and Option Committee (the "Committee") is comprised of Ms.
Simpson, Chair and Messrs. King and Yellen. The Committee reviews and approves
the compensation of the Company's executive officers and determines the general
compensation policy for the Company. The Committee is also responsible for the
administration of the Company's Restated 1992 Stock Option Plan and, if adopted
by the stockholders, will be responsible for the administration of the 1998
Equity Participation Plan. The Committee is authorized to determine the options
to be granted under such plans and the terms and provisions of such options.
The Company has four executive officers, one of whom is its Chief Executive
Officer.
COMPENSATION PHILOSOPHY
The Committee endeavors to ensure that the compensation programs for
executive officers of the Company are effective in attracting and retaining key
executives responsible for the success of the Company and are administered in
appropriate fashion in the long-term interests of the Company and its
stockholders. The Committee seeks to align total compensation for senior
management with the overall performance of the Company as well as the individual
performance of each executive officer. The Company's compensation package,
which currently is comprised of base salary, bonuses, stock options and
restricted stock, is intended to reinforce management's commitment to enhancing
profitability and stockholder value.
In determining the level and composition of compensation for the executive
officers of the Company, the Committee considers various corporate performance
measures, both in absolute terms and in relation to similar companies, and
individual performance measures. Although the Committee considers funds from
operations per share as an important measure of Company performance, the
Committee does not apply any specific quantitative formula in making
compensation decisions. The Committee also may evaluate the following factors
in establishing executive compensation: (a) periodically, the comparative
compensation surveys and other material concerning compensation levels and stock
grants at similar companies; (b) historical compensation levels and stock awards
at the Company; (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 and its peer group relative
to market condition; and (e) from time to time, the Committee may seek the
advice of an independent compensation consultant in assessing its overall
compensation philosophy. The Committee assigns no specific weight to any of the
factors discussed above in establishing executive compensation.
BASE SALARIES
Base salaries are reviewed and adjusted by the Committee on an annual
basis. The Committee seeks to ensure that the base salaries are established at
levels considered appropriate in light of responsibilities and duties of the
executive officers as well as at levels competitive to amounts paid to executive
officers of its peer group. In determining an individual executive's actual
base salary, the Committee also considers other factors, which may include the
executive's past performance and contributions to the Company's success.
BONUSES
Bonuses are awarded based on the overall performance of the Company and
individual performance of each executive officer. The amounts awarded may vary
from year to year and may be awarded to executive officers in other forms such
as stock awards in lieu of cash payments.
12
<PAGE>
STOCK OPTION PLANS
The Company has adopted the Restated 1992 Stock Option Plan (the "Restated
Plan") under which awards may be granted including stock options (incentive or
non-qualified), stock appreciation rights, restricted stock, deferred stock and
dividend equivalents. The Company reserved 1,400,000 shares of Common Stock for
issuance thereunder. The Restated Plan is administered by the Committee which
sets the terms and provisions of the awards granted under the Restated Plan.
Incentive stock options, stock appreciation rights, restricted stock, deferred
stock and dividend equivalents may only be awarded officers and other full-time
employees of the Company to promote long-term performance of the Company 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 the Company. Currently, the Restated Plan has
no pre-set formula or criteria for determining the number of options that may be
granted. The Committee reviews and evaluates the overall compensation package
of the executive officers and determines the awards based on the overall
performance of the Company and the individual performance of the executive
officers.
The Committee has also adopted the 1998 Equity Participation Plan. For a
further description of this plan, see "Proposal 2: Description of 1998 Equity
Participation Plan."
1997 CASH COMPENSATION
Base compensation for Messrs. Dimitriadis, Pieczynski and Ishikawa and Ms.
Privettt for 1997 were $400,000, $190,000, $112,500 and $55,208, respectively.
In September 1997, the Committee increased the annual base salaries payable to
Messrs. Pieczynski and Ishikawa to $265,000 and $150,000, respectively, and
employed Ms. Privett as an executive officer at a base salary of 250,000. In
addition, the Committee approved new forms of employment agreements for each of
Messrs. Dimitriadis, Pieczynski and Ishikawa and Ms. Privett. The final forms
of such employment agreements are currently being negotiated. See "Executive
Compensation-Employment Agreements." In December 1997, the Board of Directors
approved and paid discretionary bonuses to senior management for 1997
performance, reflecting a decrease from the prior year amount for Mr.
Dimitriadis and an increase from the prior year amount for Mr. Pieczynski. The
bonus paid to each executive officer for 1997 was based upon what the Committee
felt was appropriate relative to the significant growth of the Company's funds
from operations per share as compared to 1996 and the quality, amount and type
of investments completed during 1997. For the twelve months ending December 31,
1997, the total return (including the reinvestment of quarterly dividends) to
stockholders was approximately 23%. The five-year return (including the
reinvestment of quarterly dividends) to stockholders for the period from
December 31, 1992 through December 31, 1997 was approximately 216%.
POLICY WITH RESPECT TO SECTION 162(m)
The Compensation and Option Committee has considered the anticipated tax
treatment to the Company regarding the compensation and benefits paid to the
executive officers of the Company in light of the enactment of Section 162(m) of
the Internal Revenue Code of 1986, as amended. Under Section 162(m), the amount
of compensation paid to certain executives that is deductible with respect to
the Company's corporate taxes is limited to $1,000,000 annually. The basic
philosophy of the Committee is to strive to provide such executive officers with
a compensation package which will balance the deductibility of such payments for
the Company with the necessity to provide competitive compensation packages.
Certain types of compensation payments and their deductibility depend upon the
timing of the executive officer's vesting or exercise of previously granted
rights. Certain compensation arising from restricted stock awarded to and cash
bonuses paid to executive officers does not meet the requirements of section
162(m). Moreover, interpretations of and changes in the tax laws and other
factors beyond the Compensation Committee's control may affect the deductibility
of certain compensation payments. The Compensation Committee will 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.
Compensation and Option Committee
April 17, 1998 Wendy L. Simpson, Chair
Edmund C. King
Sam Yellen
13
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Company's Common Stock from December 31, 1992 to December 31, 1997, with the
cumulative stockholder total return of (1) the Standard & Poor's 500 Stock Index
and (2) the NAREIT All REIT Index ("NAREIT Index"). The comparison assumes $100
was invested on December 31, 1992 in the Company's Common Stock and in each of
the foregoing indices and assumes the reinvestment of dividends.
LTC PROPERTIES, INC.
SHAREHOLDER RETURN
FIVE YEARS ENDED DECE
<TABLE>
<CAPTION>
LTC S&P 500 NAREIT
------------------------------------
<S> <C> <C> <C>
Dec-92 100.00 100.00 100.00
Dec-93 139.56 109.99 118.55
Dec-94 155.57 111.43 119.50
Dec-95 191.96 153.13 141.36
Dec-96 256.39 188.29 191.93
Dec-97 316.25 251.13 228.13
</TABLE>
Assumes $100 was invested on 12/31/92 and the reinvestment of dividends
The stock performance depicted in the above graph is not necessarily
indicative of future performance. The Stock Performance Graph and Compensation
and Option Committee Report shall not be deemed incorporated by reference into
any filing by the Company under the Securities Act or the Exchange Act except
to the extent that the Company specifically incorporates 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 the Company's directors and
executive officers, and persons who own more than ten percent of a registered
class of the Company's equity securities, to file with the Securities and
Exchange Commission and the New York Stock Exchange initial reports of ownership
and reports of changes in ownership of Common Stock and other equity securities
of the Company. Officers, directors and greater than ten percent stockholders
are required by Securities Exchange Commission regulations to furnish the
Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1997, all
directors, executive officers and persons who beneficially own more than 10% of
the Company's Common Stock have complied with the reporting requirements of
Section 16(a).
14
<PAGE>
PROPOSAL 2
APPROVAL OF THE COMPANY'S 1998 EQUITY PARTICIPATION PLAN
The Company's 1998 Equity Participation Plan (the "1998 Plan") was adopted
by the Board of Directors by unanimous written consent dated as of April 13,
1998, subject to stockholder approval. The 1998 Plan reserves 500,000 shares of
Common Stock that may be granted as stock options or other awards under such
plan. The principal purposes of the 1998 Plan are to provide incentives for
officers, employees, non-employee directors and consultants of the Company and
its subsidiaries through granting of options, restricted stock and other awards
("Awards"), thereby stimulating their personal and active interest in the
Company's development and financial success and inducing them to remain in the
Company's employ.
The Compensation Committee intends to continue to grant stock options and
other awards under the Company's existing Restated 1992 Stock Option Plan (the
"Restated Plan"). As of March 31, 1998, 21,000 shares of Common Stock remained
available for future awards under the Restated Plan, and a total of 525,500
shares of Common Stock were subject to outstanding stock options and restricted
stock awards under the Restated Plan. The Board of Directors believes that in
order to continue to provide an incentive to secure and retain officers,
employees, non-employee directors and consultants of outstanding ability and to
provide added incentives to those persons responsible for the success of the
Company, the Company should continue its policy of assuring equity ownership of
the Company by adopting the 1998 Plan. Whether or not the 1998 Plan is approved
by stockholders, the Company intends to grant stock options and/or awards with
respect to all shares that remain available under the Restated Plan.
DESCRIPTION OF 1998 EQUITY PARTICIPATION PLAN
Under the 1998 Plan, not more than 500,000 shares of Common Stock of the
Company (or the equivalent in other equity securities) are authorized for
issuance upon exercise of options, stock appreciation rights ("SARs") and other
Awards, or upon vesting of restricted or deferred stock awards. The maximum
number of shares which may be subject to Awards granted under the 1998 Plan to
any individual in any calendar year will not exceed 100,000 shares.
As of March 31, 1998, the last reported sales price of the Common Stock on
the New York Stock Exchange was $19.9375.
The principal features of the 1998 Plan are summarized below, but the
summary is qualified in its entirety by reference to the 1998 Plan, which is
attached as Exhibit A to this Proxy Statement.
ADMINISTRATION. The Compensation Committee of the Board or another
committee thereof (the "Plan Committee") will administer the 1998 Plan with
respect to grants to employees or consultants of the Company and the full Board
will administer the 1998 Plan with respect to grants to non-employee directors
("Independent Directors"). The Plan Committee will consist of at least two
members of the Board, each of whom is a "non-employee director" for purposes of
Rule 16b-3 under the Securities Exchange Act of 1934, as amended ("Rule 16b-3")
and an "outside director" for the purposes of Section 162(m) of the Code
("Section 162(m)"). Subject to the terms and conditions of the 1998 Plan, the
Board or Plan Committee has the authority to select the persons to whom Awards
are to be made, to determine the number of shares to be subject thereto and the
terms and conditions thereof and to make all other determinations and to take
all other actions necessary or advisable for the administration of the 1998
Plan. Similarly, the Board has discretion to determine the terms and
conditions of grants to Independent Directors and to interpret and administer
the 1998 Plan with respect to grants to Independent Directors. The Plan
Committee (and the Board) are also authorized to adopt, amend and rescind rules
relating to the administration of the 1998 Plan.
ELIGIBILITY. Options, SARs, restricted stock and other Awards under the
1998 Plan may be granted to individuals who are then officers or other employees
of the Company or any of its present or future subsidiaries. Such Awards also
may be granted to consultants of the Company selected by the Board or Plan
Committee for participation in the 1998 Plan. Independent Directors may be
granted NQSOs (as defined below) and other Awards by the Board. The 1998 Plan
will authorize the Plan Committee and the Board to, and it is expected that the
Plan Committee and the Board will, adopt procedures pursuant to which employees,
consultants and Independent Directors will be permitted to elect to receive
bonuses or directors' fees, which would otherwise be payable to them in cash, in
the form of NQSOs, restricted stock and/or other Awards.
15
<PAGE>
GRANT OF AWARDS. The 1998 Plan provides that the Plan Committee (or the
Board, with respect to Independent Directors) may grant or issue stock options,
SARs, restricted stock, deferred stock, dividend equivalents, performance
awards, stock payments and other stock related benefits, or any combination
thereof. Each Award will be set forth in a separate agreement or certificate
and will indicate the type, terms and conditions of the Award.
NONQUALIFIED STOCK OPTIONS ("NQSOS") will provide for the right to purchase
Common Stock at a specified price which, except with respect to NQSOs intended
to qualify as performance-based compensation under Section 162(m), may be less
than fair market value on the date of grant and usually will become exercisable
(in the discretion of the Board or Plan Committee) in one or more installments
after the grant date, subject to the participant's continued provision of
services to the Company and/or subject to the satisfaction of individual or
Company performance targets established by the Board or Plan Committee. NQSOs
may be granted for any term specified by the Board or Plan Committee.
INCENTIVE STOCK OPTIONS ("ISOS"), will be designed to comply with the
provisions of the Code and will be subject to certain restrictions contained in
the Code. Among such restrictions, ISOs must have an exercise price not less
than the fair market value of a share of Common Stock on the date of grant, may
only be granted to employees, must expire within a specified period of time
following the Optionee's termination of employment and must be exercised within
the ten years after the date of grant; but, subject to the consent of the
optionee, may be subsequently modified to disqualify them from treatment as ISOs
RESTRICTED STOCK may be sold to participants at various prices or may be
granted for no cash consideration and, in either case, may be made subject to
such restrictions as may be determined by the Board or Plan Committee.
Restricted stock may be repurchased by the Company at the original purchase
price if the conditions or restrictions associated with such restricted stock
are not met, or if no cash consideration was paid in connection with its sale or
grant, may be cancelled if such conditions or restrictions are not met. In
general, restricted stock may not be sold, or otherwise transferred or
hypothecated, until restrictions are removed or expire. Purchasers of
restricted stock, unlike recipients of options, will have voting rights and will
receive dividends prior to the time when the restrictions lapse.
DEFERRED STOCK may be awarded to participants, typically without payment of
consideration, but subject to vesting conditions based on continued employment
or on performance criteria established by the Board or Plan Committee. Like
restricted stock, deferred stock may not be sold, or otherwise transferred or
hypothecated, until vesting conditions are removed or expire. Unlike restricted
stock, deferred stock will not be issued until the deferred stock award has
vested and recipients of deferred stock generally will have no voting or
dividend rights prior to the time when vesting conditions are satisfied.
STOCK APPRECIATION RIGHTS may be granted in connection with stock options
or other Awards, or separately. SARs granted by the Board or Plan Committee in
connection with stock options or other awards typically will provide for
payments to the holder based upon increases in the price of the Company's Common
Stock over the exercise price of the related option or other Awards, but
alternatively may be based upon criteria such as book value. Except as required
by Section 162(m) with respect to a SAR intended to qualify as performance-based
compensation as described in Section 162(m), there are no restrictions specified
in the 1998 Plan on the exercise of SARs or the amount of gain realizable
therefrom, although restrictions may be imposed by the Board or Plan Committee
in the SAR agreements. The Board or Plan Committee may elect to pay SARs in
cash or in Common Stock or in a combination of both.
DIVIDEND EQUIVALENTS are rights to receive the equivalent value (in cash or
Common Stock) of dividends paid on common stock that is covered by a stock
option, SAR or other Award held by the participant.
PERFORMANCE AWARDS may be granted by the Board or Plan Committee on an
individual or group basis. Generally, these Awards will be based upon specific
performance targets and may be paid in cash or in Common Stock or in a
combination of both. Performance Awards may include "phantom" stock Awards that
provide for payments based upon increases in the price of the Company's Common
Stock over a predetermined period. Performance Awards may also include bonuses
which may be granted by the Board or Plan Committee on an individual or group
basis and which may be payable in cash or in Common Stock or in a combination of
both.
STOCK PAYMENTS may be authorized by the Board or Plan Committee in the form
of shares of Common Stock or an option or other right to purchase Common Stock
as part of a deferred compensation arrangement in lieu of all or any part of
compensation, including bonuses, that would otherwise be payable in cash to the
key employee or consultant.
16
<PAGE>
INDEPENDENT DIRECTOR OPTIONS to purchase 15,000 shares of Common Stock will
be granted to each person who is initially elected to the Board on or after the
date of the effectiveness of the Plan and who is an Independent Director at the
time of such initial election. Each Independent Director Option shall vest with
respect to 5,000 shares on each of the first, second and third anniversary of
the date of grant and shall expire on the earlier of the seventh anniversary of
the date of vesting or one year following an Independent Director ceasing to be
a Director for any reason: PROVIDED that no option shall vest more than one year
following an Independent Director's ceasing to be a Director. The Board may
from time to time, in its absolute discretion, and subject to applicable
limitations of the Plan determine (i) which Independent Directors, if any,
should in its opinion, be granted Non-Qualified Stock Options, (ii) the number
of shares subject to such options, and (iii) the terms and conditions of such
options. Members of the Board who are employees of the Company who subsequently
retire from the Company and remain on the Board will not receive an initial
option grant pursuant to the first sentence of this paragraph.
SECURITIES LAWS AND FEDERAL INCOME TAXES
SECURITIES LAWS. The 1998 Plan is intended to conform to the extent
necessary with all provisions of the Securities Act and the Exchange Act and any
and all regulations and rules promulgated by the Securities and Exchange
Commission thereunder, including without limitation Rule 16b-3. The 1998 Plan
will be administered and Awards will be granted and may be exercised, only in
such a manner as to conform to such laws, rules and regulations. To the extent
permitted by applicable law, the 1998 Plan and Awards granted thereunder shall
be deemed amended to the extent necessary to conform to such laws, rules and
regulations.
GENERAL FEDERAL TAX CONSEQUENCES. Under current federal laws, in general,
recipients of awards and grants of nonqualified stock options, stock
appreciation rights, restricted stock, deferred stock, dividend equivalents,
performance awards and stock payments under the 1998 Plan are taxable under
Section 83 of the Code upon their receipt of Common Stock or cash with respect
to such awards or grants and, subject to Section 162(m), the Company will be
entitled to an income tax deduction with respect to the amounts taxable to such
recipients. Under Sections 421 and 422 of the Code, recipients of ISOs are
generally not taxed on their receipt of Common Stock upon their exercises of
ISOs if the ISOs and option stock are held for certain minimum holding periods
and, in such event, the Company is not entitled to income tax deductions with
respect to such exercises. Participants in the 1998 Plan will be provided with
detailed information regarding the tax consequences relating to the various
types of awards and grants under the plan.
SECTION 162(M) LIMITATION. In general, under Section 162(m), income tax
deductions of publicly-held corporations may be limited to the extent total
compensation (including base salary, annual bonus, stock option exercises and
non-qualified benefits paid) for certain executive officers exceeds $1 million
(less the amount of any "excess parachute payments" as defined in Section 280G
of the Code) per officer in any one year. However, under Section 162(m), the
deduction limit does not apply to certain "performance-based compensation."
Under Section 162(m), stock options and SARs will satisfy the "performance-based
compensation" exception if the awards are made by a qualifying compensation
committee, the plan sets the maximum number of shares that can be granted to any
person within a specified period and the compensation is based solely on an
increase in the stock price after the grant date (i.e. the option or SAR
exercise price is equal to or greater than the fair market value of the stock
subject to the award on the grant date). Other types of awards may only qualify
as "performance-based compensation" if such awards are only granted or payable
to the recipients based upon the attainment of objectively determinable and
pre-established performance goals which are established by a qualifying
compensation committee and which relate to performance criteria which are
approved by the corporation's stockholders.
The 1998 Plan has been designed in order to permit the Plan Committee to
grant stock options and SARs which will qualify as "performance-based
compensation." In addition, in order to permit Awards other than stock options
and SARs to qualify as "performance-based compensation", the 1998 Plan provides
that the Plan Committee may designate as "Section 162(m) Participants" certain
employees whose compensation for a given fiscal year may be subject to the limit
on deductible compensation imposed by Section 162(m). The Plan Committee may
grant Awards to Section 162(m) Participants that vest or become exercisable upon
the attainment of performance criteria which are related to one or more of the
following performance goals: (i) net income, (ii) investments, (iii) cash flow,
(iv) earnings per share, (v) return on equity, (vi) return on invested capital
or assets, (vii) cost reductions or savings, (viii) funds from operations, (ix)
appreciation in the fair market value of Common Stock and (x) earnings before
any one or more of the following items: interest, depreciation or amortization.
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REGISTRATION STATEMENT ON FORM S-8. The Company intends to file a
registration statement on Form S-8 under the Securities Act to register the
shares of Common Stock reserved for issuance under the 1998 Plan.
REQUIRED VOTE AND RECOMMENDATIONS
Stockholder approval of the 1998 Plan is required (i) under Section 162(m)
to have the 1998 Plan qualify as an incentive compensation plan, (ii) under
Section 422 of the Code for any options so designated to qualify as incentive
stock options, and (iii) under the rules of the New York Stock Exchange for
listing the shares of Common Stock reserved under the 1998 Plan. The
affirmative vote of a majority of all the votes cast at a meeting at which a
quorum is present is required to approve the 1998 Plan as set forth in this
Proposal 2. For purposes of the vote on Proposal 2, abstentions and broker
non-votes will not be counted as votes cast and thus 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 APPROVAL OF THE COMPANY'S 1998
EQUITY PARTICIPATION PLAN AS DESCRIBED IN PROPOSAL 2.
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INDEPENDENT PUBLIC ACCOUNTANTS
Ernst & Young LLP audited the Company's financial statements for the year
ended December 31, 1997 and have been the Company's auditors since the Company's
organization in May 1992. The directors have selected the firm of Ernst & Young
LLP as independent accountants for the Company for the fiscal year ending
December 31, 1998. A representative of Ernst & Young LLP is expected to be
present at the May 19, 1998 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 SEC provide that certain stockholder
proposals must be included in the proxy statement for the Company's Annual
Meeting. For a proposal to be considered for inclusion in next year's proxy
statement, it must be received by the Company no later than December 18, 1998.
OTHER MATTERS
The cost of the solicitation of proxies will be borne by the Company. In
addition to solicitation by mail, directors and officers of the Company, without
receiving any additional compensation, may solicit proxies personally, by
telephone or telegraph. The Company 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 Shares and will reimburse them for their expenses in doing so. The Company
has 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.
The Company's Annual Report to Stockholders, including the Company's
audited financial statements for the year ended December 31, 1997, is being
mailed herewith to all stockholders of record. THE COMPANY WILL PROVIDE WITHOUT
CHARGE TO ANY PERSON SOLICITED HEREBY, UPON THE WRITTEN REQUEST OF ANY SUCH
PERSON, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K (WITHOUT EXHIBITS)
FOR THE YEAR ENDED DECEMBER 31, 1997 FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION. SUCH REQUESTS SHOULD BE DIRECTED TO THE SECRETARY OF THE COMPANY,
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
Pamela J. Privett
Corporate Secretary
Oxnard, California
April 17, 1998
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EXHIBIT A
THE 1998 EQUITY PARTICIPATION PLAN
OF
LTC PROPERTIES, INC.
LTC Properties, Inc., a Maryland corporation, has adopted The 1998
Equity Participation Plan of LTC Properties, Inc. (the "Plan"), effective May
19, 1998, for the benefit of its eligible employees, consultants and
directors.
The purposes of the Plan are as follows:
(1) To provide an additional incentive for directors, key Employees (as
such term is defined below) and consultants to further the growth,
development and financial success of the Company by personally benefiting
through the ownership of Company stock and/or rights which recognize such
growth, development and financial success.
(2) To enable the Company to obtain and retain the services of
directors, key Employees and consultants considered essential to the long
range success of the Company by offering them an opportunity to own stock in
the Company and/or rights which will reflect the growth, development and
financial success of the Company.
ARTICLE I.
DEFINITIONS
Wherever the following terms are used in the Plan they shall have the
meanings specified below, unless the context clearly indicates otherwise.
"ADMINISTRATOR" shall mean the entity that conducts the general
administration of the Plan as provided in Article X. With reference to the
administration of the Plan with respect to Options granted to Independent
Directors, the term "Administrator" shall refer to the Board. With reference
to the administration of the Plan with respect to any other Award, the term
"Administrator" shall refer to the Committee unless the Board has assumed the
authority for administration of the Plan generally as provided in Section
10.2.
"AWARD" shall mean an Option, a Restricted Stock award, a Performance
Award, a Dividend Equivalents award, a Deferred Stock award, a Stock Payment
award or a Stock Appreciation Right which may be awarded or granted under the
Plan (collectively, "Awards").
"AWARD AGREEMENT" shall mean a written agreement executed by an
authorized officer of the Company and the Holder which shall contain such
terms and conditions with respect to an Award as the Administrator shall
determine, consistent with the Plan.
"AWARD LIMIT" shall mean one hundred thousand (100,000) shares of Common
Stock, as adjusted pursuant to Section 11.3 of the Plan.
"BOARD" shall mean the Board of Directors of the Company.
"CHANGE IN CONTROL" shall mean a change in ownership or control of the
Company effected through any of the following transactions:
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(a) any person or related group of persons (other than the
Company or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Company)
directly or indirectly acquires beneficial ownership (within the
meaning of Rule 13d-3 under the Exchange Act) of securities of the
Company representing forty percent (40%) or more of the total
combined voting power of the Company's then outstanding securities;
or
(b) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation (or other
entity), other than a merger or consolidation which would result in
the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or
by being converted into voting securities of the surviving entity)
more than 66-2/3% 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 the Company (or similar transaction) in which no
person acquires more than 40% of the combined voting power of the
Company's then outstanding securities shall not constitute a Change
in Control; or
(c) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale of
disposition by the Company of all or substantially all of the
Company's assets, or
(d) a majority of the members of the Board cease to be, as of
any date of determination, members of the Board who were members of
the Board as of the date the Plan was approved by the stockholders
of the Company or was nominated for election or elected to the Board
with the approval of a majority of the members of the Board at the
time of such nomination or election.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMITTEE" shall mean the Compensation Committee of the Board, or
another committee or subcommittee of the Board, appointed as provided in
Section 11.1.
"COMMON STOCK" shall mean the common stock of the Company, par value
$.01 per share, and any equity security of the Company issued or authorized
to be issued in the future, but excluding any preferred stock and any
warrants, options or other rights to purchase Common Stock. Debt securities
of the Company convertible into Common Stock shall be deemed equity
securities of the Company.
"COMPANY" shall mean LTC Properties, Inc., a Maryland corporation.
"CORPORATE TRANSACTION" shall mean any of the following
stockholder-approved transactions to which the Company is a party:
(a) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of
which is to change the State in which the Company is incorporated,
form a holding company or effect a similar reorganization as to form
whereupon the Plan and all Options are assumed by the successor
entity;
(b) the sale, transfer, exchange or other disposition of all
or substantially all of the assets of the Company, in complete
liquidation or dissolution of the Company in a transaction not
covered by the exceptions to clause (a), above; or
(c) any reverse merger in which the Company is the surviving
entity but in which securities possessing more than forty percent
(40%) of the total combined voting power of the Company's
outstanding securities are transferred or issued to a person or
persons different from those who held such securities immediately
prior to such merger.
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"CSAR" shall mean a Coupled Stock Appreciation Right.
"DEFERRED STOCK" shall mean Common Stock awarded under Article VIII of
the Plan.
"DIRECTOR" shall mean a member of the Board.
"DIVIDEND EQUIVALENT" shall mean a right to receive the equivalent value
(in cash or Common Stock) of dividends paid on Common Stock, awarded under
Article VIII of the Plan.
"EMPLOYEE" shall mean any officer or other employee (as defined in
accordance with Section 3401(c) of the Code) of the Company, or of any
corporation which is a Subsidiary.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"FAIR MARKET VALUE" of a share of Common Stock as of a given date shall
be (i) the closing price of a share of Common Stock on the principal exchange
on which shares of Common Stock are then trading, if any (or as reported on
any composite index which includes such principal exchange), on the trading
day previous to such date, or if shares were not traded on the trading day
previous to such date, then on the next preceding date on which a trade
occurred, or (ii) if Common Stock is not traded on an exchange but is quoted
on NASDAQ or a successor quotation system, the mean between the closing
representative bid and asked prices for the Common Stock on the trading day
previous to such date as reported by NASDAQ or such successor quotation
system; or (iii) if Common Stock is not publicly traded on an exchange and
not quoted on NASDAQ or a successor quotation system, the Fair Market Value
of a share of Common Stock as established by the Administrator acting in good
faith.
"GRANTEE" shall mean an Employee, Independent Director or consultant
granted a Performance Award, Dividend Equivalent, Stock Payment or Stock
Appreciation Right, or an award of Deferred Stock, under the Plan.
"HOLDER" shall mean a person who has been granted or awarded an Award.
"INCENTIVE STOCK OPTION" shall mean an option which conforms to the
applicable provisions of Section 422 of the Code and which is designated as
an Incentive Stock Option by the Committee.
"INDEPENDENT DIRECTOR" shall mean a member of the Board who is not an
Employee of the Company.
"NON-QUALIFIED STOCK OPTION" shall mean an Option which is not
designated as an Incentive Stock Option by the Committee.
"OPTION" shall mean a stock option granted under Article IV of the Plan.
An Option granted under the Plan shall, as determined by the Committee, be
either a Non-Qualified Stock Option or an Incentive Stock Option; PROVIDED,
HOWEVER, that Options granted to Independent Directors and consultants shall
be Non-Qualified Stock Options.
"OPTIONEE" shall mean an Employee, consultant or Independent Director
granted an Option under the Plan.
"PERFORMANCE AWARD" shall mean a cash bonus, stock bonus or other
performance or incentive award that is paid in cash, Common Stock or a
combination of both, awarded under Article VIII of the Plan.
"PERFORMANCE CRITERIA" shall mean the following business criteria with
respect to the Company or any Subsidiary: (i) net income, (ii) investments,
(iii) cash flow, (iv) earnings per share, (v) return on equity, (vi) return
on invested capital or assets, (vii) cost reductions or savings, (viii) funds
from operations, (ix)
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appreciation in the fair market value of Common Stock and (x) earnings before
any one or more of the following items: interest, depreciation or
amortization.
"PLAN" shall mean The 1998 Equity Participation Plan of LTC Properties,
Inc.
"QDRO" shall mean a qualified domestic relations order as defined by the
Code or Title I of the Employee Retirement Income Security Act of 1974, as
amended, or the rules thereunder.
"RESTRICTED STOCK" shall mean Common Stock awarded under Article VII of
the Plan.
"RESTRICTED STOCKHOLDER" shall mean an Employee, Independent Director or
consultant granted an award of Restricted Stock under Article VII of the Plan.
"RULE 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act,
as such Rule may be amended from time to time.
"SECTION 162(m) PARTICIPANT" shall mean any key Employee designated by
the Committee as a key Employee whose compensation for the fiscal year in
which the key Employee is so designated or a future fiscal year may be
subject to the limit on deductible compensation imposed by Section 162(m) of
the Code.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"STOCK APPRECIATION RIGHT" shall mean a stock appreciation right granted
under Article IX of the Plan.
"STOCK PAYMENT" shall mean (i) a payment in the form of shares of Common
Stock, or (ii) an option or other right to purchase shares of Common Stock,
as part of a deferred compensation arrangement, made in lieu of all or any
portion of the compensation, including without limitation, salary, bonuses
and commissions, that would otherwise become payable to a key Employee or
consultant in cash or director fees that would otherwise be paid to an
Independent Director in cash, awarded under Article VIII of the Plan.
"SUBSIDIARY" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other
than the last corporation in the unbroken chain then owns stock possessing
fifty percent (50%) or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
"TERMINATION OF CONSULTANCY" shall mean the time when the engagement of
a Holder as a consultant to the Company or a Subsidiary is terminated for any
reason, with or without cause and with or without notice, including, but not
by way of limitation, by resignation, discharge, death or retirement; but
excluding terminations where there is a simultaneous commencement of
employment with the Company or any Subsidiary. The Committee, in its
absolute discretion, shall determine the effect of all matters and questions
relating to Termination of Consultancy, including, but not by way of
limitation, the question of whether a Termination of Consultancy resulted
from a discharge for good cause, and all questions of whether a particular
leave of absence constitutes a Termination of Consultancy. Notwithstanding
any other provision of the Plan, the Company or any Subsidiary has an
absolute and unrestricted right to terminate a consultant's service at any
time for any reason whatsoever, with or without cause and with or without
notice, except to the extent expressly provided otherwise in writing.
"TERMINATION OF DIRECTORSHIP" shall mean the time when a Holder who is
an Independent Director ceases to be a Director for any reason, including,
but not by way of limitation, a termination by resignation, failure to be
elected, death or retirement. The Board, in its sole and absolute
discretion, shall determine the effect of all matters and questions relating
to Termination of Directorship with respect to Independent Directors.
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"TERMINATION OF EMPLOYMENT" shall mean the time when the
employee-employer relationship between a Holder and the Company or any
Subsidiary is terminated for any reason, with or without cause and with or
without notice, including, but not by way of limitation, a termination by
resignation, discharge, death, disability or retirement; but excluding (i)
terminations where there is a simultaneous reemployment or continuing
employment of a Holder by the Company or any Subsidiary, (ii) at the
discretion of the Committee, terminations which result in a temporary
severance of the employee-employer relationship, and (iii) at the discretion
of the Committee, terminations which are followed by the simultaneous
establishment of a consulting relationship by the Company or a Subsidiary
with the former employee. The Committee, in its absolute discretion, shall
determine the effect of all matters and questions relating to Termination of
Employment, including, but not by way of limitation, the question of whether
a Termination of Employment resulted from a discharge for good cause, and all
questions of whether a particular leave of absence constitutes a Termination
of Employment; PROVIDED, HOWEVER, that, with respect to Incentive Stock
Options, unless otherwise determined by the Committee in its discretion, a
leave of absence, change in status from an employee to an independent
contractor or other change in the employee-employer relationship shall
constitute a Termination of Employment if, and to the extent that, such leave
of absence, change in status or other change interrupts employment for the
purposes of Section 422(a)(2) of the Code and the then applicable regulations
and revenue rulings under said Section. Notwithstanding any other provision
of the Plan, the Company or any Subsidiary has an absolute and unrestricted
right to terminate an Employee's employment at any time for any reason
whatsoever, with or without cause and with or without notice, except to the
extent expressly provided otherwise in writing.
ARTICLE II.
SHARES SUBJECT TO PLAN
2.1. SHARES SUBJECT TO PLAN.
(a) The shares of stock subject to Awards shall be Common Stock,
initially shares of the Company's Common Stock, par value $.01 per share.
The aggregate number of such shares which may be issued upon exercise of
such Options or rights or upon any such awards under the Plan shall not
exceed Five Hundred Thousand (500,000). The shares of Common Stock
issuable upon exercise of such Options or rights or upon any such awards
may be either previously authorized but unissued shares or treasury
shares.
(b) The maximum number of shares which may be subject to
Awards, granted under the Plan to any individual in any calendar
year shall not exceed the Award Limit. To the extent required by
Section 162(m) of the Code, shares subject to Options which are
canceled continue to be counted against the Award Limit and if,
after grant of an Option, the price of shares subject to such Option
is reduced, the transaction is treated as a cancellation of the
Option and a grant of a new Option and both the Option deemed to be
canceled and the Option deemed to be granted are counted against the
Award Limit. Furthermore, to the extent required by Section 162(m)
of the Code, if, after grant of a Stock Appreciation Right, the base
amount on which stock appreciation is calculated is reduced to
reflect a reduction in the Fair Market Value of the Common Stock,
the transaction is treated as a cancellation of the Stock
Appreciation Right and a grant of a new Stock Appreciation Right and
both the Stock Appreciation Right deemed to be canceled and the
Stock Appreciation Right deemed to be granted are counted against
the Award Limit.
2.2. ADD-BACK OF OPTIONS AND OTHER RIGHTS. If any Option, or other
right to acquire shares of Common Stock under any other Award under the Plan,
expires or is canceled without having been fully exercised, or is exercised
in whole or in part for cash as permitted by the Plan, the number of shares
subject to such Option or other right but as to which such Option or other
right was not exercised prior to its expiration, cancellation or exercise may
again be optioned, granted or awarded hereunder, subject to the limitations
of Section 2.1. Furthermore, any shares subject to Awards which are adjusted
pursuant to Section 11.3 and
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become exercisable with respect to shares of stock of another corporation
shall be considered cancelled and may again be optioned, granted or awarded
hereunder, subject to the limitations of Section 2.1. Shares of Common
Stock which are delivered by the Holder or withheld by the Company upon the
exercise of any Award under the Plan, in payment of the exercise price
thereof or tax withholding thereon, may again be optioned, granted or awarded
hereunder, subject to the limitations of Section 2.1. If any share of
Restricted Stock is forfeited by the Holder or repurchased by the Company
pursuant to Section 7.5 hereof, such share may again be optioned, granted or
awarded hereunder, subject to the limitations of Section 2.1. Notwithstanding
the provisions of this Section 2.2, no shares of Common Stock may again be
optioned, granted or awarded if such action would cause an Incentive Stock
Option to fail to qualify as an incentive stock option under Section 422 of
the Code.
ARTICLE III.
GRANTING OF AWARDS
3.1 AWARD AGREEMENT. Each Award shall be evidenced by an
Award Agreement. Award Agreements evidencing Awards intended to
qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code shall contain such terms and conditions as
may be necessary to meet the applicable provisions of Section 162(m)
of the Code. Award Agreements evidencing Incentive Stock Options
shall contain such terms and conditions as may be necessary to meet
the applicable provisions of Section 422 of the Code.
3.2 PROVISIONS APPLICABLE TO SECTION 162(m) PARTICIPANTS.
(a) The Committee, in its discretion, may determine whether an
Award is to qualify as performance-based compensation as described
in Section 162(m)(4)(C) of the Code.
(b) Notwithstanding anything in the Plan to the contrary, the
Committee may grant any Award to a Section 162(m) Participant,
including Restricted Stock the restrictions with respect to which
lapse upon the attainment of performance goals which are related to
one or more of the Performance Criteria and any performance or
incentive award described in Article VIII that vests or becomes
exercisable or payable upon the attainment of performance goals
which are related to one or more of the Performance Criteria.
(c) To the extent necessary to comply with the
performance-based compensation requirements of Section 162(m)(4)(C)
of the Code, with respect to any Award granted under Articles VII
and VIII which may be granted to one or more Section 162(m)
Participants, no later than ninety (90) days following the
commencement of any fiscal year in question or any other designated
fiscal period or period of service (or such other time as may be
required or permitted by Section 162(m) of the Code), the Committee
shall, in writing, (i) designate one or more Section 162(m)
Participants, (ii) select the Performance Criteria applicable to the
fiscal year or other designated fiscal period or period of service,
(iii) establish the various performance targets, in terms of an
objective formula or standard, and amounts of Restricted Stock or
bonus amounts, as applicable, which may be earned for such fiscal
year or other designated fiscal period or period of service and (iv)
specify the relationship between Performance Criteria and the
performance targets and the amounts of Restricted Stock or bonus
amounts, as applicable, to be earned by each Section 162(m)
Participant for such fiscal year or other designated fiscal period
or period of service. Following the completion of each fiscal year
or other designated fiscal period or period of service, the
Committee shall certify in writing whether the applicable
performance targets have been achieved for such fiscal year or other
designated fiscal period or period of service. In determining the
amount earned by a Section 162(m) Participant, the Committee shall
have the right to reduce (but not to increase) the amount payable at
a given level of performance to take into account additional factors
that the Committee may deem relevant to the
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assessment of individual or corporate performance for the fiscal
year or other designated fiscal period or period of service.
3.3 CONSIDERATION. In consideration of the granting of an Award under
the Plan, the Holder shall agree, in the Award Agreement, to remain in the
employ of (or to consult for or to serve as an Independent Director of, as
applicable) the Company or any Subsidiary for a period of at least one year
(or such shorter period as may be fixed in the Award Agreement or by action
of the Administrator following grant of the Award) after the Award is granted
(or, in the case of an Independent Director, until the next annual meeting of
stockholders of the Company).
3.4 AT-WILL EMPLOYMENT. Nothing in the Plan or in any Award Agreement
hereunder shall confer upon any Holder any right to continue in the employ
of, or as a consultant for, the Company or any Subsidiary, or as a director
of the Company, or shall interfere with or restrict in any way the rights of
the Company and any Subsidiary, which are hereby expressly reserved, to
discharge any Holder at any time for any reason whatsoever, with or without
cause and with or without notice, except to the extent expressly provided
otherwise in a written employment agreement between the Holder and the
Company and any Subsidiary.
ARTICLE IV.
GRANTING OF OPTIONS TO EMPLOYEES,
CONSULTANTS AND INDEPENDENT DIRECTORS
4.1. ELIGIBILITY. Any Employee or consultant selected by the Committee
pursuant to Section 4.4(a)(i) shall be eligible to be granted an Option.
Each Independent Director of the Company shall be eligible to be granted
Options at the times and in the manner set forth in Sections 4.5 and 4.6.
4.2. DISQUALIFICATION FOR STOCK OWNERSHIP. No person may be granted an
Incentive Stock Option under the Plan if such person, at the time the
Incentive Stock Option is granted, owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of
the Company or any then existing Subsidiary or parent corporation (within the
meaning of Section 422 of the Code) unless such Incentive Stock Option
conforms to the applicable provisions of Section 422 of the Code.
4.3. QUALIFICATION OF INCENTIVE STOCK OPTIONS. No Incentive Stock
Option shall be granted to any person who is not an Employee.
4.4. GRANTING OF OPTIONS TO EMPLOYEES AND CONSULTANTS.
(a) The Committee shall from time to time, in its absolute
discretion, and subject to applicable limitations of the Plan:
(i) Determine which Employees are key Employees and select
from among the key Employees or consultants (including Employees
or consultants who have previously received Awards under the
Plan) such of them as in its opinion should be granted Options;
(ii) Subject to the Award Limit, determine the number of
shares to be subject to such Options granted to the selected key
Employees or consultants;
(iii) Subject to Section 4.3, determine whether such Options
are to be Incentive Stock Options or Non-Qualified Stock Options
and whether such Options are to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code;
and
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(iv) Determine the terms and conditions of such Options,
consistent with the Plan; PROVIDED, HOWEVER, that the terms and
conditions of Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code
shall include, but not be limited to, such terms and conditions
as may be necessary to meet the applicable provisions of Section
162(m) of the Code.
(b) Upon the selection of a key Employee or consultant to be granted
an Option, the Committee shall instruct the Secretary of the Company to
issue the Option and may impose such conditions on the grant of the Option
as it deems appropriate. Without limiting the generality of the preceding
sentence, the Committee may, in its discretion and on such terms as it
deems appropriate, require as a condition on the grant of an Option to an
Employee or consultant that the Employee or consultant surrender for
cancellation some or all of the unexercised Options, any other Award or
other rights which have been previously granted to him/her under the Plan
or otherwise. An Option, the grant of which is conditioned upon such
surrender, may have an Option price lower (or higher) than the exercise
price of such surrendered Option or other award, may cover the same (or a
lesser or greater) number of shares as such surrendered Option or other
award, may contain such other terms as the Committee deems appropriate, and
shall be exercisable in accordance with its terms, without regard to the
number of shares, price, exercise period or any other term or condition of
such surrendered Option or other award.
(c) Any Incentive Stock Option granted under the Plan may be modified
by the Committee, with the consent of the Optionee, to disqualify such
Option from treatment as an "incentive stock option" under Section 422 of
the Code.
4.5. GRANTING OF OPTIONS TO INDEPENDENT DIRECTORS.
(a) During the term of the Plan, a person who is initially elected
to the Board and who is an Independent Director at the time of such
initial election automatically shall be granted an Option to purchase
Fifteen Thousand (15,000) shares of Common Stock (subject to adjustment
as provided in Section 11.3) on the date of such initial election.
Members of the Board who are employees of the Company who subsequently
retire from the Company and remain on the Board will not receive an
initial Option grant pursuant to the preceding sentence.
(b) The Board shall from time to time, in its absolute discretion,
and subject to applicable limitations of the Plan determine (i) which
Independent Directors, if any, should, in its opinion, be granted
Non-Qualified Stock Options, (ii) subject to the Award Limit, determine
the number of number of shares to be subject to such Options, and (iii)
the terms and conditions of such Options, consistent with the Plan.
4.6. OPTIONS IN LIEU OF CASH COMPENSATION. Options may be granted under
the Plan to Employees and consultants in lieu of cash bonuses which would
otherwise be payable to such Employees and consultants and to Independent
Directors in lieu of directors' fees which would otherwise be payable to such
Independent Directors, pursuant to such policies which may be adopted by the
Administrator from time to time.
ARTICLE V.
TERMS OF OPTIONS
5.1 OPTION PRICE. The price per share of the shares subject to each
Option granted to Employees and consultants shall be set by the Committee;
PROVIDED, HOWEVER, that such price shall be no less than the par value of a
share of Common Stock, unless otherwise permitted by applicable state law,
and (i) in the case of Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code, such price
shall not be less than 100% of the Fair Market Value of a share of Common
Stock on the date
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the Option is granted; (ii) in the case of Incentive Stock Options such price
shall not be less than 100% of the Fair Market Value of a share of Common
Stock on the date the Option is granted (or the date the Option is modified,
extended or renewed for purposes of Section 424(h) of the Code); and (iii) in
the case of Incentive Stock Options granted to an individual then owning
(within the meaning of Section 424(d) of the Code) more than 10% of the total
combined voting power of all classes of stock of the Company or any
Subsidiary or parent corporation thereof (within the meaning of Section 422
of the Code), such price shall not be less than 110% of the Fair Market Value
of a share of Common Stock on the date the Option is granted (or the date the
Option is modified, extended or renewed for purposes of Section 424(h) of the
Code).
5.2 OPTION TERM. The term of an Option granted to an Employee or
consultant shall be set by the Committee in its discretion; PROVIDED,
HOWEVER, that, in the case of Incentive Stock Options, the term shall not be
more than ten (10) years from the date the Incentive Stock Option is granted,
or five (5) years from such date if the Incentive Stock Option is granted to
an individual then owning (within the meaning of Section 424(d) of the Code)
more than 10% of the total combined voting power of all classes of stock of
the Company or any Subsidiary or parent corporation thereof (within the
meaning of Section 422 of the Code). Except as limited by requirements of
Section 422 of the Code and regulations and rulings thereunder applicable to
Incentive Stock Options, the Committee may extend the term of any outstanding
Option in connection with any Termination of Employment or Termination of
Consultancy of the Optionee, or amend any other term or condition of such
Option relating to such a termination.
5.3 OPTION VESTING
(a) The period during which the right to exercise, in whole or
in part, an Option granted to an Employee or a consultant vests in
the Optionee shall be set by the Committee in its sole and absolute
discretion and the Committee may determine that an Option may not be
exercised in whole or in part for a specified period after it is
granted; PROVIDED, HOWEVER, that, unless the Committee otherwise
provides in the terms of the Award Agreement or otherwise, no Option
shall be exercisable by any Optionee who is then subject to Section
16 of the Exchange Act within the period ending six months and one
day after the date the Option is granted. At any time after grant of
an Option, the Committee may, in its sole and absolute discretion
and subject to whatever terms and conditions it selects, accelerate
the period during which an Option granted to an Employee or
consultant vests.
(b) No portion of an Option granted to an Employee or
consultant which is unexercisable at Termination of Employment or
Termination of Consultancy, as applicable, shall thereafter become
exercisable, except as may be otherwise provided by the Committee
either in the Award Agreement or by action of the Committee
following the grant of the Option.
(c) To the extent that the aggregate Fair Market Value of
stock with respect to which "incentive stock options" (within the
meaning of Section 422 of the Code, but without regard to Section
422(d) of the Code) are exercisable for the first time by an
Optionee during any calendar year (under the Plan and all other
incentive stock option plans of the Company and any parent or
subsidiary corporation (within the meaning of Section 422 of the
Code) of the Company) exceeds $100,000, such Options shall be
treated as Non-Qualified Options to the extent required by Section
422 of the Code. The rule set forth in the preceding sentence shall
be applied by taking Options into account in the order in which they
were granted. For purposes of this Section 5.3(c), the Fair Market
Value of stock shall be determined as of the time the Option with
respect to such stock is granted.
5.4 TERMS OF OPTIONS GRANTED TO INDEPENDENT DIRECTORS. The price per
share of the shares subject to each Option granted to an Independent Director
shall equal 100% of the Fair Market Value of a share of Common Stock on the
date the Option is granted. Subject to Section 6.6, each Option granted to
an Independent Director pursuant to Section 4.5 shall become exercisable in
cumulative annual installments of 33-1/3% on each of the first, second and
third anniversaries of the date of grant and shall expire on the earlier of
the seventh anniversary of the date of vesting or one year following an
Independent Director's Termination
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of Directorship for any reason; PROVIDED that no Option shall vest more than
one year following an Independent Director's Termination of Directorship.
ARTICLE VI.
EXERCISE OF OPTIONS
6.1. PARTIAL EXERCISE. An exercisable Option may be exercised in whole
or in part. However, an Option shall not be exercisable with respect to
fractional shares and the Administrator may require that, by the terms of the
Option, a partial exercise be with respect to a minimum number of shares.
6.2. MANNER OF EXERCISE. All or a portion of an exercisable Option
shall be deemed exercised upon delivery of all of the following to the
Secretary of the Company or his/her office:
(a) A written notice complying with the applicable rules
established by the Administrator stating that the Option, or a
portion thereof, is exercised. The notice shall be signed by the
Optionee or other person then entitled to exercise the Option or
such portion of the Option;
(b) Such representations and documents as the Administrator, in
its absolute discretion, deems necessary or advisable to effect
compliance with all applicable provisions of the Securities Act and
any other federal or state securities laws or regulations. The
Administrator may, in its absolute discretion, also take whatever
additional actions it deems appropriate to effect such compliance
including, without limitation, placing legends on share certificates
and issuing stop-transfer notices to agents and registrars;
(c) In the event that the Option shall be exercised pursuant to
Section 11.1 by any person or persons other than the Optionee,
appropriate proof of the right of such person or persons to exercise
the Option; and
(d) Full cash payment to the Secretary of the Company for the
shares with respect to which the Option, or portion thereof, is
exercised. However, the Administrator, may in its discretion (i)
allow a delay in payment up to thirty (30) days from the date the
Option, or portion thereof, is exercised; (ii) allow payment, in
whole or in part, through the delivery of shares of Common Stock
owned by the Optionee, duly endorsed for transfer to the Company
with a Fair Market Value on the date of delivery equal to the
aggregate exercise price of the Option or exercised portion thereof;
(iii) allow payment, in whole or in part, through the surrender of
shares of Common Stock then issuable upon exercise of the Option
having a Fair Market Value on the date of Option exercise equal to
the aggregate exercise price of the Option or exercised portion
thereof; (iv) allow payment, in whole or in part, through the
delivery of property of any kind which constitutes good and valuable
consideration; (v) allow payment, in whole or in part, through the
delivery of a full recourse promissory note bearing interest (at no
less than such rate as shall then preclude the imputation of
interest under the Code) and payable upon such terms as may be
prescribed by the Committee or the Board; (vi) allow payment, in
whole or in part, through the delivery of a notice that the Optionee
has placed a market sell order with a broker with respect to shares
of Common Stock then issuable upon exercise of the Option, and that
the broker has been directed to pay a sufficient portion of the net
proceeds of the sale to the Company in satisfaction of the Option
exercise price; or (vii) allow payment through any combination of
the consideration provided in the foregoing subparagraphs (ii),
(iii), (iv), (v) and (vi). In the case of a promissory note, the
Administrator may also prescribe the form of such note and the
security to be given for such note. The Option may not be
exercised, however, by delivery of a promissory note or by a loan
from the Company when or where such loan or other extension of
credit is prohibited by law.
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6.3. CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES. The Company shall
not be required to issue or deliver any certificate or certificates for
shares of stock purchased upon the exercise of any Option or portion thereof
prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock
exchanges on which such class of stock is then listed;
(b) The completion of any registration or other qualification
of such shares under any state or federal law, or under the rulings
or regulations of the Securities and Exchange Commission or any
other governmental regulatory body which the Administrator shall, in
its absolute discretion, deem necessary or advisable;
(c) The obtaining of any approval or other clearance from any
state or federal governmental agency which the Administrator shall,
in its absolute discretion, determine to be necessary or advisable;
(d) The lapse of such reasonable period of time following the
exercise of the Option as the Committee (or Board, in the case of
Options granted to Independent Directors) may establish from time to
time for reasons of administrative convenience; and
(e) The receipt by the Company of full payment for such shares,
including payment of any applicable withholding tax, which in the
discretion of the Committee or the Board may be in the form of
consideration used by the Optionee to pay for such shares under
Section 6.2(d).
6.4. RIGHTS AS STOCKHOLDERS/ DIVIDEND EQUIVALENTS. Optionees shall not
be, nor have any of the rights or privileges of, stockholders of the Company
in respect of any shares purchasable upon the exercise of any part of an
Option unless and until certificates representing such shares have been
issued by the Company to such Optionees. Notwithstanding the foregoing, any
Optionee may be granted Dividend Equivalents based on the dividends declared
on Common Stock, to be credited as of dividend payment dates, during the
period between the date an Option is granted, and the date such Option is
exercised, vests or expires, as determined by the Committee (or the Board,
with respect to Independent Directors). Such Dividend Equivalents shall be
converted to cash or additional shares of Common Stock by such formula and at
such time and subject to such limitations as may be determined by the
Committee (or the Board, with respect to Independent Directors). With
respect to Dividend Equivalents granted with respect to Options intended to
be qualified performance-based compensation for purposes of Section 162(m) of
the Code, such Dividend Equivalents shall be payable as of dividend payment
dates regardless of whether such Option is exercised.
6.5. OWNERSHIP AND TRANSFER RESTRICTIONS. The Administrator, in its
absolute discretion, may impose such restrictions on the ownership and
transferability of the shares purchasable upon the exercise of an Option as
it deems appropriate. Any such restriction shall be set forth in the
respective Award Agreement and may be referred to on the certificates
evidencing such shares. The Committee may require the Employee to give the
Company prompt notice of any disposition of shares of Common Stock acquired
by exercise of an Incentive Stock Option within (i) two years from the date
of granting (including the date the Option is modified, extended or renewed
for purposes of Section 424(h) of the Code) such Option to such Employee or
(ii) one year after the transfer of such shares to such Employee. The
Committee may direct that the certificates evidencing shares acquired by
exercise of any such Option refer to such requirement to give prompt notice
of disposition.
6.6. ADDITIONAL LIMITATIONS ON EXERCISE OF OPTIONS. Optionees may be
required to comply with any timing or other restrictions with respect to the
settlement or exercise of an Option, including a window-period limitation, as
may be imposed in the discretion of the Administrator.
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ARTICLE VII.
AWARD OF RESTRICTED STOCK
7.1. ELIGIBILITY. Subject to the Award Limit, Restricted Stock may be
awarded to any Employee who the Committee determines is a key Employee, any
consultant who the Committee determines should receive such an Award or any
Independent Director who the Board determines should receive such an Award.
7.2. AWARD OF RESTRICTED STOCK.
(a) The Committee (or the Board, with respect to Independent
Directors) may from time to time, in its absolute discretion:
(i) Determine which Employees are key Employees and select
from among the key Employees, Independent Directors or
consultants (including Employees, Independent Directors or
consultants who have previously received other awards under the
Plan) such of them as in its opinion should be awarded Restricted
Stock; and
(ii) Determine the purchase price, if any, and other terms
and conditions applicable to such Restricted Stock, consistent
with the Plan.
(b) The Committee (or the Board, with respect to Independent
Directors) shall establish the purchase price, if any, and form of payment
for Restricted Stock.
(c) Upon the selection of a key Employee, Independent Director or
consultant to be awarded Restricted Stock, the Committee (or the Board,
with respect to Independent Directors) shall instruct the Secretary of the
Company to issue such Restricted Stock and may impose such conditions on
the issuance of such Restricted Stock as it deems appropriate.
7.3. RIGHTS AS STOCKHOLDERS. Subject to Section 7.4, upon delivery of
the shares of Restricted Stock to the escrow holder pursuant to Section 7.6,
the Restricted Stockholder shall have, unless otherwise provided by the
Committee (or the Board, with respect to Independent Directors), all the
rights of a stockholder with respect to said shares, subject to the
restrictions in his/her Award Agreement, including the right to receive all
dividends and other distributions paid or made with respect to the shares;
PROVIDED, HOWEVER, that in the discretion of the Committee (or the Board,
with respect to Independent Directors), any extraordinary distributions with
respect to the Common Stock shall be subject to the restrictions set forth in
Section 7.4.
7.4. RESTRICTION. All shares of Restricted Stock issued under the Plan
(including any shares received by holders thereof with respect to shares of
Restricted Stock as a result of stock dividends, stock splits or any other
form of recapitalization) shall, in the terms of each individual Award
Agreement, be subject to such restrictions as the Committee (or the Board,
with respect to Independent Directors) shall provide, which restrictions may
include, without limitation, restrictions concerning voting rights and
transferability and restrictions based on duration of employment with the
Company, Company performance and individual performance; PROVIDED, HOWEVER,
that, except with respect to shares of Restricted Stock granted to Section
162(m) Participants, by action taken after the Restricted Stock is issued,
the Committee may, on such terms and conditions as it may determine to be
appropriate, remove any or all of the restrictions imposed by the terms of
the Award Agreement. Restricted Stock may not be sold or encumbered until
all restrictions are terminated or expire. If no consideration was paid by
the Restricted Stockholder upon issuance, a Restricted Stockholder's rights
in unvested Restricted Stock shall lapse upon Termination of Employment or,
if applicable, upon Termination of Consultancy or Termination of Directorship
with the Company; PROVIDED, HOWEVER, that the Committee in its sole and
absolute discretion may provide that such rights shall not lapse in the event
of a Termination of Employment following a "change of ownership control"
(within the meaning of
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Treasury Regulation Section 1.62-27(e)(2)(v) or any successor regulation
thereto) of the Company or because of the Restricted Stockholder's death or
disability; PROVIDED, FURTHER, except with respect to shares of Restricted
Stock granted to Section 162(m) Participants, the Committee in its sole and
absolute discretion may provide that no such right of repurchase shall exist
in the event of a Termination of Employment, or a Termination of Consultancy,
without cause or following any Change in Control of the Company or because of
the Restricted Stockholder's retirement, or otherwise.
7.5. REPURCHASE OF RESTRICTED STOCK. The Committee (or the Board, with
respect to Independent Directors) shall provide in the terms of each
individual Award Agreement that the Company shall have the right to
repurchase from the Restricted Stockholder the Restricted Stock then subject
to restrictions under the Award Agreement immediately upon a Termination of
Employment or, if applicable, upon a Termination of Consultancy between the
Restricted Stockholder and the Company, at a cash price per share equal to
the price paid by the Restricted Stockholder for such Restricted Stock;
PROVIDED, HOWEVER, that the Committee in its sole and absolute discretion may
provide that no such right of repurchase shall exist in the event of a
Termination of Employment following a "change of ownership or control"
(within the meaning of Treasury Regulation Section 1.162-27(e)(2)(v) or any
successor regulation thereto) of the Company or because of the Restricted
Stockholder's death or disability; PROVIDED, FURTHER, that, except with
respect to shares of Restricted Stock granted to Section 162(m) Participants,
the Committee in its sole and absolute discretion may provide that no such
right of repurchase shall exist in the event of a Termination of Employment
or a Termination of Consultancy without cause or following any Change in
Control of the Company or because of the Restricted Stockholder's retirement,
or otherwise.
7.6. ESCROW. The Secretary of the Company or such other escrow holder
as the Committee may appoint shall retain physical custody of each
certificate representing Restricted Stock until all of the restrictions
imposed under the Award Agreement with respect to the shares evidenced by
such certificate expire or shall have been removed.
7.7. LEGEND. In order to enforce the restrictions imposed upon shares
of Restricted Stock hereunder, the Committee (or the Board, with respect to
Independent Directors) shall cause a legend or legends to be placed on
certificates representing all shares of Restricted Stock that are still
subject to restrictions under Award Agreements, which legend or legends shall
make appropriate reference to the conditions imposed thereby.
7.8. SECTION 83(b) ELECTION. If a Restricted Stockholder makes an
election under Section 83(b) of the Code, or any successor section thereto,
to be taxed with respect to the Restricted Stock as of the date of transfer
of the Restricted Stock rather than as of the date or dates upon which the
Restricted Stockholder would otherwise be taxable under Section 83(a) of the
Code, the Restricted Stockholder shall deliver a copy of such election to the
Company immediately after filing such election with the Internal Revenue
Service.
7.9. RESTRICTED STOCK IN LIEU OF CASH COMPENSATION. Restricted Stock
may be awarded under the Plan to Employees and consultants in lieu of cash
bonuses which would otherwise be payable to such Employees and consultants
and to Independent Directors in lieu of directors' fees which would otherwise
be payable to such Independent Directors, pursuant to such policies which may
be adopted by the Administrator from time to time.
ARTICLE VIII.
PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS, DEFERRED STOCK,
STOCK PAYMENTS
8.1. ELIGIBILITY. Subject to the Award Limit, one or more Performance
Awards, Dividend Equivalents, awards of Deferred Stock, and/or Stock Payments
may be granted to any Employee who the Committee determines is a key
Employee, any consultant who the Committee determines should receive such an
Award or any Independent Director who the Board determines should receive
such an Award.
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8.2 PERFORMANCE AWARDS. Any key Employee or consultant selected by the
Committee or any Independent Director selected by the Board may be granted
one or more Performance Awards. The value of such Performance Awards may be
linked to any one or more of the Performance Criteria or other specific
performance criteria determined appropriate by the Committee (or the Board,
with respect to Independent Directors), in each case on a specified date or
dates or over any period or periods determined by the Committee (or the
Board, with respect to Independent Directors). In making such
determinations, the Committee (or the Board, with respect to Independent
Directors) shall consider (among such other factors as it deems relevant in
light of the specific type of award) the contributions, responsibilities and
other compensation of the particular key Employee, Independent Director or
consultant.
8.3. DIVIDEND EQUIVALENTS. Any key Employee or consultant selected by
the Committee or any Independent Director selected by the Board may be
granted Dividend Equivalents based on the dividends declared on Common Stock,
to be credited as of dividend payment dates, during the period between the
date a Stock Appreciation Right, Deferred Stock or Performance Award is
granted, and the date such Stock Appreciation Right, Deferred Stock or
Performance Award is exercised, vests or expires, as determined by the
Committee (or the Board, with respect to Independent Directors). Such
Dividend Equivalents shall be converted to cash or additional shares of
Common Stock by such formula and at such time and subject to such limitations
as may be determined by the Committee (or the Board, with respect to
Independent Directors).
8.4. STOCK PAYMENTS. Any key Employee or consultant selected by the
Committee or any Independent Director selected by the Board may receive Stock
Payments in the manner determined from time to time by the Committee (or the
Board, with respect to Independent Directors). The number of shares shall be
determined by the Committee (or the Board, with respect to Independent
Directors) and may be based upon the Performance Criteria or other specific
performance criteria determined appropriate by the Committee (or the Board,
with respect to Independent Directors), determined on the date such Stock
Payment is made or on any date thereafter.
8.5. DEFERRED STOCK. Any key Employee or consultant selected by the
Committee or any Independent Director selected by the Board may be granted an
award of Deferred Stock in the manner determined from time to time by the
Committee (or the Board, with respect to Independent Directors). The number
of shares of Deferred Stock shall be determined by the Committee (or the
Board, with respect to Independent Directors) and may be linked to the
Performance Criteria or other specific performance criteria determined to be
appropriate by the Committee (or the Board, with respect to Independent
Directors), in each case on a specified date or dates or over any period or
periods determined by the Committee (or the Board, with respect to
Independent Directors). Common Stock underlying a Deferred Stock award will
not be issued until the Deferred Stock award has vested, pursuant to a
vesting schedule or performance criteria set by the Committee (or the Board,
with respect to Independent Directors). Unless otherwise provided by the
Committee (or the Board, with respect to Independent Directors), a Holder of
Deferred Stock shall have no rights as a Company stockholder with respect to
such Deferred Stock until such time as the Award has vested and the Common
Stock underlying the Award has been issued.
8.6. TERM. The term of a Performance Award, Dividend Equivalent, award
of Deferred Stock and/or Stock Payment shall be set by the Committee (or the
Board, with respect to Independent Directors) in its discretion.
8.7. EXERCISE OR PURCHASE PRICE. The Committee (or the Board, with
respect to Independent Directors) may establish the exercise or purchase
price of a Performance Award, shares of Deferred Stock, or shares received as
a Stock Payment.
8.8. EXERCISE UPON TERMINATION OF EMPLOYMENT, TERMINATION OF
DIRECTORSHIP OR TERMINATION OF CONSULTANCY. A Performance Award, Dividend
Equivalent, award of Deferred Stock and/or Stock Payment is exercisable or
payable only while the Holder is an Employee, Independent Director or
consultant; PROVIDED, HOWEVER, that the Committee in its sole and absolute
discretion may provide that the Performance Award,
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Dividend Equivalent, award of Deferred Stock and/or Stock Payment may be
exercised or paid subsequent to a Termination of Employment following a
"change of control or ownership" (within the meaning of Section
1.162-27(e)(2)(v) or any successor regulation thereto) of the Company;
PROVIDED, FURTHER, that except with respect to Performance Awards granted to
Section 162(m) Participants, the Committee in its sole and absolute
discretion may provide that the Performance Awards may be exercised or paid
following a Termination of Employment or a Termination of Consultancy without
cause, or following a Change in Control of the Company, or because of the
Grantee's retirement, death or disability, or otherwise.
8.9 PAYMENT ON EXERCISE. Payment of the amount determined under Section
8.1 or 8.2 above shall be in cash, in Common Stock or a combination of both,
as determined by the Committee (or the Board, with respect to Independent
Directors). To the extent any payment under this Article VIII is effected in
Common Stock, it shall be made subject to satisfaction of all provisions of
Section 6.3.
8.10 PERFORMANCE AWARD, DIVIDEND EQUIVALENT, DEFERRED STOCK AND/OR STOCK
PAYMENT IN LIEU OF CASH COMPENSATION. Performance Awards, Dividend
Equivalents, Deferred Stock and/or Stock Payments may be awarded under the
Plan to Employees and consultants in lieu of cash bonuses which would
otherwise be payable to such Employees and consultants and to Independent
Directors in lieu of directors' fees which would otherwise be payable to such
Independent Directors, pursuant to such policies which may be adopted by the
Administrator from time to time.
ARTICLE IX.
STOCK APPRECIATION RIGHTS
9.1. GRANT OF STOCK APPRECIATION RIGHTS. A Stock Appreciation Right may
be granted to any key Employee or consultant selected by the Committee or any
Independent Director selected by the Board. A Stock Appreciation Right may
be granted (i) in connection and simultaneously with the grant of an Option,
(ii) with respect to a previously granted Option, or (iii) independent of an
Option. A Stock Appreciation Right shall be subject to such terms and
conditions not inconsistent with the Plan as the Committee (or the Board,
with respect to Independent Directors) shall impose and shall be evidenced by
an Award Agreement. Without limiting the generality of the foregoing, the
Committee (or the Board, with respect to Independent Directors) may, in its
discretion and on such terms as it deems appropriate, require as a condition
of the grant of a Stock Appreciation Right to an Employee, Independent
Director or consultant that the Employee, Independent Director or consultant
surrender for cancellation some or all of the unexercised Options, awards of
Restricted Stock or Deferred Stock, Performance Awards, Stock Appreciation
Rights, Dividend Equivalents or Stock Payments, or other rights which have
been previously granted to him/her under the Plan or otherwise. A Stock
Appreciation Right, the grant of which is conditioned upon such surrender,
may have an exercise price lower (or higher) than the exercise price of the
surrendered Option or other award, may cover the same (or a lesser or
greater) number of shares as such surrendered Option or other award, may
contain such other terms as the Committee (or the Board, with respect to
Independent Directors) deems appropriate, and shall be exercisable in
accordance with its terms, without regard to the number of shares, price,
exercise period or any other term or condition of such surrendered Option or
other award.
9.2. COUPLED STOCK APPRECIATION RIGHTS.
(a) A CSAR shall be related to a particular Option and shall be
exercisable only when and to the extent the related Option is
exercisable.
(b) A CSAR may be granted to the Grantee for no more than the
number of shares subject to the simultaneously or previously granted
Option to which it is coupled.
(c) A CSAR shall entitle the Grantee (or other person entitled to
exercise the Option pursuant to the Plan) to surrender to the Company
unexercised a portion of the Option to which the CSAR relates (to the
extent then exercisable pursuant to its terms) and to receive from the
Company in
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exchange therefor an amount determined by multiplying the difference
obtained by subtracting the Option exercise price from the Fair
Market Value of a share of Common Stock on the date of exercise of
the CSAR by the number of shares of Common Stock with respect to
which the CSAR shall have been exercised, subject to any limitations
the Committee (or the Board, with respect to Independent Directors)
may impose.
9.3. INDEPENDENT STOCK APPRECIATION RIGHTS.
(a) An Independent Stock Appreciation Right ("ISAR") shall be
unrelated to any Option and shall have a term set by the Committee
(or the Board, with respect to Independent Directors). An ISAR
shall be exercisable in such installments as the Committee (or the
Board, with respect to Independent Directors) may determine. An
ISAR shall cover such number of shares of Common Stock as the
Committee (or the Board, with respect to Independent Directors) may
determine. The exercise price per share of Common Stock subject to
each ISAR shall be set by the Committee (or the Board, with respect
to Independent Directors). An ISAR is exercisable only while the
Grantee is an Employee, Independent Director or consultant; provided
that the Committee (or the Board, with respect to Independent
Directors) may determine that the ISAR may be exercised subsequent
to Termination of Employment, Termination of Directorship or
Termination of Consultancy without cause, or following a Change in
Control of the Company, or because of the Grantee's retirement,
death or disability, or otherwise.
(b) An ISAR shall entitle the Grantee (or other person entitled
to exercise the ISAR pursuant to the Plan) to exercise all or a
specified portion of the ISAR (to the extent then exercisable
pursuant to its terms) and to receive from the Company an amount
determined by multiplying the difference obtained by subtracting the
exercise price per share of the ISAR from the Fair Market Value of a
share of Common Stock on the date of exercise of the ISAR by the
number of shares of Common Stock with respect to which the ISAR
shall have been exercised, subject to any limitations the Committee
(or the Board, with respect to Independent Directors) may impose.
9.4. PAYMENT AND LIMITATIONS ON EXERCISE.
(a) Payment of the amount determined under Section 9.2(c) and
9.3(b) above shall be in cash, in Common Stock (based on its Fair
Market Value as of the date the Stock Appreciation Right is
exercised) or a combination of both, as determined by the Committee
(or the Board, with respect to Independent Directors). To the
extent such payment is effected in Common Stock it shall be made
subject to satisfaction of all provisions of Section 6.3 above
pertaining to Options.
(b) Grantees of Stock Appreciation Rights may be required to
comply with any timing or other restrictions with respect to the
settlement or exercise of a Stock Appreciation Right, including a
window-period limitation, as may be imposed in the discretion of the
Committee (or the Board, with respect to Independent Directors).
ARTICLE X.
ADMINISTRATION
10.1. COMPENSATION COMMITTEE. The Compensation Committee (or another
committee or a subcommittee of the Board assuming the functions of the
Committee under the Plan) shall consist solely of two or more Independent
Directors appointed by and holding office at the pleasure of the Board, each
of whom is both a "non-employee director" as defined by Rule 16b-3 and an
"outside director" for purposes of Section 162(m) of the Code. Appointment
of Committee members shall be effective upon acceptance of
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appointment. Committee members may resign at any time by delivering written
notice to the Board. Vacancies in the Committee may be filled by the Board.
10.2. DUTIES AND POWERS OF COMMITTEE. It shall be the duty of the
Committee to conduct the general administration of the Plan in accordance
with its provisions. The Committee shall have the power to interpret the
Plan and the agreements pursuant to which Awards are granted or awarded, and
to adopt such rules for the administration, interpretation, and application
of the Plan as are consistent therewith and to interpret, amend or revoke any
such rules. Notwithstanding the foregoing, the full Board, acting by a
majority of its members in office, shall conduct the general administration
of the Plan with respect to Options granted to Independent Directors. Any
such grant or award under the Plan need not be the same with respect to each
Holder. Any such interpretations and rules with respect to Incentive Stock
Options shall be consistent with the provisions of Section 422 of the Code.
In its absolute discretion, the Board may at any time and from time to time
exercise any and all rights and duties of the Committee under the Plan except
with respect to matters which under Rule 16b-3 or Section 162(m) of the Code,
or any regulations or rules issued thereunder, are required to be determined
in the sole discretion of the Committee.
10.3. MAJORITY RULE; UNANIMOUS WRITTEN CONSENT. The Committee shall act
by a majority of its members in attendance at a meeting at which a quorum is
present or by a memorandum or other written instrument signed by all members
of the Committee.
10.4. COMPENSATION; PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS.
Members of the Committee shall receive such compensation for their services
as may be determined by the Board. All expenses and liabilities which
members of the Committee incur in connection with the administration of the
Plan shall be borne by the Company. The Committee may, with the approval of
the Board, employ attorneys, consultants, accountants, appraisers, brokers,
or other persons. The Committee, the Company and the Company's officers and
Directors shall be entitled to rely upon the advice, opinions or valuations
of any such persons. All actions taken and all interpretations and
determinations made by the Committee or the Board in good faith shall be
final and binding upon all Holders, the Company and all other interested
persons. No members of the Committee or Board shall be personally liable for
any action, determination or interpretation made in good faith with respect
to the Plan or Awards, and all members of the Committee and the Board shall
be fully protected by the Company in respect of any such action,
determination or interpretation.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1. NOT TRANSFERABLE. No Award under the Plan may be sold, pledged,
assigned or transferred in any manner other than by will or the laws of
descent and distribution or, subject to the consent of the Administrator,
pursuant to a QDRO, unless and until such Award has been exercised, or the
shares underlying such Award have been issued, and all restrictions
applicable to such shares have lapsed. No Option, Restricted Stock award,
Deferred Stock award, Performance Award, Stock Appreciation Right, Dividend
Equivalent or Stock Payment or interest or right therein shall be liable for
the debts, contracts or engagements of the Holder or his/her successors in
interest or shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means whether such
disposition be voluntary or involuntary or by operation of law by judgment,
levy, attachment, garnishment or any other legal or equitable proceedings
(including bankruptcy), and any attempted disposition thereof shall be null
and void and of no effect, except to the extent that such disposition is
permitted by the preceding sentence.
During the lifetime of the Holder, only he may exercise an Option or
other Award (or any portion thereof) granted to him/her under the Plan,
unless it has been disposed of pursuant to a QDRO. After the death of the
Holder, any exercisable portion of an Option or other Award may, prior to the
time when such portion becomes unexercisable under the Plan or the applicable
Award Agreement, be exercised by his/her personal
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representative or by any person empowered to do so under the deceased
Holder's will or under the then applicable laws of descent and distribution.
11.2. AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN. Except as
otherwise provided in this Section 11.2, the Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at any time or from
time to time by the Board or the Committee. However, without approval of the
Company's stockholders given within twelve months before or after the action
by the Board or the Committee, no action of the Board or the Committee may,
except as provided in Section 11.3, increase the limits imposed in Section
2.1 on the maximum number of shares which may be issued under the Plan. No
amendment, suspension or termination of the Plan shall, without the consent
of the Holder alter or impair any rights or obligations under any Award
theretofore granted or awarded, unless the Award itself otherwise expressly
so provides. No Awards may be granted or awarded during any period of
suspension or after termination of the Plan, and in no event may any
Incentive Stock Option be granted under the Plan after the first to occur of
the following events:
(a) The expiration of ten years from the date the Plan is adopted by
the Board; or
(b) The expiration of ten years from the date the Plan is approved by
the Company's stockholders under Section 11.4.
In addition, if the Board determines that Awards other than Options or
Stock Appreciation Rights which may be granted to Section 162(m) Participants
should continue to be eligible to qualify as performance-based compensation
under Section 162(m)(4)(C) of the Code, the Performance Criteria must be
disclosed to and approved by the Company's stockholders no later than the
first stockholder meeting that occurs in the fifth year following the year in
which the Company's stockholders previously approved the Performance Criteria.
11.3. CHANGES IN COMMON STOCK OR ASSETS OF THE COMPANY, ACQUISITION OR
LIQUIDATION OF THE COMPANY, CHANGE IN CONTROL AND OTHER CORPORATE EVENTS.
(a) Subject to Section 11.3(d), in the event that the
Administrator determines that any dividend or other distribution
(whether in the form of cash, Common Stock, other securities, or
other property), recapitalization, reclassification, stock split,
reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase, liquidation,
dissolution, or sale, transfer, exchange or other disposition of all
or substantially all of the assets of the Company (including, but
not limited to, a Corporate Transaction), or exchange of Common
Stock or other securities of the Company, issuance of warrants or
other rights to purchase Common Stock or other securities of the
Company, or other similar corporate transaction or event, in the
Administrator's opinion, affects the Common Stock such that an
adjustment is determined by the Administrator to be appropriate in
order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan or
with respect to an Award, then the Administrator shall, in such
manner as it may deem equitable, adjust any or all of:
(i) the number and kind of shares of Common Stock (or other
securities or property) with respect to which Awards may be granted
or awarded (including, but not limited to, adjustments of the
limitations in Section 2.1 on the maximum number and kind of shares
which may be issued and adjustments of the Award Limit),
(ii) the number and kind of shares of Common Stock (or other
securities or property) subject to outstanding Options, Performance
Awards, Stock Appreciation Rights, Dividend Equivalents, or Stock
Payments, and in the number and kind of shares of outstanding
Restricted Stock or Deferred Stock, and
(iii) the grant or exercise price with respect to any Award.
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(b) Subject to Sections 11.3(b)(vii) and 11.3(d), in the event
of any Corporate Transaction or other transaction or event described
in Section 11.3(a) or any unusual or nonrecurring transactions or
events affecting the Company, any affiliate of the Company, or the
financial statements of the Company or any affiliate, or of changes
in applicable laws, regulations, or accounting principles, the
Administrator, in its sole and absolute discretion, and on such
terms and conditions as it deems appropriate, either by the terms of
the Award or by action taken prior to the occurrence of such
transaction or event and either automatically or upon the Holder's
request, is hereby authorized to take any one or more of the
following actions whenever the Administrator determines that such
action is appropriate in order to prevent dilution or enlargement of
the benefits or potential benefits intended to be made available
under the Plan or with respect to any Award under the Plan, to
facilitate such transactions or events or to give effect to such
changes in laws, regulations or principles:
(i) To provide for either the purchase of any such Award
for an amount of cash equal to the amount that could have been
attained upon the exercise of such Award or realization of the
Holder's rights had such Award been currently exercisable or
payable or fully vested or the replacement of such Award with
other rights or property selected by the Administrator in its
sole discretion;
(ii) To provide that the Award cannot vest, be exercised or
become payable after such event;
(iii) To provide that such Award shall be exercisable as to
all shares covered thereby, notwithstanding anything to the
contrary in (i) Section 5.3 or 5.4 or (ii) the provisions of such
Award;
(iv) To provide that such Award be assumed by the successor
or survivor corporation, or a parent or subsidiary thereof, or
shall be substituted for by similar options, rights or awards
covering the stock of the successor or survivor corporation, or a
parent or subsidiary thereof, with appropriate adjustments as to
the number and kind of shares and prices;
(v) To make adjustments in the number and type of shares of
Common Stock (or other securities or property) subject to
outstanding Awards, and in the number and kind of outstanding
Restricted Stock or Deferred Stock and/or in the terms and
conditions of (including the grant or exercise price), and the
criteria included in, outstanding options, rights and awards and
options, rights and awards which may be granted in the future.;
(vi) To provide that, for a specified period of time prior
to such event, the restrictions imposed under an Award Agreement
upon some or all shares of Restricted Stock or Deferred Stock may
be terminated, and, in the case of Restricted Stock, some or all
shares of such Restricted Stock may cease to be subject to
repurchase under Section 7.5 or forfeiture under Section 7.4
after such event; and
(vii) None of the foregoing discretionary actions taken under
this Section 11.3(b) shall be permitted with respect to Options
granted under Section 4.5 to Independent Directors to the extent
that such discretion would be inconsistent with the applicable
exemptive conditions of Rule 16b-3. In the event of a Change in
Control or a Corporate Transaction, to the extent that the Board
does not have the ability under Rule 16b-3 to take or to refrain
from taking the discretionary actions set forth in Section
11.3(b)(iii) above, each Option granted to an Independent
Director shall be exercisable as to all shares covered thereby
upon such Change in Control or during the five days immediately
preceding the consummation of such Corporate
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Transaction and subject to such consummation, notwithstanding
anything to the contrary in Section 5.4 or the vesting schedule of
such Options. In the event of a Corporate Transaction, to the extent
that the Board does not have the ability under Rule 16b-3 to take or
to refrain from taking the discretionary actions set forth in
Section 11.3(b)(ii) above, no Option granted to an Independent
Director may be exercised following such Corporate Transaction
unless such Option is, in connection with such Corporate
Transaction, either assumed by the successor or survivor corporation
(or parent or subsidiary thereof) or replaced with a comparable
right with respect to shares of the capital stock of the successor
or survivor corporation (or parent or subsidiary thereof).
(c) Subject to Section 11.3(d) and 11.8, the Administrator may,
in its discretion, include such further provisions and limitations
in any Award, agreement or certificate, as it may deem equitable and
in the best interests of the Company.
(d) With respect to Awards described in Article VII or VIII
which are granted to Section 162(m) Participants and are intended to
qualify as performance-based compensation under Section
162(m)(4)(C), no adjustment or action described in this Section 11.3
or in any other provision of the Plan shall be authorized to the
extent that such adjustment or action would cause such Award to fail
to so qualify under Section 162(m)(4)(C), or any successor
provisions thereto. No adjustment or action described in this
Section 11.3 or in any other provision of the Plan shall be
authorized to the extent that such adjustment or action would cause
the Plan to violate Section 422(b)(1) of the Code. Furthermore, no
such adjustment or action shall be authorized to the extent such
adjustment or action would result in short-swing profits liability
under Section 16 or violate the exemptive conditions of Rule 16b-3
unless the Administrator determines that the Award is not to comply
with such exemptive conditions. The number of shares of Common
Stock subject to any Award shall always be rounded to the next whole
number.
11.4. APPROVAL OF PLAN BY STOCKHOLDERS. The Plan will be submitted for
the approval of the Company's stockholders within twelve months after the
date of the Board's initial adoption of the Plan. Awards may be granted or
awarded prior to such stockholder approval; PROVIDED that such Awards shall
not be exercisable nor shall such Awards vest prior to the time when the Plan
is approved by the stockholders; and PROVIDED FURTHER, that if such approval
has not been obtained at the end of said twelve-month period, all Awards
previously granted or awarded under the Plan shall thereupon be canceled and
become null and void.
11.5. TAX WITHHOLDING. The Company shall be entitled to require payment
in cash or deduction from other compensation payable to each Holder of any
sums required by federal, state or local tax law to be withheld with respect
to the issuance, vesting, exercise or payment of any Award. The
Administrator may in its discretion and in satisfaction of the foregoing
requirement allow such Holder to elect to have the Company withhold shares of
Common Stock otherwise issuable under such Award (or allow the return of
shares of Common Stock) having a Fair Market Value equal to the sums required
to be withheld.
11.6. LOANS. The Committee may, in its discretion, extend one or more
loans to key Employees, Independent Directors or Consultants in connection
with the exercise or receipt of an Award granted or awarded under the Plan,
or the issuance of Restricted Stock or Deferred Stock awarded under the Plan.
The terms and conditions of any such loan shall be set by the Committee.
11.7. FORFEITURE PROVISIONS. Pursuant to its general authority to
determine the terms and conditions applicable to Awards under the Plan, the
Administrator shall have the right (to the extent consistent with the
applicable exemptive conditions of Rule 16b-3) to provide, in the terms of
Awards made under the Plan, or to require a Holder to agree by separate
written instrument, that (i) any proceeds, gains or other economic benefit
actually or constructively received by the Holder upon any receipt or
exercise of the Award, or upon the receipt or resale of any Common Stock
underlying the Award, must be paid to the Company, and (ii) the
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Award shall terminate and any unexercised portion of the Award (whether or
not vested) shall be forfeited, if (a) a Termination of Employment,
Termination of Consultancy or Termination of Directorship occurs prior to a
specified date, or within a specified time period following receipt or
exercise of the Award, or (b) the Holder at any time, or during a specified
time period, engages in any activity in competition with the Company, or
which is inimical, contrary or harmful to the interests of the Company, as
further defined by the Committee (or the Board, as applicable) or the Holder
incurs a Termination of Employment, Termination of Consultancy or Termination
of Directorship for cause.
11.8. LIMITATIONS APPLICABLE TO SECTION 16 PERSONS AND PERFORMANCE-BASED
COMPENSATION. Notwithstanding any other provision of the Plan, the Plan, and
any Award granted or awarded to any individual who is then subject to Section
16 of the Exchange Act, shall be subject to any additional limitations set
forth in any applicable exemptive rule under Section 16 of the Exchange Act
(including any amendment to Rule 16b-3 of the Exchange Act) that are
requirements for the application of such exemptive rule. To the extent
permitted by applicable law, the Plan and Awards granted or awarded hereunder
shall be deemed amended to the extent necessary to conform to such applicable
exemptive rule. Furthermore, notwithstanding any other provision of the Plan
or any Award described in Article VII or VIII which is granted to a Section
162(m) Participant and is intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall be
subject to any additional limitations set forth in Section 162(m) of the Code
(including any amendment to Section 162(m) of the Code) or any regulations or
rulings issued thereunder that are requirements for qualification as
performance-based compensation as described in Section 162(m)(4)(C) of the
Code, and the Plan shall be deemed amended to the extent necessary to conform
to such requirements.
11.9. EFFECT OF PLAN UPON OPTIONS AND COMPENSATION PLANS. The adoption
of the Plan shall not affect any other compensation or incentive plans in
effect for the Company or any Subsidiary. Nothing in the Plan shall be
construed to limit the right of the Company (i) to establish any other forms
of incentives or compensation for Employees, Independent Directors or
consultants of the Company or any Subsidiary or (ii) to grant or assume
options or other rights or awards otherwise than under the Plan in connection
with any proper corporate purpose including but not by way of limitation, the
grant or assumption of options in connection with the acquisition by
purchase, lease, merger, consolidation or otherwise, of the business, stock
or assets of any corporation, partnership, limited liability company, firm or
association.
11.10. COMPLIANCE WITH LAWS. The Plan, the granting and vesting of
Awards under the Plan and the issuance and delivery of shares of Common Stock
and the payment of money under the Plan or under Awards granted or awarded
hereunder are subject to compliance with all applicable federal and state
laws, rules and regulations (including but not limited to state and federal
securities law and federal margin requirements) and to such approvals by any
listing, regulatory or governmental authority as may, in the opinion of
counsel for the Company, be necessary or advisable in connection therewith.
Any securities delivered under the Plan shall be subject to such
restrictions, and the person acquiring such securities shall, if requested by
the Company, provide such assurances and representations to the Company as
the Company may deem necessary or desirable to assure compliance with all
applicable legal requirements. To the extent permitted by applicable law,
the Plan and Awards granted or awarded hereunder shall be deemed amended to
the extent necessary to conform to such laws, rules and regulations.
11.11. TITLES. Titles are provided herein for convenience only and are
not to serve as a basis for interpretation or construction of the Plan.
11.12. GOVERNING LAW. The Plan and any agreements hereunder shall be
administered, interpreted and enforced under the internal laws of the State
of Maryland without regard to conflicts of laws thereof.
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LTC PROPERTIES, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS-MAY 19, 1998
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 Properties, Inc. to be held at the Residence Inn by Marriott
at River Ridge, Oxnard, California, on Monday, May 19, 1998 at 11:00 A.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.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
- FOLD AND DETACH HERE -
<PAGE>
LTC PROPERTIES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /X/
1. ELECTION OF DIRECTORS-Nominees:
Andre C. Dimitriadis, James J. Pieczynski, Edmund C. King,
Wendy L. Simpson and Sam Yellen.
For All / / Withheld All / / For All Except / /
Nominee Exception __________________
2. Approval of LTC Properties, Inc. 1998 Equity Participation Plan.
For / / Against / / Abstain / /
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 and matters listed under Item (1) and
Item (2).
Dated: ____________________, 1998
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.
