DEF 14A 1 ltc-20210526xdef14a.htm DEF 14A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant

Filed by a Party other than the Registrant

Check the appropriate box:

Preliminary Proxy Statement

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material under §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):

No fee required.

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1)

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(2)

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(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)

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(5)

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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)

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(4)

Date Filed:


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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD MAY 26, 2021


The 2021 Annual Meeting of Stockholders of LTC Properties, Inc. will be held virtually, via live webcast, on Wednesday, May 26, 2021 at 5:00 p.m., Pacific Time, at www.virtualshareholdermeeting.com/LTC2021 to conduct the following items of business:

(1)

To elect six directors to serve on the Board of Directors for the ensuing year and until the election and qualification of their respective successors;

(2)

To approve the 2021 Equity Participation Plan of LTC Properties, Inc.;

(3)

To ratify the appointment of Ernst & Young LLP as independent registered public accounting firm for fiscal 2021;

(4)

To approve, on an advisory basis, the compensation of the named executive officers; and

(5)

To transact such other business as may properly come before the meeting or any adjournment or postponement thereof.

Only stockholders whose names appear of record on our books at the close of business on April 12, 2021 are entitled to notice of, and to vote at, such 2021 Annual Meeting or any adjournment or postponement of such 2021 Annual Meeting.

By Order of the Board of Directors

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PAMELA J. SHELLEY-KESSLER
Co-President, Chief Financial Officer and
Corporate Secretary

Westlake Village, California

April 20, 2021

IMPORTANT:

Whether or not you plan to attend the 2021 Annual Meeting virtually, please vote as promptly as possible (a) via the internet or telephone, if and as instructed by your broker or other nominee holder, or (b) if this proxy statement was mailed to you by completing, dating and signing the enclosed proxy card and mailing it in the accompanying postage paid envelope.

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to Be Held on May 26, 2021—the Proxy Statement and the Annual Report are available at http://materials.proxyvote.com/502175.


TABLE OF CONTENTS

PROXY STATEMENT

1

Solicitation

1

Meeting

1

Voting Rights

1

Voting of Proxy

2

Broker Non-Votes

2

Majority Voting

2

Board of Directors’ Recommendations

3

Revocability of Proxy

3

CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS

3

Code of Ethics

3

Corporate Governance Guidelines

3

Corporate Responsibility and Sustainability

3

Board Structure and Committee Composition

5

Communications with the Board

7

Consideration of Director Nominees

7

PROPOSAL 1 ELECTION OF DIRECTORS

9

PROPOSAL 2 APPROVAL OF THE 2021 EQUITY PARTICIPATION PLAN OF LTC PROPERTIES, INC.

12

PROPOSAL 3 RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

22

PROPOSAL 4 ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION

23

EXECUTIVE OFFICERS

24

EXECUTIVE COMPENSATION DISCUSSION AND ANALYSIS

25

Executive Summary

25

Executive Compensation Program Philosophy and Objectives

29

Executive Compensation Program Elements

29

Other Elements of Compensation

29

Compensation Governance Policies and Guidelines

30

Compensation Committee

31

Competitive Considerations

32

Compensation Consultant

32

Executive Compensation Review

32

Executive Compensation Practices

33

Compensation Risk Assessment

39

EXECUTIVE COMPENSATION TABLES

39

Summary Compensation Table

39

CEO to Median Employee Pay Ratio

40

Employment Agreements

41

Grants of Plan-Based Awards

41

Outstanding Equity Awards at Year-End

42

Option Exercises and Stock Vested

42

Potential Payments Upon Termination or Change In Control

43

DIRECTOR COMPENSATION

45

Director Compensation for the Year ended December 31, 2020

45

COMPENSATION COMMITTEE REPORT

46

Compensation Committee Interlocks and Insider Participation

46

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

47

Beneficial Ownership Table

47

Securities Authorized for Issuance under Equity Compensation Plans

48

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

48

Review, Approval or Ratification of Transactions with Related Persons

48

Transactions with Related Persons

48

Director Independence

49

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES AND SERVICES

50

REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

51

RISK OVERSIGHT

52

FORWARD LOOKING STATEMENTS

52

ADDITIONAL INFORMATION

52

Other Matters

52

Stockholder Proposals

52

Annual Report

53

Householding

53

Appendix A—RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

A-1

Appendix B—The 2021 Equity Participation Plan of LTC Properties, Inc.

B-1


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PROXY STATEMENT

Solicitation

This proxy statement is furnished to the stockholders of LTC Properties, Inc., a Maryland corporation (“LTC”), in connection with the solicitation of proxies by the Board of Directors (the “Board”) for use at the 2021 Annual Meeting of Stockholders of LTC or at any adjournment or postponement of the 2021 Annual Meeting. The approximate date on which this proxy statement and the form of proxy are first being sent to our stockholders is April 20, 2021.

The cost of the solicitation of proxies will be borne by us. In addition to solicitation by mail, our directors and officers, without receiving any additional compensation, may solicit proxies personally, by telephone, by facsimile or electronically. We will request brokers, banks, and other nominees holding stock in their names for others to forward proxy materials to their customers or principals who are the beneficial owners of shares of our common stock and will reimburse them for their expenses in doing so. We have retained the services of Georgeson LLC for a fee of $8,500 plus out-of-pocket expenses, to assist in the solicitation of proxies.

Meeting

The 2021 Annual Meeting will be held on Wednesday, May 26, 2021 starting at 5:00 p.m., Pacific Time.

We are pleased to announce that this year’s Annual Meeting again will be a virtual meeting via live webcast on the internet. You will be able to attend the annual meeting as well as vote during the live webcast of the meeting by visiting www.virtualshareholdermeeting.com/LTC2021 and entering the 16‐digit control number included on your proxy card or in the instructions that accompanied your proxy materials. Stockholders will have the same participation rights at our virtual meeting as they would at an in-person annual meeting of our stockholders.

Any adjournment, postponement, or material changes to the date, time, location, or format of the 2021 Annual Meeting will be announced via press release, posted on our website at www.LTCreit.com, and filed as additional proxy materials with the Securities and Exchange Commission (“SEC”).

As always, we encourage you to vote your shares prior to the 2021 Annual Meeting.

Voting Rights

At the close of business on April 12, 2021, there were 39,364,622 shares of common stock outstanding and eligible for voting at the 2021 Annual Meeting. Only stockholders of record at the close of business on April 12, 2021, are entitled to notice of, and to vote at, the 2021 Annual Meeting. The presence virtually 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 2021 Annual Meeting.

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Voting of Proxy

You may vote by attending and voting at the virtual 2021 Annual Meeting as described above under “Meeting”, or you may vote by submitting a proxy. The method of voting by proxy differs depending on whether (1) you are viewing this proxy statement on the internet or receiving a paper copy, and (2) you hold your shares as a record holder or in “street name.”

If you are the record holder of your stock and you are receiving a paper copy of this proxy statement, you may vote by completing, dating and signing the proxy card that was included with the proxy statement and promptly returning it in the pre-addressed, postage paid envelope provided to you. If you do not have a postage-prepaid envelope, please mail your completed proxy card to the following address: Broadridge Corporate Issuer Solutions, 51 Mercedes Way, Edgewood, NY 11717.

If you hold your shares of common stock in “street name,” you will receive instructions from your broker, bank or other nominee on how to vote your shares. Your broker, bank or other nominee may allow you to deliver your voting instructions via the internet and may also permit you to submit your voting instructions by telephone.

Broker Non-Votes

If you are a “street name” beneficial owner whose shares are held of record by a broker, the rules of the New York Stock Exchange (“NYSE”) require your broker to ask you for instructions on how to vote. If you do not provide voting instructions to your broker, then your broker may only exercise discretionary authority to vote on routine matters. Of the items described in this proxy statement, routine matters consist only of Proposal 3 “Ratification of Independent Registered Public Accounting Firm.” Your broker may not exercise discretionary authority to vote on non-routine matters. This lack of discretionary authority is called a “broker non-vote.” Of the items described in this proxy statement, non-routine matters consist of Proposal 1 “Election of Directors,” Proposal 2 “Approval of the 2021 Equity Participation Plan” and Proposal 3 “Advisory Vote to Approve Named Executive Officer Compensation.” The effect of broker non-votes is set forth in the description of each item in this proxy statement. Despite limitations impacting broker non-votes, your broker can register your shares as being present at the 2021 Annual Meeting for purposes of determining the presence of a quorum.

Majority Voting

The Bylaws of our company provide for a majority voting standard for the election of directors. Under this voting standard, once a quorum has been established with respect to an election that is not contested, directors are elected by a majority of the votes cast. This means that the number of shares voted for a director nominee must exceed the number of shares voted against that director nominee. Abstentions and broker non-votes are not counted as a vote cast either for or against a director nominee. If a director standing for reelection is not elected by the requisite majority of the votes cast in an uncontested election, that director must tender his or her resignation, subject to acceptance by the Board. The Nominating and Corporate Governance Committee will then make a recommendation to the Board as to whether to accept or reject the tendered resignation or whether other action should be taken. Within 90 days of certification of the stockholder vote, the Board will publicly disclose its decision and rationale regarding whether it accepted or rejected the resignation or describe what other action it took in response to the tendered resignation. In a contested election, where the number of nominees exceeds the number of directors to be elected, directors will be elected by a plurality of the votes cast. The election of directors at the 2021 Annual Meeting is uncontested and, therefore, the majority voting standard will apply.

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Board of Directors’ Recommendations

The Board’s recommendations are set forth together with the description of each item in this proxy statement. In summary, the Board recommends a vote:

For the election of each of the Board of Directors’ nominees for director;
For the approval of The 2021 Equity Participation Plan of LTC Properties, Inc.;
For the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for fiscal 2021; and
For the approval of the compensation of the named executive officers, as disclosed in this proxy statement.

Revocability of Proxy

The giving of a proxy does not preclude the right to revoke the proxy or vote virtually should the stockholder giving the proxy so desire.

If you are a stockholder of record, you have the power to revoke your proxy at any time prior to its exercise by: (a) delivering a written statement to our Investor Relations Department that the proxy is revoked; (b) by delivering to us a later-dated proxy executed by the person executing the prior proxy; or (c) by attending the 2021 Annual Meeting via live webcast and voting virtually as described above under “Meeting”.

If you hold your shares in “street name” through a broker, bank or other nominee, you may change your vote by submitting new voting instructions to your broker, bank or other nominee. Please note that to vote at the 2021 Annual Meeting via live webcast as described above under “Meeting” and thereby act to revoke prior voting instructions, you must obtain a legal proxy issued in your name from your broker, bank or other nominee.

ALL STOCKHOLDERS ARE URGED TO VOTE AS PROMPTLY AS POSSIBLE VIA (A) THE INTERNET OR TELEPHONE, IF AND AS INSTRUCTED BY YOUR BROKER OR OTHER NOMINEE, OR (B) IF THIS PROXY STATEMENT WAS MAILED TO YOU, BY COMPLETING, DATING AND SIGNING THE ENCLOSED PROXY CARD AND MAILING IT IN THE ACCOMPANYING POSTAGE PAID ENVELOPE.

CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS

Code of Ethics

LTC is committed to having sound corporate governance principles. To that end, we have adopted a Code of Business Conduct and Ethics applicable to the members of the Board and all of our company’s employees, including the principal executive officer, principal financial officer, principal accounting officer or controller, and persons providing similar functions. Our Code of Business Conduct and Ethics is available on our website at www.LTCreit.com. If we amend or waive the Code of Business Conduct and Ethics with respect to any of our directors or executive officers, we will post the amendment or waiver on our website.

Corporate Governance Guidelines

To guide us in director independence and other governance matters, we have adopted Corporate Governance Guidelines as required by the NYSE listing standards. The matters addressed in our Corporate Governance Guidelines include board composition, board meetings, board committees, management responsibility, and stock ownership guidelines. A copy of our Corporate Governance Guidelines is available on our website at www.LTCreit.com.

Corporate Responsibility and Sustainability

We recognize the importance of being good corporate stewards through socially responsible and sustainable practices within the confines of a REIT structure holding predominantly triple-net leases. We believe that integrating Environmental, Social and Governance (“ESG”) initiatives into our strategic objectives will contribute to our long-term success. The Board and our senior management understand that corporate responsibility and sustainability create value for our stakeholders and positive change for our community.

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In support of these initiatives, an internal working group in 2020 commenced a review of our ESG profile with the goal of enhancing our company’s corporate responsibility and sustainability practices. In March 2021, we announced that the Board will form a new committee to address diversity and ESG initiatives. We intend to provide more reporting about our ESG initiatives throughout 2021 and going forward.

Environmental Stewardship

Protecting the environment is integral to our company’s business. Our operators and tenants are generally responsible for maintaining the properties in our portfolio, including controlling energy usage and implementation of environmentally sustainable practices at each location. We support their operations and promote environmental stewardship through our own day-to-day activities, including these highlights:

We provide our operators with capital improvement allowances for the redevelopment, expansions and renovations at our properties which may include energy efficient and infection control improvements;

We provide our development partners with capital to build new state-of-the-art properties with energy efficient components and design features;

We obtain Phase I environmental reports as part of our due diligence procedures when acquiring properties and attempt to avoid buying real estate with known environmental contamination;

Our corporate headquarters is located in an Energy Star Building (6 years certified);

Our corporate headquarters’ energy efficiency features include automatic lights, internal temperature controls, automatic HVAC controls on evenings and weekends, power saver mode on printer and copy machines, automatic faucets and toilets;

Our document retention practice reduces paper usage and encourages electronic file sharing;

We participate in a recycling program that encourages our employees to reduce, reuse and recycle waste;

Ethical Standards

We strive to cultivate a cohesive company culture based upon ethical standards. We recognize the value of our employees and are committed to being a workplace that encourages respect, collaboration, communication, transparency, and integrity. We endeavor to provide a working environment where capable team members can have fulfilling careers in the real estate industry that enhance our company and community.

To attract, motivate, reward and retain our employees, our company offers competitive pay and compensation packages including medical, dental, and vision coverage, paid time off, paid holidays, bereavement leave, employer-funded life and disability insurance, flexible working location for certain job functions, an employee assistance program, and a certification reimbursement program. We also provide disability and medical leave, family and pregnancy leave, organ and bone marrow donation leave. In addition, for qualified employees, we offer a 401(k) retirement plan with an employer contribution matching program and an opportunity to earn discretionary bonuses and restricted stock awards.

We are committed to the health and safety of our employees. As a result of COVID-19 pandemic, we have implemented additional safety protocols for our employees including working remotely. During 2020, our company’s employee turn-over rate was 0%.

In February 2021, we adopted Human Capital Management and Labor Rights Guidelines outlining employee relations, compensation and benefits, diversity and equal opportunity, anti-harassment, discrimination and retaliation, safety and health, training and education, philanthropic support, anti-corruption, child labor, forced labor and discipline. This document is available on our website at www.LTCreit.com.

Diversity and Inclusion

Our company is comprised of talented employees and experienced directors with diverse backgrounds and perspectives. Two-thirds of our executive officers are women and fifty percent of the Board of our company are women.

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In 2021, as part of our Human Capital Management and Labor Rights Guidelines, we published data with respect to the gender, age, and diversity of our workforce.

We also are currently in compliance with California Senate Bills 826 and 979, which require a publicly held corporation with its principal executive office in California to satisfy certain diversity requirements as follows:

By the close of calendar year 2021, have a minimum of three female directors if the board size is six or more members; and
By the close of calendar year 2021, have a minimum of one director from an underrepresented community.

Succession Planning

The Board is responsible for reviewing LTC’s succession plan for the Chief Executive Officer and working with appropriate members of management to review general management succession plans. In performing these functions, the Chief Executive Officer makes available to the Board her recommendations and evaluations of potential successors, along with her review of any development plans recommended for such individuals.

Whistleblower Process

Our company has implemented a whistleblower hotline and dedicated email address to enable all interested parties, including employees, to submit confidential complaints, concerns, unethical business practices, violations or suspected violations for any and all matters pertaining to accounting, internal control, or auditing. As provided in our Code of Business Conduct and Ethics, our company will not tolerate retaliation for whistleblower reports made in good faith.

Board Structure and Committee Composition

The business of LTC is conducted under the direction of the Board, which is elected by our stockholders. The basic responsibility of the Board is to lead our company by exercising its business judgment to act in what each director reasonably believes to be the best interests of our company and its stockholders. Leadership is important to facilitate the Board acting effectively as a working group so that our company and its performance may benefit. Our Corporate Governance Guidelines contemplate that the Chief Executive Officer shall be nominated annually to serve on the Board.

Our company currently combines the positions of Chairman of the Board and Chief Executive Officer. Separation of the positions of Chairman and Chief Executive Officer is not mandated by our company’s Articles, Bylaws, or Corporate Governance Guidelines. The Board believes that the advisability of having a separate or combined Chairman and Chief Executive Officer is dependent upon the strengths of the individual(s) holding these positions. Wendy L. Simpson, Chairman and Chief Executive Officer, has served as a senior executive and director of our company for more than a decade. She has a deep understanding of our company’s historical and current business and financial operations and is able to lead the Board in anticipating and responding to key company developments, challenges, and opportunities. The Board believes that combining the Chairman and Chief Executive Officer positions provides our company with the right foundation to pursue strategic and operational objectives, while maintaining effective oversight and objective evaluation of the performance of our company. Ms. Simpson does not serve on any outside boards of directors other than LTC, so that she is able to devote her full attention to our company.

Aside from Ms. Simpson, all members of the Board are independent directors. Our Corporate Governance Guidelines provide that one independent director may be appointed lead independent director. Currently, Boyd W. Hendrickson is the lead independent director. Particularly given that our company combines the positions of Chairman and Chief Executive Officer, the lead independent director serves an important role in our leadership structure. The Board has adopted a Lead Independent Director Charter governing the responsibilities and duties of the lead independent director. A copy of our Lead Independent Director Charter is available on our website at www.LTCreit.com. As set forth in the Lead Independent Director Charter, the lead independent director position serves to enhance board effectiveness, oversee board matters, and act as a liaison between the independent directors and the Chairman. The lead independent director position also serves to ensure the independent directors have adequate resources in making decisions. The lead independent director is empowered to approve meeting agendas, meeting schedules and information sent to the Board. The lead independent director also has the authority to call meetings of the independent directors and presides at executive sessions of the independent directors.

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The Board annually conducts a self-evaluation to determine whether it and its committees are functioning effectively. This annual performance evaluation is a component of our Corporate Governance Guidelines. The evaluation includes discussions to determine what, if any, actions should be taken to improve the Board’s effectiveness.

The Board has three committees: (1) Audit; (2) Compensation; and (3) Nominating and Corporate Governance. The function of each committee and the membership of the committees currently and during the last year are described below. Each committee operates under a written charter adopted by the Board. All of the committee charters are available on our website at www.LTCreit.com.

The Board held 10 meetings in 2020. Each Board member attended at least 75% of Board meetings and committees of the Board on which such member served in 2020. Our policy is to schedule our annual meeting of stockholders after consulting with each director regarding their availability to help ensure their ability to attend. All Board members attended our 2020 Annual Meeting of Stockholders.

In March 2021, the Board elected Ms. Cornelia Cheng to the Board effective April 1, 2021. As a result, our total number of directors increased to six and total independent directors increased to five.

The following table reflects the current composition of each committee:

    

    

    

Nominating and

 

Audit

Compensation

Corporate Governance

 

Director

Committee

Committee

Committee

 

Cornelia Cheng

Boyd W. Hendrickson+

 

*

 

*

 

*

James J. Pieczynski

 

*

 

*

 

C

Devra G. Shapiro

 

C

 

*

 

*

Wendy L. Simpson

Timothy J. Triche, MD

 

*

 

C

 

*

+

Lead Independent Director

*

Member

C

Chairman

Audit Committee

The Audit Committee has oversight of all compliance related to financial matters, SEC reporting and auditing. The Audit Committee is responsible for the appointment of, determination of funding for, and oversight of the work of our independent auditor and is involved in the selection of the lead audit engagement partner. The Audit Committee meets at least quarterly with our independent auditor and communicates with the auditor on matters related to the conduct of the audit and critical accounting matters. The responsibilities of the Audit Committee include oversight of risk management, review of related party transactions, and establishing procedures for the treatment of complaints regarding accounting and other matters.

The Audit Committee Charter is available on our website at www.LTCreit.com. The Report of the Audit Committee of the Board of Directors is on page 51 of this proxy statement.

The Board has determined that each member of the Audit Committee is independent within the meaning of the Securities Exchange Act of 1934, as amended (“Exchange Act”), and NYSE listing standards. The Board also has determined that Ms. Shapiro and Mr. Pieczynski each qualify as an “audit committee financial expert” as defined by SEC rules and that they each have accounting and related financial management expertise within the meaning of NYSE listing standards. Ms. Shapiro serves as Chairman of the Audit Committee and served in that role throughout 2020. The Audit Committee met five times in 2020.

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Compensation Committee

The Compensation Committee is responsible for overseeing, reviewing, and administering our compensation and benefit practices. The Compensation Committee oversees our general compensation policies, reviews and approves compensation of our executive officers and administers all of our employee benefit plans.

The Compensation Committee Charter is available on our website at www.LTCreit.com. The Compensation Committee Report is on page 46 of this proxy statement.

The Board has determined that each member of the Compensation Committee is independent within the meaning of NYSE listing standards. Dr. Triche serves as Chairman of the Compensation Committee and served in that role throughout 2020. The Compensation Committee met four times in 2020.

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee is responsible for (i) identifying, screening and reviewing individuals qualified to serve as directors and recommending to the Board candidates for nomination for election at our Annual Meeting of Stockholders or to fill Board vacancies; (ii) overseeing our policies and procedures for the receipt of stockholder suggestions regarding Board composition and recommendations of candidates for nomination by the Board; (iii) developing, recommending to the Board and overseeing implementation of our Corporate Governance Guidelines and our Code of Business Conduct and Ethics; and (iv) reviewing on a regular basis our overall corporate governance and recommending improvements when necessary.

The Nominating and Corporate Governance Committee Charter is available on our website at www.LTCreit.com.

The Board has determined that each member of the Nominating and Corporate Governance Committee is independent within the meaning of NYSE listing standards. Mr. Pieczynski serves as Chairman of the Nominating and Corporate Governance Committee and served in that role throughout 2020. The Nominating and Corporate Governance Committee met three times in 2020.

Communications with the Board

Stockholders and all other parties interested in contacting the Board, its committees, the independent directors as a group, the lead independent director, or individual directors may send written correspondence to the Audit Committee Chairman of LTC Properties, Inc. at 2829 Townsgate Road, Suite 350, Westlake Village, California 91361. All such communications will be forwarded to the relevant director(s), except for solicitations or other matters unrelated to our company.

Consideration of Director Nominees

The Board is responsible for the selection of candidates for the nomination or appointment of all Board members. The Nominating and Corporate Governance Committee, in consultation with the Chief Executive Officer, recommends candidates for election to the Board and considers recommendations for director candidates submitted by stockholders using the same criteria it applies to recommendations from Nominating and Corporate Governance Committee members, directors and members of management. The Nominating and Corporate Governance Committee will also consider whether to nominate any person nominated by a stockholder pursuant to the provisions of our company’s Bylaws relating to stockholder nominations as described below. Since 2020, there have been no material changes to the procedures by which stockholders may recommend nominees. Stockholders may submit recommendations in writing addressed to the Nominating and Corporate Governance Committee, LTC Properties, Inc., 2829 Townsgate Road, Suite 350, Westlake Village, CA 91361.

Stockholders may directly nominate persons for director only by complying with the procedure set forth in our company’s Bylaws, which in summary requires that the stockholder submit the names of such persons in writing to our Corporate Secretary not less than 60 days nor more than 150 days prior to the first anniversary of the date of the preceding year’s Annual Meeting. The nominations must set forth (i) as to each person whom the stockholder proposes to nominate for election or reelection as a director and as to the stockholder giving the notice (a) the name, age, business

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address and residence address of such person, (b) the principal occupation or employment of such person, (c) the class and number of shares of our capital stock which are beneficially owned by such person on the date of such stockholder notice, (d) such nominee’s consent to serve as a director if elected and (ii) as to the stockholder giving the notice (a) the name and address, as they appear on our books, of such stockholder to be supporting such nominees and (b) the class and number of shares of our capital stock which are beneficially owned by such stockholder on the date of such stockholder notice and by any other stockholders known by such stockholder to be supporting such nominees on the date of such stockholder notice.

Once a prospective nominee has been identified, by either the Nominating and Corporate Governance Committee or proposed by a stockholder, the Nominating and Corporate Governance Committee makes an initial determination as to whether to conduct a full evaluation of the prospective candidate. This initial determination would include whatever information is provided with the recommendation of the prospective candidate and the Nominating and Corporate Governance Committee’s own knowledge of the prospective candidate. The Nominating and Corporate Governance Committee may make inquiries of the person making the recommendation or of others regarding the qualifications of the prospective candidate. The preliminary determination is based primarily on the need for additional Board members to fill vacancies or expand the size of the Board. The Board’s policy is to encourage selection of directors who will contribute to our overall corporate goals and to the discharge of the Board’s responsibility to our stockholders. The Nominating and Corporate Governance Committee may, at the request of the Board from time to time, review the appropriate skills and characteristics required of Board members in the context of the current makeup of the Board. Board members are expected to prepare for, attend and participate in meetings of the Board and the committees on which they serve; therefore, a prospective candidate must have the ability to dedicate sufficient time, energy and attention to the diligent performance of his or her duties as a Board member.

The Nominating and Corporate Governance Committee may conduct interviews with prospective nominees in person or by telephone. After completing the evaluation and interviews, the Nominating and Corporate Governance Committee makes a recommendation to the full Board as to the persons who should be nominated by the Board, and the Board determines the nominees after considering the recommendation and report of the Nominating and Corporate Governance Committee.

The Nominating and Corporate Governance Committee does not have a specific policy with regard to the consideration of diversity in identifying director nominees. As part of its periodic review of the composition of the Board, the Nominating and Corporate Governance Committee considers whether the composition of the Board reflects the appropriate balance of independence, sound judgment, business specialization, technical skills, diversity, and other desired qualities. The Nominating and Corporate Governance Committee does not have formal objective criteria for determining the amount of diversity needed or present on the Board. Instead, the Nominating and Corporate Governance Committee seeks to have a board of directors with a diversity of background and experience.

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PROPOSAL 1

ELECTION OF DIRECTORS

Six directors will be elected at the 2021 Annual Meeting of Stockholders. Each person elected as director will hold office until the 2022 Annual Meeting of Stockholders and, in each case, until their respective successors have been duly elected and qualified.

In accordance with the recommendation of the Nominating and Corporate Governance Committee, the Board of Directors has nominated Cornelia Cheng, Boyd W. Hendrickson, James J. Pieczynski, Devra G. Shapiro, Wendy L. Simpson, and Timothy J. Triche for election as director. Each nominee is currently a director of our company. The six director nominees, their business experience, and specific qualifications, attributes, or skills to serve as director, are set forth below:

Cornelia Cheng

Director since 2021

Age 53

         

Ms. Cheng has been a Managing Director, Investments with Brightwood Capital Advisors, LLC (“Brightwood”) since August 2019. In that role, Ms. Cheng focuses on providing a range of debt and minority equity growth capital to companies in the western region of the United States across five industry verticals: Healthcare Services, Business Services, Technology/Media/Telecom, Franchising and Transportation & Logistics. Prior to joining Brightwood, she served as an independent consultant between January 2019 and August 2019. Prior to that, between 2002 and 2018, Ms. Cheng served at Prudential Private Capital (formerly Prudential Capital Group), most recently as Head of the Greater Los Angeles Investment Team, sourcing, executing and managing a portfolio of private placement senior debt, mezzanine debt and minority equity investments in publicly traded and private companies across industries, including hospitals and REITs that invest in a range of property types, from commercial, industrial, retail, self-storage to senior housing properties. Ms. Cheng previously held positions in the high yield, leverage finance, sponsor coverage, corporate finance and debt capital markets groups with investment banking firm CIBC World Markets in New York and San Francisco. She was also previously with the M&A team, Internal Consulting Group and Economics Department at First Interstate Bank in Los Angeles, CA.

Ms. Cheng’s prior experience of sourcing, executing and managing debt and equity investments led the Board to conclude she should be nominated to serve as director.

Boyd W. Hendrickson

Director since 2005

Age 76

         

Mr. Hendrickson served as the Chief Executive Officer of Skilled Healthcare Group, Inc. (“SHG”) from April 2002 through November 2013. From November 2013 through December 2014, Mr. Hendrickson served as a consultant to SHG. Mr. Hendrickson also served as a Member of the Board of Directors of SHG from August 2003 through November 2013, including as Chairman of the Board of Directors of SHG from December 2005 through November 2013. SHG was a publicly-traded company with subsidiaries that own and operate skilled nursing and assisted living facilities. In February 2015, SHG was acquired by Genesis HealthCare, Inc. Prior to joining SHG, Mr. Hendrickson was the President and Chief Executive Officer of Evergreen Healthcare, LLC, an operator of long-term health care facilities, from January 2000 through April 2002. Additionally, since 2005, Mr. Hendrickson has served as a managing member of Executive Search Solutions, LLC, a provider of recruiting services to the health care services industry. Mr. Hendrickson is a member of the Board of Directors of Earthling Interactive, a private software development company, and is a former member of senior management and the Boards of Directors of Beverly Enterprises, Inc. and Hallmark Health Services.

Mr. Hendrickson’s prior service as an independent director of LTC, past executive and director experience with other public companies, and his multi-decade involvement in the understanding of the health care industry led the Board to conclude he should be nominated to serve another term as director.

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James J. Pieczynski

Director since 2014

Age 58

Mr. Pieczynski is currently the Vice Chairman of PacWest Bancorp and is a member of the Board of Directors of Pacific Western Bank and PacWest Bancorp. Prior to that, he was the President of the Capital Source lending division at Pacific Western Bank and a board member at Pacific Western Bank and PacWest Bancorp. Prior to that he was a member of the Board of Directors of CapitalSource, Inc. (“CSE”) from January 2010 until April 2014 when CSE was acquired by PacWest Bancorp. Mr. Pieczynski served as Chief Executive Officer from January 2012 until the acquisition in April 2014. CSE was a publicly-held bank providing commercial loans to small and middle-market businesses nationwide and depository products and services in southern and central California. Mr. Pieczynski previously served as CSE’s Co-Chief Executive Officer from January 2010 through December 2011, CSE’s President-Healthcare Real Estate Business from November 2008 until January 2010. and CSE’s Co-President-Healthcare and Specialty Finance from January 2006 until November 2008. Additionally, Mr. Pieczynski served as an executive officer of our company from 1994 to 2001, and as a member of the Board of Directors of LTC from 1997 to 2001.

Mr. Pieczynski’s prior service as an executive officer and director of LTC, his recent position as Chief Executive Officer of a public financial company, his years of experience in financial and executive positions with health care companies, and his expertise in accounting, financial reporting and controls led the Board to conclude that he should be nominated to serve as director.

Devra G. Shapiro

Director since 2009

Age 74

         

Ms. Shapiro served as Chief Financial Officer of IPC Healthcare, Inc. (“IPC”) from the time she joined IPC in March 1998 through October 2011. From 2011 to her retirement in 2014, she served as IPC's Chief Administrative Officer. IPC was a publicly–traded national physician group practice company focused on the delivery of acute and post-acute hospitalist medicine services which was acquired by Team Health in 2015. Prior to joining IPC, Ms. Shapiro held chief financial officer and other executive financial positions with several health care companies and was in the health care practice of an international accounting firm for 11 years. Formerly, Ms. Shapiro was with Arthur Andersen & Company.

Ms. Shapiro’s prior service as an independent director of LTC, her sixteen years prior experience as a senior executive of a public health care company, her many years of experience in financial and executive positions with health care companies and in public accounting, and her expertise in accounting, financial reporting and controls led the Board to conclude that she should be nominated to serve another term as director.

Wendy L. Simpson

Director since 1995

Age 72

         

Ms. Simpson was appointed Chairman of the Board of Directors of LTC in August 2013 and has served as Chief Executive Officer since March 2007. She also served as President of our company from October 2005 through May 2020, Chief Financial Officer from July 2000 through March 2007, Treasurer from January 2005 through March 2007, and Chief Operating Officer from October 2005 through March 2007. She also was Vice Chairman of the Board from April 2000 through October 2005.

Having served as a senior executive officer of LTC for more than a decade, including currently as Chairman and Chief Executive Officer, Ms. Simpson brings a deep understanding of our company’s historical and current business and financial operations. Additionally, our Corporate Governance Guidelines contemplate that our Chief Executive Officer shall be nominated to serve on the Board of Directors. These factors, and Ms. Simpson’s prior service as director of LTC, led the Board to conclude that she should be nominated to serve another term as director.

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Timothy J. Triche, MD

Director since 2000

Age 76

         

Dr. Triche has been the Director of the Center for Personalized Medicine at Children’s Hospital Los Angeles since July 2010 and previously served as the Chairman of the Department of Pathology and Laboratory Medicine at Children’s Hospital Los Angeles since 1988. He has also been a Professor of Pathology and Pediatrics at the University of Southern California Keck School of Medicine in Los Angeles, California since 1988. He also serves on the Board of Directors of Novelix Pharmaceuticals, Inc., a private biotechnology company, NanoValent Pharmaceuticals, Inc., a private nanotechnology company, GenomeDx, a private biotechnology company, MedGenome, Inc. (f/k/a Silicon Valley Biosystems and Lifecode, Inc.), a private biotechnology company, and Sanguine BioSciences, a private biomedical research company.

Dr. Triche’s prior service as an independent director of LTC, current and past executive and director experience with other health care companies, and his overall background in the health care industry led the Board to conclude he should be nominated to serve another term as director.

If any nominee becomes unavailable to serve as a director for any reason (which event is not anticipated), the shares of common stock represented by proxy may (unless such proxy contains instructions to the contrary) be voted for such other person or persons as may be determined by the holders of such proxies.

Required Vote and Recommendations

As described under “Majority Voting” on page 2 of this proxy statement, a majority of the votes cast is required for the election of each director in an uncontested election, which is the case at the 2021 Annual Meeting. A majority of the votes cast means that the number of votes cast FOR a nominee must exceed the number of votes cast AGAINST that nominee. For purposes of the vote on 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 Board’s nominees unless contrary instructions or an abstention are indicated in the proxy.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF

THE BOARD OF DIRECTORS’ NOMINEES FOR DIRECTOR.

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PROPOSAL 2
APPROVAL OF THE 2021 EQUITY PARTICIPATION PLAN OF LTC PROPERTIES, INC.

On March 29, 2021, the Board of Directors approved, subject to stockholder approval, The 2021 Equity Participation Plan of LTC Properties, Inc. (“2021 Equity Participation Plan” or “2021 Plan”). The 2021 Equity Participation Plan will not become effective until it is approved by our stockholders (the “Effective Date”). As of the Effective Date, a total of 1,900,000 shares of our common stock will be authorized and available for awards granted under the 2021 Plan, less one share for every one share that was subject to an award granted under the 2015 Equity Participation Plan (“2015 Plan”) after December 31, 2020 and prior to the Effective Date. The shares reserved under the 2021 Plan are comprised of 426,451 shares that remained available for grant under the 2015 Plan as of December 31, 2020 and 1,473,549 incremental shares. The full reserve (1,900,000 shares) and the incremental “new” shares (1,473,549 shares) are equal to approximately 4.8% and 3.7%, respectively, of the outstanding shares as of April 12, 2021. In addition, any shares that are not issued under outstanding awards under the 2015 Plan because the shares were forfeited or cancelled after December 31, 2020 will be added to and again be available for awards under the 2021 Plan.

The Board is asking our stockholders to approve the 2021 Equity Participation Plan so that we may issue to non-employee directors, key employees and consultants awards that are linked to the value of our common stock. The 2021 Equity Participation Plan will replace the 2015 Plan. If the 2021 Plan is not approved, we intend to continue to grant stock awards under the 2015 Plan to the extent we were authorized to grant such awards when the plan was approved. If the 2021 Equity Participation Plan is approved, no new grants will be made under the 2015 Plan. The 2015 Plan will then only apply to any stock awards previously granted under the 2015 Plan, which will continue to be subject to the terms of the 2015 Plan and the written agreements governing the awards.

The Board of Directors believes that equity ownership provides an important link between the interests of our stockholders and our executives, managers and key employees by rewarding the creation of long-term stockholder value. The Board believes that our ability to grant equity awards has helped us attract, retain and motivate talented professionals with superior leadership capabilities. As described in the Executive Compensation Discussion and Analysis section of this proxy statement, equity awards are a key component of our compensation program and constitute a significant portion of our executive officers’ total compensation.

In recommending approval of the 2021 Plan, the Board of Directors asks that stockholders also consider the following factors:

We Manage Our Equity Award Use Carefully

We manage our long-term stockholder dilution by limiting the number of equity awards granted annually. The Board of Directors carefully monitors our total dilution and annual equity grant rate (“burn rate”), and our company has followed a responsible approach to equity based compensation in the past.

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Overhang. The following table sets forth certain information as of December 31, 2020 with respect to the 2008 Equity Participation Plan and the 2015 Plan:

Stock Options Outstanding

15,000

Weighted-Average Exercise Price of Outstanding Stock Options

$38.43

Weighted-Average Remaining Term of Outstanding Stock Options

2.17 years

Total Full-Value Awards Outstanding

390,435

Basic Common Shares Outstanding as of the Record Date (April 12, 2021)

39,164,371

Shares Remaining Available for Future Grant*

426,451

* Reflects shares that remained available for grant under the 2015 Plan as of December 31, 2020. If the 2021 Plan is approved by our stockholders, the 2021 Plan will become effective on May 26, 2021, and no further awards will be made under the 2015 Plan. As of the Effective Date, a total of 1,900,000 shares of common stock will be reserved for awards granted under the 2021 Plan (comprised of the 426,451 shares that remained available for grant under the 2015 Plan as of December 31, 2020 and 1,473,549 incremental shares), less one share for every one share that is subject to an award granted under the 2015 Plan after December 31, 2020 and prior to the Effective Date.

Burn Rate. The following table sets forth information regarding equity awards granted over each of the last three fiscal years:

2020

2019

2018

Stock Options/SARs Granted (a)

0

0

0

Full-Value Awards Granted (b)

167,375

147,608

156,718

Weighted-Average Basic Common Shares Outstanding (c)

39,178,980

39,571,120

39,477,541

Burn Rate ((a) + (b))/(c)

0.43%

0.37%

0.40%

Key Features of the 2021 Plan Reflect Use of Compensation and Governance Best Practices

The proposed 2021 Plan includes new and continued provisions designed to protect our stockholders’ interests and reflect corporate governance best practices, including:

Performance-based awards. The 2021 Plan allow for issuing performance-based awards, including awards to executive officers. Due to the repeal of the exemption under Internal Revenue Code (“IRC”) Section 162(m) that allowed for the deductibility of performance-based compensation paid to certain executive officers, the provisions in the 2015 Plan required to satisfy the exemption have been removed from the 2021 Plan.
Repricing is not allowed. Both the 2015 Plan and the 2021 Plan prohibit the repricing of awards without shareholder approval.
Double-trigger vesting upon a Change in Control. The 2021 Plan generally provides that, unless provided otherwise in an employment or award agreement, awards will fully vest upon separation from service by the Company without cause or by the holder for good reason within 12 months following a change in control of our company.
Clawback feature. Both the 2015 Plan and the 2021 Plan include a clawback provision in the event of certain restatements of our company’s financial results and other misconduct.
No discounted stock options or stock appreciation rights. Both the 2015 Plan and the 2021 Plan provide that all stock options and stock appreciation rights will have an exercise price equal to or greater than the fair market value of our stock on the date of grant.

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No evergreen feature. The 2021 Plan contains no evergreen feature allowing additional shares to be automatically added to the 2021 Plan. Any increase in the number of shares available under the 2021 Plan must be approved by our stockholders.
No liberal share recycling. The 2021 Plan provides that shares of common stock withheld to satisfy an award holder’s tax withholding obligations or to satisfy payment of the exercise price of an option will not be added back to the number of shares available for future awards. Additionally, the full number of shares granted under a Stock Appreciation Right, and not the net number actually issued, shall reduce the number of shares available for future awards.
Substitute Awards. Under the 2021 Plan, the Committee may grant awards in our common stock to holders of awards in the stock of any entity acquired by the Company, which may contain terms consistent with the terms of the prior awards, even if inconsistent with the terms of the 2021 Plan. The number of shares of our common stock reserved under such substituted awards shall not reduce the authorized shares available under the 2021 Plan.
Post-exercise/vesting holding requirements. We have stock ownership guidelines that will be applicable to any shares of our common stock acquired by our executives or directors upon exercise or vesting of awards under the 2021 Plan.

Description of the 2021 Equity Participation Plan

The following is a description of the purpose and a summary of the provisions of the 2021 Plan. The summary is qualified in its entirety by reference to the complete text of the 2021 Plan, which is attached hereto as Appendix B.

General.  The 2021 Plan permits us to issue stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, dividend equivalents, and stock payments to non-employee directors, key employees (including officers who are directors) and consultants. The 2021 Plan does not permit the repricing of stock options or stock appreciation rights without approval of our stockholders or the granting of discounted stock options or stock appreciation rights.

Purpose. The purpose of the 2021 Plan is three-fold:

To provide an additional incentive for non-employee directors, key employees and consultants to whom awards are granted to further the growth, development and financial success of LTC by personally benefiting through the ownership of our common stock and/or rights the value of which is tied to the value of our common stock or that are linked to LTC’s growth;
To enable LTC to obtain and retain the services of non-employee directors, key employees and consultants to whom awards are granted by offering them an opportunity to own LTC common stock and/or to benefit from rights the value of which is tied to the value of our common stock or that are linked to LTC’s growth, development and financial success; and
To encourage non-employee directors, key employees and consultants to whom awards are granted to contribute materially to LTC’s growth, development and financial success, thereby benefiting LTC’s stockholders, and aligning the economic interests of the participants with those of the stockholders.

Eligible Participants. As of December 31, 2020, approximately 24 employees, 4 non-employee directors, and no consultants would be eligible to participate in the 2021 Plan, although the number of individuals who are selected to participate in the 2021 Plan may vary from year to year.

Administration of the 2021 Plan.  The Board has the authority and the discretion under the 2021 Plan to grant awards to non-employee directors and to administer those awards. The Compensation Committee of the Board of Directors has the authority and the discretion under the 2021 Plan to issue awards to key employees and consultants and to administer those awards. The Compensation Committee is comprised solely of non-employee directors of the Board. The term “Grantor” as used in this summary refers to the Board, with respect to awards to non-employee directors, and to the Compensation Committee or its delegatee, with respect to awards to key employees and consultants.

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Except as expressly limited by the 2021 Plan, the authority of the Grantor includes the authority to determine the timing of awards, to select the recipients of awards, and to determine the terms of each award, including, among other things, any modifications of awards, applicable restrictions, termination and vesting conditions, provided however, that to the extent vesting provisions are addressed by an employment agreement, such employment agreement controls.

The Compensation Committee may delegate to one or more members of the Board or to executive officers of the Company, the authority to grant awards, determine the terms of such awards, amend existing awards and exercise other administrative discretion granted to the Board or the Compensation Committee under the terms of the 2021 Plan, provided, however, that no persons delegated the authority shall exercise it with respect to any person subject to Section 16 of the Securities Exchange Act, or any person to whom such authority has been granted. The Committee may set restrictions and limitations on the discretion such delegatees are granted, and the Committee may revoke such authority at any time.

Number of Shares Available for Issuance.  As of the Effective Date, a total of 1,900,000 shares of our common stock will be authorized and available for awards granted under the 2021 Plan, less one share for every one share that was subject to an award granted under the 2015 Plan after December 31, 2020 and prior to the Effective Date. A maximum of 1,900,000 shares may be granted as incentive stock options under the 2021 Plan. The Compensation Committee or the Board may adjust the aggregate 1,900,000 limit and the number of shares under outstanding awards if it determines that an extraordinary dividend, recapitalization, stock split, merger, consolidation or other similar corporate transaction or event equitably requires an adjustment.

In addition to the 1,900,000 shares available under the 2021 Plan, any shares reserved for awards granted under the 2015 Plan prior to December 31, 2020 (and any awards granted under the 2015 Plan after December 31, 2020 and before the effective date of the 2021 Plan) that are forfeited or cancelled after December 31, 2020 shall be added to the shares available for grants under the 2021 Plan.

The limits on the authorized shares under the 2021 Plan will not apply with respect to any awards of stock options, stock appreciation rights, restricted stock and restricted stock units, or other awards in our common stock in substitution for awards under a stock plan of any entity acquired by the Company. The terms of such substitute awards may conform to the terms of the original award, even if inconsistent with the terms of the 2021 Plan. The number and exercise price of such substituted awards may be based on any exchange ratio or valuation used in such acquisition transaction. The number of shares reserved under such substitute awards shall not be counted against the limit under the 2021 Plan.

Share Counting. Shares available under the 2021 Plan are reduced by one share for each share underlying an award, including stock options, restricted stock or units and performance stock or units. Shares available under the 2021 Plan are reduced by the aggregate shares exercised pursuant to a settled stock appreciation right and not the net number of shares issued upon exercise. Shares withheld for taxes, shares tendered to pay the exercise price of an option, and shares reacquired by the company with amounts received from exercise of an option will not be added back to the 2021 Plan.

Types of Awards and Limits.  The 2021 Plan provides for the issuance of incentive stock options to our key employees and nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, dividend equivalents, and stock payments to our non-employee directors, key employees and consultants. Rights to awards may be contingent on the satisfaction of performance criteria (“Performance Criteria”) determined by the Grantor. The 2021 Plan permits the Compensation Committee to specify any reasonable definition of the financial and non-financial measures it uses, to make reasonable adjustments to such measures, and to include or exclude certain items. The Committee may exercise discretion to increase or decrease any amount intended as performance-based compensation. Additionally, such Performance Criteria may be calculated without regard to extraordinary, unusual and/or non-recurring items, and may be based on non-financial and subjective Performance Criteria.

Stock Options. The 2021 Plan provides for two types of stock options: incentive stock options and non-qualified stock options. The differences between incentive stock options and non-qualified stock options relate mainly to their tax treatment under the Code (see “U.S. Tax Consequences” below). A stock option gives the holder the right to receive a designated number of shares of our common stock during the period that the option is exercisable upon payment of the exercise price for the stock options, subject to the terms and conditions that the Grantor, in its sole discretion, shall determine at the time the award is made. The per share exercise price of an option may not be less than

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the fair market value of our common stock on the date of grant of the option, except for incentive stock options granted to 10% stockholders, in which case the per share exercise price must be at least 110% of the fair market value of our common stock on the date of grant. Incentive stock options must expire no later than the tenth anniversary of the date of grant, except for incentive stock options granted to 10% stockholders, which may expire no later than the fifth anniversary of the date of grant.

Unless otherwise specified by the Grantor or in an employment agreement, all options granted to key employees and consultants become vested upon a separation of service without cause or for good reason (if defined in the agreement) following a change in control (see “Change in Control” below).

Restricted Stock. A restricted stock award is an award of shares of our common stock for consideration or without consideration, subject to the vesting and other terms and conditions that the Grantor, in its sole discretion, shall determine at the time the award is made. Restricted stock for which the holder paid no consideration is forfeited to LTC if the non-employee director, key employee or consultant to whom it was awarded terminates service prior to the end of the vesting period determined by the Grantor. However, unless otherwise provided by the Grantor, such restricted stock will not be forfeited if the termination is due to death or disability. Restricted stock for which the holder paid consideration may be repurchased by LTC at a price equal to the price paid by the holder, if the non-employee director, key employee or consultant to whom it was awarded terminates service prior to the end of the vesting period, except that the Grantor may provide that no such repurchase right exists if the termination is due to death or disability. The vesting of restricted stock may be subject to satisfaction of company performance goals, individual performance goals and one or more of the Performance Criteria. Holders of restricted stock will be permitted to vote the shares and receive dividends after the date of grant, including during the period restrictions or right to repurchase apply.

Unless otherwise specified by the Grantor or in an employment agreement, all shares of restricted stock become vested upon a separation of service without cause or for good reason (if defined in such agreement) following a change in control (see “Change in Control” below).

Restricted Stock Unit.  A restricted stock unit is an award valued based on the value of a share of our common stock upon the terms and conditions set forth in the 2021 Plan and as determined by the Grantor in its sole discretion and set forth in the applicable award agreement. A restricted stock unit may be paid in cash, or shares of our common stock, or a combination of cash and shares determined by the Grantor, in its sole discretion. A holder of a restricted stock unit shall possess no ownership rights with respect to our common stock unless and until the unit is converted to common stock. Dividend equivalents may be earned by holders of restricted stock based on dividends declared on our common stock, to be credited as of dividend payment dates.

Unless otherwise specified by the Grantor or in an employment agreement, all restricted stock units become vested upon a separation of service without cause or for good reason (if defined in such agreement) following a change in control (see “Change in Control” below).

Stock Appreciation Rights. A stock appreciation right entitles the holder to a payment in cash or shares of our common stock equal to the excess of the fair market value of the number of shares of our common stock underlying the stock appreciation right as of the date the stock appreciation right is exercised over such fair market value as of the date the stock appreciation right is granted. A stock appreciation right is subject to the terms and conditions that the Grantor, in its sole discretion, shall determine at the time the award is made. The 2021 Plan provides for two types of stock appreciation rights: coupled stock appreciation rights and independent stock appreciation rights. A coupled stock appreciation right is related to a stock option, is exercisable only when and to the extent that the stock option is exercisable and is exercised when the holder surrenders the equivalent number of shares under the related unexercised stock option. An independent stock appreciation right is not related to an option. Unless the Grantor determines otherwise, an independent stock appreciation right is exercisable only while the recipient is a non-employee director, key employee or consultant, provided, however, the Grantor may permit stock appreciation rights to be exercised in the event of the holder’s death or disability or upon a change in control of the Company.

Unless otherwise specified by the Grantor or in an employment agreement, all stock appreciation rights become vested upon a separation of service without cause or for good reason (if defined in such agreement) following a change in control (see “Change in Control” below).

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Performance Awards. A performance award represents the right to receive a payment in cash or shares of our common stock subject to satisfaction of objective or subjective performance criteria determined appropriate by the Committee on a specified date or dates or over any period or periods determined by the Committee. The Committee may adjust any performance criteria during the performance period in the event of any extraordinary or non-recurring transaction or event affecting the company or the financial statements or due to a change in the law or accounting principles applicable to the performance criteria. The Grantor may provide that a performance award is not payable upon a separation of service prior to the end of the performance period; however, unless otherwise specified by the Grantor or in an employment agreement, a performance award may be paid prior to the end of the performance period if the holder incurs a separation of service without cause or for good reason within 12 months following a change in control (see “Change in Control” below).

Dividend Equivalents. Dividend equivalents are granted in conjunction with restricted stock units, or performance awards. A dividend equivalent represents the right to receive payments in cash or shares of our common stock in the amount of the dividend paid on a share of our common stock between the date that such an award is granted and the date such an award vests or expires. No dividend equivalents may be granted in connection with the grant of a stock option or stock appreciation right during the period prior to the date such option or stock appreciation right is exercised and shares issued. Payment of a dividend equivalent may not be related to or contingent upon the exercise of a stock appreciation right.

Stock Payments. A stock payment award represents the right to receive a share of our common stock, subject to the terms and conditions that the Grantor, in its sole discretion, shall determine at the time the award is made, which may include satisfaction of one or more of the Performance Criteria. A stock payment is payable only while the holder is a non-employee director, key employee or consultant, except that the Grantor may provide that a stock payment is payable upon a separation of service without cause or for good reason following a change in control (see “Change in Control” below).

Clawback. In the event that a mandatory restatement of LTC's financial results occurs and is released to the public at a time when LTC's securities are traded on any U.S. securities exchange (a “Restatement”), and the Restatement is attributable to misconduct or wrongdoing by a holder of an award and such holder has received payment or benefits under the 2021 Plan (whether cash or non-cash) within three years preceding the date of the issuance and release of such Restatement, and the amount of such payment or benefits under the 2021 Plan has been calculated and awarded pursuant to a specific financial formula, and such payment or benefits would have been diminished based on the restated financial results had the financial formula pursuant to which the payment or benefits for which an award has been calculated been applied to the restated financial restates (the amount of such diminution, is the “Clawback Amount”), then, upon written demand from LTC setting forth the basis for such demand, the holder shall remit to LTC the Clawback Amount less the amount of any taxes paid or payable by the holder in respect of such bonus or share grant with certain exceptions.

In addition, LTC may grant awards that require the forfeiture or clawback of any benefits received under an award in the event the holder violates LTC’s Code of Conduct or any restrictive covenants applicable to the holder, other material violations of any agreement with LTC or a breach of fiduciary duty of the individual owed to LTC, as set forth in the award agreement.

Adjustments for Changes in Capitalization.  If the Grantor determines that a dividend (other than an ordinary dividend), recapitalization, stock split, merger, consolidation, or other similar corporate transaction or event, equitably requires an adjustment, then the Grantor shall adjust any or all of:

the number and kind of shares of common stock (or other securities or property) with respect to which awards may be granted or awarded;
the number and kind of shares of common stock (or other securities or property) subject to outstanding awards; and
the grant or exercise price with respect to any outstanding option or stock appreciation right.

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Change in Control.  As described above, a non-employee director’s, key employee’s or consultant’s rights in an award may vest upon a “change in control.”  “Change in control” shall mean a change in ownership or control of LTC effected through any of the following transactions:

any person or related group of persons (other than LTC or a person that directly or indirectly controls, is controlled by, or is under common control with, LTC) is or becomes the beneficial owner (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended), of securities of LTC representing 30% or more of the combined voting power of LTC’s then outstanding securities;
consummation of a merger or consolidation of LTC with any other corporation (or other entity), other than a merger or consolidation which would result in the voting securities of LTC 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 LTC or such surviving entity outstanding immediately after such merger or consolidation; provided, however, that a merger or consolidation effected to implement a recapitalization of LTC (or similar transaction) in which no person, directly or indirectly, becomes the beneficial owner of securities representing 30% or more of the combined voting power of LTC’s then outstanding securities shall not constitute a Change in Control;
the consummation of a plan of complete liquidation of LTC or the sale or disposition by LTC of all or substantially all of LTC’s assets; or
a majority of the members of the Board of Directors of LTC cease to be, as of any date of determination, a member of the Board who (i) was a member of such Board on the date of the 2021 Plan was approved by the stockholders, 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.

Amendment and Termination.  The 2021 Plan may be terminated by the Board at any time. The Board may amend the 2021 Plan (and the awards issued thereunder), but may not, without prior approval of the stockholders:

increase the maximum number of shares of common stock that may be issued under the 2021 Plan; or
reprice any options or stock appreciation rights; or
take any other action that requires stockholder approval to comply with any law or stock exchange requirements.

U.S. Tax Consequences.  The following brief description, which is based on existing law, sets forth certain of the federal income tax consequences of the grant of awards under the 2021 Plan. This description may differ from the actual tax consequences incurred by any individual recipient of an award. Moreover, existing law is subject to change by new legislation, by new regulations, by administrative pronouncements and by court decisions or by new or clarified interpretations or applications of existing laws, regulations, administrative pronouncements and court decisions. Any such change may affect the federal income tax consequences described below. The following summary of the federal income tax consequences in respect of the 2021 Plan is for general information only. Interested parties should consult their own advisors as to specific tax consequences, including the application and effect of foreign, state and local tax laws.

Non-Qualified Stock Options. A non-employee director, key employee or consultant who is granted a non-qualified stock option will not recognize taxable income at the time the stock option is granted or at the time the option becomes vested and exercisable. In general, an optionee will be subject to tax for the year of exercise on an amount of ordinary income equal to the excess of the fair market value of the shares on the date of exercise over the option exercise price, and LTC will receive a corresponding Federal income tax deduction. Income tax withholding requirements apply upon exercise. The optionee’s basis in the shares so acquired will be equal to the option exercise price plus the amount of ordinary income upon which he or she is taxed. Upon subsequent disposition of the shares, the optionee will recognize capital gain or loss, long-term or short-term, depending upon the length of time the shares are held after the stock option is exercised.

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Incentive Stock Options. An optionee is not taxed at the time an incentive stock option is granted or at the time the options becomes vested and exercisable. The tax consequences upon exercise and later disposition generally depend upon whether the optionee was an employee of LTC or a subsidiary at all times from the date of grant until three months preceding exercise (one year in the case of disability) and on whether the optionee holds the shares for more than one year after exercise and two years after the date of grant of the stock option.

If the optionee satisfies both the employment rule and the holding rule, the optionee will not be subject to income taxation upon exercise of the stock option and LTC will not be allowed an income tax deduction at any time. Instead, upon subsequent disposition of the shares acquired upon exercise of the option (and assuming the holding rule has been satisfied) the optionee will recognize a long-term capital gain or a long-term capital loss with respect to the difference between the option exercise price and the amount realized upon disposition of the shares.

If the optionee meets the employment rule but fails to observe the holding rule (a “disqualifying disposition”), the optionee generally recognizes as ordinary income, in the year of the disqualifying disposition, equal to the excess of the fair market value of the shares at the date of exercise over the option exercise price. Any excess of the sales price over the fair market value at the date of exercise will be recognized by the optionee as capital gain (long-term or short-term depending on the length of time the stock was held after the stock option was exercised). If, however, the sale price is less than the fair market value at the date of exercise, then the ordinary income recognized by the optionee is generally limited to the excess of the sale price over the option exercise price. In both situations, the tax deduction allowable to LTC is limited to the amount of ordinary income recognized by the optionee. Under current Internal Revenue Service guidelines, LTC is not required to withhold any Federal income tax in the event of a disqualifying disposition.

Different consequences may apply for an optionee subject to the alternative minimum tax.

Restricted Stock. A non-employee director, key employee or consultant who is granted restricted stock generally will not recognize taxable income at the time the restricted stock is granted. Instead, a restricted stockholder will recognize ordinary taxable income equal to the value of the stock at the time the stock is no longer subject to a substantial risk of forfeiture and LTC will receive a corresponding Federal income tax deduction at that time. However, a restricted stockholder may file with the IRS a “section 83(b) election” when he or she receives the restricted stock, as a result of which he or she will recognize taxable ordinary income equal to the value of the stock at the time the stock is granted and LTC will receive a corresponding Federal income tax deduction. Upon subsequent disposition of the shares, the restricted stockholder will recognize capital gain or loss, long-term or short-term, depending on the length of time the shares are held after the date of grant.

Stock Appreciation Rights. A non-employee director, key employee or consultant will not realize taxable income upon the award of stock appreciation rights. Upon the exercise of stock appreciation rights, any cash received and the fair market value on the exercise date of any shares of common stock received would constitute ordinary income to the participant, and LTC would be entitled to a deduction in the amount of such income at the time of exercise.

Performance Awards, Restricted Stock Units, Dividend Equivalents, and Stock Payments. A non-employee director, key employee or consultant normally will not realize taxable income upon the award of performance awards, restricted stock units, dividend equivalent awards or stock payment awards. When the conditions and requirements established with respect to such an award have been satisfied and the payment amount determined, any cash and the fair market value of any shares of our common stock received will constitute ordinary income to the individual in the year in which paid or when no longer subject to a substantial risk of forfeiture, and LTC will be entitled to a deduction in the same amount.

Deductibility of Executive Compensation. IRC Section 162(m) disallows a tax deduction to publicly held companies for compensation paid to persons who have served as Chief Executive Officer, Chief Financial Officer and any of the three most highly compensated executive officers other than the Chief Executive Officer at any time after 2017 (“Covered Employees”), to the extent that total compensation exceeds $1 million per Covered Employee in any taxable year. Compensation paid by LTC in connection with the exercise of options or stock appreciation rights, restricted stock, restricted stock units, performance awards, dividend equivalent awards, or stock payment awards granted to a Covered Employee may be taken into account for purposes of the $1 million limitation.

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Effective for tax years after 2017, IRC Section 162(m) was amended to eliminate the deductibility of any performance-based executive compensation paid after 2017 to a Covered Employee unless such grants were provided in a written binding contract that was in effect in 2017. Thus, the exemption from the limitation on deductibility under IRC Section 162(m) that previously applied to performance-based compensation to Covered Employees no longer applies. The 2021 Plan authorizes the grant of awards that may result in the payment of compensation subject to the cap on deductibility under IRC Section 162(m) if it and other compensation exceed $1 million in a given year. There can be no assurance that compensation resulting from awards under the 2021 Plan to Covered Employees will in fact be fully deductible.

Because the Compensation Committee and the Board have discretion to determine the amount and types of awards to be granted under the 2021 Plan, all of the benefits that will be received in the future by participants are not readily determinable, but in no case will the awards granted annually exceed the limitations set forth in the 2021 Plan.

Impact of Section 409A. Section 409A of the Internal Revenue Code applies to deferred compensation, unless the compensation was both deferred and vested prior to January 1, 2005. Generally speaking, “deferred compensation” is compensation earned currently, the payment of which is deferred to a later taxable year, and an amount is “vested” on the date that the participant’s right to receive the amount is no longer conditioned on the participant’s performance of substantial future services or upon the occurrence of an event (such as a change in control) or the achievement of performance goals that are substantially related to the purpose of the compensation.

Options, stock appreciation rights, restricted stock units, and restricted stock awarded under the 2021 Plan are designed to be exempt from the requirements of Section 409A. Other awards granted under the plan may be subject to Section 409A, unless the terms of the award satisfy an exemption from Section 409A. An award that is subject to Section 409A and fails to satisfy its requirements will subject the holder of the award to immediate taxation, an interest penalty and an additional 20% tax on the amount underlying the award. The Company will administer the 2021 Plan and may amend the 2021 Plan as necessary to avoid the taxes imposed under Section 409A.

New Plan Benefits

Because the number or size of the awards that a participant may receive under the 2021 Plan is at the discretion of the Compensation Committee, it is not possible to determine the benefits that will be received by participants under the 2021 Plan if Proposal 2 is approved by our stockholders.

Each non-employee director elected or re-elected at the Annual Meeting will receive a grant of restricted stock under the 2021 Plan with the number of shares (rounded to the next whole share) equal to $95,000 divided by the closing price of our common stock on the date of the Annual Meeting. The restricted stock awards will vest as to all the shares on the first anniversary of the date of the Annual Meeting. Accordingly, if elected or re-elected at this Annual Meeting, non-employee directors will receive the award of restricted stock described above. The annual non-employee director awards will be made following such election or reelection at the Annual Meeting, regardless of whether the 2021 Plan is approved.

Registration with the Securities and Exchange Commission

If Proposal 2 is approved by our stockholders, we intend to file a registration statement with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1933, as amended, covering the shares reserved for awards under the 2021 Plan.

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Required Vote and Recommendation

Stockholder approval of the 2021 Equity Participation Plan is required (i) under the rules of the New York Stock Exchange for listing the shares of common stock reserved under the 2021 Equity Participation Plan and (ii) under the Internal Revenue Code of 1986, as amended, in order for options granted under the 2021 Equity Participation Plan to be considered “incentive stock options”. The affirmative vote of a majority of all the votes cast at the meeting, provided that the total votes cast represent over 50% in interest of all shares entitled to vote, is required to approve the 2021 Equity Participation Plan as set forth in this Proposal 2. For purposes of the vote on Proposal 2, any abstention will have the effect of a vote against the proposal and broker non-votes will not be treated as votes cast for such purpose and therefore any broker non-vote will have the effect of a vote against Proposal 2 unless the total votes cast on the proposal represent over 50% in interest of all shares entitled to vote on Proposal 2. If the total votes cast on Proposal 2 represent over 50% in interest of all shares entitled to vote on the proposal, then broker non-votes will have no effect on the result of the vote. 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
2021 EQUITY PARTICIPATION PLAN

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PROPOSAL 3

RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee of the Board of Directors has appointed Ernst & Young LLP as the independent registered public accounting firm to audit LTC’s consolidated financial statements for the year ending December 31, 2021. Ernst & Young LLP served as our independent registered public accounting firm during 2020 and also provided certain tax services as described in the Independent Registered Public Accounting Firm Fees and Services section of this proxy statement. A representative of Ernst & Young LLP is expected to be present at the virtual 2021 Annual Meeting.

Although ratification is not required by our company’s Bylaws or otherwise, the Board is submitting the selection of Ernst & Young LLP to our stockholders for ratification as a matter of good corporate practice. If the selection is not ratified, the Audit Committee will consider whether it is appropriate to select another registered public accounting firm. Even if the selection is ratified, the Audit Committee in its discretion may select a different registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of our company and our stockholders.

Required Vote and Recommendation

Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2021 requires the affirmative vote of a majority of all the votes cast at a meeting at which a quorum is present. For purposes of the vote on Proposal 3, abstentions and broker non-votes will not be counted as votes cast and this will have no effect on the result of the vote although they will count towards the presence of a quorum for Proposal 3. Properly executed, unrevoked proxies will be voted FOR Proposal 3 unless a vote against Proposal 3 or abstention is specifically indicated in the proxy.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE

APPOINTMENT OF ERNST & YOUNG LLP AS LTC’S

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

FOR THE YEAR ENDING DECEMBER 31, 2021.

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PROPOSAL 4

ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”) requires that we provide our stockholders with the opportunity to vote to approve, on a nonbinding, advisory basis, the compensation of the named executive officers as disclosed in this proxy statement in accordance with the compensation disclosure rules of the SEC. This proposal, commonly known as a “say-on-pay” proposal, gives stockholders the opportunity to express their views on named executive officer compensation. As previously reported in the Current Report on Form 8-K that we filed with the SEC on June 5, 2017, the Board has determined that LTC will hold a nonbinding, advisory “say-on-pay” vote every year to approve named executive officer compensation.

As described in the Executive Compensation Discussion and Analysis (“CD&A”) section of this proxy statement, we seek to align compensation of our executives with our overall performance as well as the individual performance of each executive. As noted in the CD&A section, our Annual Cash Bonus Incentive Plan provides for 50% of the bonus opportunity for participating executives to be based on achievement of performance goals.

Our compensation programs are designed to attract and retain executives responsible for our company’s success and are administered in the long-term interests of our company and our stockholders. In connection with services provided in 2020, approximately 60% of total named executive officer compensation was in the form of long-term incentive awards.

Please see the CD&A (and in particular its “Executive Summary” on page 25) and the Summary Compensation Table sections of this proxy statement for further details regarding our executive compensation decisions for 2020 and how our compensation program for executives is structured to support and reward our annual and long-term financial performance as an organization.

Pursuant to the resolution below, we are asking our stockholders to indicate their support for named executive officer compensation. The vote on this resolution is not intended to address any specific element of compensation. Rather, the vote relates to the compensation of the named executive officers, as described in the CD&A and accompanying tables.

Accordingly, stockholders are being asked to vote on the following resolution at the 2021 Annual Meeting:

“RESOLVED, that the stockholders of LTC Properties, Inc. approve, on an advisory basis, the compensation of the named executive officers, as disclosed in LTC Properties, Inc.’s Proxy Statement for the 2021 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the compensation discussion and analysis, the summary compensation table, and the other related tables and disclosure.”

Required Vote and Recommendation

Because the vote is advisory, it is not binding on our company, the Board, or the Compensation Committee of the Board. The Board and the Compensation Committee will take into account the outcome of the vote, however, when designing future executive compensation programs.

For purposes of the vote on Proposal 4, abstentions and broker non-votes will not be counted as votes cast and this will have no effect on the result of the vote although they will count towards the presence of a quorum for Proposal 4. Properly executed, unrevoked proxies will be voted FOR Proposal 4 unless a vote against Proposal 4 or abstention is specifically indicated in the proxy.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE

COMPENSATION OF THE NAMED EXECUTIVE OFFICERS,

AS DISCLOSED IN THIS PROXY STATEMENT.

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EXECUTIVE OFFICERS

The Board of Directors has determined that Wendy L. Simpson, Pamela J. Shelley-Kessler, and Clint B. Malin are our company’s “executive officers” as that term is defined in Rule 3b-7 under the Exchange Act. The biographies of our three current executive officers are as follows:

Wendy L. Simpson

Chief Executive Officer

Age 72

       

Wendy L. Simpson is our Chief Executive Officer, a position she has held since March 2007. From October 2005 to May 2020, she also served as President of our company. Ms. Simpson served as Chief Financial Officer from July 2000 to March 2007, Treasurer from January 2005 to March 2007, and Chief Operating Officer from October 2005 to March 2007. She has been a director of our company since 1995, including as Vice Chairman of the Board from April 2000 to October 2005. In August 2013, Ms. Simpson was appointed Chairman of the Board of Directors.

Pamela J. Shelley-Kessler

Co-President, Chief

Financial Officer and Corporate Secretary

Age 55

Pamela J. Shelley-Kessler is our Co-President and Chief Financial Officer, a position she has held since May 2020. She served as Executive Vice President and Chief Financial Officer from December 2010 to May 2020, as Senior Vice President and Chief Financial Officer from March 2007 to December 2010 and as Vice President and Controller from July 2000 to March 2007. Prior to joining our company, Ms. Shelley-Kessler was the Corporate Controller for a privately held commercial and multifamily real estate developer. She was also the Director of Financial Reporting for a Southern California apartment REIT. Ms. Shelley-Kessler also served as the Assistant Controller of the Inland Empire division of KB Home, a publicly traded homebuilder. She began her career as a certified public accountant in the real estate group of Ernst and Young LLP. In January 2018, Ms. Shelley-Kessler joined the Board of Directors of Physician’s Realty Trust where she serves on the audit committee. Ms. Shelley-Kessler also serves on the Board of Governors and as a member of the real estate committee of the Providence Tarzana Medical Center Foundation. Providence Cedars-Sinai Tarzana Medical Center is a 249-bed hospital serving the San Fernando Valley, a joint venture between Providence St. Joseph Health, a national not-for-profit health system comprised of 50 hospitals and 829 clinics throughout the western part of the United States and Cedars-Sinai Health System.

Clint B. Malin

Co-President and

Chief Investment Officer

Age 49

Clint B. Malin is our Co-President and Chief Investment Officer, a position he has held since May 2020. He served as Executive Vice President and Chief Investment Officer from June 2012 to May 2020, as Senior Vice President and Chief Investment Officer from December 2010 to June 2012 and as Vice President and Chief Investment Officer from May 2004 to December 2010. Prior to joining our company, Mr. Malin was employed by Sun Healthcare Group, Inc. (“Sun”), a nationwide owner and operator of post-acute care and skilled nursing centers from 1997 through 2004. Mr. Malin’s last position held at Sun was Vice President of Corporate Real Estate. Genesis Healthcare, Inc. acquired Sun in December 2012. Mr. Malin began his career in public accounting, initially practicing at KPMG Peat Marwick LLP and then Arthur Andersen LLP.

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EXECUTIVE COMPENSATION DISCUSSION AND ANALYSIS

Executive Summary

2020 Business Highlights

The COVID-19 pandemic dominated 2020, resulting in a challenging year that had a considerable impact on our economy, our industry and our operating partners. The pandemic had a financial and human effect on our tenants who operate skilled nursing centers and seniors housing communities that were viewed as particularly exposed places for their often-times vulnerable residents. During the year, our primary focus was on managing through the disruption related to the pandemic and providing support to our operators.

Occupancy throughout the senior housing and care market fell considerably in 2020 as a result of the pandemic, while operators’ costs increased substantially as they worked to respond to pandemic-related challenges throughout their centers and communities. U.S. government aid provided some, but insufficient, relief. We provided $2.1 million in rent abatements and deferrals, net of repayment, during the year to assist operators in recognition of the impact of the costs of unprecedented health and business challenges. We believe the business of our operators will improve in 2021 and future years, particularly as vaccines continue to become more widely available and utilized. Additionally, occupancy should stabilize, and even grow from historical lows as seniors housing visitation and openings increase, with proactive marketing, and as consumer confidence builds in the safety of these settings. However, visibility into the trajectory of the improvement remains low, so we are not able to predict a full recovery from the effect of the pandemic for the industry or the timing thereof.

In 2020, we continued to maintain a conservative capital structure with low leverage. We believe our low debt levels and ample liquidity provide us with financing flexibility and allow us to opportunistically access the capital markets at favorable rates. This disciplined strategy allowed us to weather challenging economic environments and a variety of real estate cycles, while positioning us to take advantage of new investment opportunities.

Our 2020 investment strategy shifted to smaller investments with what we believe are better risk/reward profiles, using vehicles such as mezzanine and preferred equity financing, in response to the pandemic.

2020 Transaction Highlights

Committed $19.3 million to two preferred equity agreements to develop and own a 95-unit assisted living and memory care community, and a 267-unit independent and assisted living community.
Acquired a 140-bed skilled nursing center in Texas for $13.5 million.
Funded $16.7 million in development commitments, $6.9 million in capital improvement projects, and $2.0 million under an existing mortgage loan,.
Completed the construction of, and our operator opened, a 78-unit seniors housing community in Oregon.
Completed the construction of, and our operator opened, a 90-bed skilled nursing center in Missouri.
Sold 21 skilled nursing centers for a combined $74.8 million, recognizing a net gain of $44.1 million.
Received $17.8 million of liquidation proceeds from the sale of properties in an unconsolidated joint venture, and recorded a loss of $0.8 million.
On March 12, 2020, the Board authorized the repurchase of up to 5 million outstanding shares of LTC common stock, and we purchased 615,827 shares at an average price of $29.25 per share, including commissions, for a total purchase price of $18.0 million; however, due to the rising level of uncertainty in the financial markets and the adverse effects of COVID-19 on public health and our operators, the Board terminated the stock repurchase plan on March 25, 2020.

Key Credit Metrics as of December 31, 2020

Debt to enterprise value of 30%.
Debt to annualized adjusted EBITDAre of 4.3x.
Maintained ample liquidity, with $510.1 million available under our unsecured revolving line of credit, and $200.0 million available under our equity distribution agreements.

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Key Financial Metrics for 2020

The COVID-19 pandemic led to some delayed and abated rents and limited growth, so financial results were lower although our company remained profitable.
Collected 98% of our contractual revenue, which includes mortgage interest income, rental income and the application of Senior Lifestyle’s letter of credit and security deposit.
Year-over-year revenue for 2020 decreased due to a $23.2 million write-off of straight-line rent receivable and lease incentives related to three operators, a reduction in revenue related to the sale of our Preferred Care portfolio, reduced revenue from Senior Lifestyle, abated and deferred rent and partial paydown of a mezzanine loan, partially offset by increases in revenue from contractual rent escalations, acquisitions, mortgage funding, and capital development projects.
Year-over-year funds from operations (“FFO”) decreased 23.0%, primarily due to the straight-line rent receivable and lease incentives write-off mentioned above.
FFO, excluding non-recurring items in both periods, decreased 3.1% due to a reduction in revenue related to the sale of our Preferred Care portfolio, reduced revenue from Senior Lifestyle, abated and deferred rent and partial paydown of a mezzanine loan.
Year-over-year funds available for distribution (“FAD”) decreased 3.1%.
FAD, excluding non-recurring items in both periods, was flat.

FFO and FAD are used by our company as a supplemental measure of operating performance. FFO excluding non-recurring items and FAD excluding non-recurring items allows management to compare our company’s operating performance against other REITs and across time periods on a consistent basis.

For more information about FFO excluding non-recurring items, FAD excluding non-recurring items, debt to enterprise value, and annualized adjusted EBITDAre, refer to the non-GAAP reconciliation in Appendix A to this proxy statement.

Further, performance data provided by our independent compensation consultant both at the start of 2020 and in early 2021 showed that our financial operating performance exceeded our peers for return on invested capital, return on assets and return on equity, which all were in the top quartile of our peer group.

2020 Portfolio Management

Anthem Memory Care (“Anthem”), which encountered lease-up challenges in 2017, paid $2.4 million more rent during 2020 than in 2019, for a total of $9.9 million.  

Senior Care Centers, LLC (“Senior Care”) and certain of its affiliates and subsidiaries (collectively, “Senior Care Debtors”), filed for Chapter 11 bankruptcy protection in December 2018 as a result of operational challenges and unsustainable financial obligations. During 2019, Senior Care affirmed our master lease and in March 2020 emerged from bankruptcy. Concurrently with their emergence from bankruptcy, in accordance with the order confirming Senior Care Debtors’ plan of reorganization, Abri Health Services, LLC (“Abri”) was formed as the parent company of reorganized Senior Care Debtors and became co-tenant and co-obligor with reorganized Senior Care under our master lease. In March 2021, Senior Care and Abri (collectively, “Senior Care Tenant”) failed to pay rent and additional charges owed under the master lease. Accordingly, we sent Senior Care Tenant a notice of default for non-payment of these obligations, drew on Senior Care Tenant’s letters of credit held as security under our master lease and applied the proceeds from the draws to the Senior Care Tenant’s obligations under the master lease and our damages. When Senior Care Debtors filed for bankruptcy in December 2018, we worked diligently to identify a replacement operator. Anticipating that the opportunity to transition the portfolio might occur, we began negotiating a new master lease with a different Texas-based operator familiar with these assets. As a result of Senior Care Tenant’s default and press release stating that they no longer wish to operate this portfolio, we are working to transition the portfolio to HMG Healthcare, LLC with a goal to complete the transition by the end of the second quarter of 2021.

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Preferred Care, Inc. (“Preferred Care”) and affiliated entities filed for Chapter 11 bankruptcy in 2017 as a result of a multi-million-dollar judgment in a lawsuit in Kentucky against Preferred Care and certain affiliated entities. The Preferred Care entities that held the licenses to operate the properties and subleased our 24 properties under two master leases, did not file for bankruptcy. Under the bankruptcy proceedings, Preferred Care did not affirm our master leases and failed to pay full rent in the third quarter of 2019. During the fourth quarter of 2019, we entered into multiple contracts to sell a majority of the properties. We sold two properties during the fourth quarter of 2019 and 21 properties in the first quarter of 2020. We received $78.2 million in combined net proceeds from the sales, resulting in a total gain on sale of $43.4 million. In the first quarter of 2020, the remaining property in the portfolio was closed and included in a master lease with an existing operator. The operator is marketing the property for sale. As a result of these transactions, Preferred Care no longer operates any of our properties effective March 31, 2020.

An affiliate of Senior Lifestyle Corporation (“Senior Lifestyle”) was provided deferred rent in April 2020 which has since been fully repaid. However, they failed to pay full rent during the second quarter of 2020. Accordingly, we wrote-off a total $17.7 million of straight-line rent receivable and lease incentives related to this master lease during the second quarter of 2020. From April through December 2020, we received $9.2 million of Senior Lifestyle’s $13.8 million contractual rent due. During the fourth quarter of 2020, we applied their letter of credit and deposits totaling $3.7 million to accrued 2020 second quarter rent receivable of $2.5 million and notes receivable of $0.1 million, and the remaining $1.1 million to third and fourth quarter rent. At December 31, 2020, Senior Lifestyle’s unaccrued delinquent rent balance was $1.0 million. Also, during the fourth quarter of 2020, we recorded an impairment charge of $3.0 million related to a memory care community that was operated by Senior Lifestyle. During the first quarter of 2021, we transitioned 11 assisted living communities previously leased to Senior Lifestyle to two operators. These communities are located in Illinois, Ohio and Wisconsin. Total cash rent expected under these master lease agreements is $5.2 million for the first lease year, $7.1 million for the second lease year and $7.3 million for the third lease year, escalating 2% annually thereafter. We are currently evaluating our options for the remaining 12 assisted communities operated by Senior Lifestyle, which may include re-leasing or selling some or all of the properties.

2020 Compensation Highlights

We seek to closely align the interests of our executive officers with those of our stockholders. We have structured our executive compensation program to support this alignment, with relatively modest base salaries and a greater proportion of total compensation delivered through annual bonus, long-term equity incentive opportunities and equity participation. Our long-term equity incentive awards consist of contingent performance-based market stock units (“MSUs”) and restricted common stock awards (“RSAs”).

Highlights of our executive compensation program for 2020, which was established prior to the COVID-19 pandemic and was not changed during the year, are as follows:

The CEO’s salary in 2020 was increased to $775,000, which remained below the median of our peer group. Actual cash bonus incentive for 2020 was 15% lower than for 2019 (~83% target opportunity), despite the higher salary and target bonus opportunity, as the COVID-19 pandemic harmed financial performance against goals that were set prior to the pandemic and that were not changed during the year. The CEO’s 2020 equity grant value was increased by approximately 6% but remained slightly below the median. Further, equity value remained 50% contingent on positive four-year shareholder return. This resulted in total 2020 compensation, as reported in the Summary Compensation table of this proxy statement, that was approximately the same as 2019 (1% higher) and was slightly below the median of our peer group data when CEO compensation was set. The CEO’s equity award during 2020 was set prior to the outbreak of the COVID-19 pandemic and continued the practice of making approximately half of the value contingent on a 21.6% four-year total shareholder return (“TSR”) goal (it was not changed despite the pandemic).

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Total compensation excluding bonuses in 2020 was set to be flat in 2020 compared to 2019 for Ms. Shelley-Kessler and Mr. Malin to reflect the fact that they are both already paid consistent with their veteran industry leadership. Actual bonuses for both Ms. Shelley-Kessler and Mr. Malin were lower in 2020 as a result of bonus funding that was below-target following actual performance that fell short of pre-COVID goals. Both Ms. Shelley-Kessler and Mr. Malin were promoted to Co-President roles during 2020 and there was no change to their compensation, consistent with the principle of acting as industry leaders during COVID, which adversely impacted the operations of our tenants.
2020 cash bonuses were below-target at 83%, reflecting performance against goals that were set prior to the pandemic.
2020 diluted FAD excluding non-recurring items of $2.97 was slightly higher than 2019’s FAD excluding non-recurring items of $2.95, which was viewed as relatively good performance in light of the pandemic and allowed us to continue paying dividends to our shareholders. However, the $2.97 FAD was below the $3.01 FAD goal in the 2020 bonus plan and the award funding that resulted was 83% of target after recognizing that we fell short of the threshold for our new investment goal.
Equity awards during 2020 had grant date fair value as reported in the Summary Compensation Table that was approximately 50% contingent on our four-year TSR, with a requirement that TSR is 21.6% over four years to earn at least target (with the opportunity to earn awards after only three years if TSR is at least 15.8%, which is the same compound annual growth rate).
Approximately 50% of the long-term equity incentive awards granted to our executive officers in 2020 was performance contingent and this remained the case in 2021.
The named executive officers were not provided any salary increase or increase to target bonus or equity awards in 2021 to recognize that the seniors housing industry may require some additional time to recover. Our CEO’s salary and equity compensation remain slightly below the median of our peer group in 2021, which compensation decisions will be more fully disclosed in the 2022 proxy statement. The flat compensation for Ms. Shelley-Kessler and for Mr. Malin was despite their promotion to Co-President during 2020.

2020 “Say-On-Pay” Vote

At LTC’s 2020 Annual Meeting of Stockholders, approximately 95% of the votes cast in the advisory “say-on-pay” vote were for approval of named executive officer compensation. The Board and Compensation Committee have considered the results of the 2020 “say-on-pay” vote and believe that it indicates that stockholders are supportive of the executive compensation program, which has been generally continued with the same structure and value in 2021. The Board and Compensation Committee will continue to consider “say-on-pay” votes in formulating future executive compensation policies and decisions.

Corporate Governance Highlights

We seek to maintain good governance standards, including with respect to the oversight of our compensation policies and practices. Highlights of the policies and practices in effect during 2020, as described in more detail elsewhere in this proxy statement, are as follows:

We maintain a separate “lead independent director” role in our leadership structure for the Board;
Each committee of the Board is comprised solely of independent directors;
Our employees and directors are prohibited from hedging or pledging our common stock;
Executive compensation is subject to clawback in the event of an accounting restatement; and
We have stock ownership guidelines for our executives and independent directors.

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Executive Compensation Program Philosophy and Objectives

We endeavor to ensure that the compensation programs for our executives are effective at attracting and retaining the key executives responsible for our success and are administered to support the long-term interests of our company and our stockholders. Through the oversight of the Compensation Committee, we seek to align total compensation for executive management with our overall performance as well as the individual performance and role of each executive.

Our executive compensation program may be summarized as follows:

An executive’s salary, bonuses, incentive compensation and other benefit programs should reflect their role, our company’s performance, and the executive’s individual performance and effort; and
Compensation should provide a financial interest in our company that parallels the financial interests of our stockholders.

We encourage you to read this Executive Compensation Discussion and Analysis (“CD&A”) for further details about our executive compensation program, including information about the 2020 compensation of the named executive officers.

Executive Compensation Program Elements

We seek to achieve our compensation program objectives through the following key compensation elements: base salary, annual bonus opportunity, long-term equity incentive opportunity and severance upon termination of employment under certain conditions or change in control of our company. We believe that each element of our executive compensation program helps us to achieve one or more of our compensation objectives as follows:

Base salary—attract, motivate, and retain qualified key executives. We believe the base salary should reflect job responsibilities, value to our company, individual performance/expertise and competitiveness of the market for the executive’s services/salary norms for persons in comparable positions at comparable companies. We believe that it is important to provide executives with predictable benefit amounts that reward the executive’s continued service. Salaries are set in the first quarter of the year, with reference to both market data and prior year performance.

Annual bonuses—reward company performance and individual performance and effort. We believe the annual bonus should be linked to individual performance and to our company’s performance as a whole, and where practicable, should be related to variables under our management’s control. The target bonus is set in the first quarter of the year, and actual bonus is scored at the end of the year, after performance is known.

Long-term equity incentives—align executives’ financial interests with those of our stockholders. We believe that long-term compensation should motivate and reward the creation and preservation of long-term stockholder value through both price increases and dividends. Long-term equity incentives typically vest over multiple years to reward performance over one or more years or based on achieving certain performance targets.

Severance—attract, motivate and retain qualified key executives. We believe that providing our executives with severance and other benefits upon termination of employment or change in control is consistent with the severance protections offered by similar companies and is an integral part of total executive compensation. The rationale for providing severance if there is no change in control is to ensure smooth officer transitions with a release from claims against our company. The rationale for providing severance for termination following a change in control is to neutralize an executive’s interest in ongoing personal employment in the event that the Board determines it is in our stockholders’ best interest to sell our company.

Other Elements of Compensation

In addition to the primary elements of executive compensation program described above, the executives are eligible to participate in employee benefits and group insurance generally available to employees.

29


401(k) Savings Plan

We have a 401(k) Savings Plan which is a defined contribution plan covering all of our employees. Each year, participants may contribute up to 15% of pre-tax annual compensation. In 2020, the contributions may not exceed $19,500, or $26,000 if the employee is 50 years or older. We match up to 3% of salaries for our vice presidents and contribute 3% of the individual’s salary for staff that open an account. We will not match contributions for our executive officers at the senior vice president level and higher.

Benefits

With limited exceptions, the Compensation Committee’s policy is to provide benefits to executive officers that are substantially the same as those offered to other officers of our company at or above the level of vice president. Except for the health insurance benefits described in “Severance and Other Benefits Upon Termination of Employment or Change in Control” and the supplemental medical insurance described below, the employee benefits programs in which our executive officers participate (which provide benefits such as medical, dental and vision benefits coverage, life insurance protection, and 401(k) savings plan) are generally the same programs offered to all of our full-time employees. Our officers at the level of vice president and above are eligible to participate in a supplemental medical insurance program which reimburses participants up to a maximum of $10,000 per year for eligible out-of-pocket medical expenses such as primary insurance co-payments, deductibles, and certain elective medical procedures not covered by the employee’s primary insurance policy.

Dividends

Our named executive officers receive dividends on unvested restricted common stock awards, and accumulate dividend equivalents that are paid in cash upon vesting of performance-based market stock unit awards. Dividends for 2020 paid on unvested restricted common stock are disclosed under All Other Compensation in 2020 portion of the Summary Compensation Table, and dividend equivalents are included in the grant date fair value of the MSUs.

Compensation Governance Policies and Guidelines

Prohibition on Pledging and Hedging Stock

Pursuant to our company’s Insider Trading Policy, we prohibit employees and directors from pledging or hedging their shares in our company’s stock. These robust prohibitions, which cover a full range of transactions, (i) include purchasing financial instruments or otherwise engaging in transactions that are designed to or have the effect of hedging the economic risk of ownership in our company’s stock, and (ii) are not subject to any pre-clearance or pre-approval exceptions. All of our executive officers and directors were in compliance throughout 2020 with these anti-pledging and anti-hedging provisions.

Clawback Policy

The Board has adopted a Clawback Policy that grants the Board the discretion to recoup from executive officers all cash bonuses paid that would not have been paid if performance had been measured in accordance with restated financials, for the periods covering any of the three fiscal years preceding a restatement (other than to comply with changes in applicable accounting principles). The Board is responsible for the interpretation and enforcement of this Clawback Policy.

Each of the senior executive employment agreements for Ms. Simpson, Ms. Shelley-Kessler and Mr. Malin contains a clawback provision. In particular, the employment agreements provide the Board of the Directors with the contractual ability to clawback a cash or share grant bonus in the event of a restatement of our financial results if:

the restatement is attributable to misconduct or wrongdoing by the executive;
the bonus was issued within three years preceding the restatement;
the bonus was calculated and awarded pursuant to a specific financial formula; and
the bonus would have been diminished based on the restated financial results.

30


Stock Ownership Guidelines

We encourage our executives to hold our company’s stock on a long-term basis. The following table reflects our company’s stock ownership guidelines for our executives and independent directors:

Chief Executive Officer

Six times base salary

President / Co-Presidents

Four times base salary

Executive Vice Presidents

Three times base salary

Independent Directors

Five times annual Board cash retainer

Our company’s stock ownership guidelines recommend that the Chief Executive Officer, President/Co-Presidents and Executive Vice Presidents achieve the targeted level of ownership within three years from the date of hire, promotion or appointment. The stock ownership guidelines recommend that the independent directors achieve the targeted level of ownership within five years from date of election. If an independent director is prohibited from personally holding our shares by the independent director’s employer’s internal policies, then the stock ownership guideline for the independent director will be deemed satisfied. All of our executive officers and independent directors currently hold at least the full amount of the guideline or are deemed to have satisfied the stock ownership guideline. The Nominating and Corporate Governance Committee receives a quarterly report on executive and independent director LTC stock ownership.

Deductibility of Compensation under the Tax Codes

Section 162(m) of the Internal Revenue Code denies deduction for federal income tax purposes for certain compensation in excess of $1,000,000 paid to certain executive officers. Certain awards granted before November 2, 2017, and amounts payable pursuant to certain written binding contracts that were in effect on November 2, 2017, may qualify for an exception to the $1,000,000 million deductibility limit. The Compensation Committee reserves the right to design programs that recognize a full range of performance criteria important to our success, even where the compensation paid under such programs may not be deductible. Interpretations of and changes in the tax laws and other factors beyond the Compensation Committee’s control may affect the deductibility of certain compensation payments.

Tax Withholding

We permit our employees and directors to elect to withhold shares of stock to satisfy their tax withholding requirements upon the vesting of restricted stock and performance-based market stock units.

Compensation Committee

The Compensation Committee reviews and approves the compensation of our executive officers and determines our general compensation policy. The Compensation Committee considers whether compensation decisions create incentives to take risks that could materially harm our company but does not believe that such incentives exist.

The Compensation Committee is also responsible for the administration of our equity compensation plans. Under the 2015 Equity Participation Plan of LTC Properties, Inc. (“2015 Equity Participation Plan” or “2015 Plan”), 1,400,000 shares of common stock have been reserved for awards, including nonqualified stock options grants and equity grants to officers, employees, non-employee directors and consultants. The Compensation Committee is authorized to determine the options and equity awards to be granted under equity compensation plans and the terms and provisions of such options and equity awards. The Compensation Committee determines the base salary, annual bonus and long-term equity incentives of our Chief Executive Officer. Ms. Simpson, our Chief Executive Officer, recommends to the Compensation Committee the base salary, annual bonus and long-term compensation levels for all of our other officers. None of the other senior executives had any role in determining or recommending the form or amount of the compensation of the other senior executives.

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Competitive Considerations

In determining the level and composition of compensation for our executive officers, the Compensation Committee considers various corporate performance measures, both in absolute terms and in relation to similar companies, and individual performance measures. The Compensation Committee establishes specific quantitative measurements and targets based upon our company’s FAD and new investments to determine the annual bonus awards for our senior executives as described under “Annual Cash Bonus Incentive Plan” below. The Compensation Committee also may evaluate the following factors in establishing executive compensation: (a) comparative compensation surveys and other material concerning compensation levels and stock grants at similar companies; (b) our historical compensation levels and stock awards; (c) overall competitive environment for executives and the level of compensation necessary to attract and retain executive talent; (d) financial performance of other real estate investment trusts relative to market condition; and (e) from time to time, the Compensation Committee may seek the advice of an independent compensation consultant in assessing its overall compensation philosophy. The Compensation Committee assigns no specific weight to any of the factors described above in establishing executive compensation.

While the Compensation Committee may review competitive market data for context, compensation levels are not set by reference to any percentile or benchmark within any peer group of companies or otherwise. Our goal is to provide each executive with a current compensation package that is at market based upon the Compensation Committee’s perception of comparable executives at comparable companies, including real estate investment trusts.

The target total direct compensation provided to our CEO in 2020, was set near the median of data available in our peer group of compensation reference companies at the time the compensation decisions were made and actual total compensation was slightly below the median as a result of falling short of the bonus goals. The Compensation Committee believes that this target position, combined with the performance-based nature of the bonus plan, and the fact that 50% of the equity grant value provided to the named executive officers is contingent on higher TSR performance, reflects a disciplined, reasonable, and performance-driven program that is aligned with our stockholders’ short- and long-term interests. The Committee notes that there was no increase to the CEO’s salary, target bonus, or equity award value in 2021 to recognize the effect of the pandemic on the senior housing industry.

Compensation Consultant

Pursuant to its charter, the Compensation Committee has the authority to engage independent compensation consultants and other professionals to assist in the design, formulation, analysis, and implementation of compensation programs for our executive officers.

Since September 2015, the Compensation Committee has retained Frederic W. Cook & Co., Inc. (“Cook”) as an independent compensation consultant to evaluate new programs and compensation methodologies. Cook has conducted a comprehensive review of our company’s executive compensation programs and provided a report of its review to the Compensation Committee as described under “Executive Compensation Review” below. The Compensation Committee references the Cook report in making executive compensation decisions.

After review and consultation with Cook, the Compensation Committee determined that Cook is and was an independent advisor and there is and was no conflict of interest resulting from retaining Cook in 2020.

Executive Compensation Review

As described above, Cook was engaged by the Compensation Committee to conduct a comprehensive review of our executive compensation programs. The Cook review included:

assisting with the development of a peer group for compensation comparisons; consisting of publicly-traded real estate investment trusts (“REITs”) with total assets, enterprise value, and funds from operations (“FFO”) generally similar to our company, and with a broad focus on healthcare REITs or REITs that have a triple-net business orientation and/or tenants that are commercial businesses;
conducting a review of the competitiveness of current compensation levels, programs and arrangements provided to our executives, including the named executive officers; and
conducting a competitive assessment of our non-employee director compensation program.

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The late-2019 Cook peer group used for 2020 compensation decisions included the following seventeen REITs:

American Assets Trust, Inc.
CareTrust
Cedar Realty Trust, Inc.
EastGroup Properties, Inc.
Healthcare Realty Trust Incorporated
Healthcare Trust of America, Inc.
Hersha Hospitality Trust
Medical Properties Trust Inc.
National Health Investors Inc.
Omega Healthcare Investors Inc.
Physicians Realty Trust
PS Business Parks Inc.
Retail Opportunity Investments Corp.
Sabra Health Care REIT, Inc.
Seritage
STAG Industrial, Inc.
Terreno Realty Corp.

Cook compared our company’s total direct compensation (base salary, annual and long-term incentives) for each executive position against the market compensation levels for similar executives in the consultant’s respective peer group. The review by Cook provided context that CEO’s 2020 target total direct compensation was near the median of the market data available when 2020 decisions were made. Further, in 2021, CEO total direct compensation was set near the median peer group data available at the start of 2021.

Executive Compensation Practices

Base Salaries

The named executive officers each have an employment agreement granting them the contractual right to receive a fixed base salary as described under “Employment Agreements” on page 41 of this proxy statement.

Base salaries are reviewed and adjusted by the Compensation Committee on an annual basis. The Compensation Committee seeks to ensure that base salaries are established at levels that reflect the responsibilities and duties of our executives and are competitive with amounts paid to executives of other real estate investment trusts, including our peer group companies. In determining an individual executive’s actual base salary, the Compensation Committee also considers other factors, which may include the executive’s past performance, relative importance, future potential, and contributions to our past success.

Based on the recommendations received from the Chief Executive Officer (except with respect to the Chief Executive Officer’s own salary) and taking into account our company’s performance as well as the findings from the Cook report, the Compensation Committee approved the following increases to base salaries for the named executive officers. Base salary increases were effective January 1, 2020. The following table summarizes salary adjustments approved by the Compensation Committee for 2020, which salary levels with no increase are continuing for 2021:

    

2020 Base

    

2019 Base

    

Year over

 

Named Executive Officer

Salary

Salary

Year Increase

 

Wendy L. Simpson

$

775,000

$

750,000

 

3.3

Pamela J. Shelley-Kessler

475,000

460,000

 

3.3

Clint B. Malin

475,000

460,000

 

3.3

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Annual Cash Bonus Incentive Plan

Our Annual Cash Bonus Incentive Plan provides an annual incentive bonus for selected executives whereby each participating executive has a range of incentive opportunity (threshold, target and maximum) defined as a percentage of base salary. Annually, the Compensation Committee will select the participants in the plan and establish its performance goals.

For 2020, Ms. Simpson, Ms. Shelley-Kessler and Mr. Malin had the following range of bonus opportunities:

Bonus Opportunity as a % of

 

Base Salary

 

Executive

Threshold

    

Target

    

Maximum

 

Wendy L. Simpson

    

93.8

%  

125.0

%  

218.8

Pamela J. Shelley-Kessler

 

67.5

%  

90.0

%  

157.5

Clint B. Malin

 

67.5

%  

90.0

%  

157.5

Bonuses under the 2020 bonus program were earned based 50% on the financial performance of our company and 50% on the Compensation Committee’s subjective evaluation of both individual and our company performance. Financial performance was measured using diluted FAD excluding non-recurring items per share and new investments, with 40% of the bonus plan tied to FAD per share and 10% tied to new investments. The subjective component in 2020 included factors such as individual performance, rental and mortgage interest income collection of 98% (includes the application of Senior Lifestyle’s letter of credit and security deposit), capital structure management, credit ratings, dividend growth and total stockholder return relative to peers. Performance achievement for the subjective component is determined at the discretion of the Compensation Committee. The factors used for qualitatively determining the score for the subjective factors are discussed below.

For purposes of the Annual Cash Bonus Incentive Plan, diluted FAD excluding non-recurring items, including the means of calculating it, is disclosed in our annual earnings release and in Appendix A to this proxy statement. The Board may adjust the diluted FAD excluding non-recurring items component to reflect the pro forma impact of changes to our company’s capital structure, strategic changes and other items, at the Board’s discretion, that were not contemplated at the time of adoption of the performance goals. New investments include acquisitions, loan originations, equity investments and total commitments underwritten for developments, redevelopments, expansions and renovations.

The following table summarizes each metric and its relative weighting, the approved 2020 performance goals at threshold, target and maximum levels, and actual performance achieved. Actual 2020 performance versus the diluted FAD excluding non-recurring items per share target was achieved at 99%, which funded the FAD bonus criteria at 83%. The new investments goal was not achieved and therefore that criteria was not funded. The subjective assessment was scored at 100% of target based on the factors described below and resulted in total bonus equal to 83% of target.

Based on the degree of goal achievement, the bonus formula for the year resulted in a payout of 83% of target for Ms. Simpson, Ms. Shelley-Kessler and Mr. Malin.

% of

2020 Performance Goals

Performance

Target

Metric

Weight

Threshold

Target

Maximum

Achieved

Achieved

  

Diluted FAD excluding Non-recurring Items per share

  

40

%  

$2.95

  

$3.01

  

$3.07

  

$2.97

  

99

New Investments ($ in millions)

 

10

%  

$50

$75

$100

$35

 

47

Subjective Performance

 

50

%  

Compensation Committee Determination

 

Target

 

83

34


The Compensation Committee evaluated the subjective performance component for the year considering other real estate investment trusts’ results and the weakness in the overall market during the COVID-19 pandemic. The target bonus allowed under the subjective component was awarded as a result of the following 2020 accomplishments:

Collected 98% of our contractual revenue, which includes mortgage interest income, rental income and the application of Senior Lifestyle’s letter of credit and security deposit in 2020. Minimized rent concessions during the COVID-19 pandemic by working with operators to structure rent payments reflective of the current operating environment and historical property level cash flows. Provided $2.1 million in rent deferrals, net of repayment, and abatements during the year to assist operators in recognition of the unprecedented health and business challenges caused by the COVID-19 pandemic;

Acquired a 140-bed skilled nursing center in Texas for $13.5;

Invested $6.3 million of preferred equity in an entity that will develop and own a 95-unit assisted living and memory care community in Washington;

Invested $5.0 million of a $13.0 million preferred equity commitment to develop and own a 267-unit independent and assisted living community in Washington. In the first quarter of 2021, we funded the remaining $8.0 million under this commitment;

Funded $2.0 million under an existing mortgage;

Funded $16.7 million in development commitments, and $6.9 million in capital improvement projects;

Completed the construction of, and our operator opened, a 78-unit seniors housing community in Oregon;

Completed the construction of, and our operator opened, a 90-bed skilled nursing center in Missouri;

Sold 21 skilled nursing centers for a combined $74.8 million, recognizing a net gain of $44.1 million.

Received $17.8 million of liquidation proceeds from the sale of properties in an unconsolidated joint venture, and recorded a loss of $0.8 million;

On March 12, 2020, the Board authorized the repurchase of up to 5 million outstanding shares of LTC common stock, and we purchased 615,827 shares at an average price of $29.25 per share, including commissions, for a total purchase price of $18.0 million; however, due to the rising level of uncertainty in the financial markets and the adverse effects of COVID-19 on public health and our operators, the Board terminated the stock repurchase plan on March 25, 2020; and

In March 2020, due to governmental COVID-19 lock-down mandates, we transitioned our corporate office personnel to working remotely from their homes. We did not experience any delays or deterioration in our internal business, the support we provide to our operators or reporting to our shareholders and other interested parties.

Maintained our investment grade rating from the National Association of Insurance Commissioners (NAIC).

Based on the performance achieved, the Compensation Committee approved the following payouts under the Annual Cash Bonus Incentive Plan, which were 15% lower in 2020 than the bonus award earned for 2019:

    

Wendy L.

    

Pamela J. Shelley-

Clint B.

 

Metric

Simpson

Kessler

Malin

 

Diluted FAD excluding Non-recurring Items per share

$

322,917

$

142,500

$

142,500

New Investments

 

 

 

Subjective Performance

 

484,375

 

213,750

 

213,750

Total Bonus Earned

$

807,292

$

356,250

$

356,250

35


Long-Term Equity Incentives

Long-term incentives are granted to align the executives’ financial interests with those of our stockholders and are in the form of RSAs, MSUs and stock options. Awards are made on an individual basis and are not granted at any pre-determined time during the year, though 2020 awards to the named executive officers were granted in mid-February 2020.

RSAs typically vest ratably over a three-period and are generally subject to the individual executive officer’s continued employment. The MSU awards are earned over a four-year performance period, subject to the ability to accelerate earnout if three-year performance is high enough, with the number of shares earned dependent on our total stockholder return (“TSR”) over the applicable performance period. The level of long-term incentive compensation is determined by the Compensation Committee based on an evaluation of competitive factors in conjunction with total compensation provided to each individual executive officer. The relevant weight given to each of these factors varies from individual to individual. We do not have an exact formula for allocating between cash and non-cash compensation, nor do we have a policy for allocating between long-term and currently paid out compensation.

The grant date of an equity award is typically the date the Compensation Committee approves the equity award. The grant date may also be a future date from the date of approval as specified by the Board resolution. In no instances has the grant date been retroactive or prior to the date the Compensation Committee approved the equity award. For long-term incentive awards in the form of stock options, the exercise price is the closing price of our company’s stock as reported by the NYSE on the grant date. The Compensation Committee has not and does not time the granting of equity awards with any favorable or unfavorable news released by us.

Under the 2015 Equity Participation Plan, awards that may be granted include stock options (incentive or non-qualified), stock appreciation rights, RSAs, MSUs, and dividend equivalents. The 2015 Plan is administered by the Compensation Committee which sets the terms and provisions of the awards granted under the plan. Incentive stock options, stock appreciation rights, RSAs, MSUs, and dividend equivalents may only be awarded to officers and other full-time employees to promote our long-term performance and specifically, to retain and motivate management to achieve a sustained increase in stockholder value. Non-qualified stock options, stock appreciation rights, RSAs, MSUs, and dividend equivalents may be awarded to non-employee directors, officers, employees, consultants and other key persons who provide services to us.

In 2020, the Compensation Committee used RSAs and the performance-contingent equity in the form of MSUs as the key form of long-term equity incentive awards provided to our executive officers. The design of the MSU awards granted in 2020 was effectively identical to the MSU design used in 2019 and 2018. The Compensation Committee approved equity awards to the Chief Executive Officer and the Chief Executive Officer recommended and the Compensation Committee approved equity awards to Ms. Shelley-Kessler and Mr. Malin for their service in 2020. In approving the equity awards, the Compensation Committee took into consideration the executive’s historical performance, leadership, and contributions, total ownership levels and the value of equity delivered historically, the market positioning of the executives’ pay and our company’s desire to retain the executives by providing a meaningful long-term incentive award to each executive which is aligned with stockholder interests.

On February 18, 2020, the Compensation Committee granted the following RSAs which vest ratably over a three-year period from the grant date and with the same grant value repeated again in 2021:

    

RSA

    

Number

 

Grant

of RSA

 

Named Executive Officer

Value

Grant

 

Wendy L. Simpson

$

1,250,000

 

25,536

Pamela J. Shelley-Kessler

 

610,000

 

12,462

Clint B. Malin

 

610,000

 

12,462

36


For MSU awards, the Compensation Committee approved specific grant values to be awarded to the named executive officers and the number of shares was determined by dividing the target grant value by the fair value per share on the date of grant calculated using the Monte Carlo model. The following table sets forth the grant values of target MSUs granted on February 18, 2020, which grant values were kept flat once again in 2021:

    

    

Target

 

MSU

Number

Award

of MSU

 

Named Executive Officer

Value

Award

 

Wendy L. Simpson

$

1,250,000

 

25,010

Pamela J. Shelley-Kessler

 

610,000

 

12,205

Clint B. Malin

 

610,000

 

12,205

MSUs granted in 2020 are substantially similar to MSUs granted annually since 2016 and can be earned between 0% and 200% target based on LTC’s cumulative TSR performance through February 28, 2024 (4-year performance period) and there is an opportunity to earn MSU shares early if TSR through February 28, 2023 (3-year performance period) is at least 3%. The four-year performance period may be accelerated to three years if three-year TSR performance is high enough to fund the maximum MSU earnout after three years. Dividends for outstanding MSUs are accrued in the form of cash during the restriction period and are distributed if and when the underlying shares are earned (dividends accrued on unearned/forfeited MSU shares are forfeited).

We calculate cumulative TSR as the increase in our stock price over the performance period, starting on the date of the award assuming dividend reinvestment and measured using the trailing twenty (20) trading-day average price of our common stock immediately prior to the end of the performance period, divided by our stock price on the date of the award. The 20 trading-day period is used to minimize the impact of volatility and point-to-point variation. The Compensation Committee selected the TSR performance metric to reward management for increasing TSR for stockholders.

Under the 2020 MSU design, payouts range from 0% to 200% of target, based on the schedule below:

    

Cumulative

    

Accelerated

    

Payout %

 

4-year

Cumulative

of Target

 

Growth Requirements

TSR

3-year TSR

Share Granted

 

Below Threshold

Less than 4.1%

 

Less than 3.0%

 

Threshold

4.1%

 

3.0%

 

50.0%

Target

21.6%

 

15.8%

 

100.0%

Maximum

46.4%

 

33.1%

 

200.0%

MSUs previously awarded in 2017 to the named executive officers vested in 2020 pursuant to the formulaic provision for accelerated payout. The 2017 MSU design provided the same payout schedule reflected in the schedule above for the 2020 MSU design. Based upon a cumulative TSR of 22.25% during the accelerated performance period, the 2017 MSUs vested at 136.65% in accordance with the formula’s design and without any discretionary adjustment by the Committee. Also, the named executive officers received $7.03 per share of accumulative dividends in cash on each 2017 MSU vested. The following table sets forth the 2017 awards and 2020 payout of MSUs based upon the accelerated cumulative TSR:

Target

Number

Number

of MSU

of MSU

Awarded

 

Vested

 

Named Executive Officer

in 2017

 

in 2020

 

Wendy L. Simpson

20,915

 

28,581

Pamela J. Shelley-Kessler

 

11,477

 

15,684

Clint B. Malin

 

11,477

 

15,684

37


Additionally, MSUs previously awarded in 2016 to the named executive officers vested in 2020. The 2016 MSU design provided the same payout schedule reflected in the schedule above for the 2020 MSU design. However, the 2016 MSU design, which was the initial year the Compensation Committee adopted a compensation program with performance-based market stock units, had a shorter 3.74-year performance period due to the timing of the initial program’s adoption which was a little later in the fiscal year. Based upon a cumulative TSR of 23.01% during the performance period, the 2016 MSUs vested at 16.87% which represents the current performance period payout of 113.85% less the 96.98% accelerated payout provision in 2019. The 2016 MSU vested in accordance with the formula’s design and without any discretionary adjustment by the Committee. Also, the named executive officers received $8.51 per share of accumulative dividends in cash on each 2016 MSU vested in 2020. The following table sets forth the 2016 awards and the 2019 and 2020 payout of MSUs based upon the accelerated cumulative TSR.

Target

Number

Number

Number

of MSU

of MSU

of MSU

Awarded

 

Vested

 

Vested

 

Named Executive Officer

in 2016

 

in 2019

 

in 2020

 

Wendy L. Simpson

19,808

 

19,209

 

3,342

Pamela J. Shelley-Kessler

 

10,425

 

10,110

 

1,759

Clint B. Malin

 

10,425

 

10,110

 

1,759

Severance and Other Benefits Upon Termination of Employment or Change in Control

The employment agreements with certain executive officers of our company provide severance and other benefits upon termination of employment or a change in control of our company. We believe that we need to provide key executives with severance protections that are competitive with those offered by companies similar to ours. The severance protections we have provided the named executive officers are consistent with our compensation objective to attract, motivate and retain qualified key executives.

We believe that severance should be payable to key executives if their employment is terminated for any reason, except for a termination for cause or a voluntary resignation without a good reason. The amount of severance we have agreed to pay and other severance benefits we extend to our executive officers upon such an occurrence is intended to help compensate them during a period of expected unemployment in the event of a termination without cause.

We also believe that severance should be payable to our key executives in connection with a change in control transaction. A change in control creates uncertainty regarding the continued employment of the executives. We provide severance in the event of a change in control to make our key executives indifferent about their own job security if the Board determines that it is in the best interests of stockholders to sell our company. The amount of cash severance we have agreed to pay and other severance benefits we extend to our executive officers upon such an occurrence is intended to encourage the executives to remain employed by us during an important time when their prospects for continued employment following the change in control transaction are often uncertain. Our current practice for change in control severance follows a “double-trigger” approach. Ms. Simpson’s, Ms. Shelley-Kessler’s, and Mr. Malin’s employment agreements contain double-trigger change in control provisions. Under a double-trigger approach, a severance payment obligation arises only if a change in control occurs and the executive’s employment is terminated for any reason, except for a termination for cause or a voluntary resignation without a good reason, within a 24-month period after the change in control.

Additionally, upon the circumstances described above regarding termination of employment or change in control, we have agreed to provide health insurance benefits to each named executive officer for a period of 18 months. None of the employment agreements with our executive officers provide for lifetime benefits. Also, none of the employment agreements with our executive officers provide for “gross-up payments” to offset taxes due for severance or other benefits upon termination of employment or change in control.

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Compensation Risk Assessment

We have reviewed our compensation policies and practices to determine whether risks arising from our compensation policies and practices for employees are reasonably likely to have a material adverse effect on our company. The review included assessment of our various compensation programs and consideration of risk mitigating factors. We believe that our compensation policies and practices for employees do not present risks that are reasonably likely to have a material adverse effect on our company. We generally take a conservative approach to managing our business. Although some risk-taking is necessary to manage and grow any business, we believe our compensation policies and practices do not encourage unnecessary or excessive risk-taking and do not promote short-term rewards for management decisions that could pose long-term risks to our company. With particular respect to compensation of our executive officers:

the Compensation Committee exercises discretion in determining cash bonuses and equity awards to executive officers;

awards of restricted stock with long-term vesting periods provides executive officers with an incentive to make decisions that contribute to long-term performance of our company;

our Clawback Policy and provisions in our senior executive employment agreements provide our company with recourse in the event of material non-compliance with any financial reporting requirement that leads to a material or significant restatement; and

stock ownership guidelines for executive officers further aligns their personal wealth with the long-term performance of our company.

EXECUTIVE COMPENSATION TABLES

Summary Compensation Table

The following table presents information regarding compensation of the named executive officers for services provided in 2020, 2019 and 2018:

    

    

    

    

Non-Equity

    

    

 

Stock

Incentive Plan

All other

 

Name and Principal Position

Year

Salary

Awards(1)

Compensation

Compensation(2)

Total

 

Wendy L. Simpson

 

2020

$

775,000

$

2,500,000

(3)(4)

$

807,292

(5)

$

118,064

$

4,200,356

Chairman and Chief

 

2019

 

750,000

2,349,995

(3)(4)

947,232

(5)

114,376

4,161,603

Executive Officer

 

2018

 

675,000

 

1,762,059

(3)(4)

 

875,877

(5)

 

104,404

 

3,417,340

Pamela J. Shelley-Kessler

 

2020

 

475,000

 

1,220,000

(3)(4)

 

356,250

(5)

 

70,759

 

2,122,009

Co-President, Chief

 

2019

 

460,000

 

1,220,000

(3)(4)

 

418,538

(5)

 

73,303

 

2,171,841

Financial Officer and

 

2018

 

425,000

 

1,199,999

(3)(4)

 

397,064

(5)

 

72,311

 

2,094,374

Corporate Secretary

Clint B. Malin

 

2020

 

475,000

 

1,220,000

(3)(4)

 

356,250

(5)

 

64,169

 

2,115,419

Co-President and Chief

 

2019

 

460,000

 

1,220,000

(3)(4)

 

418,538

(5)

 

67,139

 

2,165,677

Investment Officer

 

2018

 

425,000

 

1,199,999

(3)(4)

 

397,064

(5)

 

66,481

 

2,088,544

1)

Represents the fair value on the grant date of the stock awards, as required by SEC rules. Under U.S. generally accepted accounting principles, compensation expense with respect to stock awards granted is generally recognized over the vesting periods applicable to the awards. For a discussion of the assumptions and methodologies used to value the stock awards granted refer to Note 10. Equity of Notes to Consolidated Financial Statements included in our company’s 2020 Annual Report on Form 10-K.

39


2)

Named executive officers received the following other compensation:

  

2020

  

  

2019

  

  

2018

  

Supplemental

Total

Supplemental

Total

Supplemental

Total

Health

Other

Health

Other

Health

Other

Named Executive Officer

Insurance

 

 

Dividends(a)

 

 

Compensation

Insurance

 

 

Dividends(a)

 

 

Compensation

Insurance

 

 

Dividends(a)

 

 

Compensation

Wendy L. Simpson

$

5,050

$

113,014

$

118,064

$

6,794

$

107,582

$

114,376

$

2,859

$

101,545

$

104,404

Pamela J. Shelley-Kessler

10,250

60,509

70,759

10,250

63,053

73,303

9,382

62,929

72,311

Clint B. Malin

 

3,659

 

60,509

 

64,169

 

4,086

 

63,053

 

67,139

 

3,552

 

62,929

 

66,481

a)

Represents the $0.19 per share monthly dividends for 2020, each of which is payable on unvested restricted common stock owned by each named executive officer, but excludes dividend equivalent rights credited to unvested performance-based market stock units, which were previously factored into the grant date fair value for such performance-based market stock units.

3)

Named executive officers were awarded the following performance-based market stock units during 2020, 2019 and 2018 with the number of shares to be earned depending on our TSR over the applicable performance period. These MSUs require a minimum threshold of 4.1% cumulative annual TSR performance, before threshold shares are earned, and they require 21.6% cumulative TSR performance before target shares are earned, each as measured over a 4-year performance period, with opportunity to earn the awards after 3 years if cumulative TSR performance is at least 3.0% at the end of 3 years:

    

2020

  

    

2019

  

    

2018

  

Target

Target

Target

MSU

Number

MSU

Number

MSU

Number

Award

of MSU

 

Award

of MSU

 

Award

of MSU

 

Named Executive Officer

Value

Award

 

Value

Award

 

Value

Award

 

Wendy L. Simpson

$

1,250,000

 

25,010

$

1,175,000

 

22,657

$

915,188

 

22,181

Pamela J. Shelley-Kessler

 

610,000

 

12,205

 

610,000

 

11,762

 

600,000

 

14,542

Clint B. Malin

 

610,000

 

12,205

 

610,000

 

11,762

 

600,000

 

14,542

4)

Named executive officers received the following restricted common stock awards during 2020, 2019 and 2018 which vest ratably over a three-year period from the grant date:

2020

 

    

2019

 

    

2018

 

RSA

Number

RSA

Number

RSA

Number

Grant

of RSA

 

Grant

of RSA

 

Grant

of RSA

 

Named Executive Officer

Value

Grant

 

Value

Grant

 

Value

Grant

 

Wendy L. Simpson

$

1,250,000

 

25,536

$

1,174,995

 

25,247

$

846,871

 

22,181

Pamela J. Shelley-Kessler

 

610,000

 

12,462

 

610,000

 

13,107

 

599,999

 

15,715

Clint B. Malin

 

610,000

 

12,462

 

610,000

 

13,107

 

599,999

 

15,715

5)

Represents amounts earned in cash under the Annual Cash Bonus Incentive Plan for performance in 2020, 2019 and 2018 which were paid in 2021, 2020 and 2019, respectively.

CEO to Median Employee Pay Ratio

As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing information about the relationship of the annual total compensation of our employees and the annual total compensation of our CEO. The applicable rules allow companies to use various assumptions and methodologies in calculating the pay ratio and, accordingly, our pay ratio may not be comparable with the pay ratios of other companies.

We identified the median employee by examining the 2020 total compensation in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K for all individuals, excluding our CEO, who were employed by us as of December 31, 2020. We used our payroll records to identify this information. In making this determination, we did not annualize compensation for those employees who did not work for our company for the entire fiscal year. We also did not make any cost-of-living adjustments in identifying the median employee. Our Chief Executive Officer had annual total compensation of $4,200,356 and our median employee had annual total compensation of $183,055. Therefore, we estimate that our CEO’s annual total compensation is 23.0 times that of the median of the annual total compensation of all of our employees, excluding our CEO.

40


Employment Agreements

Our company has entered into employment agreements with each of the named executive officers. The following table presents information regarding the employment agreements with the named executive officers for the year ended December 31, 2020:

Named Executive Officer

   

Agreement Date

   

Agreement Term

   

Salary

 

Wendy L. Simpson

 

11/12/14

 

3-year evergreen

$

775,000

Pamela J. Shelley-Kessler

 

11/12/14

 

2-year evergreen

 

475,000

Clint B. Malin

 

11/12/14

 

2-year evergreen

 

475,000

The employment agreements provide that the base salaries may be increased at the discretion of the Board. Any increase in base salary will automatically amend each executive’s respective employment agreement to provide that thereafter the executive’s annual base salary will not be less than the increased base salary approved by the Board. During the term of his or her employment by us, each officer will devote the time necessary to provide the services reasonably required by the Board and will not, without the express approval of the Board, engage for his or her own account or for the account of any other person or entity, in a business which competes with us.

The employment agreements contain standard provisions regarding bonuses and benefits, as described in the CD&A section of this proxy statement. Additionally, the employment agreements with the named executive officers provide payments for severance upon termination of employment, including in connection with a change in control, as described under “Severance and Other Benefits Upon Termination of Employment or Change in Control” on page 38 of this proxy statement and under “Potential Payments Upon Termination or Change in Control” on page 43 below.

Grants of Plan-Based Awards

The following table presents information regarding plan-based awards made in 2020 and as of December 31, 2020 to the named executive officers and is intended to supplement the summary compensation table above:

All Other

 

Estimated Possible

Stock

Grant Date

 

 Estimated Possible Payouts Under

Payouts Under Equity

Awards:

Fair Value

 

Grant

Grant

Non-Equity Incentive Plan Awards

Incentive Plan Awards

Number

of Stock

 

Named Executive Officer

Date

Type

 

Threshold

 

Target

 

Max

  

Threshold

  

Target

  

Max

 

of RSAs

Awards

 

Wendy L. Simpson

  

2/18/20

(1)  

RSA

$

 

$

 

$

  

  

  

  

25,536

$

1,250,000

 

2/18/20

(2)  

MSU

 

 

 

 

12,505

 

25,010

 

50,020

 

 

1,250,000

 

(3)  

 

726,563

 

968,750

 

1,695,313

 

 

 

 

 

Pamela J. Shelley-Kessler

 

2/18/20

(1)  

RSA

 

 

 

 

 

 

 

 

12,462

 

610,000

 

2/18/20

(2)  

MSU

 

 

 

 

6,103

 

12,205

 

24,410

 

 

610,000

 

(3)  

 

320,625

 

427,500

 

748,125

 

 

 

 

 

Clint B. Malin

 

2/18/20

(1)  

RSA

 

 

 

 

 

 

 

12,462

 

610,000

 

2/18/20

(2)  

MSU

 

 

 

 

6,103

 

12,205

 

24,410

 

 

610,000

 

(3)  

 

320,625

 

427,500

 

748,125

 

 

 

 

 

(1)

Restricted stock awards were granted under the 2015 Equity Participation Plan and vest ratably over a three-year period from the grant date.

(2)

Performance-based market stock unit awards were granted under our 2015 Equity Participation Plan, to be earned based on our absolute TSR performance over a 4-year period starting on the grant date (with an opportunity for an early payout after 3 years). Threshold amounts shown are 50% of the MSUs granted, target amounts are 100% of the MSUs granted, and maximum amounts are 200% of the MSUs granted. No MSUs are earned for performance below threshold.

(3)

The amounts shown represents bonus opportunities for 2020 performance under the Annual Cash Bonus Incentive Plan as approved by the Compensation Committee on February 18, 2020. The actual amount awarded was based on the achievement of certain performance measures as described under “Annual Cash Bonus Incentive Plan” on page 34 of this proxy statement. The awards earned for such performance in 2020 were granted on February 11, 2021 as shown in the “Non-Equity Incentive Plan Compensation” column of the summary compensation table on page 39.

41


Outstanding Equity Awards at Year-End

The following table presents information regarding the outstanding equity awards held by the named executive officers as of December 31, 2020: