PRER 14A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by
the Registrant
x
Filed by
a Party other than the Registrant
o
Check the appropriate box:
x Preliminary proxy statement
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
o Definitive proxy statement
o Definitive Additional Materials
o Soliciting Material pursuant to § 240.14a-12
Advocat Inc.
(Name of Registrant as Specified In Its charter)
(Name of Person(s) Filing proxy statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
x No fee required.
o Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Title of each class of securities to which transaction applies: |
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Aggregate number of securities to which transaction applies: |
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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): |
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Proposed maximum aggregate value of transaction: |
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Fee paid previously with preliminary materials. |
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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. |
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Amount Previously Paid: |
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Form, Schedule or Registration Statement No.: |
ADVOCAT INC.
1621 Galleria Boulevard
Brentwood, Tennessee 37027
Dear
Fellow Shareholder:
You are cordially invited to attend the 2009 annual meeting of shareholders of Advocat Inc.
(the Company), to be held at the Companys offices, 1621 Galleria Boulevard, Brentwood, Tennessee
37027 on May 29, 2009, at 9:00 a.m. (Central Daylight Time).
The attached notice of annual meeting and proxy statement describe the formal business to be
transacted at the meeting. Following the formal business portion of the annual meeting, there will
be a report on the operations of the Company and shareholders will be given the opportunity to ask
questions. At your earliest convenience, please vote using the telephone or Internet voting
instructions found on the enclosed proxy card or mark, sign and return the accompanying proxy card
in the enclosed postage pre-paid envelope. We hope you will be able to attend the annual meeting.
Whether or not you plan to attend the annual meeting, please vote using the telephone or
Internet voting instructions found on the enclosed proxy card or complete, sign, date and mail the
enclosed proxy card promptly. If you attend the annual meeting, you may revoke such proxy and vote
in person if you wish, even if you have previously returned your proxy card. If you do not attend
the annual meeting, you may still revoke such proxy at any time prior to the annual meeting by
providing written notice of such revocation to L. Glynn Riddle, Jr., Chief Financial Officer and
Secretary of the Company. YOUR PROMPT COOPERATION WILL BE GREATLY APPRECIATED.
William R. Council, III
Chief Executive Officer
Brentwood, Tennessee
May ___, 2009
ADVOCAT INC.
1621 Galleria Boulevard
Brentwood, Tennessee 37027
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of Advocat Inc.:
The annual meeting of shareholders of Advocat Inc., a Delaware corporation (the Company),
will be held at the Companys offices, 1621 Galleria Boulevard, Brentwood, Tennessee 37027 on
Friday, May 29, 2009, at 9:00 a.m. (Central Daylight Time) for the following purposes:
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To elect two (2) Class 3 directors, to hold office for a three (3) year term
and until their successors have been duly elected and qualified; |
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To transact such other business as may properly come before the meeting, or any
adjournment or postponement thereof. |
The proxy statement and form of proxy accompanying this notice are being mailed to
shareholders on or about May ___, 2009. Only shareholders of record at the close of business on
April 15, 2009, are entitled to notice of and to vote at the meeting and any adjournment thereof.
Your attention is directed to the proxy statement accompanying this notice for a more complete
statement regarding the matters to be acted upon at the meeting.
We hope very much that you will be able to be with us. The Companys Board of Directors urges
all shareholders of record to exercise their right to vote at the annual meeting of shareholders
personally or by proxy. Accordingly, we are sending you the accompanying proxy statement and the
enclosed proxy card.
Your representation at the annual meeting of shareholders is important. To ensure your
representation, whether or not you plan to attend the annual meeting, please vote using the
telephone or Internet voting instructions found on the enclosed proxy card or complete, date, sign
and return the enclosed proxy card in the postage-paid envelope
provided. Should you desire to revoke your proxy, you may do so at any
time before it is voted in the manner provided in the accompanying proxy statement.
If
you have any questions or require any assistance with voting your
shares, please contact D.F. King & Co., Inc.
Shareholders
call toll free: (800) 628-8536
Banks and Brokers call collect: (212) 269-5550
By Order of the Board of Directors,
L. Glynn Riddle, Jr., Secretary
Brentwood, Tennessee
May ___, 2009
TABLE OF CONTENTS
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A-1 |
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ADVOCAT INC.
1621 Galleria Boulevard
Brentwood, Tennessee 37027
Revised
Preliminary Proxy, Subject to Completion dated May 4, 2009
PROXY STATEMENT
The Board of Directors is soliciting proxies for this years annual meeting of shareholders.
This proxy statement contains important information for you to consider when deciding how to vote
on matters brought before the meeting. Please read it carefully.
The Board has set April 15, 2009 as the record date for the meeting. Shareholders who owned
Advocat Inc. common stock on that date are entitled to receive notice of and vote at the meeting.
On the record date there were 5,675,987 shares of Advocat common stock outstanding. Holders of the
Companys common stock are entitled to one vote per share owned of record. Cumulative voting is
not permitted. The Company has 5,000 shares of Series C Redeemable Preferred Stock outstanding,
but such preferred stock is not entitled to vote at the annual meeting of shareholders. The
Company has the authority to issue additional shares of preferred stock in one or more series,
although no additional series of preferred stock has been issued.
This proxy statement and enclosed proxy were initially mailed or delivered to shareholders on
or about May ___, 2009. The Companys Annual Report for the fiscal year ended December 31, 2008,
is being concurrently mailed or delivered with this proxy statement to shareholders entitled to
vote at the annual meeting. The Annual Report is not to be regarded as proxy soliciting material.
In addition, this proxy statement and the Annual Report are available on our website at
www.irinfo.com/AVC.
Why am I receiving this proxy statement and proxy form?
You are receiving this proxy statement and proxy form because you own shares of Advocat common
stock. This proxy statement describes issues on which you are entitled to vote. If your shares
are registered in your name with Advocats transfer agent, you are considered to be the owner of
record of those shares and these proxy materials are being sent to you directly. When you sign the
proxy form, you appoint William R. Council III, the Companys Chief Executive Officer and L. Glynn
Riddle, Jr., the Companys Chief Financial Officer and Secretary, as your representative at the
meeting. Mr. Council and Mr. Riddle will vote your shares at the meeting as you have instructed on
the proxy form. This way, your shares will be voted even if you cannot attend the meeting.
If your shares are not voted in person or by telephone or on the Internet, they cannot be
voted on your behalf unless you provide our corporate secretary with a signed proxy authorizing
another person to vote on your behalf. Even if you expect to attend the meeting in person, in
order to ensure that your shares are represented, please vote using the telephone or Internet
voting instructions found on the enclosed proxy card or complete, sign and date the enclosed proxy
form and return it promptly.
If your shares are held in a brokerage account or in the name of another nominee, you are
considered the beneficial owner of shares held in street name, and these proxy materials are being
forwarded to you together with a voting instruction form. As the beneficial owner, you have the
right to direct your broker, trustee or nominee how to vote your shares. Since a beneficial owner
is not the owner of record, you may not vote these shares in person at the meeting unless you
obtain a legal proxy from the broker, trustee or nominee that holds your shares, giving you the
right to vote the shares at the annual meeting. Your broker, trustee or nominee has enclosed or
provided voting instructions for you to use in directing the broker, trustee or nominee how to vote
your shares.
1
Who is soliciting my proxy and who is paying the cost of the solicitation?
The
Companys Board of Directors is sending you this proxy statement in connection with its
solicitation of proxies for use at the 2009 annual meeting.
The Company will pay for the costs of solicitation.
Although no precise estimate can be made at this time, we anticipate that the aggregate amount we will
spend in connection with the solicitation of proxies will be
$175,000 (exclusive of costs we would
ordinarily expend in solicitation of proxies in the absence of an election contest and salaries and expenses
of our officers, directors and employees). To date, approximately $33,000 has been incurred. The Company will
conduct the solicitation by mail, personally, telephonically, through the Internet or by facsimile through its
officers, directors and employees identified on Appendix A, none of whom will receive additional
compensation for assisting with the solicitation. The Company may also solicit shareholders through press
releases issued by the Company, advertisements in periodicals and
postings on the Companys website. Advocat has decided to engage D.F. King & Co., Inc. to assist in
the solicitation of proxies on behalf of the Board of Directors. We expect to pay D.F. King a
customary fee of approximately $50,000
to $100,000 for its assistance
(which amount is included in the estimate above). D.F. King expects
that approximately 30 of its employees will assist in the
solicitation.
We do not expect to pay any other compensation for the solicitation of proxies, except to brokers, nominees and similar recordholders
for reasonable expenses in mailing proxy materials to beneficial owners of Advocat common stock.
What am I voting on?
At the annual meeting you will be asked to vote on the election of two Class 3 Directors to
serve a three year term on the Companys Board of Directors.
Who is entitled to vote?
Only shareholders who owned Advocat Inc. common stock as of the close of business on the
record date, April 15, 2009, are entitled to receive notice of the annual meeting and to vote the
shares that they held on that date at the meeting, or at any postponement or adjournment of the
meeting.
How do I vote?
You may vote your shares either in person at the annual meeting, by telephone or on the
Internet or by proxy. To vote by proxy, you should mark, date, sign and mail the enclosed proxy in
the prepaid envelope provided. Instructions for voting on the Internet or by telephone may be
found in the Proxy Voting Instructions accompanying the Proxy Card. If your shares are registered
in your own name and you attend the meeting, you may deliver your completed proxy in person.
Street name shareholders, that is, those shareholders whose shares are held in the name of and
through a broker or nominee, who wish to vote at the meeting will need to obtain a proxy form from
the institution that holds their shares if they did not receive one directly. Shares held in
street name may also be eligible for Internet or telephone voting in certain circumstances if you
did not receive a proxy form directly.
Can I change my vote after I return my proxy form?
Yes. You may revoke your proxy and change your vote at any time before the proxy is exercised
by filing with Mr. Riddle, either a written notice of revocation or another signed proxy bearing a
later date. The powers of the proxy holders will be suspended if you attend the meeting in person
and inform the corporate secretary that you wish to revoke or replace your proxy. Your attendance
at the meeting will not by itself revoke a previously granted proxy. If you hold your shares in
street name through a broker, bank or other nominee, you may revoke your proxy by following
instructions provided by your broker, bank or nominee. No notice of revocation or later-dated
proxy will be effective until received by Mr. Riddle at or prior to the annual meeting.
What is the Boards recommendation and how will my shares be voted?
The Board recommends a vote FOR the election of the nominated Class 3 directors listed in this
proxy statement under Proposal No. 1. If properly signed and returned in time for the annual
meeting, the enclosed proxy will be voted in accordance with the choices specified thereon. If
any other matters are properly considered at the meeting, Mr. Council and
2
Mr. Riddle will vote as recommended by the Board of Directors on such matters, or if the Board
does not give a recommendation, Mr. Council and Mr. Riddle will have discretion to vote as they
think best on such matters, in each case to the extent permitted under the Federal Securities Laws.
If you return a signed proxy, but do not specify a choice, Mr. Council and Mr. Riddle, as the
persons named as the proxy holder on the proxy form, will vote as recommended by the Board of
Directors. If a broker submits a proxy that indicates that the broker does not have discretionary
authority as to certain shares to vote on one or more matters, those shares will be counted as
shares that are present for purposes of determining the presence of a quorum but will not be
considered as present and entitled to vote with respect to such matters. Abstentions will be
counted as shares that are present for purposes of determining the presence of a quorum and are
counted in the tabulations of votes cast on proposals presented to shareholders. Each proposal is
tabulated separately.
On March 17, 2009, the Company received a letter (the Bristol Letter) from Bristol
Investment Fund Ltd. (Bristol) notifying the Company of its intent to nominate two (2) nominees
for election to the Board of Directors of the Company at the 2009 annual meeting (the Bristol
Nominees). Bristol has contacted management of the Company several times over the past few years
to discuss the Companys performance. In December 2007, Bristol made a shareholder proposal
pursuant to Rule 14a-8 for the 2008 annual meeting, but failed to appear at that annual meeting to
present the proposal. In addition, in April 2008, the Company received notice of Bristols intent
to nominate two director nominees for the 2008 annual meeting, but Bristol later withdrew those
nominees. Following receipt of the Bristol Letter in March 2009, the Chief Executive Officer and
two other directors, including the chairman of the nominating
committee, had telephone conversations
with Paul Kessler of Bristol regarding his request to be added to the Board of Directors. On April
10, 2009, Bristol filed a preliminary proxy indicating that it would seek proxies for its nominees.
The Bristol Nominees are not endorsed by our Board of Directors. We urge stockholders NOT to
vote any proxy card that you may receive from Bristol. Our Board of Directors urges you to vote FOR
BOTH of our nominees for director: William R. Council, III and Richard M. Brame.
We are not responsible for the accuracy of any information provided by or relating to Bristol
contained in any proxy solicitation materials filed or disseminated by, or on behalf of, Bristol or
any other statements that Bristol may otherwise make. Bristol will choose which shareholders
receive their proxy solicitation materials.
Will my shares be voted if I do not sign and return my proxy form?
If your shares are registered in your name and you do not return your proxy form or do not
vote in person at the annual meeting, your shares will not be voted. If your shares are held in
street name and you do not submit voting instructions to your broker, your broker may vote your
shares for you. Brokers normally have discretion to vote on routine matters, such as uncontested director
elections, but not on non-routine matters, such as contested director elections or stockholder
proposals. If Bristol solicits proxies for the election of directors at the annual meeting, the
election of directors at the annual meeting will be considered contested, and your broker will not
vote your street name shares without instructions.
How many votes are needed to hold the annual meeting?
The Company currently has a total of 5,675,987 shares of outstanding common stock. A majority
of the Companys outstanding shares as of the record date (a quorum) must be present at the annual
meeting in order to hold the meeting and conduct business. Shares are counted as present at the
meeting if: (a) a shareholder is present and votes in person at the meeting; (b) a shareholder has
properly submitted a proxy form, even if the shareholder marks abstentions on the proxy form; or
(c) a broker or nominee has properly submitted a proxy form, even if the broker does not vote
because the beneficial owner of the shares has not given the broker or nominee specific voting
instructions and the broker or nominee does not have voting discretion (a broker non-vote). A
share, once represented for any purpose at the meeting, is deemed present for purposes of
determining a quorum for the meeting (unless the meeting is adjourned and a new record date is set
for the adjourned meeting), even if the holder of the share abstains from voting with respect to
any matter brought before the meeting.
What vote is required to adopt the Proposals?
The nominees for director who receive the highest number of FOR votes cast will be elected.
Withheld votes and broker non-votes, if any, are not treated as votes cast and, therefore, will
have no effect on the proposal to elect directors.
Can I vote on other matters or submit a proposal to be considered at the meeting?
The Company has not received timely notice of any other shareholder proposals pursuant to Rule
14a-8 under the Securities Exchange Act of 1934 to be considered at the annual meeting.
Shareholders may submit matters for a vote without inclusion in this proxy statement only in
accordance with Rule 14a-4(c) or the Companys bylaws. The Board of Directors has received notice
from Bristol that it may solicit proxies for an alternate slate of directors. In that event,
you may receive a separate proxy solicitation from Bristol. OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF ALL OF THE BOARDS
NOMINEES ON THE ENCLOSED PROXY CARD AND URGES YOU NOT TO SIGN OR RETURN ANY PROXY CARD SENT TO YOU
BY BRISTOL. The Company does not intend to present any other business
at the annual meeting and does not know of any other business
intended to be presented other than as discussed or referred to in
this proxy statement (the date specified in the Companys bylaws
for advance notice of proposals by stockholders has passed). If any
other matters properly come before the annual meeting, the persons
named in the accompanying proxy card will vote the shares represented
by the proxy in the manner as the Board of Directors may recommend,
or in their discretion.
3
It is contemplated that the Companys 2010 annual meeting of shareholders will take place in
June 2010. Shareholders proposals will be eligible for consideration for inclusion in the proxy
statement for the 2010 annual meeting pursuant to Rule 14a-8 if such proposals are received by the
Company before the close of business on December 30, 2009. Notices of shareholders proposals
submitted outside the processes of Rule 14a-8 will generally be considered timely (but not
considered for inclusion in our proxy statement), pursuant to the advance notice requirement set
forth in Rule 14a-4(c). For shareholders seeking to present a proposal at the 2010 annual meeting
without inclusion of such proposal in the Companys proxy materials, the proposal should be
received by the Company no later than March 15, 2010.
Are there any dissenters rights or appraisal rights with respect to any of proposals
described in this proxy statement?
There are no appraisal or similar rights of dissenters with respect to the matters to be voted
upon.
How do I communicate with directors?
The Board has established a process for shareholders to send communications to the Board or
any of the directors. Shareholders may send communications to the Board or any of the directors by
sending such communication addressed to the Board of Directors or any individual director c/o
Advocat Inc., 1621 Galleria Boulevard, Brentwood, Tennessee 37027. All communications will be
compiled and submitted to the Board or the individual directors on a monthly basis.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
How much stock do the Companys directors, executive officers, and principal shareholders own?
Advocat is authorized to issue 20,000,000 shares of common stock and 1,000,000 shares of
preferred stock. As of April 15, 2009, there were 5,675,987 shares of common stock and 5,000 shares
of Series C Preferred Stock outstanding. The following table shows, as of April 15, 2009, the
amount of Advocat common stock beneficially owned (unless otherwise indicated) by (a) each director
and director nominee; (b) the Named Executive Officers (as defined in Executive Compensation,
below); (c) all of the Companys directors and Named Executive Officers as a group and (d) all
shareholders known by the Company to be the beneficial owners of more than 5% of the outstanding
shares of Advocat common stock. Based on information furnished by the owners and except as
otherwise noted, the Company believes that the beneficial owners of the shares listed below, have,
or share with a spouse, voting and investment power with respect to the shares. The address for
all of the persons listed below is 1621 Galleria Boulevard, Brentwood, Tennessee 37027, except as
otherwise listed in the table below.
4
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Shares Beneficially Owned (1) |
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Chad A. McCurdy (3) |
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632,300 |
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11.1 |
% |
1621 Galleria Blvd.
Brentwood, TN 37027 |
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Wallace E. Olson (4) |
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555,199 |
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9.8 |
% |
1621 Galleria Blvd.
Brentwood, TN 37027 |
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Ameriprise Financial, Inc. (5) |
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491,400 |
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8.7 |
% |
RiverSource Investments, LLC
c/o Ameriprise Financial, Inc.
145 Ameriprise Financial Center
Minneapolis, MN 55474 |
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Altrinsic Global Advisors, LLC (6) |
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435,000 |
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7.7 |
% |
100 First Stamford Place, 6th Floor
Stamford, CT 06902 |
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Bristol Investment Fund, LTD (7) |
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393,450 |
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6.9 |
% |
c/o Bristol Capital Advisors, LLC
10990 Wilshire Blvd., Suite 1410
Los Angeles, CA 90024 |
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FMR LLC (8) |
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345,254 |
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6.1 |
% |
82 Devonshire St.
Boston, MA 02109 |
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Wellington Management Company, LLP (9) |
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315,248 |
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5.6 |
% |
75 State Street
Boston, MA 02109 |
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William R. Council, III (10) |
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180,219 |
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3.1 |
% |
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William C. ONeil, Jr. (11) |
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26,999 |
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* |
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Richard M. Brame (12) |
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29,999 |
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* |
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Robert Z. Hensley (13) |
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21,999 |
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* |
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Raymond L. Tyler, Jr. (14) |
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68,230 |
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1.2 |
% |
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L. Glynn Riddle, Jr. (15) |
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74,949 |
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1.3 |
% |
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All directors and executive officers as a group (8 persons) (16) |
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1,589,894 |
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26.5 |
% |
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* less than 1% |
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5
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(1) |
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Unless otherwise indicated, the persons or entities identified in this table have sole voting and
investment power with respect to all shares shown as beneficially owned by them, subject to community property
laws, where applicable. |
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The percentages shown are based on 5,675,987 shares of common stock outstanding plus, as to each
individual and group listed, the number of shares of common stock deemed to be owned by such holder pursuant to
Rule 13d-3 under the Exchange Act, assuming exercise of options or SOSARs held by such holder that are exercisable
within 60 days of April 15, 2009. |
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Mr. McCurdys shares include 1,000 shares owned by his child and 567,100 owned by Marlin Capital
Partners, LLC of which Mr. McCurdy is the Managing Partner. Includes 10,000 shares purchasable upon exercise of
options. |
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Mr. Olsons shares include 1,300 shares owned jointly with his daughter and 548,900 owned by a
partnership controlled by Mr. Olson. Includes 4,999 shares purchasable upon exercise of options and SOSARs. |
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(5) |
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Based solely on a Schedule 13G filed by Ameriprise Financial, Inc. and RiverSource Investments, LLC
on February 12, 2009. |
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(6) |
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Based solely on a Schedule 13G/A filed by Altrinsic Global Advisors, LLC on February 10, 2009. |
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(7) |
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Based solely on a
Preliminary Proxy statement filed by Bristol Investment Fund, LTD on
April 10,
2009. |
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(8) |
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Based solely on a Schedule 13G filed by FMR LLC on February 17, 2009. |
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(9) |
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Based solely on a Schedule 13G filed by Wellington Management Company, LLP on February 17, 2009. |
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(10) |
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Includes 149,999 shares purchasable upon exercise of options and SOSARs. Ownership does not
include 12,802 Restricted Share Units purchased on March 13, 2009 in lieu of cash bonus. Restricted Share Units
will be converted to shares and delivered on March 13, 2011. |
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(11) |
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Includes 21,999 shares purchasable upon exercise of options and SOSARs. |
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(12) |
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Includes 3,999 shares purchasable upon exercise of options and SOSARs. |
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(13) |
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Includes 15,999 shares purchasable upon exercise of options and SOSARs. |
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(14) |
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Includes 65,000 shares purchasable upon exercise of options and SOSARs. Ownership does not include
4,831 Restricted Share Units purchased on March 13, 2009 in lieu of cash bonus. Restricted Share Units will be
converted to shares and delivered on March 13, 2011. |
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(15) |
|
Includes 59,999 shares purchasable upon exercise of options and SOSARs. Ownership does not
include 6,039 Restricted Share Units purchased on March 13, 2009 in lieu of cash bonus. Restricted Share Units
will be converted to shares and delivered on March 13, 2011. |
|
(16) |
|
Includes 331,994 shares purchasable upon exercise of options and SOSARs. |
6
PROPOSAL 1
ELECTION OF DIRECTORS
How many directors are nominated?
The Companys certificate of incorporation provides that the number of directors to be elected
by the shareholders shall be at least three and not more than 15, as established by the Board of
Directors from time to time. The number of directors is currently set at six.
The certificate of incorporation requires that the Companys Board of Directors be divided
into three classes which are as nearly equal in number as possible. The directors in each class
will serve staggered three-year terms or until a successor is elected and qualified. Class 3
directors, if reelected, will serve until the 2012 annual meeting; Class 1 directors are currently
serving until the 2010 annual meeting and the Class 2 directors will serve until the 2011 annual
meeting.
What happens if a nominee refuses or is unable to stand for election?
The Board may reduce the number of seats on the Board or designate a replacement nominee. If
the Board designates a replacement nominee, we will file and deliver an amended proxy statement that, (1) identifies the replacement nominee,
(2) discloses that such nominee has consented to being named in the revised proxy statement and
to serve if elected and (3) includes the information with respect to the replacement nominee that
is required to be disclosed by the Securities and Exchange Commissions proxy solicitation rules of
the Exchange Act. Only after such supplemental disclosure will the shares represented by proxy be
voted FOR the replacement nominee. The Board presently has no knowledge that any nominee will refuse, or be
unable, to serve.
Must director nominees attend our annual meeting?
It is the Companys policy that all of its directors attend the annual meeting if possible.
All directors attended the 2008 annual meeting of shareholders. All directors and nominees are
expected to be in attendance at the 2009 meeting.
Who are the Board nominees?
Information regarding the nominees is provided below, including name, age, principal
occupation during the past five years, the year first elected as a director of Advocat and the
expiration date of such directors term. Each of the Class 3 nominees for director is presently a
director of the Company.
The following directors have been nominated to continue in office for a new term or until the
election and qualification of his respective successors in office:
Information about Class 3 Director Nominees - Current Term Ending 2009
|
|
|
|
|
|
|
|
|
Name of Nominees |
|
Age |
|
Director Since |
|
Principal Occupation Last Five Years |
|
William R. Council, III |
|
|
47 |
|
|
October 2002
|
|
Member of the Board of Directors of
the Company since 2002; President
and Chief Executive Officer from
March 2003 to present; Interim
Chief Executive Officer from
October 2002 to March 2003;
Executive Vice President, Chief
Financial Officer and Secretary of
the Company from March 2001 to
December 2002. Mr. Council is a
Certified Public Accountant. |
7
|
|
|
|
|
|
|
|
|
Richard M. Brame |
|
|
55 |
|
|
December 2002
|
|
Member of the Board of Directors of
the Company since December 2002;
Chief Financial Officer of
Covington Senior Living, LLC,
Atlanta, GA. President of Regency
Health Management, LLC from July
1999 to March 2008; President of
Regency Healthcare, LLC from 2006
to March 2008; President of
Ooltewah Investments, Inc. from
1992 to 2006. President of the
General Partner of San Angelo
Nursing Center, LP from October
2001 to March 2005. |
Who are the Continuing Directors?
The following directors will continue in office for the remainder of their respective terms or
until the election and qualification of their respective successors in office:
Information
About Class 1 Continuing Directors - Current Term Ending 2010
|
|
|
|
|
|
|
|
|
Name of Directors |
|
Age |
|
Director Since |
|
Principal Occupation Last Five Years |
|
William C. ONeil, Jr.
|
|
|
74 |
|
|
Inception
|
|
Member of the Board of Directors of
the Company since 1994; Private
Investor; director of Healthways, Inc. a
specialty health care service
company; director of American
HomePatient, Inc., a provider of
home health care products and
services. |
|
|
|
|
|
|
|
|
|
Robert Z. Hensley |
|
|
51 |
|
|
July 2005
|
|
Member of the Board of Directors of
the Company since July 2005;
director, Capella Healthcare Inc.
from January 2009 to present;
Senior Advisor to Alvarez & Marsal
Transaction Advisory Group from
June 2008 to present; A Founder of
Lifes A Beach Publications LLC, a
private publishing company, from
2003 to present; Managing member
and principal owner of two real
estate and rental property
development companies from 2001 to
present; Currently a director of
HealthSpring, Inc., Spheris, Inc.
and Comsys IT Partners, Inc.; Audit
Partner at Ernst & Young, LLP from
July 2002 to September 2003; Audit
Partner at Arthur Andersen, LLP
from 1990 to 2002; Managing Partner
at Arthur Andersen, LLP from 1997
to 2002. Mr. Hensley holds a
Master of Accountancy degree, a BS
in Accounting and is a Certified
Public Accountant. |
8
Information About Class 2 Continuing Directors - Current Term Ending 2011
|
|
|
|
|
|
|
|
|
Name of Director |
|
Age |
|
Director Since |
|
Principal Occupation Last Five Years |
|
Wallace E. Olson
|
|
|
62 |
|
|
March 2002
|
|
Chairman of the Board of Directors
of the Company from October 2002 to
present; Member of the Board of
Directors of the Company since
March 2002. He has been a private
investor, managing his personal
finances, since May 1996. |
|
|
|
|
|
|
|
|
|
Chad A. McCurdy
|
|
|
40 |
|
|
March 2008
|
|
Member of the Board of Directors of
the Company since March 2008;
Managing Partner of Marlin Capital
Partners, LLC from 2004 to present;
Broker with First Dallas Securities
from 2003 through 2004. Mr. McCurdy is a graduate
of Southern Methodist University,
Cox School of Business. |
|
Is the Board independent?
The Board of Directors has determined that five of the Companys current six directors, i.e.,
all of the non-management directors, are independent as NASDAQ defines independence under NASDAQ
Rule 4200(a)(15). The Companys non-management directors meet in executive sessions, without
management present, on a regular basis.
What committees has the Board established?
The Board of Directors has established an audit committee, a compensation committee and a
nominating and corporate governance committee.
Nominating and Corporate Governance Committee. The nominating and corporate governance committee, which considers director nominations, was
established during 2006. The entire Board has adopted Corporate Governance Guidelines, which
include guidelines on the composition, selection and performance of the Board and a nominating and
corporate governance committee charter. The Companys Corporate Governance Guidelines and
nominating and corporate governance committee charter are posted on the Companys website at
www.irinfo.com/AVC.
The nominating and corporate governance committee believes that any nominee that it recommends
for a position on the Companys Board of Directors must possess high standards of personal and
professional integrity, and have demonstrated business judgment and such other characteristics as
it deems appropriate to demonstrate that he or she would be effective, in conjunction with the
other directors and nominees for director, in serving the best interest of the Companys
shareholders. The nominating and corporate governance committees assessment of existing directors
and new director nominees includes issues of diversity, age, contribution to the meetings, the
ability to work with other directors and skills such as understanding of long-term health care,
health care background, and the perceived needs of the Board at that point in time. The nominating
and corporate governance committee may solicit recommendations for director nominees from other
directors, the Companys executive officers or any other source that it deems appropriate. To
evaluate any potential nominee, the nominating and corporate governance committee will review and
evaluate the qualifications of any proposed director candidate and conduct inquiries into his or
her background to the extent that it deems appropriate under the circumstances.
9
The nominating and corporate governance committee will review and evaluate the qualifications
of any director candidates who have been recommended by shareholders of the Company in compliance
with policies described above. Any shareholder submitting a recommendation for a director candidate
must submit it to the secretary at the Companys corporate headquarters not later than the
120th calendar day before the date the Companys proxy statement was released to
shareholders in connection with the previous years annual meeting. The secretary of the Company
will forward all recommendations to the nominating and corporate governance committee. The
shareholders recommendation must include information about the shareholder making the
recommendation and about the proposed director candidate. All proposed director candidates will be
evaluated in the same manner, regardless of the source of the initial recommendation.
The nominating and corporate governance committee is composed of Mr. Hensley as chairman, Mr.
Olson and Mr. McCurdy. The Board believes that each member of the nominating and corporate
governance committee is independent under the NASDAQ rules. The nominating and corporate
governance committee held five meetings during 2008, three of which were telephonic meetings.
Audit Committee. The Company has a separately designated standing audit committee that is
established in accordance with Section 3(a)(58)(A) of the Exchange Act. The audit committee
supervises matters relating to the audit function, reviews the Companys quarterly reports, and
reviews and approves the annual report of the Companys independent registered public accounting
firm. The audit committee also has oversight with respect to the Companys financial reporting,
including the annual and other reports to the Securities and Exchange Commission and the annual
report to the shareholders. The audit committee is composed of Mr. ONeil as chairman, Mr. Brame,
Mr. Hensley and Mr. McCurdy. The Board of Directors in its business judgment, has determined that
all members of the audit committee are independent directors, qualified to serve on the audit
committee pursuant to Rule 4200(a)(15) under NASDAQs Rule 4350(d)(2)(A) regarding heightened
independence standards for audit committee members. The Board has determined that Mr. Hensley
qualifies as an audit committee financial expert as described in Regulation S-K Item 407(d).
There were four meetings of the audit committee during 2008. The audit committee has adopted a
written charter, a copy of which is posted on our web site at
www.irinfo.com/AVC.
Compensation Committee. The compensation committee presently is composed of Mr. Brame as
chairman, Mr. ONeil and Mr. Olson. The Board believes that each member of the compensation
committee is independent under the NASDAQ rules. Responsibilities of this committee include
approval of remuneration arrangements for executive officers of the Company, review of compensation
plans relating to executive officers and directors, including benefits under the Companys
compensation plans and general review of the Companys employee compensation policies. The
compensation committee has adopted a written charter, a copy of which is posted on our website at
www.irinfo.com/AVC. During 2008, the compensation committee held three meetings, one of which was
telephonic.
How often did the Board of Directors meet during 2008?
During fiscal 2008, the Board of Directors held fifteen meetings, ten of which were
telephonic. Each director attended at least 75% of the aggregate of (i) the total number of
meetings of the Board of Directors and (ii) the total number of meetings held by all committees on
which the individual director served.
10
How are directors compensated?
For the period of January 1, 2008 through June 30, 2008, directors who are not officers,
employees or consultants of the Company (currently directors Brame, Hensley, McCurdy, ONeil and
Olson) received a directors fee of $36,000 annually, $3,500 per board meeting attended in person,
$1,000 per committee meeting attended (except when held on the same day as board meetings), and
$500 per telephonic meeting. The Chairmen of the Board, audit committee, compensation committee
and nominating and corporate governance committee were paid $2,500 per meeting for serving as
meeting chairperson. Such directors are also entitled to participate in the Companys health care
plan. Directors who are officers or employees of the Company or its affiliates have not been
compensated separately for services as a director. Directors are reimbursed for expenses incurred
in connection with attendance at board and committee meetings.
On June 3, 2008, the Board of Directors approved the restructuring of the directors plan of
compensation. Effective July 1, 2008, the fees for directors who are not officers, employees or
consultants of the Company (currently directors Brame, Hensley, McCurdy, ONeil and Olson) receive
a directors fee of $30,000 annually; $2,500 per board meeting attended, and $2,000 for each
planned committee meeting. The audit committee has four planned meetings each year, and the
nominating and corporate governance committee and the compensation committee each have two planned
meetings during the year. Board and Committee Chair annual retainers consist of $20,000 for the
Board Chair, $15,000 for the Audit Chair, and $7,500 each for the Nominating and Corporate
Governance Chair and the Compensation Chair paid quarterly. Additional telephonic Board and
committee meetings and non-planned committee meetings on the day of other meetings are paid at $500
each.
On March 9, 2009, Mr. McCurdy received a grant of a non-qualified stock option to purchase
15,000 shares of common stock at an exercise price of $10.80 per share. Mr. McCurdys award
represents the initial option grant that is typically awarded to new directors as they join the
Board. The award was priced based on the share price as of March 12, 2008, the date Mr. McCurdy
joined the board, and vests 1/3 on date of grant, 1/3 on March 12, 2009, and 1/3 on March 12, 2010,
consistent with the vesting pattern of previous initial director grants. In addition to Mr.
McCurdys grant, each non-employee director received a grant of stock only stock appreciation
rights (SOSARs) on March 13, 2009 for 1,000 shares at a base value of $2.37 per share. The
SOSARs vest one-third on each of the first, second and third anniversaries of the grant date.
These grants were made in 2009 and therefore are not included in the table below.
The following table shows the amounts paid to each of our non-employee directors during 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Employee Director Compensation |
|
|
For the Year Ended December 31, 2008 |
|
|
Fees Earned or Paid in Cash |
|
|
|
|
|
|
|
|
Regular |
|
Supplemental |
|
Option |
|
All Other |
|
|
Director |
|
Fees
($)(1) |
|
Fees
($)(2) |
|
Awards
($)(7) |
|
Compensation
($)(8) |
|
Total
($) |
Wallace E. Olson |
|
|
33,000 |
|
|
|
44,000 |
(3) |
|
|
7,790 |
|
|
|
12,103 |
|
|
|
96,893 |
|
William C. ONeil, Jr. |
|
|
33,000 |
|
|
|
42,500 |
(4) |
|
|
7,790 |
|
|
|
- |
|
|
|
83,290 |
|
Richard M. Brame |
|
|
33,000 |
|
|
|
36,250 |
(5) |
|
|
7,790 |
|
|
|
- |
|
|
|
77,040 |
|
Robert Z. Hensley |
|
|
33,000 |
|
|
|
36,750 |
(6) |
|
|
7,790 |
|
|
|
- |
|
|
|
77,540 |
|
Chad A. McCurdy(9) |
|
|
24,000 |
|
|
|
27,500 |
|
|
|
- |
|
|
|
- |
|
|
|
51,500 |
|
|
|
|
(1) |
|
Regular fees represent an annual directors fee of $36,000 paid to directors who
are not officers, employees, or consultants of the Company for the period from January 1
through June 30, 2008. Effective July 1, 2008 the Board restructured the compensation fee
schedule and this amount change to $30,000 annually. |
|
(2) |
|
Supplemental fees are paid to directors for attendance at board meetings and
committee meetings. |
|
(3) |
|
Mr. Olson received $15,000 for serving as Chair of the Board meetings. |
|
(4) |
|
Mr. ONeil received $12,500 for serving as Chair of the audit committee meetings. |
11
|
|
|
(5) |
|
Mr. Brame received $6,250 for serving as Chair of the compensation committee
meetings. |
|
(6) |
|
Mr. Hensley received $6,250 for serving as Chair of the nominating and corporate
governance committee meetings. |
|
(7) |
|
The expense related to equity awards is based on equity grants valued under the
assumptions contained in Note 9 to our Consolidated Financial Statements and is non-cash in
nature. Such expense is recognized over the vesting period of the equity awards. |
|
(8) |
|
Includes insurance premiums paid by the Company for non-employee directors. |
|
(9) |
|
Mr. McCurdy became a board member effective March 12, 2008 and, therefore, did
not receive the full year compensation for the annual directors fee. |
What is the Boards recommendation with respect to the election of the Class 3 Directors?
The Board unanimously recommends a vote FOR the nominees listed above.
EXECUTIVE OFFICERS
Who are the Companys executive officers?
The following table sets forth certain information concerning the executive officers of the
Company as of March 31, 2009.
|
|
|
|
|
|
|
|
|
Name of Officer |
|
Age |
|
Officer Since |
|
Position with the Company |
|
William R. Council, III
|
|
|
47 |
|
|
March 5, 2001
|
|
President and Chief
Executive Officer from
March 2003 to present;
Interim Chief Executive
Officer from October
2002 to March 2003;
Executive Vice
President, Chief
Financial Officer and
Secretary of the Company
from March 5, 2001 to
December 2002. Mr.
Council is a Certified
Public Accountant. |
|
|
|
|
|
|
|
|
|
Raymond L. Tyler, Jr.
|
|
|
58 |
|
|
October 18, 2002
|
|
Senior Vice President of
Nursing Home Operations
of the Company from
March 2009 to present;
Executive Vice President
and Chief Operating
Officer of the Company
from December 2003 to
March 2009; Senior Vice
President of Operations
of the Company from
October 2002 to December
2003; Vice President of
Operations of the
Company from January
2001 to October 2002. |
|
|
|
|
|
|
|
|
|
L. Glynn Riddle, Jr.
|
|
|
49 |
|
|
December 9, 2002
|
|
Executive Vice
President, Chief
Financial Officer and
Secretary of the Company
since December 2002.
Mr. Riddle is a
Certified Public
Accountant. |
12
EXECUTIVE COMPENSATION
The following section describes the compensation that the Company pays its chief executive
officer, chief operating officer and chief financial officer at December 31, 2008 or during the
2008 fiscal year (collectively, the Named Executive Officers).
Compensation Discussion and Analysis
Decisions on compensation of our senior executives are made by the compensation committee of
our Board of Directors. The compensation committee consists of Mr. Brame, Mr. Olson
and Mr. ONeil. The Board of Directors has determined that each member of the compensation
committee is an independent director. It is the responsibility of the compensation committee to
assure the Board that the executive compensation programs are reasonable and appropriate, meet
their stated purpose and effectively serve our needs and the needs of our shareholders.
We believe that the executive compensation program should align the interests of shareholders
and executives. Our primary objective is to provide high quality patient care while maximizing
shareholder value. The compensation committee seeks to forge a strong link between our strategic
business goals and our compensation goals. We believe our executive compensation program is
consistent with this overall philosophy for all management levels. We believe that the more
employees are aligned with our strategic objectives, the greater our success on both a short-term
and long-term basis.
Our executive compensation program has been designed to support the overall strategy and
objective of creating shareholder value by:
|
|
|
Performance based. Emphasizing pay for performance by having a significant
portion of executive compensation at risk. |
|
|
|
|
Retention. Providing compensation opportunities that attract and retain
talented and committed executives on a long-term basis. |
|
|
|
|
Balance. Appropriately balancing the Companys short-term and long-term
business, financial and strategic goals. |
In connection with this overall strategy, we also strive to give assurance of fair treatment
and financial protection so that an executive will be able to identify and consider transactions
that would be beneficial to the long term interests of shareholders but which might have a negative
impact on the executive, without undue concern for his personal circumstances. A further
consideration is to safeguard the business of the Company, including protection from competition
and other adverse activities by the executive during and after employment.
The Companys strategic goals are:
|
|
|
Profitability. To maximize financial returns to its shareholders, in the
context of providing high quality service. |
|
|
|
|
Quality. To achieve leadership in the provision of relevant and high quality
health services. |
|
|
|
|
Stability. To be a desirable employer and a responsible corporate citizen. |
13
In order to
accomplish our objectives, the compensation committee strives to design its
executive compensation in a way that when the Company meets or exceeds its annual operating goals,
the annual executive pay targets (i.e., base salary plus incentive) are competitive with the
compensation of similar U.S. public health care companies having similar revenues.
Compensation Consultant
The compensation committee has engaged Compensation Strategies, Inc. to help the compensation
committee with its compensation program design, review senior executive compensation, prepare
comprehensive competitive compensation analyses for our Named Executive Officers, and make
suggestions regarding the components of compensation, amounts allocated to those components, and
the total compensation opportunities for the CEO and the other Named Executive Officers.
Compensation Strategies also provided the compensation committee with information on executive
compensation trends and best practices and advice for potential improvements to the executive
compensation program. In addition, Compensation Strategies advised the committee on the design of
the compensation program for non-employee directors. In 2008 and 2006, Compensation Strategies
performed services for the Company and was paid approximately $26,000 and $28,500, respectively for such
services. We did not use Compensation Strategies services in 2007.
In its analysis of Advocats compensation, Compensation Strategies considered a peer group of
similarly sized companies in the long term health industry. The companies that Compensation
Strategies used as it peer group included:
|
|
|
Almost Family, Inc.
|
|
Healthways, Inc. |
Amedisys, Inc.
|
|
LCA-Vision Inc. |
Amsurg Corp.
|
|
LHC Group, Inc. |
Assisted Living Concepts, Inc.
|
|
National HealthCare Corporation |
Capital Senior Living Corporation
|
|
Odyssey HealthCare Inc. |
Continucare Corporation
|
|
RehabCare Group, Inc. |
Emeritus Corporation
|
|
Skilled Healthcare Group, Inc. |
Ensign Group, Inc.
|
|
U.S. Physical Therapy, Inc. |
Hanger Orthopedic Group, Inc. |
|
|
Elements of Our Compensation Program for Named Executive Officers
As a result, we have generally established the following elements of compensation for our
Named Executive Officers:
Base Salary.
We pay base salaries to our Named Executive Officers which are intended to be at or near the
market median for base salaries of similar companies. These amounts are evaluated annually. We
believe that such base salaries are necessary to attract and retain executive talent. In
evaluating appropriate pay levels and salary increases for our Named Executive Officers, the
compensation committee considers achievement of our strategic goals, level of responsibility,
individual performance, internal equity and external pay practices. Regarding external pay
practices, the compensation committee reviews compensation practices of the peer companies, as
determined from information gathered by our compensation consultants. As a result of general
business and economic conditions, effective January 1, 2009 we instituted a wage freeze for all of
our senior management employees. This wage freeze will be
14
reevaluated as business and economic conditions improve. The base salaries of our Named
Executive Officers during 2008 were as follows:
|
|
|
|
|
Name |
|
Position |
|
2008
Salary |
William R. Council, III |
|
Chief Executive Officer |
|
$442,000 |
Raymond L. Tyler, Jr. |
|
Chief Operating Officer |
|
$308,000 |
L. Glynn Riddle, Jr. |
|
Chief Financial Officer |
|
$229,000 |
Annual Incentives.
Annual incentive (bonus) awards are designed to focus management attention on key operational
goals for the current fiscal year. Our Named Executive Officers may earn a bonus that is partially
dependent upon achievement of their specific operational and financial goals, as well as quality of
care targets. For 2008, the potential annual cash bonus for our Named Executive Officers was
subject to the following targets:
|
|
|
Position |
|
Bonus
Target |
Chief Executive Officer
|
|
50% of base salary |
Chief Operating Officer
|
|
40% of base salary |
Chief Financial Officer
|
|
35% of base salary |
As described in more detail below, the bonus target is based on achieving 100% of budget on
the net operating income category. Therefore, if the Company achieves over 100% of budget in this
category, the bonus percentage could be higher than the bonus target disclosed above.
The bonus amount is made up of the following categories:
|
|
|
|
|
Net Operating Income |
|
|
70 |
% |
Discretionary/quality measures/individual performance |
|
|
30 |
% |
|
|
|
|
Total |
|
|
100 |
% |
Net Operating Income. For 2008, 70% of the available bonus percentage for each executive was
tied to Company profitability. This metric was measured using budgeted operating income/loss,
adjusted for the non-cash impact of professional liability expense. In addition, the compensation
committee had the discretion to make other adjustments for unusual/unbudgeted items. The portion
of the bonus under Net Operating Income was adjusted based on performance as follows:
|
|
|
80% or less of budget, executive earns 0% of the target bonus for this category; |
|
|
|
|
81% to 100% of budget, executive earns 5% of the target bonus for this category for each
1% of budget achieved over 80%; |
|
|
|
|
101% to 125% of budget, 15% of the incremental earned net operating income is placed
into a pool to be shared among the participants. Sharing of the pool may be discretionary
and/or pro rata. |
|
|
|
|
Above 125% - additional amounts may be awarded at the discretion of the Board of
Directors. |
|
|
|
Discretionary: 30% of the bonus was based on subjective matters of performance at the
discretion of the Board, including quality of care measures. |
For 2008, the actual operating income was less than 80% of the budgeted operating income,
and the executives did not receive any bonus based on net operating income and were only
eligible for the discretionary portion of the target bonus. As a result, the Named Executive
Officers were paid a bonus
15
less than the target bonus amount. Based on the elements of the annual bonuses, the
compensation committee approved the following total bonuses for each of the Named Executive
Officers for 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
of |
Name |
|
Position |
|
2008
Bonus |
|
Base
Salary |
William R. Council, III |
|
Chief Executive Officer |
|
$ |
53,000 |
|
|
|
12.0 |
% |
Raymond L. Tyler, Jr. |
|
Chief Operating Officer |
|
$ |
20,000 |
|
|
|
6.5 |
% |
L. Glynn Riddle, Jr. |
|
Chief Financial Officer |
|
$ |
25,000 |
|
|
|
10.9 |
% |
Long-Term Incentives.
Our long-term incentive compensation program consists of nonqualified stock options and
SOSARs, which are related to improvement in long-term shareholder value. Stock option and SOSAR
grants provide an incentive that focuses the executives attention on managing the Company from the
perspective of an owner with an equity stake in the business. These grants also focus operating
decisions on long-term results that benefit us and long-term shareholders.
The option grants to executive officers offer the right to purchase shares of common stock at
their fair market value on the date of the grant. These options will have value only if the
Companys stock price increases. The number of shares covered by each grant is intended to reflect
the executives level of responsibility and past and anticipated contributions to the Company. The
Company sought shareholder approval of an increase in the number of shares available under its Key
Personnel Plan at its 2001 annual meeting. The shareholders did not approve the amendment. In
accordance with its terms, the Key Personnel Plan expired in May 2004. Accordingly, no further
grants can be made under that plan.
At our 2006 annual meeting, the compensation committee approved and recommended that the
shareholders adopt the Advocat Inc. 2005 Long-Term Incentive Plan (the 2005 Plan), which was
approved by our shareholders. The compensation committee believes that the 2005 Plan will enable
the compensation committee to again grant long-term incentives to the employees of the Company as
described above.
The purposes of the 2005 Plan are to (i) attract and retain current and prospective employees
and other service providers; (ii) motivate such persons, by means of appropriate incentives, to
achieve long range goals; (iii) provide incentive compensation opportunities that are competitive
with those of other similar companies; and (iv) further align the interests of such persons with
those of the Companys shareholders by offering compensation that is based on the Companys common
stock and/or contingent on attaining certain performance goals and thereby promoting the long-term
financial interest of the Company, including the growth in value of the Companys equity and
enhancement of long-term shareholder return.
The
compensation committee has approved the use of SOSARs instead of
non-qualified stock options. SOSARs are stock appreciation rights that are settled in shares of
Company stock. The SOSARs have a base value equal to the closing price of the stock on the date of
grant and vest one-third on each of the 1st, 2nd and 3rd
anniversaries of the date of grant. Since the value of the SOSAR to the recipient is dependent on
the increase in the value of the underlying stock, an award of this nature is also aligned with the
interests of the shareholders. Generally, the grant of stock options or SOSARs is recommended to
the compensation committee by the Chief Executive Officer excluding grants to himself. The
compensation committee considers the recommendations along with a review of the group of
individuals recommended. While we do not currently have written policies for the issuance of stock
options, we have never relied upon either the release of material information or the non-release of
material
16
information
when issuing the grants. Generally, SOSAR or option grants have been made at least
three business days after the earnings release for the previous fiscal year.
Retirement and Post Employment Compensation.
We have long sponsored a qualified defined contribution plan (the 401(k) Plan), which is
available to all employees, including our Named Executive Officers. Qualified plans such as the
401(k) Plan carry with them a limit on the amount of compensation that highly compensated
employees can defer. Each of our Named Executive Officers is considered highly compensated and
thus is greatly curtailed in their ability to contribute to the 401(k). Accordingly, the Company
also maintains a non-qualified Executive Incentive Retirement Plan (EIRP). The EIRP provides
that we will match eligible employees retirement savings on a dollar for dollar basis, up to 8% of
their salary. The EIRP provides that the Company makes a cash payment to each participating
employee on a quarterly basis. All of the Companys Named Executive Officers participated in the
Executive Incentive Retirement Plan in 2008, with the amounts of the Company contribution being
disclosed in the Summary Compensation Table under Other Annual Compensation. As this is paid to
the executive in cash, the executive is free to invest or not invest the money as he sees fit.
In 2008, our shareholders approved the Advocat Inc. 2008 Stock Purchase Plan for Key Personnel
(Stock Purchase Plan). The primary purposes of the Stock Purchase Plan are to encourage
directors and executives to develop and maintain a substantial equity-based interest in the
Company, to attract and retain highly qualified directors and executives, and to align director and
executive and shareholder long-term interests by creating a direct link between compensation and
long-term shareholder return.
The Stock Purchase Plan provides for granting of rights to purchase shares of the Companys
common stock to directors and officers (including executive officers). The Stock Purchase Plan is
administered by the compensation committee of the Board of Directors, which can make such rules and
regulations and establish such procedures for the administration of the Stock Purchase Plan as it
deems appropriate. The compensation committee has the sole discretion of determining who has the
right to participate in the Stock Purchase Plan. The maximum number of shares of common stock to
be authorized and reserved for issuance under the Stock Purchase Plan is 150,000 shares, subject to
equitable adjustment as set forth in the Stock Purchase Plan, provided that no individual officer
or director may exercise rights to purchase more than $1,000,000 in shares in any year under the
Stock Purchase Plan.
In June 2008, several of our officers, including the Named Executive Officers, elected to use
a percentage of their annual bonus to purchase shares of the Companys common stock pursuant to the
Stock Purchase Plan. The Stock Purchase Plan allows eligible employees to use a designated portion
of their salary or bonus to purchase shares of stock at a 15% discount from the market price. The
shares issued under the Stock Purchase Plan are either shares of restricted stock or restricted
stock units (RSUs), at the election of the compensation committee. Under the Stock Purchase
Plan, the restricted stock shares or RSUs remain restricted for a two year period at which time
they become fully vested provided the employee is with the Company on
that date. As a
result, in March 2009, we issued a total of 36,896.05 RSUs to twenty employees in lieu of paying a
total of $76,374.84 in cash to such employees. The following is the amount purchased by each of
the Named Executive Officers:
17
|
|
|
|
|
|
|
|
|
|
|
Amount of 2008 Bonus |
|
Number of RSUs |
Name |
|
Used
to Purchase RSUs |
|
Purchased |
|
|
$ |
26,500 |
|
|
|
12,801.93 |
|
|
|
$ |
10,000 |
|
|
|
4,830.92 |
|
|
|
$ |
12,500 |
|
|
|
6,038.65 |
|
In addition, each of our Named Executive Officers has an employment agreement with the Company
as described in more detail under Potential Payments upon Termination or Change-in-Control below.
These agreements formalize the terms of the employment relationship, and assure the executive of
fair treatment during employment and in the event of termination as well as requiring compliance
with certain restrictions on competition. Employment agreements promote careful and complete
documentation and understanding of employment terms, including strong protections for our business,
and avoid frequent renegotiation of the terms of employment. Conversely, employment agreements can
limit our ability to change certain employment and compensation terms. We provide severance
protection to our senior executives in these employment agreements. This includes protection in
the event of outright job termination not for Cause (Cause being limited to specified actions
that are directly and significantly harmful to Advocat) or in the event we change the executives
compensation opportunities, working conditions or responsibilities in a way adverse to the
executive such that it is deemed a Constructive Discharge. We believe that this protection is
designed to be fair and competitive to aid in attracting and retaining experienced executives. We
believe that the protection we provide, including the level of severance payments and
post-termination benefits, is appropriate and within the range of competitive practices. These
employment agreements do not provide for any type of gross-up payment for tax obligations
of the executive as a result of such severance payments.
We also provide severance payments and benefits if the executive should resign or be
terminated without Cause within six months after a change in control. This protection permits an
executive to evaluate a potential change in control without concern for his or her own situation or
the need to seek employment elsewhere. Change in control transactions take time to unfold, and a
stable management team can help to preserve our operations either to enhance the value delivered to
a buyer in the transaction or, if no transaction is consummated, to ensure that our business will
continue without undue disruption and retain its value. Finally, we believe that the change in
control protections in place encourage management to consider on an ongoing basis whether a
strategic transaction might be advantageous to our shareholders, even one that would vest control
of Advocat in a third party. The compensation committee believes that the potential cost of
executive change in control severance benefits are well within the range of reasonableness relative
to general industry practice, and represents an appropriate cost relative to its benefits to
Advocat and its shareholders.
The employment agreements also subject our executive officers to significant contractual
restrictions intended to prevent actions that potentially could harm our business, particularly
after termination of employment. These business protections include obligations not to compete, not
to hire away our employees, not to interfere with our relationships with suppliers and customers,
not to disparage us, not to reveal confidential information, and to cooperate with us in
litigation. Business protection provisions are included in agreements and equity awards. In
addition, we have adopted an Employee Standards and Code of Conduct that require all of our
employees, including our executive officers, to adhere to high standards of conduct. Failure to
comply with this Code of Conduct or our Corporate Compliance Program or applicable laws will
subject the executive to disciplinary measures, which may include loss of compensation, stock, and
benefits, and termination of employment for cause.
18
Role of Executive Officers in Determining Compensation
The compensation committee makes all final determinations with respect to executive officers
compensation, based on information provided by management and an appraisal of the Companys
financial status. Advocats Chief Executive Officer does make recommendations to the compensation
committee relating to the compensation of executive officers who directly report to him, but the
compensation committee has full autonomy in determining executive compensation.
Tax and Accounting Considerations
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally disallows a tax
deduction to public companies for executive compensation in excess of $1.0 million. We have not
historically paid any of our Named Executive Officers compensation in excess of $1.0 million and it
is not anticipated that we will pay any of our Named Executive Officers compensation in excess of
$1.0 million in 2009, and, accordingly, to date we have not adopted a policy in this regard.
2009 Annual Incentive Plan and Base Salary
On March 3, 2009, the compensation committee of the Board of Directors of Advocat approved the
2009 Annual Incentive Plan for the Companys Executive Officers. The 2009 Plan is similar to the
2008 plan. The 2009 Plan provides the following Targets:
|
|
|
|
|
Named
Executive Officer |
|
Position |
|
Bonus
Target |
|
|
Chief Executive Officer
|
|
50% of base salary |
|
|
Senior Vice President of Nursing Home Ops
|
|
35% of base salary |
|
|
Chief Financial Officer
|
|
35% of base salary |
As described in more detail below, the bonus target is based on achieving 100% of budget on
the net operating income category. Therefore, if the Company achieves over 100% of budget in this
category, the bonus percentage could be higher than the bonus target disclosed above.
The following categories make up the potential bonus amounts:
|
|
|
|
|
Net operating income (as defined)
|
|
|
70% |
|
Discretionary/quality measures/individual performance
|
|
|
30% |
|
|
|
|
|
|
|
|
|
100% |
|
Net Operating Income. 70% of the bonus is based on operating income performance.
This metric will be measured using budgeted operating income/loss, adjusted for the non-cash impact
of professional liability expense. In addition, the Board will have the discretion to make other
adjustments for unusual/ unbudgeted items.
The potential bonus available would be adjusted based on actual performance, as follows:
|
|
80% (or less) of budget executive would earn 0% of the target bonus for this
category |
|
|
|
81% to 100% of budget executive would earn 5% of the target bonus for this
category for each 1% of budget achieved above 80%. |
|
|
|
101% to 125% - 15% of the incremental earned net operating income would be
placed into a pool, to be shared among the participants. Sharing of the pool can
be discretionary and/or pro rata. |
|
|
|
Above 125% - additional amounts may be awarded at the discretion of the Board of
Directors. |
19
Discretionary: 30% of the bonus would be based on subjective matters of performance
to be awarded at the discretion of the Board, including quality of care measures.
In addition, the 2009 Plan allows the compensation committee, in its sole discretion, to pay
all or part of the bonus earned under the 2009 Plan in shares of common stock of the Company. The
number of shares that would be issued in the discretion of the compensation committee would be such
number of shares with a fair market value on the date of award equal to the amount of the bonus
being paid in common stock.
2009 Base Salary.
As a result of general business and economic conditions, effective January 1, 2009 we
instituted a wage freeze for all of our senior management employees. This wage freeze will be
reevaluated as business and economic conditions improve. Thus, the base salaries of our Named
Executive Officers for 2009 are as follows:
|
|
|
|
|
Name |
|
Position |
|
2009
Salary |
William R. Council, III |
|
Chief Executive Officer |
|
$442,000 |
Raymond L. Tyler, Jr. |
|
Senior Vice President of Nursing Home Operations |
|
$250,000 |
L. Glynn Riddle, Jr. |
|
Chief Financial Officer |
|
$229,000 |
Compensation Committee Report
The compensation committee has reviewed and discussed the Compensation Discussion and Analysis
required by Item 402(b) of Regulation S-K with management of the Company and, based on such review
and discussions, the compensation committee recommended to the Board of Directors of the Company
that the Compensation Discussion and Analysis be included in this proxy statement.
|
|
|
Compensation Committee: |
|
Richard M. Brame, Chair
William C. ONeil, Jr.
Wallace E. Olson |
This report of the compensation committee shall not be deemed incorporated by reference by any
general statement incorporating by reference this proxy statement into any filing under the
Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that we
specifically incorporate this information by reference, and shall not otherwise be deemed filed
under these acts.
How
much compensation did the Company pay the Named Executive Officers
during 2008, 2007 and 2006?
The following table sets forth the compensation paid to the Named Executive Officers for their
services in all capacities to the Company for the 2008, 2007 and 2006 fiscal years.
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary
Compensation Table |
Name and Principal |
|
|
|
|
|
|
|
|
|
|
|
|
|
Option |
|
Other Annual |
|
All Other |
|
|
Position |
|
Year |
|
Salary($) |
|
Bonus($)(1) |
|
Awards
(2) |
|
Compensation($)(3) |
|
Compensation($)(4) |
|
Total
($) |
(a) |
|
(b) |
|
(c) |
|
(d) |
|
(e) |
|
(f) |
|
(g) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William R. Council, III |
|
|
2008 |
|
|
|
442,000 |
|
|
|
53,000 |
|
|
|
194,752 |
|
|
|
35,360 |
|
|
|
1,839 |
|
|
|
726,951 |
|
President and |
|
|
2007 |
|
|
|
425,000 |
|
|
|
298,835 |
|
|
|
126,192 |
|
|
|
34,000 |
|
|
|
1,647 |
|
|
|
885,674 |
|
Chief Executive Officer |
|
|
2006 |
|
|
|
389,000 |
|
|
|
264,041 |
|
|
|
1,191,000 |
(5) |
|
|
31,098 |
|
|
|
1,555 |
|
|
|
1,876,694 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raymond L. Tyler, Jr. |
|
|
2008 |
|
|
|
308,000 |
|
|
|
20,000 |
|
|
|
116,851 |
|
|
|
24,652 |
|
|
|
1,784 |
|
|
|
471,287 |
|
Executive Vice President and |
|
|
2007 |
|
|
|
296,000 |
|
|
|
156,923 |
|
|
|
75,715 |
|
|
|
23,704 |
|
|
|
2,616 |
|
|
|
554.958 |
|
Chief Operating Officer(6) |
|
|
2006 |
|
|
|
285,000 |
|
|
|
150,628 |
|
|
|
397,000 |
(5) |
|
|
22,805 |
|
|
|
2,834 |
|
|
|
858,267 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
L. Glynn Riddle, Jr. |
|
|
2008 |
|
|
|
229,000 |
|
|
|
25,000 |
|
|
|
77,901 |
|
|
|
18,288 |
|
|
|
1,716 |
|
|
|
351,905 |
|
Executive Vice President and |
|
|
2007 |
|
|
|
220,000 |
|
|
|
111,792 |
|
|
|
50,477 |
|
|
|
17,854 |
|
|
|
1,858 |
|
|
|
401,981 |
|
Chief Financial Officer |
|
|
2006 |
|
|
|
211,000 |
|
|
|
100,547 |
|
|
|
794,000 |
(5) |
|
|
16,917 |
|
|
|
1,516 |
|
|
|
1,123,980 |
|
|
|
|
|
|
(1) |
|
Includes annual incentive bonus amounts which were expensed during 2008 and
paid in March 2009. Each Named Executive Officer elected to receive 50% of this bonus
in Restricted Share Units. |
|
(2) |
|
Expense related to equity awards is valued under the assumptions contained in
Note 9 to our Consolidated Financial Statements. Such expense is recognized over the
vesting period of the equity awards. The expense is calculated in accordance with
generally accepted accounting principles in the United States of
America and does not necessarily reflect the actual
value received by the executive, which may be more or less than the amount shown or
zero. As discussed below, the Named Executive Officers were granted SOSARs in March
2009 which were related to performance by the Named Executive Officers in 2008. |
|
(3) |
|
Includes contributions under the Companys Executive Incentive Retirement
Plan. |
|
(4) |
|
Includes matching contributions under the Companys 401(k) plan as well as a
holiday bonus of $816, $816 and $748 paid in December 2008 to Mr. Council, Mr. Tyler
and Mr. Riddle, respectively. |
|
(5) |
|
Option award expense is significantly higher than other years due to special
one time grant of 332,400 options during 2005. The options were subject to shareholder
approval and resulted in the compensation expense being recorded in 2006. The increase
in the Companys stock price from December 2005 to June 2006 resulted in the large
non-cash compensation charge. |
|
|
(6) |
|
Mr. Tyler served as
Chief Operating Officer until March 2009 and presently
serves as Senior Vice President of Nursing Home Operations. |
|
What plan based awards did the Company grant to the Named Executive Officers in 2008 and under
what terms?
The following table describes non-equity incentive awards granted to our Named Executive
Officers in 2008.
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grants of Plan-Based Awards |
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
All Other |
|
|
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|
|
|
|
|
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|
|
|
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Option |
|
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|
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|
|
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|
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|
|
|
|
|
|
All Other |
|
Awards: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
Number of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
Awards: |
|
Securities |
|
Exercise or |
|
Grant Date |
|
|
|
|
|
|
Estimated Future Payouts Under Non- |
|
Estimated Future Payouts Under |
|
Number |
|
Underlying |
|
Base Price |
|
Fair Value |
|
|
|
|
|
|
Equity Incentive Plan Awards (1) |
|
Equity Incentive Plan Awards |
|
of Shares |
|
Option |
|
of Option |
|
of Stock |
|
|
Grant |
|
Threshold |
|
Target |
|
Maximum |
|
Threshold |
|
Target |
|
Maximum |
|
of Stock |
|
Grants (#) |
|
Awards |
|
and Option |
Name |
|
Date |
|
($) |
|
($) |
|
($) |
|
($) |
|
($) |
|
($) |
|
(#) |
|
(2) (3) |
|
($/sh) (4) |
|
Awards |
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William R. Council III |
|
|
N/A |
|
|
|
- |
|
|
|
221,000 |
|
|
|
N/A |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
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|
|
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|
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|
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|
|
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|
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|
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|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raymond L. Tyler, Jr. |
|
|
N/A |
|
|
|
- |
|
|
|
154,000 |
|
|
|
N/A |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
L. Glynn Riddle, Jr. |
|
|
N/A |
|
|
|
- |
|
|
|
115,000 |
|
|
|
N/A |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
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|
|
|
|
|
|
William R. Council III |
|
|
03/14/08 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
25,000 |
|
|
$ |
10.88 |
|
|
$ |
235,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raymond L. Tyler, Jr. |
|
|
03/14/08 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
15,000 |
|
|
$ |
10.88 |
|
|
$ |
141,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
L. Glynn Riddle, Jr. |
|
|
03/14/08 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
10,000 |
|
|
$ |
10.88 |
|
|
$ |
94,000 |
|
21
|
|
|
|
|
(1) |
|
Amounts represent target bonus percentages for 2008 and are based upon the
salaries of the executive officers as of December 31, 2008. The target amount is based on
the Company achieving 100% of budget. The amount actually paid under this non-equity
incentive plan is included in the Summary Compensation Table (column d). |
|
(2) |
|
These SOSARs were granted in March 2008 and the expense is recognized for
financial statement purposes over the vesting period beginning in 2008 although the grant
of the SOSAR related to performance for 2007. This table does not include the SOSARs
granted in March 2009 which related to performance for 2008 as discussed below. |
|
(3) |
|
These awards are also included in the Summary Compensation Table (column e) and
the Outstanding Equity Awards at Year End table. |
|
(4) |
|
Base price of SOSAR awards is based on the average of the high and low price on
the date of grant |
As discussed in the Compensation Discussion and Analysis, the Named Executive Officers
received a grant of stock only stock appreciation rights in March 2009. These grants vest
one-third on each of the first, second and third anniversaries of the date of grant and have a base
price of $2.37 per share which equals the average high and low price of our stock on the date of
grant. Mr. Council received 25,000 shares, Mr. Tyler received 15,000 shares and Mr. Riddle
received 10,000 shares. Such grants were based on the performance of the Named Executive Officer
in 2008; however, the grant of equity awards is required to be included in the table for the
year(s) when recognized for financial statement purposes and are therefore not included in any of
these compensation tables or equity award tables.
How many equity awards are currently held by the Named Executive Officers?
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding Equity Awards at Year End December 31, 2008 |
|
|
|
SOSAR and Option Awards |
|
Stock Awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
Incentive |
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive |
|
Plan Awards: |
|
|
|
|
|
|
|
|
|
|
Incentive Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
Market |
|
Plan Awards: |
|
Market or |
|
|
|
|
|
|
|
|
|
|
Awards: |
|
|
|
|
|
|
|
|
|
Number |
|
Value of |
|
Number of |
|
Payout Value |
|
|
Number of |
|
Number of |
|
Number of |
|
|
|
|
|
|
|
|
|
of Shares |
|
Shares or |
|
Unearned |
|
of Unearned |
|
|
Securities |
|
Securities |
|
Securities |
|
|
|
|
|
|
|
|
|
or Units |
|
Units of |
|
Shares, Units |
|
Shares Units |
|
|
Underlying |
|
Underlying |
|
Underlying |
|
|
|
|
|
|
|
|
|
of Stock |
|
Stock |
|
or Other |
|
or Other |
|
|
Unexercised |
|
Unexercised |
|
Unexercised |
|
Option |
|
Option |
|
That |
|
That Have |
|
Rights That |
|
Rights That |
|
|
Options (#) |
|
Options (#) |
|
Unearned |
|
Exercise |
|
Expiration |
|
Have Not |
|
Not |
|
Have Not |
|
Have Not |
Name |
|
Exercisable(1) |
|
Unexercisable(1) |
|
Options (#) |
|
Price ($) |
|
Date |
|
Vested |
|
Vested (#) |
|
Vested (#) |
|
Vested (#) |
|
|
|
|
|
William R. Council III |
|
|
50,000 |
|
|
|
- |
|
|
|
- |
|
|
|
$0.35 |
|
|
|
04/09/2011 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
William R. Council III |
|
|
75,000 |
|
|
|
- |
|
|
|
- |
|
|
|
$5.44 |
|
|
|
12/13/2015 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
William R. Council III |
|
|
8,333 |
|
|
|
16,667 |
|
|
|
- |
|
|
|
$11.59 |
|
|
|
03/07/2017 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
William R. Council III |
|
|
- |
|
|
|
25,000 |
|
|
|
- |
|
|
|
$10.88 |
|
|
|
03/14/2018 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Raymond L. Tyler, Jr. |
|
|
25,000 |
|
|
|
- |
|
|
|
- |
|
|
|
$0.35 |
|
|
|
04/09/2011 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Raymond L. Tyler, Jr. |
|
|
25,000 |
|
|
|
- |
|
|
|
- |
|
|
|
$5.44 |
|
|
|
12/13/2015 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Raymond L. Tyler, Jr. |
|
|
5,000 |
|
|
|
10,000 |
|
|
|
- |
|
|
|
$11.59 |
|
|
|
03/07/2017 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Raymond L. Tyler, Jr. |
|
|
- |
|
|
|
15,000 |
|
|
|
- |
|
|
|
$10.88 |
|
|
|
03/14/2018 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
L. Glynn Riddle, Jr. |
|
|
50,000 |
|
|
|
- |
|
|
|
- |
|
|
|
$5.44 |
|
|
|
12/13/2015 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
L. Glynn Riddle, Jr. |
|
|
3,333 |
|
|
|
6,667 |
|
|
|
- |
|
|
|
$11.59 |
|
|
|
03/07/2017 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
L. Glynn Riddle, Jr. |
|
|
- |
|
|
|
10,000 |
|
|
|
- |
|
|
|
$10.88 |
|
|
|
03/14/2018 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
(1) |
|
Each option and SOSAR grant vests one-third on each of the first, second and
third anniversary of the date of grant. |
No Named Executive Officers exercised equity awards during 2008.
22
Is the Company a party to any key employment agreements or advisor agreements?
Yes. Effective March 31, 2006, the Company entered into employment agreements (the
Employment Agreements) with Mr. Council to serve as Chief Executive Officer, Mr. Tyler to serve
as Chief Operating Officer and Mr. Riddle to serve as Chief Financial Officer. The Employment
Agreements each have an initial term of one year. Thereafter, the Employment Agreements renew
automatically for one-year periods unless 30 days notice is given by either the Company or the
employee. The Employment Agreements may be terminated by the Company without cause at any time and
by the employee as a result of constructive discharge (e.g., a reduction in compensation or a
material change in responsibilities) or a change in control (e.g., certain tender offers,
mergers, sales of substantially all of the assets or sales of a majority of the voting securities).
In the event of a termination by the Company without cause, at the election of the employee upon a
constructive discharge or change in control or upon the Company giving notice of its intent not to
renew his employment agreement, Mr. Council is entitled to receive a lump sum severance payment in
an amount equal to 30 months of his monthly base salary, and Mr. Tyler and Mr. Riddle are each
entitled to receive lump sum severance payments in an amount equal to 12 months of monthly base
salary. In addition, with respect to each of the Named Executive Officers, the benefits and
perquisites as in effect at the date of termination of employment will be continued for eighteen
(18) months. Furthermore, upon such termination, the employees may elect to require the Company to
repurchase options granted under the Companys stock option plans for a purchase price equal to the
difference between the fair market value of the common stock at the date of termination and the
stated option exercise price, provided that such fair market value is above the stated option
price. In the event an Employment Agreement is terminated earlier by the Company for cause (as
defined therein), or by an employee other than upon a constructive discharge or a change in
control, the employees will not be entitled to any compensation following the date of such
termination other than the pro rata amount of their then current base salary through such date.
Upon termination of employment, other than in the case of termination by the Company without cause
or at the election of the employee upon a constructive discharge or upon a change in control, the
employees are prohibited from competing with the Company for 12 months.
Effective March 9, 2009, the Company and Raymond L. Tyler entered into an Amendment No. 1 to
Amended and Restated Employment Agreement (the Amendment). Pursuant to the Amendment, Mr. Tyler
will serve as Senior Vice President of Nursing Home Operations with an annual base salary of
$250,000. The Base Salary shall be reviewed annually and shall be subject to increase according to
the policies and practices adopted by the Company from time to time.
The Amendment further provides for additional payments of $25,000 on June 30, 2009 and $25,000
on December 31, 2009, provided that Mr. Tyler is still employed by the Company on each such date.
In the event that Mr. Tyler is terminated without cause or leaves as a result of a constructive
discharge, as each is defined in the agreement, he shall be entitled to a lump sum equal to the
greater of (i) 100% of his Base Salary as in effect at the time of the termination, or (ii)
$308,000. The definition of constructive discharge is expanded in the
Amendment to include the hiring of a new Chief Operating Officer; provided Mr. Tyler provides the Company with written
notice within 45 days of the commencement of employment of the new COO, and provided further that
this right shall extend to only the first such new COO hired.
23
Potential Payments upon Termination or Change-in-Control
The following tables estimate the amounts that would be paid to each of the Named Executive
Officers in the event of a termination as of December 31, 2008 under each potential reason for
termination.
William R. Council, III
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination |
|
|
Change in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
without |
|
|
Control |
|
|
Change in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cause or |
|
|
Resulting in |
|
|
Control Not |
|
|
|
|
|
|
Voluntary |
|
Termination |
|
Constructive |
|
|
Termination or |
|
|
Resulting in |
|
|
|
|
Estimated Payments |
|
Termination |
|
for Cause |
|
Discharge |
|
|
Resignation |
|
|
Termination |
|
Death |
|
Disability |
SeveranceSalary |
|
|
|
|
|
|
|
$ |
1,105,000 |
|
|
$ |
1,105,000 |
|
|
|
|
|
|
|
|
|
|
SeveranceBonus |
|
|
|
|
|
|
|
$ |
53,000 |
(1) |
|
$ |
53,000 |
(1) |
|
|
|
|
|
|
|
|
|
Vesting of unvested
equity awards |
|
|
|
|
|
|
|
|
|
(2) |
|
|
|
(2) |
|
|
|
|
(2) |
|
|
|
|
|
Repurchase of
outstanding options |
|
|
|
|
|
|
|
$ |
132,000 |
(3) |
|
$ |
132,000 |
(3) |
|
|
|
|
|
|
|
|
|
|
Benefits/Perquisites |
|
|
|
|
|
|
|
$ |
63,202 |
(4) |
|
$ |
63,202 |
(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
|
|
|
|
|
$ |
1,353,202 |
|
|
$ |
1,353,202 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Based on the annual incentive earned by Mr. Council during 2008 which was not
paid as of December 31, 2008. |
(2) |
|
As of December 31, 2008, Mr. Council had 41,667 SOSAR equity awards which were
not already fully vested. The exercise price of these SOSARs was greater than the closing
share price of Advocats stock at December 31, 2008; therefore, no amounts would be paid
for those SOSARs upon termination. In March 2009, Mr. Council received SOSARs which vest
over a 3 year period. |
(3) |
|
Based on options to purchase 50,000 shares of common stock held by Mr. Council
times $2.99, the closing price of Advocats stock on the last trading date of the year,
less the exercise price of the options. The exercise price of 75,000 vested options and
8,333 vested SOSARs was greater than the closing share price of Advocats stock at December
31, 2008. |
(4) |
|
Based on estimated cost of continued health insurance, disability insurance,
401(k) Company match and EIRP amounts for 18 months following termination. |
Raymond L. Tyler, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination |
|
|
Change in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
without |
|
|
Control |
|
|
Change in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cause or |
|
|
Resulting in |
|
|
Control Not |
|
|
|
|
|
|
|
Voluntary |
|
|
Termination |
|
|
Constructive |
|
|
Termination or |
|
|
Resulting in |
|
|
|
|
|
Estimated Payments |
|
Termination |
|
|
for Cause |
|
|
Discharge |
|
|
Resignation |
|
|
Termination |
|
|
Death |
|
|
Disability |
SeveranceSalary |
|
|
|
|
|
|
|
|
|
$ |
308,148 |
|
|
$ |
308,148 |
|
|
|
|
|
|
|
|
|
|
|
|
SeveranceBonus |
|
|
|
|
|
|
|
|
|
$ |
20,000 |
(1) |
|
$ |
20,000 |
(1) |
|
|
|
|
|
|
|
|
|
|
|
Vesting of unvested
equity awards |
|
|
|
|
|
|
|
|
|
|
|
(2) |
|
|
|
(2) |
|
|
|
(2) |
|
|
|
|
|
|
|
Repurchase of
outstanding options |
|
|
|
|
|
|
|
|
|
$ |
66,000 |
(3) |
|
$ |
66,000 |
(3) |
|
|
|
|
|
|
|
|
|
|
|
Benefits/Perquisites |
|
|
|
|
|
|
|
|
|
$ |
53,264 |
(4) |
|
$ |
53,264 |
(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
|
|
|
|
|
|
|
$ |
447,412 |
|
|
$ |
447,412 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Based on the annual incentive earned by Mr. Tyler during 2008 which was not paid
as of December 31, 2008. |
(2) |
|
As of December 31, 2008, Mr. Tyler had 25,000 SOSAR equity awards which were not
already fully vested. The exercise price of these SOSARs was greater than the closing
share price of Advocats stock at December 31, 2008; therefore, no amounts would be paid
for these SOSARs upon termination. In March 2009, Mr. Tyler received SOSARs which vest
over a 3 year period. |
(3) |
|
Based on options to purchase 25,000 shares of common stock held by Mr. Tyler
times $2.99, the closing price of Advocats stock on the last trading date of the year,
less the exercise price of the options. The exercise price of 25,000 options and 5,000
vested SOSARs was greater than the closing share price of Advocats stock at December 31,
2008. |
(4) |
|
Based on estimated cost of continued health insurance, disability insurance,
401(k) Company match and EIRP amounts for 18 months following termination. |
24
L. Glynn Riddle, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination |
|
|
Change in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
without |
|
|
Control |
|
|
Change in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cause or |
|
|
Resulting in |
|
|
Control Not |
|
|
|
|
|
|
|
Voluntary |
|
|
Termination |
|
|
Constructive |
|
|
Termination or |
|
|
Resulting in |
|
|
|
|
|
Estimated Payments |
|
Termination |
|
|
for Cause |
|
|
Discharge |
|
|
Resignation |
|
|
Termination |
|
|
Death |
|
|
Disability |
SeveranceSalary |
|
|
|
|
|
|
|
|
|
$ |
228,596 |
|
|
$ |
228,596 |
|
|
|
|
|
|
|
|
|
|
|
|
|
SeveranceBonus |
|
|
|
|
|
|
|
|
|
$ |
25,000 |
(1) |
|
$ |
25,000 |
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of unvested
equity awards |
|
|
|
|
|
|
|
|
|
|
|
(2) |
|
|
|
(2) |
|
|
|
(2) |
|
|
|
|
|
|
|
|
Repurchase of
outstanding options |
|
|
|
|
|
|
|
|
|
|
|
(3) |
|
|
|
(3) |
|
|
|
|
|
|
|
|
|
|
|
|
Benefits/Perquisites |
|
|
|
|
|
|
|
|
|
$ |
51,590 |
(4) |
|
$ |
51,590 |
(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
|
|
|
|
|
|
|
$ |
305,186 |
|
|
$ |
305,186 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Based on the annual incentive earned by Mr. Riddle during 2008 which was not paid
as of December 31, 2008. |
(2) |
|
As of December 31, 2008, Mr. Riddle had 16,667 SOSAR equity awards which were not
already fully vested. The exercise price of these SOSARs was greater than the closing
share price of Advocats stock at December 31, 2008; therefore, no amounts would be paid
for these SOSARs upon termination. In March 2009, Mr. Riddle received SOSARs which vest
over a 3 year period. |
(3) |
|
Based on options to purchase 50,000 shares of common stock and 3,333 vested
SOSARs held by Mr. Riddle all of which had a greater exercise price than the closing price
of Advocats stock on the last trading date of the year. |
(4) |
|
Based on estimated cost of continued health insurance, disability insurance,
401(k) Company match and EIRP amounts for 18 months following termination. |
Does the Company have a code of ethics for executive officers?
The Company has a code of ethics for our executive officers. A copy of the code of ethics can
be found on the Companys website at www.irinfo.com/AVC.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Companys compensation committee currently consists of directors Olson, Brame and ONeil.
No interlocking relationship exists between the members of the Companys Board of Directors or
compensation committee and the board of directors or compensation committee of any other company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company does not currently have any related party transactions in effect.
Does the Company have a policy in place with respect to contracts between the Company and
persons affiliated with the Company?
Advocat has a policy that any transactions between Advocat and its officers, directors and
affiliates will be on terms as favorable to Advocat as can be obtained from unaffiliated third
parties. Such transactions with such persons will be subject to approval by the audit committee of
the Board.
25
AUDIT COMMITTEE REPORT
The audit committee provides assistance to the Board in fulfilling its obligations with
respect to matters involving the accounting, auditing, financial reporting and internal control
functions of Advocat. Among other things, the audit committee reviews and discusses with management
and with Advocats independent registered public accounting firm (or independent auditors) the
results of the year end audit of Advocat, including the audit report and audited financial
statements. The Board of Directors, in its business judgment, has determined that all members of
the audit committee are independent directors, qualified to serve on the audit committee pursuant
to Rules 4200(a)(15) and 4350(d) of the NASDAQs listing standards. As set forth in the audit
committee charter, management of the Company is responsible for the preparation, presentation and
integrity of the Companys controls and procedures designed to assure compliance with accounting
standards and applicable laws and regulations. The independent auditors are responsible for
auditing the Companys financial statements and expressing an opinion as to their conformity with
generally accepted accounting principles in the United States of
America.
In connection with its review of Advocats audited financial statements for the fiscal year
ended December 31, 2008, the audit committee reviewed and discussed the audited financial
statements with management and the independent auditors, and discussed with the Companys auditors
the matters required to be discussed by SAS 61 (Codification of Statements on Auditing Standards,
AU 380), as currently in effect. In addition, the audit committee received the written disclosures
and the letter from BDO Seidman, LLP (BDO) required by applicable requirements of the Public
Company Accounting Oversight Board regarding BDOs communications with the audit committee
concerning independence and has discussed with BDO their independence from Advocat. The audit
committee has determined that the provision of non-audit services rendered by BDO to Advocat is
compatible with maintaining the independence of BDO from Advocat, but the audit committee will
periodically review the non-audit services rendered by BDO.
The members of the audit committee are not professionally engaged in the practice of auditing
or accounting and are not experts in the fields of accounting or auditing, including in respect of
auditor independence. Members of the audit committee rely without independent verification on the
information provided to them and on the representations made by management and the independent
auditors. Accordingly, the audit committees oversight does not provide an independent basis to
determine that management has maintained appropriate accounting and financial reporting principles
or appropriate internal control and procedures designed to assure compliance with accounting
standards and applicable laws and regulations. Furthermore, the audit committees considerations
and discussions referred to above do not assure that the audit of the Companys financial
statements has been carried out in accordance with the standards of the Public Company Accounting
Oversight Board (United States), that the financial statements are presented in accordance with
generally accepted accounting principles in the United States of
America or that the Companys auditors are in fact independent.
Based on the review and discussions referred to above and subject to the limitations on the
role and responsibilities of the audit committee referred to above and in the charter, the audit
committee recommended to Advocats Board of Directors that the audited financial statements be
included in Advocats annual report on Form 10-K for its fiscal year ended December 31, 2008, for
filing with the Securities and Exchange Commission.
|
|
|
Audit Committee: |
|
William C. ONeil, Jr., Chair
Richard M. Brame
Robert Z. Hensley
Chad A. McCurdy |
26
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Who is the Companys independent registered public accounting firm?
The Companys audit committee has selected BDO as the Companys independent auditors for the
2009 fiscal year. BDO has served as the Companys independent auditors since the 2002 fiscal year.
Representatives from BDO are expected to be present at the annual meeting and will have an
opportunity to make a statement if they desire to do so. BDO representatives are expected to be
available to respond to appropriate questions.
FEES TO BDO SEIDMAN, LLP
What fees were paid to the Companys independent auditors during fiscal 2008?
For
the fiscal years ended December 31, 2008 and 2007, the total
fees paid to our independent auditors, BDO,
were as follows:
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
2007 |
Audit Fees(1) |
|
$ |
637,000 |
|
|
$ |
610,000 |
|
Audit-Related Fees(2) |
|
|
10,000 |
|
|
|
11,000 |
|
Tax Fees(3) |
|
|
100,000 |
|
|
|
113,000 |
|
|
|
|
|
|
|
|
|
|
Total Fees for Services Provided |
|
$ |
747,000 |
|
|
$ |
734,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Audit Fees include fees billed for professional services rendered
in connection with the audit of the Companys financial statements, audit of
internal control over financial reporting (pursuant to Section 404 of
Sarbanes-Oxley) and fees charged for the review of the Companys quarterly
financial statements. These fees also include assistance with the review of
documents filed with the SEC. |
|
(2) |
|
Audit Related Fees consist of audits of the Companys savings plan
and trust. |
|
(3) |
|
Tax Fees include those charged for tax advice, planning and
compliance. |
In accordance with the charter of our audit committee and consistent with the policies of the
Securities and Exchange Commission, all auditing services and all non-audit services to be provided
by any independent auditor of the Company shall be pre-approved by the audit committee. All of the
services above were pre-approved by our audit committee. In assessing requests for services by the
independent auditor, the audit committee considers whether such services are consistent with the
auditors independence, whether the independent auditor is likely to provide the most effective and
efficient service based upon their familiarity with the Company, and whether the service could
enhance the Companys ability to manage or control risk or improve audit quality.
The audit committee has considered whether the provision of these services is compatible with
maintaining the principal accountants independence.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Companys executive officers
and directors, and persons who own more than 10% of the registered class of the Companys equity
27
securities, to file reports of ownership and changes in ownership with the Securities and
Exchange Commission (SEC). Such executive officers, directors and greater than 10% shareholders
are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they
file. The SEC requires public companies to disclose in their proxy statements whether persons
required to make such filings missed or made late filings. Based on a review of forms filed by its
reporting persons during the last fiscal year, the Company believes that they complied with the
reporting requirements of Section 16(a) of the Securities Exchange Act of 1934.
MISCELLANEOUS
It is important that proxies be returned promptly to avoid unnecessary expense. Therefore,
shareholders who do not expect to attend in person are urged, regardless of the number of shares of
stock owned, to date, sign and return the enclosed proxy promptly.
28
Appendix A
INFORMATION CONCERNING PERSONS WHO MAY BE DEEMED PARTICIPANTS IN
THE COMPANYS SOLICITATION OF PROXIES
The following sections (Directors and Nominees and Officers) set forth certain information
about our directors, nominees, and officers who, under the rules of the Securities and Exchange
Commission, are considered to be participants in our solicitation of proxies from our
shareholders in connection with our 2009 annual meeting of shareholders.
Directors and Nominees
The principal occupations of the Companys directors and nominees who may be deemed
participants in the Companys solicitation are set forth in the section of the proxy statement
entitled Proposal 1-Election of Directors. The business addresses of the Companys directors and director
nominee are as follows:
|
|
|
Name |
|
Business Address |
William R. Council, III
|
|
Advocat Inc. |
|
|
1621 Galleria Boulevard |
|
|
Brentwood, TN 37027 |
|
|
|
Richard M. Brame
|
|
Covington Senior Living, LLC |
|
|
8238 Mill Race Drive |
|
|
Ooltewah, TN 37363 |
|
|
|
William C. ONeil, Jr.
|
|
Private Investor |
|
|
5035 Hill Place Drive |
|
|
Nashville, TN 37205 |
|
|
|
Robert Z. Hensley |
|
Business Consultant |
|
|
4391 Old Bayou Trail
Destin, FL 32541-3423 |
|
|
|
Wallace E. Olson
|
|
Private Investor |
|
|
76 North Crest Road |
|
|
Chattanooga, TN 37404 |
|
|
|
Chad A. McCurdy
|
|
Marlin Capital Partners, LLC |
|
|
5429 LBJ Freeway, Suite 400 |
|
|
Dallas, TX 75240 |
A-1
Officers
William R. Council, III and L. Glynn Riddle, Jr. are the only executive officers or employees
of the Company who may be deemed participants in the Companys solicitation of proxies. The
principal
occupations of Mr. Council and Mr. Riddle are set forth under Executive Officers section of
the proxy statement. The business address for each of these persons is 1621 Galleria Boulevard,
Brentwood, Tennessee 37027.
Information Regarding Ownership of the Companys Securities by Participants
None of the persons listed above under Directors and Nominees and Officers owns any of the
Companys securities of record but not beneficially. The number of shares of common stock of the
Company held by the persons listed above under Directors and Nominees and Officers as of April
15, 2009, is set forth in the Security Ownership of Certain Beneficial Owners and Management
section of the proxy statement.
Information Regarding Transactions in the Companys Securities by Participants
The following table sets forth all transactions that may be deemed purchases and sales of
shares of our common stock by the individuals who are listed above under Directors and Nominees
and Officers between April 15, 2007 and April 15, 2009. Unless otherwise indicated, all
transactions were in the public market or pursuant to the Companys equity compensation plans and
none of the purchase price or market value of those shares is represented by funds borrowed or
otherwise obtained for the purpose of acquiring or holding such securities.
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Date |
|
Number of Shares |
|
Transaction Type |
Richard M. Brame |
|
|
3/14/2008 |
|
|
|
1,000 |
|
|
|
(1 |
) |
|
|
|
8/13/2008 |
|
|
|
2,000 |
|
|
|
(2 |
) |
|
|
|
11/12/2008 |
|
|
|
2,000 |
|
|
|
(2 |
) |
|
|
|
11/13/2008 |
|
|
|
2,000 |
|
|
|
(2 |
) |
|
|
|
11/20/2008 |
|
|
|
1,000 |
|
|
|
(2 |
) |
|
|
|
3/13/2009 |
|
|
|
1,000 |
|
|
|
(1 |
) |
|
|
|
3/30/2009 |
|
|
|
4,000 |
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
William R. Council, III |
|
|
8/15/2007 |
|
|
|
4,800 |
|
|
|
(2 |
) |
|
|
|
3/14/2008 |
|
|
|
6,870 |
|
|
|
(2 |
) |
|
|
|
3/14/2008 |
|
|
|
25,000 |
|
|
|
(1 |
) |
|
|
|
8/12/2008 |
|
|
|
3,650 |
|
|
|
(2 |
) |
|
|
|
11/12/2008 |
|
|
|
8,000 |
|
|
|
(2 |
) |
|
|
|
3/13/2009 |
|
|
|
25,000 |
|
|
|
(1 |
) |
|
|
|
3/13/2009 |
|
|
|
12,801.93 |
|
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert Z. Hensley |
|
|
3/14/2008 |
|
|
|
1,000 |
|
|
|
(1 |
) |
|
|
|
11/14/2008 |
|
|
|
4,000 |
|
|
|
(2 |
) |
|
|
|
3/13/2009 |
|
|
|
1,000 |
|
|
|
(1 |
) |
|
|
|
3/16/2009 |
|
|
|
2,000 |
|
|
|
(2 |
) |
A-2
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Date |
|
Number of Shares |
|
Transaction Type |
Chad A. McCurdy |
|
|
5/2/2007 |
|
|
|
17,600 |
|
|
|
(2 |
) |
|
|
|
5/3/2007 |
|
|
|
15,000 |
|
|
|
(2 |
) |
|
|
|
5/4/2007 |
|
|
|
27,400 |
|
|
|
(2 |
) |
|
|
|
5/18/2007 |
|
|
|
2,000 |
|
|
|
(2 |
) |
|
|
|
5/23/2007 |
|
|
|
18,000 |
|
|
|
(2 |
) |
|
|
|
5/24/2007 |
|
|
|
8,080 |
|
|
|
(2 |
) |
|
|
|
5/25/2007 |
|
|
|
800 |
|
|
|
(2 |
) |
|
|
|
5/29/2007 |
|
|
|
3,800 |
|
|
|
(2 |
) |
|
|
|
5/31/2007 |
|
|
|
2,500 |
|
|
|
(2 |
) |
|
|
|
6/1/2007 |
|
|
|
9,500 |
|
|
|
(2 |
) |
|
|
|
6/4/2007 |
|
|
|
10,000 |
|
|
|
(2 |
) |
|
|
|
6/5/2007 |
|
|
|
1,000 |
|
|
|
(2 |
) |
|
|
|
6/5/2007 |
|
|
|
10,000 |
|
|
|
(2 |
) |
|
|
|
6/8/2007 |
|
|
|
1,100 |
|
|
|
(2 |
) |
|
|
|
6/11/2007 |
|
|
|
400 |
|
|
|
(2 |
) |
|
|
|
6/12/2007 |
|
|
|
1,600 |
|
|
|
(2 |
) |
|
|
|
6/22/2007 |
|
|
|
3,100 |
|
|
|
(2 |
) |
|
|
|
6/25/2007 |
|
|
|
25,000 |
|
|
|
(2 |
) |
|
|
|
6/26/2007 |
|
|
|
9,220 |
|
|
|
(2 |
) |
|
|
|
6/27/2007 |
|
|
|
2,000 |
|
|
|
(2 |
) |
|
|
|
6/27/2007 |
|
|
|
500 |
|
|
|
(2 |
) |
|
|
|
6/28/2007 |
|
|
|
2,000 |
|
|
|
(2 |
) |
|
|
|
7/5/2007 |
|
|
|
5,000 |
|
|
|
(2 |
) |
|
|
|
7/20/2007 |
|
|
|
8,500 |
|
|
|
(2 |
) |
|
|
|
7/24/2007 |
|
|
|
13,000 |
|
|
|
(2 |
) |
|
|
|
2/8/2008 |
|
|
|
1,000 |
|
|
|
(2 |
) |
|
|
|
7/25/2007 |
|
|
|
1,500 |
|
|
|
(2 |
) |
|
|
|
5/14/2008 |
|
|
|
10,000 |
|
|
|
(2 |
) |
|
|
|
8/12/2008 |
|
|
|
12,000 |
|
|
|
(2 |
) |
|
|
|
8/13/2008 |
|
|
|
5,000 |
|
|
|
(2 |
) |
|
|
|
11/14/2008 |
|
|
|
25,000 |
|
|
|
(2 |
) |
|
|
|
11/20/2008 |
|
|
|
5,000 |
|
|
|
(2 |
) |
|
|
|
11/21/2008 |
|
|
|
5,200 |
|
|
|
(2 |
) |
|
|
|
11/25/2008 |
|
|
|
2,500 |
|
|
|
(2 |
) |
|
|
|
3/3/2009 |
|
|
|
15,000 |
|
|
|
(6 |
) |
|
|
|
3/13/2009 |
|
|
|
1,000 |
|
|
|
(1 |
) |
|
|
|
3/18/2009 |
|
|
|
257,500 |
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Wallace E. Olson |
|
|
5/15/2007 |
|
|
|
(5,000 |
) |
|
|
(4 |
) |
|
|
|
8/24/2007 |
|
|
|
(50,000 |
) |
|
|
(5 |
) |
|
|
|
9/19/2007 |
|
|
|
(50,000 |
) |
|
|
(5 |
) |
|
|
|
3/14/2008 |
|
|
|
1,000 |
|
|
|
(1 |
) |
|
|
|
8/12/2008 |
|
|
|
5,000 |
|
|
|
(2 |
) |
|
|
|
8/18/2008 |
|
|
|
5,000 |
|
|
|
(2 |
) |
|
|
|
11/18/2008 |
|
|
|
10,000 |
|
|
|
(2 |
) |
|
|
|
3/13/2009 |
|
|
|
1,000 |
|
|
|
(1 |
) |
A-3
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Date |
|
Number of Shares |
|
Transaction Type |
William C. ONeil, Jr. |
|
|
3/14/2008 |
|
|
|
1,000 |
|
|
|
(1 |
) |
|
|
|
12/11/2008 |
|
|
|
4,000 |
|
|
|
(2 |
) |
|
|
|
3/13/2009 |
|
|
|
1,000 |
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
L.
Glynn Riddle, Jr. |
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8/15/2007 |
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2,500 |
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(2 |
) |
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3/14/2008 |
|
|
|
2,800 |
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|
|
(2 |
) |
|
|
|
3/14/2008 |
|
|
|
10,000 |
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|
(1 |
) |
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|
|
8/12/2008 |
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|
|
2,000 |
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|
|
(2 |
) |
|
|
|
11/13/2008 |
|
|
|
3,650 |
|
|
|
(2 |
) |
|
|
|
3/13/2009 |
|
|
|
6,038.65 |
|
|
|
(3 |
) |
|
|
|
3/13/2009 |
|
|
|
10,000 |
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|
|
(1 |
) |
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|
(1) |
|
Acquired Stock settled stock appreciation rights grant |
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(2) |
|
Acquired Open market purchase |
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(3) |
|
Acquired Restricted stock unit grant |
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(4) |
|
Disposed Gift |
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(5) |
|
Disposed Open market sale of common stock |
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(6) |
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Acquired Stock options (right to buy) grant |
Miscellaneous Information Regarding Participants
Except as described in this Appendix A or the proxy statement, none of the participants
(i) beneficially owns (within the meaning of Rule 13d-3 under the Exchange Act), directly or
indirectly, any shares or other securities of our Company or any of our subsidiaries, (ii) has
purchased or sold any of such securities within the past two years or (iii) is, or within the past
year was, a party to any contract, arrangement or understanding with any person with respect to any
such securities. Except as disclosed in this Appendix A or the proxy statement, none of the
participants associates beneficially owns, directly or indirectly, any of our securities. Other
than as disclosed in this Appendix A or the proxy statement, neither the Company nor any of the
participants has any substantial interests, direct or indirect, by security holding or otherwise,
in any matter to be acted upon at the annual meeting or is or has been within the past year a party
to any contract, arrangement or understanding with any person with respect to any of our
securities, including, but not limited to, joint ventures, loan or option agreements, puts or
calls, guarantees against loss or guarantees of profit, division of losses or profits or the giving
or withholding of proxies. Except as described in this Appendix A or the proxy statement, none of
the Company, the participants nor any of their associates has had or will have a direct or indirect
material interest in any transaction or series of similar transactions since the beginning of our
last fiscal year or any currently proposed transactions, or series of similar transactions, to
which the Company or any of its subsidiaries was or is to be a party in which the amount involved
exceeds $120,000.
Other than as set forth in this Appendix A or the proxy statement, to our knowledge, none of
the Company, any of the participants nor any of their associates has any arrangements or
understandings with any person with respect to any future employment by us or our affiliates or
with respect to any future transactions to which we or any of our affiliates will or may be a
party.
A-4
Preliminary
Proxy
Card
Electronic Voting Instructions
You can vote by Internet or telephone!
Available 24 hours a day, 7 days a week!
Instead of mailing your proxy, you may choose one of the two voting methods outlined below to
vote your proxy.
Proxies submitted by the Internet or telephone must be received by 11:59 p.m., Central Time,
on May 28, 2009.
Vote by Internet
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Log on to the Internet and go to www.investorvote.com/AVCA |
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Follow the steps outlined on the secured website. |
Vote by telephone
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Call toll free
1-800-652-VOTE (8653) within the United
States, Canada & Puerto Rico any time on a touch tone telephone. There is NO CHARGE to you for
the call. |
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Follow the instructions provided by the recorded message. |
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Using a black ink pen, mark your votes with an X as shown in
this example. Please do not write outside the designated areas.
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x |
Annual Meeting Proxy Card
IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE
BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
A. Proposals The Board of Directors recommends a vote FOR Proposal 1.
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1. |
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Proposal to elect as directors of the Company the following persons to hold office until the
annual meeting of stockholders to be held in 2012 or until their successors have been duly
qualified and elected. |
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For
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Withhold
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01 William R. Council, III
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o |
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o |
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02 Richard M. Brame
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o |
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o |
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In their discretion,
the proxies are also authorized to vote upon such other matters as may properly
come before the meeting, and at any adjournment or postponement
thereof. |
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B. Authorized Signatures This section must be completed for your vote to be counted. Date and Sign Below
Signatures of Shareholder(s) should correspond exactly with the name printed hereon. Joint owners
should each sign personally. Executors, administrators, trustees, etc., should give full title and
authority.
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Date (mm/dd/yyyy) - Please print date below.
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Signature
1 - Please keep signature within the box.
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Signature 2 - Please keep signature within the box. |
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Preliminary
Proxy
Card
YOUR VOTE IS IMPORTANT
Regardless of whether you plan to attend the Annual Meeting
of Shareholders, you can be sure your shares are represented
at the meeting by promptly returning your proxy in the
enclosed envelope.
IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE
BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
Annual Meeting of Shareholders, May 29, 2009
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints William R. Council, III and L. Glynn Riddle, Jr. and each of them,
as proxies, each with power of substitution, to vote all shares of the undersigned at the annual
meeting of the shareholders of Advocat Inc., to be held on Friday, May 29, 2009, at 9:00 a.m.
Central Daylight Time, at the Companys offices, 1621 Galleria Boulevard, Brentwood, Tennessee
37027 and at any adjournments or postponements thereof, in accordance with the instructions on the
reverse.
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THE SHARES
WILL BE VOTED FOR PROPOSAL 1.
PLEASE SIGN AND DATE ON THE REVERSE SIDE AND RETURN PROMPTLY