Item 5.02 Departure of Directors or Certain Officers; Election
of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
(e)
Entry into Material Contract with Named Executive
Officer and Compensatory Arrangements of Certain Officers.
2019 Annual Equity Incentive Awards
On March 5, 2019, the Board of Directors
(the “
Board
”) of the Company approved the recommendations of the Compensation Committee of the Board with respect
to the 2019 Annual Performance-Based, Long-Term Incentive Plan (“
LTIP
”) Awards (the “
Annual Awards
”),
which may be granted to the executive officers of the Company and other employees of the external manager of the Company (the “
Manager
”)
who perform services for the Company. The Annual Awards will be granted pursuant to the Company’s 2016 Equity Incentive Plan
(the “
2016 Plan
”).
The Annual Awards that may be granted to
the named executive officers of the Company are described below.
|
Name
|
|
Title
|
|
2019
Annual
Award
Target
|
|
|
Number of
Target
Annual
Award
Units(1)
|
|
|
Jeffrey Busch
|
|
Chief Executive Officer, Chairman of the Board & President
|
|
$
|
180,000
|
|
|
|
17,875
|
|
|
Alfonzo Leon
|
|
Chief Investment Officer
|
|
$
|
150,000
|
|
|
|
14,896
|
|
|
Robert Kiernan
|
|
Chief Financial Officer and Treasurer
|
|
$
|
150,000
|
|
|
|
14,896
|
|
|
Jamie Barber
|
|
General Counsel and Secretary
|
|
$
|
120,000
|
|
|
|
11,917
|
|
|
Allen Webb
|
|
SVP, SEC Reporting and Technical Accounting
|
|
$
|
110,000
|
|
|
|
10,924
|
|
|
|
(1)
|
The number of target LTIP Units comprising each Annual Award is based on the closing price of the Company’s common stock reported on the New York Stock Exchange on the date of approval (March 5, 2019), rounded to the next highest whole LTIP Unit to eliminate fractional units.
|
The Annual Awards will be subject to the
terms and conditions of LTIP Annual Award Agreements (“
LTIP Annual Award Agreements
”) between the Company and
each grantee in the form attached hereto as
Exhibit 99.2
, which is incorporated herein by reference. Terms not otherwise
defined herein have the meanings assigned to them in the LTIP Annual Award Agreements.
The Compensation Committee established
performance goals for calendar year 2019 (the “
Annual Performance Period
”) as set forth in Exhibit A to the
LTIP Annual Award Agreements (the “
Performance Goals
”) that will be used to determine the number of LTIP Units
earned by each grantee under each LTIP Annual Award Agreement. As soon as reasonably practicable following the last day of the
Annual Performance Period, the Compensation Committee will determine the extent to which the Company has achieved each of the Performance
Goals (expressed as a percentage) and, based on such determination, will calculate the number of Earned LTIP Units that each grantee
is entitled to receive based on the applicable Performance Percentages described in Exhibit A to the LTIP Annual Award Agreement.
Any Annual Award LTIP Units that are not earned will not be granted, and the grantee will have no right in or to any such unearned
LTIP Units after it is determined that they were not earned.
The number of Earned LTIP Units issuable
to each grantee under the LTIP Annual Award Agreement will be determined by dividing the total number of Annual Award Target LTIP
Units into four performance areas as shown in the table below (each a “
Component
”) and multiplying the number
of Target Annual Award LTIP Units allocated to each Component by the applicable Performance Percentage described underneath the
table below based on the extent to which the Performance Goal for each such Component is achieved.
Target No. of
LTIP Units
|
|
Component
|
|
Performance Goal
|
|
25% of total Target LTIP Units
|
|
Acquisitions including (i) closed acquisitions during 2019 and (ii) acquisitions placed under definitive purchase contract on or before December 31, 2019 and closed by February 28, 2020.
|
|
Threshold
: $100 million
Target
: $150 million
Maximum
: $200 million
|
|
|
|
|
|
|
|
25% of total Target LTIP Units
|
|
AFFO per share for the year ended December 31, 2019, as reported by the Company in its year-end earnings announcement for the year ended December 31, 2019.
|
|
Threshold
: $0.78 per share
Target
: $0.80 per share
Maximum
: $0.84 per share
|
|
25% of total Target LTIP Units
|
|
Average quarterly Consolidated Leverage Ratio (as defined in the Company’s Amended and Restated Credit Agreement) (based on each fiscal quarter end).
|
|
Threshold
: 54.99%
Target
: 52.50%
Maximum
: 49.99%
|
|
|
|
|
|
|
|
25% of total Target LTIP Units
|
|
Discretionary Component
|
|
Entirely at the discretion of the Committee based on the Committee’s assessment of the grantee’s individual performance in areas the Committee deems in its discretion to be important based on the grantee’s job duties and position within the organization.
|
Performance Percentages
|
|
(i)
|
If the Company does not achieve the Threshold Goal in a particular Component in the above table, all of the Annual Award LTIP Units for that Component will be forfeited.
|
|
|
(ii)
|
If the Company achieves the Threshold Goal in a particular Component in the above table, the number of Earned LTIP Units in that Component will be equal to 50% of the number of Target Annual Award LTIP Units for that Component.
|
|
|
(iii)
|
If the Company achieves the Target Goal in a particular Component in the above table, the number of Earned LTIP Units in that Component will be equal to 100% of the number of Target Annual Award LTIP Units for that Component.
|
|
|
(iv)
|
If the Company achieves or exceeds the Maximum Goal in a particular Component in the above table, the number of Earned LTIP Units for that Component will be equal to 150% of the number of Target Annual Award LTIP Units for that Component.
|
For achievement of a Performance Goal at
an intermediate point between the Threshold Goal and the Target Goal or between the Target Goal and the Maximum Goal for any Component,
the number of Earned LTIP Units for that Component will be interpolated on a straight-line basis between 50% and 100% or between
100% and 150%, respectively, of the target number of Annual Award LTIP Units allocated to that Component. Fractional LTIP Units
will be rounded to the next highest whole LTIP Unit.
LTIP Units that have been earned based
on performance as described above are subject to forfeiture restrictions that will lapse (“
vesting
”) in the
following amounts and on the following vesting dates subject to the continuous service of the grantee through and on the applicable
vesting date:
(i) 50%
of the Earned LTIP Units will become vested, and cease to be subject to forfeiture, as of the date in 2020 on which the Board approves
the number of Earned LTIP Units to be awarded pursuant to the Components listed above (the “
Annual Award Valuation Date
”);
and
(ii) 50%
of the Earned LTIP Units become vested, and cease to be subject to forfeiture, on the first anniversary of the Annual Award Valuation
Date.
Vesting will accelerate in the event of
a termination of the executive’s position without Cause or for Good Reason, as a result of death or Disability, or as a result
of the grantee’s Retirement or upon a Change of Control. Unvested LTIP Awards will be forfeited in the event of any other
termination event.
Distributions
Pursuant to the LTIP Annual Award Agreements,
distributions equal to the dividends declared and paid by the Company will accrue during the applicable period on the maximum number
of LTIP Units that the grantee could earn (if applicable) and are paid with respect to all of the Earned LTIP Units at the conclusion
of the applicable period, in cash or by the issuance of additional LTIP Units at the discretion of the Compensation Committee.
The foregoing summary of the LTIP Annual
Award Agreement is qualified in its entirety by reference to the form of agreement filed herewith as
Exhibit 99.2
.
Long-Term Awards
On March 5, 2019, the Board approved the
recommendations of the Compensation Committee of the Board with respect to the granting of 2019 Long-Term Performance-Based Incentive
LTIP Awards (the “
Long-Term Performance Awards
”) and Long-Term Time-Based Incentive LTIP Awards (the “
Long-Term
Time-Based Awards
” and, together with the Long-Term Performance Awards, the “
Long-Term Awards
”) to
the executive officers of the Company and other employees of the Manager who perform services for the Company. The Awards were
granted pursuant to the 2016 Plan.
The Awards granted are described below.
|
Name
|
|
Title
|
|
2019 Long-Term
Performance
Award
Target
|
|
|
Number of
Target
Long-Term
Performance
Award Units
|
|
2019 Long-
Term Time-
Based
Award
|
|
|
Number of
Long-Term
Time-
Based
Award
Units
|
|
|
Jeffrey Busch
|
|
Chief Executive Officer,
Chairman of the Board & President
|
|
$
|
138,000
|
|
|
13,849
|
|
$
|
92,000
|
|
|
|
9,136
|
|
|
Alfonzo Leon
|
|
Chief Investment Officer
|
|
$
|
126,000
|
|
|
12,645
|
|
$
|
84,000
|
|
|
|
8,342
|
|
|
Robert Kiernan
|
|
Chief Financial Officer
|
|
$
|
96,000
|
|
|
9,634
|
|
$
|
64,000
|
|
|
|
6,356
|
|
|
Jamie Barber
|
|
General Counsel and Secretary
|
|
$
|
84,000
|
|
|
8,430
|
|
$
|
56,000
|
|
|
|
5,561
|
|
|
Allen Webb
|
|
SVP, SEC Reporting and
Technical Accounting
|
|
$
|
78,000
|
|
|
7,828
|
|
$
|
52,000
|
|
|
|
5,164
|
|
The number of target LTIP Units comprising each Long-Term
Performance-Based Award is based on the fair value of the Long-Term Performance-Based Awards as determined by an independent
valuation consultant, in each case rounded to the next whole LTIP Unit to eliminate fractional units.
The Long-Term Performance-Based Awards
will be subject to the terms and conditions of LTIP Long-Term Performance-Based Award Agreements (“
LTIP Long-Term Performance-Based
Award Agreements
”) between the Company and each grantee in the form attached hereto as
Exhibit 99.3
, which
is incorporated herein by reference. Terms not otherwise defined herein have the meanings assigned to them in the LTIP Long-Term
Performance-Based Award Agreements.
The number of Earned LTIP Units that each
grantee is entitled to receive under the LTIP Long-Term Performance-Based Award Agreements will be determined following the conclusion
of a three-year performance period (the “
Long-Term Performance Period
”) based on the Company’s Total Shareholder
Return (“
TSR
”) on both an absolute basis (“
Absolute TSR Component
”) (representing 75% of
the target Long-Term Performance-Based Award) and relative to the companies comprising the SNL U.S. Healthcare REIT Index (“
Relative
TSR Component
”) (representing 25% of the target Long-Term Performance-Based Award) during the Long-Term Performance Period.
Grantees will not be entitled to receive any LTIP Units except to the extent they are earned upon the end of the Long-Term Performance
Period in accordance with the terms and conditions of the LTIP Long-Term Performance-Based Award Agreements. Long-Term Performance-Based
Award LTIP Units that are not earned will be forfeited and cancelled and unvested Earned LTIP Units will be subject to forfeiture
prior to vesting as set forth below.
The number of LTIP Units earned under the
Absolute TSR Component of the Long-Term Performance-Based Awards will be determined as soon as reasonably practicable following
the earlier of (a) the calendar day immediately preceding the third anniversary of March 5, 2019, or (b) the date upon which a
Change of Control occurs (the “
Long-Term Valuation Date
”), by multiplying the total target number of Long-Term
Performance-Based Award LTIP Units by 75% and then multiplying such product by the applicable Percentage of Absolute TSR Component
Earned based on the Company’s Total Shareholder Return as shown below:
|
TSR
|
|
|
Percentage
of Absolute
TSR Component Earned
|
|
|
|
|
|
|
|
|
|
21
|
%
|
|
|
50
|
%
|
|
|
|
|
|
|
|
|
|
|
27
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
33
|
%
|
|
|
200
|
%
|
The Absolute TSR Component will be forfeited
in its entirety if the TSR is less than 21%. If the TSR is between 21% and 27%, or between 27% and 33%, the percentage of the Absolute
TSR Component earned will be determined using linear interpolation as between those tiers, respectively.
The number of Long-Term Performance-Based
Award LTIP Units earned under the Relative TSR Component will be determined as soon as reasonably practicable following the Long-Term
Valuation Date by multiplying the number of Award LTIP Units by 25% and then multiplying such product by the applicable Percentage
of Relative TSR Component Earned based on the Company’s Relative Performance as shown below:
|
Relative Performance
|
|
Percentage of Relative
TSR Component Earned
|
|
|
|
|
|
|
|
TSR equal to the 35
th
percentile of Peer Companies
|
|
|
50
|
%
|
|
|
|
|
|
|
|
TSR equal to the 55
th
percentile of Peer Companies
|
|
|
100
|
%
|
|
|
|
|
|
|
|
TSR equal to or greater than the 75
th
percentile of Peer Companies
|
|
|
200
|
%
|
The Relative TSR Component will be forfeited
in its entirety if the Relative Performance is below the 35th percentile of Peer Companies. If the Relative Performance is between
the 35th percentile and 55th percentile of Peer Companies, or between the 55th percentile and 75th percentile of Peer Companies,
the percentage of the Relative TSR Component earned will be determined using linear interpolation as between those tiers, respectively.
As soon as practicable following the Long-Term
Valuation Date, the Compensation Committee will determine the number of LTIP Units earned by each grantee under both the Absolute
TSR Component and the Relative TSR Component. Any Award LTIP Units that are not earned as set forth above will be forfeited, and
the grantee will have no right in or to any such unearned and unissued LTIP Units after it is determined that they were not earned.
Units that have been earned based on performance
as provided above are subject to forfeiture restrictions that vest in the following amounts and on the following vesting dates
subject to the continuous service of the grantee through and on the applicable vesting date:
(i) 50% of
the Earned LTIP Units become vested, and cease to be subject to forfeiture, as of the Long-Term Valuation Date; and
(ii) 50% of
the Earned LTIP Units become vested, and cease to be subject to forfeiture, on the first anniversary of the Long-Term Valuation
Date.
Vesting will accelerate in the event of
a termination of the executive’s position without Cause or for Good Reason, as a result of death or Disability, or as a result
of the grantee’s Retirement or upon a Change of Control. Unvested LTIP Awards will be forfeited in the event of any other
termination event.
Long-Term Time-Based Awards
The Long-Term Time-Based Awards will be
subject to the terms and conditions of LTIP Unit Award Agreements (“
LTIP Unit Award Agreements,
” and, together
with the LTIP Long-Term Performance-Based Award Agreements, the “
Award Agreements
”) between the Company and
each grantee in the form filed as exhibit herewith as
Exhibit 99.4
, which is incorporated herein by reference. Long-Term
Time-Based Awards become vested, and cease to be subject to forfeiture, in equal one-third increments on each of the first, second
and third anniversaries of the date of grant (March 5, 2019).
Distributions
Pursuant to the LTIP Long-Term Performance-Based
Award Agreements, distributions equal to the dividends declared and paid by the Company will accrue during the applicable period
on the maximum number of LTIP Units that the grantee could earn (if applicable) and are paid with respect to all of the Earned
LTIP Units at the conclusion of the applicable period, in cash or by the issuance of additional LTIP Units at the discretion of
the Compensation Committee.
The foregoing summaries of the LTIP Long-Term
Performance-Based Award Agreements are qualified in their entirety by reference to the forms of agreement filed herewith as
Exhibits
99.3
and
99.4
.
Director Compensation
On March 5, 2019, the Board also approved the following annual
compensation amounts for its independent directors for the year beginning with the 2019 annual meeting of the Company’s stockholders:
|
Independent Director Compensation
|
|
|
|
Annual Cash Retainer
|
|
$40,000, payable quarterly in arrears
|
|
Annual Equity Award
|
|
$40,000, granted on the date of the annual meeting upon election of the grantee as a director and payable as a number of LTIP Units based on the average closing price of the Company’s common stock as reported on the NYSE during the 10 trading days preceding the date of the annual meeting and subject to forfeiture restrictions that will lapse on the first anniversary of the grant date subject to continued service as a director through such vesting date.
|
|
|
|
|
|
Independent Committee Member Compensation
|
|
|
|
Annual Cash Retainer
|
|
Audit Committee: $7,500
Compensation Committee: $5,000
Nominating & Corporate Governance Committee: $3,500
Investment Committee: $7,500
All payable quarterly in arrears
|
|
Annual Cash Retainer for Chair
|
|
Audit Committee Chair: $15,000
Compensation Committee Chair: $10,000
Nominating & Corporate Governance Committee Chair: $7,000
Investment Committee Chair: $15,000
All payable quarterly in arrears
|
|
|
|
|
|
Lead Independent Director Compensation
|
|
|
|
Annual Cash Retainer
|
|
$15,000, payable quarterly in arrears
|