UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K/A
(Amendment No. 1)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2019
or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number 001-32641
BROOKDALE SENIOR LIVING INC.
(Exact name of registrant as specified in its charter)
Delaware (State or Other Jurisdiction of Incorporation or Organization) |
20-3068069 (I.R.S. Employer Identification No.) |
111 Westwood Place, | Suite 400, | Brentwood, | Tennessee | 37027 | ||||
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number including area code | (615) 221-2250 |
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, $0.01 Par Value Per Share | BKD | New York Stock Exchange |
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth company in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒ |
Accelerated filer ☐ |
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Non-accelerated filer ☐ |
Smaller reporting company ☐ |
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Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of common stock held by non-affiliates of the registrant on June 28, 2019, the last business day of the registrants most recently completed second fiscal quarter was approximately $1.4 billion. The market value calculation was determined using a per share price of $7.21, the price at which the registrants common stock was last sold on the New York Stock Exchange on such date. For purposes of this calculation only, shares held by non-affiliates excludes only those shares beneficially owned by the registrants executive officers, directors and stockholders owning 10% or more of the Companys outstanding common stock.
As of April 24, 2020, 183,164,490 shares of the registrants common stock, $0.01 par value, were outstanding (excluding restricted shares and restricted stock units).
Explanatory Note
This Amendment No. 1 on Form 10-K/A (this Amendment) amends the Annual Report on Form 10-K for Brookdale Senior Living Inc. (Brookdale, the Company, we, or our) for the fiscal year ended December 31, 2019, which was filed with the Securities and Exchange Commission (the SEC) on February 19, 2020 (the Original Filing).
We are filing this Amendment to include the information required by Part III and not included in the Original Filing, as we will not file our definitive proxy statement within 120 days of the end of our fiscal year ended December 31, 2019. The reference on the cover page of the Original Filing to our incorporation by reference of certain sections of our definitive proxy statement into Part III of the Original Filing is hereby deleted.
Except as set forth in Part III below and the updates to the List of Exhibits, no other changes are made to the Original Filing. The Original Filing continues to speak as of the date of the Original Filing. Unless expressly stated, this Amendment does not reflect events occurring after the filing of the Original Filing, nor does it modify or update in any way the disclosures contained in the Original Filing. Accordingly, this Amendment should be read in conjunction with the Original Filing and our other filings with the SEC.
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Item 10. Directors, Executive Officers and Corporate Governance.
Information Concerning Directors
The Companys Board of Directors (the Board) consists of nine directors and is currently divided into three classes. We are in the process of declassifying the Board using a phased approach set forth in amendments to our Certificate of Incorporation approved by stockholders at the 2018 and 2019 annual meetings of stockholders. As a result of such amendments, our Certificate of Incorporation currently provides that the terms of the Class I and Class II directors will expire at the annual meeting of stockholders to be held in 2020, the terms of the Class III directors will expire at the annual meeting of stockholders to be held in 2021, and all director nominees standing for election at or after the 2019 annual meeting of stockholders will be elected to hold office for a term of one year. See Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters below for a description of securities beneficially owned by our directors.
Guy P. Sansone
Non-Executive Chairman & Class II
Director Since: October 2019
Age: 55
Public Company Directorships:
Magellan Health, Inc.
Civitas Solutions, Inc.
Rotech Healthcare Inc.
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Mr. Sansone joined Brookdales Board in October 2019 and became Non-Executive Chairman of the Board in January 2020. For more than 25 years, he has led efforts to optimize the performance of healthcare and senior housing companies. Mr. Sansone has served as Chairman and CEO of H2 Health, a leading regional provider of physical rehabilitation services and clinician staffing solutions, since February 2020. Prior to that, he served as a Managing Director of Alvarez & Marsal, a global professional services firm specializing in performance improvement for large, high profile businesses, where he served as Chairman of the firms Healthcare Industry Group, which he founded in 2004. Mr. Sansone also served as interim Chief Executive Officer of the Visiting Nurse Service of New York, the largest non-profit home and community-based health care organization in the United States, from November 2014 to December 2016 and, prior to that, served in various executive roles at numerous healthcare companies. His prior experience in the senior housing industry includes having served as Chief Restructuring Officer and a member of the Board of Erickson Retirement Communities and as a senior consultant to Sunrise Senior Living. Mr. Sansone has served on the Board of Directors of Magellan Health, Inc. since March 2019 and previously served on the Board of Directors of Civitas Solutions, Inc. from 2009 until its acquisition in March 2019. He also serves and has served on the Boards of Directors of numerous investor-owned and not-for-profit companies, primarily in the healthcare industry. Mr. Sansone earned a B.S. in Economics from the State University of New York at Albany.
Mr. Sansones executive, senior advisory and board leadership of public and private organizations, including his extensive service to companies in the healthcare and senior housing industries, led to the conclusion that he should serve as a member of the Board.
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Lucinda M. Baier
Class I Director, President and Chief
Director Since: February 2018
Age: 55
Public Company Directorships:
The Bon-Ton Stores, Inc.
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Ms. Baier has served as Brookdales President and Chief Executive Officer and as a member of the Board since February 2018, after having served as Brookdales Chief Financial Officer since December 2015. Ms. Baier joined Brookdale from Navigant Consulting, Inc., a specialized global expert services firm, where she served as Executive Vice President and Chief Financial Officer since 2013. In addition, Ms. Baier has had multi-billion dollar operations responsibility, been the chief executive officer for a publicly-traded retailer, and served as an executive officer of a Fortune 30 company. Ms. Baier currently serves as a member of the Board of Directors of the National Investment Center for the Seniors Housing & Care Industry (NIC) and the Nashville Health Care Council where she chairs its finance and investment committee. Ms. Baier is a Certified Public Accountant and a graduate of Illinois State University, with B.S. and M.S. degrees in Accounting.
Ms. Baiers appointment as the Companys President and Chief Executive Officer after demonstrating her abilities as a change-oriented executive as our Chief Financial Officer and in multiple leadership roles at other companies led to the conclusion that she should serve as a member of the Board.
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Jordan R. Asher, MD, MA
Class II Independent Director
Director Since: February 2020
Age: 55 |
Dr. Asher brings more than 20 years of expertise and a history of success in large matrixed, mission-based, national healthcare systems. Since 2018, he has served as the Chief Physician Executive and Senior Vice President of Sentara Healthcare, a large integrated delivery health system including a clinically integrated network and insurance company serving Virginia and North Carolina, where he has a wide range of responsibilities, including a focus on growth strategies for clinical care and development and implementation of value-based care and payment models. Prior to Sentara, Dr. Asher served in several executive roles with Ascension since 2006, including Chief Clinical Officer of its Ascension Care Management subsidiary from 2016 to 2018 with responsibility for network development and population and risk management, Chief Clinical Officer and Chief Innovation Officer of Ascensions MissionPoint Health Partners subsidiary from 2015 to 2016, and Chief Medical Officer and Chief Integration Officer of MissionPoint Health Partners from 2011 to 2015. Dr. Asher earned a B.S. in Biology from Emory University, an M.D. from Vanderbilt University School of Medicine, and an M.S. in Medical Management from the University of Texas at Dallas and Southwestern Medical Center.
Dr. Ashers deep experience in the evolving healthcare landscape, including a combination of clinical training and executive leadership experience, particularly in light of the healthcare industrys transition to more integrated, value-based delivery and payment models as we continue to grow and integrate our healthcare services business, led to the conclusion that he should serve as a member of the Board.
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Marcus E. Bromley
Class III Independent Director
Director Since: July 2017
Age: 70
Brookdale Board Committees: Audit Investment
Public Company Directorships:
Cole Credit Property Trust V, Inc.
Cole Corporate Income Trust, Inc.
Cole Credit Property Trust II, Inc.
Cole Credit Property Trust III, Inc.
Gables Residential Trust
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Mr. Bromley brings more than 35 years of real estate industry leadership experience. He served as Chairman of the Board and Chief Executive Officer of Gables Residential Trust from 1993 until 2000, and then as a member of its Board until the company was acquired in 2005. Prior to joining Gables Residential Trust, Mr. Bromley was a division partner for the Southeast operation of Trammell Crow Residential Company. Mr. Bromley has served as a member of the Board of Cole Credit Property Trust V, Inc., a non-listed real estate investment trust, since March 2015 and served as its Non-Executive Chairman from June 2015 to August 2018. Mr. Bromley also currently serves as a member of the advisory board of Nancy Creek Capital Management, LLC, a private mezzanine debt and equity investment firm, and Sealy Industrial Partners, a private partnership specializing in the acquisition and operation of various industrial real estate properties. Mr. Bromley holds a B.S. in Economics from Washington & Lee University and an M.B.A. from the University of North Carolina.
Mr. Bromleys significant executive, leadership, and advisory experience in the real estate industry led to the conclusion that he should serve as a member of the Board.
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Frank M. Bumstead
Class I Independent Director
Director Since: August 2006
Age: 78
Brookdale Board Committees: Compensation (Chair) Nominating & Corporate Governance
Public Company Directorships:
Syntroleum Corporation
American Retirement Corp.
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Mr. Bumstead has over 40 years experience in the field of business and investment management and financial and investment advisory services, including representing buyers and sellers in a number of merger and acquisition transactions. Mr. Bumstead is a principal shareholder of Flood, Bumstead, McCready & McCarthy, Inc., a business management firm that represents artists, songwriters and producers in the music industry as well as athletes and other high net worth clients, and has been with the firm since 1989. From 1993 to December 1998, Mr. Bumstead served as the Chairman and Chief Executive Officer of FBMS Financial, Inc., a registered investment advisor. He served in 2015 as Chairman of the Board of Directors of the Country Music Association and is also Vice Chairman of the Board of Directors and Chairman of the Finance and Investment Committee of the Memorial Foundation, Inc., a charitable foundation. In addition, he previously served as a member of the Board of Advisors of United Supermarkets of Texas, LLC and was Chairman of its Finance and Audit Committee. Mr. Bumstead received a B.B.A. degree from Southern Methodist University and a Masters of Business Management from Vanderbilt Universitys Owen School of Management.
Mr. Bumsteads experience in business management and as a director of several public companies, along with his knowledge of the senior housing industry (through his prior service as a director of ARC), led to the conclusion that he should serve as a member of the Board.
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Victoria L. Freed
Class II Independent Director
Director Since: October 2019
Age: 63
Brookdale Board Committees: Compensation Nominating & Corporate Governance
Public Company Directorships:
ILG, Inc. (f/k/a Interval Leisure
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Ms. Freed brings more than 25 years of executive leadership in the areas of sales, customer service, and marketing, and has earned numerous awards for outstanding achievement in sales and marketing during her career. Ms. Freed is Senior Vice President of Sales, Trade Support and Service for Royal Caribbean International, having served in that role since 2008, where she oversees the largest sales team in the cruise line industry and also manages the companys consumer outreach, reservations, group sales, and customer service functions. Prior to her service with Royal Caribbean, Ms. Freed worked for 29 years with Carnival Cruise Lines, where she served as Senior Vice President of Sales and Marketing during the last 15 years of her tenure. Ms. Freed served on the Board of Directors of ILG, Inc. (f/k/a Interval Leisure Group, Inc.) from 2012 until its acquisition by Marriott Vacations Worldwide in 2018. She is a trustee of the United Way of Miami-Dade County and serves as a member of the board of Jewish Adoption and Foster Care Options (JAFCO). Ms. Freed earned a bachelors degree in business with an emphasis in marketing from the University of Colorado.
Ms. Freeds decades of executive leadership in sales, customer service and marketing in the hospitality industry led to the conclusion that she should serve as a member of the Board.
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Rita Johnson-Mills
Class III Independent Director
Director Since: August 2018
Age: 61
Brookdale Board Committees:
Nominating & Corporate
Investment
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Ms. Johnson-Mills is an experienced healthcare executive, with more than 20 years of experience in the broader healthcare industry, including experience in the public sector. She is founder and CEO of consulting firm RJM Enterprises. Ms. Johnson-Mills most recently served from August 2014 to December 2017 as President and Chief Executive Officer of UnitedHealthcare Community Plan of Tennessee, a health plan serving more than 500,000 government sponsored healthcare consumers with over $2.5 billion of annual revenue, after having previously served as Senior Vice President, Performance Excellence and Accountability for UnitedHealthcare Community & State since 2006. Ms. Johnson-Mills also previously served as the Director of Medicaid Managed Care for the Centers for Medicare and Medicaid Services and as Chief Executive Officer of Managed Health Services Indiana and Buckeye Health Plan, wholly owned subsidiaries of Centene Corporation. Ms. Johnson-Mills earned a B.S. degree from Lincoln University and an M.A. degree in Labor and Human Resource Management and M.P.A. degree in Public Policy and Management from The Ohio State University.
Ms. Johnson-Mills experience as an executive in the healthcare space, including her expertise in healthcare operations and strategy, led to the conclusion that she should serve as a member of the Board.
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Denise W. Warren
Class III Independent Director
Director Since: October 2018
Age: 58
Brookdale Board Committees: Audit (Chair) Compensation
Public Company Directorships:
Computer Programs and Systems, Inc.
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Ms. Warren brings more than 30 years of operational, financial, and healthcare experience. Since October 2015, she has served as Executive Vice President and Chief Operating Officer of WakeMed Health & Hospitals, where she is responsible for the strategic, financial and operational performance of the organizations network of facilities in the North Carolina Research Triangle area. Prior to that, from 2005 to September 2015, Ms. Warren served as Chief Financial Officer of Capella Healthcare, Inc., an owner and operator of general acute-care hospitals, as well as its Executive Vice President since January 2014, and as its Senior Vice President prior to that. Before joining Capella, she served as Senior Vice President and Chief Financial Officer of Gaylord Entertainment Company from 2000 to 2001, as Senior Equity Analyst and Research Director for Avondale Partners LLC, and as Senior Equity Analyst for Merrill Lynch & Co. Ms. Warren earned a B.S. degree in Economics from Southern Methodist University and an M.B.A. from Harvard University.
Ms. Warrens extensive executive, financial, and operational experience in the healthcare and other industries led to the conclusion that she should serve as a member of the Board.
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Lee S. Wielansky
Class I Independent Director
Director Since: April 2015
Age: 68
Brookdale Board Committees: Audit Investment (Chair)
Public Company Directorships:
Acadia Realty Trust
Isle of Capri Casinos, Inc.
Pulaski Financial Corp.
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Mr. Wielansky has more than 40 years of commercial real estate investment, management, and development experience. He currently serves as Chairman and CEO of Opportunistic Equities, which specializes in low income housing. He has also served as Chairman and CEO of Midland Development Group, Inc., which he re-started in 2003 and focused on the development of retail properties in the midwest and southeast. Prior to Midland, he served as President and CEO of JDN Development Company, Inc. and as a director of JDN Realty Corporation. Before joining JDN, he served as Managing DirectorInvestments of Regency Centers Corporation, which in 1998 acquired Midland Development Group, a retail properties development company co-founded by Mr. Wielansky in 1983. Mr. Wielansky served as Brookdales Non-Executive Chairman of the Board from February 2018 through December 2019. He received a bachelors degree in Business Administration, with a major in Real Estate and Finance, from the University of MissouriColumbia, where he is currently a member of the Strategic Development Board of the College of Business. He also serves on the Board of Directors of The Foundation for Barnes-Jewish Hospital.
Mr. Wielanskys real estate investment, management, and development experience, as well as his service as a director of several public companies, led to the conclusion that he should serve as a member of the Board.
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Audit Committee
We have a separately-designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the Exchange Act). The Audit Committee is currently chaired by Ms. Warren and also consists of Messrs. Bromley and Wielansky. All members are independent directors as defined under the listing standards of the New York Stock Exchange (NYSE) and under section 10A(m)(3) of the Exchange Act, and the Board has determined that each of Ms. Warren and Messrs. Bromley and Wielansky is an audit committee financial expert as defined by the rules of the SEC. No member of the Audit Committee simultaneously serves on the audit committees of more than three public companies.
Corporate Governance
The Board has adopted Corporate Governance Guidelines setting forth the expectations and standards the Board has with respect to the role, size, and composition of the Board and its committees, the functioning of the Board and its committees, evaluation of the Board and its committees, director compensation, succession planning, and other matters. The Board also has adopted a Code of Business Conduct and Ethics that applies to all employees, directors, and officers, as well as a Code of Ethics for Chief Executive and Senior Financial Officers, which applies to our President and Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, and Treasurer. These guidelines and codes are available on our website at www.brookdale.com/investor. Any amendment to, or waiver from, a provision of such codes of ethics granted to a principal executive officer, principal financial officer, principal accounting officer, or controller, or person performing similar functions, or to any executive officer or director, will be posted on our website.
Stockholder Proposals and Nominations for 2020 Annual Meeting
There have been no material changes to the procedures by which stockholders may recommend nominees to the Board as described in our definitive proxy statement filed with the SEC on September 18, 2019 (the 2019 Proxy Statement). While we have not changed such procedures, on April 21, 2020 we announced that the Board has determined that the 2020 annual meeting of stockholders (the Annual Meeting) will be held on Tuesday, June 30, 2020. Because the Annual Meeting will be held more than 30 days from the anniversary date of our 2019 annual meeting of stockholders, the deadlines set forth in the 2019 Proxy Statement for stockholder proposals and director nominations for consideration at the Annual Meeting no longer apply. The new deadline is the close of business on May 1, 2020 (which we determined to be a reasonable time before we expect to print and distribute our proxy materials prior to the Annual Meeting) for proposals and director nominations of stockholders intended to be included in our proxy statement and form of proxy for the Annual Meeting pursuant to Rule 14a-8 under the Exchange Act or the proxy access provisions of our Amended and Restated Bylaws, and proposals and director nominations of stockholders intended to be considered at the Annual Meeting other than by means of inclusion in our proxy statement and form of proxy card. Stockholders submitting proposals or nominations using the foregoing procedures should deliver or mail the proposal or nomination, and all supporting information required by Rule 14a-8 or our Amended and Restated Bylaws, as applicable, to Brookdale Senior Living Inc., 111 Westwood Place, Suite 400, Brentwood, Tennessee 37027, Attention: Secretary. In addition to complying with this deadline, stockholder proposals and nominations must comply with all applicable SEC rules, including Rule 14a-8 under the Exchange Act, and the requirements set forth in our Amended and Restated Bylaws and applicable law.
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Executive Officers
The following table sets forth certain information concerning our executive officers. See Information Concerning Directors above for biographical information for Ms. Baier.
Name |
Age |
Position |
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Lucinda M. Baier |
55 |
President, Chief Executive Officer and Director |
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George T. Hicks |
62 |
Executive Vice PresidentFinance and Treasurer |
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Diane Johnson May |
61 |
Executive Vice PresidentHuman Resources |
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H. Todd Kaestner |
64 |
Executive Vice PresidentAsset Management and Division PresidentEntry Fee |
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Cindy R. Kent |
51 |
Executive Vice President and President of Senior Living |
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Anna-Gene ONeal |
53 |
Division PresidentHealth Care Services |
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Mary Sue Patchett |
57 |
Executive Vice PresidentStrategic Operations |
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Steven E. Swain |
52 |
Executive Vice President and Chief Financial Officer |
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Chad C. White |
44 |
Executive Vice President, General Counsel and Secretary |
George T. Hicks became our Executive Vice PresidentFinance in July 2006 and our Treasurer in January 2016. Prior to July 2006, Mr. Hicks served as Executive Vice PresidentFinance and Internal Audit, Secretary and Treasurer of ARC since September 1993. Mr. Hicks had served in various capacities for ARCs predecessors since 1985, including Chief Financial Officer from September 1993 to April 2003 and Vice PresidentFinance and Treasurer from November 1989 to September 1993. He received a bachelors degree with distinction in philosophy from Stanford University and an M.B.A. in finance from the University of Tennessee.
Diane Johnson May joined Brookdale as Executive Vice PresidentHuman Resources in May 2019. Prior to joining Brookdale, Ms. Johnson May served as Executive Vice President, Human Resources of Kraft Foods Group, Inc. from October 2012 to October 2015, after having served in a number of key leadership roles for Kraft Foods Inc. since joining in 1980, including Senior Vice President of Human Resources, Kraft Foods International, and Vice President, Human Resources at various Kraft units. Ms. Johnson May also served as Managing Vice President of The Deli Source Inc. from September 2017 to April 2019 and was principal of Diane May Consulting, LLC from January 2016 to September 2017. She earned a bachelors degree in business administration and management from Elmhurst College.
H. Todd Kaestner became our Executive Vice PresidentAsset Management and Division PresidentEntry Fee in June 2019. Prior to that, Mr. Kaestner served as Executive Vice PresidentCorporate Development since July 2006. Mr. Kaestner served as Executive Vice PresidentCorporate Development of ARC since September 1993 and served in various capacities for ARCs predecessors since 1985, including Vice PresidentDevelopment from 1988 to 1993 and Chief Financial Officer from 1985 to 1988. He is an honors graduate of Vanderbilt University, where he studied economics, and holds an M.B.A. in finance and economics from University of Louisville
Cindy R. Kent joined Brookdale as Executive Vice President and President of Senior Living in January 2020. Prior to joining Brookdale, Ms. Kent served as President and General Manager of 3Ms Infection Prevention Division from 2016 to 2018 and President and General Manager of 3Ms Drug Delivery Systems Division from 2014 and 2016. Prior to that, she held senior leadership roles at Medtronic from 2007 to 2013. Ms. Kent earned an MBA in marketing and a Master of Divinity from Vanderbilt University. She also holds a BS in industrial engineering and management sciences from Northwestern University, earned a certification in Strategic Finance from the Harvard Business School, and is Six Sigma green belt trained. Ms. Kent has been appointed to serve as a trustee on the Vanderbilt University Board of Trust beginning July 2020.
Anna-Gene ONeal became our Division PresidentHealth Care Services in August 2019, after having joined the Company as Division Vice PresidentBHS Hospice in June 2019. Prior to that, Ms. ONeal served as President and Chief Executive Officer of Alive Hospice, a large non-profit hospice provider in Tennessee, since 2012. From 2007 to
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2012, Ms. ONeal served in quality and performance improvement leadership roles, including Senior Vice President, of CogentHMG, an industry leader in developing and managing hospital medicine programs nationwide, and from 2001 to 2007 she served as Vice President, Hospital Operations and Clinical Quality for Essent Healthcare, Inc., a multistate for-profit hospital system. Ms. ONeal is a Registered Nurse and received B.S.N., M.S.N. and M.B.A. degrees from Vanderbilt University.
Mary Sue Patchett became our Executive Vice PresidentStrategic Operations in March 2020 after serving as Executive Vice PresidentCommunity Operations since November 2015 and, prior to that, Division President for one of our senior housing divisions since February 2013 and Divisional Vice President since joining Brookdale in September 2011 in connection with our Horizon Bay acquisition. Ms. Patchett has over 30 years of senior care and housing experience serving in leadership roles. Previously, Ms. Patchett served as Chief Operating Officer of Horizon Bay from January 2011 through August 2011 and as Senior Vice President of Operations from March 2008 through December 2011. Prior to joining Horizon Bay, she was President and owner of Patchett & Associates, Inc., a management consulting firm for senior housing and other healthcare companies, from 2005 until March 2008. Ms. Patchett had previously served as Divisional Vice President for Alterra for over six years and started in senior living with nine years in numerous leadership positions at Sunrise Senior Living. Ms. Patchett has served on numerous industry boards and is serving on the Board of Directors of Argentum and the Board of Directors of Florida Senior Living Association as its past chair. She holds a Bachelor of Business Administration degree from George Mason University.
Steven E. Swain joined Brookdale as Executive Vice President and Chief Financial Officer in September 2018. Prior to joining Brookdale, Mr. Swain served as Senior Vice President and Chief Financial Officer of DISH Network Corporation from October 2014 to August 2018, after having served as its Senior Vice President of Programming from April 2014 to October 2014, and as its Vice President of Corporate Financial Planning and Analysis since joining the company in 2011. Prior to DISH Network, Mr. Swain spent more than 15 years working in the telecommunications sector, most recently at CenturyLink, Inc. and Qwest Communications International, Inc. (acquired by CenturyLink), where he served in multiple leadership roles in finance, including corporate financial planning and analysis, treasury, and investor relations, as well as in network engineering. Mr. Swain earned his B.S. degree in Chemical Engineering from the University of WisconsinMadison and his M.B.A. degree from the University of Chicago Booth School of Business.
Chad C. White joined Brookdale in February 2007 and has served as our Executive Vice President since January 2018, our General Counsel since March 2017 and our Secretary since March 2013. He previously served as our Senior Vice President and General Counsel from March 2017 until January 2018, our Senior Vice President and Co-General Counsel from July 2014 to March 2017, our Vice President and Co-General Counsel from March 2013 to July 2014, and our Associate General Counsel and Assistant Secretary prior to that. Before joining Brookdale, Mr. White served in legal roles with Dollar General Corporation and Bass, Berry & Sims PLC. Mr. White received his law degree from the Vanderbilt University School of Law where he was elected to the Order of the Coif, and a B.S. in Mass Communication and Political Science from Middle Tennessee State University.
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Item 11. Executive Compensation
Executive Compensation
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Compensation Discussion and Analysis
This Compensation Discussion and Analysis explains the key elements of our executive compensation program and compensation decisions regarding the following named executive officers (NEOs) for 2019:
Name |
Position | |
Lucinda M. Baier |
President and Chief Executive Officer | |
Steven E. Swain |
Executive Vice President and Chief Financial Officer | |
Mary Sue Patchett |
Executive Vice PresidentStrategic Operations | |
Chad C. White |
Executive Vice President, General Counsel and Secretary | |
H. Todd Kaestner |
Executive Vice PresidentAsset Management and Division PresidentEntry Fee |
Each of the named executive officers served in the roles indicated for the full-year 2019, except that Ms. Patchett served as Executive Vice PresidentCommunity Operations prior to being appointed to her current role on March 23, 2020, and Mr. Kaestner served as Executive Vice PresidentCorporate Development prior to being appointed to his current roles on June 30, 2019.
Table of Contents to Compensation Discussion and Analysis
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Executive Compensation Program Highlights
What We Do
Pay for Performance A significant portion of our NEOs target direct compensation is awarded in the form of variable, at-risk compensation based on company performance.
Clawback Policy (New for 2020) Clawback policy provides the Committee the ability to recover or require the forfeiture of performance-based compensation paid as a result of any material financial restatement or material miscalculation of a financial metric used to determine the vesting or payment of performance-based compensation.
Caps on Annual Incentive Payouts Payouts under our annual cash incentive plan are capped.
RevPAR and Relative TSR Performance Goals Performance goals for 2019 performance-based restricted shares are 3-year compound annual growth rate of same community RevPAR and our 3-year relative TSR.
Annual Say on Pay Say-on-pay advisory vote conducted annually to solicit stockholders views on our executive compensation programs. 2019 results were 94% in favor. (1)
Robust Stock Ownership Guidelines Ownership guidelines require 5x, 4x, and 3x base salary for our CEO, CFO, and other executive officers, respectively.
What We Do NOT DO
No Above Median Benchmarking The Committee aims to provide target total direct compensation for NEOs that is at or below the market median identified in the independent compensation consultants market study.
No Defined Benefit Plans/SERPs We do not sponsor any defined benefit pension or supplemental executive retirement plans (SERPs).
No Tax Gross Ups Tax gross-ups are not provided except in the limited circumstance of certain re-location expenses.
No Excessive Perquisites Minimal perquisites are provided, other than certain re-location expenses.
No Excessive Guaranteed Compensation Our 2019 annual incentive plan and performance-based restricted stock awards do not have minimum guaranteed payout levelsthis compensation is at risk.
No Pledging or Hedging Our insider trading policy prohibits all our directors and executive officers from pledging or hedging Brookdale stock.
No Stock Options We have never granted stock options.
2019 CEO and Other NEOs Pay Mix (2)
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Annual Cash Incentive Plan
2019 Incentive Plan Design and Achievement
Performance goals were chosen to focus our leaders on execution of our operational turnaround strategy and were generally cascaded to our corporate, divisional, and community leadership. Target levels were generally reflective of our 2019 budget approved by the Board. Actual 2019 achievement reflects progress made on our strategy, though overall performance was below our expectations.
Measure |
Weighting |
Achievement
/ Payout |
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Resident Fee Revenue |
10% |
106% |
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Facility Operating Income |
40% |
29% |
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Combined Adjusted Free Cash Flow |
10% |
103% |
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Strategic Objectives |
40% |
52% |
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Aggregate Achievement/Payout |
54% |
20172019 Annual Incentive Plan Achievement (3)
(1) |
Represents percentage of votes cast. |
(2) |
Represents elements of 2019 target total direct compensation and, for other NEOs, the average of such other NEOs pay mix elements. See Summary of 2019 Compensation Program below for more information. |
(3) |
Represents weighted average payout for the named executive officers for the applicable year who were serving at the end of such year. |
The Compensation Committee (the Committee) intends to ensure market-competitive executive compensation opportunities through a program designed to:
|
emphasize pay for performance by linking a significant portion of target total direct compensation to variable, at-risk components measured by our short- and long-term financial performance and other objectives designed to focus executives on key strategic initiatives; |
|
align our executives long-term interests with those of our stockholders; and |
|
attract and retain key executives to execute on our strategy. |
In determining the appropriate level and mix of compensation for each executive officer, the Committee takes into account the officers experience, scope of responsibility, individual performance, and retention risk; the Committees independent consultants market compensation studies; management input; internal equity; and other information as it deems necessary and appropriate. No pre-determined weighting is assigned to any factor, and the emphasis placed on a specific factor may vary among executive officers, reflecting market practice, business needs, and retention and succession considerations at the time compensation decisions are made.
|
13 |
Our executive compensation program generally consists of these principal elements:
Element |
Form |
Description |
Link to Stockholder Value |
|||
Base Salary |
Cash |
Amount intended to reflect the level and scope of responsibility, experience, and skills of an executive, the individual performance of the executive, retention risks, and competitive market practices. |
Assists us in attracting, and encourages retention of, key executives through an amount of fixed income paid throughout the year. |
|||
Annual Incentive Plan |
Cash |
Opportunity is at-risk with no guaranteed payout. Level of payout tied to achievement of company financial objectives and strategic objectives approved by the Committee each year, which generally are reflective of, or support, our annual budget and business plan. |
Focuses executives on taking steps necessary to meet expectations set forth in the annual budget and business plan, which the Committee believes will in turn drive longer-term performance results. |
|||
Long- Term Incentive Awards |
50%Time-Based Restricted Shares |
Awards granted in 2019 are eligible to vest ratably in four annual installments beginning approximately one year following the grant date, subject to continued employment. |
Promotes retention, stock ownership, and alignment of executives long-term goals with those of our stockholders. |
|||
50%Performance-Based Restricted Shares |
Opportunity is at-risk with no guaranteed vesting. 75% of the award is eligible to vest in February 2022 based on our 3-year compound annual growth rate (CAGR) of same community RevPAR performance, and 25% of the award is eligible to vest in February 2023 based on our 3-year relative TSR performance. |
Encourages executives to achieve long-term goals, including RevPAR (a key performance metric factoring occupancy and rate) and increasing the market value of our common stock. |
14 |
|
The Committees process for determining executive compensation is outlined below, including the role of the Committee, results of our annual say-on-pay advisory vote and other stockholder feedback, the Committees independent consultant, our management, and our compensation peer group.
Role of the Committee
The Committee, which is comprised solely of independent directors, is responsible for developing, reviewing annually, and administering our compensation program and plans applicable to our executive officers. The Committee meets regularly, typically at least five times per year, to approve all decisions regarding the compensation of our executive officers. Compensation decisions regarding our President and Chief Executive Officer are also approved by the independent members of the Board. The Committee reports on its actions to the full Board following each Committee meeting. In fulfilling its responsibilities with respect to executive compensation, the Committee reviews and approves:
|
Any changes to our executive compensation philosophy; |
|
The base salary, levels of incentive-based compensation, and all other compensation or perquisites of our executive officers; |
|
The design and framework of our incentive-based compensation plans and awards, including the applicable performance objectives and targets; |
|
Levels of achievement under such performance objectives and targets; |
|
Updates to our compensation peer group; |
|
Any employment agreements or severance arrangements with our executive officers; and |
|
Compliance with, and any changes to, our officer stock ownership and retention guidelines. |
Role of Say-on-Pay Vote and Stockholder Feedback
The Committee considers the results of our annual say-on-pay advisory vote and other feedback received from stockholders throughout the year when making executive compensation decisions. At our 2019 annual meeting of stockholders, more than 94% of the votes cast on the say-on-pay advisory vote were in favor of our executive compensation program. The Committee believes this vote affirmed our stockholders support of our executive compensation approach and provided assurance the program is reasonable and aligned with stockholder expectations.
Role of Independent Compensation Consultant
As a best practice, the Committee periodically evaluates its selection of an independent compensation consultant. During 2019, the Committee conducted this evaluation, including reviewing proposals of several potential consultants, and determined to continue to engage F.W. Cook & Co., Inc. (the Consultant) as its independent compensation consultant. The Consultant reports directly to the Committee, which has the direct responsibility for appointment, compensation, and oversight of the work of the Consultant. The Consultant does not provide any services to the Company other than services provided to the Committee. From time to time at the request of the Committee, the Consultant provides recommendations regarding the design and framework of, and amounts awarded under, our executive compensation programs, recommends updates to our compensation peer group and conducts independent market compensation studies using that peer group and other published survey information, attends meetings of the Committee, and communicates with one or more members of the Committee outside of such meetings. For 2019, the Consultant provided each of these services. The Committee conducted a specific review of its relationship with the Consultant and determined that the Consultants work for the Committee did not raise any conflicts of interest, consistent with the guidance provided under the Dodd-Frank Act of 2010 by the SEC and by the NYSE.
|
15 |
Role of Management
When making compensation decisions, the Committee considers input from our President and Chief Executive Officer and certain of our other executive officers. Such input generally includes providing information and analyses for review and advising the Committee concerning compensation decisions (other than when their own compensation is determined) and the design, framework, and performance objectives of our incentive-based compensation plans and awards. Our President and Chief Executive Officer provides compensation recommendations related to our other executive officers for the Committees consideration.
Compensation Peer Group
Typically annually, the Committee reviews and approves a compensation peer group comprised of companies recommended by the Consultant. The compensation peer group data is then used by the Consultant when preparing independent market compensation studies for the Committee. The Committee generally uses such peer group data and the Consultants studies:
|
As inputs when determining amounts of base salaries and the target amounts of annual and long-term incentive compensation; |
|
To assess the competitiveness of the target direct compensation and underlying pay mix awarded to our executive officers; and |
|
To evaluate the design, framework, and performance objectives of our incentive-based compensation plans and awards. |
The Committee, as advised by the Consultant, generally considered target total direct compensation within a range of +/- 25% of median as reported in the Consultants market compensation studies to be competitive.
For 2019 compensation decisions, the Consultant recommended updates to our compensation peer group used for 2018 compensation decisions. The peer group used in competitive comparisons to inform 2019 target compensation opportunities included 15 companies in the health care facilities, healthcare services, managed healthcare, healthcare REIT, hospitality, and restaurant industries. The Committee believes that inclusion of companies from these industries is reflective of the talent market for our business. The peer group companies chosen from the various industries are intended to be reasonably comparable to Brookdale in terms of their median levels of revenue, market capitalization, enterprise value, EBITDA, and number of employees. For 2019, the Committee determined to remove Kindred Healthcare, Inc. due to its going private and to replace Laboratory Corporation of America Holdings, Centene Corporation and Darden Restaurants, Inc. with Amedysis, Inc., Magellan Health, Inc. and Bloomin Brands, Inc. to more closely align the median levels of financial metrics and number of employees of the peer group with ours.
2019 Peer Group |
||||
Acadia Healthcare Company, Inc. | Hyatt Hotels Corporation | Select Medical Holdings Corporation | ||
Amedysis, Inc. | LifePoint Hospitals, Inc. | The Ensign Group, Inc. | ||
Bloomin Brands, Inc. | Magellan Health, Inc. | Universal Health Services, Inc. | ||
Community Health Systems, Inc. | National Healthcare Corp. | Welltower Inc. | ||
Encompass Health Corporation | Quest Diagnostics Incorporated | Wyndham Destinations (f/k/a Wyndham Worldwide Corporation) |
16 |
|
Context to Decisions
When making annual decisions for 2019, the Committee conducted a comprehensive review of our executive compensation program that included, among other considerations, external market compensation practices, our recent overall performance and 2019 business plan, our performance objectives under our incentive plans, and the responsibilities and individual performance of each of our named executive officers. The Committee reviewed the Consultants market compensation study based on the revised peer group adopted by the Committee for 2019, which indicated that each element of Ms. Baiers target total direct compensation was below or at the low end of the market range. It further indicated that each of the other named executive officers base salaries, target long-term equity awards, and target total direct compensation were at the low end, or below, the market range, and that their target annual incentive opportunities were high relative to the market range.
Following the completion of its review, the Committee approved the principal elements of compensation of our named executive officers for 2019 as shown in the Summary of 2019 Compensation Program table below. With the 2019 changes, the target total direct compensation of each of our named executive officers fell within the market ranges shown in the market compensation study, but continues to be below the market median.
Summary of 2019 Compensation Program
The table below sets forth the target total direct compensation (base salary, target annual incentive opportunity, and target long-term incentive awards) for the named executive officers. The table excludes the amounts reported in the All Other Compensation column of the Summary Compensation Table (generally employer matching on our 401(k) plan, employer-paid premiums on life and disability insurance, and the incremental cost to us of relocation expenses) and special performance bonuses in the aggregate amount of $40,000 paid to Mr. White for his service as interim leader of human resources until May 9, 2019 following the departure of the former Chief People Officer on December 31, 2018.
Base Salary |
Target Annual
Incentive Opportunity |
Grant Value of
Long-Term Incentive Awards (1) |
2019
Target Total Direct Compensation |
|||||||||||||
Ms. Baier |
|
$910,000 |
|
|
135% |
|
|
$4,750,002 |
|
|
$6,888,502 |
|
||||
Mr. Swain |
|
$515,000 |
|
|
100% |
|
|
$1,300,005 |
|
|
$2,330,005 |
|
||||
Ms. Patchett |
|
$467,750 |
|
|
100% |
|
|
$ 900,001 |
|
|
$1,835,501 |
|
||||
Mr. White |
|
$397,500 |
|
|
70% |
|
|
$ 450,001 |
|
|
$1,125,751 |
|
||||
Mr. Kaestner |
|
$344,500 |
|
|
70% |
|
|
$ 350,006 |
|
|
$ 935,656 |
|
(1) |
Represents the grant value of time- and performance-based restricted shares (i.e., number of shares granted at target performance multiplied by the stock price on the date of grant). The aggregate Accounting Standards Codification 718, Stock Compensation (ASC 718), grant date fair values of such awards were approximately 0.5% greater than the grant values included in the table due to the ASC 718 valuation of the relative TSR component of the performance-based restricted shares being 4% greater than the grant value. |
|
17 |
Base Salaries
The Committee determined that the base salaries of each of the named executive officers were below or at the low end of the market ranges identified in the Consultants market compensation study. Consistent with its compensation philosophy, the Committee determined to increase the named executive officers base salaries to bring them within the identified market ranges and towards the market medians. After making such changes, each of the named executive officers base salaries continued to be below the market medians. The following table shows the base salaries approved for 2019 compared to the prior year base salaries in effect as of December 31, 2018.
2019 | 2018 | % Change | ||||||||||
Ms. Baier |
|
$ 910,000 |
|
|
$ 825,000 |
|
|
10% |
|
|||
Mr. Swain |
|
$ 515,000 |
|
|
$ 500,000 |
|
|
3% |
|
|||
Ms. Patchett |
|
$ 467,750 |
|
|
$ 437,750 |
|
|
7% |
|
|||
Mr. White |
|
$ 397,500 |
|
|
$ 350,000 |
|
|
14% |
|
|||
Mr. Kaestner |
|
$ 344,500 |
|
|
$ 325,000 |
|
|
6% |
|
Annual Incentive Plan
The named executive officers were eligible to participate in our 2019 annual incentive plan established by the Committee. Amounts payable under the plan were to be determined by the Committee following conclusion of the 2019 performance period based on our results relative to company financial objectives and strategic objectives approved by the Committee. There were no guaranteed payout levels utilized in the 2019 annual incentive plan.
The table below shows the target annual incentive opportunity available to our named executive officers expressed as a percentage of base salary earned during 2019. The target opportunities were consistent with the prior year, except that Ms. Baiers target opportunity was increased from 125% of her base salary, and Messrs. Whites and Kaestners target opportunities were reduced from 80% of their base salaries. The Committee made such changes after finding that Ms. Baiers target opportunity was below market median, and that Messrs. Whites and Kaestners target opportunities were high relative to the market ranges provided by the Consultant.
Target Opportunity as a % of
Base Salary |
Minimum Payout as a %
of Target Opportunity |
Maximum Payout as a %
of Target Opportunity |
||||||||||||||||||||
President and CEO |
135% |
|
|
|
|
|
|
0% |
|
|
|
|
|
|
180% |
|||||||
Mr. Swain & Ms. Patchett |
100% |
|||||||||||||||||||||
Messrs. White & Kaestner |
70% |
For 2019, the Committee determined to use company financial objectives and objectively-measured strategic objectives that were developed to focus our leaders on execution of our operational turnaround strategy. Such strategic objectives were generally cascaded to our corporate, divisional, and community leadership. The weighting of each objective, the performance targets applicable to the objectives, and our actual results for 2019 are shown in the table below. The weighting of each company financial objective and the aggregate strategic objectives were consistent with the prior years weighting, except that the weighting of Combined Adjusted Free Cash Flow was reduced from 20% to 10%, and the weighting of the strategic objectives was increased from 30% to 40%. In order to emphasize the importance of meeting target-level move-ins at our consolidated comparable communities, the 2019 annual incentive plan included a move-in multiplier that would have increased the overall strategic objectives payout by between 10% and 50% had 2019 move-in performance been 1% to 5% in excess of the 2019 targeted number of move-ins. The target performance levels of the objectives were generally reflective of our 2019 budget approved by the Board. Performance below the threshold level would result in no payout for the performance objective, and payout percentages were to be interpolated between the steps shown in the table below.
18 |
|
|
19 |
(1) |
FOI and CAFCF are financial measures that are not calculated in accordance with generally accepted accounting principles (GAAP). Appendix A to this Amendment shows how we calculated FOI and CAFCF, including reconciliations to the closest GAAP financial measures. |
(2) |
The target/max payout levels for the strategic objectives do not reflect application of the move-in multiplier, which would have increased the overall strategic objectives payout by between 10% and 50% had 2019 move-in performance been 1% to 5% in excess of the 2019 targeted number of move-ins. |
Long-Term Incentive Awards
Annual Review and Decisions
For the 2019 compensation program, the Committee resumed its historical practice of using a 50/50 grant value mix of time- and performance-based restricted shares for awards to the named executive officers. Based on the Consultants market compensation study, the Committee determined that Mses. Baiers and Patchetts and Messrs. Swains and Whites target long-term equity awards were at the low end, or below, the market ranges identified in the study. Consistent with its compensation philosophy, the Committee increased the target grant values of long-term incentive awards as noted in the table below. After making such changes, each of the named executive officers target long-term incentive awards fell within the market ranges shown in the Consultants market compensation study, but continued to be below the market medians.
2019 Grant Value
of Long-Term Incentive Awards |
Change
v. 2018 |
No. of
Time-Based Restricted Shares (50% Weight) |
No. of
Performance-Based Restricted Shares (at Target Performance) (50% Weight) |
|||||||||||||
Ms. Baier |
$ | 4,750,002 | 6% | 302,163 | 302,163 | |||||||||||
Mr. Swain |
$ | 1,300,005 | 30% | 82,698 | 82,697 | |||||||||||
Ms. Patchett |
$ | 900,001 | 13% | 57,252 | 57,252 | |||||||||||
Mr. White |
$ | 450,001 | 29% | 28,626 | 28,626 | |||||||||||
Mr. Kaestner |
$ | 350,006 | 0% | 22,265 | 22,265 |
Time-Based Restricted Shares
The time-based restricted shares are eligible to vest ratably in four annual installments beginning February 27, 2020, subject to continued employment.
20 |
|
Performance-Based Restricted Shares
Seventy-five percent of the performance-based restricted shares are eligible to vest on February 27, 2022 and twenty-five percent are eligible to vest on February 27, 2023, in each case subject to continued employment and achievement of performance goals established by the Committee. Performance below the threshold level of achievement will result in forfeiture of all shares in the applicable tranche, performance at the targeted level of achievement will result in the vesting of 100% of the applicable tranche, and performance at or above the target level of achievement will result in vesting of up to 125% of the first tranche and up to 150% of the second tranche, with vesting percentages to be interpolated between the levels. The weighting, performance measures, and performance targets for the performance-based restricted shares are outlined below.
(1) |
Same community RevPAR means the average monthly senior housing resident fee revenues per available unit of the same community portfolio, calculated as resident fee revenues, excluding Health Care Services segment revenue and entrance fee amortization, of the same community portfolio for the applicable fiscal year, divided by the weighted average number of available units in the same community portfolio for the applicable fiscal year, divided by twelve. For purposes of measuring the Companys performance, principles of revenue recognition will be consistently applied when calculating same community RevPAR. |
(2) |
3-Year Relative TSR compares our compound annual TSR to the constituent companies of the S&P Midcap 400 index for the period beginning January 1, 2019 and ending December 31, 2021, assuming reinvestment of dividends or distributions. The award agreement provides that no additional shares beyond the target number of shares will be issued if our compound annual TSR is negative for the performance period. |
Other Terms of 2019 Restricted Share Awards
The restricted share agreements associated with the awards described above contain non-competition, non-solicitation, non-disparagement, and confidentiality covenants and set forth the treatment of such awards in connection with termination of employment and a change in control (as described below under Potential Payments Upon Termination or Change in Control). Although we do not currently maintain a dividend program on our common stock, the Committee determined to eliminate the right to receive immediate payment of declared dividends for the 2019 awards. To the extent we declare dividends on our shares of common stock in the future, the restricted shares awarded in 2019 will accrue such dividends to be paid in cash only to the extent the underlying restricted shares ultimately vest.
Other 2019 Decisions
Severance Arrangements for Mr. Kaestner
Mr. Kaestner serves as Executive Vice PresidentAsset Management and Division PresidentEntry Fee. On October 1, 2019, we announced that we had entered into definitive agreements with Healthpeak Properties, Inc. (f/k/a HCP, Inc.)
|
21 |
pursuant to which we agreed to, among other things, sell our interests in 16 entry fee continuing care retirement communities (CCRCs) held in an unconsolidated venture in which we held a 51% interest, which constitutes our entry fee CCRCs division. In light of our decision to dispose of our interest in the division led by Mr. Kaestner, and to incentivize him to manage the portfolio through the closing of such transactions, the Committee determined to enter into a letter agreement with Mr. Kaestner to amend and supplement the Amended and Restated Tier I Severance Pay Policy (the Severance Policy) as it applies to Mr. Kaestner. Under the letter agreement, if we complete the dispositions of our interests in all 16 entry fee CCRCs before January 1, 2021, such completion will be deemed to be a change in control under the Severance Policy if Mr. Kaestner is not offered continued acceptable employment with us or the acquiror of at least a majority of the entry fee CCRCs. An offer of continued acceptable employment means any offer of employment by us or the acquiror accepted by Mr. Kaestner, employment with us with compensation that is not materially and significantly reduced, or employment with the acquiror with responsibilities, duties, and compensation that are not materially and significantly reduced. In addition, we agreed to request that the Committee approve the acceleration and vesting of Mr. Kaestners outstanding equity upon consummation of such transactions. If the sale of our interests in all 16 entry fee CCRCs does not occur before January 1, 2021, the Severance Policy will continue to apply to Mr. Kaestner without modification by the 2019 letter agreement. As of April 29, 2020, we continued efforts to complete the sale of two entry fee CCRCs held in an unconsolidated venture with Healthpeak Properties, Inc.
Special Performance Bonuses for Mr. White
During 2019, the Committee determined to pay Mr. White special performance bonuses in the aggregate amount of $40,000 for his service as interim leader of human resources until May 9, 2019, following the departure of the former Chief People Officer on December 31, 2018.
Summary of Compensation Results
To provide a better understanding of the results of our executive compensation program, the table below sets forth the amount of compensation realized in 2019 by our named executive officers. The value of restricted shares that vested is based on the closing price per share of our stock on the applicable vesting dates. The table excludes the amounts reported in the All Other Compensation column of the Summary Compensation Table (generally employer matching on our 401(k) plan, employer-paid premiums on life and disability insurance, and the incremental cost to us of relocation expenses).
Base Salary Earned |
Annual Incentive
Opportunity Earned |
Value of Restricted
Shares that Vested |
Special
Performance Bonus Earned |
Total
Compensation Realized |
||||||||||||||||
Ms. Baier |
$ | 910,000 | $ | 657,295 | $ | 668,971 | $ | | $ | 2,236,266 | ||||||||||
Mr. Swain |
$ | 515,000 | $ | 275,545 | $ | 94,382 | $ | | $ | 884,927 | ||||||||||
Ms. Patchett |
$ | 467,750 | $ | 250,264 | $ | 172,439 | $ | | $ | 890,453 | ||||||||||
Mr. White |
$ | 397,500 | $ | 148,874 | $ | 82,353 | $ | 40,000 | $ | 668,727 | ||||||||||
Mr. Kaestner |
$ | 344,500 | $ | 129,024 | $ | 90,010 | $ | | $ | 563,534 |
Although we made significant progress on our operational turnaround strategy during 2019, our performance for the year was below our budgeted expectations. As a result, consistent with our pay-for-performance philosophy, such
22 |
|
named executive officers realized compensation was significantly less than the amounts targeted by the Committee (see Summary of 2019 Compensation Program above) and the amounts reported in the Summary Compensation Table for 2019. Such named executive officers earned 53.5% of the target annual incentive opportunity, and the majority of performance-based restricted shares eligible to vest in 2019 were forfeited as a result of failure to achieve the threshold level of performance for the 3-year CAGR of Adjusted Cash From Facility Operations (Adjusted CFFO) per share measure included in 2016 long-term incentive awards.
Annual Incentive Plan Results
A summary of the achievement and payment to our named executive officers under the 2019 annual incentive plan is provided below. See 2019 Compensation DecisionsAnnual Incentive Plan above for the performance goals and targets, and our actual performance, for each of the financial objectives and strategic objectives.
Financial Objectives
(60% Weighting) |
Strategic Objectives
(40% Weighting) |
Total | ||||||||||||||||||||||||
Achieved | Payout | Achieved | Payout | Achieved | Payout | |||||||||||||||||||||
Ms. Baier |
54.4% | $ | 400,626 | 52.2% | $ | 256,669 | 53.5% | $ | 657,295 | |||||||||||||||||
Mr. Swain |
$ | 167,947 | $ | 107,598 | $ | 275,545 | ||||||||||||||||||||
Ms. Patchett |
$ | 152,538 | $ | 97,726 | $ | 250,264 | ||||||||||||||||||||
Mr. White |
$ | 90,740 | $ | 58,134 | $ | 148,874 | ||||||||||||||||||||
Mr. Kaestner |
$ | 78,641 | $ | 50,383 | $ | 129,024 |
Long-Term Incentive Awards Results
Summary of Vesting and Forfeitures
During 2019, the named executive officers realized the compensation shown in the table below with respect to vesting of restricted shares granted prior to 2019. The value of shares that vested is based on the closing price per share of our stock on the vesting date.
Vesting of Time-Based
Restricted Shares Granted in 20152018 |
Vesting of Performance-Based
Restricted Shares Granted in 20152016 (1) |
Total Vesting of Restricted
Shares in 2019 |
||||||||||||||||||||||||||
No. of Shares | Value | No. of Shares | Value | No. of Shares | Value | |||||||||||||||||||||||
Ms. Baier |
96,812 | $ | 668,971 | | $ | | 96,812 | $ | 668,971 | |||||||||||||||||||
Mr. Swain |
13,312 | $ | 94,382 | | $ | | 13,312 | $ | 94,382 | |||||||||||||||||||
Ms. Patchett |
23,653 | $ | 163,442 | 1,302 | $ | 8,997 | 24,955 | $ | 172,439 | |||||||||||||||||||
Mr. White |
11,596 | $ | 80,217 | 309 | $ | 2,135 | 11,905 | $ | 82,352 | |||||||||||||||||||
Mr. Kaestner |
11,756 | $ | 81,234 | 1,270 | $ | 8,776 | 13,026 | $ | 90,010 |
(1) |
Details regarding our performance relative to the applicable performance targets are provided in the section below. |
|
23 |
Results of Performance-Based Restricted Shares Eligible to Vest in 2019
During 2019, performance-based restricted shares awarded in 2015 and 2016 were eligible to vest, subject to continued employment and achievement of performance goals established for each award by the Committee. The table below sets forth information regarding the performance goals and targets, our actual results, and the number of shares that vested on February 27, 2019 based on our actual results. The value of shares that vested is included in the summary table above and is based on the closing price per share of our stock on the vesting date. Performance below the threshold level of achievement would have resulted in forfeiture of all shares in the applicable tranche, achievement of the targeted level of performance (or above) would have resulted in the vesting of 100% of the applicable tranche, and vesting percentages were to be interpolated between the steps shown in the table below.
Award
Year |
Performance Goal |
% of Shares
Eligible to Vest |
Targets |
Actual
Results |
Percent
that Vested |
No. and Value of
Shares that Vested (1) |
||||||||||||||||||||||
2015 |
2018 Return on Investment (ROI) on Program Max Projects approved in 2015 and completed prior to the end of 2016 (2) |
100% (Target/Max) 20% (Threshold) |
³12% 8% |
>14% | 100% | |||||||||||||||||||||||
Ms. Patchett |
|
1,302 |
|
$ |
8,997 |
|
||||||||||||||||||||||
Mr. White |
|
309 |
|
$ |
2,135 |
|
||||||||||||||||||||||
Mr. Kaestner |
|
1,270 |
|
$ |
8,776 |
|
||||||||||||||||||||||
2016 |
3-Year CAGR of Adjusted CFFO per Share comparing 2018 results versus a 2015 base year (3)
|
100% (Target/Max) 20% (Threshold) |
³8% 4% |
<0% | 0% | |||||||||||||||||||||||
Ms. Baier |
|
|
|
$ |
|
|
||||||||||||||||||||||
Ms. Patchett |
|
|
|
$ |
|
|
||||||||||||||||||||||
Mr. White |
|
|
|
$ |
|
|
||||||||||||||||||||||
Mr. Kaestner |
|
|
|
$ |
|
|
||||||||||||||||||||||
(1) |
With respect to the 2016 awards eligible to vest on February 27, 2019, the following number of shares were forfeited as a result of failure to achieve the threshold level of performance: Ms. Baier38,820 shares; Ms. Patchett18,245 shares; Mr. White2,211 shares; and Mr. Kaestner9,057 shares. |
(2) |
Program Max is our development capital expenditures initiative through which we expand, renovate, reposition, or redevelop selected existing senior living communities where economically advantageous. |
(3) |
Adjusted CFFO per share was defined as Adjusted Cash From Facility Operations per share as reported by the Company, excluding federal income taxes to the extent we had become a federal income taxpayer during the performance period. |
24 |
|
As of December 31, 2019, the named executive officers held the number of performance-based restricted shares awarded in prior years as outlined in the table below. Vesting of the performance-based restricted shares is subject to continued employment and achievement of performance goals established by the Committee. The table below sets forth information regarding the performance goals and targets and the number of shares subject to such awards. Performance below the threshold level of achievement has resulted or will result in forfeiture of all shares in the applicable tranche, achievement of the targeted level of performance (or above) has resulted or will result in the vesting of 100% of the applicable tranche, and vesting percentages will be interpolated between the steps shown in the table below.
Award
Year |
Vesting
Date |
Performance Goal |
% of Shares
Eligible to Vest |
Targets |
Shares at Target |
|||||||||||||||
2016 | 2/27/2020 |
2019 ROI on Program Max Projects approved in 2016 and completed prior to the end of 2017 or approved prior to 2016 and completed during 2017 (1) |
100% (Target/Max)
20% (Threshold) |
³ 12%
8% |
Ms. Baier | 12,940 | ||||||||||||||
Ms. Patchett | 6,082 | |||||||||||||||||||
Mr. White | 737 | |||||||||||||||||||
Mr. Kaestner | 3,020 | |||||||||||||||||||
2017 | 2/27/2020 | 3-Year CAGR of CAFCF comparing 2019 results versus a 2016 base year (2) |
100% (Target/Max)
80%
60%
40%
20% (Threshold) |
³ 23.1%
14.3%
11.8%
9.3%
3.8% |
Ms. Baier |
|
37,904 |
|
||||||||||||
Ms. Patchett | 17,814 | |||||||||||||||||||
Mr. White | 2,158 | |||||||||||||||||||
Mr. Kaestner | 8,844 | |||||||||||||||||||
2/27/2021 |
2020 ROI on Program Max Projects approved in 2017 and completed prior to the end of 2018 or approved prior to 2017 and completed during 2018 |
100% (Target/Max)
60%
20% (Threshold) |
³ 11.0%
9.0%
8.0% |
Ms. Baier | 12,635 | |||||||||||||||
Ms. Patchett | 5,939 | |||||||||||||||||||
Mr. White | 720 | |||||||||||||||||||
Mr. Kaestner | 2,948 | |||||||||||||||||||
2018 | 2/27/2021 |
Compound annual TSR, comparing our share price of $6.53 to the volume-weighted average price for the 15 trading days ending December 31, 2020 (3) |
100% (Target/Max)
75%
50% (Threshold) |
³ 23.91%
20.17%
16.20% |
Ms. Baier | 207,469 | ||||||||||||||
Mr. Swain |
|
53,248 |
|
|||||||||||||||||
(1) |
Based on our actual ROI results of 13.6% for the year ended December 31, 2019, all of the shares awarded in 2016 and eligible to vest on February 27, 2020 vested at target/maximum. |
(2) |
Based on our actual CAGR results of less than 3.8% for the three-year period ended December 31, 2019, all of the shares awarded in 2017 and eligible to vest on February 27, 2020 were forfeited. For purposes of these performance-based restricted shares, CAFCF is defined as the sum of our Adjusted Free Cash Flow and our proportionate share of Adjusted Free Cash Flow of unconsolidated ventures, in each case as reported by the Company, excluding transaction, transaction-related, and severance costs and federal income taxes to the extent we had become a federal income taxpayer during the performance period. |
(3) |
Compound annual TSR is calculated assuming reinvestment in our common stock of any dividends or distributions paid during the period. The $6.53 beginning share price represents our closing price per share on February 28, 2018, the date that Ms. Baier became President and Chief Executive Officer. |
|
25 |
Annual Risk Assessment
In accordance with its charter, the Committee conducts an assessment annually of the relationship between our risk management policies and practices, corporate strategy, and our compensation arrangements. As part of this assessment, the Committee evaluates whether any incentive and other forms of pay encourage unnecessary or excessive risk taking. For our 2019 executive compensation program, the Committee concluded that the program, including the performance goals and targets used for incentive compensation, is appropriately structured not to encourage unnecessary or excessive risk taking, and that any risks arising from the program are not reasonably likely to have a material adverse effect on us.
Stock Ownership and Retention Guidelines
Our stock ownership and retention guidelines are applicable to certain of our officers, including our named executive officers, and are intended to further align the interests of our executives with those of our stockholders. Our named executive officers are expected to hold a number of shares with a minimum market value expressed as a | ||||
Multiple of Base Salary |
||||
Chief Executive Officer |
5.0x |
|||
Chief Financial Officer |
4.0x |
|||
Executive Vice Presidents |
3.0x |
|||
multiple of their base salary as shown in the table below. Unvested equity awards do not count toward the expected level of ownership, except that the estimated number of after-tax time-based restricted shares scheduled to vest within 90 days may be counted towards compliance. The expected level of ownership must be achieved by the fifth anniversary of such officers becoming subject to the guidelines. Until the expected ownership level is achieved, each officer is expected to retain at least 50% of after-tax shares obtained through our equity compensation plans. This retention requirement also applies in situations where an officer has achieved the expected stock ownership level but changes in the market price of our stock or the officers base salary result in such officers failure to maintain the expected stock ownership level. All of our current named executive officers are in compliance with our stock ownership and retention guidelines and will be expected to retain at least 50% of their after-tax shares obtained through our equity compensation plans until they meet their applicable required holdings.
Policy on Derivatives, Hedging and Pledging
Our insider trading policy provides that no one subject to the policy, which includes all our directors, officers, employees and their immediate family members and controlled entities, may engage in short sales, puts, calls or other derivative transactions, or in any hedging or monetization transactions (i.e., prepaid variable forward contracts, equity swaps, collars, and exchange funds), involving our securities. It also provides that our directors and officers may not pledge our securities as collateral for a loan, or hold our securities in a margin account.
Clawback Policies
In February 2020, the Committee adopted a Clawback and Forfeiture Policy, which applies to our current and former officers as defined in Rule 16a-1 of the Exchange Act. By its terms, the policy will apply to all short-term and long-term cash or equity-based incentive compensation paid, earned, vested, or otherwise awarded based on performance measures, beginning with the 2020 annual incentive plan and the performance-based restricted stock units (RSUs) awarded to such officers in February 2020. The policy provides that in the event of any material financial restatement of our reported consolidated financial statements, or that the Committee otherwise determines that a financial metric used to determine the vesting or payment of any such performance-based compensation was calculated incorrectly in any material respect, the Committee, in its discretion, may require reimbursement of an amount equal to all or a portion of such performance-based compensation previously vested or paid for any
26 |
|
performance periods which include any of the three full fiscal years immediately preceding the announcement of any financial restatement or the determination of any inaccuracy regarding calculation of a financial metric. The amount of the recoupment will be determined by the Committee in its discretion, up to the amount of such performance-based compensation previously paid or vested with respect to such officer that is in excess of the performance-based compensation that would have been received based on the correct financial metric or restated results. To the extent the Committee determines that any such amount should be recouped, the Committee may seek recovery by, among other things, requiring reimbursement of performance-based compensation previously paid, canceling or rescinding outstanding equity awards, adjusting or withholding unpaid compensation, or setting off against future grants of equity-based awards.
In February 2020, the Board adopted an amendment to our 2014 Omnibus Incentive Plan that provides that any award thereunder shall be subject to forfeiture, reduction, or recoupment to the extent provided in our Clawback and Forfeiture Policy or any other future recoupment or clawback policy adopted by us. Awards thereunder continue to be subject to forfeiture, reduction, or recoupment to the extent we adopt a policy to comply with the requirements of any applicable laws, rules, regulations, or stock exchange listing requirements, including pursuant to final SEC rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act and to the extent provided under applicable legal requirements which impose recoupment, including the Sarbanes-Oxley Act of 2002.
The RSU award agreements used in connection with the February 2020 awards to the named executive officers provide that in the event of a breach by the named executive officer of the non-competition, non-solicitation, non-disparagement, or confidentiality covenants contained in the agreements, we will have the authority to cancel all such outstanding RSUs, cancel all shares of stock beneficially owned by the named executive officer that were issued in settlement of the RSUs within 12 months on or prior to, or at any time after, the termination of the named executive officers employment, and recoup from the named executive officer any proceeds from such officers sale, transfer, or other disposition of any such cancellable shares.
To the extent the named executive officers are eligible to receive severance pay and benefits under Ms. Baiers employment agreement and the Severance Policy, as applicable, such agreement and policy provide that any breach of a restrictive covenant applicable to the named executive officer will result in the immediate and permanent cessation of payment of severance pay and benefits, the obligation of the named executive officer to repay to us upon our demand 90% of the amount or cost of such severance pay and benefits, and the obligation of the named executive officer to pay our costs and expenses to enforce such obligation.
Tax Considerations
Section 162(m) of the Internal Revenue Code places a limit of $1 million on the amount that a company may deduct in any one year with respect to compensation paid to any covered employee. Prior to the enactment of the Tax Cuts and Jobs Act in December 2017, Section 162(m) provided an exemption from this deduction limitation for compensation that qualified as performance-based compensation. However, the exemption for performance-based compensation was repealed, effective for taxable years beginning after December 31, 2017, subject to transition relief for certain arrangements in place as of November 2, 2017. These and other changes cause more elements of our compensation to be non-deductible under Section 162(m) and eliminated the Companys ability to structure performance-based awards to be exempt from Section 162(m). While the Committee will continue to consider tax implications in making compensation decisions, the Committee will not necessarily limit executive compensation to that which is or may be deductible under Section 162(m). The Committee believes that the interests of our stockholders are best served if it maintains flexibility in compensating executive officers in a manner designed to promote varying corporate goals even though some compensation awards may result in non-deductible compensation expense. In making decisions about executive compensation, the Committee also considers the impact of other tax laws, including Section 409A of the Internal Revenue Code regarding non-qualified deferred compensation and Section 280G of the Internal Revenue Code regarding compensation in connection with a change in control.
|
27 |
We are party to an employment agreement dated March 1, 2018 with Ms. Baier, which we entered into in connection with her promotion to President and Chief Executive Officer effective February 28, 2018. The employment agreement has a three year term, subject to automatic extensions for additional one year periods, unless either we or Ms. Baier gives written notice to the other party no less than 90 days prior to the expiration of the term that the term will not be extended. Ms. Baiers initial base salary was $825,000 per year, which may not be reduced without Ms. Baiers approval. In addition, Ms. Baier is eligible to receive an annual cash incentive opportunity with a target of at least 125% of base salary paid during the calendar year, subject to the terms of our annual incentive plan for senior executive officers. Ms. Baier is eligible to participate in various benefit plans that we make available to our senior executive officers (other than our severance policies). In addition, we will provide Ms. Baier with basic term life insurance benefits of at least 100% of her base salary at no cost to Ms. Baier. Under her employment agreement, Ms. Baier is entitled to severance payments if her employment is terminated by us without cause or by her for good reason. Severance payments in connection with a change in control are double trigger, which requires the occurrence of a change in control followed by termination of employment within 18 months of the change in control by us without cause or by Ms. Baier for good reason. Under Ms. Baiers employment agreement, any payments that are not deductible by us under Section 280G of the Internal Revenue Code will be cut back only to the extent that the cutback results in a better after-tax position for Ms. Baier. The employment agreement contains non-competition, non-solicitation, confidentiality, and mutual non-disparagement covenants. The non-competition restrictions will continue in effect during Ms. Baiers employment and for one year following termination of employment. The non-solicitation restrictions will continue in effect during her employment and for two years following her termination of employment. The confidentiality and mutual non-disparagement obligations will apply during her employment and thereafter.
Our other named executive officers do not have employment agreements, but are eligible to participate in the Severance Policy. Ms. Patchett participates in the Severance Policy as a Designated Officer as defined therein, and each of Messrs. Swain, White, and Kaestner participates in the Severance Policy as a Selected Officer as defined therein. Mr. Kaestner is also party to separate letter agreements with us dated effective as of August 6, 2010 and September 25, 2019, which provide for certain modifications of the Severance Policy as it applies to Mr. Kaestner. Under the Severance Policy, the participating named executive officers are entitled to severance payments if their employment is terminated by us without cause (or by Mr. Kaestner for good reason) or, following a change in control, by the executive for good reason. The severance payments under the Severance Policy applicable in connection with a change in control are double trigger, which require the occurrence of a change in control followed by termination of employment by us without cause or by the executive for good reason. If payments pursuant to the Severance Policy and other arrangements are not deductible by us under Section 280G of the Internal Revenue Code, such payments shall be reduced (or repaid) in order to ensure our deduction of payments in connection with a change in control.
A detailed description of potential severance payments pursuant to the foregoing employment agreement and the Severance Policy, as well as the effect of certain terminations and a change in control pursuant to outstanding equity award agreements, is set forth under Potential Payments Upon Termination or Change in Control below.
When making annual compensation decisions for 2020, the Committee conducted a comprehensive review of our executive compensation program similar to the review conducted for 2019 annual compensation decisions. With respect to market compensation practices, the Consultant reviewed our compensation peer group and recommended that it be updated to replace LifePoint Hospitals, Inc., Magellan Health, Inc., and Wyndham Destinations with LHC Group, Inc., Norwegian Cruise Line Holdings Ltd., Wyndham Hotels & Resorts, Inc., and
28 |
|
Chemed Corporation to reflect mergers and acquisitions activity and to more closely align the median levels of financial metrics and number of employees of the peer group with ours.
The Consultant also completed a market compensation study. The Committee, as advised by the Consultant, considered target total direct compensation within a range of +/- 20% of median as reported in the Consultants study to be competitive. The Committee found that Ms. Baiers target total direct compensation was slightly below the market median, and that Messrs. Swains and Whites base salaries, target total cash compensation, target long-term equity awards, and target total direct compensation were at the low end, or below, the median market ranges. Following completion of its review, the Committee approved the principal elements of compensation of our named executive officers for 2020 as summarized in the table below. With the 2020 changes, the elements of Messrs. Swains and Whites compensation fell within the market ranges shown in the market compensation study, but continued to be below the market medians.
2020 Base
Salary |
Change v.
2019 |
2020 Target
Annual Incentive Opportunity |
Change v.
2019 |
2020 Grant
|
Change v.
2019 (1) |
2020 Target
Total Direct Compensation |
Change v.
2019 |
|||||||||||||||||||||||||
Ms. Baier |
|
$ 938,000 |
|
|
3% |
|
|
135% |
|
|
% |
|
|
$ 4,900,000 |
|
|
3% |
|
|
$ 7,104,300 |
|
|
3% |
|
||||||||
Mr. Swain |
|
$ 575,000 |
|
|
12% |
|
|
100% |
|
|
% |
|
|
$ 1,700,000 |
|
|
31% |
|
|
$ 2,850,000 |
|
|
22% |
|
||||||||
Ms. Patchett |
|
$ 467,750 |
|
|
% |
|
|
100% |
|
|
% |
|
|
$ 900,000 |
|
|
% |
|
|
$ 1,835,500 |
|
|
% |
|
||||||||
Mr. White |
|
$ 425,000 |
|
|
7% |
|
|
70% |
|
|
% |
|
|
$ 550,000 |
|
|
22% |
|
|
$ 1,272,500 |
|
|
13% |
|
||||||||
Mr. Kaestner |
|
$ 355,000 |
|
|
3% |
|
|
70% |
|
|
% |
|
|
$ 350,000 |
|
|
% |
|
|
$ 953,500 |
|
|
2% |
|
(1) |
The dollar amount of the 2020 long-term incentive awards, and the percentage change versus 2019, is based on the grant value of such awards (i.e., number of restricted stock units granted at target performance, multiplied by the stock price on the date of grant). |
The 2020 annual incentive plan, as approved by the Committee, continues to be based on company financial objectives and strategic objectives weighted consistently with 2019, with the target levels of performance generally reflective of our 2020 budget approved by the Board at the beginning of 2020. The performance objectives are generally consistent with the 2019 annual incentive opportunity, except a quality measure will be used in lieu of the NPS-related objectives. The Committee is assessing the performance objectives and targets of the 2020 annual incentive plan in light of the COVID-19 pandemic.
For the 2020 long-term incentive awards, a 50/50 grant value mix of time- and performance-based equity was used for the named executive officers, consistent with the 2019 program. The performance objectives for the performance-based equity awards continue to be weighted at 75% using the 3-year CAGR of same community RevPAR objective and 25% using the 3-year relative TSR objective. The Committee determined to utilize restricted stock units for the 2020 program on substantially the same terms as the 2019 restricted share awards, except that the 2020 awards no longer provide for partial single-trigger acceleration of equity upon a change in control unless the awards are not assumed, continued, or substituted with an award relating to a publicly-traded security of the acquiror (or the Company) on the same terms and conditions that were applicable to the outstanding awards immediately prior to the change in control, in which case such awards would vest and be settled upon the change in control.
|
29 |
Compensation Committee Report
The Compensation Committee has reviewed and discussed the disclosure set forth above under the heading Compensation Discussion and Analysis with management and, based on the review and discussions, it has recommended to the Board that the Compensation Discussion and Analysis be included herein.
Respectfully submitted by the Compensation Committee of the Board,
COMPENSATION COMMITTEE
Frank M. Bumstead, Chairman
Victoria L. Freed
Denise W. Warren
30 |
|
Summary Compensation Table for 2019
The following summary compensation table sets forth information concerning the compensation earned by, awarded to, or paid to our named executive officers for the periods indicated.
Name and Principal Position (1)
|
Year
|
Salary
|
Bonus
|
Stock
|
Non-Equity
|
All Other
|
Total ($)
|
|||||||||||||||||||||
Lucinda M. Baier President and Chief Executive Officer |
|
2019 |
|
|
910,000 |
|
|
|
|
|
4,773,420 |
|
|
657,295 |
|
|
10,186 |
|
|
6,350,901 |
|
|||||||
|
2018 |
|
|
782,248 |
|
|
50,000 |
|
|
3,551,872 |
|
|
281,023 |
|
|
9,112 |
|
|
4,674,255 |
|
||||||||
|
2017 |
|
|
550,000 |
|
|
|
|
|
1,500,013 |
|
|
196,150 |
|
|
161,025 |
|
|
2,407,188 |
|
||||||||
Steven E. Swain Executive Vice President and Chief Financial Officer |
|
2019 |
|
|
515,000 |
|
|
|
|
|
1,306,414 |
|
|
275,545 |
|
|
20,490 |
|
|
2,117,449 |
|
|||||||
|
2018 |
|
|
161,538 |
|
|
100,000 |
|
|
802,324 |
|
|
46,038 |
|
|
162,235 |
|
|
1,272,135 |
|
||||||||
Mary Sue Patchett Executive Vice President, Strategic Operations |
|
2019 |
|
|
467,750 |
|
|
|
|
|
904,438 |
|
|
250,264 |
|
|
9,037 |
|
|
1,631,489 |
|
|||||||
|
2018 |
|
|
437,750 |
|
|
450,000 |
|
|
800,004 |
|
|
62,905 |
|
|
7,783 |
|
|
1,758,442 |
|
||||||||
|
2017 |
|
|
425,000 |
|
|
|
|
|
705,004 |
|
|
134,995 |
|
|
7,026 |
|
|
1,272,025 |
|
||||||||
Chad C. White Executive Vice President, General Counsel and Secretary |
|
2019
2018 |
|
|
397,500
350,000 |
|
|
40,000
300,000 |
|
|
452,219
350,009 |
|
|
148,874
81,396 |
|
|
7,807
7,198 |
|
|
1,046,400
1,088,604 |
|
|||||||
H. Todd Kaestner Executive Vice President Asset Management and Division PresidentEntry Fee |
|
2019 |
|
|
344,500 |
|
|
|
|
|
351,731 |
|
|
129,024 |
|
|
9,134 |
|
|
834,389 |
|
(1) |
The named executive officers served in the positions noted in the table at all times during the years presented, except that: Ms. Baier served as Chief Financial Officer until being appointed as our President and Chief Executive Officer effective February 28, 2018; Mr. Swain joined the Company as Executive Vice President and Chief Financial Officer effective September 4, 2018; Ms. Patchett previously served as Executive Vice PresidentCommunity Operations until March 23, 2020, and Mr. Kaestner previously served as Executive Vice PresidentCorporate Development until June 30, 2019. |
(2) |
The 2019 amount for Mr. White consists of special performance bonuses paid to Mr. White for his service as interim leader of human resources until May 9, 2019 following the departure of the former Chief People Officer on December 31, 2018. |
(3) |
Represents the aggregate grant date fair value of time- and performance-based restricted shares computed in accordance with ASC 718. See Note 2 to our Consolidated Financial Statements included in the Original Filing for a summary of the assumptions made in the valuation of these awards. See footnotes 2 and 3 to the Grants of Plan-Based Awards Table for the grant values of performance-based restricted shares awarded in 2019 assuming maximum levels of performance. |
(4) |
Represents the payout of each named executive officers annual cash incentive opportunity with respect to performance in the applicable year. |
(5) |
For each of the named executive officers, the 2019 amount includes the employer matching contribution to our 401(k) Plan and premiums on Company-provided life and disability insurance. For Mr. Swain, the 2019 amount also includes the incremental cost to the Company of $12,457 for relocation assistance provided to Mr. Swain, including associated tax gross ups of $4,902. |
|
31 |
Grants of Plan-Based Awards
The following table summarizes grants of plan-based awards made to our named executive officers in 2019. To the extent we declare dividends on our shares of common stock, the restricted shares awarded in 2019 will accrue such dividends to be paid in cash only to the extent the underlying restricted shares ultimately vest.
(1) |
Amounts represent the threshold, target, and maximum payout levels under our 2019 annual incentive plan. The actual payouts are reported in the Summary Compensation Table as Non-Equity Incentive Plan Compensation in the following amounts: Ms. Baier$657,295; Mr. Swain$275,545; Ms. Patchett$250,264; Mr. White$148,874; and Mr. Kaestner$129,024. |
(2) |
Represents performance-based restricted shares granted under our 2014 Omnibus Incentive Plan which are eligible to vest on February 27, 2022, subject to continued employment and the achievement of 3-year CAGR of same community RevPAR performance targets as described above. The values reported in the table represent the grant date fair values computed in accordance with ASC 718, which are equivalent to the grant values (i.e., number of shares granted at target performance level, multiplied by the closing price on the date of grant). Achievement at the threshold, target, and maximum or above performance levels will result in vesting of 25%, 100%, and 125% of the target number of shares, respectively, and vesting percentages will be interpolated between threshold and target, and target and maximum performance levels. Failure to achieve the threshold |
32 |
|
performance level will result in forfeiture of all such shares. The grant values of the awards (i.e., number of shares granted multiplied by the closing price on the date of grant) assuming achievement at or above the maximum performance level are: Ms. Baier$2,226,557; Mr. Swain$609,370; Ms. Patchett$421,870; Mr. White$210,939; and Mr. Kaestner$164,062. |
(3) |
Represents performance-based restricted shares granted under our 2014 Omnibus Incentive Plan which are eligible to vest on February 27, 2023, subject to continued employment and the achievement of 3-year relative TSR performance targets as described above. The values reported in the table represent the grant date fair values computed in accordance with ASC 718, which were 4% more than the grant values (i.e., number of shares granted at target performance level, multiplied by the closing price on the date of grant). Achievement at the threshold, target, and maximum or above performance levels will result in vesting of 50%, 100%, and 150% of the target number of shares, respectively (provided that no additional shares beyond the target number of shares will be issued if our compound annual TSR is negative for the performance period), and vesting percentages will be interpolated between threshold and target, and target and maximum performance levels. Failure to achieve the threshold performance level will result in forfeiture of all such shares. The grant values of the awards (i.e., number of shares granted multiplied by the closing price on the date of grant) assuming achievement at or above the maximum performance level are: Ms. Baier$890,624; Mr. Swain$243,746; Ms. Patchett$168,746; Mr. White$84,369; and Mr. Kaestner$65,623. |
(4) |
Represents time-based restricted shares granted under our 2014 Omnibus Incentive Plan which are eligible to vest ratably in four annual installments beginning on February 27, 2020, subject to continued employment. |
|
33 |
Outstanding Equity Awards at Fiscal Year-End
The following table summarizes the outstanding equity awards held by each of our named executive officers as of December 31, 2019. The market values of such awards are based on $7.27 per share, the closing market price of our stock on December 31, 2019.
Stock Awards | ||||||||||||||||||||
Name |
Grant Date |
Number of Shares
or Units of Stock That Have Not Vested (#) (1) |
Market Value of
Shares or Units of Stock That Have Not Vested ($) |
Equity Incentive Plan
Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) |
Equity Incentive Plan
Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) |
|||||||||||||||
Ms. Baier
|
|
2/26/2016
|
|
|
12,940
|
|
|
94,074
|
|
|
12,940 (2)
|
|
|
94,074
|
|
|||||
|
2/13/2017
|
|
|
25,270
|
|
|
183,713
|
|
|
20,215 (3)
|
|
|
146,963
|
|
||||||
|
1/5/2018
|
|
|
77,479
|
|
|
563,272
|
|
|
|
|
|
|
|
||||||
|
1/5/2018
|
|
|
58,110
|
|
|
422,460
|
|
|
|
|
|
|
|
||||||
|
3/5/2018
|
|
|
155,602
|
|
|
1,131,227
|
|
|
103,735 (4)
|
|
|
754,150
|
|
||||||
|
2/11/2019
|
|
|
302,163
|
|
|
2,196,725
|
|
|
264,392 (5)
|
|
|
1,992,130
|
|
||||||
Mr. Swain
|
|
9/10/2018
|
|
|
39,937
|
|
|
290,342
|
|
|
26,624 (4)
|
|
|
193,556
|
|
|||||
|
2/11/2019
|
|
|
82,698
|
|
|
601,214
|
|
|
72,360 (5)
|
|
|
526,057
|
|
||||||
Ms. Patchett
|
|
2/26/2016
|
|
|
6,082
|
|
|
44,216
|
|
|
6,082 (2)
|
|
|
44,216
|
|
|||||
|
2/13/2017
|
|
|
11,877
|
|
|
86,346
|
|
|
9,501 (3)
|
|
|
69,072
|
|
||||||
|
1/5/2018
|
|
|
41,322
|
|
|
300,411
|
|
|
|
|
|
|
|
||||||
|
1/5/2018
|
|
|
30,993
|
|
|
225,319
|
|
|
|
|
|
|
|
||||||
|
2/11/2019
|
|
|
57,252
|
|
|
416,222
|
|
|
50,095 (5)
|
|
|
364,191
|
|
||||||
Mr. White
|
|
2/26/2016
|
|
|
2,212
|
|
|
16,081
|
|
|
737 (2)
|
|
|
5,358
|
|
|||||
|
2/13/2017
|
|
|
4,319
|
|
|
31,399
|
|
|
1,151 (3)
|
|
|
8,368
|
|
||||||
|
5/4/2017
|
|
|
1,780
|
|
|
12,941
|
|
|
|
|
|
|
|
||||||
|
1/5/2018
|
|
|
18,079
|
|
|
131,434
|
|
|
|
|
|
|
|
||||||
|
1/5/2018
|
|
|
13,560
|
|
|
98,581
|
|
|
|
|
|
|
|
||||||
|
2/11/2019
|
|
|
28,626
|
|
|
208,111
|
|
|
25,048 (5)
|
|
|
182,099
|
|
||||||
Mr. Kaestner
|
|
2/26/2016
|
|
|
3,020
|
|
|
21,955
|
|
|
3,020 (2)
|
|
|
21,955
|
|
|||||
|
2/13/2017
|
|
|
5,897
|
|
|
42,871
|
|
|
4,717 (3)
|
|
|
34,293
|
|
||||||
|
1/5/2018
|
|
|
18,079
|
|
|
131,434
|
|
|
|
|
|
|
|
||||||
|
1/5/2018
|
|
|
13,560
|
|
|
98,581
|
|
|
|
|
|
|
|
||||||
|
2/11/2019
|
|
|
22,265
|
|
|
161,867
|
|
|
19,482 (5)
|
|
|
141,634
|
|
(1) |
Represents time-based restricted shares, the vesting of which is subject to continued employment. The awards granted during January, February, March, and September have vested or are eligible to vest ratably in four annual installments beginning on February 27 (November 19 for Mr. Swains September 2018 award) in the year following the year of grant, except that with respect to the second award with a grant date of January 5, 2018, 75% of the award is eligible to vest on February 27, 2021 and 25% of the award is eligible vest on February 27, 2022. The award granted during May 2017 vested ratably in three annual installments beginning on May 20 in the year following the year of grant. |
(2) |
Represents performance-based restricted shares, the vesting of which was subject to continued employment and the achievement of specified performance targets based on our 2019 ROI on Program Max projects as described above. The number of shares reported represents the target level of performance, and such reported shares vested on February 27, 2020 based on our actual performance. |
(3) |
Represents performance-based restricted shares, the vesting of which is subject to continued employment and the achievement of specified performance targets. Up to 75% of the shares awarded were eligible to vest on February 27, 2020 based on our 3-year CAGR of Combined Adjusted Free Cash Flow, and up to 25% of the shares awarded are eligible to vest on February 27, 2021 based on our 2020 ROI on Program Max projects, each as described above. The number of shares reported represents the threshold level of performance for the first tranche and the target level of performance for the second tranche. The threshold level of performance for the first tranche was not achieved; therefore, the named executive officers forfeited the following number of shares on February 27, 2019: Ms. Baier37,904 shares; Ms. Patchett17,814 shares; Mr. White2,158 shares; and Mr. Kaestner8,844 shares. |
34 |
|
(4) |
Represents performance-based restricted shares, which are eligible to vest on February 27, 2021, subject to continued employment and the achievement of compound annual TSR performance targets based on a beginning stock price of $6.53 per share as described above. The number of shares reported represents the threshold level of performance. |
(5) |
Represents performance-based restricted shares with the terms described in footnotes 2 and 3 to the Grants of Plan-Based Awards Table. The number of shares reported represents the target level of performance with respect to the shares eligible to vest on February 27, 2022 based on our 3-year CAGR of same community RevPAR performance, and the threshold level of performance with respect to the shares eligible to vest on February 27, 2023 based on our 3-year relative TSR performance. |
Stock Vested for 2019
The following table summarizes the vesting of time- and performance-based restricted shares and the value realized by our named executive officers as a result of such vesting during 2019.
Stock Awards | ||||||||
Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) (1) | |||||||
Ms. Baier | 96,812 | 668,971 | ||||||
Mr. Swain | 13,312 | 94,382 | ||||||
Ms. Patchett | 24,955 | 172,439 | ||||||
Mr. White | 11,905 | 82,353 | ||||||
Mr. Kaestner | 13,026 | 90,010 |
(1) |
The value realized is based on the closing market price of the underlying stock on the date the shares vested (or the most recent trading day if such date was not a trading day): February 27, 2019 (Ms. Baier96,812 shares; Ms. Patchett24,955 shares; Mr. White10,125 shares; and Mr. Kaestner13,026 shares); May 20, 2019 (Mr. White1,780 shares); and November 19, 2019 (Mr. Swain13,312 shares). |
Pension Benefits
None of our named executive officers participates in or has account balances in qualified or non-qualified defined benefit plans sponsored by us. The Committee may elect to adopt qualified or non-qualified defined benefit plans in the future if it determines that doing so is in our best interests.
Nonqualified Deferred Compensation
None of our named executive officers participates in or has an accrued benefit in non-qualified defined contribution plans or other non-qualified deferred compensation plans maintained by us. The Committee may elect to adopt non-qualified defined contribution plans or other non-qualified deferred compensation plans in the future if it determines that doing so is in our best interests.
|
35 |
Potential Payments Upon Termination or Change in Control
The following table sets forth potential amounts payable upon termination of employment or a change in control to our named executive officers assuming termination of employment on December 31, 2019, with equity-based amounts based on $7.27 per share, the closing market price of our stock on December 31, 2019.
Name/Benefit |
Voluntary
Resignation by Executive ($) |
Termination
by us for Cause ($) |
Termination
by us without Cause ($) |
Termination
|
Termination
by Executive for Good Reason ($) |
Disability
($) |
Death
($) |
|||||||||||||||||||||
Ms. Baier |
||||||||||||||||||||||||||||
Salary |
| | 1,365,000 | 1,820,000 | 1,365,000 | | | |||||||||||||||||||||
Pro-Rata Bonus (1) |
| | 657,295 | 657,295 | 657,295 | 657,295 | 657,295 | |||||||||||||||||||||
Severance Bonus |
| | 1,842,750 | 2,457,000 | 1,842,750 | | | |||||||||||||||||||||
PTO |
70,000 | 70,000 | 70,000 | 70,000 | 70,000 | 70,000 | 70,000 | |||||||||||||||||||||
COBRA |
| | 15,219 | 15,219 | 15,219 | | | |||||||||||||||||||||
Accelerated Vesting of Restricted Shares (2) |
| | 1,628,705 | 8,757,987 | 926,249 | 1,628,705 | 1,628,705 | |||||||||||||||||||||
Total |
|
70,000 |
|
70,000 | 5,578,969 | 13,777,501 | 4,876,513 | 2,356,000 | 2,356,000 | |||||||||||||||||||
Mr. Swain |
||||||||||||||||||||||||||||
Salary |
| | 515,000 | 772,500 | | | | |||||||||||||||||||||
Pro-Rata Bonus (1) |
| | 275,545 | 275,545 | | 275,545 | 275,545 | |||||||||||||||||||||
Severance Bonus |
| | 515,000 | 772,500 | | | | |||||||||||||||||||||
PTO |
26,711 | 26,711 | 26,711 | 26,711 | 26,711 | 26,711 | 26,711 | |||||||||||||||||||||
COBRA |
| | 8,285 | 12,427 | | | | |||||||||||||||||||||
Accelerated Vesting of Restricted Shares (2) |
| | 247,078 | 1,879,877 | | 247,078 | 247,078 | |||||||||||||||||||||
Total |
|
26,711 |
|
26,711 | 1,587,619 | 3,739,560 | 26,711 | 549,334 | 549,334 | |||||||||||||||||||
Ms. Patchett |
||||||||||||||||||||||||||||
Salary |
| | 701,625 | 935,500 | | | | |||||||||||||||||||||
Pro-Rata Bonus (1) |
| | 250,264 | 250,264 | | 250,264 | 250,264 | |||||||||||||||||||||
Severance Bonus |
| | 701,625 | 935,500 | | | | |||||||||||||||||||||
PTO |
35,981 | 35,981 | 35,981 | 35,981 | 35,981 | 35,981 | 35,981 | |||||||||||||||||||||
COBRA |
| | 14,900 | 14,900 | | | | |||||||||||||||||||||
Accelerated Vesting of Restricted Shares (2) |
| | 460,962 | 1,705,637 | | 460,962 | 460,962 | |||||||||||||||||||||
Total |
|
35,981 |
|
35,981 | 2,165,357 | 3,877,782 | 35,981 | 724,207 | 747,207 | |||||||||||||||||||
Mr. White |
||||||||||||||||||||||||||||
Salary |
| | 397,500 | 596,250 | | | | |||||||||||||||||||||
Pro-Rata Bonus (1) |
| | 148,874 | 148,874 | | 148,874 | 148,874 | |||||||||||||||||||||
Severance Bonus |
| | 278,250 | 417,375 | | | | |||||||||||||||||||||
PTO |
30,578 | 30,578 | 30,578 | 30,578 | 30,578 | 30,578 | 30,578 | |||||||||||||||||||||
COBRA |
| | | | | | | |||||||||||||||||||||
Accelerated Vesting of Restricted Shares (2) |
| | 200,674 | 732,940 | | 200,674 | 200,674 | |||||||||||||||||||||
Total |
|
30,578 |
|
30,578 | 1,055,876 | 1,926,017 | 30,578 | 380,126 | 380,126 | |||||||||||||||||||
Mr. Kaestner |
||||||||||||||||||||||||||||
Salary |
| | 344,500 | 516,750 | 344,500 | | | |||||||||||||||||||||
Pro-Rata Bonus (1) |
| | 129,024 | 129,024 | | 129,024 | 129,024 |
36 |
|
Name/Benefit |
Voluntary
Resignation by Executive ($) |
Termination
by us for Cause ($) |
Termination
by us without Cause ($) |
Termination
|
Termination
by Executive for Good Reason ($) |
Disability
($) |
Death
($) |
|||||||||||||||||||||
Severance Bonus |
| | 241,150 | 361,725 | 180,863 | | | |||||||||||||||||||||
PTO |
26,501 | 26,501 | 26,501 | 26,501 | 26,501 | 26,501 | 26,501 | |||||||||||||||||||||
COBRA |
| | 13,828 | 20,742 | 13,828 | | | |||||||||||||||||||||
Accelerated Vesting of Restricted Shares (2) |
| | 204,382 | 726,258 | | 204,382 | 204,382 | |||||||||||||||||||||
Total |
|
26,501 |
|
26,501 | 959,385 | 1,781,000 | 565,692 | 359,907 | 359,907 |
(1) |
The amounts listed in the applicable columns represent the amount payable to the named executive officer under the 2019 annual incentive plan based on our actual performance in 2019. |
(2) |
A portion of the amounts listed in the applicable columns relate to the potential vesting of performance-based restricted shares following a termination of the executives employment by us without cause (other than in connection with a change in control), as a result of the executives death or disability and, with respect to grants made to Ms. Baier on or after March 1, 2018, upon her termination of employment for good reason (other than in connection with a change in control). As described in more detail below, upon each of these events, all or a portion of outstanding performance-based restricted shares would remain outstanding an eligible to vest only if and to the extent the relevant performance targets were achieved. The amounts in the applicable columns in respect of the potential vesting of these performance-based restricted shares include the performance-based restricted shares awarded in 2016 that vested on February 27, 2020 and consist of $94,074 for Ms. Baier, $44,216 for Ms. Patchett, $5,358 for Mr. White, and $21,955 for Mr. Kaestner. The remainder of the applicable amounts consist of the accelerated vesting of time-based restricted shares, and in the column under the heading Termination by us without Cause following a Change in Control, additional vesting of performance-based restricted shares, each as described in more detail below. |
Severance Arrangements
Our employment agreement with Ms. Baier and the Severance Policy provide for severance payments and benefits for certain terminations of employment of our named executive officers. In addition, equity award agreements with the named executive officers provide for the treatment of outstanding restricted shares and restricted stock units upon certain terminations of employment. Summaries of such arrangements are set forth below. Unless otherwise indicated, cause, good reason and change in control are defined in the employment agreement or Severance Policy, as applicable, or with respect to the outstanding equity award agreements, our 2014 Omnibus Incentive Plan. In addition to the severance pay and benefits described below, upon any termination of a named executive officers employment, the executive will be entitled to receive a payout of up to 160 hours of the executives paid time off (PTO) balance, and upon termination of a named executive officers employment due to death or disability, our 2019 annual incentive plan and Ms. Baiers employment agreement provide that the annual bonus will be paid to the extend earned, pro-rated based on the number of days employed during the year.
Employment Agreement
Under Ms. Baiers employment agreement, in the event her employment is terminated by us without cause or by Ms. Baier for good reason, in each case other than within 18 months following a change in control, she will be entitled to: (i) 150% of her base salary and target annual bonus for the year of termination, payable over 18 months; (ii) an annual bonus for the year of termination (to the extent earned under the terms of the bonus plan), pro-rated based on the number of days she was employed, and (iii) if then eligible for, and she elects continuation of health coverage under COBRA, we will pay the employer portion of her COBRA premium payments for 18 months as if she were still an active employee (the COBRA Benefits).
In the event Ms. Baiers employment is terminated by us without cause or by Ms. Baier for good reason, in each case within 18 months following a change in control, she will be entitled to: (i) 200% of her base salary payable over 18 months, (ii) 200% of her target bonus for the year of termination paid in a lump sum on the 60th day following such termination; (iii) an annual bonus for the year of termination (to the extent earned under the terms of the bonus plan), pro-rated based on the number of days she was employed, and (iv) the COBRA Benefits for 18 months.
|
37 |
If Ms. Baiers employment is terminated by reason of her death or disability (as defined in the employment agreement), she (or her beneficiary or estate, as applicable) will be entitled to receive an annual bonus for the year of termination (to the extent earned under the terms of the bonus plan), pro-rated based on the number of days she was employed.
Payments of such severance pay and benefits under the employment agreement are conditioned on Ms. Baier having signed and returned an effective waiver and release of claims in a form satisfactory to us and continuing to comply with all applicable restrictive covenants. She must acknowledge in such release that all restrictive covenants to which she is a party will remain in force for the period specified in such covenants. A breach of such covenants will result in the cessation of severance pay and benefits and may result in her being required to repay certain severance pay and benefits already provided as well as certain costs and expenses.
Termination of Ms. Baiers employment within 30 days of the end of the initial term or any renewal term of the employment agreement following the provision of written notice of non-renewal by us will be treated as a termination of Ms. Baiers employment without cause for purposes of the employment agreement and for purposes of any equity awards previously granted to Ms. Baier or granted to her during the term of the employment agreement.
With respect to any termination of Ms. Baiers employment, treatment of outstanding equity awards will be as provided in the applicable award agreement governing such awards, as described below.
Any payments that are not deductible by us under Section 280G of the Internal Revenue Code will be cut back only to the extent that the cutback results in a better after-tax position for Ms. Baier.
The employment agreement contains non-competition, non-solicitation, confidentiality, and mutual non-disparagement covenants. The non-competition restrictions will continue in effect during Ms. Baiers employment and for one year following termination of employment. The non-solicitation restrictions will continue in effect during her employment and for two years following her termination of employment. The confidentiality and mutual non-disparagement obligations will apply during her employment and thereafter.
The non-competition provisions provide that Ms. Baier shall not directly or indirectly, either as a principal, agent, employee, employer, consultant, partner, shareholder of a closely held corporation or shareholder in excess of five percent (5%) of a publicly traded corporation, corporate officer or director, or in any other individual or representative capacity, engage or otherwise participate in any manner or fashion in any business that is a Competing Business in the Area. For purposes of this provision: Area means a fifteen (15) mile radius of any senior living facility owned, managed or operated by us (or our successor) at the time Ms. Baiers employment is terminated; and Competing Business means the business of owning, operating or managing senior living facilities having gross annualized revenues of at least $35 million or owning, operating or managing, in the aggregate, at least 1,000 units/beds provided that at least 750 units/beds owned, operated or managed by such business are located within the Area.
Severance Policy
Ms. Patchett participates in the Severance Policy as a Designated Officer as defined therein, and each of Messrs. Swain, White, and Kaestner participates in the Severance Policy as a Selected Officer as defined therein. Mr. Kaestner is party to separate letter agreements with us dated effective as of August 6, 2010 and September 25, 2019, which provide for certain modifications of the Severance Policy as it applies to Mr. Kaestner, described further below.
38 |
|
The table below sets forth the severance pay and benefits available under the Severance Policy for the participating named executive officers assuming a separation from service (as defined in the Severance Policy) without cause or without cause or for good reason within 18 months following a change in control.
Separation without Cause Not
within 18 Months Following Change in Control |
Separation without Cause or for
Good Reason within 18 Months Following Change in Control |
Other Severance Pay and
Benefits for Both Circumstances |
||||
Ms. Patchett |
150% of base salary and target annual bonus payable over 18 months |
200% of base salary payable over 18 months
200% of target annual bonus payable 60 days after termination |
Pro-rated annual bonus for the year of termination to the extent earned, payable when such bonus would otherwise be due |
|||
Messrs. Swain, White, and Kaestner |
100% of base salary and target annual bonus payable over 12 months |
150% of base salary and target annual bonus payable over 18 months |
COBRA Benefits for length of severance payment period |
In addition to the foregoing, pursuant to Mr. Kaestners 2010 letter agreement, if Mr. Kaestner separates from service for good reason otherwise than within 18 months following a change in control, he will be eligible to receive 100% of his annual salary and 75% of his target annual bonus payable over 12 months. Further, pursuant to Mr. Kaestners 2019 letter agreement, if we complete the dispositions of our interests in our 16 entry fee CCRCs before January 1, 2021, such completion will be deemed to be a change in control under the Severance Policy if Mr. Kaestner is not offered continued acceptable employment with us or the acquiror of at least a majority of the entry fee CCRCs. An offer of continued acceptable employment means any offer of employment by us or the acquiror accepted by Mr. Kaestner, employment with us with compensation that is not materially and significantly reduced, or employment with the acquiror with responsibilities, duties, and compensation that are not materially and significantly reduced. In addition, pursuant to such letter, we agreed to request that the Committee approve the acceleration and vesting of any of Mr. Kaestners outstanding equity awards upon consummation of such transactions. If our sale of our interests in all 16 entry fee CCRCs does not occur before January 1, 2021, the Severance Policy will continue to apply to Mr. Kaestner without modification by such letter.
Payments of the foregoing severance pay and benefits under the Severance Policy are conditioned upon the executive having signed and returned an effective waiver and release of claims in a form satisfactory to us and continuing to comply with all applicable restrictive covenants. In 2020, the Committee amended the Severance Policy to further condition payments of such severance pay and benefits upon the executive having executed and delivered an enforceable non-competition covenant acceptable to the Company with a duration of 12 months following termination of employment. The executive must acknowledge in the waiver and release that all restrictive covenants, including the foregoing non-competition covenant and covenants contained in equity award agreements to which he or she is a party will remain in force for the period specified in such covenants. A breach of such covenants will result in the cessation of severance pay and benefits and may result in such executives being required to repay certain severance pay and benefits already provided as well as certain costs and expenses. If payments pursuant to the Severance Policy are not deductible by us under Section 280G of the Internal Revenue Code, such payments shall be reduced (or repaid) in order to ensure our deduction of payments in connection with a change in control.
Outstanding Equity Award Agreements
Time-Based Restricted Shares Granted Prior to 2020
With respect to time-based restricted shares granted prior to 2020 that vest ratably on an annual basis: (i) if an executives employment is terminated by us without cause or due to death or disability (or with respect to Ms. Baiers awards granted on or after March 1, 2018 by her for good reason as defined in her employment agreement), the next tranche of unvested restricted shares will immediately vest and the remaining unvested restricted shares will
|
39 |
immediately be forfeited; (ii) upon the occurrence of a change in control, the next tranche of unvested restricted shares will immediately vest and the remaining unvested restricted shares will remain outstanding and eligible to vest on the previously established vesting dates, subject to continued employment, and (iii) in the event an executives employment is terminated by us without cause or by the executive for good reason (as defined in Ms. Baiers employment agreement or the Severance Policy, as applicable) within 12 months following a change in control, all remaining unvested restricted shares will immediately vest.
With respect to time-based restricted shares awarded in January 2018 for which 75% are eligible to vest on February 27, 2021 and 25% are eligible to vest on February 27, 2022: (i) if an executives employment is terminated by us without cause or due to death or disability, the next tranche of unvested restricted shares will immediately vest and the remaining unvested restricted shares will immediately be forfeited; provided, however, that if the termination had occurred on or prior to February 27, 2019, 25% of the unvested restricted shares would have immediately vested and the remaining unvested restricted shares would have immediately been forfeited, and if the termination had occurred after February 27, 2019 and on or before February 27, 2020, 50% of the unvested restricted shares would have immediately vested and the remaining unvested restricted shares would have immediately been forfeited; (ii) upon the occurrence of a change in control, the next tranche of unvested restricted shares will immediately vest, and the remaining unvested restricted shares will remain outstanding and will vest on the previously established vesting dates, subject to continued employment; provided, however, that if the change in control had occurred on or prior to February 27, 2019, 25% of the unvested restricted shares would have immediately vested and if the change in control had occurred after February 27, 2019 and on or before February 27, 2020, 50% of the unvested restricted shares would have immediately vested; and (iii) if an executives employment is terminated by us without cause or by the executive for good reason (as defined in the Severance Policy) within 12 months following a change in control, all remaining unvested restricted shares will immediately vest.
Time-Based Restricted Stock Units Granted in 2020
With respect to time-based RSUs granted in 2020: (i) if an executives employment is terminated by us without cause or due to death or disability (or with respect to Ms. Baiers awards, by her for good reason as defined in her employment agreement), the next tranche of unvested RSUs will vest upon such termination and be settled within 30 days, and the remaining outstanding RSUs will immediately be forfeited; (ii) upon the occurrence of a change in control in which the outstanding RSUs are not assumed, continued, or substituted with an award relating to a publicly-traded security of the acquiror (or the Company) on the same terms and conditions that were applicable to the outstanding RSUs immediately prior to the change in control, such outstanding RSUs will vest and be settled upon consummation of the change in control; and (iii) in the event an executives employment is terminated by us without cause or by the executive for good reason (as defined in Ms. Baiers employment agreement or the Severance Policy, as applicable) within 12 months following a change in control in which such outstanding RSUs were assumed, continued, or substituted, all RSUs outstanding at the time of such termination will vest upon such termination and be settled within 30 days.
Performance-Based Restricted Shares Granted in 2016 and 2017
With respect to performance-based restricted shares awarded in 2016 and 2017, if an executives employment is terminated by us without cause or due to death or disability, the unvested restricted shares eligible to vest on the next vesting date will remain outstanding until the next vesting date (with all other unvested restricted shares from the award immediately being forfeited) and will vest only if and to the extent that the relevant performance targets for such tranche are achieved. However, with respect to such awards, if the termination had occurred on or prior to the second anniversary or first anniversary prior to the vesting date for the first tranche of shares, the executive would have only been able to achieve vesting of up to 25% or 50%, respectively, of the unvested restricted shares based on our one-year or two-year CAGR of Adjusted CFFO per share or Combined Adjusted Free Cash Flow, as applicable, respectively.
Under the terms of such awards, upon the occurrence of a change in control, all of the shares will automatically convert to time-based restricted shares. In addition, upon the date of the change in control, the next tranche of these
40 |
|
shares will immediately vest. However, if the change in control had occurred on or prior to the second anniversary or first anniversary prior to the vesting date for the first tranche of shares, only 25% or 50%, respectively, of the unvested restricted shares would have immediately vested. All other shares will remain outstanding and eligible to vest on the previously established vesting dates, subject to continued employment. In the event an executives employment is terminated by us without cause or by the executive for good reason (as defined in the Severance Policy) within 12 months following such change in control, all remaining unvested restricted shares will immediately vest.
Performance-Based Restricted Shares Granted in 2018
With respect to the performance-based restricted shares awarded in 2018, if an executives employment was or is terminated by us without cause or due to death or disability (or with respect to Ms. Baiers award, by her for good reason as defined in her employment agreement): (i) on or before February 27, 2019, one-third of the shares would have remained outstanding and eligible to vest on February 27, 2019 based on, and subject to, the 15-day volume weighted average price per share (VWAP) as of December 31, 2018 compared to a partial-period TSR target, and the remainder of such outstanding shares would have been immediately forfeited; (ii) after February 27, 2019 and on or before February 27, 2020, two-thirds of the shares would have remained outstanding and eligible to vest on February 27, 2020 based on, and subject to, the 15-day VWAP as of December 31, 2019 compared to a partial-period TSR target, and the remainder of such outstanding shares would have been immediately forfeited; and (iii) after February 27, 2020, 100% of the shares will remain outstanding and eligible to vest on February 27, 2021 based on, and subject to, the 15-day VWAP as of December 31, 2020 compared to the stated TSR target.
Under the terms of such outstanding restricted shares, upon the occurrence of a change in control occurring (i) on or before February 27, 2019, one-third of the shares would have accelerated and vested and the remainder would have converted to time-based restricted shares eligible to vest in two equal annual installments beginning on February 27, 2020, subject to continued employment; (ii) after February 27, 2019 and on or before February 27, 2020, two-thirds of the shares would have accelerated and vested and the remainder would have converted to time-based restricted shares eligible to vest on February 27, 2021, subject to continued employment; and (iii) after February 27, 2020 and on or before February 27, 2021, all of the shares will accelerate and vest. In the event that the executives employment is terminated by us without cause or by the executive for good reason (as defined in Ms. Baiers employment agreement or the Severance Policy, as applicable) within 12 months following such change in control, all remaining unvested shares will immediately vest.
Performance-Based Restricted Shares Granted in 2019
With respect to the performance-based restricted shares awarded in 2019, if an executives employment is terminated by us without cause or due to death or disability (or with respect to Ms. Baiers award, by her for good reason as defined in her employment agreement): (i) on or before February 27, 2020, one-third of the shares eligible to vest on February 27, 2022 based on the CAGR of Same-Community RevPAR performance goal (together with any additional shares that may be issued as a result of performance in excess of the target level, the First Tranche Shares) and one-fourth of the shares eligible to vest on February 27, 2023 based on the relative TSR performance goal (together with any additional shares that may be issued as a result of performance in excess of the target level, the Second Tranche Shares) would have remained outstanding and eligible to vest upon the Committees certification of our performance following December 31, 2021, and the remainder of such outstanding shares would have been immediately forfeited; (ii) after February 27, 2020 and on or before February 27, 2021, two-thirds of the First Tranche Shares and one-half of the Second Tranche Shares will remain outstanding and eligible to vest upon the Committees certification of our performance following December 31, 2021, and the remainder of such outstanding shares will be immediately forfeited; (iii) after February 27, 2021 and before December 31, 2021, all of the First Tranche Shares and three-fourths of the Second Tranche Shares will remain outstanding and eligible to vest upon the Committees certification of our performance following December 31, 2021, and the remainder of such outstanding shares will be immediately forfeited; (iv) on or after December 31, 2021 and on or before February 27, 2022, all of the then outstanding First Tranche Shares and three-fourths of the then outstanding Second Tranche Shares (in each
|
41 |
case, such number of shares to be determined following application of the performance goals and targets) will vest upon the Committees certification of our performance and the remainder of such Second Tranche Shares will be immediately forfeited; and (v) after February 27, 2022, all of the then outstanding Second Tranche Shares will vest effective upon the date of termination.
Under the terms of such outstanding restricted shares, upon the occurrence of a change in control, such shares will be converted into time-based restricted shares if it occurs before December 31, 2021, and such shares shall vest or remain outstanding and eligible to vest as follows: (i) if the change in control had occurred on or before February 27, 2020, one-third of the First Tranche Shares and one-fourth of the Second Tranche Shares would have accelerated and vested, and the remaining First Tranche Shares and Second Tranche Shares would have been eligible to vest on February 27, 2022 and February 27, 2023, respectively, subject to continued employment; (ii) if the change in control occurs after February 27, 2020 and on or before February 27, 2021, two-thirds of the First Tranche Shares and one-half of the Second Tranche Shares will accelerate and vest, and the remaining First Tranche Shares and Second Tranche Shares will be eligible to vest on February 27, 2022 and February 27, 2023, respectively, subject to continued employment; (iii) if the change in control occurs after February 27, 2021 and before December 31, 2021, all of the First Tranche Shares and three-fourths of the Second Tranche Shares will accelerate and vest, and the remaining Second Tranche Shares will be eligible to vest on February 27, 2023, subject to continued employment; (iv) if the change in control occurs on or after December 31, 2021 and on or before February 27, 2022, all of the then outstanding First Tranche Shares and three-fourths of the then outstanding Second Tranche Shares (in each case, such number of shares to be determined following application of the performance goals and targets) will accelerate and vest, and the remaining Second Tranche Shares will be eligible to vest on February 27, 2023, subject to continued employment; and (v) if the change in control occurs after February 27, 2022, all of the then outstanding Second Tranche Shares will accelerate and vest. In the event that the executives employment is terminated by us without cause, or by the executive for good reason (as defined in Ms. Baiers employment agreement or the Severance Policy, as applicable), within 12 months following such change in control, all then outstanding First Tranche Shares and Second Tranche Shares will accelerate and vest.
Performance-Based Restricted Stock Units Granted in 2020
With respect to performance-based RSUs granted in 2020, if an executives employment is terminated by us without cause or due to death or disability (or with respect to Ms. Baiers award, by her for good reason as defined in her employment agreement), a pro-rata percentage of the RSUs will remain outstanding following such termination and will be eligible to vest subject to achievement of the performance criteria as of the applicable vesting date, and the remaining outstanding RSUs will immediately be forfeited. For purposes of these awards, the pro-rata percentage means: with respect to the RSUs eligible to vest on February 27, 2023, 33 1/3%, 66 2/3%, and 100% if such termination of employment occurs on or prior to February 27, 2021, after February 27, 2021 but on or prior to February 27, 2022, and after February 27, 2022, respectively; and with respect to the RSUs eligible to vest on February 27, 2024, 25%, 50%, 75% and 100% if such termination of employment occurs on or prior to February 27, 2021, after February 27, 2021 but on or prior to February 27, 2022, after February 27, 2022 but on or prior to February 27, 2023, and after February 27, 2023, respectively.
Under the terms of such outstanding RSUs, upon the occurrence of a change in control in which the outstanding RSUs are not assumed, continued, or substituted with an award relating to a publicly-traded security of the acquiror (or the Company) on the same terms and conditions that were applicable to the outstanding RSUs immediately prior to the change in control, such outstanding RSUs will vest and be settled upon consummation of the change in control. If such outstanding awards are so assumed, continued, or substituted, the outstanding RSUs will continue to vest at target level performance conditioned only upon continued employment if such change in control occurs prior to the conclusion of the performance period on December 31, 2022, and the outstanding RSUs determined after application of the performance criteria will continue to vest conditioned only upon continued employment if such change in control occurs on or after conclusion of such performance period. With respect to such assumed, continued, or substituted RSUS, in the event an executives employment is terminated by us without cause or by the executive for good reason (as defined in Ms. Baiers employment agreement or the Severance Policy, as applicable)
42 |
|
within 12 months following a change in control, all RSUs outstanding at the time of such termination will vest upon such termination and be settled within 30 days.
Definitions of Change in Control, Cause and Good Reason
Under Ms. Baiers employment agreement, the Severance Policy, and our 2014 Omnibus Incentive Plan, a change in control shall be deemed to have occurred if (a) any person becomes the beneficial owner of securities representing fifty percent (50%) or more of the combined voting power of our outstanding securities (not including in the securities beneficially owned by such person any securities acquired directly from us or any of our affiliates); (b) we or any of our subsidiaries merge or consolidate with any other corporation, except when the individuals who comprise the Board immediately prior to the transaction constitute at least a majority of the Board of Directors of the surviving entity (or its ultimate parent); or (c) our stockholders approve a plan of liquidation or dissolution or we complete the sale of all or substantially all of our assets (other than a sale to an entity, at least fifty percent (50%) of the combined voting power of the securities of which are owned by our stockholders after the transaction in substantially the same proportions as their ownership of us prior to the transaction, or other than a sale immediately following which the individuals who comprise the Board immediately prior to the transaction constitute at least a majority of the Board of Directors of the entity to which the assets are sold (or its ultimate parent)). In addition, for purposes of our 2014 Omnibus Incentive Plan, a change in control shall be deemed to have occurred if the following individuals cease for any reason to constitute a majority of the number of directors then serving on the Board: individuals who were directors on June 5, 2014 and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including, but not limited to, a consent solicitation, relating to the election of directors) whose appointment or election by the Board or nomination for election by the Companys stockholders was approved or recommended by a vote of at least two-thirds of the directors then still in office who either were directors on June 5, 2014 or whose appointment, election or nomination for election was previously so approved or recommended. In any event, a change of control shall not be deemed to have occurred by virtue of the consummation of any transaction (or series of integrated transactions) immediately following which our stockholders prior to the transaction(s) continue to have substantially the same proportionate ownership in any entity which owns all or substantially all of the assets of the us immediately following such transaction(s).
Under Ms. Baiers employment agreement and the Severance Policy, cause means (a) conviction of, guilty plea concerning or confession of any felony; (b) any act of fraud, theft or embezzlement committed by the executive in connection with our or our subsidiaries business; (c) any material breach of any reasonable and lawful rule or directive; (d) the gross or willful neglect of duties or gross misconduct by the executive; or (e) the habitual use of drugs or habitual, excessive use of alcohol to the extent that any of such uses in the Boards good faith determination materially interferes with the performance of the executives duties. For purposes of Ms. Baiers employment agreement, cause is also defined to include any material breach by Ms. Baier of the agreement, after notice and opportunity to cure. Under the 2014 Omnibus Incentive Plan, unless otherwise defined in an employment agreement applicable to the executive, cause means the continued failure of the executive to substantially perform his or her duties and obligations, the executives fraud or material dishonesty against us, or the executives conviction or plea of guilty or nolo contendere for the commission of a felony or a crime involving material dishonesty.
Under Ms. Baiers employment agreement and the Severance Policy, good reason means the occurrence, without the executives written consent, of any of the following circumstances, unless such circumstances are fully corrected by us within thirty (30) days following written notice by the executive that he or she intends to terminate employment for one of the reasons set forth below: (i) the failure by us to pay to the executive any portion of his or her base salary or bonus within thirty (30) days of the date such compensation is due; (ii) the relocation of the executives principal office to a location outside a fifty (50) mile radius from the executives present principal office location; or (iii) the executive is assigned duties, compensation or responsibilities that are materially and significantly reduced with respect to the scope or nature of his or her duties, compensation and/or responsibilities. For purposes of Ms. Baiers employment agreement, good reason is also defined to include any material breach by us of the agreement.
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43 |
Compensation Committee Interlocks and Insider Participation
During 2019, Mses. Freed and Warren, Mr. Bumstead, and former director Jackie M. Clegg served on the Committee. None of these persons has at any time been an officer or employee of us or any of our subsidiaries. In addition, there are no relationships among our executive officers, members of the Committee or entities whose executives serve on the Board or the Committee that require disclosure under applicable SEC regulations.
Pay Ratio
For 2019, the ratio of the total annual compensation of Ms. Baier to the median of the annual total compensation of all of our other employees was 317:1. The median of the annual total compensation of our employees, other than Ms. Baier, was $20,057 for 2019.
We identified the median employee using our employee population of approximately 58,400 employees as of December 31, 2019, 34% of whom are part-time. In determining the median employee, we did not make any full-time equivalent adjustments to compensation of our part-time employees. Consistent with the prior year, to identify the median employee, we used amounts reported in box 5 of wage statements on Form W-2 as our consistently applied compensation measure. We then calculated the annual total compensation for the identified employee in accordance with the requirements of the Summary Compensation Table (including matching contributions to our 401(k) Plan and premiums on Company-provided life and disability insurance). For the annual total compensation of Ms. Baier, we used the amount reported in the total column of the Summary Compensation Table.
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Director Compensation
|
Non-Employee Director Compensation Program
The table below sets forth the elements of the non-employee director compensation program. During 2019, the Committee reviewed the program, including receiving a market compensation study from the Consultant regarding the practices of the compensation peer group approved by the Committee for 2019 annual compensation decisions. The Committee made no changes to the program at that time. Later during the year, the Committee recommended, and the Board approved, a change to the program such that if a director retires prior to the date of the annual grant of immediately vested stock or concludes his or her service at the expiration of his or her term of office, a pro-rata cash amount will be payable to the director at the time of retirement or expiration in lieu of the annual grant of immediately vested shares, in recognition of the partial year of service. The Committee also recommended, and the Board approved, an increase to the retainer for service as chair of the Investment Committee from $10,000 to $15,000 effective October 29, 2019.
In 2020, the Committee again reviewed the non-employee director compensation program, including receiving a market compensation study from the Consultant related to the peer group approved by the Committee for 2020 annual compensation decisions. Following such review, the Committee recommended, and the Board approved, the changes to the program noted below.
Cash Fees |
2019 | Changes for 2020 | Description | |||||
Annual Retainer |
$ |
100,000 |
|
No change |
Cash retainers are payable quarterly in arrears and are pro-rated for service less than the full year. Cash meeting fees are payable quarterly in arrears for attendance by the director or committee member in person or telephonically. Each director has the opportunity to elect to receive either immediately vested shares or restricted stock units in lieu of up to 50% of quarterly cash compensation, as described below. | |||
Annual Committee Chair Retainers: |
||||||||
Audit |
$ |
20,000 |
|
No change |
||||
Compensation/NCG |
$ |
15,000 |
|
No change |
||||
Investment (1) |
$ |
15,000 |
|
No change |
||||
Meeting Attendance Fees: |
||||||||
Per Board Meeting |
$ |
3,000 |
|
Applicable only to
meetings in excess of 6 per year |
||||
Per Committee Meeting
|
$ |
2,000 |
|
Applicable only to
meetings in excess of 8 per director per year |
||||
Equity Awards |
||||||||
Annual Grant of Immediately Vested Stock under 2014 Omnibus Incentive Plan |
$ | 100,000 |
Increased to
$135,000 (applicable to 2021 award for 2020 service) |
Typically granted in February each year for service in the prior year and pro-rated for service less than the full year. Directors may elect to receive restricted stock units (as described below) in lieu of the immediately vested shares. If a director retires prior to the annual grant date or concludes his or her service at the expiration of his or her term of |
|
45 |
office, a pro-rata cash amount will be payable to the director at the time of retirement or expiration in lieu of the annual grant of immediately vested shares, in recognition of the partial year of service. | ||||||||
Initial Grant of Restricted Shares under 2014 Omnibus Incentive Plan |
$ | 100,000 | No change | Granted to each new non-employee director upon joining the Board. The restricted shares awarded during 2019 are eligible to vest on the earlier to occur of the 2020 annual meeting of stockholders or the first anniversary of our 2019 annual meeting, subject to the directors continued service. |
(1) |
The retainer payable to the chair of the Investment Committee was increased from $10,000 to $15,000 effective October 29, 2019. |
Each non-employee director has the opportunity to elect to receive either immediately vested shares or restricted stock units in lieu of up to 50% of the directors quarterly cash compensation, and to elect to receive restricted stock units in lieu of the annual grant of immediately vested shares. Immediately vested shares are issued under our Director Stock Purchase Plan, and restricted stock units are issued under our 2014 Omnibus Incentive Plan. With respect to quarterly cash elections, the number of shares or restricted stock units to be issued is based on the closing price of our common stock on the date of issuance, or if such date is not a trading date, on the previous trading days closing price. Each restricted stock unit will be payable in the form of one share of our common stock following the directors termination of service as a member of the Board.
46 |
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Compensation of Non-Executive Chairman of the Board
Mr. Wielansky served as our Non-Executive Chairman of the Board through December 31, 2019. His compensation arrangements for service as Non-Executive Chairman remained unchanged from 2018 when he was appointed to serve in the role. Under such arrangements Mr. Wielansky received compensation applicable generally to non-employee directors described above and received an additional annual cash retainer of $250,000 for his service as Non-Executive Chairman through 2019. All cash amounts were payable as noted in the table above.
The Board appointed Mr. Sansone as Non-Executive Chairman of the Board effective January 1, 2020. In connection with his appointment, the Committee recommended, and the Board approved, a reduction to the retainer for service as Non-Executive Chairman. Such reduction reflected the Committees view that the time commitment of the Non-Executive Chair role had reduced since we initiated a turnaround strategy under new leadership in 2018. As a result, Mr. Sansone receives compensation applicable generally to non-employee directors described above and receives an additional annual cash retainer of $100,000 for his service as Non-Executive Chairman. All cash amounts are payable as noted in the table above.
Director Stock Ownership Guidelines
The Board has adopted Stock Ownership Guidelines that require each of our non-employee directors to maintain ownership of a multiple of the non-employee directors annual cash retainer for service on the Board, exclusive of any retainers for service as chairman of the Board or any of its committees and any cash meeting fees. In 2020, the Board amended the guidelines to increase the multiple from 3.0x to 5.0x of the annual cash retainer after reviewing the practices of the compensation peer group approved by the Committee for 2020.
Unvested equity awards do not generally count toward satisfaction of the guidelines. Stock ownership levels are required to be achieved by the fifth anniversary of the directors initial appointment or election to the Board (or, if later, the fifth anniversary of adoption of the guidelines). Until the expected ownership level is achieved, each director is expected to retain at least 50% of any shares obtained through our stock incentive plans.
As of April 24, 2020, each of our non-employee directors is in compliance with the guidelines, but each other than Mr. Bumstead holds fewer shares than required by the increased 5.0x guideline. Therefore, each of the non-employee directors other than Mr. Bumstead will be expected to retain at least 50% of any shares obtained through our stock incentive plans until the required holding level is met.
|
47 |
Director Compensation for 2019
The following table sets forth the compensation awarded to, earned by, or paid to our directors for the year ended December 31, 2019, other than Ms. Baier whose compensation information is set forth under Executive Compensation. Each of the directors included in the table served for the full-year 2019, except that Ms. Freed and Mr. Sansone joined the Board at the Companys 2019 annual meeting of stockholders held on October 29, 2019 as successors to former directors Jackie M. Clegg and James R. Seward, whose terms expired at the annual meeting.
Name |
Fees Earned or
Paid in Cash |
Stock Awards (1)(2) |
All Other
Compensation |
Total | ||||||||||||
Marcus E. Bromley |
$ |
157,000 |
|
$ | 99,995 (3) |
$ |
|
|
$ |
256,995 |
|
|||||
Frank M. Bumstead |
$ | 190,000 | $ | 99,995 (3) |
$ |
|
|
$ |
289,995 |
|
||||||
Victoria L. Freed |
$ |
24,391 |
|
$ | 99,996 (4) |
$ |
|
|
$ |
124,387 |
|
|||||
Rita Johnson-Mills |
$ |
170,609 |
(5) |
$ | 41,367 (3) |
$ |
|
|
$ |
211,976 |
|
|||||
Guy P. Sansone |
$ |
20,391 |
|
$ | 99,996 (4) |
$ |
|
|
$ |
120,387 |
|
|||||
Denise W. Warren |
$ |
172,500 |
|
$ | 24,382 (3) |
$ |
|
|
$ |
196,882 |
|
|||||
Lee S. Wielansky |
$ |
406,609 |
|
$ | 99,995 (3) |
$ |
|
|
$ |
506,604 |
|
|||||
Jackie M. Clegg |
$ |
249,052 |
(6) |
$ | 99,995 (3) |
$ |
|
|
$ |
349,047 |
|
|||||
James R. Seward |
$ |
227,408 |
(6) |
$ | 99,995 (3) |
$ |
|
|
$ |
327,403 |
|
(1) |
Represents the aggregate grant date fair value of awards of immediately vested stock and/or restricted shares computed in accordance with ASC 718. See Note 2 to our Consolidated Financial Statements included in the Original Filing for a summary of the assumptions made in the valuation of these awards |
(2) |
As of December 31, 2019, (i) none of the directors held any unvested stock awards, except that each of Ms. Freed and Mr. Sansone held 14,727 time-based restricted shares, and (ii) Ms. Johnson-Mills held 3,580 vested restricted stock units. |
(3) |
Represents the grant date fair value of the annual grant of unrestricted shares for the previous year served awarded on February 11, 2019, consisting of: 12,722 immediately vested shares for each of Messrs. Bromley, Bumstead, Wielansky, and Seward and Ms. Clegg; 5,263 immediately vested shares for Ms. Johnson-Mills; and 3,102 immediately vested shares for Ms. Warren. |
(4) |
Represents the grant date fair value of the initial grant of 14,727 time-based restricted shares awarded on December 13, 2019 to each of Ms. Freed and Mr. Sansone in connection with their joining the Board on October 29, 2019. |
(5) |
Ms. Johnson-Mills elected to receive vested restricted stock units in lieu of a portion of her cash compensation for service during 2019. The reported amount includes: 1,060 vested restricted stock units issued on April 1, 2020 for service during the first quarter of 2019 with a grant date fair value of $6,996; 1,338 vested restricted stock units issued on July 1, 2019 for service during the second quarter of 2019 with a grant date fair value of $9,995; 1,182 vested restricted stock units issued on October 1, 2019 for service during the third quarter of 2019 with a grant date fair value of $9,196; and 1,089 vested restricted stock units issued on January 1, 2020 for service during the fourth quarter of 2019 with a grant date fair value of $7,917. |
(6) |
Includes $82,740 of cash paid to each of Ms. Clegg and Mr. Seward, representing the cash amount paid in lieu of the pro-rata annual grant of immediately vested stock for service through the expiration of their terms of office at the Companys 2019 annual meeting of stockholders held on October 29, 2019. |
48 |
|
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of April 24, 2020, the total number of shares of our common stock beneficially owned, and the percent so owned, by (1) each person known by us to own more than 5% of our common stock, (2) each of our directors and named executive officers and (3) all directors and executive officers as a group, based on 183,164,490 shares of our common stock outstanding as of that date (excluding restricted shares and restricted stock units). Unless otherwise indicated, each of the beneficial owners listed has, to the Companys knowledge, sole voting and investment power with respect to the indicated shares of common stock. Unless otherwise indicated, the address of each person named in the table is c/o Brookdale Senior Living Inc., 111 Westwood Place, Suite 400, Brentwood, Tennessee 37027.
Name of Beneficial Owner |
Number of Shares |
Percentage |
||||||
Executive Officers and Directors (1) |
||||||||
Lucinda M. Baier |
|
252,154 |
|
|
* |
|
||
Steven E. Swain |
|
22,659 |
|
|
* |
|
||
Mary Sue Patchett |
|
101,238 |
|
|
* |
|
||
Chad C. White |
|
50,928 |
|
|
* |
|
||
H. Todd Kaestner |
|
98,868 |
|
|
* |
|
||
Jordan R. Asher |
|
|
|
|
* |
|
||
Marcus E. Bromley |
|
75,171 |
|
|
* |
|
||
Frank M. Bumstead |
|
300,224 |
|
|
* |
|
||
Victoria L. Freed |
|
2,491 |
|
|
* |
|
||
Rita Johnson-Mills |
|
41,907 |
|
|
* |
|
||
Guy P. Sansone |
|
2,491 |
|
|
* |
|
||
Denise W. Warren |
|
48,606 |
|
|
* |
|
||
Lee S. Wielansky |
|
101,338 |
|
|
* |
|
||
All executive officers and directors as a group (17 persons) |
|
1,252,845 |
|
|
* |
|
||
5% Stockholders |
|
|
|
|||||
Glenview Capital Management, LLC (2) |
|
17,633,572 |
|
|
9.6% |
|
||
Deerfield Partners, L.P. (3) |
|
17,291,933 |
|
|
9.4% |
|
||
The Vanguard Group (4) |
|
17,228,568 |
|
|
9.4% |
|
||
Dimensional Fund Advisors LP (5) |
|
14,895,528 |
|
|
8.1% |
|
||
Renaissance Technologies LLC (6) |
|
14,372,920 |
|
|
7.8% |
|
||
BlackRock, Inc. (7) |
|
14,292,257 |
|
|
7.8% |
|
||
Camber Capital Management (8) |
|
12,500,000 |
|
|
6.8% |
|
||
Macquarie Group Limited (9) |
|
10,016,040 |
|
|
5.5% |
|
|
49 |
* |
Less than 1% |
(1) |
Consists of shares of common stock held as of April 24, 2020, shares of restricted stock scheduled to vest on or before June 23, 2020, and for Mr. Bromley and Ms. Johnson-Mills 14,205 and 6,679 vested restricted stock units, respectively, held by the director, which were issued at the directors election in lieu of a portion of quarterly cash compensation for service as a director. The reported amounts exclude the following number of restricted shares and RSUs outstanding as of April 24, 2020 (assuming target performance for performance-based restricted shares and RSUs): Ms. Baier1,677,502; Mr. Swain479,384; Ms. Patchett301,894; Mr. White158,220; Mr. Kaestner121,696; Ms. Freed14,727; Mr. Sansone14,727; and all executive officers and directors as a group1,252,845. |
(2) |
Information regarding Glenview Capital Management, LLC (Glenview) is based solely on a Schedule 13G/A filed with the SEC on February 14, 2020 by Glenview and Larry Robbins. Glenview reported that it has shared voting power and shared dispositive power with respect to the shares reported in the table. The address of the principal business office of Glenview is 767 Fifth Avenue, 44th Floor, New York, NY 10153. |
(3) |
Information regarding Deerfield Partners, L.P. (Deerfield) is based solely on a Schedule 13G filed with the SEC on March 9, 2020 by Deerfield, its general partner Deerfield Mgmt, L.P., its investment advisor Deerfield Management Company, L.P., and James Flynn. Deerfield reported that it has shared voting power and shared dispositive power with respect to the shares reported in the table. The address of the principal business office of Deerfield is 780 Third Avenue, 37th Floor, New York, NY 10017. |
(4) |
Information regarding The Vanguard Group (Vanguard) is based solely on a Schedule 13G/A filed with the SEC on February 12, 2020 by Vanguard. Vanguard reported that it has sole voting power with respect to 179,694 shares, shared voting power with respect to 39,627 shares, sole dispositive power with respect to 17,034,589 shares and shared dispositive power with respect to 193,979 shares. The address of the principal business office of Vanguard is 100 Vanguard Blvd., Malvern, PA 19355. |
(5) |
Information regarding Dimensional Fund Advisors LP (Dimensional Fund) is based solely on a Schedule 13G/A filed with the SEC on February 12, 2020 by Dimensional Fund. Dimensional Fund reported that it has sole voting power with respect to 14,455,205 shares and sole dispositive power with respect to 14,895,528 shares. The address of the principal business office of Dimensional Fund is Building One, 6300 Bee Cave Road, Austin, TX 78746. |
(6) |
Information regarding Renaissance Technologies LLC (Renaissance) is based solely on a Schedule 13G filed with the SEC on February 12, 2020 by Renaissance and Renaissance Technologies Holdings Corporation. Renaissance reported that it has sole voting power with respect to 14,161,832 shares, sole dispositive power with respect to 14,306,769 shares, and shared dispositive power with respect to 66,151 shares. The address of the principal business office of Renaissance is 800 Third Avenue, New York, NY 10022. |
(7) |
Information regarding BlackRock, Inc. (BlackRock) is based solely on a Schedule 13G/A filed with the SEC on February 5, 2020 by BlackRock. BlackRock reported that it has sole voting power with respect to 13,805,139 shares and sole dispositive power with respect to 14,292,257 shares. The address of the principal business office of BlackRock is 55 East 52nd Street, New York, NY 10055. |
(8) |
Information regarding Camber Capital Management LP (Camber) is based solely on a Schedule 13G/A filed with the SEC on February 14, 2020 by Camber and Stephen DuBois. Camber reported that it has shared voting and shared dispositive power with respect to the shares reported in the table. The address of the principal business office of Camber is 101 Huntington Avenue, Suite 2101, Boston, MA 02199. |
(9) |
Information regarding Macquarie Group Limited (Macquarie) is based solely on a Schedule 13G filed with the SEC on February 13, 2020 by Macquarie, Macquarie Bank Limited, Macquarie Investment Management Austria Kapitalanlage AG, Macquarie Investment Management Holdings Inc. and Macquarie Investment Management Business Trust. Macquarie reported that Macquarie Investment Management Holdings Inc. and Macquarie Investment Management Business Trust have sole voting and dispositive power with respect to 9,821,171 shares and Macquarie Investment Management Austria Kapitalanlage AG has sole voting and dispositive power with respect to 194,869 shares. The address of the principal business office of Macquarie is 2005 Market Street, Philadelphia, PA 19103. |
Equity Compensation Plan Information
The following table provides certain information as of December 31, 2019 with respect to our equity compensation plans (after giving effect to shares issued and/or vesting on such date):
Plan category |
Number of securities
to be issued upon exercise of outstanding options, warrants and rights (a) (1) |
Weighted-average
exercise price of outstanding options, warrants and rights (b) |
Number of securities
remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) |
|||||
Equity compensation plans approved by security holders (2) |
|
|
|
11,497,326 |
|
|||
Equity compensation plans not approved by security holders (3) |
|
|
|
35,936 |
|
|||
Total |
|
|
|
11,533,262 |
|
50 |
|
(1) |
As of December 31, 2019, an aggregate of 7,252,459 shares of unvested restricted stock and an aggregate of 3,580 vested restricted stock units were outstanding under our 2014 Omnibus Incentive Plan. Pursuant to SEC guidance, such shares of restricted stock and restricted stock units are not reflected in the table above. Our 2014 Omnibus Incentive Plan allows awards to be made in the form of stock options, stock appreciation rights, restricted shares, restricted stock units, unrestricted shares, performance awards, and other stock-based awards. |
(2) |
The number of shares remaining available for future issuance under equity compensation plans approved by security holders consists of 11,042,465 shares remaining available for future issuance under our 2014 Omnibus Incentive Plan and 454,861 shares remaining available for future issuance under our Associate Stock Purchase Plan. |
(3) |
Represents shares remaining available for future issuance under our Director Stock Purchase Plan. Under the existing compensation program for the members of our Board of Directors, each non-employee director has the opportunity to elect to receive either immediately vested shares or restricted stock units in lieu of up to 50% of his or her quarterly cash compensation. Any immediately vested shares that are elected to be received will be issued pursuant to the Director Stock Purchase Plan. Under the director compensation program, all cash amounts are payable quarterly in arrears, with payments to be made on April 1, July 1, October 1 and January 1. Any immediately vested shares that a director elects to receive under the Director Stock Purchase Plan will be issued at the same time that cash payments are made. The number of shares to be issued will be based on the closing price of our common stock on the date of issuance (i.e., April 1, July 1, October 1 and January 1), or if such date is not a trading date, on the previous trading days closing price. Fractional amounts will be paid in cash. The Board of Directors initially reserved 100,000 shares of our common stock for issuance under the Director Stock Purchase Plan. |
|
51 |
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Certain Relationships and Related Transactions
|
The Board has adopted a written Policy and Procedures with Respect to Related Person Transactions, which we refer to as our Related Person Policy. Pursuant to the terms of the Related Person Policy, we will enter into or ratify related person transactions only when the Audit Committee determines that the transaction in question is in, or is not inconsistent with, the best interests of the Company and our stockholders.
Related person transactions that are identified as such prior to the consummation thereof or amendment thereto may be consummated or amended only if the transaction has been reviewed and approved in advance by the Audit Committee (or in those instances where the General Counsel determines that it is not practicable or desirable for the Company to wait until the next Audit Committee meeting, by the chair of the Audit Committee). All Related Persons (defined below) and all business unit leaders responsible for a proposed transaction are required to report to our legal department any potential related person transaction prior to entering into the transaction. The legal department will determine whether the transaction is a related person transaction and, therefore, should be submitted to the Audit Committee for consideration. In the event our Chief Executive Officer, Chief Financial Officer or General Counsel becomes aware of a pending or ongoing related person transaction that has not been previously approved or ratified, the transaction will promptly be submitted to the Audit Committee or its chair, which will evaluate all available options, including ratification, amendment or termination of the transaction. In the event any of such persons become aware of a completed related person transaction that has not been previously approved or ratified, the Audit Committee or its chair shall evaluate the transaction to determine if rescission of the transaction and/or any disciplinary action is appropriate.
At the Audit Committees first meeting of each fiscal year, the committee will review any previously approved or ratified related person transactions that remain ongoing and have a remaining term of more than six months or remaining amounts payable to or receivable from the Company of more than $120,000 and, taking into consideration the Companys contractual obligations, will determine whether to continue, modify or terminate each such transaction.
Our Related Person Policy covers all transactions, arrangements or relationships (or any series of similar transactions, arrangements or relationships) in which the Company (including any of its subsidiaries) was, is or will be a participant and the amount involved exceeds $120,000, and in which any Related Person had, has or will have a direct or indirect material interest.
A Related Person, as defined in our Related Person Policy, means any person who is, or at any time since the beginning of the Companys last fiscal year was, a director or executive officer of the Company or a nominee to become a director of the Company; any person who is known to be the beneficial owner of more than 5% of any class of the Companys voting securities; any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of the director, executive officer, nominee or more than 5% beneficial owner, and any person (other than a tenant or employee) sharing the household of such director, executive officer, nominee or more than 5% beneficial owner; and any firm, corporation or other entity in which any of the foregoing persons is employed or is a general partner or principal or in a similar position or in which such person has a 5% or greater beneficial ownership interest.
Our Related Person Policy also requires Audit Committee pre-approval of proposed charitable contributions, or pledges of charitable contributions, by the Company to a charitable or non-profit organization for which a Related Person is actively involved in fundraising or otherwise serves as a director, trustee or in a similar capacity.
52 |
|
Since December 31, 2018, there have not been any related person transactions that are required to be disclosed pursuant to Item 404(a) of Regulation S-K.
Director Independence
The Board has affirmatively determined that eight of our nine directors, Mses. Freed, Johnson-Mills, and Warren, Dr. Asher, and Messrs. Sansone, Bromley, Bumstead, and Wielansky are independent under Section 303A.02 of the listing standards of the NYSE, and that Ms. Clegg and Mr. Seward were independent prior to the expiration of their terms as a director at the 2019 annual meeting of stockholders. In each case, the Board affirmatively determined that none of such individuals had a material relationship with the Company. In making these determinations, the Board considered all relevant facts and circumstances, as required by applicable NYSE listing standards.
There were no transactions, relationships or arrangements not disclosed pursuant to Item 404(a) of Regulation S-K that were considered by the Board in making the required independence determinations. None of the directors that were deemed independent had any relationship with us (other than as a director or stockholder).
Item 14. Principal Accounting Fees and Services.
Audit Fees, Audit-Related Fees, Tax Fees and All Other Fees
The Company engaged Ernst & Young LLP (E&Y) for audit services in 2019, including the audit of the Companys annual financial statements. The following table shows information about the respective fees billed by E&Y during or related to the fiscal years ended December 31, 2019 and 2018.
2019 | 2018 | |||||||
Audit Fees |
$ |
2,162,000 |
|
$ |
2,189,000 |
|
||
Audit-Related Fees |
$ |
|
|
$ |
5,000 |
|
||
Tax Fees |
$ |
1,500 |
|
$ |
35,680 |
|
||
All Other Fees |
$ |
|
|
$ |
|
|
||
Total |
$ |
2,163,500 |
|
$ |
2,229,680 |
|
Audit Fees include fees for the audit of the Companys annual financial statements and review of financial statements included in the Companys quarterly reports (Forms 10-Q) and fees for the audit of internal control over financial reporting.
Audit-Related Fees include fees for assurance and related services that are reasonably related to the performance of the audit or review of the Companys financial statements and that are traditionally performed by the independent registered public accounting firm. These fees include our purchase of subscriptions to E&Y research services.
Tax Fees include fees for professional services rendered by E&Y for tax compliance, tax advice, and tax planning. These corporate tax services include technical tax advice on tax matters, assistance with preparing tax returns, value added tax, government sales tax and equivalent tax matters in local jurisdictions, assistance with local tax authority documentation and reporting requirements for tax compliance purposes, assistance with tax audit defense matters, and tax advice related to mergers and acquisitions.
|
53 |
Audit Committee Pre-Approval Policies and Procedures
The Audit Committee has policies and procedures that require the pre-approval by the Audit Committee or one of its members of all fees paid to, and all services performed by, the Companys independent registered public accounting firm. In the early part of each year, the Audit Committee approves the proposed services, including the nature, type and scope of services contemplated and the related fees, to be rendered by any such firm during the year. In addition, pre-approval by the Audit Committee or one of its members is also required for those engagements that may arise during the course of the year that are outside the scope of the initial services and fees pre-approved by the Audit Committee. Pursuant to the Sarbanes-Oxley Act of 2002, the fees and services provided as noted in the table above were authorized and approved in compliance with the Audit Committee pre-approval policies and procedures described herein.
54 |
|
Item 15. Exhibits, Financial Statement Schedules.
1.) The following documents required under this item were filed as part of the Original Filing:
Our Audited Consolidated Financial Statements
Report of the Independent Registered Public Accounting Firm
Report of the Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2019 and 2018
Consolidated Statements of Operations for the Years Ended December 31, 2019, 2018 and 2017
Consolidated Statements of Equity for the Years Ended December 31, 2019, 2018 and 2017
Consolidated Statements of Cash Flows for the Years Ended December 31, 2019, 2018 and 2017
Notes to Consolidated Financial Statements
Schedule IIValuation and Qualifying Accounts
2.) Exhibits: |
|
Exhibit No. |
Description |
|
3.1 |
|
|
3.2 |
|
|
4.1 |
|
|
4.2
|
Description of the Companys common stock.#
|
|
10.1.1 |
|
|
10.1.2 |
|
|
10.1.3 |
|
|
10.1.4 |
|
|
10.1.5 |
|
|
10.2.1 |
|
|
55 |
Exhibit No. |
Description |
|
10.6.2
|
Amendment No. 1 to Omnibus Incentive Plan effective February 12, 2020.#*
|
|
10.7 |
|
|
10.8 |
|
|
10.9 |
|
|
10.10 |
|
|
10.11 |
|
|
10.12 |
|
|
10.13 |
|
|
10.14 |
|
|
10.15 |
|
|
10.16 |
|
|
10.17 |
|
|
10.18 |
|
|
10.19 |
|
|
57 |
58 |
|
Exhibit No. |
Description |
|
31.3
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31.4
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32 |
|
|
101.SCH
|
Inline XBRL Taxonomy Extension Schema Document.
|
|
101.CAL
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
101.DEF
|
Inline XBRL Taxonomy Extension Definition Linkbase Document.
|
|
101.LAB
|
Inline XBRL Taxonomy Extension Label Linkbase Document.
|
|
101.PRE
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
104 |
The cover page from the Companys Annual Report on Form 10-K for the year ended December 31, 2019, formatted in Inline XBRL (included in Exhibit 101).
|
# |
Filed with Original Filing |
* |
Management Contract or Compensatory Plan |
|
Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K. |
|
Portions of this exhibit have been omitted pursuant to a request for confidential treatment, which has been granted by the SEC. |
|
59 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
BROOKDALE SENIOR LIVING INC. | ||
By: |
/s/ Lucinda M. Baier |
|
Name: | Lucinda M. Baier | |
Title: | President and Chief Executive Officer | |
Date: | April 29, 2020 |
60 |
|
Non-GAAP Financial Measures
|
Facility Operating Income
For purposes of the 2019 annual incentive plan, Facility Operating Income (FOI) was defined as our 2019 consolidated resident fee revenue less facility operating expense. The table below reconciles our Facility Operating Income from our net income (loss).
Year Ended
December 31, 2019 ($ in 000s) |
||||
Facility Operating Income |
||||
Net income (loss) |
$ | (268,492) | ||
Provision (benefit) for income taxes |
(2,269) | |||
Equity in (earnings) loss of unconsolidated ventures |
4,544 | |||
Debt modification and extinguishment costs |
5,247 | |||
Loss (gain) on sale of assets, net |
(7,245) | |||
Other non-operating (income) loss |
(14,765) | |||
Interest expense |
248,341 | |||
Interest income |
(9,859) | |||
Income (loss) from operations |
(44,498) | |||
Depreciation and amortization |
379,433 | |||
Goodwill and asset impairment |
49,266 | |||
Loss (gain) on facility lease termination and modification, net |
3,388 | |||
Facility operating lease expense |
269,666 | |||
General and administrative expense (including non-cash stock-based compensation expense) |
219,289 | |||
Management Fees |
(57,108) | |||
Facility Operating Income |
$ | 819,436 |
Combined Adjusted Free Cash Flow
For purposes of the 2019 annual incentive plan, CAFCF was defined as the sum of the Companys consolidated Adjusted Free Cash Flow plus its proportionate share of unconsolidated ventures Adjusted Free Cash Flow for 2019.
Adjusted Free Cash Flow is a non-GAAP liquidity measure that we define as net cash provided by (used in) operating activities before: distributions from unconsolidated ventures from cumulative share of net earnings, changes in prepaid insurance premiums financed with notes payable, changes in operating lease liability for lease termination and modification, cash paid/received for gain/loss on facility lease termination and modification, and lessor capital expenditure reimbursements under operating leases; plus: property insurance proceeds and proceeds from refundable entrance fees, net of refunds; less: non-development capital expenditures and payment of financing lease
|
A-1 |
obligations. Non-development capital expenditures are comprised of corporate and community-level capital expenditures, including those related to maintenance, renovations, upgrades, and other major building infrastructure projects for our communities and is presented net of lessor reimbursements. Non-development capital expenditures do not include capital expenditures for community expansions, major community redevelopment and repositioning projects, and the development of new communities.
Our proportionate share of Adjusted Free Cash Flow of unconsolidated ventures is calculated based on our equity ownership percentage and in a manner consistent with our definition of Adjusted Free Cash Flow for our consolidated entities. Our investments in our unconsolidated ventures are accounted for under the equity method of accounting and, therefore, our proportionate share of Adjusted Free Cash Flow of unconsolidated ventures does not represent cash available to our consolidated business except to the extent it is distributed to us.
The table below reconciles our and our proportionate share of our unconsolidated ventures Adjusted Free Cash Flow from our and theirs, respectively, net cash provided by (used in) operating activities. Line items under unconsolidated ventures represent the aggregate amounts of such line items for all of our unconsolidated ventures.
Year Ended
December 31, 2019 ($ in 000s) |
||||
Consolidated Adjusted Free Cash Flow |
||||
Net cash provided by (used in) operating activities |
$ | 216,412 | ||
Distributions from unconsolidated ventures from cumulative share of net earnings |
(3,472) | |||
Changes in assets and liabilities for lessor capital expenditure reimbursements under operating leases |
(31,305) | |||
Non-development capital expenditures, net |
(235,797) | |||
Payment of financing lease obligations |
(22,242) | |||
Consolidated Adjusted Free Cash Flow |
$ | (76,404) | ||
Proportionate Share of Adjusted Free Cash Flow of Unconsolidated Ventures |
||||
Net cash provided by operating activities |
$ | 104,646 | ||
Non-development capital expenditures, net |
(44,145) | |||
Proceeds from refundable entrance fees, net of refunds |
(26,186) | |||
Adjusted Free Cash Flow of Unconsolidated Ventures |
$ | 34,315 | ||
Brookdale weighted average ownership percentage |
51.2% | |||
Brookdales proportionate share of Adjusted Free Cash Flow of Unconsolidated Ventures |
17,570 | |||
Combined Adjusted Free Cash Flow |
$ | (58,834) |
A-2 |
|
Exhibit 10.29
RESTRICTED STOCK UNIT AGREEMENT
UNDER THE BROOKDALE SENIOR LIVING INC.
2014 OMNIBUS INCENTIVE PLAN
This Award Agreement (this Agreement), dated as of (the Date of Grant), is made by and between Brookdale Senior Living Inc., a Delaware corporation (the Company), and (the Participant). Capitalized terms not defined herein shall have the meaning ascribed to them in the Brookdale Senior Living Inc. 2014 Omnibus Incentive Plan (as amended and/or restated from time to time, the Plan). Where the context permits, references to the Company shall include any successor to the Company.
1. Grant of RSUs. The Company hereby grants to the Participant restricted stock units (the RSUs) under the Plan, which shall be subject to all of the terms and conditions of this Agreement and the Plan.
2. Restrictions. The RSUs may not be sold, transferred, pledged, assigned or otherwise encumbered or disposed of by the Participant, and any shares of Stock issuable with respect to the RSUs may not be sold, transferred, pledged, assigned or otherwise encumbered or disposed of until such shares of Stock have been issued to the Participant upon vesting of the RSUs in accordance with the terms of the Plan and this Agreement. Unless the Administrator determines otherwise, upon any attempt to transfer RSUs or any rights in respect of RSUs before the lapse of such restrictions, such RSUs, and all of the rights related thereto, shall be immediately forfeited by the Participant and transferred to, and reacquired by, the Company without consideration of any kind.
3. Vesting.
(a) General. Subject to the provisions set forth below, the RSUs shall vest at such times (each, including as provided in subparagraphs (b) and (c), a Vesting Date) and in the amounts set forth below, subject to the continued employment of the Participant by the Company or one of its Subsidiaries or Affiliates (or a successor to any of them) from the Date of Grant to such Vesting Date:
Incremental Number of
|
Vesting Date | |
(b) Award Not Assumed Following Change in Control. Upon the occurrence of a Change in Control, if the outstanding RSUs are not assumed, continued or substituted with an
award relating to a publicly-traded security of the acquirer (or the Company) on the same terms and conditions that were applicable to the outstanding RSUs immediately prior to the Change in Control, then all outstanding RSUs immediately prior to the Change in Control shall vest and be settled upon the consummation of the Change in Control.
(c) Following Termination of Employment. Except as otherwise provided in this Section 3(c), upon termination of the Participants employment with the Company and its Subsidiaries and Affiliates for any reason, all unvested RSUs outstanding as of the date of such termination shall automatically and without notice terminate and be forfeited and neither the Participant nor any of the Participants successors, heirs, assigns, or personal representatives shall thereafter have any further rights or interests in such RSUs. Notwithstanding the foregoing or anything herein to the contrary:
(i) [Bracketed language is included only in the Companys CEOs award agreement.] In the event that the Participants employment is terminated (other than as described in subparagraph (ii)) (A) [either] by the Company or a Subsidiary or Affiliate without Cause [or by the Participant for Good Reason (as defined in the Employment Agreement by and between the Company and the Participant dated as of March 1, 2018)], or (B) by death or Disability, the RSUs subject to vesting at the next Vesting Date shall vest effective upon the date of such termination and be settled within 30 days following such termination, and any remaining outstanding and unvested RSUs shall be forfeited, effective upon the date of such termination.
(ii) [Bracketed language is not included in the Companys CEOs award agreement.] In the event that the Participants employment is terminated (A) by the Company (or its successor) or a Subsidiary or Affiliate without Cause on or after the effective date of a Change in Control but prior to twelve (12) months following such Change in Control, or (B) by the Participant for Good Reason [(as defined in the Companys Amended and Restated Tier I Severance Pay Policy or the Companys Amended and Restated Tier II Severance Pay Policy, whichever is applicable to the Participant)] on or after the effective date of a Change in Control but prior to twelve (12) months following such Change in Control, then any unvested RSUs outstanding upon the date of such termination shall vest effective upon the date of such termination and be settled within 30 days following such termination.
4. Settlement of Restricted Stock Units. As soon as practicable following each Vesting Date (but in no event later than 30 days following the Vesting Date or such earlier time specified in Section 3(b)), the Company shall issue to the Participant the number of shares of Stock equal to the aggregate number of RSUs that have vested pursuant to this Agreement on such date and the Participant shall thereafter have all the rights of a stockholder of the Company with respect to such shares. Notwithstanding anything in this Agreement to the contrary, no fractional shares shall vest or be issuable under this Agreement, and any such fractional shares shall be rounded down to the next whole share; provided, that the Administrator may, in its sole discretion, provide a cash payment in lieu of any such fractional share.
5. Rights as a Stockholder. The Participant shall have no voting rights with respect to RSUs outstanding on any applicable record date. Any ordinary or extraordinary cash or stock dividend that may be declared and paid on the Common Stock with a record date on or after the Date of Grant and prior to the settlement date of the RSUs shall be deposited (in the same form as
2
was payable to the holders of Common Stock) in an account and be paid upon, and subject to, the vesting and settlement of the RSUs. For the avoidance of doubt, the Participant shall not be entitled to payment of dividends or dividend equivalents with respect to an RSU unless and until the vesting and settlement of such RSU in accordance with this Agreement, and all such dividends or dividend equivalents with respect to any RSU shall forfeit upon the forfeiture of such RSU.
6. Adjustments. Pursuant to Section 5 of the Plan, in the event of a change in capitalization as described therein, the Administrator shall make such equitable changes or adjustments, as it deems necessary or appropriate, in its discretion, to the number and kind of securities or other property (including cash) issued or issuable in respect of outstanding RSUs.
7. Certain Changes. The Administrator may accelerate the vesting dates or otherwise adjust any of the terms of the RSUs; provided that, subject to Section 5 of the Plan and Section 12(f) and Section 22 of this Agreement, no action under this Section shall adversely affect the Participants rights hereunder.
8. Notices. All notices and other communications under this Agreement shall be in writing and shall be given by facsimile or first class mail, certified or registered with return receipt requested, and shall be deemed to have been duly given three days after mailing or 24 hours after transmission by facsimile to the respective parties, as follows: (i) if to the Company, at Brookdale Senior Living Inc., 111 Westwood Place, Suite 400, Brentwood, TN 37027, Facsimile: (615) 564-8204, Attn: General Counsel and (ii) if to the Participant, using the contact information on file with the Company. Either party hereto may change such partys address for notices by notice duly given pursuant hereto. Notwithstanding the foregoing, the Company may, in its sole discretion, decide to deliver any notice or other communications related to the RSUs, this Agreement or current or future participation in the Plan by electronic means. The Participant hereby consents to receive such notices and other communications by electronic delivery and agrees to participate in the Plan through an online or electronic system established and maintained by the Company or a third party designated by the Company (including the Companys stock plan service providers website).
9. Taxes. The Participant has reviewed with the Participants own tax advisors the Federal, state, local and foreign tax consequences of the transactions contemplated by this Agreement. The Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. The Participant acknowledges and agrees that the Participant is responsible for the tax consequences associated with the award and vesting of the RSUs.
10. Withholding. Delivery of shares of Stock is conditioned upon Participants making arrangements satisfactory to the Administrator regarding payment of income and employment tax withholding requirements as set forth in Section 15 of the Plan; provided, however, that the Participant may elect, without the consent of the Company, to have the Company withhold from delivery of shares of Stock issuable upon the settlement of the RSUs such number of shares of Stock having a Fair Market Value not exceeding the applicable taxes to be withheld and applied to the tax obligations of the Participant as determined by the Company. In making its determination, the Company may calculate such amount by taking into account applicable withholding rates not exceeding the maximum individual statutory tax rates in the Participants applicable jurisdictions.
3
11. Failure to Enforce Not a Waiver. The failure of the Company to enforce at any time any provision of this Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.
12. Restrictive Covenants. The Participant understands the Company has developed, and is continuing to develop, substantial relationships with actual and prospective officers, directors, employees, consultants, agents, customers, residents, patients, referral sources, clients, vendors, suppliers, investors, and equity and financing sources, associate and customer goodwill, and confidential and proprietary business information and trade secrets, which the Company and its Subsidiaries and Affiliates have the right to protect in order to safeguard their legitimate business interests. Any misappropriation of such relationships or goodwill, or any improper disclosure or use of the Companys and its Subsidiaries and Affiliates confidential and proprietary business information and trade secrets would be highly detrimental to their business interests in that serious and substantial loss of business and pecuniary damages would result therefrom. The Participant acknowledges that during the period of the Participants employment with the Company or any Subsidiary or Affiliate, the Participant shall have access to the Companys Confidential Information (as defined below) and will meet and develop such relationships and goodwill. Nothing contained in this Section 12 shall limit any common law or statutory obligation that the Participant may have to the Company or any Subsidiary or Affiliate. For purposes of this Section 12, the Company refers to the Company and any incorporated or unincorporated affiliates of the Company, including any entity which becomes the Participants employer as a result of any reorganization or restructuring of the Company for any reason. The Company shall be entitled, in connection with its tax planning or other reasons, to terminate the Participants employment (which termination shall not be considered a termination for any purposes of this Agreement, any employment agreement or otherwise) in connection with an invitation from another affiliate of the Company to accept employment with such affiliate in which case the terms and conditions hereof shall apply to the Participants employment relationship with such entity mutatis mutandis.
(a) Noncompetition. [Bracketed language is not included in the Companys CEOs award agreement.] The Participant agrees that during the period of the Participants employment with the Company and for the one (1) year period immediately following the termination of such employment for any reason or for no reason, the Participant shall not directly or indirectly, either as a principal, agent, employee, employer, consultant, partner, shareholder of a closely held corporation or shareholder in excess of five percent of a publicly traded corporation, corporate officer or director, or in any other individual or representative capacity, engage or otherwise participate in any manner or fashion in any business that is a Competing Business (as defined herein). [Notwithstanding the foregoing, (i) if the Participants employment is terminated by the Participant after Participant experiences an aggregate reduction to the Participants annual target cash compensation by 20% or more, the covenant in this Section 12(a) shall not apply; and (ii) the covenant in this Section 12(a) shall not be interpreted to restrict the Participants right to practice law in violation of any rules of professional conduct applicable to the Participant.]
4
For purposes of this Section 12(a), Competing Business means a business (which shall include any sole proprietorship, partnership, limited partnership, limited liability partnership, limited liability company, corporation or other for-profit or not-for-profit business organization) (A) engaged in the business of owning, operating or managing senior living facilities within the United States, or (B) that, itself or with its affiliates, provides healthcare or other services to patients or customers through home health care agencies, hospice agencies, outpatient therapy clinics and/or community based/private duty agencies within any state that the Company or its subsidiaries or affiliates provides now, or provides during the Participants employment, such healthcare or other services to patients or customers, and that derives, together with its controlled affiliates or together with its affiliates, more than 10% of its and its controlled affiliates or 10% of its and its affiliates, respectively, revenue from the provision of healthcare or other services to patients or customers through home health care agencies, hospice agencies, outpatient therapy clinics and/or community based/private duty agencies.
(b) Solicitation of Employees, Clients, Referral Sources, Vendors, Etc. The Participant agrees that during the period of the Participants employment with the Company or any Subsidiary or Affiliate, and for the two (2) year period immediately following the date of termination of such employment for any reason, the Participant shall not, directly or indirectly, jointly or individually, on Participants own behalf or on behalf of or in assistance to any individual, person or entity, for any purpose or in any place:
(i) solicit for employment or service, hire, employ or retain the services of any Covered Employee (as defined below) or induce or encourage any Covered Employee to terminate or sever his, her or its employment or other relationship with the Company or any Subsidiary or Affiliate or any of their successors or assigns; or
(ii) solicit business from any Covered Person (as defined below) or induce or encourage any Covered Person to terminate, change or reduce his, her or its relationship with the Company or any Subsidiary or Affiliate or any of their successors or assigns.
Notwithstanding the foregoing, a general advertisement or solicitation for employment that is not targeted and that does not have the effect of being targeted to any current or former Covered Employee or Covered Person shall not, by itself, be deemed to be a violation of the restrictions on solicitation contained in this Section 12(b). For purposes of this Section 12(b), Covered Employee shall mean any officer, director, employee, consultant or agent who is employed or engaged by the Company or any Subsidiary or Affiliate or any of their successors or assigns or was so employed or engaged at any time during the twelve (12) months prior to the Participants termination of employment, and Covered Person shall mean any customers, residents, patients, referral sources, clients, vendors, suppliers, investors, equity or financing sources, or consultants of the Company or any Subsidiary or Affiliate or any of their successors or assigns.
(c) Disparaging Comments. [Bracketed language is included only in the Companys CEOs award agreement.] The [Company and the] Participant agrees [agree] that during the period of the Participants employment with the Company or any Subsidiary or Affiliate, and any time thereafter, the Participant shall not make any disparaging or defamatory comments regarding the Company or any Subsidiary or Affiliate or any of their successors or assigns, [and the Company and its Affiliates shall not make or issue any public statements which
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are disparaging or defamatory regarding the Participant,] or any time after termination of such employment, [neither party shall] make any comments concerning any aspect of the termination of their relationship. The obligations of [the Company and] the Participant under this Section 12(c) shall not apply to disclosures required by applicable law, regulation or order of any court or governmental agency.
(d) Confidentiality. All books of account, records, systems, correspondence, documents, memoranda, manuals, email, electronic or magnetic recordings or data and any and all other data, in whatever form and any copies thereof, concerning or containing any reference to the works and business of the Company or any Subsidiary or Affiliate shall belong to the Company and shall be given up to the Company whenever the Company requires the Participant to do so. The Participant agrees that the Participant shall not at any time during the term of the Participants employment with the Company or any Subsidiary or Affiliate, or at any time thereafter, without the Companys prior written consent, disclose to any individual, person or entity any information or any trade secrets, plans or other information or data, in whatever form (including, without limitation, (a) any financing strategies and practices, pricing information and methods, training and operational procedures, advertising, marketing, and sales information or methodologies or financial information and (b) any Proprietary Information (as defined below)), concerning the Companys or any Subsidiarys or Affiliates or any of their customers, referral sources or clients practices, businesses, procedures, systems, plans or policies (collectively, Confidential Information), nor shall the Participant utilize any such Confidential Information in any way or communicate with or contact any such customer, referral source or client other than in connection with the Participants employment by the Company or any Subsidiary or Affiliate. The Participant hereby confirms that all Confidential Information constitutes the Companys exclusive property, and that all of the restrictions on the Participants activities contained in this Agreement and such other nondisclosure policies of the Company are required for the Companys reasonable protection. Confidential Information shall not include any information that has otherwise been disclosed to the public not in violation of this Agreement. This confidentiality provision shall survive the termination of this Agreement and shall not be limited by any other confidentiality agreements entered into with the Company or any Subsidiary or Affiliate. Notwithstanding the foregoing, nothing in this Agreement (or any other Company policy or contract to which the Participant is or was subject) shall be construed to prohibit the Participant from communicating with any federal, state or local governmental agency or commission with oversight of the Company, as provided for, protected under or warranted by applicable law.
With respect to any Confidential Information that constitutes a trade secret pursuant to applicable law, the restrictions described above shall remain in force for so long as the particular information remains a trade secret or for the two (2) year period immediately following termination of the Participants employment for any reason, whichever is longer. With respect to any Confidential Information that does not constitute a trade secret pursuant to applicable law, the restrictions described above shall remain in force during Participants employment and for the two (2) year period immediately following termination of such employment for any reason.
The Participant agrees that the Participant shall promptly disclose to the Company in writing all information and inventions generated, conceived or first reduced to practice by the Participant alone or in conjunction with others, during or after working hours, while in the employ of the
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Company or any Subsidiary or Affiliate (all of which is collectively referred to in this Agreement as Proprietary Information); provided, however, that such Proprietary Information shall not include (a) any information that has otherwise been disclosed to the public not in violation of this Agreement and (b) general business knowledge and work skills of the Participant, even if developed or improved by the Participant while in the employ of the Company or any Subsidiary of Affiliate. All such Proprietary Information shall be the exclusive property of the Company and is hereby assigned by the Participant to the Company. The Participants obligation relative to the disclosure to the Company of such Proprietary Information anticipated in this Section 12(d) shall continue beyond the Participants termination of employment and the Participant shall, at the Companys expense, give the Company all assistance it reasonably requires to perfect, protect and use its right to the Proprietary Information.
(e) Enforcement.
(i) The Participant acknowledges that compliance with all provisions, covenants and agreements set forth in this Agreement, and the duration, terms and geographical area thereof, are reasonable and necessary to protect the legitimate business interests of the Company and its Subsidiaries and Affiliates.
(ii) The Participant acknowledges that a breach of the Participants obligations under this Section 12 will result in irreparable and continuing damage to the Company and/or its Subsidiaries and Affiliates for which there is no adequate remedy at law.
(iii) The Participant acknowledges that the Participants education, experience and/or abilities are such that the enforcement of the restrictive covenants in this Agreement will not prevent the Participant from earning a living and will not cause any undue hardship upon the Participant.
(iv) In the event of the violation by the Participant of any of the covenants contained in Section 12, the terms of each such covenant so violated shall be automatically extended from the date on which the Participant permanently ceases such violation for a period equal to the period in which the Participant was in breach of the covenant or for a period of twelve (12) months from the date of the entry by a court of competent jurisdiction of an order or judgment enforcing such covenant(s), whichever period is later.
(v) The Participant agrees that, in the event of any breach of the restrictive covenants contained in this Agreement, the Company and/or its Subsidiaries and Affiliates shall be entitled to obtain, from any court of competent jurisdiction, preliminary and permanent injunctive relief to restrain the violation of the terms hereof by the Participant, and all persons acting for or on the Participants behalf.
(vi) Each of the restrictive covenants contained in this Agreement is independent of any other contractual obligations of this Agreement or otherwise owed by the Participant to the Company and/or its Subsidiaries and Affiliates. The existence of any claim or cause of action by the Participant against the Company and/or its Subsidiaries or Affiliates, whether based on this Agreement or otherwise, shall not create a defense to the enforcement by the Company and/or its Subsidiaries and Affiliates of any restrictive covenant contained in this Agreement.
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(f) Remedies.
(i) It is intended that, in view of the nature of the Companys and its Subsidiaries and Affiliates business, the restrictions contained in this Agreement are considered reasonable and necessary to protect the Companys and its Subsidiaries and Affiliates legitimate business interests and that any violation of these restrictions would result in irreparable injury to the Company and/or its Subsidiaries and Affiliates. In the event of a breach (a Covenant Breach) or threatened breach by the Participant of any provision contained herein, the Company and its Subsidiaries and Affiliates shall be entitled to a temporary restraining order and injunctive relief without the posting of a bond. Nothing contained herein shall be construed as prohibiting the Company or its Subsidiaries or Affiliates from pursuing any other legal or equitable remedies available to it or them for any breach or threatened breach of these provisions, including, without limitation, recoupment and other remedies specified in the Agreement. In the event of a dispute regarding, arising out of, or in connection with the breach, enforcement or interpretation of this Agreement, including, without limitation, any action seeking injunctive relief, and provided that the Company is the prevailing party, the Company shall recover from the Participant all reasonable attorneys fees and costs incurred by the Company in connection therewith.
(ii) In the event of a Covenant Breach, the Company shall have the authority to (i) cancel all outstanding RSUs, whether vested or unvested; (ii) cancel all shares of Stock beneficially owned by the Participant that were issued in settlement of RSUs within 12 months on or prior to, or at any time after, the date of Participants termination of employment (Cancellable Shares); and (iii) recoup from the Participant any proceeds from the Participants sale, transfer or other disposition of Cancellable Shares. The Company is hereby authorized by the Participant, as the Participants attorney-in-fact, to execute all documents and undertake any required action on behalf of the Participant to transfer any Cancellable Shares back to the Company, after which the Participant shall not have any right, title, or interest of any kind to the Cancellable Shares. Participant acknowledges and agrees that the Company has no obligation of any kind to the Participant with respect to the cancellation of RSUs or the Cancellable Shares, or the recoupment of proceeds from the disposition of Cancellable Shares, pursuant to this Section, including, but not limited to, reimbursement for any taxes previously paid by the Participant with respect to Cancellable Shares. This remedy shall be in addition to all other remedies, including those set forth in this Agreement and any other agreements between the parties.
13. Governing Law. This Agreement shall be governed by and construed according to the laws of the State of Delaware without regard to its principles of conflict of laws.
14. Incorporation of Plan. The Plan is hereby incorporated by reference and made a part hereof, and the RSUs and this Agreement shall be subject to all terms and conditions of the Plan.
15. Amendments; Construction. [Bracketed language is not included in the Companys CEOs award agreement.] The Administrator may amend the terms of this Agreement prospectively or retroactively at any time, but no such amendment shall impair the rights of the
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Participant hereunder without the Participants consent. [The duration of the covenant contained in Section 12(a) shall supersede the duration of any covenant of the same subject matter set forth in any prior agreement between the parties to the extent the duration of such other covenant is longer than the duration contained in Section 12(a).] Headings to Sections of this Agreement are intended for convenience of reference only, are not part of this Agreement and shall have no effect on the interpretation hereof.
16. Survival of Terms. This Agreement shall apply to and bind the Participant and the Company and their respective permitted assignees and transferees, heirs, legatees, executors, administrators and legal successors. The terms of Section 12 and Section 22 shall expressly survive the vesting and/or forfeiture of the RSUs and any expiration or termination of this Agreement.
17. Compliance with Stock Ownership and Retention Guidelines. The Participant hereby agrees to comply with the Companys Stock Ownership and Retention Guidelines (as amended from time to time, the Guidelines), to the extent such Guidelines are applicable, or become applicable, to the Participant. The Participant further acknowledges that, if the Participant is not in compliance with such Guidelines (if applicable), the Administrator may refrain from issuing additional equity awards to the Participant and/or elect to pay the Participants annual bonus in the form of vested or unvested Common Stock.
18. Agreement Not a Contract for Services. Neither the Plan, the granting of the RSUs, this Agreement nor any other action taken pursuant to the Plan shall constitute or be evidence of any agreement or understanding, express or implied, that the Participant has a right to continue to provide services as an officer, director, employee, consultant or advisor of the Company or any Subsidiary or Affiliate for any period of time or at any specific rate of compensation.
19. Authority of the Administrator. The Administrator shall have full authority to interpret and construe the terms of the Plan and this Agreement. The determination of the Administrator as to any such matter of interpretation or construction shall be final, binding and conclusive.
20. Severability. Should any provision of this Agreement be held by a court of competent jurisdiction to be unenforceable, or enforceable only if modified, such holding shall not affect the validity of the remainder of this Agreement, the balance of which shall continue to be binding upon the parties hereto with any such modification (if any) to become a part hereof and treated as though contained in this original Agreement. Moreover, if one or more of the provisions contained in this Agreement shall for any reason be held to be excessively broad as to scope, activity, subject or otherwise so as to be unenforceable, in lieu of severing such unenforceable provision, such provision or provisions shall be construed by the appropriate judicial body by limiting or reducing it or them, so as to be enforceable to the maximum extent compatible with the applicable law as it shall then appear, and such determination by such judicial body shall not affect the enforceability of such provision or provisions in any other jurisdiction.
21. Acceptance. The Participant hereby acknowledges receipt of a copy of the Plan and this Agreement. The Participant has read and understands the terms and provisions of the Plan and this Agreement, and accepts the RSUs subject to all the terms and conditions of the Plan and
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this Agreement. The Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under this Agreement. By the Participants electronically accepting the award of the RSUs using an online or electronic system established and maintained by the Company or a third party designated by the Company (including the Companys stock plan service providers website), the Participant agrees to be bound by the terms and conditions of the Plan and this Agreement. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. The Participants electronic acceptance of the award of the RSUs shall have the same validity and effect as a signature affixed to this Agreement by the Participants hand.
22. Clawback. Notwithstanding anything herein to the contrary, this award (and any shares of Stock delivered to the Participant upon settlement thereof) shall be subject to forfeiture, reduction, and/or recoupment (i) to the extent provided in the Companys Clawback and Forfeiture Policy, as it may be amended from time to time (the Clawback Policy); (ii) to the extent that Participant becomes subject to any other recoupment or clawback policy hereafter adopted by the Company, including any such policy adopted by the Company to comply with the requirements of any applicable laws, rules, regulations, or stock exchange listing requirements, including pursuant to final SEC rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act, or (iii) to the extent provided under applicable legal requirements which impose recoupment, under circumstances set forth in such applicable legal requirements, including the Sarbanes-Oxley Act of 2002.
23. Section 409A. This Agreement shall be interpreted in such a manner that all provisions relating to the settlement of the RSUs are exempt from the requirements of Section 409A of the Code as short-term deferrals as described in Section 409A of the Code. Notwithstanding anything to the contrary in this Agreement or an accompanying election form executed by the Participant, if (i) on the date of the Participants Separation from Service with the Company the Participant is a specified employee (as such term is defined under Section 1.409A-1(i) of the Treasury Regulations promulgated under Section 409A of the Code) of the Company and (ii) any payments to be provided to the Participant pursuant to this Agreement are or may become subject to the additional tax under Section 409A(a)(1)(B) of the Code, or any other taxes or penalties imposed under Section 409A of the Code if provided at the time otherwise required under this Agreement, then such payments shall be delayed until the date that is six months after the date of the Participants separation from service from the Company, or if earlier, his or her death. Any payments delayed pursuant to this paragraph shall be made in a lump sum on the first day of the seventh month following the Participants separation from service, or if earlier, the Participants death. Each payment upon settlement of RSUs (and any related dividend or related dividend equivalent rights) constitutes a separate payment for purposes of Section 409A of the Code. Notwithstanding any other provision of this Agreement, if and to the extent that any payment under this Agreement constitutes non-qualified deferred compensation under Section 409A of the Code, and is payable upon (i) the Participants termination of employment, then such payment shall be made or provided to the Participant only upon a separation from service as defined for purposes of Section 409A of the Code, or (ii) a Change in Control, then such payment shall be made or provided to the Participant only upon a change in the ownership, a change in effective control or a change in the ownership of a substantial portion of the assets of the applicable corporation as defined for purposes of Section 409A of the Code.
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[Signature page to follow.]
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the day and year first above written.
BROOKDALE SENIOR LIVING INC. | ||
By: |
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Name: | ||
Title: | ||
PARTICIPANT | ||
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Exhibit 10.30
PERFORMANCE-BASED RESTRICTED STOCK UNIT AGREEMENT
UNDER THE BROOKDALE SENIOR LIVING INC.
2014 OMNIBUS INCENTIVE PLAN
This Award Agreement (this Agreement), dated as of (the Date of Grant), is made by and between Brookdale Senior Living Inc., a Delaware corporation (the Company), and (the Participant). Capitalized terms not defined herein shall have the meaning ascribed to them in the Brookdale Senior Living Inc. 2014 Omnibus Incentive Plan (as amended and/or restated from time to time, the Plan). Where the context permits, references to the Company shall include any successor to the Company.
1. Grant of PSUs.
(a) The Company hereby grants to the Participant performance-based restricted stock units under the Plan, the vesting with respect to 75% of the units is subject to the performance criteria set forth on Exhibit A hereto (the First Tranche PSUs) and with respect to 25% of the units is subject to the performance criteria set forth on Exhibit B hereto (the Second Tranche PSUs), and all which shall be subject to all of the terms and conditions of this Agreement and the Plan. The First Tranche PSUs and the Second Tranche PSUs shall collectively be referred to in this Agreement as the PSUs.
(b) Additional performance-based restricted stock units may become issuable to the Participant under the Plan as set forth in Section 3(a). If and when any such additional units become issuable, such additional units shall be subject to all of the terms and conditions of the Plan and this Agreement as First Tranche PSUs or Second Tranche PSUs, as applicable.
2. Restrictions. The PSUs may not be sold, transferred, pledged, assigned or otherwise encumbered or disposed of by the Participant, and any shares of Stock issuable with respect to the PSUs may not be sold, transferred, pledged, assigned or otherwise encumbered or disposed of until such shares of Stock have been issued to the Participant upon vesting of the PSUs in accordance with the terms of the Plan and this Agreement. Unless the Administrator determines otherwise, upon any attempt to transfer PSUs or any rights in respect of PSUs before the lapse of such restrictions, such PSUs, and all of the rights related thereto, shall be immediately forfeited by the Participant and transferred to, and reacquired by, the Company without consideration of any kind.
3. Vesting.
(a) General. Vesting of the PSUs is subject to the satisfaction of both the Performance Criteria and the Service Condition (each as defined below). Subject to the provisions set forth below, the First Tranche PSUs may vest on February 27, 2023 (the First Vesting Date), and the Second Tranche PSUs may vest on February 27, 2024 (the Second Vesting Date, and together with the First Vesting Date and any other date on which PSUs may vest pursuant to this Section 3, a Vesting Date), with the exact percentage that vest to be determined by the degree to which the Companys performance results meet the performance criteria set forth on Exhibit A
and Exhibit B hereto, respectively (the Performance Criteria). Following the completion of the performance periods on December 31, 2022 (the Measurement Date), the Compensation Committee of the Companys Board of Directors (the Committee) shall determine the Companys performance results relative to the applicable Performance Criteria. If the Companys performance results are less than 100% on the scale set forth in the applicable Performance Criteria, any First Tranche PSUs or Second Tranche PSUs which are not earned shall forfeit and be deemed no longer to be outstanding for purposes of this Agreement effective as of the Measurement Date. If the Companys performance results exceed 100% on the scale set forth in the applicable Performance Criteria, any additional performance-based restricted stock units earned in excess of 100% (the Additional PSUs) shall be issued automatically under the Plan, become First Tranche PSUs or Second Tranche PSUs, as applicable, and be deemed to be outstanding for purposes of this Agreement effective as of the Measurement Date. Except as otherwise specifically set forth herein, vesting of the PSUs on any Vesting Date is subject to the continued employment of the Participant by the Company or one of its Subsidiaries or Affiliates (or a successor to any of them) from the Date of Grant to such Vesting Date (the Service Condition).
(b) Change in Control.
(i) Upon the occurrence of a Change in Control, if the PSUs outstanding effective immediately prior to such Change in Control are not assumed, continued or substituted with an award relating to a publicly-traded security of the acquirer (or the Company) on the same terms and conditions that were applicable to the PSUs outstanding effective immediately prior to the Change in Control, then all such PSUs shall vest and be settled upon the consummation of the Change in Control.
(ii) Upon the consummation of a Change in Control in which the PSUs outstanding effective immediately prior to such Change in Control are assumed, continued or substituted with an award relating to a publicly-traded security of the acquirer (or the Company) on the same terms and conditions that were applicable to the PSUs outstanding effective immediately prior to the Change in Control, such PSUs shall continue to vest subject to the Service Condition, and the Performance Criteria shall no longer apply if such Change in Control occurs prior to the Measurement Date (and for the avoidance of doubt, no Additional PSUs shall be issued or issuable under this Agreement in the event that a Change in Control occurs prior to the Measurement Date).
(iii) [Bracketed language is included only in the Companys CEOs award agreement.] Notwithstanding anything in this Section 3(b) to the contrary, in the event that the Participants employment with the Company, a Subsidiary, or an Affiliate (or a successor to any of them) is terminated within twelve months following a Change in Control by the Company (or such other entity) without Cause or by the Participant for Good Reason (as defined in the Companys Amended and Restated Tier I Severance Pay Policy or the Companys Amended and Restated Tier II Severance Pay Policy, whichever is applicable to Participant) [(as defined in the Employment Agreement by and between the Company and the Participant dated as of March 1, 2018)], then any PSUs outstanding effective upon the date of such termination shall vest effective upon such termination and be settled within 30 days following such termination.
(c) Termination of Employment. [Bracketed language is included only in the Companys CEOs award agreement.] Except as otherwise provided in this Section 3(c) and Section 3(b)(iii), upon termination of the Participants employment with the Company and its Subsidiaries and Affiliates for any reason, all unvested PSUs outstanding effective as of the date of such termination shall automatically and without notice terminate and be forfeited and neither the Participant nor any of the Participants successors, heirs, assigns, or personal representatives shall thereafter have any further rights or interests in such PSUs. In the event that the Participants employment with the Company, a Subsidiary, or an Affiliate is terminated by the Company (or such other entity) without Cause [, by the Participant for Good Reason,] or on account of the Participants death or Disability, a Pro Rata Percentage (as hereinafter defined) of the PSUs outstanding effective as of the date of such termination of employment shall remain outstanding following such termination and shall be eligible to vest subject to the achievement of the Performance Criteria as if the Service Condition shall have been met as of the applicable Vesting Date. For purposes of this Section 3(c), Pro Rata Percentage means:
(A) with respect to the First Tranche PSUs, 33 1/3% if a termination described in Section 3(c) occurs on or prior to February 27, 2021; 66 2/3% if such termination occurs after February 27, 2021 but on or prior to February 27, 2022; and 100% if such termination occurs after February 27, 2022; and
(B) with respect to the Second Tranche PSUs, 25% if a termination described in Section 3(c) occurs on or prior to February 27, 2021; 50% if such termination occurs after February 27, 2021 but on or prior to February 27, 2022; 75% if such termination occurs after February 27, 2022 but on or prior to February 27, 2023; and 100% if such termination occurs after February 27, 2023.
Notwithstanding the foregoing, in the event of a Change in Control following a termination event described in this Section 3(c), the Pro Rata Percentage of the PSUs that would have vested under Section 3(b) above had the Participant met the Service Condition as of the Change in Control (regardless of whether the PSUs are assumed, continued or substituted in the Change in Control) shall vest and be settled as of the date of the Change in Control.
4. Settlement of Restricted Stock Units. As soon as practicable following each Vesting Date (but in no event later than 30 days following the Vesting Date or such earlier time specified in Section 3(b) or Section 3(c)), the Company shall issue to the Participant the number of shares of Stock equal to the aggregate number of PSUs that have vested pursuant to this Agreement on such date and the Participant shall thereafter have all the rights of a stockholder of the Company with respect to such shares. Notwithstanding anything in this Agreement to the contrary, no fractional shares shall vest or be issuable under this Agreement, and any such fractional shares shall be rounded down to the next whole share; provided, that the Administrator may, in its sole discretion, provide a cash payment in lieu of any such fractional share.
5. Rights as a Stockholder. The Participant shall have no voting rights with respect to PSUs outstanding on any applicable record date. Any ordinary or extraordinary cash or stock dividend that may be declared and paid on the Common Stock with a record date on or after the Date of Grant and prior to the settlement date of PSUs shall be deposited (in the same form as was payable to the holders of Common Stock) in an account and be paid upon, and subject to, the
vesting and settlement of the PSUs (provided that dividend equivalents shall accrue for any Additional PSUs earned pursuant to Section 3(a) as if such Additional PSUs were issued as of the Date of Grant). For the avoidance of doubt, the Participant shall not be entitled to payment of dividends or dividend equivalents with respect to a PSU unless and until the vesting and settlement of such PSU in accordance with this Agreement, and all such dividends or dividend equivalents with respect to any PSU shall forfeit upon the forfeiture of such the PSU.
6. Adjustments. Pursuant to Section 5 of the Plan, in the event of a change in capitalization as described therein, the Administrator shall make such equitable changes or adjustments, as it deems necessary or appropriate, in its discretion, to the Performance Criteria and to the number and kind of securities or other property (including cash) issued or issuable in respect of outstanding PSUs.
7. Certain Changes. The Administrator may accelerate the vesting dates or otherwise adjust any of the terms of the PSUs; provided that, subject to Section 5 of the Plan and Section 12(f) and Section 22 of this Agreement, no action under this Section shall adversely affect the Participants rights hereunder.
8. Notices. All notices and other communications under this Agreement shall be in writing and shall be given by facsimile or first class mail, certified or registered with return receipt requested, and shall be deemed to have been duly given three days after mailing or 24 hours after transmission by facsimile to the respective parties, as follows: (i) if to the Company, at Brookdale Senior Living Inc., 111 Westwood Place, Suite 400, Brentwood, TN 37027, Facsimile: (615) 564-8204, Attn: General Counsel and (ii) if to the Participant, using the contact information on file with the Company. Either party hereto may change such partys address for notices by notice duly given pursuant hereto. Notwithstanding the foregoing, the Company may, in its sole discretion, decide to deliver any notice or other communications related to the PSUs, this Agreement or current or future participation in the Plan by electronic means. The Participant hereby consents to receive such notices and other communications by electronic delivery and agrees to participate in the Plan through an online or electronic system established and maintained by the Company or a third party designated by the Company (including the Companys stock plan service providers website).
9. Taxes. The Participant has reviewed with the Participants own tax advisors the Federal, state, local and foreign tax consequences of the transactions contemplated by this Agreement. The Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. The Participant acknowledges and agrees that the Participant is responsible for the tax consequences associated with the award and vesting of PSUs.
10. Withholding. Delivery of shares of Stock is conditioned upon Participants making arrangements satisfactory to the Administrator regarding payment of income and employment tax withholding requirements as set forth in Section 15 of the Plan; provided, however, that the Participant may elect, without the consent of the Company, to have the Company withhold from delivery of shares of Stock issuable upon the settlement of the RSUs such number of shares of Stock having a Fair Market Value not exceeding the applicable taxes to be withheld and applied to the tax obligations of the Participant as determined by the Company. In making its determination, the Company may calculate such amount by taking into account applicable withholding rates not exceeding the maximum individual statutory tax rates in the Participants applicable jurisdictions.
11. Failure to Enforce Not a Waiver. The failure of the Company to enforce at any time any provision of this Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.
12. Restrictive Covenants. The Participant understands the Company has developed, and is continuing to develop, substantial relationships with actual and prospective officers, directors, employees, consultants, agents, customers, residents, patients, referral sources, clients, vendors, suppliers, investors, and equity and financing sources, associate and customer goodwill, and confidential and proprietary business information and trade secrets, which the Company and its Subsidiaries and Affiliates have the right to protect in order to safeguard their legitimate business interests. Any misappropriation of such relationships or goodwill, or any improper disclosure or use of the Companys and its Subsidiaries and Affiliates confidential and proprietary business information and trade secrets would be highly detrimental to their business interests in that serious and substantial loss of business and pecuniary damages would result therefrom. The Participant acknowledges that during the period of the Participants employment with the Company or any Subsidiary or Affiliate, the Participant shall have access to the Companys Confidential Information (as defined below) and will meet and develop such relationships and goodwill. Nothing contained in this Section 12 shall limit any common law or statutory obligation that the Participant may have to the Company or any Subsidiary or Affiliate. For purposes of this Section 12, the Company refers to the Company and any incorporated or unincorporated affiliates of the Company, including any entity which becomes the Participants employer as a result of any reorganization or restructuring of the Company for any reason. The Company shall be entitled, in connection with its tax planning or other reasons, to terminate the Participants employment (which termination shall not be considered a termination for any purposes of this Agreement, any employment agreement or otherwise) in connection with an invitation from another affiliate of the Company to accept employment with such affiliate in which case the terms and conditions hereof shall apply to the Participants employment relationship with such entity mutatis mutandis.
(a) Noncompetition. [Bracketed language is not included in the Companys CEOs award agreement.] The Participant agrees that during the period of the Participants employment with the Company and for the one (1) year period immediately following the termination of such employment for any reason or for no reason, the Participant shall not directly or indirectly, either as a principal, agent, employee, employer, consultant, partner, shareholder of a closely held corporation or shareholder in excess of five percent of a publicly traded corporation, corporate officer or director, or in any other individual or representative capacity, engage or otherwise participate in any manner or fashion in any business that is a Competing Business (as defined herein). [Notwithstanding the foregoing, (i) if the Participants employment is terminated by the Participant after Participant experiences an aggregate reduction to the Participants annual target cash compensation by 20% or more, the covenant in this Section 12(a) shall not apply; and (ii) the covenant in this Section 12(a) shall not be interpreted to restrict the Participants right to practice law in violation of any rules of professional conduct applicable to the Participant.]
For purposes of this Section 12(a), Competing Business means a business (which shall include any sole proprietorship, partnership, limited partnership, limited liability partnership, limited liability company, corporation or other for-profit or not-for-profit business organization) (A) engaged in the business of owning, operating or managing senior living facilities within the United States, or (B) that, itself or with its affiliates, provides healthcare or other services to patients or customers through home health care agencies, hospice agencies, outpatient therapy clinics and/or community based/private duty agencies within any state that the Company or its subsidiaries or affiliates provides now, or provides during the Participants employment, such healthcare or other services to patients or customers, and that derives, together with its controlled affiliates or together with its affiliates, more than 10% of its and its controlled affiliates or 10% of its and its affiliates, respectively, revenue from the provision of healthcare or other services to patients or customers through home health care agencies, hospice agencies, outpatient therapy clinics and/or community based/private duty agencies.
(b) Solicitation of Employees, Clients, Referral Sources, Vendors, Etc. The Participant agrees that during the period of the Participants employment with the Company or any Subsidiary or Affiliate, and for the two (2) year period immediately following the date of termination of such employment for any reason, the Participant shall not, directly or indirectly, jointly or individually, on Participants own behalf or on behalf of or in assistance to any individual, person or entity, for any purpose or in any place:
(i) solicit for employment or service, hire, employ or retain the services of any Covered Employee (as defined below) or induce or encourage any Covered Employee to terminate or sever his, her or its employment or other relationship with the Company or any Subsidiary or Affiliate or any of their successors or assigns; or
(ii) solicit business from any Covered Person (as defined below) or induce or encourage any Covered Person to terminate, change or reduce his, her or its relationship with the Company or any Subsidiary or Affiliate or any of their successors or assigns.
Notwithstanding the foregoing, a general advertisement or solicitation for employment that is not targeted and that does not have the effect of being targeted to any current or former Covered Employee or Covered Person shall not, by itself, be deemed to be a violation of the restrictions on solicitation contained in this Section 12(b). For purposes of this Section 12(b), Covered Employee shall mean any officer, director, employee, consultant or agent who is employed or engaged by the Company or any Subsidiary or Affiliate or any of their successors or assigns or was so employed or engaged at any time during the twelve (12) months prior to the Participants termination of employment, and Covered Person shall mean any customers, residents, patients, referral sources, clients, vendors, suppliers, investors, equity or financing sources, or consultants of the Company or any Subsidiary or Affiliate or any of their successors or assigns.
(c) Disparaging Comments. [Bracketed language is included only in the Companys CEOs award agreement.] The [Company and the] Participant agrees [agree] that
during the period of the Participants employment with the Company or any Subsidiary or Affiliate, and any time thereafter, the Participant shall not make any disparaging or defamatory comments regarding the Company or any Subsidiary or Affiliate or any of their successors or assigns, [and the Company and its Affiliates shall not make or issue any public statements which are disparaging or defamatory regarding the Participant,] or any time after termination of such employment, [neither party shall] make any comments concerning any aspect of the termination of their relationship. The obligations of the [the Company and the Participant under this Section 12(c) shall not apply to disclosures required by applicable law, regulation or order of any court or governmental agency.
(d) Confidentiality. All books of account, records, systems, correspondence, documents, memoranda, manuals, email, electronic or magnetic recordings or data and any and all other data, in whatever form and any copies thereof, concerning or containing any reference to the works and business of the Company or any Subsidiary or Affiliate shall belong to the Company and shall be given up to the Company whenever the Company requires the Participant to do so. The Participant agrees that the Participant shall not at any time during the term of the Participants employment with the Company or any Subsidiary or Affiliate, or at any time thereafter, without the Companys prior written consent, disclose to any individual, person or entity any information or any trade secrets, plans or other information or data, in whatever form (including, without limitation, (a) any financing strategies and practices, pricing information and methods, training and operational procedures, advertising, marketing, and sales information or methodologies or financial information and (b) any Proprietary Information (as defined below)), concerning the Companys or any Subsidiarys or Affiliates or any of their customers, referral sources or clients practices, businesses, procedures, systems, plans or policies (collectively, Confidential Information), nor shall the Participant utilize any such Confidential Information in any way or communicate with or contact any such customer, referral source or client other than in connection with the Participants employment by the Company or any Subsidiary or Affiliate. The Participant hereby confirms that all Confidential Information constitutes the Companys exclusive property, and that all of the restrictions on the Participants activities contained in this Agreement and such other nondisclosure policies of the Company are required for the Companys reasonable protection. Confidential Information shall not include any information that has otherwise been disclosed to the public not in violation of this Agreement. This confidentiality provision shall survive the termination of this Agreement and shall not be limited by any other confidentiality agreements entered into with the Company or any Subsidiary or Affiliate. Notwithstanding the foregoing, nothing in this Agreement (or any other Company policy or contract to which the Participant is or was subject) shall be construed to prohibit the Participant from communicating with any federal, state or local governmental agency or commission with oversight of the Company, as provided for, protected under or warranted by applicable law.
With respect to any Confidential Information that constitutes a trade secret pursuant to applicable law, the restrictions described above shall remain in force for so long as the particular information remains a trade secret or for the two (2) year period immediately following termination of the Participants employment for any reason, whichever is longer. With respect to any Confidential Information that does not constitute a trade secret pursuant to applicable law, the restrictions described above shall remain in force during Participants employment and for the two (2) year period immediately following termination of such employment for any reason.
The Participant agrees that the Participant shall promptly disclose to the Company in writing all information and inventions generated, conceived or first reduced to practice by the Participant alone or in conjunction with others, during or after working hours, while in the employ of the Company or any Subsidiary or Affiliate (all of which is collectively referred to in this Agreement as Proprietary Information); provided, however, that such Proprietary Information shall not include (a) any information that has otherwise been disclosed to the public not in violation of this Agreement and (b) general business knowledge and work skills of the Participant, even if developed or improved by the Participant while in the employ of the Company or any Subsidiary of Affiliate. All such Proprietary Information shall be the exclusive property of the Company and is hereby assigned by the Participant to the Company. The Participants obligation relative to the disclosure to the Company of such Proprietary Information anticipated in this Section 12(d) shall continue beyond the Participants termination of employment and the Participant shall, at the Companys expense, give the Company all assistance it reasonably requires to perfect, protect and use its right to the Proprietary Information.
(e) Enforcement.
(i) The Participant acknowledges that compliance with all provisions, covenants and agreements set forth in this Agreement, and the duration, terms and geographical area thereof, are reasonable and necessary to protect the legitimate business interests of the Company and its Subsidiaries and Affiliates.
(ii) The Participant acknowledges that a breach of the Participants obligations under this Section 12 will result in irreparable and continuing damage to the Company and/or its Subsidiaries and Affiliates for which there is no adequate remedy at law.
(iii) The Participant acknowledges that the Participants education, experience and/or abilities are such that the enforcement of the restrictive covenants in this Agreement will not prevent the Participant from earning a living and will not cause any undue hardship upon the Participant.
(iv) In the event of the violation by the Participant of any of the covenants contained in Section 12, the terms of each such covenant so violated shall be automatically extended from the date on which the Participant permanently ceases such violation for a period equal to the period in which the Participant was in breach of the covenant or for a period of twelve (12) months from the date of the entry by a court of competent jurisdiction of an order or judgment enforcing such covenant(s), whichever period is later.
(v) The Participant agrees that, in the event of any breach of the restrictive covenants contained in this Agreement, the Company and/or its Subsidiaries and Affiliates shall be entitled to obtain, from any court of competent jurisdiction, preliminary and permanent injunctive relief to restrain the violation of the terms hereof by the Participant, and all persons acting for or on the Participants behalf.
(vi) Each of the restrictive covenants contained in this Agreement is independent of any other contractual obligations of this Agreement or otherwise owed by the Participant to the Company and/or its Subsidiaries and Affiliates. The existence of any claim or cause of action by the Participant against the Company and/or its Subsidiaries or Affiliates, whether based on this Agreement or otherwise, shall not create a defense to the enforcement by the Company and/or its Subsidiaries and Affiliates of any restrictive covenant contained in this Agreement.
(f) Remedies.
(i) It is intended that, in view of the nature of the Companys and its Subsidiaries and Affiliates business, the restrictions contained in this Agreement are considered reasonable and necessary to protect the Companys and its Subsidiaries and Affiliates legitimate business interests and that any violation of these restrictions would result in irreparable injury to the Company and/or its Subsidiaries and Affiliates. In the event of a breach (a Covenant Breach) or threatened breach by the Participant of any provision contained herein, the Company and its Subsidiaries and Affiliates shall be entitled to a temporary restraining order and injunctive relief without the posting of a bond. Nothing contained herein shall be construed as prohibiting the Company or its Subsidiaries or Affiliates from pursuing any other legal or equitable remedies available to it or them for any breach or threatened breach of these provisions, including, without limitation, recoupment and other remedies specified in the Agreement. In the event of a dispute regarding, arising out of, or in connection with the breach, enforcement or interpretation of this Agreement, including, without limitation, any action seeking injunctive relief, and provided that the Company is the prevailing party, the Company shall recover from the Participant all reasonable attorneys fees and costs incurred by the Company in connection therewith.
(ii) In the event of a Covenant Breach, the Company shall have the authority to (i) cancel all outstanding PSUs, whether vested or unvested; (ii) cancel all shares of Stock beneficially owned by the Participant that were issued in settlement of PSUs within 12 months on or prior to, or at any time after, the date of Participants termination of employment (Cancellable Shares); and (iii) recoup from the Participant any proceeds from the Participants sale, transfer or other disposition of Cancellable Shares. The Company is hereby authorized by the Participant, as the Participants attorney-in-fact, to execute all documents and undertake any required action on behalf of the Participant to transfer any Cancellable Shares back to the Company, after which the Participant shall not have any right, title, or interest of any kind to the Cancellable Shares. Participant acknowledges and agrees that the Company has no obligation of any kind to the Participant with respect to the cancellation of PSUs or the Cancellable Shares, or the recoupment of proceeds from the disposition of Cancellable Shares, pursuant to this Section, including, but not limited to, reimbursement for any taxes previously paid by the Participant with respect to Cancellable Shares. This remedy shall be in addition to all other remedies, including those set forth in this Agreement and any other agreements between the parties.
13. Governing Law. This Agreement shall be governed by and construed according to the laws of the State of Delaware without regard to its principles of conflict of laws.
14. Incorporation of Plan. The Plan is hereby incorporated by reference and made a part hereof, and the PSUs and this Agreement shall be subject to all terms and conditions of the Plan.
15. Amendments; Construction. [Bracketed language is not included in the Companys CEOs award agreement.] The Administrator may amend the terms of this Agreement prospectively or retroactively at any time, but no such amendment shall impair the rights of the Participant hereunder without the Participants consent. [The duration of the covenant contained in Section 12(a) shall supersede the duration of any covenant of the same subject matter set forth in any prior agreement between the parties to the extent the duration of such other covenant is longer than the duration contained in Section 12(a).] Headings to Sections of this Agreement are intended for convenience of reference only, are not part of this Agreement and shall have no effect on the interpretation hereof.
16. Survival of Terms. This Agreement shall apply to and bind the Participant and the Company and their respective permitted assignees and transferees, heirs, legatees, executors, administrators and legal successors. The terms of Section 12 and Section 22 shall expressly survive the vesting and/or forfeiture of the PSUs and any expiration or termination of this Agreement.
17. Compliance with Stock Ownership and Retention Guidelines. The Participant hereby agrees to comply with the Companys Stock Ownership and Retention Guidelines (as amended from time to time, the Guidelines), to the extent such Guidelines are applicable, or become applicable, to the Participant. The Participant further acknowledges that, if the Participant is not in compliance with such Guidelines (if applicable), the Administrator may refrain from issuing additional equity awards to the Participant and/or elect to pay the Participants annual bonus in the form of vested or unvested Common Stock.
18. Agreement Not a Contract for Services. Neither the Plan, the granting of the PSUs, this Agreement nor any other action taken pursuant to the Plan shall constitute or be evidence of any agreement or understanding, express or implied, that the Participant has a right to continue to provide services as an officer, director, employee, consultant or advisor of the Company or any Subsidiary or Affiliate for any period of time or at any specific rate of compensation.
19. Authority of the Administrator. The Administrator shall have full authority to interpret and construe the terms of the Plan and this Agreement (including, without limitation, the authority to determine whether, and the extent to which, any Performance Criteria have been achieved). Pursuant to the terms of the Plan, the Administrator shall also have full authority to make equitable adjustments to the Performance Criteria in recognition of unusual or non-recurring events affecting the Company or any Subsidiary or Affiliate or the financial statements of the Company or any Subsidiary or Affiliate, in response to changes in applicable laws or regulations, or to account for items of gain, loss or expense determined to be extraordinary or unusual in nature or infrequent in occurrence or related to the disposal of a segment of a business or related to a change in accounting principles. The determination of the Administrator as to any such matter of interpretation or construction shall be final, binding and conclusive.
20. Severability. Should any provision of this Agreement be held by a court of competent jurisdiction to be unenforceable, or enforceable only if modified, such holding shall not affect the validity of the remainder of this Agreement, the balance of which shall continue to be binding upon the parties hereto with any such modification (if any) to become a part hereof and treated as though contained in this original Agreement. Moreover, if one or more of the provisions
contained in this Agreement shall for any reason be held to be excessively broad as to scope, activity, subject or otherwise so as to be unenforceable, in lieu of severing such unenforceable provision, such provision or provisions shall be construed by the appropriate judicial body by limiting or reducing it or them, so as to be enforceable to the maximum extent compatible with the applicable law as it shall then appear, and such determination by such judicial body shall not affect the enforceability of such provision or provisions in any other jurisdiction.
21. Acceptance. The Participant hereby acknowledges receipt of a copy of the Plan and this Agreement. The Participant has read and understands the terms and provisions of the Plan and this Agreement, and accepts the PSUs subject to all the terms and conditions of the Plan and this Agreement. The Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under this Agreement. By the Participants electronically accepting the award of the PSUs using an online or electronic system established and maintained by the Company or a third party designated by the Company (including the Companys stock plan service providers website), the Participant agrees to be bound by the terms and conditions of the Plan and this Agreement. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. The Participants electronic acceptance of the award of the PSUs shall have the same validity and effect as a signature affixed to this Agreement by the Participants hand.
22. Clawback. Notwithstanding anything herein to the contrary, this award (and any shares of Stock delivered to the Participant upon settlement thereof) shall be subject to forfeiture, reduction, and/or recoupment (i) to the extent provided in the Companys Clawback and Forfeiture Policy, as it may be amended from time to time (the Clawback Policy); (ii) to the extent that Participant becomes subject to any other recoupment or clawback policy hereafter adopted by the Company, including any such policy adopted by the Company to comply with the requirements of any applicable laws, rules, regulations, or stock exchange listing requirements, including pursuant to final SEC rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act, or (iii) to the extent provided under applicable legal requirements which impose recoupment, under circumstances set forth in such applicable legal requirements, including the Sarbanes-Oxley Act of 2002.
23. Section 409A. This Agreement shall be interpreted in such a manner that all provisions relating to the settlement of the PSUs are exempt from the requirements of Section 409A of the Code as short-term deferrals as described in Section 409A of the Code. Notwithstanding anything to the contrary in this Agreement or an accompanying election form executed by the Participant, if (i) on the date of the Participants Separation from Service with the Company the Participant is a specified employee (as such term is defined under Section 1.409A-1(i) of the Treasury Regulations promulgated under Section 409A of the Code) of the Company and (ii) any payments to be provided to the Participant pursuant to this Agreement are or may become subject to the additional tax under Section 409A(a)(1)(B) of the Code, or any other taxes or penalties imposed under Section 409A of the Code if provided at the time otherwise required under this Agreement, then such payments shall be delayed until the date that is six months after the date of the Participants separation from service from the Company, or if earlier, his or her death. Any payments delayed pursuant to this paragraph shall be made in a lump sum on the first day of the seventh month following the Participants separation from service, or if earlier, the
Participants death. Each payment upon settlement of PSUs (and any related dividend or related dividend equivalent rights) constitutes a separate payment for purposes of Section 409A of the Code. Notwithstanding any other provision of this Agreement, if and to the extent that any payment under this Agreement constitutes non-qualified deferred compensation under Section 409A of the Code, and is payable upon (i) the Participants termination of employment, then such payment shall be made or provided to the Participant only upon a separation from service as defined for purposes of Section 409A of the Code, or (ii) a Change in Control, then such payment shall be made or provided to the Participant only upon a change in the ownership, a change in effective control or a change in the ownership of a substantial portion of the assets of the applicable corporation as defined for purposes of Section 409A of the Code.
[Signature page to follow.]
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the day and year first above written.
BROOKDALE SENIOR LIVING INC. | ||
By: |
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Name: | ||
Title: | ||
PARTICIPANT | ||
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EXHIBIT A
Same Community RevPAR*
Vesting of the First Tranche PSUs (plus any Additional PSUs that become issuable pursuant to Section 3(a) of the Agreement) will be dependent upon the Companys three year compound annual growth rate (CAGR) of Same Community RevPAR for fiscal 2022 compared to a base year of fiscal 2019 as set forth in the grid below, with vesting to be interpolated on a straight-line basis between the applicable levels based on actual results.
Percentage of First Tranche PSU Vesting |
CAGR | |
Vest 125% |
[ ]% or above | |
Vest 100% |
[ ]% | |
Vest 25% |
[ ]% | |
No vesting |
[ ]% |
For purposes of this calculation, Same Community RevPAR for fiscal 2019 and the measurement fiscal year means the average monthly senior housing resident fee revenues per available unit of the same community portfolio (as defined below). RevPAR shall be calculated as resident fee revenues, excluding Health Care Services segment revenue and entrance fee amortization, of the same community portfolio for the applicable fiscal year, divided by the weighted average number of available units in the same community portfolio for the applicable fiscal year, divided by twelve. Principles of revenue recognition will be consistently applied for calculating Same Community RevPAR, and, for the avoidance of doubt, same community RevPAR for fiscal 2019 will exclude the additional resident fee revenue recognized as a result of the application of the new lease accounting standard under ASC 842.
The same community portfolio will be comprised of communities operated by the Company on a consolidated basis as of December 31, 2019, but excluding communities acquired through purchase or leasing activity, or disposed through sale or lease termination activity, after January 1, 2019 and other communities that would be excluded from any quarter during fiscal 2019 or the comparison year using the Companys existing policy for excluding communities from same community results. The Compensation Committee may exercise its discretion to exclude additional communities that have experienced a catastrophic natural disaster loss or other casualty loss that do not otherwise meet the foregoing criteria.
* |
Subject in all cases to the terms of the Plan and the Agreement, including the discretionary and interpretative authority of the Administrator set forth in Section 6 and Section 19 of the Agreement. |
[Bracketed language is included only in the Companys CEOs award agreement.] [Notwithstanding this Exhibit, and subject to Section 5 of the Plan, Section 6 of this Agreement, and Section 6 of the Time-Based Restricted Stock Unit Agreement dated February 12, 2020 between the Company and Participant (the RSU Agreement), the aggregate number of Additional PSUs issuable pursuant to this Agreement shall be reduced to the extent issuance of such Additional PSUs would cause the aggregate number of restricted stock units issued pursuant to this Agreement and the RSU Agreement to exceed 800,000 restricted stock units].
EXHIBIT B
Relative TSR*
Vesting of the Second Tranche PSUs (plus any Additional PSUs that become issuable pursuant to Section 3(a) of the Agreement) will be dependent upon the Companys TSR ranking relative to the TSRs of the companies in the Comparator Group during the Performance Period as set forth in the grid below, with vesting to be interpolated on a straight-line basis between the applicable levels based on actual results; provided, however, that in no event shall additional PSUs (above 100%) vest and be paid with respect to the Second Tranche PSUs if the Companys TSR is negative for the Performance Period.
Percentage of Second Tranche PSU Vesting |
Performance | |
Vest 150% |
[ ]th Percentile or above | |
Vest 100% |
[ ]th Percentile | |
Vest 50% |
[ ]th Percentile | |
No vesting |
Below [ ]th Percentile |
For purposes of the foregoing:
|
Performance Period shall mean January 1, 2020 through December 31, 2022 |
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Comparator Group shall mean the constituent companies of the S&P Midcap 400 as of the beginning of the Performance Period, except that any such companies that have been acquired, delisted from a national securities exchange, or declared bankrupt during the Performance Period will be excluded. |
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TSR shall mean the compound annual total stockholder return calculated using a beginning price equal to the average closing price over the 20-trading days preceding the beginning of the Performance Period, using an ending price equal to the average closing price over the 20-trading days immediately prior to the end of the Performance Period, and assuming the reinvestment of any dividends or distributions as of the ex-dividend date. |
* |
Subject in all cases to the terms of the Plan and the Agreement, including the discretionary and interpretative authority of the Administrator set forth in Section 6 and Section 19 of the Agreement. |
[Bracketed language is included only in the Companys CEOs award agreement.] [Notwithstanding this Exhibit, and subject to Section 5 of the Plan, Section 6 of this Agreement, and Section 6 of the RSU Agreement, the aggregate number of Additional PSUs issuable pursuant to this Agreement shall be reduced to the extent issuance of such Additional PSUs would cause the aggregate number of restricted stock units issued pursuant to this Agreement and the RSU Agreement to exceed 800,000 restricted stock units.]
EXHIBIT 31.3
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Lucinda M. Baier, certify that:
1. |
I have reviewed this Amendment No. 1 to the Annual Report on Form 10-K/A of Brookdale Senior Living Inc.; and |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. |
Date: April 29, 2020 |
/s/ Lucinda M. Baier |
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Lucinda M. Baier | ||||||
President and Chief Executive Officer |
EXHIBIT 31.4
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Steve E. Swain, certify that:
1. |
I have reviewed this Amendment No. 1 to Annual Report on Form 10-K/A of Brookdale Senior Living Inc.; and |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. |
Date: April 29, 2020 |
/s/ Steven E. Swain |
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Steven E. Swain | ||||||
Executive Vice President and Chief Financial Officer |