DEF 14A 1 d124801ddef14a.htm DEF 14A DEF 14A

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

(Rule 14a-101)

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant                                      Filed by a Party other than the Registrant    

Check the appropriate box:

 

 

Preliminary Proxy Statement

 

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

 

Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material Pursuant to §240.14a-12

Brookdale Senior Living Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

 

No fee required.

 

 

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

 

  (1)

Title of each class of securities to which transaction applies:

  (2)

Aggregate number of securities to which transaction applies:

  (3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

  (4)

Proposed maximum aggregate value of transaction:

  (5)

Total fee paid:

 

 

Fee paid previously with preliminary materials.

 

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

  (1)

Amount Previously Paid:

  (2)

Form, Schedule or Registration Statement No.:

  (3)

Filing Party:

  (4)

Date Filed:

 

 

 


 

LOGO

 

 

2021

Notice of Annual Meeting

of Stockholders & Proxy Statement


LOGO

April 29, 2021

Dear Fellow Stockholders:

On behalf of the Board of Directors, I am pleased to invite all of our stockholders to the 2021 Annual Meeting of Stockholders of Brookdale Senior Living Inc. (the “2021 Annual Meeting” or the “Annual Meeting”). The meeting will be held on Thursday, June 17, 2021 at 10:00 a.m. Central time at our principal executive offices located at 111 Westwood Place, Brentwood, Tennessee*. A notice of the 2021 Annual Meeting and a proxy statement containing information about the matters to be acted upon are included with this letter.

Early in the pandemic, the U.S. Centers for Disease Control and Prevention confirmed seniors face disproportionately higher risk of adverse outcomes from COVID-19, with seniors 85 and older at the highest risk. This placed Brookdale’s communities and our residents, patients, and associates at the center of the fight against COVID-19 during 2020. Our management team took decisive actions to dedicate our business’s efforts and energy first and foremost on maintaining the health and wellbeing of our residents, patients, and associates, to develop and execute on plans to ensure that we had the financial resources to survive the pandemic as an organization, and to identify opportunities for our recovery from the pandemic. The Board is proud of the extraordinary efforts and successes of management and our associates during 2020 to help keep residents as safe as possible while serving on the front lines of a once in a century pandemic.

The Board is optimistic that 2021 brings the opportunity to recover from the pandemic. As a result of the executive team’s extensive advocacy for vaccine prioritization and clinic planning, followed by successful execution, at least three rounds of vaccine clinics had been completed at all of Brookdale’s approximately 700 communities by April 9, 2021. Through April 23, 2021, Brookdale’s resident vaccine acceptance rate was 93% and its COVID-19 positive resident caseload had decreased by 97% since the peak in mid-December 2020. With lower caseloads, restrictions on visits have been relaxed, and substantially all of Brookdale’s communities have opened for visitors and new prospects.

As Brookdale begins its recovery from the pandemic, the quality of our leadership takes on new importance as new opportunities arise. This year, the Board has unanimously nominated each of the current directors for election at the 2021 Annual Meeting for a one-year term expiring at the 2022 Annual Meeting. With the prior years’ work of declassifying the Board complete, this represents the first time that all of our directors will be standing for election for one-year terms.

Your vote is important to us. Whether or not you expect to attend the Annual Meeting, it is important that your shares be represented and voted at the Annual Meeting. Please promptly vote your shares by submitting your proxy by telephone or Internet or by completing, signing, dating, and returning your proxy card or voting instruction form.

We thank you for your continued investment in Brookdale.

Very truly yours,

 

LOGO

Guy P. Sansone

Chairman of the Board of Directors

 

*

We intend to conduct the annual meeting in-person. However, we may impose additional safety procedures or decide to hold the annual meeting entirely online (i.e., a virtual-only meeting), depending on public health and safety concerns and recommendations that public health officials may issue in light of the ongoing COVID-19 situation. In the event that we elect to hold the Annual Meeting in a virtual meeting format, we will issue a press release and update our website at www.brookdale.com/investor to notify stockholders of such decision. We encourage you to check this website in advance if you plan to attend the annual meeting in person.


 

 

Brookdale Senior Living Inc.

Notice of 2021 Annual Meeting of Stockholders

April 29, 2021

The 2021 Annual Meeting of Stockholders (including any adjournments or postponements thereof, the “Annual Meeting” or the “2021 Annual Meeting”) of Brookdale Senior Living Inc. (“Brookdale” or the “Company”) will be held on Thursday, June 17, 2021 at 10:00 a.m. Central time at the Company’s principal executive offices located at 111 Westwood Place, Brentwood, Tennessee* for the purpose of voting on the following proposals:

 

1.

To elect nine directors nominated by the Company’s Board of Directors (the “Board of Directors” or the “Board”), each to serve for a one-year term expiring at the 2022 annual meeting of stockholders (the “2022 Annual Meeting”);

 

2.

To approve, on an advisory basis, the Company’s named executive officer compensation;

 

3.

To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2021; and

 

4.

To transact such other business as may properly come before the Annual Meeting or any adjournments or postponements thereof.

The close of business on April 23, 2021 has been fixed as the record date for the determination of stockholders entitled to notice of, and to vote at, the Annual Meeting. We are making this Notice of 2021 Annual Meeting and proxy statement first available on or about April 29, 2021.

Your vote is important. Unless you attend the Annual Meeting and vote in person, please vote as soon as possible by one of the methods shown below. Be sure to have your proxy card, voting instruction form, or Notice of Internet Availability of Proxy Materials in hand and follow the below instructions:

By Phone - You can vote your shares by calling (844) 326-5741 toll free through 11:59 p.m. Eastern time on June 16, 2021

By Internet - You can vote your shares online at www.proxypush.com/BKD through 11:59 p.m. Eastern time on June 16, 2021

By Mail - You can complete, sign, date, and return your proxy card or voting instruction form in the postage-paid envelope provided

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON JUNE 17, 2021: This proxy statement and our 2020 Annual Report to Stockholders (the “2020 Annual Report”) are available at www.proxydocs.com/BKD.

By Order of the Board of Directors

 

LOGO

Chad C. White

Executive Vice President, General Counsel and Secretary

 

 

 

*

We intend to conduct the annual meeting in-person. However, we may impose additional safety procedures or decide to hold the annual meeting entirely online (i.e., a virtual-only meeting), depending on public health and safety concerns and recommendations that public health officials may issue in light of the ongoing COVID-19 situation. In the event that we elect to hold the Annual Meeting in a virtual meeting format, we will issue a press release and update our website at www.brookdale.com/investor to notify stockholders of such decision. We encourage you to check this website in advance if you plan to attend the annual meeting in person.


 

Table of Contents

 

Brookdale Senior Living Inc.

2021 Proxy Statement

 

Proxy Statement Summary      iii  
General Information about the Annual Meeting      1  
Proposal 1: Election of Directors      5  

Board Composition

     5  

Annual Evaluation of Board Composition

     5  

Identifying Director Candidates

     5  

Evaluating Director Candidates

     6  

Board Diversity

     6  

Majority Voting for Director Elections

     7  

Director Nominees

     8  
Corporate Governance      13  

Corporate Governance Guidelines and Code of Business Conduct and Ethics

     13  

Director Independence

     13  

Board Leadership Structure

     13  

Risk Oversight

     13  

Social and Environmental Responsibility

     14  

Meetings of the Board

     14  

Communications from Stockholders

     14  

Committees of the Board

     15  
Director Compensation      17  

Non-Employee Director Compensation Program

     17  

Compensation of Non-Executive Chairman of the Board

     18  

Director Stock Ownership Guidelines

     18  

Director Compensation for 2020

     18  
Executive Officers      20  
Executive Compensation      22  

Compensation Discussion and Analysis

     22  

Compensation Committee Report

     47  

Summary Compensation Table for 2020

     48  

Grants of Plan-Based Awards

     49  

Outstanding Equity Awards at Fiscal Year-End

     51  

Stock Vested for 2020

     52  

Pension Benefits

     52  

Nonqualified Deferred Compensation

     52  

Potential Payments Upon Termination or Change in Control

     53  

Compensation Committee Interlocks and Insider Participation

     62  

Pay Ratio

     62  
Proposal 2: Advisory Approval of Named Executive Officer Compensation      63  
Proposal 3: Ratification of Appointment of Independent Registered Public Accounting Firm for 2021      65  

Proposed Independent Registered Public Accounting Firm

     65  

Audit Fees, Audit-Related Fees, Tax Fees and All Other Fees

     66  

Audit Committee Pre-Approval Policies and Procedures

     66  

Audit Committee Report

     67  
Certain Relationships and Related Transactions      68  

 

 

  

 

2021 PROXY STATEMENT

 

 

 

 

 

        i


 

Table of Contents

 

Stock Ownership Information      69  

Stock Ownership Table

     69  

Equity Compensation Plan Information

     71  
Additional Information      72  

Stockholder Proposals for 2022 Annual Meeting

     72  

Solicitation Costs

     72  

Accessing our SEC Filings

     73  
Appendix A: Reconciliations of Non-GAAP Financial Measures      A-1  

 

 

 

ii        

 

 

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Proxy Statement Summary  

 

 

Information about the Annual Meeting

Whether or not you expect to attend the Annual Meeting, we strongly encourage you to vote as soon as possible to ensure your shares are represented and voted at the meeting. See page 4 for more details about attending the Annual Meeting.

 

 

Date and Time

  

 

Location

  

 

Record Date

Thursday, June 17, 2021
10:00 a.m. Central Time
   Brookdale Senior Living Inc.
111 Westwood Place
Brentwood, Tennessee*
   April 23, 2021

 

*

We intend to conduct the annual meeting in-person. However, we may impose additional safety procedures or decide to hold the annual meeting entirely online (i.e., a virtual-only meeting), depending on public health and safety concerns and recommendations that public health officials may issue in light of the ongoing COVID-19 situation. In the event that we elect to hold the Annual Meeting in a virtual meeting format, we will issue a press release and update our website at www.brookdale.com/investor to notify stockholders of such decision. We encourage you to check this website in advance if you plan to attend the annual meeting in person.

2021 Proposals

The Board recommends that you vote as follows. If you properly submit your proxy and do not specify how your shares are to be voted, your shares will be voted in accordance with the recommendations of the Board.

 

Proposals

  

 

Unanimous
Recommendation of the
Board

  

Page Reference 

(for more detail) 

 

1. Election of nine directors nominated by the Company’s Board of Directors, each for a one-year term expiring at the 2022 Annual Meeting

  

 

 FOR
each nominee

 

  

 

5

 

2.  Advisory approval of our named executive officer compensation

 

  

 

 

 FOR

  

 

 

63

 

3.  Ratification of the appointment of Ernst  & Young LLP as independent registered public accounting firm for 2021

 

  

 

 

 FOR

  

 

 

65

How to Vote

You can submit your proxy vote by any of the following methods:

 

LOGO

You can vote your shares
online at
www.proxypush.com/BKD

through 11:59 p.m. Eastern
time on June 16, 2021

 

LOGO

You can vote your shares
by calling
(844) 326-5741 toll free

through 11:59 p.m. Eastern
time on June 16, 2021

 

LOGO

You can complete, sign,
date, and return your
proxy card or voting
instruction form in the
postage-paid envelope
provided

 

LOGO

You can vote your shares
by attending the 2021
Annual Meeting and
voting in person



 

 

  

 

2021 PROXY STATEMENT

 

 

 

 

 

        iii


 

Director Nominees

 

Director Nominees

This year, the Board has unanimously nominated each of the current directors for election at the 2021 Annual Meeting for a one-year term expiring at the 2022 Annual Meeting. With the prior years’ work of declassifying the Board complete, this represents the first time that all of our directors will be standing for election for one-year terms.

Board Composition

The Board seeks composition of its members that reflects an appropriate balance of knowledge, experience, skills, expertise, and diversity in order to support our business strategy. In the past two years the Board has enhanced its collective skills and experience by bringing on three new directors who have decades of operations, sales and marketing, and clinical experience in the senior living, healthcare, and hospitality industries. In addition, in 2018 the Board purposefully evolved its gender composition to more closely resemble our customer and employee base, of which the majority are women. Women comprise 44% of the Board. The Board also includes racial minority representation. The following information reflects the Board’s current composition.

 

 

LOGO

 



 

 

 

iv        

 

 

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Board Composition

 

BOARD EXPERIENCE AND CORE COMPETENCIES

 

 

   Experience and Core
   Competencies
  Asher   Baier   Bromley   Bumstead   Freed   Johnson-
Mills
  Sansone   Warren   Wielansky

Current or Former CEO

                       

Current or Former CFO

                           

Senior Living Operations

                               

Healthcare (Operations & Strategy)

                         

Healthcare (Clinical)

                                 

Hospitality

                               

Sales & Marketing

                                 

Real Estate

                           

Finance

                       

Mergers & Acquisitions

                       

Risk Management

                       

Other Public Board Service

                     

 

Commitment to Governance Practices

 

Independent Non-Executive Chairman of the Board with robust authority, including to approve Board agendas and call and preside over meetings of the independent directors

 

Declassification of the Board is now complete and all directors will stand for election for annual terms beginning with 2021 Annual Meeting

 

Bylaws contain majority voting standard for uncontested director elections

 

Bylaws contain proxy access procedures, which became effective beginning with the 2020 Annual Meeting

 

Corporate Governance Guidelines limit service on other public company boards (no more than three for independent directors and no more than one for the CEO)

 

Annual evaluations of the Board and its committees

 

Meaningful director stock ownership guidelines (increased in 2020 to 5x annual retainer)

 

Insider trading policy prohibits directors and executive officers from pledging or hedging Brookdale stock

 

No stockholder rights plan (poison pill) or similar plan

 

Commitment to Our Associates during the Pandemic

In 2020, our approximately 45,000 associates served on the front lines of a once in a century pandemic, dedicated to the health and wellbeing of our residents and patients. To help address the financial hardships experienced by some of our associates caused by the pandemic, whether personally or taking care a loved one, our executive leadership team donated more than $345,000 of accrued PTO hours, which benefited nearly 600 associates in need. In addition, during the year the Board of Directors contributed more than $30,000 to our Associate Compassion Fund, a non-profit organization that provides financial assistance to our associates in need due to extraordinary circumstances, including the pandemic.



 

 

  

 

2021 PROXY STATEMENT

 

 

 

 

 

        v


 

 

General Information about the Annual Meeting  

 

 

This proxy statement is furnished in connection with the solicitation of proxies by the Board of Directors (the “Board of Directors” or the “Board”) of Brookdale Senior Living Inc. (“Brookdale” or the “Company”) to be voted at the 2021 Annual Meeting of Stockholders to be held on Thursday, June 17, 2021, and at any adjournment or postponement of the meeting (the “Annual Meeting” or the “2021 Annual Meeting”).

Distribution of Proxy Materials

On or about April 29, 2021, we expect to start mailing to holders of our common stock (other than those who previously requested electronic or paper delivery of proxy materials) a Notice of Internet Availability of Proxy Materials (“Notice”), which explains how to access the proxy materials online and to make the materials available on www.proxydocs.com/BKD. If you receive a Notice by mail, you will not receive a printed copy of the proxy materials in the mail. Instead, the Notice tells you how to access and review the proxy materials online. The Notice also tells you how to submit your proxy via the Internet. If you received a Notice by mail and would like to receive a printed copy of our proxy materials, follow the instructions in the Notice explaining how to request printed materials on a one-time or ongoing basis. Our proxy materials include the notice of the Annual Meeting, this proxy statement, and our 2020 Annual Report. Copies of these documents also are available on our website at www.brookdale.com/proxy. Except to the extent specifically referenced herein, information contained or referenced on our website is not incorporated by reference into, and does not form a part of, this proxy statement.

Stockholders Entitled to Vote

Only stockholders of record at the close of business on April 23, 2021, the record date for the Annual Meeting, are entitled to receive notice of, attend, and vote at the Annual Meeting. As of the record date, there were outstanding and entitled to vote 185,166,149 shares of our common stock, excluding restricted shares and restricted stock units (“RSUs”) for which the holders have no voting rights. Each share of our common stock entitles the holder to one vote. A list of stockholders entitled to vote at the Annual Meeting will be available for examination at our principal executive offices for the ten days before the Annual Meeting between 9:00 a.m. and 5:00 p.m. Central time and at the Annual Meeting for any purpose germane to the meeting.

Voting Choices and Recommendations of the Board

With respect to Proposal 1 (Election of Directors) you will have the choice to vote “FOR,” “AGAINST” or “ABSTAIN” with respect to each nominee. With respect to all other proposals you will have the choice to vote “FOR,” “AGAINST” or “ABSTAIN.” The Board recommends a vote:

 

1.

“FOR” the election of each of the nine directors nominated by the Board, each for a one-year term expiring at the 2022 annual meeting of stockholders (the “2022 Annual Meeting”);

 

2.

“FOR” advisory approval of our named executive officer compensation; and

 

3.

“FOR” ratification of the appointment of Ernst & Young LLP (“EY”) as independent registered public accounting firm for 2021.

 

 

  

 

2021 PROXY STATEMENT

 

 

 

 

 

        1


 

General Information about the Annual Meeting

 

Stockholders of Record and Beneficial Holders

If your shares of common stock are owned directly in your name with our transfer agent, American Stock Transfer & Trust Company, you are considered a registered holder of those shares. If you are the beneficial owner of shares of common stock held by a broker or other custodian, you hold those shares in “street name” and are not a registered stockholder. If you hold your shares in “street name,” your broker or other custodian will vote your shares as you direct. However, if you do not give specific voting instructions to your broker, generally your broker will have discretion to vote your shares on routine matters but will not have discretion to vote your shares on non-routine matters. When the broker exercises its discretion to vote on routine matters in the absence of voting instructions from you, a broker non-vote occurs with respect to the non-routine matters since the broker will not have discretion to vote on such non-routine matters. The election of directors (Proposal 1) and the advisory approval of our named executive officer compensation (Proposal 2) will be considered non-routine matters. The ratification of the appointment of EY (Proposal 3) will be considered a routine matter. Therefore, if you hold your shares in “street name” and do not submit voting instructions to your broker or other custodian, they will only be authorized to vote your shares on Proposal 3.

Quorum Requirement

The presence at the Annual Meeting, in person or by proxy, of the holders of a majority of the shares of our common stock issued and outstanding on the record date will constitute a quorum for the transaction of business. We will count abstentions and broker non-votes for the purpose of determining the presence of a quorum. If a quorum is not present, the Annual Meeting may be adjourned by the chairman of the meeting or by the vote of a majority of the shares represented at the Annual Meeting until a quorum has been obtained.

Voting Instructions and Information

 

 

 

 Voting Instructions

You may vote by proxy or in person at the Annual Meeting. Whether or not you plan to attend the Annual Meeting, you are encouraged to vote as soon as possible to ensure that your shares are represented and voted at the Annual Meeting. If you hold your shares as a record holder, you may vote your shares by proxy via the phone or the Internet by following the instructions provided on your Notice or proxy card or, if you received a printed set of proxy materials by mail, by completing, signing, dating, and returning your proxy card in the postage-paid envelope provided. If you hold your shares through your broker or other custodian, please follow the instructions you received from the holder of record to vote your shares.

 

 

 

2        

 

 

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Voting Instructions and Information

 

 

 Revoking or Changing Your Vote

Stockholders of record may revoke their proxy or change their vote at any time prior to exercise of the proxy at the Annual Meeting by:

 

 

Delivering a written notice of revocation to our Secretary at 111 Westwood Place, Suite 400, Brentwood, Tennessee 37027;

 

 

Submitting another properly completed proxy card with a later date;

 

 

Submitting another timely proxy via the phone or the Internet through 11:59 p.m. Eastern time on June 16, 2021; or

 

 

Attending the Annual Meeting and voting in person.

Stockholders holding shares beneficially in street name should contact their broker or other custodian for instructions on how to revoke or change their voting instructions.

For all methods of voting, the last vote properly cast will supersede all previous votes. Attendance at the Annual Meeting will not cause your previously granted proxy to be revoked unless you specifically make that request or vote in person at the Annual Meeting.

 

 

 Voting of Proxies

If you properly submit your signed proxy card or voting instruction form, or complete your proxy by telephone or the Internet, your shares will be voted as you direct or will be voted as specified in the above Board recommendations if you do not direct a particular vote. With respect to director elections, should any nominee be unable to serve, the persons designated as proxies reserve full discretion to vote for another person. The Board currently has no reason to believe that any nominee will be unable to serve if elected.

The Board does not intend to bring any other business before the Annual Meeting, and it does not know of any other matters that may come before the Annual Meeting. However, if any other matters are properly presented at the meeting, proxies will be voted in accordance with the judgment of the persons designated as proxies.

Vote Required to Approve Proposals

The following table summarizes the votes required for passage of each proposal and the effect of abstentions and broker non-votes.

 

Proposal

   Vote required for approval    Effect of
Abstentions
  

Effect of
Broker Non-

Votes

1.  Election of directors

  

Majority of votes cast with respect to each director

  

No effect

  

No effect

2.  Advisory vote to approve named executive officer compensation (say-on-pay)

  

Majority of shares present and entitled to vote on the matter

  

Against

  

No effect

3.  Ratification of appointment of independent registered public accounting firm for 2021

  

Majority of shares present and entitled to vote on the matter

  

Against

  

N/A

 

 

  

 

2021 PROXY STATEMENT

 

 

 

 

 

        3


 

General Information about the Annual Meeting

 

Attending the Annual Meeting

Only stockholders as of the record date, or their duly appointed proxies, and invited guests of the Company may attend the Annual Meeting. Admission to the Annual Meeting will begin at approximately 9:30 a.m. Central time. In order to be admitted to the Annual Meeting, you should:

 

 

bring current, government-issued photo identification, such as a driver’s license, and proof of ownership of common stock on the record date. If you are a holder of record, your identity will be checked against a list of registered holders at the Annual Meeting. If you hold your shares in street name, a recent brokerage statement or a letter from your bank, broker, trustee, or other nominee are examples of proof of ownership. If you want to vote your shares held in street name in person, you must obtain a legal proxy in your name from the broker, bank, trustee, or other nominee that holds your shares of common stock;

 

 

leave your camera at home because cameras, transmission, broadcasting, and other recording devices will not be permitted in the meeting room;

 

 

be prepared to comply with mask and social distancing guidelines and other procedures designed to address public health and safety concerns;

 

 

be prepared to comply with security requirements, which may include, among other security measures, security guards searching all bags and attendees passing through a metal detector; and

 

 

arrive shortly after 9:30 a.m. Central time to ensure that you are seated by the start of the Annual Meeting at 10:00 a.m. Central time.

Any holder of a proxy from a stockholder must present a properly executed legal proxy and a copy of the proof of ownership. If you do not provide photo identification and comply with the other procedures outlined above for attending the Annual Meeting in person, you will not be admitted to the Annual Meeting.

 

 

 

4        

 

 

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Proposal 1: Election of Directors  

 

 

The Board is comprised of nine directors, and each of their terms will expire at the 2021 Annual Meeting. The Board has unanimously nominated each of the current directors for election at the 2021 Annual Meeting, each to hold office for a one-year term expiring at the 2022 Annual Meeting. If any of the nominees becomes unavailable or unwilling to serve, an event that the Board does not presently expect, the named proxies will vote the shares represented by proxies for the election of directors for the election of such other person(s) as the Board may recommend.

The Company’s Bylaws provide that the election of director nominees at the 2021 Annual Meeting will be by the vote of the majority of the votes cast with respect to each director’s election. Accordingly, each director nominee will be elected if he or she receives more votes “FOR” his or her election than “AGAINST” his or her election. Shares that are not voted in the election of directors, including abstentions and broker non-votes, have no direct effect in the election of directors. Those shares, however, are taken into account in determining whether a sufficient number of shares are present to establish a quorum.

 

           

 

The Board unanimously recommends that you vote “FOR” the election of each of the nine directors nominated by the Board, each for a one-year term expiring at the 2022 Annual Meeting. Unless otherwise instructed, the named proxies will vote all proxies we receive “FOR” the election of the Board’s nominees.

 

Board Composition

The process for evaluating our Board composition and identifying and evaluating director candidates is outlined below. Through this process, in the past two years the Board has enhanced its collective skills and experience by bringing on three new directors who have decades of operations, sales and marketing, and clinical experience in the senior living, healthcare, and hospitality industries.

 

 

 

 Annual Evaluation of Board Composition

At least annually the Nominating and Corporate Governance Committee seeks input from each director regarding the composition of the Board. The Nominating and Corporate Governance Committee uses these results to assess with the Board whether the Board’s composition reflects an appropriate balance of knowledge, experience, skills, expertise, and diversity in order to support our business strategy. The Nominating and Corporate Governance Committee may seek and receive input from certain stockholders regarding the skills, experience, and other characteristics that stockholders believe would be beneficial to our Board composition. The Nominating and Corporate Governance Committee also reviews the size of the Board and, if deemed appropriate, will recommend to the Board any changes to its size.

 

 

 

 Identifying Director Candidates

The Nominating and Corporate Governance Committee may engage an independent search firm to conduct targeted searches to identify well-qualified candidates who meet the needs of the Board. When an independent search firm is used, the Nominating and Corporate Governance Committee retains the firm and approves payment of its fees. Potential director candidates may also be identified by the Nominating and Corporate Governance Committee by asking current directors and executive officers to notify the committee if they become aware of candidates who possess skills, experience, or other characteristics needed for the Board.

 

 

  

 

2021 PROXY STATEMENT

 

 

 

 

 

        5


 

Proposal 1: Election of Directors

 

The Nominating and Corporate Governance Committee also will consider candidates recommended by stockholders, and its process for evaluating stockholder-recommended candidates is no different than its process for evaluating candidates suggested by search firms, directors, or executive officers. To make a formal nomination of a director candidate, a stockholder must comply with either the proxy access or advance notice provisions of our Bylaws. Proxy access permits a stockholder, or a group of up to 20 stockholders, owning at least three percent of our outstanding common stock continuously for at least three years, to nominate and include in our annual meeting proxy materials director nominees constituting up to the greater of two director nominees or 20% of the number of directors in office (rounded down to the nearest whole number), provided that the stockholders and nominees satisfy the requirements specified in our Bylaws. See “Stockholder Proposals for 2022 Annual Meeting” in this proxy statement for further information regarding the process for stockholders to formally nominate director candidates and the deadlines for making such nominations. Stockholders who wish to submit a nomination are encouraged to seek independent counsel about requirements under our Bylaws.

 

 

 

 Evaluating Director Candidates

The Nominating and Corporate Governance Committee is responsible for evaluating director candidates and recommending nominees to the Board for Board membership. The Nominating and Corporate Governance Committee evaluates biographical and background information relating to director candidates and interviews candidates selected by the committee and by the Board in making its decisions whether to recommend director candidates to the Board. When evaluating director candidates, the Nominating and Corporate Governance Committee considers whether candidates have demonstrated, by significant accomplishment in their field, an ability to make a meaningful contribution to the Board’s oversight of our business, and the candidates’ reputation for honesty and ethical conduct in their personal and professional activities. The Nominating and Corporate Governance Committee also thoroughly examines a candidate’s senior housing, real estate, finance, operations, sales, marketing, healthcare, and other relevant experience, understanding of our business, educational and professional background, and contributions to diversity on the Board. In order to ensure that director candidates are able to commit the substantial time required to fulfill their Board responsibilities, the Nominating and Corporate Governance Committee also considers the number of public company boards and other boards on which the candidate is a member. Our Corporate Governance Guidelines limit the number of outside public company boards on which a director may serve (three for independent directors and one for the CEO). In determining whether to recommend a director for re-election, the Nominating and Corporate Governance Committee also considers the director’s tenure, past attendance at meetings, participation in and contributions to the activities of the Board, and participation in continuing education programs. Although the Nominating and Corporate Governance Committee considers directors’ tenure and age as part of its overall evaluation process, the Board does not believe that term limits or a mandatory retirement age are appropriate and removed the retirement age from our Corporate Governance Guidelines in 2020. The committee evaluates each candidate, including existing directors, in the context of the Board as a whole, with the objective of recommending director nominees who can best support our business strategy and represent stockholder interests through the exercise of sound judgment.

 

 

 

 Board Diversity

Diversity is one of the characteristics the committee considers in identifying and evaluating director candidates. The Board seeks directors who have different backgrounds, experiences, and perspectives, including race and gender characteristics, which the Board believes will enhance the quality of its deliberations and decisions. The Board’s commitment to creating and fostering an inclusive and diverse workplace is demonstrated by its membership. In 2018, the Board purposefully evolved its gender composition to more closely resemble our customer and employee base, of which the majority are women. Women comprise 44% of the Board. The Board also includes racial minority representation. Brookdale has signed on to The Board Challenge and committed to help foster continued efforts to improve the representation of Black directors on public boards. In addition, Ms. Baier serves on the New York Stock Exchange (“NYSE”) Board Advisory Council, which identifies and connects diverse board candidates to NYSE-listed companies seeking new directors.

 

 

 

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Majority Voting for Director Elections

 

Majority Voting for Director Elections

Our Bylaws provide for a majority voting standard in uncontested director elections. Each director will be elected by a vote of the majority of votes cast with respect to that director’s election at any meeting for the election of directors at which a quorum is present. For these purposes, a majority of votes cast means that the number of votes cast for a director’s election exceeds the number of votes cast against that director’s election, with abstentions and broker non-votes not counted as a vote cast either for or against. An election will be considered contested if as of the tenth day preceding the date we first mail our notice of meeting for such meeting to stockholders, the number of nominees exceeds the number of directors to be elected. Since the number of director nominees for election at the 2021 Annual Meeting does not exceed the number of directors to be elected, the director elections at the 2021 Annual Meeting will be subject to the majority voting standard.

In order for any person to be nominated by the Board for election as a director, such nominee must submit an irrevocable resignation, contingent on that nominee not receiving a majority of the votes cast in an election that is not a contested election and acceptance of that resignation by the Board in accordance with the policies and procedures adopted by the Board for such purpose. In the event a nominee fails to receive a majority of the votes cast in an election that is not a contested election, the Nominating and Corporate Governance Committee will make a recommendation to the Board as to whether to accept or reject the resignation of such nominee, or whether other action should be taken. The Board will act on the resignation, taking into account the Nominating and Corporate Governance Committee’s recommendation, and publicly disclose (by a press release and filing an appropriate disclosure with the SEC) its decision regarding the resignation and, if such resignation is rejected, the rationale behind the decision within ninety (90) days following certification of the election results. The Nominating and Corporate Governance Committee in making its recommendation and the Board in making its decision each may consider any factors and other information that it considers appropriate and relevant. Any nominee who tenders his or her resignation as described herein will not participate in the deliberations of the Nominating and Corporate Governance Committee or the Board regarding whether to accept the resignation. If the Board accepts a nominee’s resignation, then the Nominating and Corporate Governance Committee will recommend to the Board whether to fill the resulting vacancy or vacancies or to reduce the size of the Board. Each of the nominees for election at the 2021 Annual Meeting has submitted the irrevocable resignation described above.

 

 

  

 

2021 PROXY STATEMENT

 

 

 

 

 

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Proposal 1: Election of Directors

 

Director Nominees

Biographical information for the nine current directors nominated for election at the 2021 Annual Meeting is set forth below.

 

Guy P. Sansone

Non-Executive Chairman & Independent Director

   

Lucinda M. Baier

Director, President and Chief Executive Officer

 

LOGO

 

Director Since: October 2019

 

Age: 56

 

Public Company Directorships:

•   MEDNAX, Inc.

(2020 – current)

•  Magellan Health, Inc.

(2019 – current)

•  Civitas Solutions, Inc.

(2009 – 2019)

•  Rotech Healthcare Inc.

(2004 – 2005)

   

LOGO

 

Director Since: February 2018

 

Age: 56

 

Public Company Directorships:

•  The Bon-Ton Stores, Inc. (2007-2016)

Mr. Sansone joined Brookdale’s 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 firm’s 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. 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.

 

   

Ms. Baier has served as Brookdale’s President and Chief Executive Officer and as a member of the Board since February 2018, after having served as Brookdale’s 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. She has served for more than a decade as a board member of public and private companies and organizations. She currently serves as a member of the board of directors of the Nashville Health Care Council, where she serves on the Executive Committee, and is a member of the NYSE Board Advisory Council, which identifies and connects diverse board candidates to NYSE-listed companies seeking new directors. Ms. Baier has been recognized by a number of professional organizations, including as recipient of the Corporate Citizenship 2020 Award from the Committee for Economic Development of The Conference Board, being named in WomenInc.’s 2019 Most Influential Corporate Directors list, and for the second consecutive year being named to the Nashville Business Journal’s “Most Admired CEO” list. Ms. Baier is a Certified Public Accountant and a graduate of Illinois State University, with B.S. and M.S. degrees in Accounting.

Mr. Sansone’s 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.

 

   

Ms. Baier’s continued leadership and accomplishments in the areas of our people, portfolio, and operations and strong crisis management as the Company’s President and Chief Executive Officer, and her prior leadership roles at other companies, led to the conclusion that she should serve as a member of the Board.

 

 

 

 

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Director Nominees

 

Jordan R. Asher, MD

Independent Director

   

Marcus E. Bromley

Independent Director

LOGO

 

Director Since: February 2020

 

Age: 56

 

Brookdale Board Committees:

•  Audit

•  Investment

     

LOGO

 

Director Since: July 2017

 

Age: 71

 

Brookdale Board Committees:

•   Audit

•   Investment

 

Public Company Directorships:

•  Cole Credit Property Trust V, Inc. (2015 – current)

•  Cole Corporate Income Trust, Inc. (2011 – 2015)

•  Cole Credit Property Trust II, Inc. (2005 – 2013)

•  Cole Credit Property Trust III, Inc. (2008 – 2012)

•  Gables Residential Trust
(1993 – 2005)

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 Ascension’s 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.

 

   

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.

 

Dr. Asher’s deep experience in the evolving healthcare landscape, including a combination of clinical training and executive leadership experience, particularly in light of the healthcare industry’s transition to more integrated, value-based delivery and payment models, led to the conclusion that he should serve as a member of the Board.

   

Mr. Bromley’s 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.

 

 

 

  

 

2021 PROXY STATEMENT

 

 

 

 

 

        9


 

Proposal 1: Election of Directors

 

Frank M. Bumstead

Independent Director

   

Victoria L. Freed

Independent Director

LOGO

 

 

 

Director Since: August 2006

 

Age: 79

 

Brookdale Board Committees:

•   Compensation (Chair)

•   Nominating and Corporate Governance

 

Public Company Directorships:

•   Syntroleum Corporation

(1993 – 2014)

•   American Retirement Corp.

(1997 – 2006)

     

LOGO

 

Director Since: October 2019

 

Age: 64

 

Brookdale Board Committees:

•   Compensation

•   Nominating and Corporate Governance

 

Public Company Directorships:

•   ILG, Inc. (f/k/a Interval Leisure Group, Inc.) (2012 – 2018)

 

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 University’s Owen School of Management.

 

   

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 company’s 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. 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 bachelor’s degree in business with an emphasis in marketing from the University of Colorado.

 

Mr. Bumstead’s 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.

   

Ms. Freed’s 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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Director Nominees

 

Rita Johnson-Mills

Independent Director

   

Denise W. Warren

Independent Director

 

 

LOGO

 

Director Since: August 2018

 

Age: 62

 

Brookdale Board Committees:

•  Nominating and Corporate Governance (Chair)

•  Investment

 

 

     

LOGO

 

Director Since: October 2018

 

Age: 59

 

Brookdale Board Committees:

•  Audit (Chair)

•  Compensation

 

Public Company Directorships:

•  Computer Programs and Systems, Inc. (2017 – current)

 

   

Ms. Johnson-Mills is a healthcare executive with more than 25 years of combined federal, state, and private industry experience. She is founder and CEO of consulting firm RJM Enterprises. Ms. Johnson-Mills 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, and was a founding member of UnitedHealthGroup’s Diversity and Inclusion Council. 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. She currently serves on the Board of Directors of Quest Analytics and is a Governance Fellow with the National Association of Corporate Directors (NACD). 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. Warren brings more than 30 years of operational, financial and healthcare experience. Most recently, she served as Executive Vice President and Chief Operating Officer of WakeMed Health & Hospitals from October 2015 through December 2020, where she was responsible for the strategic, financial and operational performance of the organization’s 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. She also currently serves on the Board of Directors of Virtusa, Inc. Ms. Warren is National Association of Corporate Directors (NACD) Directorship CertifiedTM and received a Corporate Directors Certificate from Harvard Business School. Ms. Warren earned a B.S. degree in Economics from Southern Methodist University and a M.B.A. from Harvard 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.

   

Ms. Warren’s 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.

 

 

 

  

 

2021 PROXY STATEMENT

 

 

 

 

 

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Proposal 1: Election of Directors

 

Lee S. Wielansky

Independent Director

 

 

LOGO

 

Director Since: April 2015

 

Age: 69

 

Brookdale Board Committees:

•  Audit

•   Investment (Chair)

 

Public Company Directorships:

•  Acadia Realty Trust

(2000 – current)

•   Isle of Capri Casinos, Inc.

(2007 – 2017)

•   Pulaski Financial Corp.

(2005 – 2016)

 

 

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 Director – Investments 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 joined the Company’s Board of Directors in April 2015 and served as Non-Executive Chairman of the Board from February 2018 through December 2019. He also serves as Lead Trustee of Acadia Realty Trust and served as a director of Isle of Capri Casinos, Inc. from 2007 to 2017 and Pulaski Financial Corp. from 2005 to 2016. Mr. Wielansky received a bachelor’s degree in Business Administration, with a major in Real Estate and Finance, from the University of Missouri – Columbia, where he is currently a member of the Strategic Development Board of the College of Business. He also served on the Board of Directors of The Foundation for Barnes-Jewish Hospital.

 

Mr. Wielansky’s 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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Corporate Governance  

 

 

Corporate Governance Guidelines and Code of Business Conduct and Ethics

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.

Director Independence

Our Corporate Governance Guidelines and the listing standards of the NYSE require that the Board be comprised of a majority of independent directors. 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. 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). The Board also determined that each member of the Audit, Compensation, and Nominating and Corporate Governance Committees is independent, including that each member of the Audit Committee is independent under the listing standards of the NYSE and under section 10A(m)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Ms. Baier is not independent due to her employment as our President and Chief Executive Officer.

Board Leadership Structure

Our Corporate Governance Guidelines do not require the separation of the positions of Chairman of the Board and Chief Executive Officer and provide that the Board is free to choose its Chairman in any way that it deems best for the Company at any given time. However, since the date of our formation, the Board has separated the positions of Chairman and Chief Executive Officer in the belief that this structure improves management’s accountability to the Board. Mr. Sansone currently serves as Non-Executive Chairman of the Board, and Ms. Baier serves as President, Chief Executive Officer and director.

Risk Oversight

The business of the Company is managed with the oversight of the Board. As contemplated by the NYSE listing standards and as reflected in the charter of the Audit Committee, the Board has delegated to the Audit Committee the responsibility to discuss guidelines and policies governing the process by which our senior management and the relevant departments and functions of the Company (including our internal audit function) assess and manage our

 

 

  

 

2021 PROXY STATEMENT

 

 

 

 

 

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Corporate Governance

 

exposure to risk. To that end, the Audit Committee regularly reviews our processes for risk assessment and risk management, as well as our major financial risk exposures and the steps management has taken to monitor and control such exposures. In addition, the Board regularly receives reports from management regarding our risk exposures and monitors our risk management activities.

Social and Environmental Responsibility

The Board is responsible for overseeing and ensuring our strategy is informed by the opportunities and risks associated with our human capital resources and environmental changes and looks to the Nominating and Corporate Governance Committee to report on various social and environmental topics. The Nominating and Corporate Governance Committee reviews management’s work to develop our social and environmental initiatives and reporting. As a business of people taking care of people, we focus on human capital management, including diversity and inclusion, workplace safety, and maximizing employee satisfaction and retention. Please see our 2021 ESG Update posted to our website at www.brookdale.com/esg for more information about our social and environmental initiatives.

Meetings of the Board

The Board met nine times in 2020. Each incumbent director attended at least 75% of the total number of meetings of the Board and committees of the Board on which he or she served during 2020. Our non-management directors, i.e., those who are not executive officers, meet in regularly scheduled executive sessions without management. Any non-management director may request that additional executive sessions be scheduled. Under our Corporate Governance Guidelines, our Non-Executive Chairman of the Board presides at executive sessions of our non-management directors. The Board has not adopted a formal policy that requires directors to attend our annual stockholders’ meetings, although they are invited and encouraged to attend. Eight of the nine members of the Board attended the 2020 annual meeting of stockholders.

Communications from Stockholders

The Board has in place a process for security holders to send communications to the Board. Specifically, the Board will review and give appropriate attention to written communications submitted by stockholders and other interested parties, and will respond if and as appropriate. Absent unusual circumstances or as otherwise contemplated by committee charters, the Chairperson of the Nominating and Corporate Governance Committee will, with the assistance of our General Counsel, be primarily responsible for monitoring communications from stockholders and provide copies or summaries of such communications to the other directors as he or she considers appropriate. Communications will generally be forwarded to all directors if they relate to substantive matters and include suggestions or comments that the Chairperson of the Nominating and Corporate Governance Committee considers to be important for the directors to consider. Stockholders and other interested parties who wish to send communications on any topic to the Board should address such communications to Chairperson of the Nominating and Corporate Governance Committee, c/o General Counsel, Brookdale Senior Living Inc., 111 Westwood Place, Suite 400, Brentwood, Tennessee 37027. Stockholders who wish to contact any non-management director, including the Non-Executive Chairman of the Board, or the non-management directors as a group, should address such communications to the non-management director (or group of directors) they wish to contact (or if any, to “Any Non-Management Director”), c/o General Counsel, at such address.

 

 

 

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Committees of the Board

 

Committees of the Board

The Board has four separate standing committees: the Audit Committee, the Compensation Committee, the Investment Committee, and the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee is responsible for making recommendations to the Board with respect to committee membership assignments after consultation with the Chairman of the Board and the Chief Executive Officer. The Board is responsible for appointing committee chairs and members following review of such recommendations. The Board has adopted written charters for the standing committees, copies of which are available on our website located at www.brookdale.com/investor.

The following table identifies the members of the Board’s standing committees and the number of meetings held by each committee during 2020. The Non-Executive Chairman is invited to attend, and generally attends, the regularly scheduled meetings of the standing committees.

 

     Audit Committee      Compensation  
Committee
   Investment
Committee  
   NCG
Committee  

Jordan R. Asher

  

       

    

Marcus E. Bromley

  

       

    

Frank M. Bumstead

       

Chair

       

Victoria L. Freed

       

       

Rita Johnson-Mills

            

  

Chair

Denise W. Warren

  

Chair

  

         

Lee S. Wielansky

  

       

Chair

    

Number of Meetings in 2020

  

5

  

4

  

4

  

6

 

 

  

 

2021 PROXY STATEMENT

 

 

 

 

 

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Corporate Governance

 

The following table provides information about the key responsibilities and functions of the Board’s standing committees.

 

Committee

  

Key Functions and Additional Information

 

Audit Committee

  

 

•   Reviews the audit plans and findings of the independent registered public accounting firm and our internal audit and compliance functions, as well as the results of regulatory examinations, and tracks management’s corrective action plans where necessary

 

•   Reviews our financial statements (and related regulatory filings), including any significant financial items and/or changes in accounting policies, with our senior management and independent registered public accounting firm

 

•   Reviews our risk and control issues, compliance programs, and significant tax and legal matters

 

•   Appoints annually, in its sole discretion, the independent registered public accounting firm and evaluates its independence and performance, as well as sets clear hiring policies for our hiring of employees or former employees of the independent registered public accounting firm

 

•   Reviews our risk management processes

 

•   Reviews our exposure to cyber security risk, the effectiveness of our cyber security, and the knowledge, experience and capabilities of the Committee and management with respect to cyber security and cyber security risk.

 

•   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.

 

 

Compensation Committee

  

 

•   Reviews and approves equity-related grants for our directors, officers, key employees, and consultants

 

•   Reviews and approves corporate goals and objectives relevant to our Chief Executive Officer’s and other executive officers’ compensation, evaluates the Chief Executive Officer’s and other executive officers’ performance in light of those goals and objectives, and determines the Chief Executive Officer’s and other executive officers’ compensation based on that evaluation

 

•   Recommends to the Board the compensation of our non-employee directors

 

•   Oversees our compensation and employee benefit and incentive compensation plans, and administers our 2014 Omnibus Incentive Plan and Associate Stock Purchase Plan

 

 

Investment Committee

  

 

•   Reviews and approves (or recommends that the Board approve, as applicable) certain investments and proposed transactions on behalf of the Board

 

•   Reviews and evaluates (and makes recommendations to the Board regarding) our capital structure and financial strategies, our material capital allocation plans, and our dividend and share repurchase policies and programs

 

•   Performs such other responsibilities as may be delegated to it by the Board from time to time

 

 

Nominating and Corporate Governance Committee

  

 

•   Reviews the performance of the Board and incumbent directors and makes recommendations to the Board regarding the selection of candidates, qualification, and competency requirements for service on the Board and the suitability of proposed nominees as directors

 

•   Advises the Board with respect to our Corporate Governance Guidelines

 

•   Oversees the annual evaluation of the Board and its committees and our management

 

•   Reports to the Board on various social, environmental, and governance topics, and reviews management’s work to develop our social and environmental initiatives and reporting

 

 

 

 

 

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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. In 2020, the Compensation Committee reviewed the non-employee director compensation program, including receiving a market compensation study from the Consultant (as defined below) 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 during 2020. No changes were made to the non-employee director compensation program for 2021.

 

Cash Fees

   2020      Changes from 2019    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 RSUs 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

  

$

  15,000

 

  

No change

Meeting Attendance Fees:

     

Per Board Meeting

  

$

  3,000

 

   Limited only to
meetings in excess
of 6 per year

Per Committee Meeting
(Members Only)

  

$

  2,000

 

   Limited only to
meetings in
excess of 8 per
director per year

Equity Awards

                

Annual Grant of Immediately Vested Stock under 2014 Omnibus Incentive Plan

   $   135,000    Increased from
$100,000
beginning with
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 RSUs (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 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 2020 were eligible to vest on the first anniversary of the director’s appointment to the Board, subject to the director’s continued service.

 

 

 

  

 

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Director Compensation

 

Each non-employee director has the opportunity to elect to receive either immediately vested shares or RSUs in lieu of up to 50% of the director’s quarterly cash compensation, and to elect to receive RSUs in lieu of the annual grant of immediately vested shares. Immediately vested shares are issued under our Director Stock Purchase Plan, and RSUs are issued under our 2014 Omnibus Incentive Plan. With respect to quarterly cash elections, the number of shares or RSUs 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 day’s closing price. Each RSU will be payable in the form of one share of our common stock following the director’s termination of service as a member of the Board.

Compensation of Non-Executive Chairman of the Board

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 Committee’s 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 director’s 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 director’s initial appointment or election to the Board. 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 23, 2021, each of our non-employee directors is in compliance with the guidelines, but each other than Messrs. Bromley, Bumstead, and Wielansky holds fewer shares than required by the increased 5.0x guideline. Therefore, each of the non-employee directors other than Messrs. Bromley, Bumstead, and Wielansky will be expected to retain at least 50% of any shares obtained through our stock incentive plans until the required holding level is met.

Director Compensation for 2020

The following table sets forth the compensation awarded to, earned by, or paid to our directors for the year ended December 31, 2020, 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 2020, except that Dr. Asher joined the Board on February 24, 2020.

 

Name

   Fees Earned or
Paid in Cash
   

Stock       

Awards (1)(2)

     All Other
Compensation
     Total    

Jordan R. Asher

   $   91,165     $   100,000 (3)        

$

  –

 

  

$

  191,165  

 

Marcus E. Bromley

  

$

  111,000

 

  $   100,003 (4)        

$

      –

 

  

$

  211,033  

 

Frank M. Bumstead

   $   128,000     $   100,003 (4)        

$

  –

 

  

$

  228,003  

 

Victoria L. Freed

  

$

  113,000

 

  $   17,537 (4)        

$

  –

 

  

$

  130,537  

 

Rita Johnson-Mills

  

$

  128,000

 (5) 

  $   100,003 (4)        

$

  –

 

  

$

  228,003  

 

Guy P. Sansone

  

$

  209,000

 

  $   17,537 (4)        

$

  –

 

  

$

  226,537  

 

Denise W. Warren

  

$

  131,000

 

  $   100,003 (4)        

$

  –

 

  

$

  231,003  

 

Lee S. Wielansky

  

$

  126,000

 

  $   100,003 (4)        

$

  –

 

  

$

  226,003  

 

 

 

 

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Director Compensation for 2020

 

(1)

Represents the aggregate grant date fair value of awards of immediately vested stock, restricted shares and/or RSUs computed in accordance with Accounting Standards Codification 718, Stock Compensation (“ASC 718”). See Note 2 to our Consolidated Financial Statements included in our 2020 Annual Report for a summary of the assumptions made in the valuation of these awards.

 

(2)

As of December 31, 2020, (i) none of the directors held any unvested stock awards, except that Dr. Asher held 27,248 time-based restricted shares, (ii) Ms. Johnson-Mills held 11,092 vested RSUs, and (iii) Mr. Bromley held 14,205 vested RSUs.

 

(3)

Represents the grant date fair value of the initial grant of 27,248 time-based restricted shares awarded on April 28, 2020 to Dr. Asher in connection with his joining the Board on February 24, 2020.

 

(4)

Represents the grant date fair value of the annual grant of equity for the previous year served awarded on February 12, 2020, consisting of: 14,205 immediately vested shares for each of Directors Bumstead, Johnson-Mills, Warren, and Wielansky; 14,205 vested RSUs for Mr. Bromley (issued in lieu of immediately vested shares at his election); and 2,491 immediately vested shares for each of Directors Freed and Sansone (whose award amounts reflect a pro-rata amount of the annual award for their partial year of service beginning October 29, 2019).

 

(5)

Ms. Johnson-Mills elected to receive vested RSUs in lieu of a portion of her cash compensation for service during 2020. The reported amount includes: 2,010 vested RSUs issued on April 1, 2020 for service during the first quarter of 2020 with a grant date fair value of $5,749; 1,923 vested RSUs issued on July 1, 2020 for service during the second quarter of 2020 with a grant date fair value of $5,750; 2,490 vested RSUs issued on October 1, 2020 for service during the third quarter of 2020 with a grant date fair value of $6,350; and 1,749 vested RSUs issued on January 1, 2021 for service during the fourth quarter of 2020 with a grant date fair value of $7,748.

 

 

  

 

2021 PROXY STATEMENT

 

 

 

 

 

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  Executive Officers

 

 

 

The following table sets forth certain information concerning our executive officers. See “Director Nominees” above for biographical information for Ms. Baier. Mary Sue Patchett ceased being designated as an executive officer effective January 1, 2021 and on April 26, 2021 provided notice that she would retire on June 1, 2021.

 

  Name

  

Age

  

Position

  Lucinda M. Baier

  

56

  

President, Chief Executive Officer and Director

  George T. Hicks

  

63

  

Executive Vice President–Finance and Treasurer

  H. Todd Kaestner

  

65

  

Executive Vice President–Asset Management and Division President–Entry Fee

  Cindy R. Kent

  

52

  

Executive Vice President and President of Senior Living

  Anna-Gene O’Neal

  

54

  

Division President–Health Care Services

  Steven E. Swain

  

53

  

Executive Vice President and Chief Financial Officer

  Chad C. White

  

45

  

Executive Vice President, General Counsel and Secretary

George T. Hicks became our Executive Vice President–Finance in July 2006 and our Treasurer in January 2016. Prior to July 2006, Mr. Hicks served as Executive Vice President–Finance and Internal Audit, Secretary and Treasurer of American Retirement Corp. (“ARC”) since September 1993. Mr. Hicks had served in various capacities for ARC’s predecessors since 1985, including Chief Financial Officer from September 1993 to April 2003 and Vice President–Finance and Treasurer from November 1989 to September 1993. He received a bachelor’s degree with distinction in philosophy from Stanford University and an M.B.A. in finance from the University of Tennessee.

H. Todd Kaestner became our Executive Vice President–Asset Management and Division President–Entry Fee in June 2019. Prior to that, Mr. Kaestner served as Executive Vice President–Corporate Development since July 2006. Prior to joining Brookdale, Mr. Kaestner served as Executive Vice President–Corporate Development of ARC since September 1993 and served in various capacities for ARC’s predecessors since 1985, including Vice President–Development 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 3M’s Infection Prevention Division from 2016 to 2018 and President and General Manager of 3M’s 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 served as a member of the Board of Directors of Accolade, Inc. since January 2021 and is a member of its Nominating and Corporate Governance Committee, has served on the Board of Directors of the National Investment Center for Seniors Housing and Care (NIC) since February 2021, and has served as a trustee on the Vanderbilt University Board of Trust since July 2020. She previously served as a member of the Board of Directors of Best Buy from September 2018 through June 2020 and served on the Compensation & Human Resources and Finance & Investment Policy committees.

Anna-Gene O’Neal became our Division President–Health Care Services in August 2019, after having joined the Company as Division Vice President–BHS Hospice in June 2019. Prior to that, Ms. O’Neal served as President and Chief Executive Officer of Alive Hospice, a large non-profit hospice provider in Tennessee, since 2012. From 2007 to 2012, Ms. O’Neal 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

 

 

 

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Executive Officers

 

2001 to 2007 she served as Vice President, Hospital Operations and Clinical Quality for Essent Healthcare, Inc., a multistate for-profit hospital system. Ms. O’Neal is a Registered Nurse and received B.S.N., M.S.N. and M.B.A. degrees from Vanderbilt 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 Wisconsin–Madison 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.

 

 

  

 

2021 PROXY STATEMENT

 

 

 

 

 

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  Executive Compensation

 

 

 

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 2020:

 

Name

   Position

Lucinda M. Baier

   President and Chief Executive Officer

Steven E. Swain

   Executive Vice President and Chief Financial Officer

Cindy R. Kent

   Executive Vice President and President of Senior Living

Mary Sue Patchett

   Executive Vice President–Strategic Operations

Chad C. White

   Executive Vice President, General Counsel and Secretary

Each of the named executive officers served in the roles indicated for the full-year 2020, except that Ms. Kent joined the Company effective January 6, 2020 and Ms. Patchett served as Executive Vice President–Community Operations prior to being appointed to her current role on March 23, 2020. Ms. Patchett ceased being designated as an executive officer effective January 1, 2021 and on April 26, 2021 provided notice that she would retire on June 1, 2021.

 

 

Table of Contents to Compensation Discussion and Analysis

 

 

 

 

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Compensation Discussion and Analysis

 

 

Executive Compensation Program Highlights

 

LOGO 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 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.

Annual Say on Pay “Say-on-pay” advisory vote conducted annually to solicit stockholders’ views on our executive compensation programs.

Robust Stock Ownership Guidelines Ownership guidelines require 5x, 4x, and 3x base salary for our CEO, CFO and President of Senior Living, and other executive officers, respectively.

Annual Risk Assessment The Committee conducts a compensation program risk assessment annually.

LOGO 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 range identified in the independent compensation consultant’s 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 relocation expenses.

No Excessive Perquisites Minimal perquisites are provided, other than certain relocation expenses.

No Excessive Guaranteed Compensation Our annual incentive plan and performance-based long-term incentive awards do not have minimum guaranteed payout levels–this 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.

 

 

 

 

 

Compensation Philosophy

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 officer’s experience, scope of responsibility, individual performance, and retention risk; the Committee’s independent consultant’s 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.

 

 

  

 

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Executive Compensation

 

 

 

Principal Elements of Compensation

 

 

Consistent with the prior year, our 2020 executive compensation program generally consisted of the following 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 RSUs

  

 

Annual awards 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 RSUs

  

 

Opportunity is at-risk with no guaranteed vesting. 75% of the 2020 award was eligible to vest in February 2023 based on our 3-year compound annual growth rate (“CAGR”) of same community revenue per available unit (“RevPAR”) performance,(1) and 25% of the award is eligible to vest in February 2024 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.

 

(1)

As described in “Pandemic-Related Decisions” below, each of the named executive officers voluntarily agreed to forfeit the RSUs based on same community RevPAR effective February 22, 2021 in order to be eligible to receive a discretionary cash payment for extraordinary performance in fiscal 2020 related to the COVID-19 pandemic.

 

 

 

Process for Determining Executive Compensation

 

The Committee’s process for determining executive compensation is outlined below, including the role of the Committee, results of our annual say-on-pay advisory vote, the Committee’s independent consultant, our management, and our compensation peer group.

 

 

 

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Compensation Discussion and Analysis

 

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

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. When making 2020 compensation decisions, the Committee believed this level of support generally affirmed our executive compensation approach and provided assurance the program was reasonable and aligned with stockholder expectations. At our 2020 annual meeting of stockholders, 86% of the votes cast were in favor of our executive compensation program. The Committee took this lower level of support into consideration when making decisions in 2021.

Role of Independent Compensation Consultant

As a best practice, the Committee periodically evaluates its selection of an independent compensation consultant. For 2020 executive compensation decisions, the Committee 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. 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 our 2020 compensation programs, the Consultant provided each of these services. The Committee conducted a specific review of its relationship with the Consultant and determined that the Consultant’s 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.

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

 

 

  

 

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Executive Compensation

 

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 Committee’s 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 Consultant’s 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 base salary and target annual cash compensation within a range of +/- 15%, and target total direct compensation within a range of +/- 20%, of median as reported in the Consultant’s market compensation studies to be competitive.

For 2020 compensation decisions, the Consultant recommended updates to our prior-year compensation peer group. The peer group used to inform 2020 target compensation opportunities included 16 companies in the health care facilities, healthcare services, 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 2020, the Committee determined to replace LifePoint Hospitals, Inc., Magellan Health, Inc., and Wyndham Destinations with Chemed Corporation, LHC Group, Inc., Norwegian Cruise Line Holdings Ltd., and Wyndham Hotels & Resorts, Inc. 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.

 

    

 

2020 Peer Group

    
     
Acadia Healthcare Company, Inc.    Encompass Health Corporation    Select Medical Holdings Corporation
Amedysis, Inc.    Hyatt Hotels Corporation    The Ensign Group, Inc.
Bloomin’ Brands, Inc.    LHC Group, Inc.    Universal Health Services, Inc.
Chemed Corporation    National Healthcare Corp.    Welltower Inc.
Community Health Systems, Inc.    Norwegian Cruise Line Holdings Ltd. Quest Diagnostics Incorporated    Wyndham Hotels & Resorts, Inc.

 

 

 

2020 Compensation Decisions (Pre-Pandemic)

Summary of 2020 Compensation Program

When making annual decisions for 2020, the Committee considered the Consultant’s market compensation study based on the revised peer group adopted by the Committee for 2020, our recent overall performance and 2020 business plan, our performance objectives under our incentive plans, and the responsibilities and individual performance of each of our named executive officers. The Committee made its annual compensation decisions in early February 2020, a month prior to the United States’ declaring a national emergency for the COVID-19 pandemic. See “Pandemic-Related Decisions” below for a summary of the impact of the pandemic on our executive compensation program and the actions taken by the Committee in response.

 

 

 

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Compensation Discussion and Analysis

 

Following conclusion of this review, the Committee found that Ms. Baier’s target total direct compensation was slightly below the market median, and that Messrs. Swain’s and White’s base salaries, target total cash compensation, target long-term equity awards, and target total direct compensation were below or at the low end of the median market ranges. 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 to Messrs. Swain’s and White’s base salaries and target long-term equity awards, the elements of Messrs. Swain’s and White’s compensation fell within the market ranges shown in the market compensation study, but continued to be below the market medians.

Compensation decisions for Ms. Kent were made in connection with her joining the Company as Executive Vice President and President of Senior Living effective January 6, 2020. The Committee reviewed the Consultant’s market compensation study when setting her compensation. Her offer letter provided an annual base salary of $515,000, a target annual incentive opportunity of 100% of salary earned, and target long-term equity awards of $1,000,000. In addition, the offer letter provided for an onboarding grant of time-based equity of $150,000 and relocation assistance in accordance with the Company’s policy.

The table below sets forth the target total direct compensation (base salary, target annual incentive opportunity, and grant value of target annual long-term incentive awards) for the named executive officers. The table reflects Ms. Kent’s annualized base salary and excludes the onboarding award of time-based RSUs with a grant value of approximately $150,000 as set forth in her offer letter. The table also 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 the Bonus column of the Summary Compensation Table for discretionary cash payments for extraordinary performance in fiscal 2020 related to the COVID-19 pandemic.

 

    2020 Base
Salary
    Change v.
2019
    2020 Target
Annual
Incentive
Opportunity
    Change v.
2019
    2020 Grant
Value of
Long-Term
Incentive
Awards (1)
    Change v.
2019
    2020 Target
Total Direct
Compensation
    Change v.
2019
 

Ms. Baier

 

 

$938,000

 

 

 

3%

 

 

 

135%

 

 

 

–%

 

 

 

$4,900,002

 

 

 

3%

 

 

 

$7,104,302

 

 

 

3%

 

Mr. Swain

 

 

$575,000

 

 

 

12%

 

 

 

100%

 

 

 

–%

 

 

 

$1,700,005

 

 

 

31%

 

 

 

$2,850,005

 

 

 

22%

 

Ms. Kent

 

 

$515,000

 

 

 

N/A

 

 

 

100%

 

 

 

N/A

 

 

 

$1,000,004

 

 

 

N/A

 

 

 

$2,030,004

 

 

N/A

 

Ms. Patchett

 

 

$467,750

 

 

 

–%

 

 

 

100%

 

 

 

–%

 

 

 

$   900,001

 

 

 

–%

 

 

 

$1,835,501

 

 

 

–%

 

Mr. White

 

 

$425,000

 

 

 

7%

 

 

 

70%

 

 

 

–%

 

 

 

$   550,000

 

 

 

22%

 

 

 

$1,272,500

 

 

 

13%

 

 

(1)

Represents the grant value of time- and performance-based RSUs (i.e., number of units granted at target performance multiplied by the stock price on the date of grant). The aggregate ASC 718 grant date fair values of such awards were approximately 0.8% greater than the grant values included in the table due to the ASC 718 valuation of the relative TSR component of the performance-based RSUs being 6.4% greater than the grant value.

Annual Incentive Plan

The named executive officers were eligible to participate in our 2020 annual incentive plan established by the Committee. Cash amounts payable under the plan were to be determined by the Committee following conclusion of the 2020 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, and the aggregate maximum payout was 180% as a percentage of the target opportunity.

 

 

  

 

2021 PROXY STATEMENT

 

 

 

 

 

        27


 

Executive Compensation

 

For 2020, 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 2020 are shown in the table below. The weighting of each company financial objective and the aggregate strategic objectives were consistent with the prior year’s weighting. In order to emphasize the importance of meeting target-level move-ins at our consolidated comparable communities, the 2020 annual incentive plan included a move-in multiplier that would have increased the overall strategic objectives payout by between 10% and 50% had 2020 move-in performance been 1% to 5% in excess of the 2020 targeted number of move-ins. The target performance levels of the objectives were generally reflective of our 2020 budget approved by the Board in early February 2020, a month prior to the United States’ declaring a national emergency for the COVID-19 pandemic. Performance below the threshold level would result in no payout for the performance objective, and payout percentages were to be interpolated for performance between the steps shown in the table below.

 

 

 

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Compensation Discussion and Analysis

 

   

 

Measure

 

 

 

Weighting

 

   

 

Description and Link to Strategy and Business Plan

 

               
           

Financial Objectives

 

Resident Fee Revenue

    10%     Resident fee revenue was defined as our 2020 consolidated resident fee revenue, which excludes management fee revenue and reimbursed costs incurred on behalf of managed communities. This measure was intended to focus management on improving top-line revenue of our seniors housing portfolio and Health Care Services segment. The Board and management use this measure in the budgeting process and when evaluating our results.   Level     Payout      

Target /Actual

($ in MM)

 

 

  Maximum     200%     $ 3,355  
  Target     100%     $ 3,226  
  Threshold     25%     $ 3,129  
  Actual     0%     $ 2,893  
         
         
                                   
 

Facility Operating Income (“FOI”) (1)

    40%     FOI was defined as our 2020 consolidated resident fee revenue less facility operating expense. FOI reflects the net result of our revenue and the facility operating expenses of our consolidated senior housing portfolio and Health Care Services segment, which are the largest drivers of our financial results and which management has the ability to impact on a day-to-day basis. The Board and management use this measure in the budgeting process and when evaluating our results.   Level     Payout      

Target / Actual

($ in MM)

 

 

  Maximum     200%     $ 968  
  Target     100%     $ 896  
  Threshold     25%     $ 842  
  Actual     0%     $ 551  
     
     
                                   
 

Adjusted Free Cash Flow (“AFCF”) (1)

    10%     AFCF reflects the cash generated through our operations after non-development capital expenditures and certain other adjustments and included management agreement termination fees received in 2020. The Board and management use this measure in the budgeting process and when evaluating our ability to service indebtedness or engage in share repurchases, and to make additional capital investments. In addition, AFCF was used in our February 2020 forward-looking guidance and in our quarterly reporting.   Level     Payout      

Target / Actual

($ in MM)

 

 

  Maximum     200%     $ 117  
  Target     100%     $ 87  
  Threshold     25%     $ 62  
  Actual     0%     $ 24  
         
         
         
           
                                     

Strategic Objectives (2)

 

Move-Ins

    7.5%     Move-ins reflected the number of new residents at our comparable consolidated community portfolio for 2020, and move-outs reflected the percentage of our residents who moved out of our comparable consolidated community portfolio for controllable reasons. Our Board and management team focus on such metrics, and the objectives reinforced our 2020 strategy to win locally and leverage scale effectively through maintaining and improving the quality of our communities and aligning our sales, marketing, and operations teams to drive top line performance. Maintaining 2019 performance for the move-outs metric was set as the 2020 target in light of outstanding performance in the prior two years.   Level     Payout       Target / Actual  
      Target/Max      100%       4.4% growth  
      Threshold     25%      

Maintaining
2019
performance


 
      Actual     0%      

Worse than
2019
performance
 

 
         
         
 

Move-Outs

    7.5%     Level     Payout       Target / Actual  
      Actual     100%      

Better than
2019
performance
 
 
 
      Target/Max     100%      

Maintaining
2019
performance
 
 
 
      Threshold     25%      

3% increase
from 2019
performance
 
 
 
                                   
           
 

Quality Measure

    10%     Management determined to temporarily suspend scoring of its community quality assurance program in the manner contemplated by the annual plan due to community access restrictions imposed as a result of the COVID-19 pandemic. The objective would have been measured by our meeting or exceeding an average targeted score under the program.   Level     Payout       Target / Actual  
  Target/Max     100%       95.0
  Threshold     50%       94.0
  Actual     0%       N/A  
                       
         

 

 

  

 

2021 PROXY STATEMENT

 

 

 

 

 

        29


 

Executive Compensation

 

   

 

Measure

 

 

 

Weighting

 

   

 

Description and Link to Strategy and Business Plan

 

               
           
 

Community Key Leader Retention

    5%     Brookdale’s culture is based on servant leadership, and we believe engaged associates lead to an enhanced resident experience and lower turnover, leading to improved operations. The community key leader retention objective applied to the three key positions at our consolidated comparable communities (executive directors, sales directors, and health and wellness/nursing directors). The community associate turnover objective applied to the other positions at our consolidated comparable communities. The corporate associate objective applied to our non-community-level associates. Maintaining 2019 performance for the corporate retention metric was set as the 2020 target in light of substantial improvement achieved in 2019.   Level     Payout       Target / Actual  
  Target/Max     100%      

2% improvement
to 2019
performance
 
 
 
  Threshold     25%      
Maintaining 2019
performance
 
 
  Actual     0%      
Worse than 2019
performance
 
 
         
         
 

Community Associate Turnover

    5%     Level     Payout       Target / Actual  
    Target/Max     100%      

2% improvement
to 2019
performance
 
 
 
    Threshold     25%      
Maintaining 2019
performance
 
 
      Actual     0%      
Worse than 2019
performance
 
 
         
         
 

Corporate Associate Retention

    5%     Level     Payout       Target / Actual  
    Actual     100%      
Better than
2019 performance
 
 
    Target/Max     100%      
Maintaining 2019
performance
 
 
                    Threshold     25%      

3% decline from
2019
performance
 
 
 

 

(1)

FOI and AFCF are financial measures that are not calculated in accordance with generally accepted accounting principles (“GAAP”). Appendix A to this proxy statement shows how we calculated FOI and AFCF, 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 2020 move-in performance been 1% to 5% in excess of the 2020 targeted number of move-ins.

Long-Term Incentive Awards

For the 2020 compensation program, the Committee used a 50/50 grant value mix of time- and performance-based full value awards, consistent with the prior year program. The Committee determined to utilize RSUs 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. Starting with the 2020 awards, “double-trigger” acceleration of vesting applies in connection with a change in control. That is, vesting will only accelerate in connection with a change in control if either 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, or the participant experiences a qualifying termination within 12 months after the change in control. Each RSU is payable in the form of one share of our common stock upon vesting. The agreements associated with the 2020 awards 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”). To the extent we declare dividends on our shares of common stock, the RSUs awarded will accrue cash equivalents to be paid only to the extent the underlying RSUs ultimately vest.

Time-Based RSUs. The annual awards of time-based RSUs are eligible to vest ratably in four annual installments beginning February 27, 2021, subject to continued employment. The onboarding award of time-based RSUs to Ms. Kent is eligible to vest ratably in three annual installments beginning February 27, 2021, subject to continued employment.

 

 

 

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Compensation Discussion and Analysis

 

Performance-Based RSUs. Seventy-five percent of the performance-based RSUs were eligible to vest on February 27, 2023 and twenty-five percent are eligible to vest on February 27, 2024, 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 for performance between the levels. The weighting, performance measures, and performance targets for the performance-based restricted shares are outlined below. Ms. Baier’s award agreement further provided that in no event would the aggregate number of shares issued pursuant to the 2020 time-based and performance-based award agreements exceed 800,000 shares. As described in “Pandemic-Related Decisions” below, the named executive officers voluntarily agreed to forfeit the first tranche of such performance-based RSUs effective February 22, 2021 in order to be eligible to receive a discretionary cash payment for extraordinary performance in fiscal 2020 related to the COVID-19 pandemic.

Executive Compensation

 

Performance Measure

  Weighting    

Description and Link to Strategy

and Business Plan

  Vesting
Date
  Performance Targets  

3-Year CAGR of Same Community RevPAR for 2022 compared to 2019 (1)

    75%     RevPAR is a key performance metric utilized by the Board and management to measure both occupancy and rate performance on a monthly basis. This objective focuses our management on delivering long-term top-line growth through increasing occupancy while maintaining rate discipline.   2/27/2023   Level   % of Target
Shares
Vesting
   



3-Year
CAGR of
Same
Community
RevPAR




 
      Maximum   125%     4.5%  
      Target   100%     4.0%  
      Threshold   25%     2.0%  
                   

 

   

 

   

 

 

 

 

 

       

 

 

 

 

 

 

 

3-Year Relative TSR Compared to S&P Midcap 400 Index Companies (2)

    25%    

The relative total shareholder return (“TSR”) objective aligns our management’s priorities with those of our stockholders to establish and achieve long-term goals designed to increase the market value of our common stock relative to the constituent companies of a broad-based comparable index of companies.

 

  2/27/2024   Level   % of Target
Shares
Vesting
   
Relative
TSR Rank

 
      Maximum   150%     75th %ile  
      Target   100%     50th %ile  
              Threshold   50%     25th %ile  

 

(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 Company’s performance, principles of revenue recognition would be consistently applied when calculating same community RevPAR and for 2019 would exclude the additional resident fee revenue recognized as a result of the application of the new lease accounting standard under ASC 842.

 

(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, 2020 and ending December 31, 2022, assuming reinvestment of dividends or distributions. The award agreement provides that no additional RSUs beyond the target number of RSUs will be issued if our compound annual TSR is negative for the performance period.

 

 

  

 

2021 PROXY STATEMENT

 

 

 

 

 

        31


 

Executive Compensation

 

 

 

2020 Compensation Results and Pandemic-Related Decisions

Summary of Compensation Results

The table below sets forth the amount of compensation earned for 2020 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
    Pandemic-Related
Performance
Compensation
Earned
    Total
Compensation
Earned
 

Ms. Baier

  $  938,000     $ 158,288     $  1,184,016     $ 1,044,698     $ 3,325,002  

Mr. Swain

  $  575,000     $  71,875     $  185,887     $ 474,375     $  1,307,137  

Ms. Kent

  $ 509,103     $  63,638     $     $ 287,462     $  860,203  

Ms. Patchett

  $  467,750     $  58,469     $ 273,147     $  379,739     $ 1,179,105  

Mr. White

  $  425,000     $  37,188     $  113,409     $ 245,438     $ 821,035  

Annual Incentive Plan Results

A summary of the achievement and payment to our named executive officers under the 2020 annual incentive plan is provided below. See “2020 Compensation Decisions–Annual 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

   0%    $             –         31.3%    $  158,288         12.5%    $  158,288  

Mr. Swain

   $         $ 71,875         $ 71,875  

Ms. Kent

   $         $  63,638         $  63,638  

Ms. Patchett

   $         $  58,469         $  58,469  

Mr. White

   $               $  37,188               $  37,188  

 

 

 

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Compensation Discussion and Analysis

 

Long-Term Incentive Awards Results

Summary of Vesting and Forfeitures

During 2020, the named executive officers realized the compensation shown in the table below with respect to vesting of restricted shares granted prior to 2020. 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 2016–2019
     Vesting of Performance-Based
Restricted Shares  Granted in
2016(1)
            Total Vesting of Restricted
Shares in 2020
 
     No. of Shares      Value      No. of Shares      Value            No. of Shares      Value  

Ms. Baier

     172,352      $ 1,101,329        12,940      $ 82,687                185,292      $ 1,184,016  

Mr. Swain

     33,986      $  185,887        –        $ –                  33,986      $ 185,887  

Ms. Patchett

     36,664      $  234,283        6,082      $  38,864                42,746      $  273,147  

Mr. White

     17,827      $  108,699        737      $ 4,709                18,564      $ 113,409  

 

(1)

Details regarding our performance relative to the applicable performance targets are provided in the section below.

Results of Performance-Based Restricted Shares Eligible to Vest in 2020

During 2020, performance-based restricted shares awarded in 2016 and 2017 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, 2020 based on our actual results. 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 for performance between the steps shown in the table below.

 

 Award
 Year
 

Performance

Goal

  % of Shares
Eligible to Vest
  Targets   Actual
Results
  Percent
that
Vested

 

 2016

 

 

2019 Return on Investment (“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)

 

³12%

8%

  13.6%   100%

 

 2017

  3-Year CAGR of Combined Adjusted Free Cash Flow comparing 2019 results versus a 2016 base year (2)  

100% (Target/Max)

20% (Threshold)

 

³23.1%

3.8%

  <0%   0% (3)

 

(1)

Program Max is our development capital expenditures initiative through which we expand, renovate, reposition, or redevelop selected existing senior living communities where economically advantageous.

 

(2)

Combined Adjusted Free Cash Flow was defined as our Adjusted Free Cash Flow and our proportionate share of Adjusted Free Cash Flow of unconsolidated ventures as reported and defined in our public releases and/or filings, excluding transaction, transaction-related and severance costs and federal income taxes to the extent we had become a federal income taxpayer.

 

(3)

With respect to the 2017 awards eligible to vest on February 27, 2020, the following number of shares were forfeited as a result of failure to achieve the threshold level of performance: Ms. Baier–37,904 shares; Ms. Patchett–17,814 shares; and Mr. White–2,158 shares.

 

 

  

 

2021 PROXY STATEMENT

 

 

 

 

 

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Executive Compensation

 

Pandemic-Related Decisions

The Committee evaluated our executive compensation program in late 2020 and early 2021. The program’s performance measures and targets had been selected and set prior to the COVID-19 pandemic’s impacting the United States. Early in the pandemic, the U.S. Centers for Disease Control and Prevention (the “CDC”) confirmed seniors face disproportionately higher risk of adverse outcomes from COVID-19, with seniors 85 and older at the highest risk. This placed Brookdale’s approximately 700 communities and our residents, patients, and associates at the center of the fight against COVID-19 during 2020. Our management team took decisive actions to dedicate our business’s efforts and energy first and foremost on maintaining the health and wellbeing of our residents, patients, and associates, to develop and execute on plans to ensure that we had the financial resources to survive the pandemic as an organization, and to identify opportunities for our recovery from the pandemic. The nature of the

pandemic’s effect on our business, management’s extraordinary and successful response, and the considerations and actions taken by the Committee are summarized below.

Drastic Action Required Due to High Risk among Seniors

The health and wellbeing of our residents, patients, and associates is and has been our highest priority. The high risks posed by COVID-19 on the nearly 100,000 residents who lived in our communities during 2020 called on us to take drastic actions to fight the disease. The average age of our residents is over 87, and many of our residents, particularly in our assisted living and memory care communities, are frail and/or suffer from cognitive impairment. According to the CDC, the risk for severe illness and other adverse outcomes from COVID-19 significantly increases with age, with the greatest risk for severe illness among those aged 85 and older. Particularly in the first three months of the pandemic, COVID-19 incidence in the United States was highest among seniors aged 80 or more. Since the pandemic began, 80% of COVID-19 deaths in the United States have been in adults aged 65 or older.

Impact to Our Business

To help protect our residents, patients, and associates from contracting COVID-19, management took drastic actions that fundamentally changed the environment of our communities and our business model during 2020. Those actions included closing our communities to visitors and prospective residents, and in some cases restricting new resident move-ins. The continuity of our business is predicated on moving in roughly 50% of our occupied units each year to maintain stable occupancy, given our residents’ average length of stay. Therefore, the actions we took resulted in a sharp decrease in our occupancy and revenue.

Specifically, we took the following actions to help protect our residents and associates living and working on the front lines:

 

 

We enhanced our infection prevention and control protocols based on requirements and guidance of federal, state, and local governments and agencies, including the CDC, U.S. Centers for Medicare & Medicaid Services (“CMS”), and other leading health authorities. We enhanced and reinforced training our associates in such protocols and throughout 2020 actively monitored frequently changing government requirements and guidance and adapted our policies, procedures, and response efforts to meet or exceed those requirements and guidance.

 

 

Upon confirmation of positive COVID-19 exposure at a community, we took actions intended to minimize further exposure, including associates’ adhering to personal protection protocols, isolating residents or finding placement in an alternate care setting to best address their care needs, and in some cases, restricting new resident admissions, as directed by local health authorities.

 

 

In March 2020 we began restricting visitors at all our communities to essential healthcare personnel and certain compassionate care situations, screening associates and permitted visitors, suspending group outings, modifying communal dining and programming to comply with social distancing guidelines and, in most cases, implementing in-room only dining and activities programming, requesting that residents refrain from leaving the community unless medically necessary, and requiring new residents and residents returning from a hospital or nursing home to isolate in their apartment for fourteen days. We began easing restrictions on a community-by-community

 

 

 

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Compensation Discussion and Analysis

 

  basis in July 2020 where regulatory requirements and guidance allowed, which easing may have included permitting outdoor, and in some cases, indoor visits with families, reduced capacity or socially distanced communal dining, limited communal activities programming, and in-person prospective resident visits.

In addition, the demand for senior living communities and the typical sales process were seriously disrupted by several factors, including stay-at-home notices, restrictions on move-ins, and the significant restrictions on resident activities, including visits with family members, which were necessary to help protect residents. Data from the National Investment Center for Seniors Housing & Care (NIC) shows that our industry’s occupancy decreased for three consecutive quarters ending December 31, 2020, with nearly all markets falling to record low occupancy by the fourth quarter of 2020. Similarly, we experienced a year-over-year decrease in monthly move-ins of our same community portfolio each consecutive month of the three quarters ended December 31, 2020. Our consolidated senior housing portfolio’s weighted average occupancy declined in each month of the pandemic, from 82.7% in March 2020 to 71.5% in December 2020. Both of these trends continued through February 2021.

The heavy impact on move-ins and our occupancy outlined above translated to an estimated $281 million of lost resident fee revenue based on our pre-pandemic expectations for 2020. Our same community RevPAR declined each quarter on a year-over-year basis, including 11.1% for the fourth quarter of 2020. We also incurred $126 million of direct and incremental pandemic-related operating expense during the year, including costs for acquisition of additional personal protective equipment (“PPE”), medical equipment, and cleaning and disposable food service supplies, enhanced cleaning and environmental sanitation, increased employee-related costs, including labor, workers compensation, and health plan expense, increased expense for general liability claims, and COVID-19 testing of residents and associates where not otherwise covered by government payor or third-party insurance sources.

Key Initiatives Taken by Our Management

The high risks posed by COVID-19, its impact on our operations and sales process, and its financial impact created a dire situation for our company. Our management identified and appropriately assessed the substantial risks associated with COVID-19 and took decisive actions to dedicate our business’s efforts and energy first and foremost on maintaining the health and wellbeing of our residents, patients, and associates, to develop and execute on plans to ensure that we had the financial resources to survive the pandemic as an organization, and to identify opportunities for our recovery from the pandemic. Most importantly, we took extraordinary actions to help protect our residents and associates living and working on the front lines and to ensure that our communities would receive vaccine access as quickly as possible. Also of critical importance, our leadership team re-invented our sales model and took actions to protect and preserve our liquidity and future financial prospects. The Board believes management’s efforts helped save a substantial number of lives and positioned us to weather the pandemic and emerge a stronger company.

Protecting Our Residents and Associates

Management undertook several extraordinary projects to help protect our residents, patients, and associates from contracting COVID-19 at our communities on the front lines of the pandemic.

 

 

Emergency Command Center – As an agile learning organization, in February 2020, we opened a cross-functional emergency command center at our headquarters office, which remained in operation throughout the year as the vast majority of our corporate associates worked from home. The command center was staffed 24 hours a day with operational and clinical leadership who served as mission control to lead our pandemic response and to ensure that we took appropriate actions throughout the organization to align with our top priority of maintaining the health and wellbeing of our residents, patients, and associates. Throughout the pandemic, the command center prioritized obtaining rapidly-developing intelligence, including requirements and guidance of the CDC, CMS, state, and local governments and agencies, and other leading health authorities, and engaged in scenario planning and analysis. Based on its learning, analysis, and assimilation of relevant information, the command center developed, updated, and implemented protocols throughout the year to address the virus at an operational level in our approximately 700 communities. The command center also monitored COVID-19 cases among our communities and developed and implemented a framework for determining when to ease restrictions

 

 

  

 

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Executive Compensation

 

  at each of our communities based on several criteria, including regulatory requirements and guidance, completion of baseline testing at the community, and the presence of current confirmed positive COVID-19 cases. We also led the industry by publishing a COVID-19 response toolkit early in the pandemic to share our emerging best practices with other senior living providers and the public.

 

 

Acquisition of Personal Protective Equipment – Our associates’ access to quality personal protective equipment (PPE) was necessary to help ensure their safety and to help prevent the spread of the virus while they served on the front-lines in our communities. Sourcing sufficient volume of quality, genuine PPE was one of the biggest challenges faced by us and our industry early in the pandemic as public and private supply was diverted to first responders and hospitals. Our typical PPE suppliers could not fulfill even our typical requirements, and federal and state resources were limited for our industry. In addition, counterfeit and low-quality PPE flooded the market. Management innovated, leading expansive procurement efforts to screen hundreds of vendors, develop a new supply chain, and ensure secure delivery of quality, genuine PPE to our communities. By June 2020 we had sourced more than 14 million surgical masks, three million N-95 masks, and one million disposable gowns from nearly 50 vendors. Due to the success of our proactive PPE acquisition initiative, we were able to supply appropriate PPE to our community associates throughout the year. By contrast, we believe many other senior housing operators could not source appropriate PPE for several months.

 

 

Resident and Associate Testing – As the pandemic progressed, it became clear that asymptomatic and pre-symptomatic positive individuals could spread the virus, which presented substantial challenges to infection control. As we learned of this, management went above and beyond regulatory requirements by proactively commencing a resident and associate testing program in April 2020 to help us to identify positive individuals, including asymptomatic and pre-symptomatic positive individuals, better understand how our infection protocols were working, and minimize our residents’ further exposure to positive individuals. In the face of COVID-19 testing supply constraints, management also advocated extensively to federal, state, and local leaders for priority access to COVID-19 test kits, including rapid antigen tests, and prioritized turnaround times for lab-based tests. By July 2020 we had completed baseline testing at all of our communities. We continued testing throughout the year, accumulating more than 270,000 test results by year end.

 

 

Vaccine Advocacy and Prioritization – As positive results of early clinical trials for the Moderna and Pfizer vaccines became available, it became clear that vaccinating seniors and staff living and working in senior living communities as early as possible would help save lives and could dramatically reduce our residents’ and associates’ exposure to the virus. We also knew that vaccine roll out to our communities would be a significant step to recovering from the pandemic as it could enable us to welcome more new residents, increase healthcare referrals, and make our communities more attractive to prospects. Management undertook extensive advocacy efforts to CDC leaders and other federal and state government agencies to ensure that our residents and associates would be prioritized. Our leadership also worked with CVS Health Corporation regarding the design and implementation of the Pharmacy Partnership for Long-Term Care Program offered through the CDC. Ultimately, all of our communities’ residents and associates were prioritized for early vaccine administration. We believe we led the industry in our vaccine roll-out, and that our efforts saved lives. Our leadership and clinical teams worked extensively to prepare for and host CVS clinics as quickly as possible among our approximately 700 communities. This monumental effort included extensive planning, gathering insurance information, obtaining consents, scheduling appointments, holding educational sessions with residents, families, and associates, detailed coordination of traffic flow, and staffing observation areas. We hosted our first clinics on December 18, 2020 and by January 22, 2021 had hosted over 500 community vaccine clinics, which we believe was a 2.5x faster roll out than our industry’s average. Our early planning work was successful, as we had completed at least three vaccine clinics at all of our communities by April 9, 2021. Through April 23, 2021, our resident vaccine acceptance rate was 93%, and our COVID-19 positive resident caseload had decreased by 97% since the peak in mid-December 2020.

Protecting and Strengthening Our Business

At the outset of the pandemic and throughout the year, management completed scenario planning to assess the financial hardship that our business could endure due to the pandemic’s disproportionate and immense impact on

 

 

 

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Compensation Discussion and Analysis

 

seniors. Management urgently acted to develop and execute on plans to ensure we had resources available to fund pandemic-related expenses necessary to help keep our residents, patients, and associates safe, and to mitigate the impacts of declining revenue. Management also developed and executed on a strategy to weather the pandemic and improve our operational and financial foundation for the recovery phase of the business. We believe that without management’s success in the areas identified below, our ability to continue as a going concern would have been jeopardized.

 

 

Redesigning Sales Process — Despite reduced demand for senior housing and challenges to the sales process due to stay-at-home notices and restrictions on in-person visits (including new resident tours), management took charge to ensure that our sales team could meet the needs of prospective residents and their families. Early in the pandemic we reinvented our sales process to include virtual tours, video engagement, and outdoor prospective resident meetings, enhanced and adapted our marketing programs to address the social distancing environment, and sought to strengthen our relationships with referral sources. These efforts allowed us to continue to move residents into our communities where permitted. Through adversity, we believe the virtual sales process provides the opportunity for us to complement our traditional in-person sales process even after the pandemic subsides.

 

 

Cost Mitigation — We incurred $126 million of direct and incremental pandemic-related operating expense during the year, which was necessary to help protect our residents, patients, and associates. Management worked diligently to identify areas for expense control and discipline to ensure we had resources available to fund these critical pandemic-related expenses and to mitigate the impacts of declining revenue, without impacting the quality of care we provide to our residents. We did not resort to lay-offs in our seniors housing business, as our associates’ efforts were critical to serve in our communities during the pandemic. Compared to the prior year, in 2020 we reduced non-pandemic related facility operating expense approximately $49 million in our same community portfolio and health care services segment by actively monitoring and matching our cost structure to reflect decreased occupancy and census. We reduced general and administrative expense, excluding transaction costs, $13.8 million, or 7.4%, through reduced travel-related expenses and lower headcount achieved through disciplined backfilling of corporate roles. We also reduced our cash facility lease payments by $69 million for 2020, excluding a one-time cash lease payment related to our lease restructuring with Ventas, Inc. and generated year-over-year interest expense savings of $37 million, primarily as a result of the transactions described below. We identified and delayed or canceled a number of elective capital expenditure projects where possible, resulting in an approximate $67 million reduction to our pre-pandemic full-year 2020 capital expenditure plans. Management’s success in reducing non-essential expenses allowed us to make the necessary investments to fulfill our top priority of maintaining the health and wellbeing of our residents, patients, and associates, and enhanced our liquidity.

 

 

Financing Transactions — Management focused our finance team on ensuring we had sufficient liquidity to weather the significant revenue losses and increased expense attributable to the pandemic. We successfully took extensive actions to preserve and enhance our liquidity and ensure our debt maturities through 2021 were refinanced or satisfied during 2020. To bolster our available cash, at the outset of the pandemic we drew the full available balance on our secured credit facility of $166 million and planned to refinance the balance with long-term mortgage debt. In late March 2020, we completed $149 million of mortgage financing on 18 communities, which extended the prior maturities ten years and refinanced a majority of our 2020 maturities. In August 2020, we terminated and repaid the outstanding balance on our credit facility by completing $267 million of mortgage financing on 16 communities, most of which secured the former facility. In September 2020, we completed $221 million of mortgage financing on 27 communities, which extended the prior maturities nine to ten years. Through these financing transactions, together with others completed during 2020, management successfully refinanced or satisfied substantially all of our maturities through 2021 at favorable rates despite declining performance of the underlying communities and the pressures on credit markets created by the pandemic. We concluded 2020 with $553 million of cash, cash equivalents, and marketable securities, which we believe will help us weather the rest of the pandemic and position us positively for the recovery phase.

 

 

  

 

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Executive Compensation

 

 

Capital Transactions — During 2020, management worked diligently to complete several transactions which unlocked significant value and enhanced our liquidity at a critical time. In January 2020, we closed the sale of our 51% interest in our joint venture with Healthpeak Properties, Inc., which held 14 entry fee continuing care retirement communities (CCRCs), acquired 18 formerly leased communities from Healthpeak, and amended and restated our master lease for 24 remaining leased communities. Our net proceeds from the sale were $283 million, and we obtained a negotiated $100 million cash management agreement termination fee. We used a portion of the proceeds, along with mortgage financings, to acquire the 18 communities. These transactions added to our liquidity and reduced our cash lease expense just prior to the pandemic and were crucial components of our strategy to reduce our lease exposure and the complexity of our business to focus on our core assisted living, memory care, and independent living offerings. In July 2020, we entered into agreements with Ventas, Inc., our largest lessor, to restructure our lease arrangements for 120 communities. Among other things, the transaction reduced our initial annual minimum rent to $100 million, representing a reduction of approximately $86 million over the twelve months ending June 30, 2021, and removed the prior requirements that we satisfy financial covenants and maintain a security deposit with Ventas. We began realizing the reduction to cash rent expense during the third quarter of 2020. The restructuring reduced our cash lease expense 46% over the lease term, or $500 million over five and one-half years, which will prove crucial as we recover from the pandemic.

Committee’s Evaluation and Decisions

During late 2020 and early 2021, the Committee assessed our executive compensation program in the context of the totality of the circumstances resulting from the pandemic and the Committee’s philosophy to emphasize pay for performance, align our executives’ long-term interests with those of our stockholders, and retain key executives. It considered the extraordinary efforts of management to successfully detect, assess, and effectively respond to the high risks associated with the pandemic, to lead our organization in its primary mission to maintain the health and wellbeing of our residents, patients, and associates, to ensure that we had the financial resources to survive the pandemic, and to lead our industry in response efforts and advocacy. The Committee also considered the pandemic’s continued pressure on our stock price and the impact to investors, and ensuring fair pay outcomes.

The Committee identified several areas of our executive compensation program that were most impacted by the pandemic and the significant changes to our business, including the following.

 

 

2020 Annual Incentive Plan. The performance targets contained in the 2020 annual incentive plan were set prior to the pandemic. As outlined above, the pandemic had dramatic impacts on our pre-pandemic budgeted revenue, facility operating expense, and move-ins, and the performance targets had become obsolete early in the year. The Committee also considered the fact that it had exercised discretion with respect to the non-executive participants in the 2020 annual incentive plan, including guaranteeing certain payout levels to non-executive associates for the first two quarters of 2020 to promote associate retention and appropriately reward them for their efforts. The Committee determined that our actual achievement of 12.5% of target under the 2020 annual incentive plan was not reflective of the extraordinary efforts and successes of the named executive officers during 2020 and desired to reward those efforts.

 

 

Outstanding Performance-Based Equity. The Committee considered the pandemic’s impact to the performance measures of the outstanding awards of performance-based equity granted in 2017 through 2020. In this evaluation, the Committee took into account the effect on our equity plan of the continued pressure of the pandemic on our stock price. Due to our lower stock price, the Committee desired to reduce the overhang of awards outstanding under our 2014 Omnibus Incentive Plan and to create additional availability of shares for issuance pursuant to future awards (i.e., to extend the lifespan of the shares available under the plan). The table below sets forth details regarding the outstanding performance-based equity and the Committee’s considerations and determinations.

 

 

 

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Compensation Discussion and Analysis

 

Award

Year

  Performance
Goal
  Vesting
Date
  % of Award
Eligible to Vest
  Targets                 Shares at Target     Considerations and
Determinations of the
Committee
 

2017

  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 (1)   2/27/2021   100% (Target/Max)
60%

20% (Threshold)

  ³ 11.0%
9.0%
8.0%
      Ms. Baier     12,635     The Committee took into advisement that our ROI performance was on track to exceed the target level of performance prior to the pandemic and that our actual ROI performance adjusted to include estimated lost revenue and exclude incremental expense due to COVID-19 was 13.8%, exceeding the target level of performance for 2020. The Committee exercised discretion to approve vesting on February 27, 2021 at target.
  Ms. Patchett     5,939  
 

Mr. White

 

   

 

720

 

 

 

 

2018

  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 (2)   2/27/2021   100% (Target/Max)
75%
50% (Threshold)
  ³ 23.91%
20.17%
16.20%
      Ms. Baier     207,469     The Committee determined not to modify this award since our pre-pandemic stock price performance did not suggest that the award would vest. The restricted shares forfeited on February 27, 2021 based on our negative absolute TSR performance for the performance period.
 

Mr. Swain

 

   

 

53,248

 

 

 

 

 

  

 

2021 PROXY STATEMENT

 

 

 

 

 

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Executive Compensation

 

Award

Year

  Performance
Goal
  Vesting
Date
  % of Award
Eligible to Vest
  Targets                 Shares at Target     Considerations and
Determinations of the
Committee
 

 

2019

  3-Year CAGR of Same Community RevPAR for 2021 compared to 2018 (3)   2/27/2022   125% (Max)
100% (Target)
25% (Threshold)
  ³ 4.0%
3.5%
1.5%
      Ms. Baier     226,622     The Committee took into advisement that our same-community RevPAR performance for the full-year 2019 (pre-pandemic) was tracking towards approximately 42% achievement. It also considered that same community RevPAR declined 5.1% during the second year of the performance period, including 11.1% for the fourth quarter of 2020 on a year-over-year basis, which would have a pronounced cumulative impact for the entire performance period. In order to reduce the overhang and to increase the number of shares available for future awards under our 2014 Omnibus Incentive Plan, the Committee determined to request that executives voluntarily forfeit such awards in order to be eligible to receive a discretionary cash bonus for extraordinary performance during the pandemic, as described further below.
  Mr. Swain     62,023  
  Ms. Patchett     42,939  
 

Mr. White

 

    21,470  
 
    3-Year Relative TSR Compared to S&P Midcap 400 Index Companies (4)   2/27/2023   150% (Max)
100% (Target)
50% (Threshold)
  ³  75th %ile
50th %ile
25th %ile
      Ms. Baier     75,541     The Committee believed the awards continued to align our executives’ interests with our stockholders as we recover from the pandemic. The Committee determined not to modify such awards.
  Mr. Swain     20,674  
  Ms. Patchett     14,313  
 

Mr. White

 

    7,156  

 

 

 

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Compensation Discussion and Analysis

 

Award

Year

  Performance
Goal
  Vesting
Date
  % of Award
Eligible to Vest
  Targets                 Shares at Target     Considerations and
Determinations of the
Committee
 

2020

  3-Year CAGR of Same Community RevPAR for 2022 compared to 2019 (3)   2/27/2023   125% (Max)
100% (Target)
25% (Threshold)
  ³ 4.5%
4.0%
2.0%
      Ms. Baier     261,008     The Committee took into advisement that due to the pandemic same community RevPAR declined 5.1% during the first year of the performance period, including 11.1% for the fourth quarter of 2020 on a year-over-year basis, which would have a pronounced cumulative impact for the entire performance period. In order to reduce the overhang and to increase the number of shares available for future awards under our 2014 Omnibus Incentive Plan, the Committee determined to request that executives voluntarily forfeit such awards in order to be eligible to receive a discretionary cash bonus for extraordinary performance during the pandemic, as described further below.
  Mr. Swain     90,554  
  Ms. Kent     53,267  
  Ms. Patchett     47,940  
 

Mr. White

 

   

 

29,296

 

 

 

  3-Year Relative TSR Compared to S&P Midcap 400 Index Companies (4)   2/27/2024   150% (Max)
100% (Target)
50% (Threshold)
  ³  75th%ile
50th%ile
25th%ile
                      The Committee believed the awards continued to align our executives’ interests with our stockholders as we recover from the pandemic. The Committee determined not to modify such awards.
  Ms. Baier     87,003  
  Mr. Swain     30,185  
  Ms. Kent     17,756  
  Ms. Patchett     15,980  
 

Mr. White

 

   

 

9,765

 

 

 

 

(1)

Program Max is our development capital expenditures initiative through which we expand, renovate, reposition, or redevelop selected existing senior living communities where economically advantageous.

 

(2)

Compound annual TSR was calculated assuming reinvestment in our common stock of any dividends or distributions paid during the performance 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.

 

(3)

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 Company’s performance, principles of revenue recognition would be consistently applied when calculating same community RevPAR.

 

(4)

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 of the year of grant and ending December 31 of the third year of the measurement period, assuming reinvestment of dividends or distributions. The award agreements provide that no additional shares beyond the target number of shares will be issued if our compound annual TSR is negative for the performance period

 

 

  

 

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Executive Compensation

 

Following its comprehensive evaluation of the impact of the pandemic on our business and financial performance in the context of our executive compensation program, the Committee determined that each of the named executive officers would be eligible for a cash payment for extraordinary performance during 2020 beyond the 12.5% achievement under the 2020 annual incentive plan. Any such cash payment, when combined with the 12.5% earned payout under the 2020 annual incentive plan, would not exceed 95% of the named executive officer’s target payout under the 2020 annual incentive plan. To be eligible for the additional cash payment, the named executive officers would be required to voluntarily forfeit early the entirety of the RevPAR component of their 2019 and 2020 performance-based equity awards (i.e., 75% of the aggregate performance-based awards in such years), which would increase availability of shares for future awards under the 2014 Omnibus Incentive Plan. The amount of the cash payment would be determined with reference to the level of extraordinary performance and individual contributions during 2020, including in the areas identified above, and the amount of performance-based equity voluntarily forfeited. The named executive officers voluntarily agreed to forfeit the RevPAR component of their 2019 and 2020 performance-based equity awards early, effective February 22, 2021.

As a result of the foregoing evaluation and actions, the Committee determined to make payouts under the 2020 annual incentive plan based on our actual performance of 12.5% of target, to award discretionary amounts of cash as noted in the table below, and to accept the voluntary forfeitures by the named executive officers of their same-community RevPAR restricted shares and RSUs awarded in 2019 and 2020.

 

    2020 Annual
Incentive Plan
Earned
(12.5% of Target)
    2020
Pandemic-Related
Performance
Compensation
Earned
    Total     Total as a % of
Target 2020
Annual Incentive
Plan
    Number of Same Community
RevPAR Restricted Shares and
RSUs Forfeited
 

Ms. Baier

  $ 158,288     $ 1,044,698     $ 1,202,986       95%       487,630  

Mr. Swain

  $ 71,875     $ 474,375     $ 546,250       95%       152,577  

Ms. Kent

  $ 63,638     $ 287,462     $ 351,100       69%       53,267  

Ms. Patchett

  $ 58,469     $ 379,739     $ 438,208       94%       90,879  

Mr. White

  $ 37,188     $ 245,438     $ 282,626       95%       50,766  

 

Other Compensation Policies

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 2020 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.

 

 

 

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Compensation Discussion and Analysis

 

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 their base salary as shown in the table.     
      

 

Multiple of Base Salary     

 

 

Chief Executive Officer

  

 

5.0x

 

 

Chief Financial Officer and President of Senior Living

  

 

4.0x

 

 

Executive Vice Presidents                                                 

  

 

3.0x

    

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 officer’s becoming subject to the guidelines. We encourage our executives to retain shares obtained through our equity compensation programs, and until the expected ownership level is achieved the guidelines require each officer to retain at least 50% of after-tax shares obtained through those 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 officer’s base salary result in such officer’s 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 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 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.

 

 

  

 

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Executive Compensation

 

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 long-term incentive award agreements for awards made in 2020 and after 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 awards, cancel all shares of stock beneficially owned by the named executive officer that were issued in settlement of RSUs within 12 months on or prior to, or at any time after, the termination of the named executive officer’s employment, and recoup from the named executive officer any proceeds from such officer’s sale, transfer, or other disposition of any such cancellable shares or any amounts paid under the award.

To the extent the named executive officers are eligible to receive severance pay and benefits under Ms. Baier’s 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 Company’s 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.

 

 

 

Employment Agreement and Severance Policies Applicable to Named Executive Officers

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. The employment agreement was automatically extended for one-year effective February 28, 2021. Ms. Baier’s initial base salary was $825,000 per year, which may not be reduced without Ms. Baier’s approval. In

 

 

 

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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. Baier’s 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. Baier’s 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. Under the Severance Policy, the participating named executive officers are entitled to severance payments if their employment is terminated by us without cause 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 long-term incentive award agreements, is set forth under “Potential Payments Upon Termination or Change in Control” below.

 

 

 

2021 Compensation Decisions

When making annual compensation decisions for 2021, the Committee reviewed the compensation peer group used for 2020 decisions with the Consultant and determined to make no changes. The Consultant completed a market compensation study using this peer group. Following its review of our executive compensation program, the Committee approved the principal elements of compensation of our named executive officers for 2021 as summarized in the table below.

 

    2021 Base
Salary
    Change v.
2020
    2021 Target
Annual
Incentive
Opportunity
    Change v.
2020
    2021 Grant
Value of
Long-
Term
Incentive
Awards (1)
    Change v.
2020 (1)
    2021 Target
Total Direct
Compensation
    Change v.
2020
 

 Ms. Baier

    $938,000       –%       135%       –%       $5,530,000       13%       $7,734,300       9%  

 Mr. Swain

    $575,000       –%       100%       –%       $1,925,000       13%       $3,075,000       8%  

 Ms. Kent

    $540,000       5%       100%       –%       $1,250,000       25%       $2,333,000       15%  

 Mr. White

    $425,000       –%       70%       –%       $645,000       17%       $1,367,500       7%  

 

(1)

The dollar amount of the long-term incentive awards, and the percentage change versus 2020, is based on the grant value of such awards (i.e., the number of RSUs granted at target performance, multiplied by the stock price on the date of grant, and the target amount of cash for performance-based cash awards granted in 2021).

 

 

  

 

2021 PROXY STATEMENT

 

 

 

 

 

        45


 

Executive Compensation

 

The 2021 annual incentive plan, as approved by the Committee, continues to be based on company financial objectives and strategic objectives. For 2021, the Committee determined to increase the weighting of financial objectives to 70% and decrease the weighting of strategic objectives to 30%. The financial objectives will have two six-month performance periods, and the strategic objectives will be measured on an annual basis. All amounts earned will be paid out following the end of the year. The financial objectives are our 2021 consolidated portfolio RevPAR and our consolidated facility operating income (FOI) excluding pandemic-related expenses, with the target levels of performance generally reflective of our 2021 budget approved by the Board at the beginning of 2021. The performance goals for the FOI objective, and our actual performance, will exclude our Brookdale Healthcare Services segment assuming we close the pending sale of 80% of our equity in our Health Care Services segment to HCA Healthcare, Inc. during 2021. The strategic objectives focus on our human capital resources and include retention of key community leadership at our consolidated comparable community portfolio and retention of our corporate associates.

A 50/50 grant value mix of time- and performance-based long-term incentive awards was used for the named executive officers, consistent with the 2020 program. The Committee evaluated the number of shares remaining available for issuance under our 2014 Omnibus Incentive Plan and the share burn rate that would result from awarding equity while the pandemic continued to pressure our stock price. It also considered the alignment of executives’ interests with those of our stockholders created by awarding long-term compensation in the form of equity. After deliberation, the Committee determined to grant the time-based awards in the form of RSUs consistent with the prior year and to grant performance-based awards denominated in cash (i.e., not indexed to or payable in stock). Ms. Baier’s performance-based cash award was issued outside the 2014 Omnibus Incentive Plan, and the other named executive officer’s awards were issued as performance awards under the plan. Seventy-five percent of the target cash awards are eligible to vest on February 27, 2024 and twenty-five percent are eligible to vest on February 27, 2025, in each case subject to continued employment and achievement of performance goals established by the Committee. The portion of the target award eligible to vest on February 27, 2024 is divided into three equal tranches, the first of which is subject to strategic goals for 2021 and the second and third of which are subject to year-over-year same community RevPAR growth for 2022 and 2023, respectively. The portion of the target award eligible to vest on February 27, 2025 is subject to a relative TSR performance goal for the three year period ending December 31, 2023. Performance below the threshold level of achievement for a performance goal will result in forfeiture of the target cash amount for the applicable portion of the Award, performance at the targeted level of achievement will result in the vesting of 100% of the applicable target cash amount, and performance at or above the target level of achievement will result in vesting of up to 150% of applicable target cash amount, with vesting percentages to be interpolated for performance between the levels.

 

 

 

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Compensation Committee Report

 

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

 

 

  

 

2021 PROXY STATEMENT

 

 

 

 

 

        47


 

Executive Compensation

 

Summary Compensation Table for 2020

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
($)
    Bonus
($) (2)
    Stock
Awards
($) (3)
    Non-Equity
Incentive Plan
Compensation
($) (4)
    All Other
Compensation
($) (5)
   

    Total    

($)

 

Lucinda M. Baier

President and

Chief Executive Officer

    2020       938,000       1,044,698       4,939,153       158,288       7,331       7,087,470  
    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  

Steven E. Swain

Executive Vice President and

Chief Financial Officer

    2020       575,000       474,375       1,713,588       71,875       6,918       2,841,756  
    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  

Cindy R. Kent

Executive Vice President and

President of Senior Living

    2020       509,103       287,462       1,157,995       63,638       91,129       2,109,327  

Mary Sue Patchett

Executive Vice President –

Strategic Operations

    2020       467,750       379,739       907,192       58,469       6,771       1,819,921  
    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  

Chad C. White

Executive Vice President,

General Counsel and
Secretary

    2020       425,000       245,438       554,395       37,188       3,501       1,265,522  
    2019       397,500       40,000       452,219       148,874       7,807       1,046,400  
    2018       350,000       300,000       350,009       81,396       7,198       1,088,604  

 

(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. Kent joined the Company as Executive Vice President and President of Senior Living effective January 6, 2020; and Ms. Patchett previously served as Executive Vice President–Community Operations until March 23, 2020.

 

(2)

The 2020 amounts consist of discretionary cash payments made to the named executive officers for extraordinary performance in fiscal 2020 related to the COVID-19 pandemic. The discretionary payments, when combined with the amounts of non-equity incentive plan compensation earned, did not exceed 95% of the 2020 target annual incentive opportunity for any named executive officer, and the discretionary payments were conditioned on the named executive officers’ voluntary forfeiture of the same community RevPAR tranches of their performance-based restricted shares and RSUs granted in 2019 and 2020 (i.e., 75% of the target performance-based equity awards granted in those years). See “Pandemic-Related Decisions” above for more information about the 2020 discretionary cash payments.

 

(3)

Represents the aggregate grant date fair value of time-based and performance-based RSUs awarded in 2020 and restricted stock awarded in prior years, in each case computed in accordance with ASC 718. See Note 2 to our Consolidated Financial Statements included in our 2020 Annual Report 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 the performance-based RSUs awarded in 2020 assuming maximum levels of performance.

 

(4)

Represents the payout of each named executive officer’s annual cash incentive opportunity with respect to performance in the applicable year.

 

(5)

For each of the named executive officers, the 2020 amount includes the employer matching contribution to our 401(k) Plan and premiums on Company-provided life and disability insurance. For Ms. Kent, the 2020 amount also includes the incremental cost to the Company of $87,923 for relocation assistance provided, including associated tax gross ups of $24,155.

 

 

 

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Grants of Plan-Based Awards

 

Grants of Plan-Based Awards

The following table summarizes grants of plan-based awards made to our named executive officers in 2020. To the extent we declare dividends on our shares of common stock, the RSUs awarded will accrue cash equivalents to be paid only to the extent the underlying RSUs ultimately vest.

 

Name

  Grant Date    

Estimated Possible Payouts

Under Non-Equity Incentive

Plan Awards

         

Estimated Possible Payouts

Under Equity Incentive Plan

Awards

    All Other
Stock
Awards:
Number
of Shares
of Stock
or Units
(#)
   

Grant
Date

Fair

Value of
Stock
Awards

($)

 
 

Threshold

($)

   

Target

($)

   

Maximum

($)

         

Threshold

(#)

   

Target

(#)

   

Maximum

(#)

 

Ms. Baier

    –  (1)       329,238       1,266,300       2,279,340              
    2/12/2020  (2)               65,252       261,008       326,260             1,837,496  
    2/12/2020  (3)               43,501       87,003       130,504             651,652  
    2/12/2020  (4)                                                         348,012       2,450,004  

Mr. Swain

    –  (1)       149,500       575,000       1,035,000              
    2/12/2020  (2)               22,639       90,554       113,193             637,500  
    2/12/2020  (3)               15,092       30,185       45,277             226,086  
    2/12/2020  (4)                                                         120,739       850,003  

Ms. Kent

    –  (1)       132,367       509,103       916,385              
    2/12/2020  (2)               13,317       53,267       66,584             375,000  
    2/12/2020  (3)               8,878       17,756       26,634             132,992  
    2/12/2020  (4)                                 71,023       500,002  
    2/12/2020  (5)                                                         21,307       150,001  

Ms. Patchett

    –  (1)       121,615       467,750       841,950              
    2/12/2020  (2)               11,985       47,940       59,925             337,498  
    2/12/2020  (3)               7,990       15,980       23,970             119,690  
    2/12/2020  (4)                                                         63,921       450,004  

Mr. White

    –  (1)       77,350       297,500       535,500              
    2/12/2020  (2)               7,325       29,297       36,621             206,224  
    2/12/2020  (3)               4,883       9,765       14,648             73,147  
    2/12/2020  (4)                                                         39,063       275,004  

 

(1)

Amounts represent the threshold, target, and maximum payout levels under our 2020 annual incentive plan. The actual payouts are reported in the Summary Compensation Table as Non-Equity Incentive Plan Compensation.

 

(2)

Represents performance-based RSUs granted under our 2014 Omnibus Incentive Plan which were eligible to vest on February 27, 2023, subject to continued employment and the achievement of 3-year CAGR of same community RevPAR performance targets. Each RSU was payable in the form of one share of our common stock upon vesting. The values reported in the table represent the grant date fair values computed in accordance with

 

 

  

 

2021 PROXY STATEMENT

 

 

 

 

 

        49


 

Executive Compensation

 

  ASC 718, which are equivalent to the grant values (i.e., number of RSUs 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 would have resulted in vesting of 25%, 100%, and 125% of the target number of RSUs, respectively, and vesting percentages were to be interpolated for performance between those levels. Failure to achieve the threshold performance level would have resulted in forfeiture of all such RSUs. The grant values of the awards (i.e., number of RSUs granted multiplied by the closing price on the date of grant) assuming achievement at or above the maximum performance level were: Ms. Baier–$2,296,870; Mr. Swain–$796,877; Ms. Kent–$468,752; Ms. Patchett–$421,872; and Mr. White–$257,809. As described in “Pandemic-Related Decisions” above, each of the named executive officers voluntarily agreed to forfeit such RSUs effective February 22, 2021 in order to be eligible to receive a discretionary cash payment for extraordinary performance in fiscal 2020 related to the COVID-19 pandemic.

 

(3)

Represents performance-based RSUs granted under our 2014 Omnibus Incentive Plan which are eligible to vest on February 27, 2024, subject to continued employment and the achievement of 3-year relative TSR performance targets. Each RSU is payable in the form of one share of our common stock upon vesting. The values reported in the table represent the grant date fair values computed in accordance with ASC 718, which were 6.4% more than the grant values (i.e., number of RSUs 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 RSUs, respectively (provided that no additional shares beyond the target number of RSUs will be issued if our compound annual TSR is negative for the performance period), and vesting percentages will be interpolated for performance between those levels. Failure to achieve the threshold performance level will result in forfeiture of all such RSUs. Ms. Baier’s performance-based award agreement further provided that in no event would the aggregate number of shares issued pursuant to the 2020 time-based and performance-based award agreements exceed 800,000 shares. The grant values of the awards (i.e., number of RSUs granted multiplied by the closing price on the date of grant) assuming achievement at or above the maximum performance level are: Ms. Baier–$918,749; Mr. Swain–$318,751; Ms. Kent–$187,501; Ms. Patchett–$168,749; and Mr. White–$103,122.

 

(4)

Represents time-based RSUs granted under our 2014 Omnibus Incentive Plan which are eligible to vest ratably in four annual installments beginning on February 27, 2021, subject to continued employment. Each RSU is payable in the form of one share of our common stock upon vesting.

 

(5)

Represents time-based RSUs granted under our 2014 Omnibus Incentive Plan which are eligible to vest ratably in three annual installments beginning on February 27, 2021, subject to continued employment. Each RSU is payable in the form of one share of our common stock upon vesting. The onboarding award was made in connection with Ms. Kent’s joining the Company effective January 6, 2020.

 

 

 

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Outstanding Equity Awards at Fiscal Year-End

 

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, 2020, with market values of such awards based on $4.43 per share, the closing market price of our stock on such date.

 

          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

 

   

 

2/13/2017

 

 

 

   

 

12,635

 

 

 

   

 

55,973

 

 

 

   

 

12,635  (2)

 

 

 

   

 

55,973

 

 

 

   

 

1/5/2018

 

 

 

   

 

77,479

 

 

 

   

 

343,232

 

 

 

   

 

–      

 

 

 

   

 

 

 

 

   

 

1/5/2018

 

 

 

   

 

38,740

 

 

 

   

 

171,618

 

 

 

   

 

–      

 

 

 

   

 

 

 

 

   

 

3/5/2018

 

 

 

   

 

103,735

 

 

 

   

 

459,546

 

 

 

   

 

103,735  (3)

 

 

 

   

 

459,544

 

 

 

   

 

2/11/2019

 

 

 

   

 

226,623

 

 

 

   

 

1,003,940

 

 

 

   

 

94,426  (4)

 

 

 

   

 

418,307

 

 

 

   

 

2/12/2020

 

 

 

   

 

348,012

 

 

 

   

 

1,541,693

 

 

 

   

 

108,753  (5)

 

 

 

   

 

481,778

 

 

 

Mr. Swain

 

   

 

9/10/2018

 

 

 

   

 

26,625

 

 

 

   

 

117,949

 

 

 

   

 

26,624  (3)

 

 

 

   

 

117,944

 

 

 

   

 

2/11/2019

 

 

 

   

 

62,024

 

 

 

   

 

274,766

 

 

 

   

 

25,843  (4)

 

 

 

   

 

114,484

 

 

 

   

 

2/12/2020

 

 

 

   

 

120,739

 

 

 

   

 

534,874

 

 

 

   

 

37,731  (5)

 

 

 

   

 

167,148

 

 

 

Ms. Kent

 

   

 

2/12/2020

 

 

 

   

 

71,023

 

 

 

   

 

314,632

 

 

 

   

 

22,195  (5)

 

 

 

   

 

98,322

 

 

 

   

 

2/12/2020

 

 

 

   

 

21,307

 

 

 

   

 

94,390

 

 

 

   

 

–      

 

 

 

   

 

 

 

 

Ms. Patchett

 

   

 

2/13/2017

 

 

 

   

 

5,939

 

 

 

   

 

26,310

 

 

 

   

 

5,939  (2)

 

 

 

   

 

26,310

 

 

 

   

 

1/5/2018

 

 

 

   

 

41,322

 

 

 

   

 

183,056

 

 

 

   

 

–      

 

 

 

   

 

 

 

 

   

 

1/5/2018

 

 

 

   

 

20,662

 

 

 

   

 

91,533

 

 

 

   

 

–      

 

 

 

   

 

 

 

 

   

 

2/11/2019

 

 

 

   

 

42,939

 

 

 

   

 

190,220

 

 

 

   

 

17,891  (4)

 

 

 

   

 

79,258

 

 

 

   

 

2/12/2020

 

 

 

   

 

63,921

 

 

 

   

 

283,170

 

 

 

   

 

19,975  (5)

 

 

 

   

 

88,489

 

 

 

Mr. White

 

   

 

2/13/2017

 

 

 

   

 

2,160

 

 

 

   

 

9,569

 

 

 

   

 

720  (2)

 

 

 

   

 

3,190

 

 

 

   

 

1/5/2018

 

 

 

   

 

18,079

 

 

 

   

 

80,090

 

 

 

   

 

–      

 

 

 

   

 

 

 

 

   

 

1/5/2018

 

 

 

   

 

9,040

 

 

 

   

 

40,047

 

 

 

   

 

–      

 

 

 

   

 

 

 

 

   

 

2/11/2019

 

 

 

   

 

21,470

 

 

 

   

 

95,112

 

 

 

   

 

8,946  (4)

 

 

 

   

 

39,629

 

 

 

   

 

2/12/2020

 

 

 

   

 

39,063

 

 

 

   

 

173,049

 

 

 

   

 

12,207  (5)

 

 

 

   

 

54,076

 

 

 

 

(1)

Represents time-based restricted shares or RSUs, the vesting of which is subject to continued employment. The awards have vested or are eligible to vest ratably in four annual installments beginning on February 27 in the year following the year of grant, except that with respect to the first award with a grant date of January 5, 2018, 75% of the award was eligible to vest on February 27, 2021 and 25% of the award is eligible vest on February 27, 2022; with respect to Mr. Swain’s September 2018 award, the award has vested or is eligible to vest ratably in four annual installments beginning on November 19, 2019; and with respect to Ms. Kent’s second award with a grant date of February 12, 2020, the award has vested or is eligible to vest ratably in three annual installments beginning on February 27, 2021.

 

(2)

Represents performance-based restricted shares eligible to vest on February 27, 2021 subject to continued employment and the achievement of specified performance targets based on our 2020 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 such date.

 

(3)

Represents performance-based restricted shares 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, which was not achieved. The named executive officers forfeited the following number of restricted shares on February 27, 2021: Ms. Baier–207,469; and Mr. Swain–53,248.

 

(4)

Represents performance-based restricted shares for which vesting is or was subject to continued employment and the achievement of specified performance targets. Up to 75% of the target shares awarded were eligible to vest on February 27, 2022 based on our 3-year CAGR of same community RevPAR performance (first tranche), and up to 25% of the target shares awarded are eligible to vest on February 27, 2023 based on 3-year relative TSR performance targets (second tranche). The number of shares reported represents the threshold level of performance for each tranche. As described in “Pandemic-Related Decisions” above, each of the named executive officers voluntarily agreed to forfeit the first tranche of such restricted shares effective February 22, 2021 in order to be eligible to receive a discretionary cash payment for extraordinary performance in fiscal 2020 related to the COVID-19 pandemic. As a result, the named executive officers forfeited the following number of restricted shares on February 22, 2021 (at target level performance): Ms. Baier–226,622; Mr. Swain–62,023; Ms. Patchett–42,939; and Mr. White–21,470. The second tranche performance-based restricted shares were unchanged and remain outstanding.

 

 

  

 

2021 PROXY STATEMENT

 

 

 

 

 

        51


 

Executive Compensation

 

(5)

Represents performance-based RSUs with the terms described in footnotes 2 and 3 to the Grants of Plan-Based Awards Table. The number of RSUs reported represents the threshold level of performance with respect to the RSUs eligible to vest on February 27, 2023 based on our 3-year CAGR of same community RevPAR performance (first tranche), and the threshold level of performance with respect to the RSUs eligible to vest on February 27, 2024 based on our 3-year relative TSR performance (second tranche). As described in “Pandemic-Related Decisions” above, the named executive officers voluntarily agreed to forfeit the first tranche of such RSUs effective February 22, 2021 in order to be eligible to receive a discretionary cash payment for extraordinary performance in fiscal 2020 related to the COVID-19 pandemic. As a result, the named executive officers forfeited the following number of RSUs on February 22, 2021 (at target level performance): Ms. Baier–261,008; Mr. Swain–90,554; Ms. Kent–53,267; Ms. Patchett–47,940; and Mr. White–29,296. The second tranche performance-based RSUs were unchanged and remain outstanding.

Stock Vested for 2020

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 2020.

 

     Stock Awards  
     Number of Shares Acquired on Vesting (#)      Value Realized on Vesting ($) (1)  
  Ms. Baier      185,292        1,184,016  
  Mr. Swain      33,986        185,887  
  Ms. Kent      –          –    
  Ms. Patchett      42,746        273,147  
  Mr. White      18,564        113,409  

 

(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, 2020 (Ms. Baier–185,292 shares; Mr. Swain–20,674 shares; Ms. Patchett–42,746 shares; and Mr. White–16,784 shares); May 20, 2020 (Mr. White–1,780 shares); and November 19, 2020 (Mr. Swain–13,312 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.

 

 

 

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Potential Payments Upon Termination or Change in Control

 

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, 2020, with equity-based amounts based on $4.43 per share, the closing market price of our stock on December 31, 2020.

 

Name/Benefit

  Voluntary
Resignation by
Executive
($)
    Termination
by us for
Cause
($)
    Termination
by us without
Cause
($)
   

 

Termination
by us without
Cause
following a
Change in
Control
($)

    Termination
by Executive
for Good
Reason
($)
    Disability
($)
    Death
($)
 

 

Ms. Baier

             

Salary

                1,407,000       1,876,000       1,407,000              

Pro-Rata Bonus (1)

                158,288       158,288       158,288       158,288       158,288  

Severance Bonus

                1,899,450       2,532,600       1,899,450              

PTO

    72,154       72,154       72,154       72,154       72,154       72,154       72,154  

COBRA

                16,422       16,422       16,422              

Accelerated Vesting of
Equity Awards   (2)(3)

                1,405,019       5,204,377       1,005,814       1,405,019       1,405,019  

Total

 

 

 

 

72,154

 

 

    72,154       4,958,333       9,859,841       4,559,128       1,635,461       1,635,461  

Mr. Swain

             

Salary

                575,000       862,500                    

Pro-Rata Bonus (1)

                71,875       71,875             71,875       71,875  

Severance Bonus

                575,000       862,500                    

PTO

    18,786       18,786       18,786       18,786       18,786       18,786       18,786  

COBRA

                8,782       13,173                    

Accelerated Vesting of
Equity Awards   (2)(3)

                284,282       1,421,392             284,282       284,282  

Total

 

 

 

 

18,786

 

 

    18,786       1,533,725       3,250,226       18,786       374,943       374,943  

Ms. Kent

             

Salary

                515,000       772,500                    

Pro-Rata Bonus (1)

                63,638       63,638             63,638       63,638  

Severance Bonus

                515,000       772,500                    

PTO

    19,065       19,065       19,065       19,065       19,065       19,065       19,065  

COBRA

                4,965       7,448                    

Accelerated Vesting of
Equity Awards   (2)(3)

                110,117       424,748             110,117       110,117  

Total

 

 

 

 

19,065

 

 

    19,065       1,227,785       2,059,899       19,065       192,820       192,820  

Ms. Patchett

             

Salary

                701,625       935,500                    

Pro-Rata Bonus (1)

                58,469       58,469             58,469       58,469  

Severance Bonus

                701,625       935,500                    

PTO

    35,981       35,981       35,981       35,981       35,981       35,981       35,981  

COBRA

                16,112       16,112                    

Accelerated Vesting of
Equity Awards   (2)(3)

                369,874       906,666             369,874       369,874  

Total

 

 

 

 

35,981

 

 

    35,981       1,883,686       2,888,228       35,981       464,324       464,324  

 

 

  

 

2021 PROXY STATEMENT

 

 

 

 

 

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Executive Compensation