DEF 14A 1 ncp10000567x1_def14a.htm DEF14A

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
SCHEDULE 14A
 
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.          )

Filed by the Registrant ☒
 
Filed by a Party other than the Registrant ☐
 
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Preliminary Proxy Statement
 
 
 
  
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Definitive Proxy Statement
 
 
 
  
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Soliciting Material under §240.14a-12

VENTAS, INC.
(Name of Registrant as Specified In Its Charter)
 
 
 
 
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
 
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(VENTAS LOGO)
           

PROXY STATEMENT SUMMARY
 
We prepared the following summary to highlight important information you will find in this Proxy Statement regarding our 2018 performance and the matters to be considered at the 2019 Annual Meeting of Stockholders. As it is only a summary, please review our Annual Report on Form 10-K for the year ended December 31, 2018 (which we refer to as our “2018 Form 10-K”) and the other information contained in this Proxy Statement before you vote. This Proxy Statement and the materials accompanying it are first being sent to stockholders on or about April 1, 2019.
     
2018 Performance*
 
Financial and Operating Performance Highlights
 
In 2018, Ventas achieved 3.4% total stockholder return (“TSR”), outperforming the S&P 500 Index and the MSCI REIT Index by nearly eight percentage points. Our TSR also outperformed the MSCI REIT Index and the FTSE National Association of Real Estate Investment Trusts (“NAREIT”) Equity Health Care Index for the three-, five- and 10-year periods ended December 31, 2018, demonstrating short- and long-term outperformance during varied economic cycles.
 
We further strengthened our financial condition by refinancing or repaying $3.5 billion of debt, thereby extending our debt maturity profile by 0.7x to 7.0 years and minimizing intermediate-term interest rate exposure. We renewed and extended our $900 million term loan at improved pricing and proactively issued $1.4 billion in new 10-year senior notes at attractive pricing and effective execution. We also maintained our BBB+ credit rating and strong balance sheet with a 5.6x net debt to adjusted pro forma EBITDA* ratio and a fixed charge coverage ratio of 4.6x.
 
Our high quality and diverse portfolio of assets delivered normalized funds from operations (“FFO”) per share* of $4.07 and same-store cash net operating income* (“NOI”) growth of 1.2%.
 
We harvested $1.3 billion in proceeds from profitable investments, including timely receipt of (a) greater than $900 million repayments of well-structured and high unlevered IRR loans and (b) proceeds from the sale of non-core properties at an average 6% yield. We redeployed the proceeds into future growth opportunities and improvement of our balance sheet.
 
We made investments of nearly $800 million at a blended 7.5% cash yield to further improve the quality of our portfolio, including an acquisition of a premier independent living seniors housing community located in the appealing Battery Park neighborhood of downtown Manhattan.
 
We elevated and expanded our Research & Innovation Business (grown by 45% since inception) with the nation’s leading research universities and created a $1.5 billion development pipeline consisting of near-term projects with new and existing university relationships.
 
In addition, we reached collaborative and mutually beneficial arrangements with several of our operators and partners, including lease extensions with Brookdale Senior Living (“Brookdale”) and a 10-year extension of our exclusive medical office building (“MOB”) development relationship with Pacific Medical Buildings (“PMB”), which has nearly 50 years of experience in MOB development with top health systems in the U.S.
     
We grew our dividend again in 2018, marking our 9th consecutive year of dividend growth.
  

*
Net debt to adjusted pro forma EBITDA and normalized FFO are not calculated according to U.S. generally accepted accounting principles (“GAAP”), but please see Annex A for reconciliations of these performance measures to our GAAP earnings (the most directly comparable GAAP measure). In addition, please see Annex A for a discussion of how we calculate same-store cash NOI.
 
 
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Portfolio Highlights
 
 
 
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Balance Sheet and Liquidity Highlights
 

 
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Investment Highlights


 
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2018 Executive Compensation
 
Our executive compensation programs are designed to attract, retain and motivate talented executives, to reward executives for the achievement of pre-established company and tailored individual goals consistent with our strategic plan and to link compensation to company performance. We compensate our executives primarily through base salary, annual cash incentive compensation and long-term equity incentive compensation. Our executive compensation philosophy emphasizes performance-based incentive compensation over fixed cash compensation, so that the vast majority of total direct compensation is variable and not guaranteed. In addition, as shown in the graphic below, we deliver the majority of our executive pay in the form of equity incentive compensation rather than cash to create stronger alignment with our stockholders. We believe this structure appropriately focuses our executive officers on the creation of long-term value and encourages prudent evaluation of risks.



2018 Executive Compensation Decisions
 
In 2018, our compensation decisions once again reflected strong alignment between pay and performance. In determining the incentive compensation paid to our Named Executive Officers for 2018, our Executive Compensation Committee (the “Compensation Committee”) of our Board of Directors (the “Board”), which is responsible for evaluating and setting the compensation of our Named Executive Officers other than the Chief Executive Officer, and the independent members of our Board, who are responsible for evaluating and setting the compensation for our Chief Executive Officer pursuant to the Company’s Guidelines on Governance (the Compensation Committee and the independent members of our Board are collectively referred to as the “Compensation Board Members” herein), rigorously evaluated company and individual performance relative to the pre-established measures and goals under our annual cash and long-term equity incentive plans.
 
Our 3.4% TSR in 2018 outperformed the S&P 500 Index and the MSCI REIT Index by nearly eight percentage points.  Our TSR also outperformed the MSCI REIT Index and the FTSE NAREIT Equity Health Care Index for the three-, five- and 10-year periods ended December 31, 2018, demonstrating short- and long-term outperformance during varied economic cycles. In addition, we earned normalized FFO per share of $4.07 in 2018 and delivered excellent strategic, financial and operating performance.

 
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The graph below illustrates our long-term pay-for-performance alignment by comparing our Chief Executive Officer’s total direct compensation to our TSR performance (indexed to a 2013 base year) for each of the past five years.



“Total Direct Compensation” includes, for the applicable year, base salary, actual annual cash incentive awards earned, the value of long-term equity incentive awards earned or granted (as applicable) and “All Other Compensation” as reported in the Summary Compensation Table. This graph differs from compensation reported in the 2018 Summary Compensation Table in the following respects:
 
For 2013-2016, the period during which our backward-looking plan was in effect, the graph aligns the value of long-term equity incentive awards with the performance year for which they were earned, rather than the year in which they were granted (e.g., long-term equity incentive awards granted in January 2017 for 2016 performance are shown in the graph above as 2016 compensation), consistent with the manner in which our Compensation Board Members evaluated compensation and pay-for-performance under the previous backward-looking plan for our Named Executive Officers.
   
For 2017 and 2018, the first years our new forward-looking long-term equity incentive plan was in effect, we report the grant date fair value (approximating target level of performance) of the performance-based restricted stock units (“pRSUs”) granted in 2017 and 2018 that may be earned, if at all, based on performance relative to performance goals measured from January 1, 2017 through December 31, 2019 and January 1, 2018 through December 31, 2020, respectively. Actual payouts will occur in 2020 and 2021, respectively, and will range from 0% - 220% of the target value.
   
The 2017 figure excludes one-time time-based restricted stock unit (“RSU”) transition awards received by certain of our Named Executive Officers, which were designed to partially mitigate the impact of a reduction in the realized pay for our Named Executive Officers in 2018 and 2019 resulting from the transition from a backward-looking long-term equity incentive plan to a forward-looking plan because the new forward-looking awards do not pay out, if at all, until 2020 and later. These awards are excluded because they were one-time in nature, did not recur in 2018 or 2019 and the Compensation Committee does not view these awards as a continuing feature of the long-term equity incentive plan.
 
 
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2018 Annual Cash Incentive Awards
 
For 2018, annual cash incentive awards were based on our performance with respect to pre-established company financial goals. For our Named Executive Officers (other than Mr. Bulgarelli), the goals were normalized FFO per share (40% of the target award opportunity), debt reduction/refinancing (15%), fixed charge coverage ratio (10%), and the achievement of individual objectives tailored for each Named Executive Officer (35%). For Mr. Bulgarelli, the goals were normalized FFO per share (15% of the target award opportunity), debt reduction/refinancing (6%), fixed charge coverage ratio (4%), segment-specific objectives (25%) and the achievement of individual objectives (50%).
 
As further explained in the “Compensation Discussion and Analysis” section below, our performance in 2018 with respect to these metrics resulted in cash incentive awards earned by our Named Executive Officers between the target and maximum levels.
 
2018 Long-Term Equity Incentive Awards
 
Consistent with 2017 awards, for 2018, long-term equity incentive awards were split between (i) pRSUs, earned entirely based on our performance with respect to pre-established quantitative measures, specifically (a) three-year TSR relative to the MSCI REIT Index, (b) three-year TSR relative to the FTSE NAREIT Equity Health Care Index and (c) the three-year average of net debt to adjusted pro forma EBITDA, a risk management measure (which together accounted for 60% of the long-term equity incentive award opportunity), and (ii) time-based RSUs, vesting in equal one-third increments beginning on the first anniversary of the grant date (which accounted for the remaining 40% of the long-term equity incentive award opportunity).
 
2018 Compensation Practices at a Glance
 

 
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Responsiveness to Stockholder Feedback
 
We received support from nearly 60% of our stockholders with respect to our 2018 advisory vote on our Named Executive Officers’ compensation. In response to this advisory vote, together with our Compensation Committee Chairman, we continued our extensive stockholder outreach program to 40 of our largest investors (holding ~65% of our shares). We carefully considered constructive feedback on our executive compensation program and corporate governance provided to us by our stockholders and took responsive action in addition to the numerous improvements made in 2017, including increasing the performance-based component of our CEO’s 2019 long-term equity incentive award from 60% to 70%, decreasing the dollar value and weighting of the 2019 time-based component from 40% to 30% and decreasing our CEO’s 2019 threshold long-term equity incentive award opportunity from 431% to 393% of her base salary, as set forth below in further detail in the “Compensation Discussion and Analysis” section.
 
2019 Annual Meeting of Stockholders
 
Voting and Meeting Information
 
You are entitled to vote at the 2019 Annual Meeting of Stockholders if you were a stockholder of record at the close of business on March 15, 2019, the record date for the meeting. On the record date, there were 357,353,468 shares of common stock issued and outstanding and entitled to vote at the meeting.
 
Information regarding the meeting date and location is set forth below.

When:         Tuesday, May 14, 2019, 8:00 a.m. local (Central) time
Where:        James C. Tyree Auditorium, 353 North Clark Street, Chicago, Illinois 60654

You may vote at the Annual Meeting through any of the following methods:
 
 
Vote by Telephone:  Call (800) 690-6903, 24 hours a day, seven days a week through May 13, 2019
 
Vote on the Internet:  Visit www.proxyvote.com, 24 hours a day, seven days a week through May 13, 2019
 
Vote by Mail:  Request, complete and return a copy of the proxy card in the postage-paid envelope provided
 
Vote in Person:  Request, complete and deposit a copy of the proxy card or complete a ballot at the Annual Meeting
 
 
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Proposals Requiring Your Vote
 
Proposal 1 — Election of Directors (see page 72)
 
The following table provides summary information about our nine director-nominees, each of whom currently serves on our Board. Age is as of the date of the 2019 Annual Meeting. Directors are elected annually by a majority of votes cast in uncontested elections. Our Board recommends that you vote FOR each of the named director-nominees.
 
Name
Age
Director
since
Primary Position
Current
Committees**
Principal Skills
Melody C. Barnes*
55
2014
Co-Founder and Principal of MB Squared Solutions LLC and Chair, Aspen Institute Forum for Community Solutions
A; N
Public Policy, Government Relations, Strategic Planning, Leadership Development
Debra A. Cafaro
61
1999
Chairman and CEO of Ventas
E; I
Real Estate Industry, Corporate Finance, Mergers and Acquisitions, Capital Markets, Strategic Planning
Jay M. Gellert*
65
2001
Former President and CEO of Health Net, Inc.
E; I; N
Healthcare Industry, Mergers and Acquisitions, Strategic Planning, Government Relations, Executive Compensation
Richard I. Gilchrist*
73
2011
Senior Advisor to The Irvine Company and Chairman of TIER REIT, Inc.
C; I
Real Estate Industry, Mergers and Acquisitions, Strategic Planning, Executive Compensation, Corporate Governance
Matthew J. Lustig*
58
2011
Head of North America Investment Banking and Head of Real Estate and Lodging at Lazard Frères & Co. LLC
E; I
Real Estate Industry, Corporate Finance, Mergers and Acquisitions, Capital Markets, Strategic Planning, International Transactions
Roxanne M. Martino*
62
2016
Managing Partner of OceanM19; former CEO, Partner and Investment Committee Chairperson of Aurora Investment Management L.L.C.
C; I
Corporate Finance, Mergers and Acquisitions, Capital Markets, Strategic Planning
Walter C. Rakowich*
61
2016
Former CEO of Prologis, Inc.
A
Real Estate Industry, Corporate Finance, Mergers and Acquisitions, Capital Markets, Strategic Planning
Robert D. Reed*
66
2008
Former Senior Vice President and Chief Financial Officer of Sutter Health
A; E
Healthcare Industry, Corporate Finance, Strategic Planning, Capital Intensive Operations, Pension Fund Investments
James D. Shelton*
65
2008
Former Chairman of Omnicare, Inc.; former CEO and Chairman of Triad Hospitals, Inc.
C; E; N
Healthcare Industry, Mergers and Acquisitions, Strategic Planning, Capital Intensive Operations, Government Relations, Executive Compensation, Corporate Governance


*
Independent Director
Presiding Director
**
Abbreviations: A = Audit and Compliance; C = Executive Compensation; E = Executive; I = Investment; N = Nominating and Corporate Governance.  Bold print indicates committee chair.

 
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BOARD COMPOSITION INFORMATION

 

Proposal 2 — Ratification of the Selection of KPMG LLP as Our Independent Registered Public Accounting Firm for Fiscal Year 2019 (see page 80)
 
KPMG audited our financial statements for the year ended December 31, 2018 and has been our independent registered public accounting firm since July 2014. Our Board recommends that you vote FOR the ratification of the selection of KPMG LLP as our independent registered public accounting firm for fiscal year 2019.
 
Proposal 3 — Advisory Vote to Approve Our Executive Compensation (see page 82)
 
We submit an advisory vote to approve our executive compensation to our stockholders on an annual basis. Because your vote is advisory, it will not be binding on the Board or our Compensation Committee. However, your vote is important because it will be taken into account when making future decisions relating to executive compensation.
 
Our executive compensation programs are designed to attract, retain and motivate talented executives, to reward executives for the achievement of pre-established Company and tailored individual goals consistent with our strategic plan and to link compensation to Company performance. We compensate our executives primarily through base salary, annual cash incentive compensation and long-term equity incentive compensation. Our executive compensation philosophy emphasizes performance-based incentive compensation over fixed cash compensation, so that the vast majority of total direct compensation is variable and not guaranteed. In addition, we deliver the majority of our executive pay in the form of equity incentive compensation rather than cash to create stronger alignment with our stockholders.

 
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Our Compensation Board Members have carefully evaluated our overall executive compensation program and believe that it is well designed to achieve our objectives of retaining talented executives and rewarding superior performance in the context of our business risk environment. By maintaining a performance- and achievement-oriented environment that provides the opportunity to earn market-competitive levels of compensation, we believe that our executive compensation program is structured optimally to support our goal to deliver sustained, superior returns to stockholders, and our exceptional long-term performance demonstrates the success of this program. For these reasons, our Board recommends that you vote FOR the approval, on an advisory basis, of our executive compensation.
 
Electronic Document Delivery to Stockholders
 
Instead of receiving future copies of our Notice of Annual Meeting, Proxy Statement and Annual Report by mail, stockholders of record and most beneficial owners may elect to receive an e-mail that will provide electronic links to these documents. Electronic document delivery saves us the cost of producing and mailing documents and will give you an electronic link to the proxy voting site. It is also more environmentally friendly.
 
We are making this Proxy Statement and the materials accompanying it available to our stockholders via the Internet, as permitted by SEC rules. We will mail to stockholders a Notice of Internet Availability containing instructions on how to access our proxy materials and how to vote by proxy online. Starting on or about April 1, 2019, we will also mail this Proxy Statement and the materials accompanying it to stockholders who have requested paper copies. If you would like to receive a printed copy of our proxy materials by mail, you should follow the instructions for requesting those materials included in the Notice that we mail to you.
 
IMPORTANT NOTICE REGARDING INTERNET AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING TO BE HELD ON MAY 14, 2019:
 
This Proxy Statement, our 2018 Form 10-K and our 2018 Annual Report are available at
www.proxyvote.com.
 
Questions and Answers
 
More information about proxy voting, proxy materials and attending the Annual Meeting can be found in the “Questions and Answers” section of this Proxy Statement.
 
 
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ANNUAL MEETING INFORMATION
 
Quorum
 
The holders of a majority of the shares of our common stock outstanding as of the close of business on the record date for the Annual Meeting, March 15, 2019, must be present in person or represented by proxy to constitute a quorum to transact business at the Annual Meeting. Stockholders who abstain from voting and broker non-votes are counted for purposes of establishing a quorum. A broker non-vote occurs when a beneficial owner does not provide voting instructions to the beneficial owner’s broker or custodian with respect to a proposal on which the broker or custodian does not have discretionary authority to vote.
 
Who Can Vote
 
Only Ventas stockholders of record at the close of business on the record date are entitled to vote at the Annual Meeting. As of that date, 357,353,468 shares of our common stock, par value $0.25 per share, were outstanding. Each share of our common stock entitles the owner to one vote on each matter properly brought before the Annual Meeting. However, certain shares designated as “Excess Shares” (generally any shares owned by a beneficial owner in excess of 9.0% of our outstanding common stock) or as “Special Excess Shares” pursuant to our Amended and Restated Certificate of Incorporation, as amended (our “Charter”), may not be voted by the record owner of those shares and will be voted in accordance with Article IX of our Charter.
 
A list of all stockholders entitled to vote at the Annual Meeting will be available for inspection by any stockholder for any purpose reasonably related to the meeting at the Annual Meeting and during ordinary business hours for the ten days preceding the meeting at our principal executive offices located at 353 North Clark Street, Suite 3300, Chicago, Illinois 60654.
 
How to Vote
 
You may vote your shares in one of several ways, depending on how you own your shares:
 
Stockholders of Record
 
If you own shares registered in your name (a “stockholder of record”), you may:
 
 
Vote your shares by proxy by calling (800) 690-6903, 24 hours a day, seven days a week until 11:59 p.m. Eastern time on May 13, 2019. Please have your proxy card in hand when you call. The telephone voting system has easy-to-follow instructions and provides confirmation that the system has properly recorded your vote.
 
 
OR
 
Vote your shares by proxy via the website www.proxyvote.com, 24 hours a day, seven days a week until 11:59 p.m. Eastern time on May 13, 2019. Please have your proxy card in hand when you access the website. The website has easy-to-follow instructions and provides confirmation that the system has properly recorded your vote.
 
 
OR
 
If you have requested or receive paper copies of our proxy materials by mail, vote your shares by proxy by signing, dating and returning the proxy card in the postage-paid envelope provided. If you vote by telephone or over the Internet, you do not need to return your proxy card by mail.
 
 
OR
 
Vote your shares by attending the Annual Meeting in person and depositing your proxy card at the registration desk (if you have requested paper copies of our proxy materials by mail) or completing a ballot that will be distributed at the Annual Meeting.
 
Beneficial Owners
 
If you own shares registered in the name of a broker, bank or other custodian (a “beneficial owner”), follow the instructions provided by your broker, bank or custodian to instruct it how to vote your shares. If you want to vote your shares in person at the Annual Meeting, contact your broker, bank or custodian to obtain a legal proxy or broker’s proxy card that you should bring to the Annual Meeting to demonstrate your authority to vote.
 
 
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If you do not instruct your broker, bank or custodian how to vote, it will have discretionary authority, under current New York Stock Exchange (“NYSE”) rules, to vote your shares in its discretion on the ratification of the selection of KPMG LLP as our independent registered public accounting firm for fiscal year 2019 (Proposal 2). However, your broker, bank or custodian will not have discretionary authority to vote on the election of directors (Proposal 1) or the advisory vote to approve our executive compensation (Proposal 3) without instructions from you. As a result, if you do not provide instructions to your broker, bank or custodian, your shares will not be voted on Proposal 1 or Proposal 3.
 
Votes by Proxy
 
All shares that have been properly voted by proxy and not revoked will be voted at the Annual Meeting in accordance with the instructions contained in the proxy. Shares represented by proxy cards that are signed and returned, but do not contain any voting instructions will be voted consistent with the Board’s recommendations:
 
FOR the election of all director-nominees named in this Proxy Statement (Proposal 1);

FOR the ratification of the selection of KPMG LLP as our independent registered public accounting firm for fiscal year 2019 (Proposal 2);

FOR the approval, on an advisory basis, of our executive compensation (Proposal 3); and

In the discretion of the proxy holders, on such other business as may properly come before the Annual Meeting.

OUR BOARD OF DIRECTORS
 
Our Board provides guidance and oversight with respect to our financial and operating performance, strategic plans, key corporate policies and decisions and enterprise risk management. Among other matters, our Board considers and approves significant acquisitions, dispositions and other transactions and advises and counsels senior management on key financial and business objectives. Members of the Board monitor our progress with respect to these matters on a regular basis, including through presentations made at Board and committee meetings by our Chief Executive Officer, Chief Financial Officer, Chief Investment Officer and other members of senior management.
 
Criteria for Board Membership
 
Our Guidelines on Governance set forth the process by which our Nominating and Corporate Governance Committee (the “Nominating Committee”) identifies and evaluates nominees for Board membership. In accordance with this process, the Nominating Committee annually considers and recommends to the Board a slate of directors for election at the next annual meeting of stockholders. In selecting this slate, the Nominating Committee considers the following: incumbent directors who have indicated a willingness to continue to serve on our Board; candidates, if any, nominated by our stockholders; and other potential candidates identified by the Nominating Committee. Additionally, if at any time during the year a seat on the Board becomes vacant or a new seat is created, the Nominating Committee considers and recommends to the Board a candidate for appointment to fill the vacant or newly-created seat.
 
The Nominating Committee considers different perspectives, skill sets, education, ages, genders, ethnic origins and business experience in its annual nomination process. In general, the Nominating Committee seeks to include on our Board a complementary mix of individuals with diverse backgrounds, knowledge and viewpoints reflecting the broad set of challenges that the Board confronts without representing any particular interest group or constituency. The Nominating Committee regularly reviews the size and composition of the Board on a holistic basis, utilizing a rigorous matrix of identified skills, experiences and other criteria for maintaining an excellent, independent Board in light of our changing requirements and seeks nominees who, taken together as a group, possess the skills, diversity and expertise appropriate for an effective Board.
 
The Nominating Committee also monitors the average tenure of our Board members and seeks to achieve a variety of director tenures in order to benefit from long-tenured directors’ institutional knowledge and newly-elected directors’ fresh perspectives. Over the past several years, the Nominating Committee and the Board has taken the opportunity to refresh the composition of the Board by replacing our longest-tenured directors departing from the Board with new directors.
 
The Nominating Committee seeks to recommend candidates that have adequate time to devote to Board activities, recognizing that public company board of directors responsibilities command a significant portion of directors’ time. Accordingly, the Company maintains an overboarding policy that prohibits directors from simultaneously serving on more than four public company boards other than the Company’s Board.
 
 
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In evaluating potential director candidates, the Nominating Committee considers, among other factors, the experience, qualifications and attributes listed below and any additional characteristics that it believes one or more directors should possess, based on an assessment of the needs of our Board at that time. Our Guidelines on Governance provide that, in general, nominees for membership on the Board should:

have demonstrated management or technical ability at high levels in successful organizations;

have experience relevant to our operations, such as real estate, REITs, healthcare, finance or general management;

be well-respected in their business and home communities;

have time to devote to Board duties; and

be independent from us and not related to our other directors or employees.

In addition, our directors are expected to be active participants in governing our enterprise, and our Nominating Committee looks for certain characteristics common to all Board members, including integrity, independence, leadership ability, constructive and collegial personal attributes, candor and the ability and willingness to evaluate, challenge and stimulate.
 
No single factor or group of factors is necessarily dispositive of whether a candidate will be recommended by our Nominating Committee. The Nominating Committee considers and applies these same standards in evaluating individuals recommended for nomination to our Board by our stockholders in accordance with the procedures described in this Proxy Statement under “Requirements for Submission of Stockholder Proposals, Director Nominations and Other Business.” Our Board’s satisfaction of these criteria is implemented and assessed through ongoing consideration of directors and nominees by the Nominating Committee and the Board, as well as the Board’s annual self-evaluation process, as described in more detail below. Based upon these activities, our Nominating Committee and our Board believe that the director-nominees named in this Proxy Statement satisfy these criteria.
 
We have from time to time retained search firms and other third parties to assist us in identifying potential candidates based on specific criteria that we provided to them, including the qualifications described above. We may retain search firms and other third parties on similar or other terms in the future.
 
Annual Board Evaluation Process
 
The Board recognizes that a robust and constructive evaluation process is an essential component of good corporate governance and Board effectiveness. The Board and each of its committees conduct self-evaluations related to their performance on an annual basis. Through this process, directors provide feedback and assess Board, committee and director performance, including areas where the Board believes it is functioning effectively and areas where the Board believes it can improve.
 
Our Nominating Committee supervises the annual self-evaluations and uses various processes from year to year in order to solicit feedback, including periodic in-person interviews conducted by the Presiding Director with each of the Board members. The Board and each committee review and discuss the evaluation results, and take this information into account when assessing the qualifications of the Board and further enhancing the effectiveness of the Board and its committees over time.
 
Director Independence
 
Our Guidelines on Governance require that at least a majority of the members of our Board meet the criteria for independence under the rules and regulations of the NYSE. For a director to be considered independent under the NYSE’s listing standards, the director must satisfy certain bright-line tests, and the Board must affirmatively determine that the director has no direct or indirect material relationship with us. Not less than annually, our Board evaluates the independence of each non-management director on a case-by-case basis by considering any matters that could affect his or her ability to exercise independent judgment in carrying out the responsibilities of a director, including all transactions and relationships between that director, members of his or her family and organizations with which that director or family members have an affiliation, on the one hand, and us, our subsidiaries and our management, on the other hand. Any such matters are evaluated from the standpoint of both the director and the persons or organizations with which the director has an affiliation. Each director abstains from participating in the determination of his or her independence.
 
 
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Based on its most recent review, the Board has affirmatively determined that each of our non-employee directors has no direct or indirect material relationship with us and qualify as independent under the NYSE’s listing standards. Ms. Cafaro is not considered independent under the NYSE listing standards due to her employment as our Chief Executive Officer.
 
Leadership Structure and Independent Presiding Director
 
Our Board recognizes that one of its key responsibilities is to evaluate and determine its optimal leadership structure so as to provide effective oversight of management and a fully engaged, high-functioning Board. The Board understands that no single approach to Board leadership is universally accepted and that the appropriate leadership structure may vary based on a company’s size, industry, operations, history and culture. Consistent with this understanding, our Board, led by our Nominating Committee, annually assesses its leadership structure in light of our operating and governance environment at the time to achieve the optimal model for us and for our stockholders. Following its most recent review, the Board has determined that our existing leadership structure—under which our Chief Executive Officer also serves as Chairman of the Board and a Presiding Director assumes specific responsibilities on behalf of the independent directors—is effective, provides the appropriate balance of authority between those persons charged with overseeing our company and those who manage it on a day-to-day basis and achieves the optimal governance model for us and for our stockholders.
 
Under our Fifth Amended and Restated By-Laws, as amended (our “By-Laws”), and our Guidelines on Governance, our Board has discretion to determine whether to separate or combine the roles of Chief Executive Officer and Chairman of the Board as part of its leadership structure evaluation. Ms. Cafaro has served in both capacities since 2003, and our Board continues to believe that her combined role is most advantageous to us and our stockholders. Ms. Cafaro possesses extensive knowledge of the issues, opportunities and risks facing us, our business and our industry and has consistently demonstrated the vision and leadership necessary to focus the Board’s time and attention on the most critical matters and to facilitate constructive dialogue among Board members on strategic issues. Moreover, the combined roles enable decisive leadership, clear accountability and consistent communication of our message and strategy to all of our stakeholders. These leadership attributes are uniquely important to our company given the value to our business of opportunistic capital markets execution, our history of rapid and significant growth, and our culture of proactive engagement and risk management.
 
In connection with Ms. Cafaro’s service as our Chief Executive Officer and Chairman of the Board, our Guidelines on Governance require that the independent members of our Board annually select one independent director to serve as Presiding Director, whose specific responsibilities include, among other things, presiding at all meetings of our Board at which the Chairman is not present, including executive sessions and all other meetings of the independent directors. The Presiding Director also serves as liaison between the Chairman and the independent directors, approves information sent to the Board and approves Board meeting agendas and meeting schedules to assure that there is sufficient time for discussion of all agenda items. The Presiding Director has authority to call meetings of the independent directors and, if requested by major stockholders, ensures that he or she is available for consultation and direct communication with stockholders. In addition, the Presiding Director reviews with our General Counsel potential conflicts of interest and has such other duties as may be assigned from time to time by the independent directors or the Board. Although the Presiding Director is elected on an annual basis, the Board generally expects that he or she will serve for more than one year. James D. Shelton has served as our Presiding Director since 2016.
 
Management Succession Planning
 
Our Board regularly reviews short- and long-term succession plans for the Chief Executive Officer and other senior management positions. In assessing possible Chief Executive Officer candidates, our independent directors identify the skills, experience and attributes they believe are required to be an effective leader in light of the Company’s strategic plan, business opportunities and challenges. The Board employs a similar approach with respect to evaluating possible candidates for other senior management positions. In general, the Board’s management succession planning is designed to anticipate both “planned” successions, such as those arising from anticipated retirements, as well as unexpected successions, such as those occurring when an executive leaves suddenly to take a new position, or due to death, disability or other unforeseen events.
 
Committees
 
Our Board has five standing committees that perform certain delegated functions for the Board: the Audit and Compliance Committee (the “Audit Committee”); the Compensation Committee; the Executive Committee; the Investment Committee; and the Nominating Committee. Each of the Audit, Compensation and Nominating Committees operates under a written charter that is available in the Corporate Governance section of our website at  www.ventasreit.com/investor-relations/corporate-governance. We also provide copies of the Audit, Compensation and Nominating Committee charters, without charge, upon request to our Corporate Secretary at Ventas, Inc., 353 North Clark Street, Suite 3300, Chicago, Illinois 60654. Information on our website is not a part of this Proxy Statement. Additional details regarding the five standing committees of our Board are described below.
 
 
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Board and Committee Meetings
 
Our Board held a total of five meetings during 2018. Evidencing a strong commitment to our company, each director attended at least 75% of the total meetings of the Board and the committees on which he or she served that were held during 2018. The table below provides current membership and 2018 meeting information for each of our Board committees:
 

Our independent directors meet in executive session, outside the presence of management, at each regularly scheduled quarterly Board meeting and at other times as necessary or desirable. The Presiding Director (currently Mr. Shelton) chairs all regularly scheduled executive sessions of the Board and all other meetings of the independent directors. Members of our Audit, Compensation and Nominating Committees also meet in executive session, outside the presence of management, at each regularly scheduled committee meeting and at other times as necessary or desirable.
 
We strongly encourage, but do not require, directors to attend our annual meetings of stockholders. Other than Mr. Lustig, all directors who were nominated for reelection at our 2018 Annual Meeting of Stockholders attended that meeting.
 
How to Communicate with Directors
 
Stockholders and other parties interested in communicating directly with our Board or any director on Board-related issues may do so by writing to Board of Directors, c/o Corporate Secretary, Ventas, Inc., 353 North Clark Street, Suite 3300, Chicago, Illinois 60654, or by submitting an e-mail to bod@ventasreit.com. Additionally, stockholders and other parties interested in communicating directly with the Presiding Director of the Board or with the independent directors as a group may do so by writing to Presiding Director, Ventas, Inc., 353 North Clark Street, Suite 3300, Chicago, Illinois 60654, or by sending an e-mail to independentbod@ventasreit.com. Communications addressed to our Board or individual members of the Board are screened by our Corporate Secretary for appropriateness before distributing to the Board, or to any individual director or directors, as applicable.
 
AUDIT AND COMPLIANCE COMMITTEE
 
Our Audit Committee assists our Board in fulfilling its responsibilities relating to our accounting and financial reporting practices, including oversight of the quality and integrity of our financial statements; our compliance with legal and regulatory requirements; the qualifications, independence and performance of our independent registered public accounting firm and the performance of our internal audit function.
 
 
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The Audit Committee maintains free and open communication with the Board, our independent registered public accounting firm, our internal auditor and our financial and accounting management. Our Audit Committee meets separately in executive session, outside the presence of management, with each of our independent registered public accounting firm and our internal auditor at each regularly scheduled meeting and at other times as necessary or desirable.
 
Our Board has determined that each member of the Audit Committee is independent and satisfies the independence standards of the Sarbanes-Oxley Act of 2002 and related rules and regulations of the SEC and the NYSE listing standards, including the additional independence requirements for audit committee members. The Board has also determined that each member of the Audit Committee is financially literate and that Messrs. Rakowich and Reed qualify as “audit committee financial experts” for purposes of the SEC’s rules.
 
The Nominating Committee recognizes that Audit Committee members must have adequate time to devote to Audit Committee activities, given that such responsibilities command a significant portion of directors’ time. Accordingly, the Company maintains a policy prohibiting Audit Committee members from simultaneously serving on more than two public company audit committees other than the Company’s.
 
EXECUTIVE COMMITTEE
 
Our Board has delegated to our Executive Committee the power to direct the management of our business and affairs in emergency situations during intervals between meetings of the Board, except for matters specifically reserved for our Board and its other committees. The Executive Committee exercises its delegated authority only under extraordinary circumstances and has not held a meeting since 2002.
 
EXECUTIVE COMPENSATION COMMITTEE
 
Our Compensation Committee has primary responsibility for the design, review, approval and administration of all aspects of our executive compensation program. The Compensation Committee reviews the performance of, and makes all compensation decisions for, each of our executive officers other than our Chief Executive Officer. Our Compensation Committee also reviews the performance of, and makes compensation recommendations to the independent members of our Board for, our Chief Executive Officer.
 
The Compensation Committee meets throughout the year to review our compensation philosophy and its continued alignment with our business strategy and to consider and approve our executive compensation program for the subsequent year. With the assistance of a nationally-recognized, independent compensation consultant, the Compensation Committee discusses changes, if any, to the program structure, assesses the appropriate peer companies for benchmarking purposes, sets base salaries and incentive award opportunities, establishes the applicable performance measures and related goals under our incentive plans, evaluates performance in relation to the established measures and goals and determines annual cash and long-term equity incentive awards for our executive officers.
 
Our executive officers provide support to our Compensation Committee by coordinating meeting logistics, preparing and disseminating relevant financial and other information regarding us and the companies in our compensation peer group as a supplement to the comparative market data prepared by our independent compensation consultant and making recommendations with respect to performance measures and related goals. Our Chief Executive Officer attends meetings at the Compensation Committee’s request and recommends to the Compensation Committee compensation changes affecting our other executive officers. However, our Chief Executive Officer plays no role in setting her own compensation. At various times, our General Counsel and Corporate Secretary, our Assistant General Counsel, Corporate & Securities and our Chief Human Resources Officer may also attend meetings at the Compensation Committee’s request to act as secretary and record the minutes of the meetings, provide updates on legal developments and make presentations regarding certain organizational matters. Our Compensation Committee meets separately in executive session, without management present, at each regularly scheduled meeting and at other times as necessary or desirable.
 
The Compensation Committee meets during the first quarter of each year, typically in January, to (i) review and certify the achievement of pre-established performance goals with respect to our annual cash and long-term equity incentive awards, (ii) determine the appropriate annual cash awards to be earned by our executive officers based on prior-year performance and (iii) determine the appropriate grants of equity awards to our executive officers, the majority of which may be earned based on future performance as measured against specified performance criteria. Our executive officers provide support to our Compensation Committee in this process, and the Chief Executive Officer makes incentive award recommendations with respect to the other executive officers.
 
Our Board has determined that each member of the Compensation Committee is independent and satisfies the independence standards of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the related NYSE listing standards, including the additional independence requirements for compensation committee members. The Board has also determined that each member of the Compensation Committee meets the additional requirements for “outside directors” set forth in Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and “non-employee directors” set forth in Rule 16b-3 under the Exchange Act. In 2018, Richard I. Gilchrist was named the new Chair of the Compensation Committee, replacing long-time Chair Jay M. Gellert.
 
 
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Compensation Committee Interlocks and Insider Participation
 
During the year ended December 31, 2018, Ms. Martino and Messrs. Gilchrist and Shelton (and Mr. Gellert until May 15, 2018) served on our Compensation Committee. No member of the Compensation Committee is, or has been, employed by us or our subsidiaries or is an employee of any entity for which any of our executive officers serves on the board of directors.
 
Independent Compensation Consultant
 
Under its charter, our Compensation Committee has authority to retain, and approve the terms of engagement and fees paid to, compensation consultants, outside counsel and other advisors that the Compensation Committee deems appropriate, in its sole discretion, to assist it in discharging its duties. Any compensation consultant engaged by our Compensation Committee reports to the Compensation Committee and receives no fees from us that are unrelated to its role as advisor to our Board and its committees. Our Compensation Committee meets regularly with the compensation consultant without management present. Although a compensation consultant may periodically interact with company employees to gather and review information related to our executive compensation program, this work is done at the direction and subject to the oversight of the Compensation Committee. Under the Compensation Committee charter, any compensation consultant retained by our Compensation Committee must be independent, as determined annually by the Compensation Committee in its reasonable business judgment, considering the specific independence factors set forth in Rule 10C-1 under the Exchange Act and all other relevant facts and circumstances.
 
Semler Brossy Consulting Group (“SBCG”) was retained to serve as our Compensation Committee’s independent compensation consultant for 2018. Our Compensation Committee retained SBCG to advise it and the independent members of our Board, as applicable, on matters related to our executive compensation levels and program design for 2018. Our Compensation Committee reviews the scope of work provided by its consultant on an annual basis and, in connection with SBCG’s engagement, determined that SBCG met the independence criteria under the Compensation Committee charter. SBCG did not perform any consulting services unrelated to executive compensation for us during the year ended December 31, 2018, and SBCG’s work for the Board and its committees has raised no conflict of interest.
 
INVESTMENT COMMITTEE
 
The function of our Investment Committee is to review and approve proposed acquisitions and dispositions of properties and other investments meeting applicable criteria, in accordance with our Amended and Restated Investment and Divestiture Approval Procedures.
 
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
 
Our Nominating Committee oversees our corporate policies and other corporate governance matters, as well as matters relating to the practices and procedures of our Board, including the following: identifying, selecting and recommending to the Board qualified director-nominees; making recommendations to the Board regarding its committee structure and composition; reviewing and making recommendations to the Board regarding non-employee director compensation; overseeing an annual evaluation of the Board and its committees; developing and recommending to the Board a set of corporate governance guidelines and the corporate code of ethics; and generally advising the Board on corporate governance and related matters.
 
Our Board has determined that each member of the Nominating Committee is independent and satisfies the NYSE listing standards.
 
CORPORATE GOVERNANCE
 
Governance Policies
 
Our Guidelines on Governance reflect the fundamental corporate governance principles by which our Board and its committees operate. These guidelines set forth general practices the Board and its committees follow with respect to structure, function, organization, composition and conduct. These guidelines are reviewed at least annually by the Nominating Committee and are updated periodically in response to changing regulatory requirements, evolving corporate governance practices, input from our stockholders and otherwise as circumstances warrant.
 
 
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Our Global Code of Ethics and Business Conduct sets forth the legal and ethical standards for conducting our business to which our directors, officers and employees, including our Chief Executive Officer, our Chief Financial Officer, and the directors, officers and employees of our subsidiaries must adhere. Our Global Code of Ethics and Business Conduct covers all significant areas of professional conduct, including employment practices, conflicts of interest, unfair or unethical use of corporate opportunities, protection of confidential information and other company assets, compliance with applicable laws and regulations, political activities and other public policy matters, and proper and timely reporting of financial results. See also “Public Policy Matters.”
 
Our Human Rights Policy reflects our commitment to upholding human dignity and equal opportunity in all of our business functions under principles outlined in the United Nation’s Universal Declaration of Human Rights. Our Vendor Code of Conduct is designed to educate our suppliers about our expectations for ethical and responsible business dealings, including upholding human rights, protecting health and safety and pursuing environmental sustainability. Our expectation is that our vendors will treat people with respect and dignity, encourage diversity, promote equal opportunity for all and create an ethical and inclusive culture.
 
Our Guidelines on Governance, Global Code of Ethics and Business Conduct, Human Rights Policy and Vendor Code of Conduct are available in the Corporate Governance section of our website at www.ventasreit.com/investor-relations/corporate-governance. We also provide copies of our Guidelines on Governance, Global Code of Ethics and Business Conduct, Human Rights Policy and Vendor Code of Conduct, without charge, upon request to our Corporate Secretary at Ventas, Inc., 353 North Clark Street, Suite 3300, Chicago, Illinois 60654. Waivers from, and amendments to, our Global Code of Ethics and Business Conduct that apply to our Chief Executive Officer, Chief Financial Officer or persons performing similar functions will be timely posted on our website at www.ventasreit.com. The information on our website is not a part of this Proxy Statement.
 
Transactions with Related Persons
 
Our written Policy on Transactions with Related Persons requires that any transaction involving us in which any of our directors, officers or employees (or their immediate family members) has a direct or indirect material interest be approved or ratified by the Audit Committee or the disinterested members of our Board. Our Global Code of Ethics and Business Conduct requires our directors, officers and employees to disclose in writing to our General Counsel any existing or proposed transaction in which he or she has a personal interest, or in which there is or might appear to be a conflict of interest by reason of his or her connection to another business organization. Our General Counsel reviews these matters with the Presiding Director to determine whether the transaction raises a conflict of interest that warrants review and approval by the Audit Committee or the disinterested members of the Board. In determining whether to approve or ratify a transaction, the Audit Committee or disinterested members of the Board consider all relevant facts and circumstances available to them and other factors they deem appropriate.
 
We did not have any related party transactions during 2018.
 
Risk Management
 
Management has primary responsibility for identifying and managing our exposure to risk, subject to active oversight by our Board of the processes we establish to assess, monitor and mitigate that exposure. The Board, directly and through its committees, routinely discusses with management our significant enterprise risks and reviews the guidelines, policies and procedures we have in place to address those risks, such as our approval process for acquisitions, dispositions and other investments. At Board and committee meetings, directors engage in comprehensive analyses and dialogue regarding specific areas of risk following receipt of written materials and in-depth presentations from management and third-party experts, including an enhanced annual enterprise risk management process and presentation to the Board to better identify risks, owners and mitigants. This process enables our Board to focus on the strategic, financial, operational, legal, regulatory and other risks that are most significant to us and our business in terms of likelihood and potential impact and ensures that our enterprise risks are well understood, mitigated to the extent reasonable and consistent with the Board’s view of our risk profile and risk tolerance.
 
In addition to the overall risk oversight function administered directly by our Board, each of our Audit, Compensation, Nominating and Investment Committees exercises its own oversight related to the risks associated with the particular responsibilities of that committee:
 
Our Audit Committee reviews financial, accounting and internal control risks and the mechanisms through which we assess and manage risk, in accordance with NYSE requirements, and has certain responsibilities with respect to our compliance programs, such as our Global Code of Ethics and Business Conduct, our Global Anti-Corruption Policy, our Political Contributions, Expenditure and Activity Policy and our Amended and Restated Securities Trading Policy.

 
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Our Compensation Committee, as discussed in greater detail below, evaluates whether our compensation policies and practices, as they relate to both executive officers and employees generally, encourage excessive risk-taking.

Our Nominating Committee focuses on risks related to corporate governance, board effectiveness and succession planning. Our Board has adopted an emergency succession plan to facilitate the transition to both interim and long-term leadership in the unlikely event of an untimely vacancy in the position of Chief Executive Officer.

Our Investment Committee is responsible for overseeing certain transaction-related risks, including the review of transactions in excess of certain thresholds, with existing tenants, operators, borrowers or managers, or that involve investments in non-core assets.

The chairs of these committees report on such matters to the full Board at each regularly scheduled Board meeting and other times as appropriate. Our Board believes that this division of responsibilities is the most effective approach for identifying and addressing risk, and through Ms. Cafaro’s combined role as Chief Executive Officer and Chairman, our Board leadership structure appropriately supports the Board’s role in risk oversight by facilitating prompt attention by the Board and its committees to the significant enterprise risks identified by management in our day-to-day operations.
 
Compensation Risk Assessment
 
As part of its risk oversight role, our Compensation Committee annually considers whether our compensation policies and practices for all employees, including our executive officers, create risks that are reasonably likely to have a material adverse effect on our company. In conducting its risk assessment in 2018, the Compensation Committee reviewed a report prepared by management regarding our existing compensation plans and programs, including our severance and change-in-control arrangements, in the context of our business risk environment. In its review, the Compensation Committee noted several design features of our compensation programs that reduce the likelihood of excessive risk-taking, including, but not limited to, the following:
 
a balanced mix of cash and equity compensation with a strong emphasis on performance-based incentive awards;

multiple performance measures selected in the context of our business strategy and often in tension with each other, for example, goals which promote FFO growth and maintaining a strong balance sheet;

regular review of comparative compensation data to maintain competitive compensation levels in light of our industry, size and performance;

incentive award opportunities that do not provide minimum guaranteed payouts, are based on a range of performance outcomes and are plotted along a continuum, and have capped payouts, subject in all cases to the Compensation Committee’s and, in the case of our Chief Executive Officer, the independent Board members’ overall assessment of performance;

equity compensation consisting entirely of full-value awards—pRSUs and time-based RSUs—to provide greater incentive to create and preserve long-term stockholder value;

equity incentive awards granted for future performance with multi-year vesting schedules/performance periods to enhance retention;

minimum stock ownership guidelines that align executive officers with long-term stockholder interests;

our recoupment policy enables our Board to “claw back” incentive compensation in the event of a financial restatement; and

prohibitions on engaging in derivative and other hedging transactions in our securities and restrictions on holding our securities in margin accounts or otherwise pledging our securities to secure loans.

Based on its evaluation, the Compensation Committee has determined, in its reasonable business judgment, that our compensation practices and policies for all employees do not create risks that are reasonably likely to have a material adverse effect on our company and instead promote behaviors that support long-term sustainability and creation of stockholder value.
 
 
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Public Policy Matters
 
We are committed to ethical business conduct and expect our directors, officers and employees to act with integrity and to conduct themselves and our business in a way that protects our reputation for fairness and honesty. Consistent with these principles, in our Global Code of Ethics and Business Conduct, our Global Anti-Corruption Policy and our Political Contribution, Expenditure and Activity Policy, we have established the policies and practices described below with respect to political contributions and other public policy matters.
 
Political Contributions and Expenditures
 
We do not use corporate funds or resources for direct contributions to federal political candidates, parties or campaigns, other than occasional de minimis use of our property, such as using a conference room. Corporate resources include non-financial donations, such as the use of our property in a political campaign or our employees’ use of work time and telephones to solicit for a political cause or candidate.
 
Promotion of Company Interests
 
We do not have a political action committee. However, we may advocate a position, express a view or take other appropriate action with respect to legislative or political matters affecting our company or our interests. We may also ask our employees to make personal contact with governmental officials or to write letters to present our position on specific issues. Any such advocacy is done in compliance with applicable laws and regulations.
 
Political Activities by Company Personnel
 
We believe that our directors, officers and employees have rights and responsibilities to participate in political activities as citizens, including voting in elections, keeping informed on political matters, serving on civic bodies and contributing financially to, and participating in the campaigns of, the political candidates of their choice. Accordingly, our directors, officers and employees are not constrained from engaging in political activities, making political contributions, expressing political views or taking action on any political or legislative matter, so long as they are acting in their individual capacity, on their own time and at their own expense. Directors, officers and employees acting in their individual capacity must not give the impression that they are speaking on our behalf or representing our company in such activities.
 
Relationships with Government Officials
 
Our directors, officers and employees may not maintain any relationship or take any action with respect to public officials that could impugn our integrity or reputation. In particular, our directors, officers and employees may not offer, promise or give anything of value, including payments, entertainment and gifts, to any government official, employee, agent or other intermediary of the United States government or any domestic or foreign government.

 
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EXECUTIVE COMPENSATION
 
Compensation Committee Report
 
The Compensation Committee has reviewed and discussed with management the following Compensation Discussion and Analysis and, based on such review and discussion, has recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference into the 2018 Form 10-K.
 
COMPENSATION COMMITTEE
 
Richard I. Gilchrist, Chair
Roxanne M. Martino
James D. Shelton
 
Compensation Discussion and Analysis
 
This Compensation Discussion and Analysis (“CD&A”) provides a detailed description of our executive compensation philosophy, objectives and programs, the compensation decisions made under those programs and the factors considered by our Compensation Board Members in making those decisions. The CD&A focuses on the compensation of our Named Executive Officers for 2018, who were:
 
Name
Title
Debra A. Cafaro
Chairman and Chief Executive Officer
Robert F. Probst
Executive Vice President and Chief Financial Officer
John D. Cobb
Executive Vice President and Chief Investment Officer
T. Richard Riney
Executive Vice President, Chief Administrative Officer, General Counsel and Ethics and Compliance Officer
Peter J. Bulgarelli
Executive Vice President, Office; President and Chief Executive Officer, Lillibridge Healthcare Services, Inc.
 
As in previous years, we awarded compensation to our Named Executive Officers for 2018 based on policies that closely link compensation to performance. These policies, in structured combination, generate rewards for achievement of high-level company and individual performance and discourage excessive short-term risk taking. This balance is essential to align management with the long-term interests of our stockholders.
 
Executive Summary
 
Our executive compensation program is designed to attract, retain and motivate talented executives, to reward them for the achievement of pre-established company objectives combined with tailored individual goals consistent with our strategic plan and to link compensation to company performance. We compensate executives primarily through base salary, annual cash incentive compensation and long-term equity incentive compensation. Our executive compensation philosophy emphasizes performance-based incentive compensation over fixed cash compensation, so that the vast majority of total direct compensation is variable and not guaranteed. A significant percentage of incentive compensation is in the form of equity awards that may be earned, if at all, based on future performance over a period of three years. This structure appropriately focuses our executive officers on the creation of long-term value and encourages prudent risk evaluation.
 
 
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2018 Performance
 
Long-term Outperformance and Balance Sheet Strength
 


Returns to Stockholders. Our long history of delivering sustained, superior returns to stockholders continued in 2018:
 
 
Our 3.4% TSR in 2018 outperformed the S&P 500 Index and the MSCI REIT Index by nearly eight percentage points. Our TSR also outperformed the MSCI REIT Index and the FTSE NAREIT Equity Health Care Index for the three-, five- and 10-year periods ended December 31, 2018, demonstrating short- and long-term outperformance during varied economic cycles.
   
 
For the period from January 1, 2000 through December 31, 2018 (the 19 full fiscal years of our Chief Executive Officer’s tenure), we delivered compound annual TSR of 23%, dramatically outperforming our peers, the S&P 500 Index and the MSCI REIT Index.
   

We increased our dividend in 2018, marking our 9th consecutive year of dividend growth.

 
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Strategic, Financial and Operating Performance.  We delivered exceptional strategic, financial and operating performance in 2018:
 
Normalized FFO and Same-Store Cash NOI Growth:
   
 
Our high quality and diverse portfolio of assets delivered normalized FFO of $4.07 and same-store cash NOI growth of 1.2%;
   

Effective Balance Sheet Management and Efficient Capital Markets Execution:
 
 
 
Further strengthened our financial condition by refinancing or repaying $3.5 billion of debt, thereby extending our debt maturity profile by 0.7x to 7.0 years and minimizing intermediate-term interest rate exposure, including the renewal and extension of our $900 million term loan at improved pricing, proactive issuance of $1.4 billion in new 10-year senior notes at attractive pricing and effective execution and maintenance of our BBB+ credit rating and strong balance sheet with a 5.6x net debt to adjusted pro forma EBITDA ratio and a fixed charge coverage ratio of 4.6x;
   
Profitable Dispositions:
   
 
Continued our strategic and highly profitable disposition program, harvesting $1.3 billion in proceeds from profitable investments, including the timely receipt of (a) greater than $900 million repayments of well-structured and high unlevered IRR loans and (b) proceeds from the sale of non-core properties at an average 6% yield, redeploying the proceeds into future growth opportunities and improvement of our balance sheet;
   
Value-Creating Investments:
   
 
Made investments of $800 million at a blended 7.5% cash yield to further improve the quality of our portfolio, including an acquisition of a premier independent living seniors housing community located in the appealing Battery Park neighborhood of downtown Manhattan;
   
Research & Innovation Business Growth:
   
 
Elevated and expanded our Research & Innovation Business (grown by 45% since inception) with the nation’s leading research universities and created a $1.5 billion development pipeline consisting of near-term projects with new and existing university relationships;
   
Successful Operator and Partner Collaborations:
   
 
Successful negotiation of collaborative and mutually beneficial arrangements with several of our operators and partners, including lease extensions with Brookdale and a 10-year extension of our exclusive MOB development relationship with PMB, which has nearly 50 years of experience in MOB development with top health systems in the U.S.;
   
Sustainability, Values, Reputation and Industry Leadership:
   
 
Published our high quality and well-received inaugural Corporate Sustainability Report, which provides transparency on our ESG outcomes, actions and policies;
   
 
We were named among Fortune’s “World’s Most Admired Companies” and received numerous prestigious awards in 2018 in recognition of our philanthropy, reputation, commitment to superior governance and results, industry leaders, exemplary stewardship and world-class team;
   
 
First REIT signatory to the CEO Action for Diversity & Inclusion™ pledge, a cross-industry CEO-driven business commitment to advance diversity and inclusion in the workplace, and unconscious bias training was conducted for all employees;
   
 
Established and made public our Vendor Code of Conduct and Human Rights Policy;
   
 
Continued to build an industry-leading portfolio of 72 ENERGY STAR Certified buildings and 38 LEED Certified buildings, which includes more than $430 million of investment in 8 active developments pursuing LEED certification and receipt of a broad range of awards and recognitions during the year in REIT space, healthcare industry and among global corporations, including inclusion in the Dow Jones Sustainability Index (attaining top quartile results across ESG metrics among all North American real estate companies), achieving the #1 rank among public Healthcare REITs in the 2018 GRESB Real Estate Assessment on Sustainability and representation in the FTSE4GOOD Sustainability Index Series;

 
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Identified as a “Winning Company” in the 2020 Women on Boards Gender Diversity Index and a “Corporate Champion” by the Women’s Forum of New York for having an industry-leading 33% female Board of Directors;
   
 
Ventas Charitable Foundation contributed greater than $900,000 to 78 organizations in 2018, including our ongoing 5-year, $1 million marquee partnership with the Greater Chicago Food Depository to alleviate senior hunger; and
   
 
Greater than 90 percent of requests have been met and in excess of $670,000 given to an Employee Charitable Fund, which provides grants to organizations that are directly nominated by our employees.


The 2018 compensation decisions made by our Compensation Board Members reflected our level of achievement overall with respect to the pre-established measures and goals under our annual cash and long-term equity incentive plans and the individual performance and contributions of our Named Executive Officers to our strong financial and operating performance during the year.
 
2018 Executive Compensation
 
In 2018, our compensation decisions again reflected strong alignment between pay and performance. In determining the incentive compensation paid to our Named Executive Officers for 2018, our Compensation Board Members rigorously evaluated company and individual performance relative to the pre-established measures and goals under our annual cash and long-term equity incentive plans.

 
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2018 Base Salary.  Following a review of compensation data for peers with substantially similar roles and responsibilities (as described below under “Benchmarking and Comparable Companies”), Messrs. Probst, Cobb and Riney received increases in their base salaries for 2018 to remain near the market median. Because Mr. Bulgarelli joined the Company during 2018, he did not receive a base salary increase for 2018. Ms. Cafaro did not receive a base salary increase for 2018 and her base salary has been flat since 2015.
 
2018 Annual Cash Incentive Awards.  Cash incentive awards granted to our Named Executive Officers for 2018 performance were earned between the target and maximum levels, ranging from 112% to 174% of their respective target award opportunities, based on our performance with respect to pre-established company financial measures, as further described below in the “Annual Cash Incentive Compensation — Opportunities, Measures and Actual Performance” section.
 
2018 Long-Term Equity Incentive Awards. Our Named Executive Officers received long-term equity incentive awards in 2018 that were consistent with the 2017 awards issued under our newly-redesigned forward-looking long-term equity incentive plan. The 60% pRSU component may be earned, if at all, based on performance against the specified performance criteria from January 1, 2018 through December 31, 2020. The 40% time-based RSU component of the program vests in equal one-third increments beginning on the first anniversary of the grant date. Full details of our long-term equity incentive plan are further described below in the “Long-Term Equity Incentive Compensation — Opportunities, Measures and Performance” section.
 
Pay-for-Performance Alignment
 
The graph below illustrates our long-term pay-for-performance alignment by comparing our Chief Executive Officer’s total direct compensation to our TSR performance (indexed to a 2013 base year) for each of the past five years.


“Total Direct Compensation” includes, for the applicable year, base salary, actual annual cash incentive awards earned, the value of long-term equity incentive awards earned or granted (as applicable) and “All Other Compensation” as reported in the Summary Compensation Table. This graph differs from compensation reported in the 2018 Summary Compensation Table in the following respects:
 
 
For 2013-2016, the period during which our backward-looking plan was in effect, the graph aligns the value of long-term equity incentive awards with the performance year for which they were earned, rather than the year in which they were granted (e.g., long-term equity incentive awards granted in January 2017 for 2016 performance are shown in the graph above as 2016 compensation), consistent with the manner in which our Compensation Board Members evaluated compensation and pay-for-performance under the previous backward-looking plan for our Named Executive Officers.

 
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For 2017 and 2018, the first years our new forward-looking long-term equity incentive plan was in effect, we report the grant date fair value (approximating target level of performance) of the pRSUs granted in 2017 and 2018 that may be earned, if at all, based on performance relative to performance goals measured from January 1, 2017 through December 31, 2019 and January 1, 2018 through December 31, 2020, respectively. Actual payouts will occur in 2020 and 2021, respectively, and will range from 0% - 220% of the target value.
   
 
The 2017 figure excludes one-time time-based restricted stock unit (“RSU”) transition awards received by certain of our Named Executive Officers, which were designed to partially mitigate the impact of a reduction in the realized pay for our Named Executive Officers in 2018 and 2019 resulting from the transition from a backward-looking long-term equity incentive plan to a forward-looking plan because the new forward-looking awards do not pay out, if at all, until 2020 and later. These awards are excluded because they were one-time in nature, did not recur in 2018 or 2019 and the Compensation Committee does not view these awards as a continuing feature of the long-term equity incentive plan.

  Compensation Policies and Practices—Good Governance

Consistent with our commitment to strong corporate governance and responsiveness to our stockholders, our Board maintained the following compensation policies and practices in 2018 to drive performance and serve our stockholders’ long-term interests:
 
 
Balance: The structure of our executive compensation program includes a balanced mix of cash and equity compensation with a strong emphasis on performance-based incentive awards that contain a blend of metrics promoting responsible growth and risk management.
   
 
Capped Opportunity: Our Named Executive Officers’ incentive award opportunities are capped, and the value of their awards is determined based on the Compensation Committee’s or the independent Board members’ assessment of performance with respect to multiple performance measures, including relative TSR, that promote stockholder value.
   
 
Retention: The long-term equity incentive awards granted to our Named Executive Officers measure future performance over a three-year period to enhance retention and alignment with long-term stockholder value.
   
 
Peer Companies: The competitiveness of our executive compensation program is assessed by comparison to the median of a group of peer companies that are comparable to us in terms of enterprise value, market capitalization and total assets.
   
 
Independence: Our Compensation Committee is comprised solely of independent directors and annually engages an independent compensation consultant to advise on matters related to our executive compensation program.
   
 
Change of Control: Our employment agreements and all forward-looking equity award agreements with executive officers do not provide single-trigger change of control benefits, and we prohibit new tax gross-up arrangements under our anti-tax gross-up policy. Only one of our Named Executive Officers has a legacy agreement with a tax gross-up provision.
   
Stock Ownership Guidelines: We maintain meaningful stock ownership guidelines for our executive officers and non-employee directors that promote a long-term stockholder perspective.
   
Risk Review: Our Compensation Committee annually reviews and assesses the potential risks of our compensation policies and practices for all employees.
   
Clawback Policy: Our recoupment policy enables our Board to “claw back” incentive compensation in the event of a financial restatement.
   
Limited Perquisites: Our executive officers receive limited perquisites and other personal benefits that are not otherwise generally available to all of our employees.
   
 
No Pledging or Hedging: Our Amended and Restated Securities Trading Policy (“Securities Trading Policy”) prohibits our executive officers and directors from engaging in derivative and other hedging transactions in our securities and restricts our executive officers and directors from holding our securities in margin accounts or otherwise pledging our securities to secure loans without the prior approval of the Audit Committee (no executive officer or director pledged or held our securities in margin accounts at any time during 2018).

 
2019 PROXY STATEMENT
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PROACTIVE INVESTOR OUTREACH

Investor outreach and maintaining open lines of communication with our stockholder are critical components of our executive compensation and corporate governance programs. We regularly solicit feedback from and engage in robust discussions with our investor in an effort to ensure we are being responsive to our stockholder and keeping abreast of best practices.
 
Recently, we gained valuable insight from engaging with our stockholders on a consistent basis before, during and after we redesigned our long-term equity incentive compensation plan in 2017, Below is a summary of these recent efforts:
 



 
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Based on these discussions, we learned that our stockholders generally:

 
approve of the overall structure of our executive compensation program and diversity of goals, particularly our use of balanced metrics of growth, risk management and capital structure to mitigate risk and promote responsible, sustained long-term growth;
   
approve of our implementation of the executive compensation program, the factors considered and the decisions made under the program;
   
approve of our proxy disclosures regarding our executive compensation program and corporate governance best practices;
   
support our pay-for-performance alignment; and
   
endorse our corporate governance practices.
 
2016-2017 Responsiveness to Constructive Feedback
 
We have also received constructive feedback from our investors. After careful consideration of this feedback, we have made significant and responsive modifications to our executive compensation program, beginning with the 2017 compensation cycle.
 

The key features of our current program are consistent with the feedback we received from our largest stockholders, as described in further detail below in the section entitled, “Long-Term Equity Incentive Compensation — Opportunities, Measures and Performance.” We believe this redesigned program enhances alignment of pay and performance, is responsive to investor feedback and provides simpler, clear objectives, while achieving our goals of attracting, retaining and motivating talented executives and rewarding superior performance in the context of our business risk environment.

 
2019 PROXY STATEMENT
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Following initial disclosure of the compensation program redesign in our 2017 Proxy Statement, these changes were well-received by our investors and we received support from more than 95% of our stockholders with respect to our 2017 advisory vote on our Named Executive Officers’ compensation.
 
2018 Responsiveness to Constructive Feedback
 
We received support from nearly 60% of our stockholders with respect to our 2018 advisory vote on our Named Executive Officers’ compensation. In response to this advisory vote on our Named Executive Officers’ compensation, together with our Compensation Committee Chair, we continued our extensive stockholder outreach program to a significant number of our largest investors in 2018 and 2019.
 
We received varied and diverse constructive feedback from our investors during our 2018 and 2019 outreach programs. Some common themes were the following:


 
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Objectives of Our Compensation Program
 
We recognize that effective compensation strategies are critical to recruiting, incentivizing and retaining key employees who contribute to our long-term success and thereby create value for our stockholders. Accordingly, our compensation program is designed to achieve the following primary objectives:
 
attract, retain and motivate talented executives;
   
reward performance that meets or exceeds pre-established company and tailored individual goals consistent with our strategic plan, while maintaining alignment with stockholders;
   
provide balanced incentives that discourage excessive risk-taking;
   
retain sufficient flexibility to permit our executive officers to manage risk and adjust appropriately to meet rapidly changing market and business conditions;
   
evaluate performance by balancing consideration of those measures that management can directly and significantly influence with market forces that management cannot control (such as monetary policy and interest rate expectations), but that impact stockholder value;
   
encourage executives to become and remain long-term stockholders of our company; and
   
maintain compensation and corporate governance practices that support our goal to deliver sustained, superior returns to stockholders.
 
We align the interests of our executive officers and stockholders by maintaining a performance- and achievement-oriented environment that provides executives with the opportunity to earn market-competitive levels of cash and equity compensation for strong performance measured against key strategic, financial and operating goals that create long-term stockholder value.
 
Benchmarking and Comparable Companies
 
For 2018 benchmarking purposes, SBCG provided our Compensation Board Members with comparative market data on compensation practices and programs based on its analysis of a group of peer companies (the “Comparable Companies”) and provided guidance on compensation trends and best practices. Using this market data, SBCG advised the Compensation Board Members and made recommendations with respect to program design and setting base salaries and incentive award opportunity levels for our Named Executive Officers for 2018.
 
In determining 2018 compensation targets for our Named Executive Officers, our Compensation Committee, in consultation with SBCG, considered the competitive positioning of our executive compensation levels relative to compensation data for the Comparable Companies with respect to the following components of pay: base salary; total annual compensation (base salary plus annual incentive awards); long-term equity incentives (annualized expected value of long-term equity incentive awards) and total direct compensation (base salary plus annual incentive awards and annualized expected value of long-term equity incentive awards). Consistent with our compensation philosophy, our Compensation Committee reviewed each element of pay in the context of the Comparable Companies, but targeted approximately the median of the Comparable Companies on an overall, total direct compensation basis, subject to adjustment based on the unique skills, expertise and individual contributions of each Named Executive Officer. Our 2018 executive compensation program was designed to deliver compensation levels above or below these targets if performance exceeded or failed to achieve the goals established for the annual cash and long-term equity incentive awards. We believe this methodology is appropriate for our operating style and reflects the need to attract, retain and stretch top executive talent.
 
The group of Comparable Companies consists of large-cap REITs in our healthcare sector and different sectors (such as office, retail and lodging), but otherwise similar to us in terms of FFO. Based on SBCG’s advice, the Compensation Committee refined and simplified its approach to setting the peer group in 2018 by generally including all publicly-traded REITs with enterprise values of more than $20 billion and having total assets of more than $10 billion, irrespective of direct business fit. This change resulted in Digital Realty Trust, Inc., Realty Income Corp. and Weyerhaeuser Co. being added to the existing 15-company peer group set.
 
The Compensation Committee believes this updated approach will result in a more predictable and consistent peer group consisting of companies within our same industry, while maintaining focus on companies comparable to us in terms of size and talent.

 
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2018 Comparable Companies
American Tower Corp.
AvalonBay Communities, Inc.
Boston Properties, Inc.
Crown Castle International Corp.
Digital Realty Trust, Inc.
Equinix, Inc.
Equity Residential
GGP Inc.
HCP, Inc.
Prologis, Inc.
Public Storage, Inc.
Realty Income Corp.
Simon Property Group, Inc.
SL Green Realty Group, Inc.
The Macerich Company
Vornado Realty Trust, Inc.
Welltower, Inc.
Weyerhaeuser Co.

2019 Comparable Companies
 
In August 2018, the Compensation Committee and SBCG examined the 2018 peer group and concluded that the 18 Comparable Companies identified above continued to be an appropriate mix of companies comparable to us in terms of size and talent. The Compensation Committee utilized the same Comparable Companies for purposes of setting 2019 compensation. GGP Inc. was acquired by Brookfield Property REIT Inc. effective August 28, 2018.
 
Compensation Mix
 
Our executive compensation philosophy promotes a compensation mix that emphasizes variable pay and long-term stockholder value. We believe that an emphasis on incentive compensation creates greater alignment with the interests of our stockholders, ensures that our business strategy is executed by decision-makers in a manner that focuses on the creation of long-term value rather than only short-term results, and encourages prudent evaluation of risks. Accordingly, our compensation structure is designed such that a significant portion of Named Executive Officers’ total direct compensation is in the form of equity awards. Under our forward-looking long-term equity incentive plan, equity awards will be earned and vest based on future performance over a period of three years from the grant date.
 
The following chart lays out our 2018 compensation program for our Named Executive Officers and shows our Chief Executive Officer’s base salary, target annual cash incentive compensation and target long-term equity incentive compensation as a percentage of her target total direct compensation for 2018. Ms. Cafaro’s target total direct compensation reflects a heavy weight on long-term equity incentive compensation because our Compensation Board Members believe that, due to her leadership role as our Chief Executive Officer, her compensation structure should reflect significant alignment with our stockholders.
 
 
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Elements of Our Compensation Program
 
For 2018, the compensation provided to our executive officers consisted of the same elements generally available to our non-executive officers: base salary; annual cash incentive compensation; long-term equity incentive compensation; and other perquisites and benefits.
 
Base Salary
 
The base salary payable to each Named Executive Officer provides a fixed component of compensation that reflects the executive’s position and responsibilities. Base salary is generally targeted to approximate the competitive market median of the Comparable Companies, but may deviate from this target based on an individual’s sustained performance, contributions, leadership, experience, expertise and specific roles within our company as compared to the benchmark data. Our Compensation Committee reviews base salaries annually and may make adjustments to better match competitive market levels or to recognize an executive’s professional growth and development or increased responsibilities. The Compensation Committee also considers the success of each executive officer in developing and executing our strategic plans, exercising leadership and creating stockholder value.
 
In determining 2018 base salaries for our Named Executive Officers, our Compensation Board Members analyzed base salary information of the Comparable Companies contained in a report prepared by SBCG. Although the Compensation Board Members periodically consider information from REIT industry and other compensation surveys, they place primary emphasis on publicly-available data from the Comparable Companies’ proxy statements and other SEC filings, which is more detailed by individual executive officer position than the data typically provided in compensation surveys.
 
The Compensation Board Members kept Ms. Cafaro’s base salary in 2018 at the same level it has been since 2015. For 2018, as part of a continuing effort to maintain our Named Executive Officers’ total direct compensation opportunities approximately at the median of our peer group, our Compensation Board Members approved the following base salary levels for our Named Executive Officers:
 
 
Base Salary
Year-Over-Year
% Change
 
2017
2018
Debra A. Cafaro
$ 1,075,000
 
$ 1,075,000
 
0%
Robert F. Probst
615,000
 
627,300
 
2.0%
John D. Cobb
605,000
 
626,175
 
3.5%
T. Richard Riney
560,000
 
571,200
 
2.0%
Peter J. Bulgarelli
 
450,000
 
 
At these levels, the Compensation Board Members considered each Named Executive Officer’s 2018 base salary to continue to be within the competitive range given each individual’s unique skills, expertise and individual contributions. Mr. Bulgarelli was not eligible to receive a base salary increase in 2018 because he commenced employment with the Company during 2018.
 
For the fourth consecutive year, the Compensation Board Members did not increase Ms. Cafaro’s base salary in 2019 and her base salary has remained flat since 2015. For 2019, our Compensation Board Members approved the following base salary increases for certain of our Named Executive Officers (other than Ms. Cafaro):
   
 
Base Salary
Year-Over-Year
% Change
 
2018
2019
Debra A. Cafaro
$ 1,075,000
 
$ 1,075,000
 
0%
Robert F. Probst
627,300
 
646,119
 
3.0%
John D. Cobb
626,175
 
644,960
 
3.0%
T. Richard Riney
571,200
 
576,912
 
1.0%
Peter J. Bulgarelli
450,000
 
468,000
 
4.0%

At these levels, the Compensation Board Members considered each Named Executive Officer’s base salary to be within the competitive range given each individual’s unique skills, expertise and individual contributions.
 
 
2019 PROXY STATEMENT
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Annual Cash Incentive Compensation — Opportunities, Measures and Actual Performance
 
We provide our Named Executive Officers with an annual opportunity to earn cash incentive awards for the achievement of pre-established company financial goals and tailored individual objectives. At the beginning of each performance year, our Compensation Board Members approve specific performance measures, goals and weightings and an award opportunity range (expressed as multiples of base salary and corresponding to threshold, target and maximum levels of performance) for each Named Executive Officer.
 
Cash incentive awards granted to our Named Executive Officers for 2018 performance were earned between the target and maximum levels, ranging from 112% to 174% of their respective target award opportunities. We achieved maximum performance for normalized FFO, fixed charge coverage and debt reduction/refinancing (each goal as further described below) that together accounted for 65% of the award opportunity (or 25% in the case of Mr. Bulgarelli). Performance with respect to MOB operations financial metrics, which accounted for 25% of Mr. Bulgarelli’s 2018 annual cash incentive award opportunity, finished below threshold on a combined basis for this portion of his award. With respect to the tailored individual objectives that accounted for the remaining 35% of the award opportunity (or 50% in the case of Mr. Bulgarelli for his initial partial year of employment with the Company), our Compensation Board Members determined that each Named Executive Officer achieved above target performance, in recognition of each Named Executive Officers’ achievement of his or her tailored individual goals and contribution to our success.
 
2018 Award Opportunities.  In January 2018, our Compensation Board Members approved the 2018 annual cash incentive award opportunities for our Named Executive Officers other than Mr. Bulgarelli, whose 2018 annual cash incentive award opportunity was approved in connection with his commencement of employment on April 9, 2018. The 2018 annual cash incentive award opportunities for all of our other Named Executive Officers remained unchanged from 2017 opportunities.
  
Ms. Cafaro’s annual cash incentive opportunity structure has greater leverage and a wider range of outcomes than the structures of our other Named Executive Officers in support of the view that the Chief Executive Officer’s compensation should be more strongly aligned with stockholders than our other executive officers.
 
2018 Performance Measures and Results.  Below is a summary of the annual cash incentive plan measures and goals approved by our Compensation Board Members, the relative weighting for each performance measure, the reasons why we consider each performance measure to be an important component of our pay-for-performance philosophy, and our results with respect to those measures. Consistent with our compensation philosophy, the 2018 annual cash incentive plan measures and goals were determined taking into consideration our strategic plan and were designed to be challenging, but balanced and also discourage excessive risk-taking. Although these performance measures focus on shorter-term results, they have a counterbalancing effect on each other. They incentivize our Named Executive Officers to effectively meet rapidly changing market and business conditions and make appropriate business adjustments that benefit the long-term interests of our stockholders. For 2018 only, Mr. Bulgarelli’s individual performance component was more heavily weighted because he began his employment on April 9, 2018 and therefore could not drive performance for the Company and Office segment for the full year. As discussed below, Mr. Bulgarelli’s 2019 goal weightings were adjusted to align with our traditional performance measure weightings for a Named Executive Officer with his responsibilities.
 
In the first quarter of the year following the performance year, each Named Executive Officer’s performance is carefully evaluated with respect to the applicable pre-established measures and goals to determine the earned value of the individual’s annual cash incentive award, if any, within the established award opportunity range.

 
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Normalized FFO Per Share
Normalized FFO per share, excluding non-cash items,
for the year ended December 31, 2018
 
Weighting: 40% (15% for Mr. Bulgarelli)
 
Goals:
 
Threshold
$3.95
Target
$4.00
Maximum
$4.05
 
Why does this measure matter?  FFO is a common measure of operating performance for REITs because it excludes, among other items, the effect of gains and losses from real estate sales and real estate depreciation and amortization, to allow investors, analysts and management to compare operating performance among companies and across time periods on a consistent basis. A REIT’s FFO can have a significant impact on the trading price of its common stock and, therefore, its TSR. Normalized FFO is the main measure the Company uses in its publicly-reported earnings and is defined as FFO excluding certain items, such as non-cash income tax items and deal costs/expenses. Though these goals represented a slight reduction from 2017 normalized FFO per share, the goals aligned with our public guidance and the Compensation Committee believed they were appropriately challenging in the current economic and interest rate environment for healthcare REITs. In setting the threshold, target and maximum performance levels, the Compensation Committee considers the Company’s business model, growth rates of peers, size, and the asset classes in which it operates, as well as the desired tradeoffs between growth in FFO per share and maintaining an appropriate risk profile through sound investments.
 
Result:  Achieved Maximum Performance Goal. Our 2018 normalized FFO per diluted share was $4.07. The variance between our actual results and our pre-established goals was largely due to actions led by our Named Executive Officers, principally our property NOI growth and well-structured, profitable investments, including Ardent Health Services, Inc. (“Ardent”) and Brookdale.

 
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Fixed Charge Coverage (Year End)
Fixed charge coverage ratio as of December 31, 2018
 
Weighting: 10% (4% for Mr. Bulgarelli)
 
Goals:
 
Threshold
3.75x
Target
4.00x
Maximum
4.25x
 
Why does this measure matter?  Fixed charge coverage ratio reflects the strength of our balance sheet and our ability to generate sufficient cash flow to meet our debt obligations and continue to pay or increase our dividend. A strong ratio of EBITDA-generation compared to fixed payment obligations—one element of our comprehensive risk management program—is especially important for REITs, which are dividend-paying and required to distribute to stockholders a substantial portion of their annual taxable net income. By maintaining a high fixed charge coverage ratio, we are able to preserve and enhance stockholder value. Even if our EBITDA declines in times of economic cycles or other impacts to our cash flows, high coverage of cash flow to fixed obligations should enable us to generate sufficient free cash flow to meet our fixed obligations such as principal and interest payments and at the same time be able to maintain and even increase our dividend, which is an important component of our value proposition (total return) to stockholders. Strong fixed charge coverage also enables us to maintain a strong BBB or better credit rating, which enhances our cost of capital (a critical component of our continued investment strategy) and provides us with more consistent access to the debt capital markets even during periods of capital market disruption. We take a balanced approach to fixed charge coverage by maintaining a strong coverage ratio, while avoiding suboptimal capitalization from an unnecessarily high ratio.
  
In a rising interest rate environment, merely maintaining a stable fixed charge coverage results in effectively outperforming the prior year’s goals. In addition to this inherent tightening of the goals and in light of our history of strong fixed charge coverage performance, the 2018 goals were increased by 25 basis points at each of the threshold, target and maximum levels relative to our 2017 goals in order to further enhance their rigor.
 
Result:  Achieved Maximum Performance Goal. As of December 31, 2018, our fixed charge coverage ratio was 4.6x. The variance between our actual results and our pre-established goals was largely due to actions led by our Named Executive Officers, including efficient capital markets execution, total debt reduction, effective management of sources and uses, hedging strategies and disciplined and consistent balance sheet management.


 
Debt Reduction/Refinancing
Reduction in Principal from Refinancing or Repayment of 2018-2021 Debt Maturities
through December 31, 2018
 
Weighting: 15% (6% for Mr. Bulgarelli)
 
Goals:
 
Threshold
$1 billion
Target
$1.75 billion
Maximum
$2.5 billion
 
Why does this measure matter?  Debt reduction/refinancing replaced liquidity coverage ratio as a metric for 2018 because a primary focus for our business in 2018 was managing and reducing intermediate-term interest rate risk by reducing or repaying significant 2018-2021 debt maturities, which could have imposed higher interest costs on the Company, particularly in the event of potentially unfavorable capital markets conditions.
 
Result:  Achieved Maximum Performance Goal. As of December 31, 2018, we refinanced or repaid $3.5 billion of our 2018-2021 debt maturities. The variance between our actual results and our pre-established goals was largely due to actions led by our Named Executive Officers, including careful management of our debt maturities and effective and opportunistic repayment and refinancing thereof.


 
 
2019 PROXY STATEMENT
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Lillibridge Financial Performance (Year End)
 
Same-Store Cash NOI, Same-Store Occupancy and Bad Debt for the year ended December 31, 2018
 
Weighting: 25% for Mr. Bulgarelli
 
Goals:*
 
MOB Measure
Achievement
Goal
Weighting
Same-Store MOB Cash NOI
Threshold
1.0%
40%
Target
1.5%
Maximum
2.0%
Same-Store Occupancy
Threshold
91.0%
30%
Target
91.5%
Maximum
92.0%
Non-Same Store MOB Cash NOI
Threshold
$36.62 million
10%
Target
$37.59 million
Maximum
$38.55 million
Cash Leasing Spread
Threshold
-1.0%
10%
Target
0.0%
Maximum
1.0%
FAD Capital Expenditures
Threshold
≤ $55.0 million
10%
Target
≤ $53.5 million
Maximum
≤ $52.0 million

* Certain of these goals were established for certain pools of assets and used certain definitions in place on January 1, 2018; they may differ from other reported same-store pools of assets based on asset sales and intended sales, and/or market definitions.
 
 
Why do these measures matter?  These goals are important measures of the MOB business’s ability to generate internal organic growth and maximize the productivity of these assets.
 
Result:  Below Threshold on a Combined Basis. As of December 31, 2018, Lillibridge achieved (i) same-store cash NOI of less than 1.0%, which was below the threshold level, (ii) same-store occupancy of 91.6%, which was slightly above the target level, (iii) non-same store MOB cash NOI of $38.2 million, which was between the target and maximum levels, (iv) a cash leasing spread of less than (1.0)%, which was below the threshold level and (v) FAD Capital Expenditures of less than $52 million, which was above the maximum level.
 

 
2019 PROXY STATEMENT
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Individual Performance
Individual performance under management
objectives established for each Named Executive Officer
 
Weighting: 35% (50% for Mr. Bulgarelli)
 
Goals:
 
Individual objectives relate to areas of special emphasis within the executive’s particular responsibilities and duties, such as achieving certain cost, NOI or revenue targets, or achieving other extraordinary or unusual accomplishments or contributions, in light of our business risk environment.
 
Why does this measure matter?  A review of each Named Executive Officer’s annual accomplishments enables our Compensation Board Members to evaluate the specific contributions of the Named Executive Officer to our success and more closely link pay to performance.
 
Result:  Between Target and Maximum Performance. Each of our Named Executive Officers achieved between target and maximum performance with respect to his or her tailored individual objectives. The significant accomplishments considered by our Compensation Board Members in determining the individual performance component of our Named Executive Officers’ 2018 annual cash incentive awards are summarized below.
 
Name
Accomplishments
Debra A. Cafaro
Drove delivery of 3.4% TSR in 2018, outperforming the S&P 500 Index and the MSCI REIT Index by nearly eight percentage points and the MSCI REIT Index and the FTSE NAREIT Equity Health Care Index for the three-, five- and 10-year periods ended December 31, 2018.
 
Oversaw the delivery of strong financial results, including:
a.   normalized FFO of $4.07 and
b.   same-store cash NOI growth of 1.2%.
 
Oversaw improved financial strength and flexibility, and management of intermediate term interest rate and maturity schedule risk, including:
a.    5.6x net debt to adjusted pro forma EBITDA,
b.    4.6x fixed charge coverage and
c.    refinancing/repayment of $3.5 billion of debt, including issuance of $1.4 billion in 10 year fixed senior notes and renewal and extension of our $900 million term loan at improved pricing.
 
Continued emphasis on portfolio reshaping and quality enhancement through:
a.   the timely receipt of (i) greater than $900 million repayments of well-structured and high unlevered IRR loans and (ii) proceeds from the sale of non-core properties at an average 6% yield, and
b.   redeployment of proceeds into future growth opportunities and improvement of our balance sheet.
 
Oversaw strategy evolution with focus on high quality university-based Research & Innovation business, and other key initiatives geared toward growth and strength. Utilized extensive networks and external policy contacts to inform Ventas strategy and investments.
 
Retained and motivated excellent team, including recruitment and onboarding of new Office leader. Emphasized performance, positive culture, cohesion and forward focus on growth and financial strength.
 
Oversaw successful negotiation of collaborative and mutually beneficial arrangements with several of our operators and partners, including Brookdale lease amendments, Kindred “go private” and a 10-year extension of our exclusive MOB development relationship with PMB, which has nearly 50 years of experience in MOB development with top health systems in the U.S.
 
Elevated our ESG efforts and profile, including issuance of our high quality and well-received inaugural Corporate Sustainability Report, being the first REIT signatory to the CEO Action for Diversity & Inclusion™ pledge, being identified as a “Winning Company” in the 2020 Women on Boards Gender Diversity Index and a “Corporate Champion” by the Women’s Forum of New York for having an industry-leading 33% female Board of Directors, inclusion in the Dow Jones Sustainability Index (attaining top quartile results across ESG metrics among all North American real estate companies), achieving the #1 rank among public Healthcare REITs in the 2018 GRESB Real Estate Assessment on Sustainability, recipient of the NAREIT Health Care “Leader in the Light” Award for the third time and representation in the FTSE4GOOD Sustainability Index Series.
 
Earned numerous prestigious recognitions, including being named a Top 100 CEOs in the World by the Harvard Business Review (1 of only 18 named five consecutive years), 100 Most Influential People in Healthcare by Modern Healthcare (four years) and elected as Chair of Real Estate Roundtable by leaders in the industry.

 
2019 PROXY STATEMENT
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Robert F. Probst
Drove the delivery of strong financial results through careful management of Company resources, including:
a.    normalized FFO of $4.07 and
b.    same-store cash NOI growth of 1.2%. 
 
Oversaw improved financial strength and flexibility, and management of intermediate term interest rate and maturity schedule risk, including:
a.    5.6x net debt to adjusted pro forma EBITDA,
b.    4.6x fixed charge coverage and
c.    refinancing/repayment of $3.5 billion of debt, including issuance of $1.4 billion in 10 year fixed senior notes and renewal and extension of our $900 million term loan at improved pricing.
 
Built enhanced teams in IT, Finance and Senior Living Asset Management and recruited and onboarded internal and external top talent and significantly upgraded capabilities.
 
Outstanding external communication with stakeholders, especially regarding senior housing market conditions.
 
Improved capital expenditures management and accounting functions.
 
Significant investment in senior housing data analytics and resources to provide insight generation and enhanced decision-making capabilities.
 
Led strategic process to evolve firm strategy with significant contributions in senior housing thought leadership and developing our competitive position and growth opportunities in our university-based Research & Innovation business.
 
Recognized as the 2018 Chicago Public Company CFO of the Year by the Financial Executives International Chicago Chapter.
John D. Cobb
Led team to make $800 million of attractive, value-creating investments at a blended 7.5% cash yield, including an acquisition of a premier independent living seniors housing community located in the appealing Battery Park neighborhood of downtown Manhattan.
 
Effective oversight and management of active development and redevelopment projects across all asset classes, including continued growth in our university-based Research & Innovation business with significant developments and acquisitions (grown by 45% since inception with a strong pipeline of opportunities). Built and accelerated a strong pipeline of Research & Innovation projects.
 
Received $1.3 billion in disposition proceeds and loan repayments, including timely receipt of (a) greater than $900 million repayments of well-structured and high unlevered IRR loans and (b) proceeds from the sale of non-core properties at an average 6% yield.
 
Key role in negotiating mutually beneficial arrangements with several of our operators to protect stockholder value and foster positive customer relationships, including lease amendments with Brookdale and a 10-year extension of our exclusive MOB development relationship with PMB, which has nearly 50 years of experience in MOB development with top health systems in the U.S.
 
Reorganized Investments team to enhance focus on Research & Innovation and other targeted business segments.
 
Created and oversaw team to evaluate Chicago office space market.
 
Effective transition of assets to Eclipse Senior Living, a newly formed operator, on an accelerated timeline.
T. Richard Riney
Led and managed all legal aspects of investments, divestitures and collaborative and mutually beneficial arrangements with several of our operators.
 
Improved and streamlined risk management review function.
 
Drove superior same-store cash NOI growth in triple-net healthcare business.
 
Reorganized triple-net healthcare team and improved talent.
 
Implemented customer-focused process initiatives to enhance the triple-net customer experience.
 
Optimized risk management through key improvements to our policies and procedures, including improved enterprise risk management program.
 
Enhanced company-wide Integrity and Compliance program.
Peter J. Bulgarelli
 
Decisively and effectively assumed management of our growing Office segment.
Increased leasing focus and tenant retention within MOB segment, resulting in record leasing volume.
Efficiently controlled operating expenses.
 
Implemented customer relationship management program and another initiatives to drive customer satisfaction.
 
Enhanced data analytics capabilities.
 
Restaffed Office asset management and FP&A functions and streamlined reporting processes.
 
Became initial executive sponsor of newly created Asset Management Leadership Council.
 
Served on Ardent board during crucial time of IPO preparation and decision-making.
 
 
2019 PROXY STATEMENT
    46

2018 Earned Awards.  Based on the performance summarized above, in January 2019, our Compensation Board Members approved 2018 cash incentive awards between the target and maximum levels, ranging from 112% to 174% of our Named Executive Officers’ respective target award opportunities, as set forth in the table below:
 
Named Executive Officer
Threshold Opportunity
Target Opportunity
Maximum Opportunity
Actual Payout
Debra A. Cafaro
$ 1,290,000
$ 2,150,000
$ 3,870,000
$ 3,749,600
Robert F. Probst
784,125
1,097,775
1,568,250
1,518,850
John D. Cobb
782,719
1,095,806
1,565,438
1,516,126
T. Richard Riney
714,000
999,600
1,428,000
1,338,036
Peter J. Bulgarelli
450,000
675,000
900,000
752,8241

1 Mr. Bulgarelli’s 2018 annual cash incentive award was guaranteed at no less than the target level for 2018 only because he began his employment on April 9, 2018 and therefore could not drive performance for the Company and Office segment for the full year. However, Mr. Bulgarelli earned an award in excess of the target level for 2018.

The dollar value of each Named Executive Officer’s award is set forth in the “Non-Equity Incentive Plan Compensation” column of the 2018 Summary Compensation Table.
 
2019 Award Opportunities.  In December 2018 and January 2019, our Compensation Board Members approved the 2019 annual cash incentive award opportunities for our Named Executive Officers. The 2019 annual cash incentive award opportunities as a percentage of base salary for all Named Executive Officers remained unchanged from 2018 opportunities.
 
Our Compensation Board Members approved one change to the performance goals for the 2019 annual cash incentive award program as compared to 2018, replacing the debt repayment or refinancing goal with Research & Innovation Development Growth, consistent with our strategic plan for 2019 to focus on developing this significant pipeline of opportunities. All annual cash incentive award weightings remained the same for 2019 (including Research & Innovation Development Growth at 15%), except that Mr. Bulgarelli’s 2019 annual incentive award opportunity will be based 30% on performance relative to Ventas corporate goals, 35% on performance relative to the Office segment and 35% on his individual performance (to match the annual incentive award opportunity weightings applicable to the other Named Executive Officers for his first full year of employment with the Company). In response to investor feedback, we retained the fixed charge coverage ratio goal but further increased the difficulty of the goals for the second consecutive year.
 
Long-Term Equity Incentive Compensation — Opportunities, Measures and Performance
 
Our Compensation Committee believes that a substantial portion of each Named Executive Officer’s compensation should be in the form of long-term equity incentive compensation. While the annual cash incentive plan rewards management actions that positively impact short- and mid-term performance, equity incentive awards encourage management to create and sustain stockholder value over longer periods because their value is directly attributable to changes in the price of our common stock over time. In addition, equity awards promote management retention because their full value cannot be realized until vesting occurs, which generally requires continued employment for multiple years. At the beginning of each performance year, our Compensation Board Members approve specific performance measures, goals and weightings and an award opportunity range (expressed as multiples of base salary and corresponding to threshold, target and maximum levels of performance) for each Named Executive Officer.

 
2019 PROXY STATEMENT
    47

2018 Plan Design
 
In response to constructive feedback on our executive compensation program and corporate governance provided to us by our largest stockholders, we redesigned our long-term incentive compensation program in 2017, switching from a backward-looking plan to a forward-looking plan. With minor adjustments to weightings, we continued the use of this forward-looking plan structure for our 2018-2020 awards:


Our long-term equity incentive compensation program emphasizes our commitment to aligning pay and performance, retaining and motivating talented executives and rewarding superior performance without incentivizing undue risk-taking. In addition, our program is consistent with our overall strategy of targeting the total direct compensation of our Named Executive Officers at approximately the market median, subject to adjustment based on the unique skills, expertise and individual contributions of each Named Executive Officer. The key features of the 2018 program are summarized below.
 
Forward-Looking Rather than Retrospective. The 2018 long-term equity incentive compensation program is prospective instead of retrospective. Performance-based awards will be earned at a higher or lower level (including zero payout) based on future performance, rather than being granted following the satisfaction of specified performance goals.
   
No Qualitative or Discretionary Goals. Consistent with investor feedback, qualitative or discretionary goals, which comprised 50% of the award opportunity under the program prior to 2017, are completely eliminated.
   
Three-Year Measurement Periods. All performance-based award performance periods are three years.
   
Significant Performance-Based Component. The aggregate target award value for each Named Executive Officer in 2018 is allocated such that 60% of the value is performance-based, in the form of pRSUs, and 40% of the value is time-based RSUs. As further described below, the weighting of our CEO’s 2019 long-term equity incentive award tied to performance was increased from 60% to 70% and the dollar value and weighting of the time-based portion was decreased from 40% to 30%.
   
Balanced Mix of Performance Metrics; Substantial Relative TSR Metric Weighting. 44% of the overall award opportunity under the 2018 program (and 73.3% of the pRSU award component) may be earned based on two relative TSR metrics. Consistent with our investors’ strong preference for the maintenance of a risk mitigation metric, 16% of the overall award opportunity (and 26.7% of the pRSU component) may be earned based on the three-year average of the ratio of the Company’s net debt to adjusted pro forma EBITDA.
   
Three-Year Vesting Period. Time-based RSUs will vest in equal installments on each of the first three anniversaries of the grant date to promote retention, generally subject to the Named Executive Officer’s continued employment with the Company on each such date. No portion of the RSUs will be vested as of the grant date. PRSUs vest at the end of the three-year performance period.
   
Double-Trigger Vesting. All awards granted under the 2018 program are subject to double-trigger vesting upon the consummation of a change of control.
   
Dividends Paid on pRSUs when Earned, if at All. Dividend equivalents are accrued and paid on our Named Executive Officers’ pRSUs if and to the extent pRSUs are earned based on performance during the applicable performance period, generally subject to the Named Executive Officer’s continued employment through the end of the applicable performance period.
 
 
2019 PROXY STATEMENT
    48

2018 Performance Goals. For 2018, pRSUs may be earned, if it all, based on the Company’s three-year performance from January 1, 2018 through December 31, 2020 in relation to the following three performance goals.


 
Three Year Relative TSR Compared to the MSCI REIT Index
Our TSR from January 1, 2018 through December 31, 2020
relative to the TSR of the MSCI REIT Index for the same period
 
Weighting: 36.7% of pRSU Component (22% of Overall Award Opportunity)
 
Goals:
 
Below Threshold (No Payout)
Below - 500 basis points
Threshold
- 500 basis points
Target
Equal to Index
Maximum
+ 500 basis points
 
Why does this measure matter?  TSR is the most direct measure of our creation and preservation of stockholder value. The MSCI REIT Index is comprised of small, mid and large cap REITs across a diverse set of industries and therefore represents an appropriate index against which we should compare our long-term TSR performance and reward our Named Executive Officers for superior performance.



Three Year Relative TSR Compared to the FTSE NAREIT Equity Health Care Index
Our TSR from January 1, 2018 through December 31, 2020
relative to the TSR of the FTSE NAREIT Equity Health Care Index for the same period
 
Weighting: 36.7% of pRSU Component (22% of Overall Award Opportunity)
 
Goals:
 
Below Threshold (No Payout)
Below - 500 basis points
Threshold
- 500 basis points
Target
Equal to Index
Maximum
+ 500 basis points
 
Why does this measure matter?  TSR is the most direct measure of our creation and preservation of stockholder value. The FTSE NAREIT Equity Health Care Index is comprised of all healthcare REITs and therefore represents an appropriate index against which we should compare our long-term TSR performance and reward our Named Executive Officers for superior performance.



Three Year Reported Net Debt to Adjusted Pro Forma EBITDA
Reported Net Debt to Adjusted Pro Forma EBITDA from January 1, 2018 through December 31, 2020
(Simple Average of 12 Quarter-Ends)
 
Weighting: 26.7% of pRSU Component (16% of Overall Award Opportunity)
 
Why does this measure matter?  Reported Net Debt to Adjusted Pro Forma EBITDA reflects the strength of our balance sheet and our ability to generate sufficient cash flow earnings to meet our debt obligations. Our commitment to financial strength and flexibility—of which Reported Net Debt to Adjusted Pro Forma EBITDA is a key measure and an important element of our comprehensive risk management program—is especially important for REITs, which are required to distribute to stockholders a substantial portion of their annual taxable net income. By maintaining such financial strength, we are able to preserve and enhance stockholder value. First, during recessionary economic cycles or other impacts to our EBITDA, a strong Reported Net Debt to Adjusted Pro Forma EBITDA enables us to weather downturns and continue to meet our debt obligations without impairing stockholder capital through dilutive equity offerings or distressed asset sales. In addition, this financial strength enables us to create stockholder value by enabling us to be opportunistic as we continue to execute on our acquisition and investment strategy. It also enables us to maintain a strong BBB or better credit rating, which enhances our cost of capital (a critical component of our continued investment strategy) and provides us with more consistent access to the debt capital markets even during periods of capital market disruption. We seek to maintain a strong Reported Net Debt to Adjusted Pro Forma EBITDA ratio, while avoiding suboptimal capitalization from an unnecessarily low ratio. This measure is balanced with our normalized FFO/share growth metric to incent prudent growth while managing risk.



 
2019 PROXY STATEMENT
    49

Form and Amount of 2018 Awards. Our 2018 long-term equity incentive plan consisted of two components: (i) pRSUs, which comprise 60% of the regular award opportunity and (ii) time-based RSUs, which comprise 40% of the regular award opportunity. As further described below, the weighting of our CEO’s 2019 long-term equity incentive award tied to performance was increased from 60% to 70% and the dollar value and weighting of the time-based portion was decreased from 40% to 30%.
 
In accordance with SEC reporting rules, the dollar value of each Named Executive Officer’s 2018 forward-looking equity awards is reported as 2018 compensation in the “Stock Awards” columns of the 2018 Summary Compensation Table in this Proxy Statement (including pRSU awards reported at the Target level), even though (i) the awards, if earned at all, may vest at a higher or lower amount (including zero for below threshold performance) and the stock price may vary at vesting from the grant date price and (ii) the relevant performance period for pRSUs will conclude at the end of 2020 and no portion of the 2018 time-based RSUs vested in 2018.
 
2018 pRSUs
 
The range of pRSU payouts is 0% - 220% of target for Ms. Cafaro and 0% - 180% for the other Named Executive Officers. Ms. Cafaro received pRSUs with a target award opportunity of 464% of her base salary with threshold and maximum award opportunities of 26% of target and 201% of target, respectively. Each Named Executive Officer other than Ms. Cafaro received pRSUs with target award opportunities ranging from 150% - 285% of their base salaries, with threshold and maximum award opportunities of 33% of target and 180% of target, respectively. The table below sets forth each Named Executive Officer’s award opportunity, which was determined by dividing the award dollar amount approved by our Compensation Board Members by the closing price of our stock on the grant date:
 
 Named Executive Officer
Threshold pRSUs
Target pRSUs
Maximum pRSUs
Debra A. Cafaro
23,492
89,157
179,513
Robert F. Probst
10,662
31,987
57,690
John D. Cobb
10,643
31,930
57,587
T. Richard Riney
7,665
22,995
41,391
Peter J. Bulgarelli
4,516
13,549
24,390
 
These awards will be earned, if at all, based on the Company’s performance from January 1, 2018 through December 31, 2020 in relation to the preestablished performance goals described above. Dividends will be accrued on pRSU awards and will be paid if and to the extent pRSUs are earned and ultimately pay out to award recipients.
 
These pRSUs are intended to reward long-term performance, strengthen our pay for performance linkage with our stockholders and enhance retention of our Named Executive Officers.
 
2018 Time-Based RSUs
 
The grant date value of the time-based RSU component was equal to 309% of Ms. Cafaro’s base salary and ranged from 100% to 190% of each other Named Executive Officer’s base salary.
 
Named Executive Officer
Time-Based RSUs
Debra A. Cafaro
59,438
Robert F. Probst
21,325
John D. Cobb
21,287
T. Richard Riney
15,330
Peter J. Bulgarelli
9,034
 
One third of the time-based RSUs will vest on each of the first three anniversaries of the grant date, generally subject to the Named Executive Officer’s continued employment with the Company on each such date.

 
2019 PROXY STATEMENT
    50

These time-based awards are intended to enhance retention among our Named Executive Officers. Dividends are paid on time-based awards in the same manner as paid to all of our stockholders.
 
2019 Award Opportunities.  In response to investor feedback, we made changes to our 2019 long-term equity incentive program. Our Compensation Board Members increased the weighting of Ms. Cafaro’s 2019 long-term equity incentive award tied to performance from 60% to 70% and decreased the dollar value and weighting of the time-based portion from 40% to 30%. In addition, as compared to 2018, we decreased Ms. Cafaro’s threshold long-term equity incentive award opportunity for 2019 from 431% to 393% of her base salary. In doing so, the Compensation Board Members further aligned our Chief Executive Officer’s pay with the Company’s performance.
 
In December 2018 and January 2019, our Compensation Board Members approved the long-term equity incentive award opportunities for the January 1, 2019 – December 31, 2021 performance period for our Named Executive Officers. The long-term equity incentive award opportunities for 2018 and 2019 are shown in the table below:
 
 Named Executive Officer
2018 Total Award Opportunity
2019 Total Award Opportunity
Threshold
Target
Maximum
Threshold
Target
Maximum
Debra A. Cafaro
$ 4,635,000
$ 8,305,000
$ 13,355,000
$ 4,229,550
$ 8,775,000
$ 14,978,925
Robert F. Probst
1,787,805
2,979,675
4,416,192
1,841,439
3,069,065
4,542,217
John D. Cobb
1,784,599
2,974,331
4,408,272
1,838,137
3,063,561
4,534,071
T. Richard Riney
1,285,200
2,142,000
3,170,160
1,298,052
2,163,420
3,201,862
Peter J. Bulgarelli
675,000
1,125,000
1,665,000
842,400
1,404,000
2,077,920

As noted above, as compared to 2018, for 2019, Ms. Cafaro received a reduction of $470,000 (range of opportunity decreased from 431% to 393% of base salary) in her threshold long-term equity incentive compensation opportunity and a reduction of $689,500 in her solely time-based RSU award. Her target and maximum long-term equity incentive compensation opportunities, which represent an entirely at-risk portion of her overall compensation, increased from 773% to 816% and 1,242% to 1393% of her base salary, respectively, with the maximum amount increasing primarily because a larger portion of her long-term equity incentive compensation award (70%) is tied to Company performance.
 
The 2019 long-term equity incentive award opportunities as a percentage of base salary for all Named Executive Officers except Ms. Cafaro and Mr. Bulgarelli remained unchanged from 2018 opportunities. Mr. Bulgarelli’s threshold, target and maximum opportunities were increased from 150%, 250% and 370% of his base salary to 180%, 300% and 444%, respectively, to reflect his excellent 2018 performance and to bring his target total direct compensation closer to the market median.
 
At these levels, the Compensation Board Members considered each Named Executive Officer’s long-term equity incentive award opportunities to be within the competitive range given each individual’s unique skills, expertise and individual contributions.
 
The performance goals and proportional weightings for the long-term equity incentive award program otherwise remained unchanged for 2019.
 
Other Benefits and Perquisites
 
Our executive compensation program focuses on the elements described above, with extremely limited provision of perquisites. Our Named Executive Officers are generally eligible to participate in the same benefit programs that we offer to other employees, which in 2018 included the following:
 
health, dental and vision insurance (of which we paid 90% of the premium in 2018);
   
short-term disability, long-term disability and life insurance coverage (at no cost to the employee); and
   
participation in a 401(k) plan (to which we made matching contributions up to 3.5% of the employee’s base salary, up to the federal limit, in 2018).
 
We believe these benefits are competitive with overall market practices. In addition, we provide certain limited perquisites and other benefits to attract and retain superior employees for key positions. The only benefits provided to our Named Executive Officers in 2018 that was not otherwise available to all employees consisted of legacy supplemental disability and life insurance coverage, including reimbursement for taxes relating to that life insurance coverage, for Ms. Cafaro, as well as an opportunity to receive an executive physical medical examination. Our Compensation Committee periodically reviews the perquisites and other personal benefits provided to each Named Executive Officer and has determined that they are consistent with current market practice. Except for the eligibility to participate in, and our matching contributions to, the 401(k) plan, as described above, we do not provide our Named Executive Officers with any retirement benefits.
 
 
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    51

Severance Benefits
 
Our Named Executive Officers are entitled to receive severance benefits under existing agreements upon certain qualifying terminations of employment (subject to any required payment delay pursuant to Section 409A of the Code). Generally, these severance arrangements support executive retention and continuity of management and provide replacement income if an executive is terminated involuntarily other than for cause.
 
None of our executive officers are entitled to severance benefits solely upon a change of control of our company. Moreover, our Chief Executive Officer is not entitled to any tax gross-ups with respect to payments made in connection with a change of control. Although a long-standing legacy arrangement with Mr. Riney provides a tax gross-up with respect to payments made in connection with a change of control, no such gross-up payment would have been payable to him under the scenarios and assumptions presented under “Potential Payments Upon Termination or Change of Control” in this Proxy Statement. At the time we entered into this arrangement with Mr. Riney, our Compensation Committee considered the potential severance benefits, including any potential tax gross-up, to be necessary to attract and retain Mr. Riney and, based on the market compensation analyses of the Compensation Committee’s independent compensation consultant, to be consistent with then-current competitive market practices. Our Employee Protection and Non-Competition Agreements with Messrs. Probst, Cobb and Bulgarelli do not provide for any tax gross-up payments in connection with a change of control.
 
In 2013, consistent with our commitment to strong corporate governance and responsiveness to our stockholders, our Board adopted a policy against tax gross-up arrangements, which formalized our existing practice of not entering into new tax gross-up arrangements with our executive officers.
 
Tax Considerations
 
Section 162(m) of the Code generally places a limit of $1 million on the amount of compensation that we may deduct in any year with respect to certain covered executive officers. Although we consider the impact of Section 162(m), as well as other tax and accounting consequences, when developing and implementing our executive compensation programs, our Compensation Committee retains flexibility to make compensation decisions that do not meet the requirements for deductibility under Section 162(m) when it considers it appropriate or necessary to do so. In addition, due to ambiguities and uncertainties as to the interpretation and application of Section 162(m) of the Code, no assurances can be given that compensation would satisfy the requirements for deductibility under Section 162(m), even if intended to do so. Accordingly, our Compensation Committee may approve compensation that exceeds the $1 million limit or does not otherwise meet the requirements of Section 162(m).
 
Voluntary Adoption of Proxy Access
 
In 2017, our Board voluntarily amended and restated our bylaws to add a proxy access bylaw. Subject to certain requirements, a stockholder, or group of up to 20 stockholders, owning three percent or more of our outstanding common stock continuously for at least three years, may nominate and require us to include in our proxy materials for an annual meeting of stockholders director candidates constituting up to 20% of the Board, rounding down to the nearest whole number, but not less than two directors.
 
Minimum Share Ownership Guidelines for Executive Officers
 
Our minimum share ownership guidelines require each executive officer to maintain a minimum equity investment in our company based upon a multiple (six times in the case of the Chief Executive Officer and three times in the case of all other executive officers) of his or her base salary at the time his or her compliance with the guidelines is evaluated. Each executive officer must achieve the minimum equity investment within five years from the date he or she first becomes subject to the guidelines and, until that time, must retain at least 60% of the shares of our common stock granted to the executive officer or purchased by the executive officer through the exercise of stock options. The independent members of our Board annually review each executive officer’s compliance with the guidelines as of July 1. All of our executive officers (other than Mr. Bulgarelli, who is still subject to the transition period) are currently in compliance with the minimum share ownership guidelines. Except as described above, our minimum share ownership guidelines and our 2012 Incentive Plan do not specify a minimum holding period for stock options, restricted stock or other equity grants.
 
 
2019 PROXY STATEMENT
    52

Recoupment Policy
 
The Board has adopted a Policy for Recoupment of Incentive Compensation that allows us to recapture amounts paid to our executive officers under certain circumstances. Under this policy, our Compensation Committee may require an executive officer to repay all or a portion of any excess cash or equity incentive compensation he or she received during the preceding three-year period if the incentive compensation was based on achieving certain financial results that were later required to be restated due to our material noncompliance with any financial reporting requirement.
 
Following the SEC’s adoption of final rules regarding executive compensation recoupment policies pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, we will review our recoupment policy and make any changes necessary to comply with the final rules.
 
Anti-Hedging and Pledging Policy
 
Our Amended and Restated Securities Trading Policy prohibits our directors, executive officers and employees from engaging in derivative and other hedging transactions in our securities and restricts our executive officers and directors from holding our securities in margin accounts or otherwise pledging our securities to secure loans without the approval of our Audit Committee. No executive officer or director pledged or held our securities in margin accounts at any time during 2018.

 
2019 PROXY STATEMENT
    53

Compensation Tables
 
2018 Summary Compensation Table
 
The following table sets forth the compensation awarded or paid to, or earned by, each of our Named Executive Officers during 2018, 2017 and 2016 (except for Mr. Bulgarelli, who was not a Named Executive Officer in 2016 or 2017). Due to the way our previous backward-looking equity incentive program was structured, the 2017 and 2016 rows include equity incentive awards that were granted in each such year but that were earned for performance in 2016 and 2015, respectively.
 
For more information regarding the total direct compensation earned by our Named Executive Officers for 2018 performance, see “Compensation Discussion and Analysis—Executive Summary” above.
 
Name and Principal Position
Year
Salary
($)
Bonus
(1)
($)
Stock Awards
(2)
($)
Option
Awards
($)
Non-Equity
Incentive Plan Compensation
(3)
($)
All Other
Compensation
(4)
($)
Total
($)
Debra A. Cafaro
Chairman of the Board and Chief Executive Officer 
2018
$1,075,000
 
$     —
 
$ 8,211,805
 
$       —
 
$ 3,749,600
 
$ 79,797
 
$ 13,116,202
 
2017
1,075,000
 
 
 17,385,196
 
 3,530,299
 
 3,199,200
 
 64,912
 
 25,254,607
 
2016
1,075,000
 
 
 2,918,592
 
 2,415,093
 
 3,196,190
 
61,148
 
9,666,023
 
Robert F. Probst
Executive Vice President and Chief Financial Officer
2018
627,300
 
 
2,838,860
 
 
1,518,850
 
10,591
 
4,995,601
 
2017
615,000
 
 
5,647,649
 
973,955
 
1,357,613
 
10,080
 
8,604,297
 
2016
592,000
 
 
791,466
 
654,928
 
1,289,228
 
9,369
 
3,336,991
 
John D. Cobb
Executive Vice President and Chief Investment Officer
2018
626,175
 
 
2,833,802
 
 
1,516,126
 
14,250
 
4,990,353
 
2017
605,000
 
 
5,502,415
 
906,278
 
1,335,538
 
10,080
 
8,359,311
 
2016
541,000
 
 
730,522
 
604,494
 
1,216,033
 
9,369
 
3,101,418
 
T. Richard Riney
Executive Vice President, Chief Administrative Officer, General Counsel and Ethics and Compliance Officer
2018
571,200
 
 
2,040,801
 
 
1,338,036
 
12,397
 
3,962,434
 
2017
560,000
 
 
4,436,973
 
890,050
 
1,221,500
 
12,222
 
7,120,745
 
2016
541,000
 
 
699,808
 
579,090
 
1,178,163
 
9,369
 
3,007,430
 
Peter J. Bulgarelli
Executive Vice President, Office; President and Chief Executive Officer, Lillibridge Healthcare Services, Inc. (5)
2018
329,178
 
675,000
 
979,000
 
 
77,824
 
4,318
 
2,065,320
 
                             
                             
 

(1)
The amount shown in the Bonus column for Mr. Bulgarelli represents the payment of his minimum guaranteed annual cash incentive for 2018 only (his target annual cash incentive amount), pursuant to the terms of his offer of employment.
   
(2)
The amounts shown in the Stock Awards column for 2018 reflect the full grant date fair value of the 2018 pRSUs and the 2018 time-based RSUs, which are calculated pursuant to FASB guidance relating to fair value provisions for share-based payments. See Note 12 of the Notes to Consolidated Financial Statements included in the 2018 Form 10-K for a discussion of the relevant assumptions used in calculating grant date fair value. For further information on these awards, see the 2018 Grants of Plan-Based Awards Table and 2018 Outstanding Equity Awards at Fiscal Year-End Table in this Proxy Statement. These grant date award values, including the maximum potential value of pRSUs as of the grant date, are shown below.

 Name
Time-Based RSUs
pRSUs (at Target)
Total Grant Date Fair Value
Maximum Value of pRSUs
Debra A. Cafaro
$ 3,321,990
$ 4,889,815
$ 8,211,805
$ 9,845,391
Robert F. Probst
1,191,854
1,647,006
2,838,860
2,970,459
John D. Cobb
1,189,730
1,644,072
2,833,802
2,965,158
T. Richard Riney
856,794
1,184,007
2,040,801
2,131,219
Peter J. Bulgarelli
449,984
529,016
979,000
952,299
 

(3)
The amounts shown in the Non-Equity Incentive Plan Compensation column reflect annual cash incentive awards earned by our Named Executive Officers for performance in 2018, 2017 and 2016. For Mr. Bulgarelli, this amount includes only the amount he earned in excess of his minimum guaranteed bonus for 2018 only.
   
(4)
The amounts shown in the All Other Compensation column for 2018 include supplemental disability insurance premiums (in the amount of $57,913) and supplemental life insurance premiums paid on behalf of Ms. Cafaro; group term life insurance premiums paid on behalf of our Named Executive Officers; reimbursement for the payment of taxes relating to such group term life insurance for Ms. Cafaro (in the amount of $2,333); our matching contributions to the Named Executive Officers’ 401(k) plan accounts (in the amount of $9,625 for each Named Executive Officer other than Mr. Bulgarelli, who received $3,039); and, for Mr. Cobb only, an executive physical medical examination (in the amount of $3,995).
   
(5)
Mr. Bulgarelli commenced employment with the Company on April 9, 2018.
 
 
2019 PROXY STATEMENT
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2018 Grants of Plan-Based Awards Table
 
The following table provides additional information relating to grants of plan-based awards made to our Named Executive Officers during 2018:
 
       
All Other
Stock Awards:
Number of
Shares of Stock or
Units
(#)
Grant Date
Fair Value
of Stock
and
Option
Awards(1)
($)
       
 
Name
Grant
Date
Estimated Possible Payouts Under
 Non-Equity Incentive Plan Awards
Estimated future payouts under equity incentive plan awards
Threshold
($)
Target
($)
Maximum
($)
Threshold
(#)
Target
(#)
Maximum
(#)
Debra A. Cafaro
 
(2)
$1,290,000
 
$2,150,000
 
$3,870,000
 
 
 
 
 
$    —
1/24/2018
(3)
 
 
 
 23,492
 
89,157
 
179,513
 
 
4,889,815
1/24/2018
(4)
 
 
 
 
 
 
59,438
 
3,321,990
Robert F. Probst
 —
 
(2)
784,125
 
1,097,775
 
1,568,250
 
 
 
 
 
1/24/2018
(3)
 
 
 
10,662
 
31,987
 
57,690
 
 
1,647,006
1/24/2018
(4)
 
 
 
 
 
 
21,325
 
1,191,854
John D. Cobb
 
(2)
782,719
 
1,095,806
 
1,565,438
 
 
 
 
 
1/24/2018
(3)
 
 
 
10,643
 
31,930
 
57,587
 
 
1,644,072
1/24/2018
(4)
 
 
 
 
 
 
21,287
 
1,189,730
T. Richard Riney
 
(2)
714,000
 
999,600
 
1,428,000
 
 
 
 
 
1/24/2018
(3)
 
 
 
7,665
 
22,995
 
41,391
 
 
1,184,007
1/24/2018
(4)
 
 
 
 
 
 
15,330
 
856,794
Peter J. Bulgarelli
 
(2)
450,000
 
675,000
 
900,000
 
 
 
 
 
4/9/2018
(3)
 
 
 
4,516
 
13,549
 
24,390
 
 
529,016
4/9/2018
(4)
 
 
 
 
 
 
9,034
 
449,984
  

(1)
The amounts shown reflect the full grant date fair value of the awards calculated pursuant to FASB guidance regarding fair value provisions for share-based payments. See Note 12 of the Notes to Consolidated Financial Statements included in our 2018 Form 10-K for a discussion of the relevant assumptions used in calculating grant date fair value.
   
(2)
The amounts shown represent each Named Executive Officer’s threshold, target and maximum annual cash incentive opportunities for performance in 2018. These opportunities were approved by our Compensation Board Members in January 2018 (and March 2018 in the case of Mr. Bulgarelli). The actual amount of each Named Executive Officer’s award is based on the achievement of certain performance measures as discussed in our CD&A. The annual cash incentive awards earned by our Named Executive Officers for performance in 2018 were paid during the first quarter of 2019. Such earned awards are shown in the “Non-Equity Incentive Plan Compensation” column of the 2018 Summary Compensation Table.
   
(3)
The amounts shown represent our Named Executive Officer’s threshold, target and maximum pRSU award opportunities for performance from January 1, 2018 – December 31, 2020. These opportunities were approved by our Compensation Board Members in January 2018 (and March 2018 in the case of Mr. Bulgarelli). The actual amount of each Named Executive Officer’s earned pRSUs, if any, will be based on the achievement of certain performance measures as discussed in our CD&A.
   
(4)
The amounts shown reflect time-based RSUs granted to our Named Executive Officers as part of the forward-looking long-term equity incentive plan for 2018. These shares vest in three equal annual installments, with the first installment vesting on the first anniversary of the date of grant.
 
 
2019 PROXY STATEMENT
    55

2018 Outstanding Equity Awards at Fiscal Year-End Table
     
The following table sets forth information regarding equity-based awards granted to our Named Executive Officers that were outstanding at December 31, 2018:
 
 
 
Option Awards (1) 
Stock Awards (1) 
Number of
Securities
Underlying Unexercised
Options
Exercisable
(#)
Number of Securities Underlying Unexercised Options Unexercisable
(2)
(#)
Option Exercise
Price
($)
Option Expiration
Date
Number of Shares
or Units That
Have Not Vested
(3)
(#)
Market Value of
Shares or Units That
Have Not Vested(4)
($)
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (5)
(#)
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(4)
($)
Debra A. Cafaro
204,248
 
 
$ 45.00
 
1/24/2021
 
 
$        —
 
 
$        —
 
 
216,906
 
 
46.88
 
1/18/2022
 
 
 
 
 
 
208,802
 
 
55.50
 
1/23/2023
 
 
 
 
 
 
421,756
 
 
51.85
 
1/29/2024
 
 
 
 
 
 
377,758
 
 
65.94
 
1/21/2025
 
 
 
 
 
 
123,870
 
 
53.79
 
1/27/2026
 
 
 
 
 
 
123,870
 
 
65.45
 
5/4/2026
 
 
 
 
 
 
123,870
 
 
73.71
 
8/3/2026
 
 
 
 
 
 
123,870
 
 
63.24
 
11/2/2026
 
 
 
 
 
 
448,720
 
224,359
 
62.22
 
1/18/2027
 
 
 
 
 
 
 
 
 
 
163,987
 
9,607,998
 
344,170
 
21,493,510
 
Robert F. Probst
26,083
 
 
65.94
 
1/21/2025
 
 
 
 
 
 
33,592
 
 
53.79
 
1/27/2026
 
 
 
 
 
 
33,591
 
 
65.45
 
5/4/2026
 
 
 
 
 
 
33,591
 
 
73.71
 
8/3/2026
 
 
 
 
 
 
33,591
 
 
63.24
 
11/2/2026
 
 
 
 
 
 
123,795
 
61,897
 
62.22
 
1/18/2027
 
 
 
 
 
 
 
 
 
 
56,425
 
3,305,941
 
102,169
 
6,366,774
 
John D. Cobb
28,724
 
 
59.21
 
3/8/2023
 
 
 
 
 
 
26,634
 
 
51.85
 
1/29/2024
 
 
 
 
 
 
78,753
 
 
65.94
 
1/21/2025
 
 
 
 
 
 
31,005
 
 
53.79
 
1/27/2026
 
 
 
 
 
 
31,005
 
 
65.45
 
5/4/2026
 
 
 
 
 
 
31,004
 
 
73.71
 
8/3/2026
 
 
 
 
 
 
31,004
 
 
63.24
 
11/2/2026
 
 
 
 
 
 
115,193
 
57,596
 
62.22
 
1/18/2027
 
 
 
 
 
 
 
 
 
 
55,661
 
3,261,178
 
101,343
 
6,314,169
 
T. Richard Riney
78,844
 
 
65.94
 
1/21/2025
 
 
 
 
 
 
29,702
 
 
53.79
 
1/27/2026
 
 
 
 
 
 
29,702
 
 
65.45
 
5/4/2026
 
 
 
 
 
 
29,701
 
 
73.71
 
8/3/2026
 
 
 
 
 
 
29,701
 
 
63.24
 
11/2/2026
 
 
 
 
 
 
113,130
 
56,565
 
62.22
 
1/18/2027
 
 
 
 
 
 
 
 
 
 
42,908
 
2,513,980
 
73,792
 
4,599,289
 
Peter J. Bulgarelli
 
 
 
 
9,034
 
529,302
 
24,390
 
1,486,814
 
 

(1)
All awards are reported on a post-spin-off of Care Capital Properties, Inc. (the “Spin-off”) basis in order to reflect the arithmetic adjustment made to outstanding awards as of August 17, 2015, the effective date of the Spin-off, in order to exclude the impact of the Spin-off. The awards granted to our current Named Executive Officers shown in these columns (awards granted as of December 31, 2018) will vest (or have vested) as follows:
 
 
2019 PROXY STATEMENT
    56

 
 
Ms. Cafaro
Mr. Probst
Mr. Cobb
Mr. Riney
Mr. Bulgarelli
 
 
Options
Shares/Units
Options
Shares/Units
Options
Shares/Units
Options
Shares
Options
Shares/Units
2019
January 18
224,359
87,888
61,897
29,499
57,596
28,864
56,565
23,258
   
January 24
 
19,813
 
7,109
 
7,096
 
5,110
   
April 9
                 
3,012
December 31*
 
0 - 164,657
 
0 – 44,479
 
0 – 43,756
 
0 – 32,401
   
2020
January 18
 
16,661
 
5,601
 
5,510
 
4,320
   
January 24
 
19,813
 
7,108
 
7,096
 
5,110
   
April 9
                 
3,011
December 31*
 
0 – 179,513
 
0 – 57,690
 
0 – 57,587
 
0 – 41,391
 
0 – 24,390
2021
January 24
 
19,812
 
7,108
 
7,095
 
5,110
   
April 9
                 
3,011
 

      *
The pRSU awards are reported on this row in a range because pRSUs may be earned, if at all, based on the Company’s performance against preestablished performance goals from January 1, 2017 – December 31, 2019 or January 1, 2018 – December 31, 2020, as applicable. Earned awards, if any, will be paid out in the first quarter of the year following the end of the performance period.
   
(2)
Outstanding option awards vest in three equal annual installments beginning on the date of grant and expire on the tenth anniversary of the date of grant.
   
(3)
Outstanding restricted stock awards vest in three equal annual installments beginning on the date of grant and time-based RSUs vest in three equal annual installments beginning on the first anniversary of the date of grant. The one-time transition time-based RSUs granted to certain of our Named Executive Officers vest one-third on the first anniversary of the date of grant and two-thirds on the second anniversary of the date of grant. Our Named Executive Officers are generally entitled to dividends paid on unvested shares of restricted stock and all time-based RSUs.
   
(4)
For purposes of the table, the market value of restricted stock, time-based RSUs and pRSU awards that have not vested is determined by multiplying the number of shares/units by $58.59, the closing price of our common stock on December 31, 2018.
   
(5)
Outstanding pRSU awards may be earned and vest, if at all, in a single installment following the end of the applicable three-year performance period the date of grant. The pRSUs are reported at the maximum level because we are required by SEC rules to compare our performance through 2018 under the pRSU grant against the threshold, target and maximum performance levels for the grant and report the applicable potential share number. If the performance is between levels, we are required to report the potential payout at the next highest level. For example, if performance through the previous year exceeded target, even by only a modest amount, and even if it is unlikely that we will achieve the results that would dictate the payment of the maximum amount, we are required by SEC rules to report the maximum potential payouts. For the first year of the 2018-2020 performance period, we tracked between the target and maximum levels of performance against the three pRSU performance goals on a combined basis and have accordingly reported the pRSUs at the maximum award level. For the first two years of the 2017-2019 performance period, we tracked between the target and maximum levels of performance against the three pRSU performance goals on a combined basis and have accordingly reported the pRSUs at the maximum award level.
  
Dividend equivalents are accrued and paid on our Named Executive Officers’ pRSUs if and to the extent pRSUs are earned based on performance during the applicable performance period, generally subject to the Named Executive Officer’s continued employment through the end of the applicable performance period. Thus, the unit amounts reported in the table also include the following accrued dividend equivalents at the maximum level (which are not paid unless and until the performance goals are met with respect to the underlying pRSUs):

 
2017-2019 pRSU Dividend Equivalents
2018-2020 pRSU Dividend Equivalents
Total Dividend Equivalents
Ms. Cafaro
$  903,144
$  425,446
$  1,328,589
Mr. Probst
243,967
136,725
380,693
Mr. Cobb
240,002
136,481
376,483
Mr. Riney
177,719
98,097
275,816
Mr. Bulgarelli
57,804
57,804
 
 
2019 PROXY STATEMENT
    57

2018 Options Exercised and Stock Vested Table
 
The following table sets forth information regarding the value realized by our Named Executive Officers pursuant to the vesting or exercise of equity-based awards during 2018:
 
 
Option Awards(1)
Stock Awards(1) 
Name
Number of
Shares Acquired
Upon Exercise
(#)
Value
Realized
Upon Exercise
($)
Number of
Shares Acquired
Upon Vesting
(#)
Value
Realized
Upon Vesting(2)
($)
Debra A. Cafaro
92,830
 
1,660,029
 
84,546
 
4,624,921
 
Robert F. Probst
 
 
26,368
 
1,441,297
 
John D. Cobb
 
 
25,356
 
1,385,695
 
T. Richard Riney
 
 
21,701
 
1,186,648
 
Peter J. Bulgarelli
 
 
 
 
 

(1)
If a Named Executive Officer used share withholding to pay the exercise price of options or to satisfy the tax obligations with respect to the option exercise or the vesting of restricted stock, the number of shares acquired and the value realized were less than the amounts shown.
   
(2)
The amounts shown in this column reflect the value of the vested shares based on the closing price of our common stock on the vesting dates.
 
Employment and Severance Agreements with Named Executive Officers
 
We are party to the following employment and severance agreements with our Named Executive Officers:
 
(GRAPHIC)
a second amended and restated employment agreement with Ms. Cafaro dated March 22, 2011 (the “Cafaro Employment Agreement”);
   
(GRAPHIC)
 
an offer letter to Mr. Probst dated September 16, 2014, and an employee protection and non-competition agreement with Mr. Probst dated September 16, 2014, as amended (collectively, the “Probst Employee Protection Agreement”);
   
(GRAPHIC)
an employee protection and noncompetition agreement with Mr. Cobb dated October 21, 2013, as amended (the “Cobb Employee Protection Agreement”);
   
(GRAPHIC)
 
an amended and restated employment agreement with Mr. Riney dated July 31, 1998, as amended (the “Riney Employment Agreement”), and an amended and restated change-in-control severance agreement with Mr. Riney dated March 22, 2011 (the “Riney Severance Agreement”); and
   
(GRAPHIC)
an employee protection and noncompetition agreement with Mr. Bulgarelli dated March 20, 2018 (the “Bulgarelli Employee Protection Agreement”).
 
Under these agreements, our Named Executive Officers are entitled to receive severance benefits upon certain qualifying terminations of employment (subject to any required payment delay pursuant to Section 409A of the Code). At the time we entered into each of the agreements, our Compensation Board Members considered the potential severance benefits, including any potential tax gross-up, to be necessary to attract and retain top executives and, generally based on market compensation analyses of the Compensation Committee’s independent compensation consultant, to be consistent with then current competitive market practices. None of the agreements other than the agreement with Mr. Riney provide for any tax gross-up payments in connection with a change of control, and in 2013, consistent with our commitment to strong corporate governance and responsiveness to stockholders, we formalized our existing practice of not entering into new tax gross-up arrangements with our executive officers.
 
 
2019 PROXY STATEMENT
    58

Cafaro Employment Agreement
 
The Cafaro Employment Agreement provides Ms. Cafaro with an annual base salary of not less than $915,000 and eligibility to participate in our incentive and other employee benefit plans. The Cafaro Employment Agreement also requires that we provide Ms. Cafaro with $2 million of life insurance coverage and executive disability coverage that would provide annual benefits of at least 100% of her base salary. Under the Cafaro Employment Agreement, the term of Ms. Cafaro’s employment will continue until terminated or the Cafaro Employment Agreement is amended. Upon termination of Ms. Cafaro’s employment for any reason, Ms. Cafaro will be subject to noncompetition and nonsolicitation restrictions for a period of one year, as well as certain confidentiality and nondisparagement restrictions.
 
Under the terms of the Cafaro Employment Agreement, Ms. Cafaro is entitled to the benefits summarized below upon the event specified. Under certain circumstances, Ms. Cafaro’s severance payments or other benefits are subject to reduction such that there will be no taxes imposed upon her by Section 4999 of the Code or any similar state or local tax.
 
Termination For Cause* or Without Good Reason*
    None

Change of Control* Without a Termination of Employment**
    None

Termination Other Than For Cause or With Good Reason
(In connection with a Change of Control or otherwise)
    Prorated portion of Target Bonus* for the year of termination
    3x sum of (x) base salary in effect, plus (y) Target Bonus for the year of termination
    Full vesting of all restricted stock, stock options and other performance-related compensation (assuming maximum individual and company performance)
    Continuation of medical, dental, life and disability insurance benefits for two years
    Outplacement services, including executive office space and an executive secretary, for one year following termination, with an aggregate cost not to exceed $50,000

Death/Disability**
    Prorated portion of Target Bonus for the year of termination
    Continuation of medical and dental insurance benefits for two years (disability only)

*
“Cause” means Ms. Cafaro’s: (1) conviction of or plea of nolo contendere to a crime involving moral turpitude; or (2) willful and material breach of her duties and responsibilities that is directly and materially harmful to our business and reputation and that is committed in bad faith or without reasonable belief that such conduct is in our best interests and, with respect to (2), the Board’s adoption of a resolution by a vote of at least 75% of its members so finding after giving Ms. Cafaro and her attorney an opportunity to be heard.
   
 
“Change of Control” means the occurrence of any of the following events: (1) beneficial ownership by any “person” or “group” (as those terms are defined in the Exchange Act), other than us, our subsidiaries or any employee benefit plan maintained by us, of 20% or more of any class of our outstanding equity securities or the combined voting power of our outstanding voting securities; (2) persons who constituted our Board as of March 22, 2011, together with any new director whose election or nomination for election was approved by a vote of a majority of those persons, cease for any reason to constitute a majority of our Board; (3) consummation of a merger, consolidation or reorganization involving us (subject to certain exceptions); (4) approval by our stockholders of a complete liquidation or dissolution of our company; (5) approval by our stockholders of an agreement for the assignment, sale, conveyance, transfer, lease or other disposition of all or substantially all of our assets to any person, other than our subsidiaries; (6) any transaction which is reasonably likely to result in our company ceasing to be a REIT; and (7) any other event that the Board determines constitutes an effective Change of Control.
   
 
“Good Reason” means the occurrence of any of the following events: (1) a diminution in Ms. Cafaro’s position, authority, duties or responsibilities as Chief Executive Officer (Ms. Cafaro ceasing to be the chief executive officer of a publicly-traded company following a transaction in which we are a participant will constitute a diminution under this clause (1)); (2) a reduction in Ms. Cafaro’s base salary, maximum annual bonus opportunity or, except as uniformly applicable to all of our similarly situated executives, benefits and perquisites; (3) our requiring Ms. Cafaro to relocate her principal business office to a location more than 30 miles from her existing office; (4) our failure or refusal to comply with any provision of the Cafaro Employment Agreement; (5) certain events of bankruptcy involving our company; and (6) our failure to obtain the assumption of the Cafaro Employment Agreement by any successor to all or substantially all of our business and/or assets.
   
 
“Target Bonus” means the greater of (1) the highest bonus paid to Ms. Cafaro pursuant to our annual incentive plan for any of the three preceding calendar years and (2) the full amount of Ms. Cafaro’s annual bonus, assuming maximum individual and company performance, in respect of service for the year of termination.
   
**
Certain of Ms. Cafaro’s outstanding backward-looking stock option and restricted stock awards would have vested in full upon death, disability or a change of control pursuant to the terms of the applicable incentive plan or award agreement. However, all forward-looking pRSU, time-based RSU and one-time transition time-based RSUs are “double-trigger” and do not vest solely upon a change of control.

 
2019 PROXY STATEMENT
    59

Employee Protection Agreements for Messrs. Probst, Cobb and Bulgarelli
 
The Probst Employee Protection Agreement provides Mr. Probst with an initial annual base salary of $575,000, subject to annual review commencing in 2016, and eligibility to participate in our incentive and other employee benefit plans. Upon termination of Messrs. Probst, Cobb or Bulgarelli’s (collectively, the “Executives”) employment for any reason, the Executives will be subject to noncompetition, nonsolicitation and noninterference restrictions for a period of one year, as well as certain confidentiality and nondisparagement restrictions, except that Mr. Probst’s Employee Protection Agreement was amended in December 2017 to provide for noncompetition restrictions lasting for two years in the event he is terminated without Cause or for Good Reason within one year of a Change in Control (each term as defined in his Employee Protection Agreement). Following a review of competitive market practices, the Employee Protection Agreements for Messrs. Probst and Cobb were also amended in December 2017 to remove the caps on certain cash severance amounts.
 
Under the terms of the Employee Protection Agreements for the Executives, the Executives are entitled to the benefits summarized below upon the event specified. Under certain circumstances, the Executives’ severance payments or other benefits are subject to reduction such that there will be no taxes imposed upon them by Section 4999 of the Code or any similar state or local tax.
 
Termination For Cause* or Without Good Reason*
    None

Change of Control* Without a Termination of Employment**
    None

Termination Other Than For Cause or With Good Reason
(Not in connection with Change of Control)
    Lump sum payment equal to the sum of base salary as then in effect and Target Annual Bonus* (in the case of Messrs. Probst and Bulgarelli) or Maximum Annual Bonus* (in the case of Mr. Cobb) for the year of termination
    Continuation of medical, dental and vision insurance benefits for up to one year (or lump sum equivalent in cash)

Termination Other Than For Cause or With Good Reason
(Within one year of Change of Control)
    Lump sum payment equal to 2x (in the case of Mr. Probst) or 2.5x (in the case of Messrs. Cobb and Bulgarelli) the sum of base salary as then in effect and Maximum Annual Bonus (in the case of Mr. Probst) or Target Annual Bonus (in the case of Messrs. Cobb and Bulgarelli) for the year of termination
    Continuation of medical, dental and vision insurance benefits for up to two years (or lump sum equivalent in cash)

Death/Disability **
    None

*
“Cause” means the Executive’s: (1) indictment for, conviction of, or plea of nolo contendere to any felony or misdemeanor involving fraud, dishonesty or moral turpitude; (2) willful or intentional material breach of duties and responsibilities; (3) willful or intentional material misconduct in the performance of duties; or (4) willful or intentional failure to comply with any lawful instruction or directive of the Chief Executive Officer.
   
 
“Change of Control” means the occurrence of any of the following events: (1) beneficial ownership by any “person” or “group” (as those terms are defined in the Exchange Act), other than us, our subsidiaries or any employee benefit plan maintained by us, of 35% or more of the combined voting power of our outstanding voting securities; (2) persons who constituted our Board as of September 30, 2013 (in the case of Messrs. Probst and Cobb) or March 20, 2018 (in the case of Mr. Bulgarelli), together with any new director whose election or nomination for election was approved by a vote of a majority of those persons, cease for any reason to constitute a majority of our Board; (3) consummation of a merger, consolidation or reorganization involving us (subject to certain exceptions); (4) approval by our stockholders of a complete liquidation or dissolution of our company; or (5) approval by our stockholders of an agreement for the assignment, sale, conveyance, transfer, lease or other disposition of all or substantially all of our assets to any person, other than our subsidiaries.
   
 
“Good Reason” means the occurrence of any of the following events: (1) a material diminution of the Executive’s position, authority or duties; (2) a material reduction in the Executive’s base salary or Target Annual Bonus opportunity; (3) our requiring the Executive to relocate his principal business office to any location that is more than 30 miles from our current Chicago headquarters; or (4) our failure to cause the assumption of the Employee Protection Agreement by any successor to all or substantially all of our business and/or assets, in each case, that is not cured within 30 days after written notice from the Executive.
   
 
“Maximum Annual Bonus” means the full amount of the Executive’s annual bonus, assuming maximum individual and company performance.
   
 
“Target Annual Bonus” means the Executive’s annual bonus, assuming target individual and company performance.
   
**
Certain of the Executives’ outstanding backward-looking stock option and restricted stock awards would have vested in full upon death, disability or a change of control pursuant to the terms of the applicable incentive plan or award agreement. However, all forward-looking pRSU, time-based RSU and one-time transition time-based RSUs are “double-trigger” and do not vest solely upon a change of control.

 
2019 PROXY STATEMENT
    60

Riney Employment Agreement and Riney Change of Control Severance Agreement
 
The Riney Employment Agreement provides Mr. Riney with an annual base salary of not less than $137,000 and eligibility to participate in our incentive and other employee benefit plans. The term of the Riney Employment Agreement is automatically extended by one additional day for each day following the effective date of the agreement that Mr. Riney remains employed by us unless we elect to cease such automatic extension with notice to Mr. Riney. The Riney Employment Agreement will terminate one year following any such notice.
 
Under the terms of the Riney Employment Agreement and the Riney Severance Agreement, Mr. Riney is entitled to the benefits summarized below upon the event specified. The Riney Employment Agreement and the Riney Severance Agreement provide for a gross-up for any taxes imposed upon him by Section 4999 of the Code, or any similar state or local tax, as a result of any payment or benefits to which he may be entitled under such agreements or any other agreement. Any severance benefits payable to Mr. Riney under the Riney Employment Agreement, including any tax gross-up, cannot be duplicated by any severance benefits payable to Mr. Riney under the Riney Severance Agreement.
 
Termination For Cause* or Without Good Reason*
    None

Change of Control* Without a Termination of Employment**
    Payment for any excise taxes he may incur as a result of the Change of Control

Termination Other Than For Cause or With Good Reason
(Not in connection with Change of Control)
    Lump sum payment (not to exceed $3 million, as adjusted annually beginning in 2008 to reflect increases in the Consumer Price Index (“CPI”)) equal to (x) prorated portion of Target Bonus* for the year of termination, plus (y) the sum of base salary as then in effect and Target Bonus for the year of termination
    Credited with one additional year of service for purposes of vesting of restricted stock
    Continuation of medical, dental, life and long-term disability insurance benefits for up to one year

Termination Other Than For Cause or With Good Reason
(Within two years of Change of Control)
    Lump sum payment (not to exceed $3 million, as adjusted annually beginning in 2008 to reflect increases in CPI) equal to 2x the greater of (a) the sum of (x) base salary and Target Bonus as of the date of termination, plus (y) the fair market value of the maximum number of shares of restricted stock authorized to be issued to Mr. Riney for the year of termination, and (b) the sum of (x) base salary and Target Bonus as of the date immediately prior to the effectiveness of the Change of Control, plus (y) the fair market value of the maximum number of shares of restricted stock authorized to be issued to him for the year in which the date immediately prior to the effectiveness of the Change of Control occurs
    Continuation of medical, dental, life and disability insurance benefits for two years
    Payment for any excise taxes he may incur as a result of the Change of Control

Death/Disability**
    Prorated portion of Target Bonus for the year of termination

*
“Cause” means Mr. Riney's: (1) conviction of or plea of nolo contendere to a crime involving moral turpitude; or (2) willful and material breach of his duties and responsibilities that is committed in bad faith or without reasonable belief that such conduct is in our best interests and, with respect to (2), the Board’s adoption of a resolution by a vote of at least 75% of its members so finding after giving Mr. Riney and his attorney an opportunity to be heard.
   
 
“Good Reason” means the occurrence of any of the following events: (1) the assignment to Mr. Riney of duties substantially of a non-executive or non-managerial nature; (2) an adverse change in Mr. Riney’s status or position as an executive officer, including as a result of a diminution in his duties and responsibilities (other than a change directly attributable to our ceasing to be a publicly owned company); (3) a reduction in Mr. Riney’s base salary, bonus opportunity or, except as uniformly applicable to all of our similarly situated executives, benefits and perquisites (which reduction, for purposes of the Riney Employment Agreement, is material); (4) our requiring Mr. Riney to relocate his principal business office to a location more than 30 miles from his existing office; and (5) our failure to obtain the assumption of the Riney Employment Agreement by any successor to all or substantially all of our business or assets, in each case, for purposes of the Riney Employment Agreement, that is not cured within 30 days after written notice from Mr. Riney.
   
 
“Change of Control” means the occurrence of any of the following events: (1) beneficial ownership by any “person” or “group” (as those terms are defined in the Exchange Act), other than us, our subsidiaries or any employee benefit plan maintained by us, of 20% or more of the combined voting power of our outstanding voting securities; (2) persons who constituted our Board as of May 1, 1998, together with any new director whose election or nomination for election was approved by a vote of a majority of those persons, cease for any reason to constitute a majority of our Board; (3) consummation of a merger, consolidation or reorganization involving us (subject to certain exceptions); (4) approval by our stockholders of a complete liquidation or dissolution of our company; (5) approval by our stockholders of an agreement for the assignment, sale, conveyance, transfer, lease or other disposition of all or substantially all of our assets to any person, other than our subsidiaries; and (6) any other event that the Board determines constitutes an effective Change of Control.

 
2019 PROXY STATEMENT
    61

 
“Target Bonus” means the full amount of bonuses and performance compensation that would be payable to Mr. Riney, assuming satisfaction of all performance criteria on which such bonuses and performance compensation are based, in respect of services for the year of termination.
   
**
Certain of Mr. Riney's outstanding backward-looking stock option and restricted stock awards would have vested in full upon death, disability or a change of control pursuant to the terms of the applicable incentive plan or award agreement. However, all forward-looking pRSU, time-based RSU and one-time transition time-based RSUs are “double-trigger” and do not vest solely upon a change of control.
 
Potential Payments Upon Termination or Change of Control
 
The table below reflects the amount of compensation and benefits payable to each Named Executive Officer in the event of:
 

termination for Cause or without Good Reason;

 
termination other than for Cause or with Good Reason (“involuntary termination”);

 
a Change of Control (without any termination of employment);

 
involuntary termination following a Change of Control; and

 
death or disability.

The amounts shown are estimates of the amounts that would be paid to the Named Executive Officers assuming the applicable termination and/or Change of Control occurred on December 31, 2018. The actual amounts can be determined only if and when the Named Executive Officer’s employment is terminated or the Change of Control occurs. Receipt of benefits upon termination is subject to the execution of a general release of claims by the Named Executive Officer or his or her beneficiary. Although our employment and severance agreements with our Named Executive Officers (other than Mr. Riney) contain certain restrictive covenants, including noncompetition and nonsolicitation provisions, no specific value to the company has been ascribed to these covenants in the table.
 
Benefit
Termination for Cause or without Good Reason
Involuntary Termination (without Change of Control)
Change of Control (without Termination)
Involuntary Termination Following Change of Control(1)
Death or Disability
Debra A. Cafaro
 
 
 
 
 
 
 
 
 
 
Prorated portion of Target Bonus for year of termination(2)
$  —
 
$  3,870,000
 
$        —
 
$  3,870,000
 
$ 3,870,000
 
Payment equal to multiple of base salary in effect at termination(3)
 
3,225,000
 
 
3,225,000
 
 
Payment equal to multiple of Target Bonus for year of termination(2)(3)
 
11,610,000
 
 
11,610,000
 
 
Vesting of equity awards(4)(5)
 
31,101,508
 
1,662,140
 
31,101,508
 
19,847,032
 
Continued insurance benefits(6)
 
233,514
 
 
233,514
 
52,843
 
Office space and administrative services
 
50,000
 
 
50,000
 
 
Reduction(7)
 
 
 
 
 
Total for Debra A. Cafaro
$  —
 
$ 50,090,023
 
$ 1,662,140
 
$ 50,090,023
 
$ 23,769,876
 
Robert F. Probst
           
Payment equal to multiple of base salary in effect at termination(3)
 
627,300
 
 
1,254,600
 
 
Payment equal to multiple of Target Annual Bonus for year of termination(2)(3)
 
1,097,775
 
 
 
 
Payment equal to multiple of Maximum Annual Bonus for year of termination(2)(3)
 
 
 
3,136,500
 
 
Vesting of equity awards(4)(5)
 
3,340,581
 
458,525
 
6,839,162
 
6,839,162
 
Continued insurance benefits(6)
 
26,569
 
 
53,138
 
 
Reduction(7)
 
 
 
(2,233,425)
 
 
Total for Robert F. Probst
$  —
 
$ 5,092,225
 
$ 458,525
 
$ 9,049,974
 
$ 6,839,162
 

 
2019 PROXY STATEMENT
    62

Benefit
Termination for Cause or without Good Reason
Involuntary Termination (without Change of Control)
Change of Control (without Termination)
Involuntary Termination Following Change of Control(1)
Death or Disability
John D. Cobb
 
 
 
 
 
 
 
 
 
 
Payment equal to multiple of base salary in effect at termination(3)
 
$  626,175
 
 
$  1,565,438
 
 
Payment equal to multiple of Target Annual Bonus for year of termination(2)(3)
 
 
 
2,739,516
 
 
Payment equal to multiple of Maximum Annual Bonus for year of termination(2)(3)
 
1,565,438
 
 
 
 
Vesting of equity awards(4)(5)
 
3,314,570
 
426,652
 
6,765,166
 
6,765,166
 
Continued insurance benefits(6)
 
26,569
 
 
53,138
 
 
Reduction(7)
 
 
 
 
 
Total for John D. Cobb
$  —
 
$ 5,532,752
 
$ 426,652
 
$ 11,123,257
 
$ 6,765,166
 
T. Richard Riney