HEALTHCARE REIT, INC. 2015-2017 LONG-TERM INCENTIVE PROGRAM
EX-10.3 4 Ex-10.3.htm EX-10.3
EXHIBIT 10.3
HEALTH CARE REIT, INC.
2015-2017 LONG-TERM INCENTIVE PROGRAM
1. Purpose. This 2015-2017 Long-Term Incentive Program (the “Program”) is adopted pursuant to the Amended and Restated Health Care REIT, Inc. 2005 Long-Term Incentive Plan (the “Equity Plan”) and any successor equity plan and is intended to provide an incentive for superior work and to motivate executives and employees of Health Care REIT, Inc. (the “Company”) toward even higher achievement and business results, to tie their goals and interests to those of the Company and its stockholders and to enable the Company to attract and retain highly qualified executives and employees. The Program is for the benefit of Participants (as defined below).
2. Definitions. Capitalized terms used herein without definitions shall have the meanings given to those terms in the Equity Plan. In addition, as used herein:
“All REIT Index” means the MSCI US REIT Index
“Annualized TSR Percentage” means (1*(1 + Cumulative TSR))^(1/3) - 1.
“Average Same-Store Cash NOI Growth” means the average same-store cash net operating income growth for the period January 1, 2015 through September 30, 2018, as calculated in accordance with generally acceptable accounting standards.
“Award” means a grant to a Participant hereunder.
“Award Notice” means the restricted stock unit award agreement with a Participant that sets forth the terms, conditions and limitations of the Participant’s participation in this Program, including, without limitation, the Participant’s Target Award.
“Cause” for termination of the Participant’s employment for purposes of Section 6 means (a) if the Participant is a party to an employment agreement with the Company immediately prior to such termination, and “Cause” is defined therein, then “Cause” shall have the meaning set forth in such employment agreement, or (b) if the Participant is not party to an employment agreement with the Company immediately prior to such termination or the Participant’s employment agreement does not define “Cause,” then “Cause” shall mean: (i) gross negligence or willful misconduct by the Participant in connection with the performance of his or her material duties as an employee of the Company or any Subsidiary; (ii) a breach by the Participant of any of his or her material duties as an employee of the Company or any Subsidiary and the failure of the Participant to cure such breach within 30 days after written notice thereof by the Company or any Subsidiary; (iii) conduct by the Participant against the material best interests of the Company or any Subsidiary or a material act of statutory or common law fraud against the Company, any Subsidiary or the employees of either the Company or any Subsidiary; or (iv) indictment of the Participant of a felony or a misdemeanor involving moral turpitude and such indictment has a material adverse effect on the interests or reputation of the Company or any Subsidiary.
“Change in Corporate Control” shall have the same meaning as set forth in Section 10.1(a) (but substituting “fifty percent (50%)” for “twenty percent (20%)”) and Section 10.1(c) of the Equity Plan.
“Code” means the Internal Revenue Code of 1986, as amended.
“Common Stock” means the Company’s common stock, par value $1.00 per share, either currently existing or authorized hereafter.
“Common Stock Price” means, as of a particular date, the average of the Fair Market Value of one share of Common Stock over the 20 consecutive trading days ending on, and including such date (or if such date is not a trading day, the most recent trading day immediately preceding such date); provided that, if such date is the date upon which a Transactional Change of Control occurs, the Common Stock Price as of such date shall be equal to the fair value, as determined by the Committee, of
the total consideration paid or payable in the transaction resulting in the Transactional Change of Control for one share of Common Stock.
“Cumulative TSR” means ((1*(1 + TSR Year 1)*(1 + TSR Year 2)*(1 + TSR Year 3)) ‑ 1.
“Disability” for termination of the Participant’s employment for purposes of Section 6 means (a) if the Participant is a party to an employment agreement with the Company immediately prior to such termination, and “Disability” is defined therein, then “Disability” shall have the meaning set forth in such employment agreement, or (b) if the Participant is not party to an employment agreement with the Company that defines “Disability,” then “Disability” shall have the same meaning as defined in the Equity Plan.
“Dividend Value” means the aggregate amount of dividends and other distributions paid on one Share for which the record date occurred on or after the first day of the Performance Period and prior to the Issuance Date for the Performance Period (excluding dividends and distributions paid in the form of additional Shares).
“Earned Award” means, with respect to a Participant, the actual number of shares of Restricted Stock that were earned by such Participant pursuant to this Program at the end of the Performance Period.
“Equity Plan” means the Amended and Restated Health Care REIT, Inc. 2005 Long-Term Incentive Plan, as amended from time to time.
“Fair Market Value” means, as of any given date, the fair market value of a security which shall be the closing sale price reported for such security on the principal stock exchange or, if applicable, any other national exchange on which the security is traded or admitted to trading on such date on which a sale was reported. If there are no market quotations for such date, the determination shall be made by reference to the last date preceding such date for which there are market quotations.
“Fixed Charge Coverage” means the Company’s fixed charge coverage, as calculated in accordance with generally acceptable accounting standards and measured as of the last quarter of the Performance Period annualized.
“Good Reason” for termination of the Participant’s employment for purposes of Section 6 means (a) if the Participant is a party to an employment agreement with the Company immediately prior to such termination, and “good reason” is defined therein, then “Good Reason” shall have the meaning set forth in such employment agreement, or (b) if the Participant is not party to an employment agreement with the Company immediately prior to such termination and/or the Participant’s employment agreement does not define “Good Reason”: (i) a substantial adverse change, not consented to by the Participant, in the nature or scope of the Participant’s responsibilities, authorities, powers, functions, or duties; (ii) a breach by the Company of any of its material obligations hereunder; or (iii) a material change in the geographic location at which the Participant must perform his or her services. Unless otherwise provided in an employment agreement to which the Participant is a party immediately prior to such termination, to constitute “good reason termination,” the Participant must: (1) provide written notice to the Company within 90 days of the initial existence of the event constituting “Good Reason;” (2) may not terminate his or her employment unless the Company fails to remedy the event constituting “Good Reason” within 30 days after such notice has been given; and (3) the Participant must terminate employment with the Company no later than 30 days after the end of the 30-day period in which the Company fails to remedy the event constituting “Good Reason.”
“Health Care REIT Index” means the NAREIT Health Care REIT Index comprising of Ventas, Inc, HCP, Inc., Omega Healthcare Investors, Senior Housing Properties Trust, Healthcare Trust of America, Inc., Healthcare Realty Trust, National Health Investors, Medical Properties Trust, America Realty Capital Healthcare Trust, Sabra Health Care REIT, LTC Properties, New Senior Investment Group, Physicians Realty Trust, Universal Health Realty Income and Care Trust REIT, but specifically excluding the Company. Any health care REIT organization that is not in existence for the entire Performance Period shall be omitted from this index.
“Index Return” means, with respect to the Performance Period, the compounded annualized return of the either the Health Care REIT Index, or the All REIT Index, as applicable, over the Performance Period expressed as a percentage. For the avoidance of doubt, the intent of the Committee is that Index Return over the Performance Period be calculated in a manner designed to produce a fair comparison between the Company’s Annualized TSR Percentage and the Index Return for the purpose of determining Relative Performance. In the case of the Health Care REIT Index, the Index Return shall be
calculated by a non-weighted comparison of all the companies that comprise the Health Care REIT Index as of program commencement.
“Participant” means an executive or employee of the Company or any Subsidiary selected by the Compensation Committee to participate in the Program.
“Performance Peers” means HCP, Inc., Ventas, Inc., Healthcare Trust of America, Inc., Healthcare Realty Trust Incorporated and Sabra Health Care REIT, Inc.
“Performance Period” means the period commencing on January 1, 2015 and concluding on the earlier of (i) December 31, 2017, or (ii) a Change in Corporate Control.
“Program” means this Health Care REIT, Inc. 2015-2017 Long-Term Incentive Program, as amended from time to time.
“Qualified Termination” means termination of a Participant’s employment for Good Reason, by reason of the Participant’s death, Disability, by the Company without Cause, Retirement and in the case of a Participant who is party to an employment agreement with the Company, a non‑renewal by the Company of the term of such agreement.
“Relative Performance” means the Annualized TSR Percentage relative to the applicable Index Return.
“Relative Same-Store Cash NOI Growth” means the differential between the Company’s Average Same-Store Cash NOI Growth and the Performance Peer Group’s Average Same-Store Cash NOI Growth for the same period.
“Retirement” means the voluntary termination of employment by a Participant after attaining age 55, completing ten consecutive years of service and if the sum of the Participant’s age and years of service to the Company is equal to 70 or more; provided that the Participant (a) delivers to the Company, at least six months prior to the date of his or her retirement, written notice specifying such retirement date and the Participant remains in the continuous service of the Company from the date the notice is provided until his or her retirement date, and (b) enters into a retirement agreement with the Company that includes (i) a customary release of claims against the Company and its affiliates and (ii) non-competition, non-solicitation, non-disparagement and non-disclosure covenants in favor of the Company.
“Target Award” means a Participant’s target award, expressed in numbers of Restricted Stock Units, for the Performance Period, as set forth in the Participant’s Award Notice.
“Total Shareholder Return” or “TSR” means the compounded annual growth rate, expressed as a percentage (rounded to the nearest tenth of a percent (0.1%)), in the value per share of Common Stock during the Performance Period due to the appreciation in the price per share of Common Stock and dividends paid during the Performance Period, assuming dividends are reinvested. Total Shareholder Return or TSR for any 12-month period shall be calculated as follows: (i) the Common Stock Price at the end of the period plus dividends paid during the 12-month period divided by (ii) the Fair Market Value of the Common Stock at the beginning of the period, minus (iii) 1. As set forth in, and pursuant to, Section 8 of this Agreement, appropriate adjustments to the Total Shareholder Return shall be made to take into account all stock dividends, stock splits, reverse stock splits and the other events set forth in Section 8 that occur during the Performance Period.
“Transactional Change of Control” means a Change in Corporate Control resulting from any person or group making a tender offer for Common Stock, a merger or consolidation where the Company is not the acquirer or surviving entity or consisting of a sale, lease, exchange or other transfer to an unrelated party of all or substantially all of the assets of the Company.
“Valuation Date” means the earlier of (a) December 31, 2017, or (b) the date upon which a Change of Control shall occur.
3. Administration
(a) The Program shall be administered by the Compensation Committee in accordance with the Equity Plan. The Compensation Committee shall have the discretionary authority to make all determinations (including, without limitation, the interpretation and construction of the Program and the determination of relevant facts) regarding the entitlement to any Award hereunder and the amount of any Award to be paid under the Program (including the number of shares of Restricted Stock issuable to any Participant), provided such determinations are made in good faith and are consistent with the terms, purpose and intent of the Program. In particular, but without limitation and subject to the foregoing, the Compensation Committee shall have the authority:
(i) to select Participants under the Program;
(ii) to determine the Target Award and any formula or criteria for the determination of the Target Award for each Participant and to determine the Earned Award;
(iii) to determine the terms and conditions, consistent with the terms of this Program, which shall govern Award Notices and all other written instruments evidencing an Award hereunder, including the waiver or modification of any such conditions;
(iv) to adopt, alter and repeal such administrative rules, guidelines and practices governing the Program as it shall from time to time deem advisable; and
(v) to interpret the terms and provisions of the Program and any Award granted under the Program (and any Award Notices or other agreements relating thereto) and to otherwise supervise the administration of the Program.
(b) Subject to the terms hereof, all decisions made by the Compensation Committee in good faith pursuant to the Program shall be final, conclusive and binding on all persons, including the Company and the Participants. No member of the Compensation Committee, nor any officer or employee of the Company acting on behalf of the Compensation Committee, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to this Program, and all members of the Compensation Committee and each and any officer or employee of the Company acting on their behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company in respect of any such action, determination or interpretation.
4. Determination of Awards
(a) Each Participant’s Award Notice shall specify such Participant’s Target Award.
(b) The percentage of a Participant’s Target Award that may be earned for the Performance Period shall be determined as follows: 35 percent of the Target Award shall be earned based on the Company’s Relative Performance to the Health Care REIT Index; 15 percent of the Target Award shall be earned based on the Company’s Relative Performance to the All REIT Index; 15 percent of the Target Award shall be earned based on the Company’s Annualized TSR Percentage; 20 percent of the Target Award shall be earned based on the Company’s Fixed Charge Coverage; and 15 percent of the Target Award shall be earned based on the Company’s Relative Same-Store Cash NOI Growth; and as further set forth on Exhibit A.
(c) Depending on the weighted average score for the Company’s performance during the Performance Period as determined pursuant to Exhibit A, the percentage of a Participant’s Target Award that may be earned for the Performance Period shall be determined as follows:
Threshold | Target | High | Extraordinary |
50% | 100% | 125% | 150% |