Value-Added Transactions | ◆Steady Earnings Growth over the Past Three Years | | Two consecutive yearsSustainable Future
| $1.1 Billion new investments closed in 2022 worldwide $13 Billion new investments closed since the beginning of double digit growth in net income2019 | | | | 17.6 Years Weighted-Average Lease and Normalized FFO(2)Loan Maturity |
| ◆ | 122%Double-digit year-over-year growth in total pro forma gross assets(1)net income of 37.6% in 2022, with an approximate 34% cumulative annual growth rate since the beginning of 20192020
|
| ◆ | Steady growth in Normalized FFO(1) over the past three years, with an approximate 25% cumulative annual growth rate since the beginning of 2020 |
| ◆ | Continued to improve tenant diversification with no single property representing more than 3% of our overall portfolio(1) |
| ◆ | Steady dividend growth with 10 consecutive years of dividend increases that continued in 2022, with 3.6% year-over-year growth |
Dividend per Share Growth (3.8% CAGR since 2012) | (1) | Refer to Appendix A for our definition of total pro forma gross assets and a reconciliation of total assets to total pro forma gross assets.
|
| (2) | Refer to Appendix A for our definition of FFO and Normalized FFO and a reconciliation of net income to FFO and Normalized FFO. |
| (2) | Our largest tenant concentration was 19.8% as of December 31, 2022 on a total adjusted gross asset basis. Refer to Appendix A for our definition of total adjusted gross assets and a reconciliation of total assets to total adjusted gross assets. |
| (3) | As of December 31, 2022. |
| | | 2820 Proxy Statement and Notice of 20222023 Annual Meeting | | |
| | | Compensation Discussion and Analysis | | |
Total Stockholder Return Performance ◆ | Since our IPO, we have generated over $8.0Our sustained payment of well-covered cash dividends has resulted in exceptional relative value to shareholders in the face of 2022’s global inflation and interest rate spikes
|
◆ | $4.32 billion in stockholder value creation, with over $5 billion in value createdcumulative dividends paid since the beginning of 2019IPO |
Cumulative5-Year TSR GrowthSince-IPO (Value of $100 invested in 2016)
◆ | Building on our strong total stockholder returns in 2021, we continue to provide consistent value creation on an absolute basis resulting in a two-year total stockholder return of +25% and three-year total stockholder return of +73%:
|
| | | | | | | | | | | | | | | | | | | | | | 1-Year TSR | | 2-Year TSR | | 3-Year TSR | | 5-Year TSR | | 10-Year TSR | | Since-IPO TSR | | | | | | | | Medical Properties Trust | | 14% | | 25% | | 73% | | 160% | | 357% | | 661% | | | | | | | | Dow Jones U.S. Real Estate Health Care | | 16% | | 5% | | 27% | | 38% | | 102% | | 320% | | | | | | | | S&P Global REIT | | 33% | | 22% | | 52% | | 57% | | 163% | | 211% |
◆ | Steady dividend growth with 9 consecutive years of dividend increases that has continued in 2021, with 3.7% year-over-year growth
|
Dividend per Share Growth
3.8% CAGR since 2012on July 7, 2005)
| | | | | | | | | | | | | | | | | | | As of December 31, 2022 | | | | | | | | | | | | | | Since IPO TSR | | 10-Year TSR | | 5-Year TSR | | 1-Year TSR | | | | | | | | Medical Properties Trust | | | | | | 288% | | 77% | | 10% | | -49% | | | | | | | | Dow Jones U.S. Real Estate Health Care | | | | | | 228% | | 32% | | 7% | | -22% | | | | | | | | S&P Global REIT | | | | | | 138% | | 63% | | 10% | | -24% |
| | | | | Proxy Statement and Notice of 20222023 Annual Meeting 2921 |
| | | Compensation Discussion and Analysis | | |
Stockholder Engagement | | | Stockholder support forOur stockholders have continuously and strongly approved our Say-on-Pay proposal continues to be strong.executive compensation plans. Over 95%92% of the shares present and entitled to vote at our 2021 Annual Meeting2022 annual meeting of stockholders were cast in favor of the 2021 2022 Say-on-Pay proposal. Average Support for our Say-on-Pay support over proposal has exceeded 90% in each of the past fiveseven years, is approximatelywith average support of nearly 95%, with over 92%this period as compared 91% support in each year, exceeding overall support in the REIT industry.for all REITs.
Proactive engagement and transparency. Our history of Say-on-Pay results is indicative of our stockholders’ support and approval of our executive compensation program. Our stockholders continue to affirm their positive support and feedback for our program and, accordingly, we maintained the core elements of our compensation program but continued to make enhancements to further maintainimprove our strong governance standards. | | | We actively engage with our stockholders in person and telephonically to ensure that they are fully informed about our executive compensation policies. In the past three years, we have held discussions with stockholders representing approximately 60%the majority of our shares outstanding. |
| | |
| | Review:Review results from the Annual Meetingannual meeting of stockholders to inform the framework of our annual compensation review process Analyze:Monitor market trends and review compensation policy based on governance trends and stockholder feedback (e.g., benchmarking levels and structural considerations) Engage:Engage with stockholders regarding the core structure and elements of our executive compensation Implement:Implement and adjust compensation program based on feedback from stockholders and current market and governance standards File:Publish annual proxy statement and prepare for Annual Meetingannual meeting of stockholders |
| | | 30 Proxy Statement and Notice of 2022 Annual Meeting | | |
| | | Compensation Discussion and Analysis
| | |
What We Heard
In 2021,2022, the feedback on our executive compensation program from our stockholder engagement efforts was positive and resulted in consistently strong Say-on-Pay approval. Based on the overwhelmingly positive support of our program from our stockholders, we kept the overall structure of the compensation program and magnitude of target compensation largely unchanged with the exception of minor enhancementsor decreased to further strengthen alignment with our stockholders as further described below in our “Evolution of our Compensation Program”. Over the past several years, stockholder feedback on our executive compensation program has included the following key themes:
| | | Transparency
| | Stockholder Feedback: Strong emphasis on the importance of transparency on compensation program design and related decisions.
Our Approach: Continuous refinement and enhancements to our proxy disclosure on annual basis to ensure our investors have a clear understanding of our rationale and decision-making process, as well as improvements to our overall proxy disclosure and governance-related matters.
| | | Pay-for-Performance
| | Stockholder Feedback: Indicated a strong preference for performance-based incentives that are tied to rigorous short-term and long-term performance goals.
Our Approach: The overwhelming majority of our NEOs’ compensation is tied to formulaic incentives either through our annual cash bonus program that supports our annual business plan or long-term incentives that require both the achievement of our multi-year business strategy and strong absolute and relative TSR performance.
| | | PayAlignment
| | Stockholder Feedback: Compensation should be tied to a company’s business strategy and aligned with stockholders’ interests.
Our Approach: Our compensation program directly supports our strategic business plan that includes executing accretive acquisitions supported by strategic financing and strong balance sheet management that translates into significant value creation for our stockholders.
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| | | | | 22 Proxy Statement and Notice of 20222023 Annual Meeting 31 | | |
| | | Compensation Discussion and Analysis | | |
Evolution of Our Compensation Program and Governance. We have made consistent progress in developing a compensation program that is aligned with best market and governance practices. The importance of stockholder engagement is evidenced by the meaningful enhancements we have made over the years: | | | | | | | | | Compensation and Governance Evolution | 2018 and Prior | | | | › Streamlined annual cash incentive measures and clarified rationale for metrics › Adopted anti-hedging and anti-pledging policies for NEOs, directors and employees › Implemented a clawback policy that applies to both cash and equity compensation › Established executive stock ownership guidelines, including a minimum of 6x base salary for the CEO › Committed to eliminate multi-year evergreen, single-trigger change of control and excise tax gross-up provisions from future employment agreements (no such provisions have been included in Company contracts since 2003) | 2019 | | | | › Modified performance-based equity awards to include both operational performance metrics that drive long-term stockholder value creation and TSR metrics › Reduced the discretionary portion of annual cash incentives from 35% to 20% › Established an employee-led Green Team › Implemented Company-wide environmental initiatives and engaged in active dialogue with our tenants and developers on ESG-related matters | 2020 | | | | › Increased the performance-based equity portion to represent two-thirds of the target long-term incentive value › Incorporated an absolute TSR modifier (in addition to the existing relative TSR modifier) to ensure that our executives would not be significantly rewarded during periods of low or no growth (payouts reduced up to 25% if TSR is below 3% per annum) › Refined our executive compensation peer group to include only the most comparable REITs using a transparent selection methodology › Added ESG performance to the annual cash bonus program consistent with our commitment to ESG initiatives › Diversified our Board with one additional female director who is also Latina and a native of Costa Rica | 2021 - 20222023 | | | | › Continued to achieve market leading say-on-paySay-on-Pay support, including 95.5%92.3% in 20212022 as compared to 88.7% for all other REITs › Established two new standing Board committees including an Environmental and Social Committee and a Risk Committee › Demonstrated our commitment to Board refreshment and diversity with the addition of one additional female director (female directors now represent 33% of the Board, up from 25%) › No increases to target compensation for any of our NEOs despite the significant increase toin our size and the complexity of our business and consistently being in the top quartile of performance over both the short- and long-term › Streamlined CD&A disclosure to enhance pay transparency › Enhanced disclosure on how we determine equity awards and the Compensation Committee’s assessment of the discretionary portion of the bonus program |
| | | 32 | | Proxy Statement and Notice of 20222023 Annual Meeting | | 23 |
| | | Compensation Discussion and Analysis | | |
Compensation Philosophy, Design, and Process Our executive compensation program is designed to attract and retain high caliber executives capable of managing our unique business model with expertise in real estate, healthcare, international and financing operations. The foundation of ourOur program was designed to motivate and reward executives to execute onfor successful execution of our business strategy that is tied to rigorous performance goals that ultimately result in significant value created for our stockholders.goals. In therecent years, following, we have made several enhancements but maintained thethese core elements of our program. The effectiveness of our executive compensation program is illustrated by the achievement of record performance – far surpassing our peers – over the past several years:significant achievements, including: | ◆ | Strong TSR of 73%, outperforming the healthcare REIT industry by 46% since the beginning of 2019, which was the first year under the construct of our current compensation program
|
| ◆ | Accretive acquisitionsnew investments of over $12$13 billion since the beginning of 2019 |
| ◆ | Growth in netNet income of 126% and Normalized FFO(1)$902.6 million, representing 37.6% year-over-year growth in 2022
|
| ◆ | 10 consecutive years of 118% and over the past four yearsdividend growth per share |
Additionally, we believe that our current executive compensation program represents a balanced and strategically aligned pay-for-performance program as demonstrated by the following:
| ◆ | Approximately 70%66% of our CEO’s compensation is variable and at-risk, tied directly to the achievement of operational and financial performance, because we value the clarity of formulas that tie compensation to stockholder returns in the long-term. |
| ◆ | The variable components of our compensation program specifically include rigorous performance goals meant to motivate management to execute our business plan tied to accretive growth, strategic financing and raising efficient capital. In our long-term program, we set a newour 2022 goals required meaningful growth in terms of FFO per share, EBITDA growth target that is 49% higher than our 2020 target.and acquisitions while also decreasing compensation based on the relative and absolute TSR performance in 2022. |
| ◆ | The majority of our equity awards (approximately two-thirds for all NEOs) are at-risk performance-based stock awards earned based on the achievement of operational goals and subject to adjustment based on both absolute and relative TSR, with the remainder granted in the form of time-based stock awards that are subject to the same stock price fluctuations as our stockholders. This approach reflects our understanding that our investors value equity-based compensation to align our executives’ interests with those of our stockholders. In 2022, because of the one-year TSR performance that negatively impacted our stockholders, our NEOs’ compensation was also adjusted negatively. |
| ◆ | Less than 10% of our CEO’s compensation is guaranteedfixed in the form of base salary, which plays a recruiting and retention role, because we can neither wait for the long-term to arrive before compensating our people nor incentivize a risky swing-for-the-fences strategy. |
| (1) | Refer to Appendix A for our definition of FFO and Normalized FFO and a reconciliation of net income to FFO and Normalized FFO.
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| | | | | 24 Proxy Statement and Notice of 20222023 Annual Meeting 33 | | |
| | | Compensation Discussion and Analysis | | |
Our Executive Compensation Process | | | | | | | | | | | | | | Compensation Committee | | | | Compensation Consultant | | | | Management | Provides independent oversight and final approval with respect to executive compensation matters | | | | Provides guidance to the Compensation Committee throughout the year on compensation matters, including benchmarking for pay levels, pay practices and governance trends | | | | ProvidesProvide additional information as requested by the Compensation Committee
| | | | | | Assesses corporate and individual performance as it relates to actual compensation for our NEOs | | | | Assists with peer group selection and analysis | | | | CEO provides input on individual performance for other NEOs and achievements relating to strategic non-financial business goals | | | | | | Administers our equity incentive programs, including reviewing and approving equity grants to our NEOs | | | | Reviews and advises on recommendations, plan design and measures | | | | |
Role of the Compensation Committee Pursuant to its charter, the Compensation Committee is responsible for designing our executive compensation plans,program, establishing compensation levels, and measuring the performance of our NEOs. The Compensation Committee, which consists of three independent directors, is responsible for the design, review, and approval of all aspects of our executive compensation program. Among other duties, the Compensation Committee is responsible for the following: | ◆ | Reviewing and approving, on an annual basis, the corporate incentive goals and objectives relevant to the annual cash bonus plan and performance-based shares |
| ◆ | Evaluating the performance of our executive officers in light of these goals and objectives |
| ◆ | Evaluating the competitiveness of each executive officer’s total compensation package relative to what other publicly traded and private equity-backed real estate investors may offer |
| ◆ | Approving any changes to each of our executive’s total compensation package, including, but not limited to, base salary, annual and long-term incentive award opportunities and payouts, and retention programs |
In order to assist the Compensation Committee to design, establishin designing, establishing and monitormonitoring our executive compensation plans, the Compensation Committee has engaged an independent executive compensation consultant, as described below. Peer Group Data
We use peer group data to ensure that our compensation program remains both appropriate and competitive in relation to those companies with whom we most directly compete for talent and business opportunities, among other things. Constructing an appropriate peer group requires various considerations as no single company or industry fully captures the scope of our operations. In particular, the complexities faced by our Company as a result of our global operations and the expertise required of our executives given our specialized assets presents a unique challenge in developing an appropriate peer group.
On an annual basis, we review our peer group to ensure the overall composite reflects an appropriate competitor set. Accordingly, we reviewed our peer group based on the following criteria:
| ◆ | Size: REITs within an appropriate size range, in terms of total capitalization, relative to our Company (i.e., approximately 0.4x to 2.5x, which is consistent with ISS size selection criteria)
|
| ◆ | Global: Companies with a global presence that reflect the same complexities faced by our global operations and challenges associated with operating on an international scale
|
| ◆ | Healthcare Expertise: REITs that primarily invest in medical properties and/or healthcare assets whose executives require expertise in the healthcare/medical sector
|
| ◆ | Specialized REITs: REITs with specialized assets that require executives to have knowledge of the underlying assets
|
| ◆ | Net Lease REITs: REITs with a significant portion of properties leased on a triple-net basis
|
| | | 34 Proxy Statement and Notice of 2022 Annual Meeting | | |
| | | Compensation Discussion and Analysis
| | |
In 2020, we refined our peer group identification methodology to include only REITs, with a focus on strategic peers that better reflect the uniqueness of our business, growth initiatives and global operations. For 2021, the Compensation Committee carefully reviewed the peer group with its independent compensation consultant to ensure that it continued to reflect, on a blended basis, our unique dynamics while taking into account our significant growth and M&A activity.
The approved peer group for 2021 includes the following companies (ranked by total capitalization) and Medical Properties Trust is slightly above median of the peer group based on total capitalization:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Company | | | | Total
Capitalization | | | Industry | | Size | | | | Global | | | | Healthcare
Expertise | | | | Specialized
REIT | | | | Net Lease
REIT | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | SBA Communications Corporation
| | | | | $58,554
| | | Specialty REIT
| | ◆
| | | | ◆
| | | | | | | | ◆
| | | | | | | Welltower Inc.
| | | | | $52,467
| | | Health Care REIT
| | ◆
| | | | ◆
| | | | ◆
| | | | ◆
| | | | ◆
| | | | | | | | | | | | | | | | | Alexandria Real Estate Equities, Inc.
| | | | | $46,435
| | | Office REIT
| | ◆
| | | | ◆
| | | | | | | | ◆
| | | | ◆
| | | | | | | | | | | | | | | | | Boston Properties, Inc.
| | | | | $35,397
| | | Office REIT
| | ◆
| | | | | | | | | | | | ◆
| | | | | | | | | | | | | | | | | | | | | Ventas, Inc.
| | | | | $33,041
| | | Health Care REIT
| | ◆
| | | | ◆
| | | | ◆
| | | | | | | | | | | | | | | | | | | | | | | | | Iron Mountain Incorporated
| | | | | $26,771
| | | Specialty REIT
| | ◆
| | | | ◆
| | | | ◆
| | | | ◆
| | | | | | | | | | | | | | | | | | | | | Healthpeak Properties, Inc.
| | | | | $25,916
| | | Health Care REIT
| | ◆
| | | | ◆
| | | | ◆
| | | | ◆
| | | | | | | | | | | | | | | | | | | | | Medical Properties Trust, Inc.
| | | | | $24,675
| | | Health Care REIT
| | ◆
| | | | ◆
| | | | ◆
| | | | ◆
| | | | ◆
| | | | | | | | | | | | | | | | | Vornado Realty Trust
| | | | | $19,641
| | | Office REIT
| | ◆
| | | | | | | | | | | | ◆
| | | | | | | | | | | | | | | | | | | | | Gaming and Leisure Properties, Inc.
| | | | | $17,921
| | | Casino REIT
| | ◆
| | | | | | | | | | | | ◆
| | | | ◆
| | | | | | | | | | | | | | | | | Omega Healthcare Investors, Inc.
| | | | | $12,534
| | | Health Care REIT
| | ◆
| | | | ◆
| | | | ◆
| | | | | | | | ◆
| | | | | | | | | | | | | | | | | Kilroy Realty Corporation
| | | | | $12,057
| | | Office REIT
| | ◆
| | | | | | | | | | | | ◆
| | | | | | | | | | | | | | | | | | | | | Douglas Emmett, Inc.
| | | | | $11,910
| | | Office REIT
| | ◆
| | | | | | | | | | | | ◆
| | | | | | | | | | | | | | | | | | | | | Healthcare Trust of America, Inc.
| | | | | $10,821
| | | Health Care REIT
| | ◆
| | | | | | | | ◆
| | | | | | | | ◆
| | | | | | | | | | | | | | | | | SL Green Realty Corp.
| | | | | $10,004
| | | Office REIT
| | ◆
| | | | | | | | | | | | ◆
| | | | | | | | | | | | | | | | | | | | | Hudson Pacific Properties, Inc.
| | | | | $8,740
| | | Office REIT
| | ◆
| | | | | | | | | | | | ◆
| | | | | | | | | | | | | | | | | | | | | JBG SMITH Properties
| | | | | $6,249
| | | Diversified REIT
| | ◆
| | | | | | | | | | | | ◆
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | Based on the selection criteria above, QTS Realty Trust, Inc. and CyrusOne, Inc. were removed from the peer group and JBG SMITH Properties and Welltower Inc. were added to the peer group for 2021
|
| (2) | All financial data in $ millions per S&P Capital IQ Pro as of December 31, 2021
|
How We Use Peer Group Data
During 2021, the Compensation Committee utilized peer group compensation data to understand the Company’s pay levels and structure as compared to the market. Although the Compensation Committee does not adhere to a specific formula nor does it target a certain percentile of compensation, we believe it is important to understand the competitive landscape to effectively assess each NEO’s total compensation opportunity, pay mix and overall governance and market trends. We strive to ensure that our compensation program and opportunities remain equitable and competitive, while also considering factors such as size, scope of operations and our relative performance, as appropriate.
Role of the Compensation Consultant The Compensation Committee recognizes that it is essential to receive objective advice from its outside compensation consultant and, in 2021,2022, the Compensation Committee retained Gressle & McGinley, LLC, a nationally recognized compensation consulting firm (the “Compensation Consultant” or “Gressle & McGinley”). The Compensation Consultant was engaged by and reports directly to the Compensation Committee. Upon the request of the Compensation Committee, a representative of Gressle & McGinley attended meetings of the Compensation Committee and communicated with the Chairman of the Compensation Committee between meetings; however, the Compensation Committee makes all decisions regarding the compensation of our executive officers. | | | | | Proxy Statement and Notice of 2022 Annual Meeting 35 |
| | | Compensation Discussion and Analysis
| | |
The Compensation Consultant provides various executive compensation services to the Compensation Committee. Generally, these services include, among others, (i) advising the Compensation Committee on the principal aspects of our executive compensation program and director compensation program and evolving industry practices; (ii) presenting information to assist the Compensation Committee in determining the appropriate peer group to be used to evaluate the competitiveness of our compensation program; (iii) providing market information and analysis regarding the competitiveness of our program design and our award values in relationship to our performance; and (iv) preparing recommendations based on the Company’s performance, current market trends and corporate governance developments. The Compensation Committee has determined, based on a review of relevant factors, that | | | | | Proxy Statement and Notice of 2023 Annual Meeting 25 |
| | | Compensation Discussion and Analysis | | |
Gressle & McGinley is independent and that their work has not raised any conflict of interests. The Compensation Committee also closely examines the safeguards and steps that Gressle & McGinley takes to ensure that its executive compensation consulting services are objective. Other than advising the Compensation Committee as described above, Gressle & McGinley did not provide any other services to the Company in 2021.2022. Role of the Chief Executive Officer Although executive compensation determinations are ultimately made by the Compensation Committee, the CEO provides additional information to assist the Committee in evaluating and determining executive compensation and provides input on each executive officer’s performance, other than his own. Use of Peer Group Data We use peer group data to ensure that our compensation program remains both appropriate and competitive in relation to those companies with whom we most directly compete for talent and business opportunities, among other things. Constructing an appropriate peer group requires various considerations as no single company or industry fully captures the scope of our operations. In particular, the complexities faced by our Company as a result of our global operations and the expertise required of our executives given our specialized assets presents a unique challenge in developing an appropriate peer group. Beginning in 2020, we refined our peer group identification methodology to include only REITs, with a focus on strategic peers that better reflect the uniqueness of our business, growth initiatives and global operations. On an annual basis, we review our peer group to ensure the overall composition reflects an appropriate competitor set. Accordingly, we reviewed our peer group based on the following criteria: | ◆ | Continuity: Sensitivity to peer group continuity to ensure that peer group results are comparable year-over-year and are not arbitrarily adjusted for short-term changes in peer dynamics |
| ◆ | Size: REITs within an appropriate size range relative to our Company, in terms of total capitalization and ensuring the Company is at the approximate median or above the overall peer set. For 2022, the size range was slightly expanded to account for significant market volatility in the REIT sector and ranged from 0.3x to 3.0x (as compared to 0.4x to 2.5x in 2021). No new companies were added as a result of this change, but it allowed for peer group continuity |
| ◆ | Global: Companies with a global presence that reflect the same complexities faced by our global operations and challenges associated with operating on an international scale |
| ◆ | Healthcare Expertise: REITs that primarily invest in medical properties and/or healthcare assets whose executives require expertise in the healthcare/medical sector |
| ◆ | Specialized REITs: REITs with specialized assets that require executives to have knowledge of the underlying assets |
| ◆ | Net Lease REITs: REITs with a significant portion of properties leased on a triple-net basis |
During 2022, the Compensation Committee utilized peer group compensation data to understand the Company’s pay levels and structure as compared to the market. Although the Compensation Committee does not adhere to a specific formula nor does it target a certain percentile of compensation, we believe it is important to understand the competitive landscape to effectively assess each NEO’s total compensation opportunity, pay mix and overall governance and market trends. We strive to ensure that our compensation program and opportunities remain equitable and competitive, while also considering factors such as size, scope of operations and our relative performance, as appropriate. | | | 3626 Proxy Statement and Notice of 20222023 Annual Meeting | | |
| | | Compensation Discussion and Analysis | | |
2022 Executive Compensation Peer Group The approved peer group for 2022 includes the following companies (ranked by total capitalization) with MPT slightly above median of the peer group based on total capitalization: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Company | | | | Total Capitalization(1) | | | Industry | | Size | | | | Global | | | | Healthcare Expertise | | | | Specialized REIT | | | | Net Lease REIT | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Welltower Inc. | | | | | $47,373 | | | Health Care REIT | | ◆ | | | | ◆ | | | | ◆ | | | | ◆ | | | | ◆ | | | SBA Communications Corporation (REIT) | | | | | $46,466 | | | Specialty REIT | | ◆ | | | | ◆ | | | | | | | | ◆ | | | | | | | | | | | | | | | | | | | | | Alexandria Real Estate Equities, Inc. | | | | | $38,477 | | | Office REIT | | ◆ | | | | ◆ | | | | | | | | ◆ | | | | ◆ | | | | | | | | | | | | | | | | | Ventas, Inc. | | | | | $30,746 | | | Health Care REIT | | ◆ | | | | ◆ | | | | ◆ | | | | | | | | | | | | | | | | | | | | | | | | | Boston Properties, Inc. | | | | | $27,669 | | | Office REIT | | ◆ | | | | | | | | | | | | ◆ | | | | | | | | | | | | | | | | | | | | | Iron Mountain Incorporated | | | | | $27,577 | | | Specialty REIT | | ◆ | | | | ◆ | | | | ◆ | | | | ◆ | | | | | | | | | | | | | | | | | | | | | Healthpeak Properties, Inc. | | | | | $20,910 | | | Health Care REIT | | ◆ | | | | ◆ | | | | ◆ | | | | ◆ | | | | | | | | | | | | | | | | | | | | | Gaming and Leisure Properties, Inc. | | | | | $20,160 | | | Casino REIT | | ◆ | | | | | | | | | | | | ◆ | | | | ◆ | | | | | | | | | | | | | | | | | Medical Properties Trust, Inc. | | | |
| $16,139 |
| | Health Care REIT | | ◆ | | | | ◆ | | | | ◆ | | | | ◆ | | | | ◆ | | | | | | | | | | | | | | | | | Vornado Realty Trust | | | | | $15,004 | | | Office REIT | | ◆ | | | | | | | | | | | | ◆ | | | | | | | | | | | | | | | | | | | | | Healthcare Realty Trust Incorporated(2) | | | | | $13,245 | | | Health Care REIT | | ◆ | | | | | | | | ◆ | | | | | | | | ◆ | | | | | | | | | | | | | | | | | Omega Healthcare Investors, Inc. | | | | | $12,028 | | | Health Care REIT | | ◆ | | | | ◆ | | | | ◆ | | | | | | | | ◆ | | | | | | | | | | | | | | | | | SL Green Realty Corp. | | | | | $9,282 | | | Office REIT | | ◆ | | | | | | | | | | | | ◆ | | | | | | | | | | | | | | | | | | | | | Kilroy Realty Corporation | | | | | $8,944 | | | Office REIT | | ◆ | | | | | | | | | | | | ◆ | | | | | | | | | | | | | | | | | | | | | Douglas Emmett, Inc. | | | | | $8,441 | | | Office REIT | | ◆ | | | | | | | | | | | | ◆ | | | | | | | | | | | | | | | | | | | | | Hudson Pacific Properties, Inc. | | | | | $7,244 | | | Office REIT | | ◆ | | | | ◆ | | | | | | | | ◆ | | | | �� | | | | | | | | | | | | | | | | | JBG SMITH Properties | | | | | $4,882 | | | Diversified REIT | | ◆ | | | | | | | | | | | | ◆ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | All financial data in $ millions per S&P Capital IQ Pro as of December 31, 2022. |
| (2) | Based on the selection criteria above, Healthcare Trust of America, Inc. was removed and replaced with Healthcare Realty Trust Incorporated (the post-Merger entity). |
| | | | | Proxy Statement and Notice of 2023 Annual Meeting 27 |
| | | Compensation Discussion and Analysis | | |
Compensation Program Features The following chart provides an overview of the components of our 20212022 executive compensation program, including the objective of each component and how it ties to our overall compensation philosophy, which can be summarized in the following key categories: | | | | | | | | | Retention | | | | Provide Competitive Pay Opportunities | | | Motivate Execution of Business Strategy | | | | Balance Short-Term and Long-Term Performance | | | Alignment with Stockholders | | | | Drive Performance Through Rigorous Performance Goals |
| | | | | | | | | | | Element | | | | Description | | Objective | | | | Pay Philosophy
Element | | | | | | | Base Salary | | | | Based on duties, experience and internal pay equity | | Provides a fixed level of cash compensation to attract and retain talented executives | | | | | | | | | | | Annual
Cash Bonus | | | | 50% Normalized FFO per Share | | Aligns our executives with near-term financial goals and strategic priorities, which for 20212022 included Normalized FFO growth and managing leverage | | | |
| | 20% EBITDA/Interest Expense | | 10% ESG Initiatives | | For 20212022 as we remain focused on the importance of ESG for both internal and external stakeholders, we continued to include the achievement of ESG initiatives in our annual cash bonus program as standalone assessment criteria | | | | 20% Qualitative Performance | | Given that the majority of our compensation is based on pre-established metrics and goals, allows for a subjective assessment of performance on a more holistic basis and considers factors that may not be quantifiable | | | | | | | | | Time-Based Shares | | | | Vest ratably over 3 years | | Promotes retention and aligns executives with stockholders | | | | | | | | | | | Performance-Based Shares | | | | 30% FFO per Share Growth | | Rewards executives for meaningful FFO per share growth in both the short- and long-term. Achievement of these goals requires significant accretive growth on an annual and cumulative basis | | | |
| | 40% EBITDA | | Ensures that executives are focused on profitability and stockholder value creation through sector-leading EBITDA growth in both the short-term and long-term periods | | | | 30% Acquisitions | | Motivates our executives to execute our growth strategy that involves making accretive acquisitions to achieve portfolio growth that would not be achieved through a simpler organic growth model focused only on leasing spreads | | | | Absolute and Relative TSR Modifier | | Adjusts payouts to align with long-term stockholder returns on both an absolute and relative basis | | |
| | | | | 28 Proxy Statement and Notice of 20222023 Annual Meeting 37 | | |
| | | Compensation Discussion and Analysis | | |
Elements of Pay Base Pay Base pay represents fixed cash compensation intended to attract and retain talent and is generally determined based on a review of individual experience, performance, internal pay equity considerations and peer group base pay levels. Although base pay levels are only adjusted periodically, the Compensation Committee reviews levels annually. The following chart sets forth 20212022 base salaries for our NEOs, which remained unchanged from 20202021 amounts. | | | | | | | | Named Executive Officer | | 20212022 Base Salary
($) | | | | | | Edward K. Aldag, Jr. | | 1,000,000 | | | | | | R. Steven Hamner | | 675,000 | | | | | | Emmett E. McLean | | 550,000 | | |
For 2022, base salaries will remain flat for our NEOs.
| | | | | | | | | Most Recent Action by the Compensation Committee | | | |
No 2023 salary increases were provided to our NEOs based on the Compensation Committee’s review at year-end 2022. Our CEO and COO’s salary have not been increased since 2018 and our CFO’s salary has not been increased since 2020. |
Annual Cash Bonus Plan Annual Cash Bonus Opportunities For 2021,2022, cash bonus opportunities for our NEOs as a percent of base salary were as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | Named Executive Officer | | Threshold | | Target | | Maximum | | | | | | | | Edward K. Aldag, Jr. | | | | 100% | | | | | 200% | | | | | 300% | | | | | | | | | | | | R. Steven Hamner | | | | 100% | | | | | 150% | | | | | 225% | | | | | | | | | | | | Emmett E. McLean | | | | 50% | | | | | 100% | | | | | 175% | | | | | | |
We make periodic adjustments to pay opportunities, which were last adjusted in 2020 in an effort to bring more balance to our compensation pay mix with minimal increases to base salaries. For 2022, annual cash bonus opportunities will continue to remain unchanged.
| | | | | | | | | Most Recent Action by the Compensation Committee | | | |
We make periodic adjustments to target bonus opportunities, which were last adjusted in 2020 in an effort to bring more balance to our compensation pay mix with minimal increases to base salaries. For 2023, annual cash bonus opportunities will continue to remain unchanged for the CEO and CFO. For our COO, Mr. McLean, the maximum payout decreased to 125% (from 175%). |
Annual Cash Bonus Plan Metrics The cash bonus plan metrics are reviewed annually by the Compensation Committee to ensure continued alignment with our strategic goals for the upcoming year. These goals are critical to our long-term success and are designed to be challenging and rigorous to ensure that we remain focused on differentiated growth and our overall business strategy. Nevertheless, we ultimately outperformed on each measure, meeting or surpassing the stretch goals. | | | 38 | | Proxy Statement and Notice of 20222023 Annual Meeting | | 29 |
| | | Compensation Discussion and Analysis | | |
The 20212022 cash bonus plan metrics are set forth in the following chart: | | | | | | | | | | | | | | | | | | | | | | | | Performance Metric | | Weighting | | Threshold | | Target | | Maximum | | | | | 2021 Achievement | | Normalized FFO Per Share Encourages focus on profitability as measured by the most frequently used REIT earnings measurement on a per share basis; mitigates the risk of non-profitable acquisitions or other low-quality growth. | | 50% | | $1.60 | | $1.64 | | $1.69 | | | | | | | > $1.69 | | | | | Target Normalized FFO per share represents a 4.55% increase over 2020 results, which is higher than median FFO growth among other equity REITs. | | | | | | | | | EBITDA/Interest Expense Ratio Motivates management to maintain financial health and a low cost of capital | | 20% | | 3.5x | | 3.7x | | 3.9x | | | | | | | 4.1x | | | | | The 3.7x target ratio was established based on our historical strategies and debt levels as publicly disclosed during recent years. We met the maximum coverage ratio goal by growing earnings and maintaining a low cost of capital. | | | | | | | | | Environmental, Social and Corporate Governance Encourages management to prioritize and execute on annual ESG initiatives | | 10% | | Compensation Committee’s Assessment | | |
| Achieved Annual ESG Initiatives | | | | | ESG accomplishments include (i) improved MSCI rating to BB, (ii) ranked by Modern Healthcare as one of the best places to work for millennials, and (iii) engaged multiple advisors to assist in our ESG strategy and environmental data collection. | | | | | | | | | Qualitative Performance Review Represents indicators of the executive’s success in fulfilling his responsibilities to the Company and in executing its strategic business plan. | | 20% | | Compensation Committee’s Assessment | | | | See Below | | | | | See below for additional detail on the Compensation Committee’s review of qualitative performance. | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | Performance Metric | | Weighting | | Threshold | | Target | | Maximum | | | | 2022 Achievement | | Normalized FFO Per Share Encourages focus on profitability as measured by the most frequently used REIT earnings measurement on a per share basis; mitigates the risk of non-profitable acquisitions or other low-quality growth | | 50% | | $1.79 | | $1.82 | | $1.85 | | | | | $1.82 | | | | | Target Normalized FFO per share represents an approximate 11% increase over the 2021 cash bonus target and a 4.0% increase over 2021 results as compared to 2.76% for US Healthcare REITs.(1)(2) | | | | | | | EBITDA/Interest Expense Ratio Motivates management to maintain financial health and a low cost of capital | | 20% | | 3.5x | | 3.7x | | 3.9x | | | | | 4.3x | | | | | The 3.4x target ratio was established based on our historical strategies and debt levels as publicly disclosed during recent years. | | | | | | | Environmental, Social and Corporate Governance Encourages management to prioritize and execute on annual ESG initiatives | | 10% | | Compensation Committee’s Assessment | |
| Achieved Annual ESG Initiatives | | | | | ESG accomplishments include (i) improved MSCI rating to BBB, (ii) ranked by Modern Healthcare as one of the best places to work for millennials, (iii) engaged multiple advisors to assist in our ESG strategy and environmental data collection and (iv) hired a dedicated ESG professional. | | | | | | | Qualitative Performance Review Represents indicators of the executive’s success in fulfilling his responsibilities to the Company and in executing its strategic business plan | | 20% | | Compensation Committee’s Assessment | | | See Below | | | | | See below for additional detail on the Compensation Committee’s review of qualitative performance. | | | | | | |
How We Determined Qualitative Performance for the Annual Cash Bonus Plan The Compensation Committee assessed qualitative performance of the Company and of each NEO, which accounts for only 20% of the overall bonus. Our NEOs’ performance is most directly tied to the Company’s overall financial and operational accomplishments and accordingly, the Committee assessed the qualitative component based on the following key considerations: | | Strong earnings growth including year-over-year growth in earnings per share of 37% and year-overYear-over year growth in Normalized FFO per share(1) of 11%4.0% as compared to approximately 6% for all US Equity REITs and 0% for2.76% median growth at U.S. Healthcare REITs(2)
|
| | Closed on $3.9$1.1 billion in acquisitionsnew investments during 20212022 |
| | Established measures for employees to transition back to the office and continued to maintain the safety and healthTen consecutive years of our employees
|
| | Total stockholder return of +14% over the one-year period and +73% over the three-year periodannual dividend growth, with a 3.8% compound annual growth rate
|
| | Continued to improve tenant diversification by expanding the number of operators comprising the top 96% of our assets(3)to 55 (from 53 (from 50 in 2020) and strategically transitioning to new operators2021) |
| | Sold a 50% stakeContinued to expand our global footprint with the acquisition of four hospitals in a portfolioFinland and the acquisition of eight Massachusetts-based hospitals that generated $1.3 billion in proceeds (Received binding commitment in 2021; closed in first quarter of 2022.)six additional Priory assets
|
| (1) | Refer to Appendix A for our definition of FFO and Normalized FFO and a reconciliation of net income to FFO and Normalized FFOFFO. |
| (2) | Information based on KeyBanc Equity REIT Leaderboard, published December 31, 2021 |
| (3) | Based on total pro forma gross assets; Refer to Appendix A for our definition of total pro forma gross assets and a reconciliation of total assets to total pro forma gross assets2022.
|
| | | | | 30 Proxy Statement and Notice of 20222023 Annual Meeting 39 | | |
| | | Compensation Discussion and Analysis | | |
Based on the above and the 20212022 performance highlights previously discussed under “20212022 Performance Highlights���”, the Compensation Committee determined that the qualitative component of the 20212022 cash bonus program was earned at the maximum,full 20%, with overall cash bonus amounts as follows: | | | | | Named Executive Officer
| | 2021 Earned Bonus
($)
| | | Edward K. Aldag, Jr.
| | 3,000,000 | | | R. Steven Hamner
| | 1,518,750 | | | Emmett E. McLean
| | 962,500 |
| | | | | | | | | | | Named Executive Officer | | 2022 Earned Bonus ($) | | 2021 Earned Bonus ($) | | % Change | | | | | Edward K. Aldag, Jr. | | 2,500,000 | | 3,000,000 | | -17% | | | | | R. Steven Hamner | | 1,265,625 | | 1,518,750 | | -17% | | | | | Emmett E. McLean | | 756,250 | | 962,500 | | -21% |
20212022 Annual Equity Awards
We use a balanced approach to equity compensation and grant a combination of both time-based shares and performance-based shares, with the majority of the awards (approximately 67%66%) vesting contingent on performance and 100% at-risk. The time-based portion of the award is intended to promote retention, while also subjecting our executives to the same market fluctuations faced by our stockholders. For 2021, we generally kept the target value of the annual equity awards granted to our NEOs flat year-over-year. In 2021,2022, our NEOs were granted time-based shares that vest in equal quarterly installments over three years as follows: | | | | Target Value of Time-Based Shares ($) | | Target Value of Time-Based Shares ($) | | | | Named Executive Officer | | 2021(1) | | 2020 | | 2022(1) | | 2021 | | % Change | | Edward K. Aldag, Jr. | | 4,250,000 | | 4,250,000 | | 4,250,000 | | 4,250,000 | | 0% | | R. Steven Hamner | | 2,125,000 | | 2,125,000 | | 2,125,000 | | 2,125,000 | | 0% | | Emmett E. McLean | | 1,300,000 | | 1,500,000 | | 950,000 | | 1,300,000 | | -27% | | NEO Total | | 7,675,000 | | 7,875,000 | | 7,325,000 | | 7,675,000 | | -5% |
| (1) | The grant date fair values, computed in accordance with ASC 718, were $4,273,928, $2,136,964,$4,109,811, $2,054,916, and $1,307,318$918,681 for Messrs. Aldag, Hamner and McLean, respectively. |
The performance-based shares are designed to incentivize performance in both the long-run and short-run. Awards are earned subject to the achievement of three-year goals, while also allowing a portion of the award to be earned subject to the achievement of one-year goals (maximum of 1/3 of the shares). The following chart provides the target value of performance-based shares granted to our NEOs in 2021.2022. | | | | Target Value of Performance-Based Shares ($) | | Target Value of Performance-Based Shares ($) | | | | Named Executive Officer | | 2021(1) | | 2020 | | 2022(1) | | 2021 | | % Change | | Edward K. Aldag, Jr. | | 8,250,000 | | 8,250,000 | | 8,250,000 | | 8,250,000 | | 0% | | R. Steven Hamner | | 4,125,000 | | 4,125,000 | | 4,125,000 | | 4,125,000 | | 0% | | Emmett E. McLean | | 2,600,000 | | 3,100,000 | | 1,950,000 | | 2,600,000 | | -25% | | NEO Total | | 14,975,000 | | 15,475,000 | | 14,325,000 | | 14,975,000 | | -4% |
| (1) | The grant date fair values, computed in accordance with ASC 718, were $8,654,604, $4,327,302,$8,270,489, $4,135,256, and $2,727,508$1,954,860 for Messrs. Aldag, Hamner and McLean, respectively. |
| | | 40 | | Proxy Statement and Notice of 20222023 Annual Meeting | | 31 |
| | | Compensation Discussion and Analysis | | |
The 20212022 performance shares can be earned based on the following goals set by the Compensation Committee, which include both long-term and annual goals to align with our strategic business plan and our commitment to sustained growth that will ultimately drive long-term value creation. The 20212022 performance metrics were selected in accordance with our strategic business plan and include goals for FFO per share growth, EBITDA and acquisitions. | | | | FFO per Share Growth | | EBITDA (in millions) ($) | | Acquisitions (in millions) ($) | | FFO per Share Growth | | | EBITDA (in millions) ($) | | | Acquisitions (in millions) ($) | | | | | 2021(1) | | 2023 | | 2021(1) | | 2023 | | 2021(1) | | 2023 | | 2022 | | | 2024 | | | 2022 | | | 2024 | | | 2022 | | | 2024 | | | Threshold (50%) | | | 2.00 | % | | | 6.00 | % | | | 1,287.5 | | | | 1,350.0 | | | | 500.0 | | | | 1,500.0 | | | | 2.00 | % | | | 4.00 | % | | $ | 1,475.0 | | | $ | 1,550.0 | | | $ | 500.0 | | | $ | 1,500.0 | | | Target (100%) | | | 3.75 | % | | | 11.25 | % | | | 1,300.0 | | | | 1,400.0 | | | | 750.0 | | | | 2,250.0 | | | | 4.00 | % | | | 8.00 | % | | $ | 1,487.5 | | | $ | 1,575.0 | | | $ | 750.0 | | | $ | 2,250.0 | | | Maximum (200%)(2)(1) | | | 5.50 | % | | | 16.50 | % | | | 1,325.0 | | | | 1,450.0 | | | | 1,000.0 | | | | 3,000.0 | | | | 6.00 | % | | | 12.00 | % | | $ | 1,500.0 | | | $ | 1,600.0 | | | $ | 1,000.0 | | | $ | 3,000.0 | |
| (1) | For 2021, our actual performance exceeded the maximum goals, which represents only one-third of the total shares. The remaining two-thirds of the shares are eligible to be earned at the end of the three-year performance period.
|
| (2) | Mr. McLean’s maximum is 150% of target. |
Performance is measured over the three-year performance period and shares are earned based on the three-year performance goals listed above. To further strengthen alignment with our stockholders, any earned shares are subject to both an absolute and relative TSR modifier. One-half of the earned shares will be adjusted between 75% to 125% based on relative TSR performance between the 25th percentile to the 75th percentile, and one-half of the earned shares will be adjusted between 75% to 125% based on absolute TSR performance between 0% and 6% per annum. To track the milestone progress during the performance period and to incentivize the consistent execution of our strategy and business plan, up to one-third of the target award may be earned at the end of 2021.2022. The Compensation Committee believes that using one-year and three-year goals creates a balanced program that ensures that management remains focused in both the short-term and the long-term to drive consistent market-leading growth. How We Determine Annual Equity Awards Equity compensation is a critical component of our executive compensation program that directly aligns our NEOs’ long-term interests with our stockholders and provides additional retention for our executives. Grants were approved in January 20212022 based on the following considerations: | › | Our consistent and significant performance achievements over both the short- and long-term periods: |
Strong earnings growth including an approximate 34% cumulative annual growth in net income since the beginning of 2020 | ○• | | Double digit growth in earnings, including growth in net income per share of 37% andYear-over year growth in Normalized FFO per share(1) per share of 11% in 20214.0% as compared to 2.76% median growth at U.S. Healthcare REITs(2)
|
Closed on $1.1 billion in new investments during 2022 and $13 billion since the beginning of 2019 Ten consecutive years of annual dividend growth, with a 3.8% compound annual growth rate | › | A significant portion of our annual equity awards are tied to significant performance achievements that align and reward our executives for successfully executing on our strategic growth plan and only earn value to the extent that these significant performance hurdles are achieved |
| ○ | Three-year TSR of 73%, outperforming healthcare REITs by 46% since the beginning of 2019
|
| ○ | Accretive acquisitions of over $12 billion since the beginning of 2019
|
| ○ | 122% growth in total pro forma gross assets(2) since the beginning of 2019
|
| ○ | Nine consecutive years of annual dividend growth, with a 3.8% compound annual growth rate
|
| › | The Compensation Committee’s assessment of our NEOs’ overall compensation relative to our peer group and the confirmation that the value realized by NEOs was materially impacted by lost equity value in consideration2022 (consistent with the intent of our pay-for-performance compensation structure). |
| | | 32 Proxy Statement and Notice of 2023 Annual Meeting | | |
| | | Compensation Discussion and Analysis | | |
| › | Based on this review, our Compensation Committee made the following decisions related to grants made in January 2022 and 2023: |
| | | Most Recent Action by the Compensation Committee | | No increases to target equity values for the CEO and CFO in 2022 or 2023. For our COO, Mr. McLean, his target equity values decreased in 2022 and 2023. Additionally, the pay mix of the factequity awards was designed so that our size has doubled in the past three years.majority of the awards vest contingent on achievement of rigorous performance goals (reflects approximately 66% of the market value on the date of grant). |
| (1) | Refer to Appendix A for our definition of FFO and Normalized FFO and a reconciliation of net income to FFO and Normalized FFO. |
| (2) | Refer to Appendix A for our definition of total pro forma gross assets and a reconciliation of total assets to total pro forma gross assets.Information based on KeyBanc Equity REIT Leaderboard, published December 31, 2022
|
Based on this review, our Compensation Committee made the following decisions related to grants made in January 2021:
| | The market value of the 2021 annual equity awards should generally remain consistent with the aggregate value issued to our NEOs in the prior year to maintain market competitive levels and in recognition of our continued market-leading performance.
|
| | | | | Proxy Statement and Notice of 2022 Annual Meeting 41 |
| | | Compensation Discussion and Analysis
| | |
| | Consistent with our pay-for-performance philosophy that includes focusing on operational and financial performance that leads to sustainable and strategic growth and motivating management to execute on strategic value-added transactions, the pay mix of the equity awards was designed so that the majority of the awards vest contingent on achievement of rigorous performance goals (reflects approximately 67% of the market value on the date of grant).
|
Other Benefits We maintain a 401(k) retirement savings plan and annually match 100% of the first 3% of pay contributed, plus 50% of the next 2% of pay contributed, to such plan by any employee (subject to certain tax limitations). We offer medical, dental, and vision plans, and pay the coverage cost under these plans for the NEOs and their families.eligible dependents. Each of our NEOs has an employment agreement with us pursuant to which certain other benefits are provided to them. The material terms of each such employment agreement are set forthdescribed under “Employment Agreements with Named Executive Officers” below.
| | | | | Proxy Statement and Notice of 2023 Annual Meeting 33 |
| | | Compensation Discussion and Analysis | | |
Other Aspects of Our Executive Compensation Program Equity Ownership Guidelines We believe that equity ownership by our directors and officers can help further align their interests with our stockholders’ interests. To that end, we have adopted equity ownership guidelines applicable to our directors and to executive officers. Failure to meet the ownership levels or show sustained progress towards meeting them, may result in payment to the directors and executive officers of future compensation in the form of equity rather than cash. With respect to our executive officers and non-employee directors, the guidelines require ownership of shares of our common stock within five years of becoming an executive officer or three years after a non-employee director initially joins the Board, with a value equal to the following multiple of base salary (or annual fee for the non-employee directors): | | | | | | | | | | | | | | Title | | Multiple
of Base
Salary /
Annual Fee | | Compliance
with
Guidelines | | | | Chairman, Chief Executive Officer and President | | 6x | | Yes | | | | Executive Vice Presidents (including CFO and COO) | | 4x | | Yes | | | | Non-Employee Directors | | 3x | | Yes* |
| * | All of our non-employee directors and NEOs as of March 29, 20222023 met the equity ownership guidelines, except for Ms. Mozingo, and Ms. Murphy, who haveMs. Pitman and Mr. Thompson. Ms. Murphy has three years from theirher initial election to the Board to reach compliance. Ms. Mozingo, Ms. Pitman and Mr. Thompson are not in compliance with the equity ownership guidelines as a result of the decrease in the price of our common stock. We anticipate that they will be back in compliance with the guidelines within the next 12 months. |
Clawback Policy In February 2013, the Board adopted a clawback policy applicable to our executive officers. The policy allows for the recoupment of incentive awards (including awards made under our annual cash bonus plan and long-term incentive plans) in the event the Company is required to restate its financial statements due to the material noncompliance of the Company with financial reporting requirements under the securities laws, as a result of intentional misconduct, fraud or gross negligence. Each executive officer who is directly responsible for the intentional misconduct, fraud or gross negligence shall reimburse the Company for incentive awards made to that executive officer after January 1, 2013, that would not have been made if the restated financial measures had been reported initially. In light of the SEC’s adoption of final clawback rules in October 2022 and the NYSE’s issuance of its proposed rule in February 2023, we intend to update our clawback policy to comply with applicable NYSE listing rules when effective. No Hedging or Pledging The Company maintains an internal “Insider Trading Policy” that is applicable to our executive officers and directors. Among other things, the policy prohibits any employee of the Company (including directors or executive officers) from (i) engaging in short sales of the Company’s securities and from trading in puts, calls, options or other derivative securities based on the Company’s securities, (ii) engaging in hedging or monetization transactions (which allow a stockholder to continue to own the covered securities, but without the full risks and rewards of ownership) and (iii) pledging the Company’s securities as loan collateral. | | | 42 Proxy Statement and Notice of 2022 Annual Meeting | | |
| | | Compensation Discussion and Analysis
| | |
Other Practices with Regard to Equity Awards and Purchases and Sales of Shares The Compensation Committee determines the number of shares underlying grants of restricted stock awards and the executive officers who will receive such awards. All NEOs must receive prior authorization for any purchase or sale of our common stock. We have never granted stock options to our executive officers, and we have not granted any stock options since those granted to our initial directors in 2004. | | | 34 Proxy Statement and Notice of 2023 Annual Meeting | | |
| | | Compensation Discussion and Analysis | | |
Compensation Risk Assessment During 2021,2022, the Compensation Committee reviewed the potential risks in the Company’s compensation program to ensure that compensation methods do not incentivize our executives to make decisions that, while creating apparent short-term financial and operating success, may in the longer-term result in future losses and other value depreciation. After reviewing the analysis, the Compensation Committee concluded that the Company’s compensation policies and practices do not encourage excessive risk taking nor create any risks that would be reasonably likely to have a materially adverse effect on the Company, and it believes that the following risk oversight and compensation design features assist in guarding against excessive risk taking: Review and approval of corporate objectives by the Compensation Committee to ensure that these goals are aligned with the Company’s annual operating and strategic plans, achieve the proper risk/reward balance, and do not encourage excessive risk taking
| • | Review and approval of corporate objectives by the Compensation Committee to ensure that these goals are aligned with the Company’s annual operating and strategic plans, achieve the proper risk/reward balance, and do not encourage excessive risk taking |
Base salaries consistent with each executive’s responsibilities so that they are not motivated to take excessive risks to achieve a reasonable level of financial security
| • | Base salaries consistent with each executive’s responsibilities so that they are not motivated to take excessive risks to achieve a reasonable level of financial security |
A significant portion of each executive’s compensation is tied to the future stock performance of the Company
| • | A significant portion of each executive’s compensation is tied to the future stock performance of the Company |
Stock compensation and vesting periods for stock awards designed to encourage executives to focus on sustained stock price appreciation
| • | Stock compensation and vesting periods for stock awards designed to encourage executives to focus on sustained stock price appreciation |
| • | A mix between cash and equity compensation designed to encourage strategies and actions that are in the long-term best interests of the Company and its stockholders. |
A mix between cash and equity compensation designed to encourage strategies and actions that are in the long-term best interests of the Company and its stockholders
Section 162(m) Policy The Compensation Committee’s policy is to consider the tax treatment of compensation paid to our executive officers while simultaneously seeking to provide our executives with appropriate rewards for their performance. Under Section 162(m) of the Code, a publicly-held corporation may not deduct compensation of more than $1 million paid to any “covered employee.” The Compensation Committee believes that stockholder interests are best served if they retain maximum flexibility to design executive compensation programs that meet stated business objectives. For that reason, while our Board and Compensation Committee have considered the potential effects of Section 162(m) of the Code on the compensation paid to our named executive officers, the Compensation Committee’s compensation policy and practices are not directly guided by considerations relating to Section 162(m) of the Code. In addition, because we qualify as a REIT under the Code, we generally distribute at least 100% of our net taxable income each year and therefore do not pay federal income tax. As a result, the possible loss of a federal tax deduction would not be expected to have a material impact on us.
| | | | | Proxy Statement and Notice of 2023 Annual Meeting 35 |
| | | Compensation Discussion and Analysis | | |
Compensation Committee Report The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis beginning on page 2819 of this Proxy Statement. Based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement. | | | | | | | | | | C. Reynolds Thompson, III. (Chairman) | | Michael G. Stewart | | D. Paul Sparks, Jr. (Chairman) | | Michael G. Stewart | | C. Reynolds Thompson, III |
| | | | | 36 Proxy Statement and Notice of 20222023 Annual Meeting 43 | | |
| | | Compensation Discussion and Analysis | | |
Summary Compensation Table The amounts in the table below are a summary of the components of compensation our NEOs received in the last three years: | | Name | | Year | | Salary ($) | | Bonus(1) ($) | | Stock Awards(2) ($) | | Non-Equity Incentive Plan Compensation(3) ($) | | All Other Compensation ($) | | Total ($) | | Year | | | Salary ($) | | | Bonus(1) ($) | | | Stock Awards(2) ($) | | | Non-Equity Incentive Plan Compensation(3) ($) | | | All Other Compensation ($) | | Total ($) | | | Edward K. Aldag, Jr. | | | | 2021 | | | | | 1,000,000 | | | | | 600,000 | | | | | 12,928,532 | | | | | 2,400,000 | | | | | 108,097 | (4) | | | 17,036,629 | | | | 2022 | | | | 1,000,000 | | | | 600,000 | | | | 12,380,300 | | | | 1,900,000 | | | | 145,213 | (4) | | | 16,025,513 | | | Chairman, Chief Executive | | | | 2020 | | | | | 1,000,000 | | | | | 600,000 | | | | | 12,732,033 | | | | | 2,400,000 | | | | | 125,604 | | | | 16,857,637 | | | | 2021 | | | | 1,000,000 | | | | 600,000 | | | | 12,928,532 | | | | 2,400,000 | | | | 108,097 | | | | 17,036,629 | | | Officer and President | | | | 2019 | | | | | 1,000,000 | | | | | 450,000 | | | | | 13,904,809 | | | | | 1,800,000 | | | | | 98,627 | | | | 17,253,436 | | | | 2020 | | | | 1,000,000 | | | | 600,000 | | | | 12,732,033 | | | | 2,400,000 | | | | 125,604 | | | | 16,857,637 | | | R. Steven Hamner | | | | 2021 | | | | | 675,000 | | | | | 303,750 | | | | | 6,464,266 | | | | | 1,215,000 | | | | | 27,313 | (5) | | | 8,685,329 | | | | 2022 | | | | 675,000 | | | | 303,750 | | | | 6,190,172 | | | | 961,875 | | | | 32,974 | (5) | | | 8,163,771 | | | Director, Executive | | | | 2020 | | | | | 675,000 | | | | | 303,750 | | | | | 6,366,029 | | | | | 1,215,000 | | | | | 61,643 | | | | 8,621,422 | | | | 2021 | | | | 675,000 | | | | 303,750 | | | | 6,464,266 | | | | 1,215,000 | | | | 27,313 | | | | 8,685,329 | | | Vice President, Chief Financial Officer | | | | 2019 | | | | | 600,000 | | | | | 210,000 | | | | | 6,952,405 | | | | | 840,000 | | | | | 61,247 | | | | 8,663,652 | | | | 2020 | | | | 675,000 | | | | 303,750 | | | | 6,366,029 | | | | 1,215,000 | | | | 61,643 | | | | 8,621,422 | | | Emmett E. McLean | | | | 2021 | | | | | 550,000 | | | | | 192,500 | | | | | 4,034,826 | | | | | 770,000 | | | | | 64,625 | (6) | | | 5,611,951 | | | | 2022 | | | | 550,000 | | | | 192,500 | | | | 2,873,541 | | | | 563,750 | | | | 40,690 | (6) | | | 4,220,481 | | | Executive Vice President, | | | | 2020 | | | | | 550,000 | | | | | 192,500 | | | | | 4,738,268 | | | | | 770,000 | | | | | 65,251 | | | | 6,316,019 | | | | 2021 | | | | 550,000 | | | | 192,500 | | | | 4,034,826 | | | | 770,000 | | | | 64,625 | | | | 5,611,951 | | | Chief Operating Officer and Secretary | | | | 2019 | | | | | 550,000 | | | | | 192,500 | | | | | 5,634,626 | | | | | 770,000 | | | | | 61,467 | | | | 7,208,593 | | | | 2020 | | | | 550,000 | | | | 192,500 | | | | 4,738,268 | | | | 770,000 | | | | 65,251 | | | | 6,316,019 | |
| (1) | Reflects the cash bonus earned by our named executive officers for the applicable year based on a qualitative review of individual performance by the Compensation Committee. |
| (2) | Represents the aggregate grant date fair value of restricted stock awards, calculated in accordance with FASB ASC Topic 718. For awards subject to performance-based vesting conditions, the value reported reflects the fair value of the award at the grant date based upon the probable outcome of the performance conditions. The reported value for these performance awards granted in 2022 was $8,654,604; $4,327,302;$8,270,489; $4,135,256; and $2,727,508$1,954,860 for Messrs. Aldag, Hamner, and McLean, respectively. The value of the performance award at the grant date, assuming that the highest level of performance conditions will be achieved, would be $21,636,510; $10,818,255;$20,676,223; $10,338,140; and $5,114,078$3,665,364 for Messrs. Aldag, Hamner, and McLean, respectively. Assumptions used in the calculation of these amounts are included in Note 7 of the Notes to Consolidated Financial Statements included in our 20212022 Annual Report on Form 10-K. |
| (3) | Reflects the cash bonus earned by our named executive officers for the applicable year based on the achievement of specified corporate goals. |
| (4) | Represents $11,600$12,200 in Company 401(k) match, $10,993$7,877 for health insurance, a $12,000 automobile allowance, $23,944$52,248 for the cost of tax preparation and financial planning services, and $49,560$51,888 for the cost of life insurance.insurance, $3,312 for disability insurance and $5,688 for annual physical. These amounts are inclusive of $32,341$46,863 to reimburse Mr. Aldag for his tax liabilities associated with such payments. |
| (5) | Represents $11,600$12,200 in Company 401(k) match, $6,713$7,877 for health insurance, $3,897 for the cost of tax preparation and a $9,000 automobile allowance. These amounts are inclusive of $1,456 to reimburse Mr. Hamner for his tax liabilities associated with such payments. |
| (6) | Represents $11,600$12,200 in Company 401(k) match, $6,713$7,877 for health insurance, a $9,000 automobile allowance, $11,153$9,540 for the cost of tax preparation, $1,379$873 for the cost of disability insurance and $24,780$1,200 for the cost of life insurance.fitness reimbursement. These amounts are inclusive of $15,802$4,076 to reimburse Mr. McLean for his tax liabilities associated with such payments. |
| | | 44 | | Proxy Statement and Notice of 20222023 Annual Meeting | | 37 |
| | | Compensation Discussion and Analysis | | |
Grants of Plan-Based Awards The following table provides information about plan-based awards granted to our NEOs during 2021.2022. For further detail regarding each of these awards, see “Compensation Discussion and Analysis—Elements of Pay.” | | Name | | Grant Date | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | | All Other Stock Awards: Number of Shares of Stock or Units (#) | | Grant Date Fair Value of Stock and Option Awards ($) | | Grant Date | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | | | All Other Stock Awards: Number of Shares of Stock or Units (#) | | Grant Date Fair Value of Stock and Option Awards ($) | | | Threshold ($) | | Target ($) | | Maximum ($) | | Threshold (#) | | Target (#) | | Maximum (#) | | Threshold ($) | | Target ($) | | Maximum ($) | | Threshold (#) | | Target (#) | | Maximum (#) | | | Edward K. Aldag, Jr. | | | 1/15/2021 | | | | 800,000 | | | | 1,600,000 | | | | 2,400,000 | | | | | | | | | | | | | | 1/28/2022 | | | | 800,000 | | | | 1,600,000 | | | | 2,400,000 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | | | 1/15/2021 | | | | | | | | | | | | | | | | 202,748 | (3) | | | 4,273,928 | | | | 1/28/2022 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 188,437 | (3) | | | 4,109,811 | | | | | | 1/15/2021 | | | | | | | | | | 147,590 | (4) | | | 393,570 | (4) | | | 983,925 | (4) | | | | | 8,654,604 | | | | 1/28/2022 | | | | – | | | | – | | | | – | | | | 137,171 | (4) | | | 365,789 | (4) | | | 914,473 | (4) | | | – | | | | 8,270,489 | | | R. Steven Hamner | | | 1/15/2021 | | | | 540,000 | | | | 810,000 | | | | 1,215,000 | | | | | | | | | | | | | | 1/28/2022 | | | | 540,000 | | | | 810,00 | | | | 1,215,000 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | | | 1/15/2021 | | | | | | | | | | | | | | | | 101,374 | (3) | | | 2,136,964 | | | | 1/28/2022 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 94,219 | (3) | | | 2,054,916 | | | | | | 1/15/2021 | | | | | | | | | | 73,796 | (4) | | | 196,785 | (4) | | | 491,963 | (4) | | | | | 4,327,302 | | | | 1/28/2022 | | | | – | | | | – | | | | – | | | | 68,586 | (4) | | | 182,895 | (4) | | | 457,238 | (4) | | | – | | | | 4,135,256 | | | Emmett E. McLean | | | 1/15/2021 | | | | 220,000 | | | | 440,000 | | | | 770,000 | | | | | | | | | | | | | | 1/28/2022 | | | | 220,000 | | | | 440,000 | | | | 770,000 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | | | 1/15/2021 | | | | | | | | | | | | | | | | 62,017 | (3) | | | 1,307,318 | | | | 1/28/2022 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 42,122 | (3) | | | 918,681 | | | | | | 1/15/2021 | | | | | | | | | | 46,513 | (4) | | | 124,034 | (4) | | | 232,564 | (4) | | | | | 2,727,508 | | | | 1/28/2022 | | | | – | | | | – | | | | – | | | | 32,423 | (4) | | | 86,460 | (4) | | | 162,113 | (4) | | | – | | | | 1,954,860 | |
| (1) | Represents cash incentive compensation opportunity, which can be earned based upon the achievement of formulaic corporate goals in the annual cash bonus program. |
| (2) | Represents awards of performance-based restricted stock. Dividends are not paid on performance-based awards until the award is earned. |
| (3) | Represents the annual time-based restricted stock awards that will vest quarterly over a period of three years. The grant date fair value of the time-based restricted stock is $21.08$21.81 per share. Eligibility to receive dividends on the time-based stock awards starts on the date of grant. |
| (4) | Represents 20212022 FFO per share growth, EBITDA and Acquisitionsacquisitions awards, which are earned based on the Company’s achievement of specific one-year and three-year goals fromfor the periods of January 1, 20212022 to December 31, 2023.2022 and January 1, 2022 to December 31, 2024. The awards are also subject to an absolute and relative TSR modifier for the respective performance periods which can increase/decrease the number of shares earned by up to 25%. The grant date fair value of these awards is $21.99$22.61 per share. |
| | | | | 38 Proxy Statement and Notice of 20222023 Annual Meeting 45 | | |
| | | Compensation Discussion and Analysis | | |
Outstanding Equity Awards as of December 31, 20212022 The table below shows the outstanding equity awards held by our NEOs as of December 31, 2021.2022. Market values are based on a price of $23.63$11.14 per share, the closing price of our common stock on December 31, 2021.30, 2022, the last trading day of 2022. | | | | Option Awards | | Stock Awards | | Option Awards | | Stock Awards | | | Name | | Number of Securities Underlying Unexercised Options (#) Exercisable | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | | Option Exercise Price ($) | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#) | | Market Value of Shares or Units of Stock That Have Not Vested ($) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | | Number of Securities Underlying Unexercised Options (#) Exercisable | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | Equity Incentive Plan Awards: Number of Securities Underlying Unearned Options (#) | | Option Exercise Price ($) | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#) | | Market Value of Shares or Units of Stock That Have Not Vested ($) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | | | Edward K. Aldag, Jr. | | | – | | | | – | | | | – | | | | – | | | | – | | | | 315,523 | (1) | | | 7,455,808 | | | | 1,275,084 | (4) | | | 30,130,235 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 253,001 | (1) | | | 2,818,431 | | | | 858,737 | (4) | | | 9,566,330 | | | R. Steven Hamner | | | – | | | | – | | | | – | | | | – | | | | – | | | | 157,760 | (2) | | | 3,727,869 | | | | 637,541 | (5) | | | 15,065,094 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 126,507 | (2) | | | 1,409,288 | | | | 429,367 | (5) | | | 4,783,148 | | | Emmett E. McLean | | | – | | | | – | | | | – | | | | – | | | | – | | | | 101,370 | (3) | | | 2,395,373 | | | | 503,599 | (6) | | | 11,900,044 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 65,925 | (3) | | | 734,405 | | | | 255,786 | (6) | | | 2,849,456 | |
| (1) | For Mr. Aldag includes (i) 71,53859,800 shares that vested on January 1, 2022,2023, (ii) 108,82167,580 shares that vest in equal quarterly installments from April 1, 20222023 through January 1, 20232024 and (iii) 135,164125,621 shares vest in equal quarterly installments from April 1, 20222023 through January 1, 2024.2025. |
| (2) | For Mr. Hamner includes (i) 35,76329,906 shares that vested on January 1, 2022,2023, (ii) 54,41533,790 shares that vest in equal quarterly installments from April 1, 20222023 through January 1, 20232024 and (iii) 67,58262,811 shares that vest in equal quarterly installments from April 1, 20222023 through January 1, 2024.2025. |
| (3) | For Mr. McLean includes (i) 26,01217,182 shares that vested on January 1, 2022,2023, (ii) 34,01720,665 shares vest in equal quarterly installments from April 1, 20222023 through January 1, 20232024 and (iii) 41,34128,078 shares vest in equal quarterly installments from April 1, 20222023 through January 1, 2024.2025. |
| (4) | For Mr. Aldag includes (i) 339,421 shares of the 2017 Absolute TSR Award*, (ii) 311,525 shares of the 2019 Performance Award**, (iii) 230,568 shares ofunderlying the 2020 Performance Award† and (iv) 393,570, (ii) 262,380 shares ofunderlying the 2021 Performance Award‡ and (iii) 365,789 shares underlying the 2022 Performance Award* remain unearned. |
| (5) | For Mr. Hamner includes (i) 169,710 shares of the 2017 Absolute TSR Award*, (ii) 155,762 shares of the 2019 Performance Award**, (iii) 115,284 shares ofunderlying the 2020 Performance Award† and (iv) 196,785, (ii) 131,188 shares ofunderlying the 2021 Performance Award‡ and (iii) 182,895 shares underlying the 2022 Performance Award* remain unearned. |
| (6) | For Mr. McLean includes (i) 152,739 shares of the 2017 Absolute TSR Award*, (ii) 140,188 shares of the 2019 Performance Award**, (iii) 86,638 shares ofunderlying the 2020 Performance Award† and (iv) 124,034, (ii) 82,688 shares ofunderlying the 2021 Performance Award‡ and (iii) 86,460 shares underlying the 2022 Performance Award* remain unearned. |
| * | 2017 Absolute TSR Award can be earned as follows: 30% of the award can be earned by achieving a TSR of 27% or greater for the period January 1, 2017 through December 31, 2019, 30% of the award can be earned by achieving a TSR of 36% or greater for the period January 1, 2017 through December 31, 2020, and 100% of the award or the remaining unearned shares can be earned by achieving a TSR of 45% or greater for the period ending December 31, 2021. Any earned shares will vest on January 1 immediately following the date on which the shares are earned.
|
| **† | The 20192020 Performance Award is earned based on the achievement of return on equity (“ROE”),FFO per Share Growth, EBITDA and Acquisitionsacquisitions goals over a three-year period with the ability to earn up to one-third of the award in 20192020 based on one-year goals. Any earned shares are subject to aan absolute TSR and relative TSR modifier (based on one-year TSR for any shares earned based on one-year goals and three-year TSR for the majority of the award based on three-year goals) that can increase or decrease the award up to 25%. Up to 1/3one-third of the shares subject to the EBITDA award maywere eligible to be earned if EBITDA is $700 million for 2019 with 100% of shares earned if EBITDA is $800 million in the third year of the performance period. Up to 1/3 of the shares subject to the ROE award may be earned if ROE is 13% for 2019 with 100% of shares earned if ROE is 13% for the three-year performance period. Up to 1/3 of the shares subject to the Acquisitions award may be earned if Acquisitions is $750 million for 2019 with 100% of shares earned if Acquisitions is $2.25 billion for the three-year performance period. Any earned shares will vest on the January 1 immediately following the date on which the shares are earned. |
| † | The 2020 Performance Award is earned based on the achievement of FFO per Share Growth, EBITDA and Acquisitions goals over a three-year period with the ability to earn up to one-third of the award in 2020 based on one-year goals. Any earned shares are subject to an absolute TSR and relative TSR modifier (based on one-year TSR for any shares earned based on one-year goals and three-year TSR for the majority of the award based on three-year goals) that can increase or decrease the award up to 25%. Up to 1/3 of the shares subject to the EBITDA award may be earned if EBITDA iswas $850 million for 2020 withand 100% of shares were eligible to earned if EBITDA iswas $940 million in the third year of the performance period. Up to 1/3one-third of the shares subject to the FFO per Share Growth award maywere eligible to be earned if FFO per Share Growth iswas 4% for 2020 withand 100% of shares were eligible to be earned if FFO per Share Growth iswas 12% for the three-year performance period. Up to 1/3one-third of the shares subject to the Acquisitionsacquisitions award maywere eligible to be earned if Acquisitions isacquisitions were $750 million for 2020 withand 100% of shares were eligible to be earned if Acquisitions isacquisitions were $2.25 billion for the three-year performance period. Any earned shares will vest on the January 1 immediately following the date on which the shares are earned.
|
| ‡ | The 2021 Performance Award is earned based on the achievement of FFO per Share Growth, EBITDA and Acquisitionsacquisitions goals over a three-year period with the ability to earn up to one-third of the award in 2021 based on one-year goals. Any earned shares are subject to an absolute TSR and relative TSR modifier (based on one-year TSR for any shares earned based on one-year goals and three-year TSR for the majority of the award based on three-year goals) that can increase or decrease the award up to 25%. Up to 1/3one-third of the shares subject to the EBITDA award maywere eligible to be earned if EBITDA iswas $1.3 billion for 2021 withand 100% of shares are eligible to be earned if EBITDA is $1.4 billion in the third year of the performance period. Up to 1/3one-third of the shares subject to the FFO per Share Growth award maywere eligible to be earned if FFO per Share Growth iswas 3.75% for 2021 withand 100% of shares are eligible to be earned if FFO per Share Growth is 11.25% for the three-year performance period. Up to 1/3one-third of the shares subject to the Acquisitionsacquisitions award maywere eligible be earned if Acquisitions isacquisitions were $750 million for 2021 withand 100% of shares were eligible to be earned if Acquisitions isacquisitions were $2.25 billion for the three-year performance period. Any earned shares willvest on the January 1 immediately following the date on which the shares are earned. |
| * | The 2022 Performance Award is earned based on the achievement of FFO per Share Growth, EBITDA and acquisitions goals over a three-year period with the ability to earn up to one-third of the award in 2022 based on one-year goals. Any earned shares are subject to an absolute TSR and relative TSR modifier (based on one-year TSR for any shares earned based on one-year goals and three-year TSR for the majority of the award based on three-year goals) that can increase or decrease the award up to 25%. Up to one-third of the shares subject to the EBITDA award were eligible to be earned if EBITDA was $1.4875 billion for 2022 and 100% of shares are eligible to be earned if EBITDA is $1.575 billion in the third year of the performance period. Up to one-third of the shares subject to the FFO per Share Growth award were eligible to be earned if FFO per Share Growth was 4.0% for 2022 and 100% of shares are eligible to be earned if FFO per Share Growth is 8.0% for the three-year performance period. Up to one-third of the shares subject to the acquisitions award were eligible to be earned if acquisitions were $750 million for 2022 and 100% of shares are eligible to be earned if acquisitions are $2.25 billion for the three-year performance period. Any earned shares vest on the January 1 immediately following the date on which the shares are earned. |
| | | 46 | | Proxy Statement and Notice of 20222023 Annual Meeting | | 39 |
| | | Compensation Discussion and Analysis | | |
Option Exercises and Stock Vested The following table sets forth the aggregate number and value of shares of restricted common stock held by our NEOs that vested in 2021.2022. The “Value Realized on Vesting” set forth below is the product of the fair market value of a share of common stock on the vesting date multiplied by the number of shares vesting. We have never issued stock options to our NEOs. | | | | Option Awards | | Stock Awards | | Option Awards | | | Stock Awards | | | Name | | Number of Shares Acquired on Exercise (#) | | Value Realized on Exercise ($) | | Number of Shares Acquired on Vesting (#) | | Value Realized on Vesting ($) | | Number of Shares Acquired on Exercise
(#) | | | Value Realized on Exercise
($) | | | Number of Shares Acquired on Vesting (#) | | | Value Realized on Vesting
($) | | | Edward K. Aldag, Jr. | | | | – | | | | | – | | | | | 965,160 | | | | | 20,700,373 | | | | – | | | | – | | | | 1,655,159 | | | | 37,752,981 | | | R. Steven Hamner | | | | – | | | | | – | | | | | 483,504 | | | | | 10,370,210 | | | | – | | | | – | | | | 827,573 | | | | 18,876,348 | | | Emmett E. McLean | | | | – | | | | | – | | | | | 389,714 | | | | | 8,367,027 | | | | – | | | | – | | | | 648,370 | | | | 14,927,196 | |
Potential Payments Upon Termination or Change of Control The following table shows potential payments and benefits that will be provided to our NEOs upon the occurrence of certain termination triggering events. The change-of-control provisions in the employment agreements are designed to align management’s interests with those of our stockholders. See the discussion below under “Employment Agreements with Named Executive Officers” for information about payments upon termination or a change of control. All equity interests included in the termination and change of control calculations represent previously granted restricted stock awards and are valued based on the closing price of our common stock on December 31, 2021,30, 2022, the last trading day of 2022, and an assumed termination of employment on December 31, 2021.2022. | | Name | | Termination and Change of Control(1) ($) | | Death ($) | | Termination Not for Cause; By Executive for Good Reason; Permanent Disability ($) | | Termination for Cause; By Executive without Good Reason ($) | | Termination and Change of Control
($) | | | Death
($) | | | Termination Not for Cause; By Executive for Good Reason; Permanent Disability
($) | | | Termination for Cause; By Executive without Good Reason
($) | | Edward K. Aldag, Jr. | | | | | | | | | | | | | | | | | | | | | | Cash Severance | | | | 12,302,762 | (2) | | | | 54,963 | | | | | 12,302,762 | (3) | | | | – | | | | 12,315,384 | (2) | | | 39,386 | | | | 12,315,384 | (3) | | – | | Equity-Award Acceleration(1) | | | | 70,750,465 | | | | | 70,750,465 | | | | | 70,750,465 | | | | | | | 27,202,159 | | | | 27,202,159 | | | | 27,202,159 | | | | | R. Steven Hamner | | | | | | | | | | | | | | | | | | | | | | Cash Severance | | | | 6,628,389 | (2) | | | | 20,139 | | | | | 6,159,639 | | | | | – | | | | 6,631,882 | (2) | | | 23,632 | | | | 6,378,757 | | | – | | Equity-Award Acceleration(1) | | | | 35,375,055 | | | | | 35,375,055 | | | | | 35,375,055 | | | | | | | 13,601,077 | | | | 13,601,077 | | | | 13,601,077 | | | | | Emmett E. McLean | | | | | | | | | | | | | | Emmett, E. McLean | | | | | | | | | | | Cash Severance | | | | 4,663,116 | (2) | | | | 20,139 | | | | | 4,663,116 | | | | | – | | | | 4,590,751 | (2) | | | 23,632 | | | | 4,384,501 | | | – | | Equity-Award Acceleration(1) | | | | 26,731,603 | | | | | 26,731,603 | | | | | 26,731,603 | | | | | | | 6,790,947 | | | | 6,790,947 | | | | 6,790,947 | | | |
| (1) | As of January 1, 2022,2023, the amount that would accelerate upon a change of control (“CoC”)CoC would be reduced to: $35,878,776to $18,845,379 for Mr. Aldag, $17,939,329$9,422,613 for Mr. Hamner and $12,628,864$4,332,956 for Mr. McLean as a result of a significant number of shares that vested on January 1, 2022.2023. |
| (2) | Amounts exclude tax related payments including any tax gross-ups in connection with a CoC. While the precise amount of any tax-related payments is difficult to calculate and may be mitigated based on a number of considerations, the estimated tax gross-up payments are: $37,280,403are $0 for Mr. Aldag, $17,293,123 for Mr. Hamner and $12,654,136 for Mr. McLean as of December 31, 2021. Due to the shares vested on January 1, 2022, the estimated excise tax gross-up payments upon a CoC on January 1, 2022 would be reduced to $0 for each of Mr. Aldag, Mr. Hamner and Mr. McLean.2022. |
| (3) | Amount excludes an estimated tax payment of $5,442,000. |
| | | | | 40 Proxy Statement and Notice of 20222023 Annual Meeting 47 | | |
| | | Compensation Discussion and Analysis | | |
Employment Agreements with Named Executive Officers Our three founders have employment agreements that were negotiated in 2003 to market standards in connection with our initial equity offering. Below we describe the terms of these agreements. Because certain market standards have evolved since our initial equity offering, we will not enter into any new contracts that include a multi-year evergreen term, single-trigger change of control provisions, or excise tax gross up provisions. We have employment agreements with Edward K. Aldag, Jr., R. Steven Hamner and Emmett E. McLean. These agreements provide that each NEO agrees to devote substantially all of his business time to our operation. The employment agreement for each of the NEOs provides for an initial three-year term, which is automatically extended for successive one-year periods, unless either party gives notice of non-renewal as provided in the agreement. The executive employment agreements provide for an annual physical at the Company’s expense, a monthly car allowance of $1,000 for Mr. Aldag and $750 for each of Messrs. Hamner and McLean. The NEOs are also reimbursed for the cost of tax preparation and financial planning services, up to $25,000 annually for Mr. Aldag and $10,000 annually for each of Messrs. Hamner and McLean. We also reimburse each executive for the income tax he incurs on the receipt of these tax preparation and financial planning services. The employment agreements also provide that Mr. Aldag will receive up to $20,000 per year in reimbursement for life insurance premiums, which amount increases annually based on the increase in the consumer price index (“CPI”) for such year, and that Messrs. Hamner and McLean will receive up to $10,000 per year in reimbursement for life insurance premiums, which amount increases annually based on the increase in the CPI for such year. We also reimburse each executive for the income tax he incurs on these life insurance premium reimbursements. The NEOs are also reimbursed for the cost of their disability insurance premiums. The employment agreements provide that the executive officers are eligible to receive the same benefits, including medical insurance coverage and retirement plan benefits in a 401(k) plan, to the same extent as other similarly situated employees, and such other benefits as are commensurate with their position. Participation in employee benefit plans is subject to the terms of said benefit plans as in effect from time-to-time. The employment agreements with the NEOs provide for contractual severance benefits and accelerated vesting of equity grants in the event of a change of control, which we believe are common in the REIT industry, are designed to reinforce and encourage the continued attention and dedication of our executive officers to their assigned duties without distraction or fear of job loss in the face of an actual or threatened change of control and to ensure that our management is motivated to negotiate the best merger consideration for our stockholders. If the NEO’s employment ends for any reason, we will pay accrued salary, bonuses, and incentive payments already determined but not yet paid, and other existing obligations. If an NEO’s employment terminates as a result of his “permanent disability” (as defined in the employment agreements), we terminate an NEO’s employment for any reason other than for “cause” (as defined in the employment agreements), or if an NEO terminates his employment for “good reason” (as defined in the employment agreements), we will be obligated to pay (i) a lump sum payment of severance equal to the sum of (x) the product of three and the sum of the salary in effect at the time of termination plus the average cash bonus (or the highest cash bonus, in the case of Mr. Aldag) paid to such executive during the preceding three years, grossed up for taxes in the case of Mr. Aldag, and (y) the incentive bonus prorated for the year in which the termination occurred; (ii) the cost of the executive’s continued participation in the Company’s benefit and welfare plans (other than the 401(k) plan) for a three-year period (a five-year period in the case of Mr. Aldag) following termination; and (iii) continued reimbursement for life insurance premiums and the taxes payable on such amounts for three years following termination (or five years in the case of Mr. Aldag). Additionally, upon such termination, all stock options, if any, and restricted stock held by the executive will become fully vested, and the executive will have whatever period remains under the term of stock options in which to exercise all vested stock options. The employment agreements also provide that the NEOs and their spouses and dependents will be permitted to continue to participate in all employee benefit and welfare plans and programs of the Company other than the 401(k) plan until the earlier of age 65 or such time as the NEO obtains full-time employment with an entity not affiliated with the NEO that provides comparable benefits. In the event of the death of any of our NEOs, in addition to the accrued salary, bonus, and incentive payments due to them, their restricted stock shall become fully vested, and their respective beneficiaries will have whatever period remains under any outstanding stock options held by the NEO to exercise such stock options. In addition, their estates would be entitled to the NEO’s prorated incentive bonus payable in a lump sum and the NEO’s spouse and each of his dependents shall be covered under the Company’s health insurance program until the earlier of age 65 or such time as the spouse or dependent obtains full-time | | | 48 | | Proxy Statement and Notice of 20222023 Annual Meeting | | 41 |
| | | Compensation Discussion and Analysis | | |
employment with an entity not affiliated with the NEO that provides comparable benefits. The Company shall pay for such coverage for three years (or five years in the case of Mr. Aldag) following the death of the NEO. In the event that the employment of any of our NEOs ends as a result of a termination by us for cause or by the NEO without good reason, then in addition to the accrued salary, bonuses and incentive payments due to them, the executives would be entitled to exercise any outstanding vested stock options held by the NEO, pursuant to the terms of the grant, but all unvested stock options and restricted stock would be forfeited upon termination. Upon a change of control, the NEOs will become fully vested in their equity awards. In addition, if the employment of any NEO is terminated by us for cause or by the executive without good reason in connection with a change of control, the executive will be entitled to receive an amount equal to the largest cash compensation paid to the executive for any 12-month period during his tenure multiplied by three. If payments become due as a result of a change of control and the excise tax imposed by Code Section 4999 applies, the terms of the employment agreements require us to gross up the amount payable to the executive by the amount of this excise tax plus the amount of income and other taxes due as a result of the gross up payment. For an 18-month period after termination of an executive’s employment for any reason other than (i) termination by us without cause or (ii) termination by the executive for good reason, each of the executives has agreed not to compete with us by working with or investing in, subject to certain limited exceptions, any enterprise engaged in a business substantially similar to our business as it was conducted during the period of the executive’s employment with us and not to solicit our employees. | | | | | 42 Proxy Statement and Notice of 20222023 Annual Meeting 49 | | |
Pay Ratio Disclosure In accordance with Item 402(u) of Regulation S-K, promulgated by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, we determined the ratio of the annual total compensation of our CEO, Mr. Aldag, relative to the annual total compensation of our median employee. For the purposes of reporting annual total compensation and the ratio of annual total compensation of the CEO to the median employee, both the CEO and the median employee’s annual total compensation were calculated consistent with the disclosure requirement underrequirements of the Summary Compensation Table. The Company’s methodology in determining our median employee is based on 20212022 base salaries (annualized for employees hired mid-year or who had a leave of absence during the year) plus incentive bonus for all individuals, excluding our CEO, who were employed by us as of December 31, 2021.2022. In accordance with Item 402(u) and instructions thereto, we included all full-time, part-time, temporary and seasonal employees. After applying the methodology described above, our median employeeemployee’s total compensation using the Summary Compensation Table requirements was $173,092.$197,738. Our CEO’s total compensation as reported in the Summary Compensation Table was $17,036,629. Therefore,$16,025,513.Therefore, our CEO to median employee pay ratio is approximately 98:81:1. The pay ratio reported above is a reasonable estimate calculated in a manner consistent with SEC rules, based on our internal records and the methodology described above. The SEC rules for identifying the median employee allow companies to adopt a variety of methodologies, to apply certain exclusions and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. Accordingly, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies have different employee populations and compensation practices and may use different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios. Compensation Committee Interlocks and Insider Participation During 2021,2022, the following directors served on the Compensation Committee: Michael G. Stewart, C. Reynolds Thompson, III (Chair), Michael G. Stewart and D. Paul Sparks, Jr. (chair). No member of the Compensation Committee was an officer or employee of our Company or had any relationships requiring disclosure by us under applicable SEC regulations during 2021.2022. Mr. Stewart served as our Executive Vice President, General Counsel and Secretary from 2005 to 2010. In addition, no executive officer served during 20212022 as a director or a member of the Compensation Committee of any entity that had an executive officer serving as a director or a member of the Compensation Committee of our Board. Equity Compensation Plan Information The following table provides information as of December 31, 20212022, regarding shares of common stock that may be issued under our equity compensation plans, consisting of the Amended and Restated 2019 Equity Incentive Plan (the “2019 Plan”). | | Plan category | | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | | Weighted average exercise price of outstanding options, warrants and rights (b) | | Number of securities remaining available for future issuance under equity compensation plan (excluding securities referenced in column (a)(c) | | Plan Category | | | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | | Weighted average exercise price of outstanding options, warrants and rights (b) | | Number of securities remaining available for future issuance under equity compensation plan (excluding securities referenced in column (a)(c) | | Equity compensation plans approved by security holders | | – | | – | | 5,699,693 | | Equity compensation plan approved by security holders | | | – | | – | | 19,346,557 | | Equity compensation plans not approved by security holders | | – | | – | | – | | – | | – | | – | | Total | | – | | – | | 5,699,693 | | – | | – | | 19,346,557 |
We have only issued restricted stock and not issued any options, warrants or rights under the 2019 Plan. | | | 50 | | Proxy Statement and Notice of 2023 Annual Meeting 43 |
Pay Versus Performance Table As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(v) of RegulationS-K, we are providing information about the relationship between “compensation actually paid” to our principal executive officer (“PEO”) and the other NEOs, calculated in accordance with Item 402(v) of RegulationS-K, and certain financial performance measures. For additional information on our compensation programs and philosophy and how we design our compensation programs to align pay with performance, see the section titled “Compensation Discussion and Analysis” beginning on page 19. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Value of Initial Fixed $100 Investment Based On: | | | | | | | | | | | | | | | | | | | Summary Compensation Table Total for PEO ($) (1) | | | Compensation Actually Paid to PEO (1)(2) | | | Average Summary Compensation Table Total for non-PEO Named Executive Officers ($) (1) | | | Average Compensation Actually Paid to non-PEO Named Executive Officers (1)(2) ($) | | | | | | Dow Jones Health Care REIT TSR (4) ($) | | | | | | Normalized FFO per Share (6) ($) | | | | | | | | | | | | | | 16,025,513 | | | | (8,729,616 | ) | | | 6,192,126 | | | | (4,100,450 | ) | | | 63.54 | | | | 81.93 | | | | 902.6 | | | | 1.82 | | | | | | | | | | | | | | 17,036,629 | | | | 33,684,966 | | | | 7,148,640 | | | | 13,836,026 | | | | 124.60 | | | | 104.84 | | | | 656.0 | | | | 1.75 | | | | | | | | | | | | | | 16,857,637 | | | | 28,218,059 | | | | 7,468,721 | | | | 12,540,993 | | | | 109.05 | | | | 90.20 | | | | 431.5 | | | | 1.57 | |
| (1) | For fiscal years 2020, 2021 and 2022, our PEO was Edward K. Aldag, Jr. Chairman, CEO and President, and our other NEOs were R. Steven Hamner, EVP and CFO and Emmett E. McLean, EVP, COO and Secretary |
| (2) | The amounts reported represent the “compensation actually paid”, computed in accordance with Item 402(v) of RegulationS-K, but do not reflect the actual amount of compensation earned by or paid in the applicable year. In accordance with Item 402(v) of RegulationS-K, the following adjustments were made to the amount reported in the “Total” column of the Summary Compensation Table for each year to calculate compensation actually paid: |
| | | | | | | | | | | | | | | | | Adjustments to Determine Compensation “Actually Paid” for PEO (a) | | | | | | | | | | | | | | SCT Total Compensation ($) | | | 16,025,513 | | | | 17,036,629 | | | | 16,857,637 | | | | | | Grant Date Fair Value of Stock Awards Granted in Fiscal Year | | | (12,380,300 | ) | | | (12,928,532 | ) | | | (12,732,033 | ) | | | | | Fair Value at Fiscal Year-End of Outstanding and Unvested Stock Awards Granted in Fiscal Year | | | 8,396,220 | | | | 24,565,926 | | | | 20,856,417 | | | | | | Change in Fair Value of Outstanding and Unvested Stock Awards Granted in Prior Fiscal Years | | | (20,548,139 | ) | | | 4,166,464 | | | | 3,013,007 | | | | | | Fair Value at Vesting of Stock Awards Granted in Fiscal Year That Vested During Fiscal Year | | | 762,900 | | | | 1,047,721 | | | | 793,180 | | | | | | Change in Fair Value as of Vesting Date of Stock Awards Granted in Prior Fiscal Years For Which Applicable Vesting Conditions Were Met During Fiscal Year | | | (985,810 | ) | | | (203,242 | ) | | | (570,149 | ) | | | | | Compensation Actually Paid | | | | | | | | | | | | |
| | | 44 Proxy Statement and Notice of 2023 Annual Meeting | | |
| | | | | | | | | | | | | | | | | Adjustments to Determine Compensation “Actually Paid” for Non-PEOs Named Executive | | | | | | | | | | | | | | SCT Total Compensation ($) | | | 6,192,126 | | | | 7,148,640 | | | | 7,468,721 | | | | | | Grant Date Fair Value of Stock Awards Granted in Fiscal Year | | | (4,531,857 | ) | | | (5,249,546 | ) | | | (5,552,149 | ) | | | | | Fair Value at Fiscal Year-End of Outstanding and Unvested Stock Awards Granted in Fiscal Year | | | 3,039,094 | | | | 9,729,908 | | | | 9,116,553 | | | | | | Change in Fair Value of Outstanding and Unvested Stock Awards Granted in Prior Fiscal Years | | | (8,678,809 | ) | | | 1,874,864 | | | | 1,423,515 | | | | | | Fair Value at Vesting of Stock Awards Granted in Fiscal Year That Vested During Fiscal Year | | | 276,519 | | | | 422,195 | | | | 342,930 | | | | | | Change in Fair Value as of Vesting Date of Stock Awards Granted in Prior Fiscal Years For Which Applicable Vesting Conditions Were Met During Fiscal Year | | | (397,523 | ) | | | (90,035 | ) | | | (258,577 | ) | | | | | Compensation Actually Paid | | | | | | | | | | | | |
| (a) | In making each of the adjustments, the “value” of a stock award is the fair value of the award on the applicable date determined in accordance with FASB ASC Topic 718 using the valuation assumptions we then used to calculate the fair value of our equity awards. The valuation methodology used to calculate fair values did not materially differ from that disclosed at the time of grant. For more information on the valuation of our equity awards, please see the notes to our financial statements that appear in our Annual Report on Form10-K each fiscal year and the footnotes to the Summary Compensation Table that appears in our annual Proxy Statement. |
| (3) | Company TSR is calculated by dividing the sum of the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and the difference between the price of our common stock at the end and the beginning of the measurement period. |
| (4) | Represents the weighted peer group TSR, weighted according to the respective companies’ stock market capitalization at the beginning of each period for which a return is indicated. The peer group used for this purpose is the Dow Jones Health Care REIT Index, a published industry index. |
| (5) | The dollar amounts reported represent the amount of net income reflected in the Company’s audited financial statements for the applicable year. |
| (6) | Refer to Appendix A for our definition of FFO and Normalized FFO and a reconciliation of net income to FFO and Normalized FFO. While the Company uses numerous financial andnon-financial performance measures for the purpose of evaluating performance for the Company’s compensation programs, the Company has determined that Normalized FFO is the financial performance measure that, in the Company’s assessment, represents the most important financial performance measure that is not otherwise required to be disclosed in the Pay Versus Performance table used by the Company to link compensation actually paid to the Company’s NEOs, computed in accordance with Item 402(v) of RegulationS-K, for the most recently completed fiscal year, to Company performance. The Company utilizes Normalized FFO as a performance metric in the Company’s performance-vesting restricted shares that are awarded to the NEOs. |
Tabular List of Important Financial Measures The following are the measures that we have determined represent the most important performance measures used to link compensation actually paid to Company performance for 2022: | | Most Important Measures for 2022 | Normalized FFO per Share | EBITDA/Interest Expense Ratio | EBITDA | Acquisitions | 1YR and 3 YR TSR (Absolute and Relative) |
Relationship between Compensation Actually Paid and Financial Measures As described in more detail in the section “Compensation Discussion and Analysis”, our executive compensation program reflects a variablephilosophy. Our compensation program is designed to support our strategic business plan and motivate management to drive long-term value creation for our stockholders. The majority of our NEOs’ compensation is comprised of equity awards for which the value is directly tied to changes in stock price. Furthermore 66% of our equity awards are earned based on the achievement of rigorous performance hurdles. As illustrated in the table and charts below, compensation actually paid to our NEOs generally aligns with our stock price performance and financial results as follows: | ◆ | In 2022, we continued to execute on our strategy including strong financial results and accretive acquisitions, but given the more challenging operating environment, our TSR declined year-over-year |
| ◆ | Our 2022 compensation actually paid to our CEO reflects a $25 million decline from Summary Compensation Table amounts, driven by the decline in fair value of outstanding equity awards |
| | | | | Proxy Statement and Notice of 2023 Annual Meeting 45 |
The following graphs further illustrate the alignment of our NEOs’ compensation actually paid relative to (i) our absolute TSR and the TSR of the Dow Jones Health Care REIT Index, (ii) net income and (iii) Normalized FFO per share: | | | 46 Proxy Statement and Notice of 2023 Annual Meeting | | |
Compensation of Directors In 2021,2022, the Compensation Committee engaged Gressle & McGinley to assist it in conducting a competitive review of our non-employee director compensation program. The Compensation Committee took into consideration Gressle & McGinley’s findings and recommendations in determining the compensation structure for our non-employee directors for 2021.2022. As compensation for serving on our Board during 2021,2022, each non-employee director received a cash retainer of $115,000. In addition, the Lead Independent Director received a cash retainer of $50,000; the Audit Committee chair received a cash retainer of $35,000; the Compensation Committee chair received a cash retainer of $30,000; the Ethics, Nominating and Corporate Governance Committee chair received a cash retainer of $30,000; the Environmental and Social Committee chair received a pro-ratedcash retainer (effective May 26, 2021) of $22,500;$30,000; and the Risk Committee chair received a pro-ratedcash retainer (effective May 26, 2021) of $22,500.$30,000. Each non-employee director was awarded restricted stock awards of 6,206 shares, 5,241 shares, and 5,928 shares and 5,552 shares in 2019, 2020, 2021 and 2021, respectively.2022, respectively, with the exception of Ms. Murphy, who was awarded a restricted stock award of 6,101 shares in 2022. These awards vest over three years in equal quarterly amounts. We also reimburse our directors for reasonable expenses incurred in attending Board and committee meetings. Our Compensation Committee may change the compensation of our non-employee directors at its discretion. Directors who are also officers or employees receive no additional compensation for their service as directors. In addition, pursuant to the Director Retirement Policy adopted by the Compensation Committee in February 2017, each non-employee director receives a single lump sum payment upon retirement equal to the director’s final annual retainer divided by 12 and multiplied by the director’s years of service on the Board. The following Director Compensation Table summarizes the compensation paid to our non-employee directors for their services during 2021:2022: | | Name | | Fees Earned or Paid in Cash ($) | | Stock Awards(1) ($) | | All Other Compensation ($) | | Total ($) | | Fees Earned or Paid in Cash ($) | | Stock Awards(1) ($) | | All Other Compensation ($) | | Total ($) | | G. Steven Dawson | | 150,000 | | 128,638 | | – | | 278,638 | | 150,000 | | 125,475 | | – | | 275,475 | | Caterina A. Mozingo | | | 145,000 | | 125,475 | | – | | 270,475 | | Emily W. Murphy(2) | | | 86,250 | | 121,288 | | – | | 207,538 | | Elizabeth N. Pitman | | 137,500 | | 128,638 | | – | | 266,138 | | 160,000 | | 125,475 | | – | | 285,475 | | D. Paul Sparks, Jr. | | 145,000 | | 128,638 | | – | | 273,638 | | 130,000 | | 125,475 | | – | | 255,475 | | Michael G. Stewart | | 165,000 | | 128,638 | | – | | 293,638 | | 165,000 | | 125,475 | | – | | 290,475 | | C. Reynolds Thompson, III | | 145,000 | | 128,638 | | – | | 273,638 | | 145,000 | | 125,475 | | – | | 270,475 | | Caterina A. Mozingo | | 137,500 | | 128,638 | | – | | 266,138 | |
(1) | Based on the grant date fair value of our common stock on January 20, 2021February 3, 2022 of $21.70$22.60. Ms. Murphy’s restricted stock award was based on the grant date fair value of our common stock on February 24, 2022 of $19.88. |
(2) | Emily Murphy joined our Board on February 17, 2022. |
The following table shows outstanding equity awards held by each of our non-employee directors aton December 31, 2021:2022: | | | | | Name | | Unvested Stock (#)
| | | G. Steven Dawson | | 7,136 7,067 | | | Caterina A. Mozingo | | 7,067 | | | Emily W. Murphy | | 4,574 | | | Elizabeth N. Pitman | | 7,136 7,067 | | | D. Paul Sparks, Jr. | | 7,136 7,067 | | | Michael G. Stewart | | 7,136 7,067 | | | C. Reynolds Thompson, III | | 7,136 | | | Caterina A. Mozingo
| | 6,628 7,067 |
| | | | | Proxy Statement and Notice of 20222023 Annual Meeting 5147 |
Share Ownership of Certain Beneficial Owners The following table provides information about the beneficial ownership of our common stock as of March 29, 2022,2023, by (i) each director of the Company, (ii) each NEO of the Company who is not a director, (iii) all directors and executive officers as a group, and (iv) each person known to the Company to be the beneficial owner of more than 5% of the outstanding shares of common stock. The SEC defines “beneficial ownership” of a security to mean the possession, directly or indirectly, of voting power and/or investment power over such security. A stockholder is also deemed to be, as of any date, the beneficial owner of all securities that such stockholder has the right to acquire within 60 days after that date through (i) the exercise of any option, warrant or right, (ii) the conversion of a security, (iii) the power to revoke a trust, discretionary account or similar arrangement, or (iv) the automatic termination of a trust, discretionary account or similar arrangement. In computing the number of shares of common stock beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options or other rights (as set forth above) held by that person that are exercisable as of March 29, 20222023 or will become exercisable within 60 days thereafter, are deemed outstanding; however, such shares are not deemed outstanding for purposes of computing the percentage ownership of any other person. Each person named in the table has sole voting and/or investment power with respect to all of the shares of common stock shown as beneficially owned by such person, except as otherwise set forth in the notes to the table. | | | | | | | | Name of Beneficial Owner* | | Number of Shares Beneficially Owned
| | Percentage of Shares Outstanding(1)
| | | | Edward K. Aldag, Jr. | | 3,253,4693,116,010 | | **(2) | | | | R. Steven Hamner | | 1,816,8471,795,283 | | **(3) | | | | Emmett E. McLean | | 1,768,7421,896,228 | | **(4) | | | | G. Steven Dawson | | 103,661123,336 | | **(5) | | | | Caterina A. Mozingo | | 16,72126,396 | | **(6) | | | | Emily W. Murphy | | 6,10115,776 | | **(7) | | | | Elizabeth N. Pitman | | 36,70246,984 | | **(8) | | | | D. Paul Sparks, Jr. | | 56,79966,474 | | **(6) | | | | Michael G. Stewart | | 214,436224,111 | | **(6) | | | | C. Reynolds Thompson, III | | 35,57845,253 | | **(6) | | | | All directors and executive officers as a group (10 persons) | | 7,309,0567,355,851 | | 1.21%1.22%(9)(9) | | | | Other Stockholders: | | | | | | | | The Vanguard Group, Inc. 100 Vanguard Blvd. Malvern, Pennsylvania 19355 | | 86,549,93288,056,198 | | 14.39%14.60%(10)(10) | | | | BlackRock Inc. 55 East 52nd52nd Street New York, New York 10055 | | 82,216,54473,409,021 | | 13.67%12.17%(11)(11) | | | | State Street Corp. 1 Lincoln Street Boston, Massachusetts 02111 | | 32,358,61636,409,732 | | 5.38%6.04%(12) |
| * | Unless otherwise indicated, the address of each named person is c/o Medical Properties Trust, Inc., 1000 Urban Center Drive, Suite 501, Birmingham, Alabama 35242.35242 |
| ** | Less than 1% of outstanding shares of common stock. |
| | | 5248 Proxy Statement and Notice of 20222023 Annual Meeting | | |
| (1) | Based on 601,311,706 shares of602,951,259 common stock outstanding as of March 29, 2022. Shares of common stock that are deemed to be beneficially owned by a stockholder within 60 days after March 29, 2022 are deemed outstanding for purposes of computing such stockholder’s percentage ownership but are not deemed outstanding for the purpose of computing the percentage outstanding of any other stockholder. Except as otherwise indicated in the notes to this table, beneficial ownership includes sole voting and investment power. |
| (2) | Includes 432,422513,956 shares of unvested restricted common stock, which the named officer has no right to sell or pledge. |
| (3) | Includes 216,216256,979 shares of unvested restricted common stock, which the named officer has no right to sell or pledge. |
| (4) | Includes 117,480110,253 shares of unvested restricted common stock, which the named officer has no right to sell or pledge. |
| (5) | Includes 11,24915,351 shares of unvested restricted common stock, which the named director has no right to sell or pledge, andpledge. Also, includes 70,20684,847 shares owned by Corriente Private Trust, an irrevocable Nevada Spendthrift Trust for which Mr. Dawson is the sole trustee and beneficiary. |
| (6) | Includes 11,24915,351 shares of unvested restricted common stock, which the named director has no right to sell or pledge. |
| (7) | Includes 6,10113,740 shares of unvested restricted common stock, which the named directorofficer has no right to sell or pledge. |
| (8) | Includes 11,24915,351 shares of unvested restricted common stock, which the named directorofficer has no right to sell or pledge, andpledge. Includes 5,923 shares of common stock held in the director’s spouse’s name. |
| (9) | See notes (1) – (8) above. |
| (10) | Share and beneficial ownership information was obtained from a Schedule 13G/A filed February 9, 20222023 with the SEC. The Schedule 13G/A indicates that the reporting entity holds sole dispositive power with respect to 85,144,74686,749,227 shares, shared voting power with respect to 988,017860,203 shares and shared dispositive power with respect to 1,405,1861,306,971 shares. |
| (11) | Share and beneficial ownership information was obtained from a Schedule 13G/A filed January 28, 202220, 2023 with the SEC. According to the Schedule 13G/A, BlackRock has sole voting power over 74,454,1170 shares and sole dipositive power over 82,216,5440 shares. The Schedule 13G/A states that various persons have the right to receive or the power to direct the receipt of dividends from or the proceeds from the sale of the Company’s common stock but that no one person’s interest in the Company’s common stock is more than five percent of the total outstanding common shares. |
| (12) | Share and beneficial ownership information was obtained from a Schedule 13G13G/A filed February 11, 20223, 2023 with the SEC. The Schedule 13G13G/A indicates that the reporting entity holds shared voting power with respect to 25,684,08626,557,878 shares and shared dispositive power with respect to 32,358,616 shares.36,409,732 shares |
Delinquent Section 16(a) Reports Section 16(a) of the Exchange Act requires our executive officers, directors and persons who own more than 10% of our common stock to file reports of ownership and changes in ownership with the SEC. SEC rules require us to identify anyone who failed to file on a timely basis reports required by Section 16(a) of the Exchange Act during the most recent fiscal year or prior fiscal years. Based on our review of Forms 3, 4 and 5, or written representations from reporting persons that no Form 5 was required for such persons, we believe that our executive officers, directors and 10% stockholders complied with Section 16(a) filing requirements applicable to them with the exceptions noted below. Ms. Murphy filed a late report on Form 3 upon her appointment to our Board in February 2022 due to a brief delay in obtaining the necessary filing code. Ms. Pitmancodes. Messrs. Aldag, Hamner, McLean and Hanna each failed to file one Form 4 in April 2022 pertaining to shares withheld upon vesting of restricted stock to satisfy tax withholding obligations but subsequently reported this share reduction via a Form 5 filing in February 2023. Mr. Dawson filed a late report on Form 5 for 2020 activity and a report on Form 5 for 2021 activity,4 in each case,March 2023 pertaining to four de minimis dividend reinvestment transactions.shares acquired and held indirectly through a 401(k) plan by his spouse in September 2022. Executive Officers For information regarding Messrs. Aldag and Hamner, please see “Proposal 1—Election of Directors” above. | | | | | | | | | | | Emmett E. McLean Age: 6667 Founder, Executive Vice President, Chief Operating Officer (since September 2003) and Secretary (since 2010) | | | | | | • Mr. McLean has served the Company in a number of positions, including Chief Financial Officer (August—September 2003) and Director (September 2003—April 2004). Prior to joining the Company, from 2000—2003, Mr. McLean was a private investor and, for part of that period, served as a consultant to a privately held company. From 1992 to 2000, Mr. McLean worked in the healthcare services industry with two different companies serving in senior positions, including Chief Financial Officer at one of the companies. • Prior to 1992, Mr. McLean worked in the investment banking field with Dean Witter Reynolds (now Morgan Stanley) and Smith Barney (now Citigroup), and in the commercial banking field with Trust Company Bank (now Truist Bank). • Mr. McLean has been active in a number of organizations: Mr. McLean is on the Board of Directors of the Alabama Symphony Orchestra, Ronald McDonald House Charities of Alabama, Smile-A-Mile, the Greater Alabama Council Boy Scouts of America, the Mike Slive Foundation, United Way of Central Alabama, the Rotary Club of Birmingham Foundation, UAB Athletics Foundation and the World Games 2022 Birmingham USA. • Mr. McLean received an MBA from the University of Virginia and a B.A. in Economics from The University of North Carolina at Chapel Hill. |
| | | | | Proxy Statement and Notice of 20222023 Annual Meeting 5349 |
| | | | | What is the purpose of the meeting? | | | | At the meeting, our stockholders will vote on the following proposals: 1.Toelect1. To elect the nine director nominees described in the enclosed Proxy Statement
2.Toratify2. To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the year ending December 31, 20222023
3.Toapprove the Amended and Restated 2019 Medical Properties Trust, Inc. Equity Incentive Plan
4.Tohold3. To hold a non-binding, advisory vote to approve named executive officer compensation
5.Totransact any other business that properly comes before4. To hold a non-binding, advisory vote on the meetingfrequency of future advisory votes on executive compensation
In addition, our management will report on our performance at the meeting and respond to appropriate questions from stockholders. | Who is entitled to
vote? | | | | The record date for the meeting is March 29, 2022.2023. Only stockholders of record at the close of business on March 29, 2022,2023, are entitled to receive notice of the meeting and to vote at the meeting the shares of our common stock that they held of record on that date. Each outstanding share of common stock entitles its holder to one vote on each matter voted on at the meeting. At the close of business on March 29, 2022,2023, there were 599,921,281599,516,410 shares of common stock outstanding and entitled to vote. | Am I entitled to vote if
my shares are held in
“street name”? | | | | If you are the beneficial owner of shares held in “street name” by a brokerage firm, bank, or other nominee, your nominee is required to vote the shares in accordance with your instructions. If you do not give instructions to your nominee, your nominee will be entitled to vote your shares on routine items but will not be permitted to do so on non-routine items. Your nominee will have discretion to vote on Proposal 2 (ratification of auditors) without any instructions from you, but your nominee will not have the ability to vote your uninstructed shares on Proposal 1 (election of directors), Proposal 3 (advisory(non-binding, advisory vote to approve named executive officer compensation) or Proposal 4 (approval(non-binding, advisory vote on the frequency of the Amended and Restated 2019 Medical Properties Trust, Inc. Equity Incentive Plan)future advisory votes on executive compensation). Accordingly, if you hold your shares in “street name” and you do not instruct your nominee how to vote on these proposals, your nominee cannot vote these shares and will report them as “broker non-votes,” and no votes will be cast on your behalf. | How many shares
must be present to
conduct business at
the meeting? | | | | A quorum must be present at the meeting in order for any business to be conducted. The presence at the meeting, in person or by proxy, of the holders of a majority of the shares of common stock outstanding on the record date, or 299,960,641299,758,206 shares, will constitute a quorum. Abstentions and broker non-votes will be included in the number of shares considered present at the meeting for the purpose of determining whether there is a quorum. | What happens if a
quorum is not present
at the meeting? | | | | If a quorum is not present at the scheduled time of the meeting, the holders of a majority of the shares present in person or represented by proxy at the meeting may adjourn the meeting to another place, date, or time until a quorum is present. The place, date, and time of the adjourned meeting will be announced when the adjournment is taken, and no other notice will be given unless the adjournment is to a date more than 120 days after the original record date or if, after the adjournment, a new record date is fixed for the adjourned meeting. |
| | | 5450 Proxy Statement and Notice of 20222023 Annual Meeting | | |
| | | Information About the Meeting | | |
| | | | | How do I vote my
shares? | | | | Voting by telephone or Internet. If you are a registered holder, meaning you hold your shares in your name, you may follow the instructions on the enclosed voting instructions: By telephone 1-800-776-9437 or by internet www.voteproxy.com. If you are a beneficial owner of shares held in “street name,” meaning your shares are held in the name of a brokerage firm, bank, or other nominee, you may be eligible to provide voting instructions to your nominee by telephone or on the Internet. A large number of brokerage firms, banks, and other nominees participate in a program provided through Broadridge Financial Solutions that offers telephone and Internet voting options. If your shares are held in “street name” by a brokerage firm, bank, or other nominee that participates in the Broadridge program, you may provide voting instructions to your nominee by telephone or on the Internet by following the instructions set forth on the voting instruction form provided to you. Voting by mail. If you are a registered stockholder, you may vote by properly completing, signing, dating, and returning the accompanying proxy card. The enclosed postage-paid envelope requires no additional postage if it is mailed in the United States or Canada. If you are a beneficial owner of shares held in “street name,” you may provide voting instructions to the brokerage firm, bank, or other nominee that holds your shares by properly completing, signing, dating, and returning the voting instruction form provided to you by your nominee. Voting in person at the meeting. If you are a registered stockholder and attend the meeting, you may deliver your completed proxy card in person. In addition, we will make written ballots available to registered stockholders who wish to vote in person at the meeting. If you are a beneficial owner of shares held in “street name” and wish to vote at the meeting, you will need to obtain a proxy form from the brokerage firm, bank, or other nominee that holds your shares that authorizes you to vote those shares. | Can I change my
vote after I submit
my proxy? | | | | Yes, you may revoke your proxy and change your vote at any time before the polls are closed at the meeting in any of the following ways: (1) by properly completing, signing, dating, and returning another proxy card with a later date; (2) if you are a registered stockholder, by voting in person at the meeting; (3) if you are a registered stockholder, by giving written notice of such revocation to our Secretary prior to or at the meeting; or (4) if you are a beneficial owner of shares held in “street name,” by following the instructions given by the brokerage firm, bank or other nominee that holds your shares. Your attendance at the meeting will not by itself revoke your proxy. | What happens if I do
not specify on my
proxy how my shares
are to be voted? | | | | If you are a registered stockholder and submit a properly executed proxy but do not indicate any voting instructions, the proxy holders will vote as the Board recommends on each proposal. | Will any other
business be
conducted at the
meeting? | | | | As of the date hereof, the Board knows of no business that will be presented at the meeting other than the proposals described in this Proxy Statement. However, if any other proposal properly comes before the stockholders for a vote at the meeting, the proxy holders will vote the shares represented by your proxy in accordance with their best judgment. |
| | | | | Proxy Statement and Notice of 2022 Annual Meeting 55 |
| | | Information About the Meeting
| | |
| | | | | How many votes are
required for action
to be taken on
each proposal? | | | | The nine director nominees will be elected to serve on the Board if they each receive a majority of the votes cast in person or represented by proxy at the meeting. This means that a director nominee will be elected only if the votes cast “for” his or her election exceed the votes cast “against” his or her election. The Board has adopted a director resignation policy whereby any director who fails to receive the required majority vote in an uncontested election is required to |
| | | | | Proxy Statement and Notice of 2023 Annual Meeting 51 |
| | | Information About the Meeting | | |
| | | | | | | | | promptly tender his or her resignation to the Board for its consideration. The Ethics, Nominating and Corporate Governance Committee will then recommend to the full Board, and the Board will decide, whether to accept or reject the resignation offer or take other action. The Board will act on the recommendation of the Ethics, Nominating and Corporate Governance Committee within 90 days following certification of the election results. If you vote to “abstain” with respect to the election of one or more director nominees, your shares will not be voted with respect to the person or persons indicated, although they will be counted for the purpose of determining whether there is a quorum at the meeting. The affirmative vote of the holders of a majority of the shares of common stock represented in person or by proxy at the annual meeting and entitled to vote on the proposal is required for approval of each of Proposals 2, 3 and 4. In respect of Proposal 4, in the event that no option receives the approval of the holders of a majority of the shares of common stock represented in person or by proxy at the annual meeting and entitled to vote on the proposal, we will consider the option that receives the most votes to be the option selected by the stockholders. Furthermore, the votes for Proposals 3 and 4 are advisory and not binding on the Board or the Company in any way. | How will abstentions
and broker non-votes
be treated? | | | | Abstentions and broker non-votes will not be counted as votes for or against any proposal and will not be included in calculating the number of votes necessary for approval of the proposal. In all cases, abstentions and broker non-votes will be considered present for the purpose of determining the presence of a quorum. | How will proxies
be solicited? | | | | The costs of soliciting proxies from our stockholders will be borne by the Company. We will solicit proxies on behalf of the Board by mail, telephone, facsimile, or other electronic means or in person. Certain of our directors, officers and other employees, without additional compensation, may participate in the solicitation of proxies. We will supply copies of the proxy solicitation materials to brokerage firms, banks, and other nominees for the purpose of soliciting proxies from the beneficial owners of the shares of common stock held of record by such nominees. We will request that such brokerage firms, banks, and other nominees forward the proxy solicitation materials to the beneficial owners and reimburse them for their reasonable expenses. In addition, we anticipate using MacKenzie Partners, Inc., 105 Madison Avenue, New York, NY 10016 as a solicitor at an initial anticipated cost of $12,500. | What is “householding”
and how does it affect
me? | | | | We have adopted a procedure, approved by the SEC, called “householding.” Under this procedure, stockholders of record who have the same address might receive only one copy of this Notice of Annual Meeting and Proxy Statement and the 20212022 Annual Report to Stockholders, unless we are notified that one or more of these stockholders wishes to continue receiving individual copies. To request individual copies of the annual report and proxy statement for each stockholder in your household, please contact Investor Relations, Medical Properties Trust Inc., 1000 Urban Center Drive, Suite 501, Birmingham, Alabama 35242 (telephone: 205-969-3755). We will deliver copies of the annual report and proxy statement promptly following your written or oral request. To ask that only one set of the documents be mailed to your household, please contact your broker. | How can I obtain
additional copies of
the proxy materialsmaterials? | | | | If you wish to request extra copies of our Form 10-K, Annual Report or Proxy Statement free of charge, please send your request to Medical Properties Trust, Inc., 1000 Urban Center Drive, Suite 501, Birmingham, Alabama 35242, or visit our website at www.medicalpropertiestrust.com. |
| | | 5652 Proxy Statement and Notice of 20222023 Annual Meeting | | |
The Board has adopted a written related person transaction approval and disclosure policy for the review, approval or ratification of any related person transaction. The policy provides that all related person transactions must be reviewed and approved by a majority of the disinterested directors on our Board in advance of us or any of our subsidiaries entering into the transaction; provided that, if we or any of our subsidiaries enter into a transaction without recognizing that such transaction constitutes a related party transaction, the approval requirement will be satisfied if such transaction is ratified by a majority of the disinterested directors serving on the Board promptly after we recognize that such transaction constituted a related person transaction. Disinterested directors are directors who do not have a personal financial interest in the transaction that is adverse to our financial interest or that of our stockholders. The term “related person transaction” refers to a transaction required to be disclosed by us pursuant to Item 404 of Regulation S-K (or any successor provision) promulgated by the SEC. For purposes of determining whether such disclosure is required, a related person will not be deemed to have a direct or indirect material interest in any transaction that is deemed not to be material (or would be deemed not material if such related person was a director) for purposes of determining director independence pursuant to standards of director independence under the NYSE’s listing standards. From time to time, including in 2022, we may have employees who are related to our executive officers or directors and whose current annualized compensation (including benefits) exceeds the SEC disclosure threshold of $120,000. The Company evaluates any such employment relationships as related party transactions subject to the Company’s approval and disclosure policies described above. During 2022, Mr. Aldag had two family members employed by the Company; and Mr. Hamner had two family members employed by the Company. Such family members were employed in non-executive positions, and each received total compensation between $120,000 and $455,000. Total compensation was comparable to that of other employees in similar positions, and family member employees were eligible to participate in benefit programs only on the same basis as other eligible employees. From time to time, we may also engage in ordinary course commercial dealings with unaffiliated companies who may employ in a non-executive capacity, or may have employed in the past, individuals related to one or more of our executive officers or directors. We enter into any such transactions on an arms-length basis on terms that are consistent with similar transactions with other similarly situated customers and vendors. During the year ended December 31, 2022, the Company paid Johnson Healthcare Real Estate (“Johnson”), a hospital development management company, approximately $1.7 million primarily related to construction project management and facility review oversight. Mr. Aldag has a family member currently employed by Johnson in a non-executive capacity. | | | | | Proxy Statement and Notice of 20222023 Annual Meeting 5753 |
Stockholder Proposals for Inclusion in Proxy Statement for 20232024 Annual Meeting of Stockholders To be considered for inclusion in our proxy statement for the 20232024 annual meeting of stockholders, a stockholder proposal submitted pursuant to Exchange Act Rule 14a-8 must be received by us no later than the close of business on December 27, 2022.29, 2023. Stockholder proposals must be sent to the Company c/o Secretary, Medical Properties Trust, Inc., 1000 Urban Center Drive, Suite 501, Birmingham, Alabama 35242. We will not be required to include in our proxy statement any stockholder proposal that does not meet all the requirements for such inclusion established by the SEC’s proxy rules and Maryland corporate law. Other Stockholder Proposals Our Second Amended and Restated Bylaws provide that a stockholder who desires to propose any business at an annual meeting of stockholders, other than proposals submitted pursuant to Exchange Act Rule 14a-8, must give us written notice of such stockholder’s intent to bring such business before such meeting. Such notice is to be delivered to, or mailed postage prepaid, and received by our Secretary at Medical Properties Trust, Inc., 1000 Urban Center Drive, Suite 501, Birmingham, Alabama 35242 not earlier than December 29, 2022,2023, nor later than January 28, 2023,2024, unless our 20232024 annual meeting of stockholders is scheduled to take place before April 26, 202325, 2024 or after July 25, 2023,24, 2024, in which case a timely notice by stockholders must be delivered not earlier than 120 days prior to such annual meeting date and not later than the later of 60 days prior to such annual meeting date and 10 days following the issuance of a press release announcing the meeting date. The stockholder’s written notice must set forth a brief description of the business desired to be brought before the meeting and certain other information as set forth in Section 1.02 of our Second Amended and Restated Bylaws. Stockholders may obtain a copy of our Second Amended and Restated Bylaws by writing to the Company c/o Secretary at the address shown above. Stockholder Nominations of Directors In order for an eligible stockholder or group of stockholders to nominate a director nominee for election at our Company’s 20232024 annual meeting pursuant to the proxy access provision of our Second Amended and Restated Bylaws, notice of such nomination and other required information must be received by our Secretary at Medical Properties Trust, Inc., 1000 Urban Center Drive, Suite 501, Birmingham, Alabama 35242 not earlier than December 29, 2022,2023, nor later than January 28, 2023,2024, unless our 20232024 annual meeting of stockholders is scheduled to take place before April 26, 202325, 2024 or after July 25, 2023,24, 2024, in which case a timely notice by stockholders must be delivered not earlier than 120 days prior to such annual meeting date and not later than the later of 60 days prior to such annual meeting date and 10 days following the issuance of a press release announcing the meeting date. In addition, our Second Amended and Restated Bylaws require the eligible stockholder or group of stockholders to update and supplement such information (or provide notice stating that there are no updates or supplements) as of specified dates. In order to be eligible to utilize these proxy access provisions, a stockholder, or group of no more than 20 stockholders, must, among other requirements: Have owned shares of common stock equal to at least 3% of the aggregate of the issued and outstanding shares of common stock of the Company continuously for at least the prior three (3) years; and
| • | | Have owned shares of common stock equal to at least 3% of the aggregate of the issued and outstanding shares of common stock of the Company continuously for at least the prior three (3) years; and |
Represent that such shares were acquired in the ordinary course of business and not with the intent to change or influence control at the Company and that such stockholder or group does not presently have such intent.
| • | | Represent that such shares were acquired in the ordinary course of business and not with the intent to change or influence control at the Company and that such stockholder or group does not presently have such intent. |
Additionally, all director nominees submitted through these provisions must be independent and meet specified additional criteria set forth in Section 2.17 of our Second Amended and Restated Bylaws. Stockholders will not be entitled to utilize this proxy access right at an annual meeting if the Company receives notice through its traditional advanced notice by-law provisions described below that a stockholder intends to nominate a director at such meeting. The maximum number of director nominees that may be submitted pursuant to these provisions may not exceed 20% of the number of directors then in office. The foregoing proxy access right is subject to additional eligibility, procedural and disclosure requirements set forth in our Second Amended and Restated Bylaws. Our Second Amended and Restated Bylaws also provide that a stockholder who desires to nominate directors at a meeting of stockholders but not submit such nomination for inclusion in our proxy statement must give us written notice of such proposed nomination. For our 20232024 annual meeting of stockholders, such notice is to be delivered to, or mailed postage prepaid, and received by our Secretary at Medical Properties Trust, Inc., 1000 Urban Center Drive, Suite 501, Birmingham, Alabama 35242 not earlier than December 29, 2023, nor | | | 5854 Proxy Statement and Notice of 20222023 Annual Meeting | | |
December 29, 2023, nor later than January 28, 2023,2024, unless our 20232024 annual meeting of stockholders is scheduled to take place before April 26, 202325, 2024 or after July 25, 2023,24, 2024, in which case a timely notice by stockholders must be delivered not earlier than 120 days prior to such annual meeting date and 10 days following the issuance of a press release announcing the meeting date. The stockholder’s written notice must include the information set forth in Section 2.03 of our Second Amended and Restated Bylaws.
Universal Proxy Nominations of Directors To comply with the universal proxy rules, (once effective),and in addition to meeting any deadlines as set forth in our Bylaws, stockholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than March 27, 2023;26, 2024 (or such earlier date as may be set forth in our Bylaws); provided, however, that in the event that the date of the annual meeting is advanced or delayed by more than 30 days from the first anniversary of the date of the preceding year’s annual meeting, notice must be provided by the later of 60 days prior to the date of the annual meeting or the 10th day following the day on which public announcement of the date of the annual meeting is first made. By Order of the Board of Directors, Emmett E. McLean Executive Vice President, Chief Operating Officer and Secretary Birmingham, Alabama April 28, 202227, 2023 | | | | | Proxy Statement and Notice of 20222023 Annual Meeting 5955 |
Appendix A: Reconciliation of Non-GAAP Financial Measures We consider non-GAAP financial measures to be useful supplemental measures of our operating performance. A non-GAAP financial measure is a measure of financial performance, financial position, or cash flows that excludes or includes amounts that are not so excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. Described below are the non-GAAP financial measures used by management to evaluate our operating performance and that we consider most useful to investors, together with reconciliations of these measures to the most directly comparable GAAP measures. Funds From Operations and Normalized Funds From Operations Investors and analysts following the real estate industry utilize funds from operations or FFO,(“FFO”) as a supplemental performance measure. FFO, reflecting the assumption that real estate asset values rise or fall with market conditions, principally adjusts for the effects of GAAP depreciation and amortization of real estate assets, which assumes that the value of real estate diminishes predictably over time. We compute FFO in accordance with the definition provided by the National Association of Real Estate Investment Trusts, or Nareit, which represents net income (loss) (computed in accordance with GAAP), excluding gains (losses) on sales of real estate and impairment charges on real estate assets, plus real estate depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. In addition to presenting FFO in accordance with the Nareit definition, we also disclose Normalized FFO, which adjusts FFO for items that relate to unanticipated or non-core events or activities or accounting changes that, if not noted, would make comparison to prior period results and market expectations less meaningful to investors and analysts. We believe that the use of FFO, combined with the required GAAP presentations, improves the understanding of our operating results among investors and the use of Normalized FFO makes comparisons of our operating results with prior periods and other companies more meaningful. While FFO and Normalized FFO are relevant and widely used supplemental measures of operating and financial performance of REITs, they should not be viewed as a substitute measure of our operating performance since the measures do not reflect either depreciation and amortization costs or the level of capital expenditures and leasing costs necessary(if any not paid by tenant) to maintain the operating performance of our properties, which can be significant economic costs that could materially impact our results of operations. FFO and Normalized FFO should not be considered an alternative to net income (loss) (computed in accordance with GAAP) as indicators of our financial performance or to cash flow from operating activities (computed in accordance with GAAP) as an indicator of our liquidity. | | | | | Proxy Statement and Notice of 20222023 Annual Meeting A-1 |
The following table presents a reconciliation of net income attributable to MPT common stockholders to FFO and Normalized FFO for the years ended December 31, 2022, 2021, 2020 2019, 2018 and 20172019 (amounts in thousands except per share data): | | | For the Years Ended December 31, | | For the Years Ended December 31, | | | | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | 2022 | | 2021 | | 2020 | | 2019 | FFO Information | | | | | | | | | | | | | | | | | | | Net income attributable to MPT common stockholders | | $ | 656,021 | | | $ | 431,450 | | | $ | 374,684 | | | $ | 1,016,685 | | | $ | 289,793 | | | $ | 902,597 | | | $ | 656,021 | | | $ | 431,450 | | | $ | 374,684 | | Participating securities’ share in earnings | | | (2,161 | ) | | | (2,105 | ) | | | (2,308 | ) | | | (3,685 | ) | | | (1,409 | ) | | | (1,602 | ) | | | (2,161 | ) | | | (2,105 | ) | | | (2,308 | ) | | | | | | | | | | | | | | | | | | | | Net income, less participating securities’ share in earnings | | $ | 653,860 | | | $ | 429,345 | | | $ | 372,376 | | | $ | 1,013,000 | | | $ | 288,384 | | | $ | 900,995 | | | $ | 653,860 | | | $ | 429,345 | | | $ | 372,376 | | Depreciation and amortization | | | 374,599 | | | | 306,493 | | | | 183,921 | | | | 143,720 | | | | 127,559 | | | | 399,622 | | | | 374,599 | | | | 306,493 | | | | 183,921 | | (Gain) loss on sale of real estate | | | (52,471 | ) | | | 2,833 | | | | (41,560 | ) | | | (719,392 | ) | | | (7,431 | ) | | | (536,887 | ) | | | (52,471 | ) | | | 2,833 | | | | (41,560 | ) | Real estate impairment charges | | | - | | | | 19,006 | | | | 21,031 | | | | 48,007 | | | | - | | | | 170,582 | | | | - | | | | 19,006 | | | | 21,031 | | | | | | | | | | | | | | | | | | | | | Funds from operations | | $ | 975,988 | | | $ | 757,677 | | | $ | 535,768 | | | $ | 485,335 | | | $ | 408,512 | | | $ | 934,312 | | | $ | 975,988 | | | $ | 757,677 | | | $ | 535,768 | | Write-off (recovery) of straight-line rent and other | | | (2,271 | ) | | | 26,415 | | | | 22,447 | | | | 18,002 | | | | 5,340 | | | Write-off (recovery) of unbilled rent and other | | | | 37,682 | | | | 7,213 | | | | 26,415 | | | | (1,713 | ) | Gain on sale of equity investments | | | | - | | | | (40,945 | ) | | | - | | | | - | | Other impairment charges, net | | | | 97,793 | | | | 39,411 | | | | - | | | | 28,089 | | Non-cash fair value adjustments | | | (8,193 | ) | | | 9,642 | | | | (6,908 | ) | | | - | | | | - | | | | (2,333 | ) | | | (8,193 | ) | | | 9,642 | | | | (6,908 | ) | Tax rate and other changes | | | 42,746 | | | | 9,295 | | | | - | | | | (4,405 | ) | | | - | | | Tax rate changes and other | | | | 10,697 | | | | 34,796 | | | | 9,295 | | | | (3,929 | ) | Debt refinancing and unutilized financing costs | | | 27,650 | | | | 28,180 | | | | 6,106 | | | | - | | | | 32,574 | | | | 9,452 | | | | 27,650 | | | | 28,180 | | | | 6,106 | | Acquisition and other transaction costs, net | | | - | | | | - | | | | - | | | | 2,072 | | | | 28,453 | | | | - | | | | - | | | | - | | | | - | | | | | | | | | | | | | | | | | | | | | Normalized funds from operations | | $ | 1,035,920 | | | $ | 831,209 | | | $ | 557,413 | | | $ | 501,004 | | | $ | 474,879 | | | $ | 1,087,603 | | | $ | 1,035,920 | | | $ | 831,209 | | | $ | 557,413 | | | | | | | | | | | | | | | | | | | | | Per diluted share data | | | | | | | | | | | | | | | | | | | Net income, less participating securities’ share in earnings | | $ | 1.11 | | | $ | 0.81 | | | $ | 0.87 | | | $ | 2.76 | | | $ | 0.82 | | | $ | 1.50 | | | $ | 1.11 | | | $ | 0.81 | | | $ | 0.87 | | Depreciation and amortization | | | 0.63 | | | | 0.57 | | | | 0.43 | | | | 0.39 | | | | 0.37 | | | | 0.67 | | | | 0.63 | | | | 0.57 | | | | 0.43 | | (Gain) loss on sale of real estate | | | (0.09 | ) | | | 0.01 | | | | (0.10 | ) | | | (1.96 | ) | | | (0.02 | ) | | | (0.90 | ) | | | (0.09 | ) | | | 0.01 | | | | (0.10 | ) | Real estate impairment charges | | | - | | | | 0.04 | | | | 0.05 | | | | 0.13 | | | | - | | | | 0.29 | | | | - | | | | 0.04 | | | | 0.05 | | | | | | | | | | | | | | | | | | | | | Funds from operations | | $ | 1.65 | | | $ | 1.43 | | | $ | 1.25 | | | $ | 1.32 | | | $ | 1.17 | | | $ | 1.56 | | | $ | 1.65 | | | $ | 1.43 | | | $ | 1.25 | | Write-off (recovery) of straight-line rent and other | | | - | | | | 0.05 | | | | 0.05 | | | | 0.05 | | | | 0.01 | | | Write-off (recovery) of unbilled rent and other | | | | 0.07 | | | | 0.01 | | | | 0.05 | | | | (0.01 | ) | Gain on sale of equity investments | | | | - | | | | (0.07 | ) | | | - | | | | - | | Other impairment charges, net | | | | 0.16 | | | | 0.07 | | | | - | | | | 0.07 | | Non-cash fair value adjustments | | | (0.01 | ) | | | 0.02 | | | | (0.01 | ) | | | - | | | | - | | | | - | | | | (0.01 | ) | | | 0.02 | | | | (0.01 | ) | Tax rate and other changes | | | 0.07 | | | | 0.02 | | | | - | | | | (0.01 | ) | | | - | | | Tax rate changes and other | | | | 0.02 | | | | 0.06 | | | | 0.02 | | | | (0.01 | ) | Debt refinancing and unutilized financing costs | | | 0.04 | | | | 0.05 | | | | 0.01 | | | | - | | | | 0.09 | | | | 0.01 | | | | 0.04 | | | | 0.05 | | | | 0.01 | | Acquisition and other transaction costs, net | | | - | | | | - | | | | - | | | | 0.01 | | | | 0.08 | | | | - | | | | - | | | | - | | | | - | | | | | | | | | | | | | | | | | | | | | Normalized funds from operations | | $ | 1.75 | | | $ | 1.57 | | | $ | 1.30 | | | $ | 1.37 | | | $ | 1.35 | | | $ | 1.82 | | | $ | 1.75 | | | $ | 1.57 | | | $ | 1.30 | | | | | | | | | | | | | | | | | | | | |
| | | A-2 Proxy Statement and Notice of 20222023 Annual Meeting | | |
Pro FormaTotal Adjusted Gross Assets
Pro formaTotal adjusted gross assets is total assets before accumulated depreciation/amortization (adjusted for our investments in unconsolidated real estate joint ventures) and, assumes all real estatematerial transaction commitments on new investments and unfunded amounts on development deals and commenced capital improvement projects as of the applicable reporting periods are fully funded,completed, and assumes cash on hand at period-end and cash generated from or to be generated from transaction commitments or financing activities subsequent to period-end are either used in these transactions.transactions or used to reduce debt. We believe total pro formaadjusted gross assets is useful to investors as it provides a more current view of our portfolio and allows for a better understanding of our concentration levels as our commitments close and our other commitments are fully funded.close. The following table presents a reconciliation of total assets to total pro formaadjusted gross assets (in thousands):
| | | | | | | | | | | | | | | | | | | As of December 31, | | | | | | | | 2021 | | 2020 | | 2019 | | 2018 | | | | | | Total assets | | $ | 20,519,801 | | | $ | 16,829,014 | | | $ | 14,467,331 | | | $ | 8,843,643 | | Add: | | | | | | | | | | | | | | | | | Real estate commitments on new investments | | | - | | | | 1,901,087 | | | | 1,988,550 | | | | 865,165 | | Unfunded amounts on development deals and commenced capital improvement projects | | | 480,132 | | | | 166,258 | | | | 163,370 | | | | 229,979 | | Accumulated depreciation and amortization | | | 993,100 | | | | 833,529 | | | | 570,042 | | | | 464,984 | | Incremental gross assets of our joint ventures and other (1) | | | 1,713,603 | | | | 1,287,077 | | | | 563,911 | | | | 375,544 | | Less: | | | | | | | | | | | | | | | | | Cash used for funding the transactions above (2) | | | (1,377,299 | ) | | | (587,384 | ) | | | (1,223,930 | ) | | | (720,868 | ) | | | | | | | | | | | | | | | | | | Total pro forma gross assets | | $ | 22,329,337 | | | $ | 20,429,581 | | | $ | 16,529,274 | | | $ | 10,058,447 | | | | | | | | | | | | | | | | | | |
| | | | | | | As of December 31, | | | | | 2022 | | | Total assets | | $ | 19,658,000 | | Add: | | | | | Accumulated depreciation and amortization | | | 1,193,312 | | Incremental gross assets of our Investments in Unconsolidated Real Estate Joint Ventures (1) | | | 1,698,917 | | Net: | | | | | Reclassification between operators (2) | | | - | | Gross book value of the transactions, net (3) | | | (1,074,024 | ) | Decrease in cash from the transactions (4) | | | (235,668 | ) | | | | | | Total adjusted gross assets | | $ | 21,240,537 | | | | | | |
(1) | AdjustmentReflects an addition to reflecttotal assets to present our total share of oureach joint ventures'venture’s gross assets. See below for details of the calculation. While we do not control any of our unconsolidated real estate joint venture arrangements and do not have direct legal claim to the underlying assets of the unconsolidated real estate joint ventures, we believe this adjustment allows investors to view certain concentration information on a basis comparable to the remainder of our real estate portfolio. This presentation is also consistent with how our management team reviews our portfolio (dollar amounts in thousands):
|
| | | | | | | As of December 31, | | | | | 2022 | | | Real estate joint venture total gross real estate and other assets | | $ | 5,921,188 | | Weighted-average equity ownership percentage | | | 55 | % | | | | | | | | | | | 3,261,727 | | Investments in Unconsolidated Real Estate Joint Ventures (A) | | | (1,562,810 | ) | | | | | | | | Incremental gross assets of our Investments in Unconsolidated Real Estate Joint Ventures | | $ | 1,698,917 | | | | | | |
(A) Includes amount shown on the “Investments in unconsolidated real estate joint ventures” line on our consolidated balance sheets, along with a CHF 60 million mortgage loan included in the “Mortgage loans” line on our consolidated balance sheet. (2) | Includes cash available on-hand plus cash generated orReflects a reclass of $0.8 billion of gross assets between Springstone and Lifepoint along with a $0.9 billion reclass of gross assets between Steward and Common Spirit Health as part of the transactions described in Note 13 to be generated from activities subsequent to period-end, such as loan repayments, issuances of debt or equity, or dispositions, if any.our Annual Report on Form 10-K.
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| | | | | Proxy Statement and Notice of 20222023 Annual Meeting A-3 |
Appendix B:
(3) | Represents the gross book value of assets sold or written off due to the committed transactions, partially offset by the addition of new gross assets from the committed transactions. See detail below (in thousands): |
Medical Properties Trust, Inc. –
Amended and Restated 2019 Equity Incentive Plan
| | | | | | | As of December 31, | | | | | 2022 | | | Gross book value of assets in transactions | | $ | (655,354 | ) | Non-cash write-offs related to transactions | | | (418,670 | ) | | | | | | Gross book value of the transactions, net | | $ | (1,074,024 | ) | | | | | |
(4) | | | | | Proxy Statement and Notice of 2022 Annual Meeting B-i |
Represents cash expected from the proceeds generated by the transactions along with cash on hand to fund the transactions or reduce debt as detailed below (in thousands):
Table of Contents
| | | | | | | | | Page | | ARTICLE 1. DEFINITIONS
| | | B-1 | | | | ARTICLE 2. COMMON STOCK SUBJECT TO PLAN
| | | B-3 | | 2.1
| | Common Stock Subject to Plan. | | | B-3 | | 2.2
| | Add-back of Grants | | | B-4 | | | | ARTICLE 3. ELIGIBILITY; GRANTS; AWARD AGREEMENTS
| | | B-4 | | 3.1
| | Eligibility | | | B-4 | | 3.2
| | Awards | | | B-4 | | 3.3
| | Award Agreement | | | B-4 | | | | ARTICLE 4. OPTIONS
| | | B-4 | | 4.1
| | Award Agreement for Option Grant | | | B-4 | | 4.2
| | Option Price | | | B-5 | | 4.3
| | Qualification for Incentive Stock Options | | | B-5 | | 4.4
| | Change in Incentive Stock Option Grant | | | B-5 | | 4.5
| | Option Term | | | B-5 | | 4.6
| | Option Exercisability and Vesting. | | | B-5 | | 4.7
| | Fair Market Value | | | B-5 | | | | ARTICLE 5. EXERCISE OF OPTIONS
| | | B-6 | | 5.1
| | Exercise | | | B-6 | | 5.2
| | Manner of Exercise | | | B-6 | | 5.3
| | Conditions to Issuance of Common Stock | | | B-6 | | 5.4
| | Rights as Stockholders | | | B-7 | | 5.5
| | Ownership and Transfer Restrictions | | | B-7 | | 5.6
| | Limitations on Exercise of Options. | | | B-7 | | | | ARTICLE 6. STOCK AWARDS
| | | B-7 | | 6.1
| | Award Agreement | | | B-7 | | 6.2
| | Awards of Restricted Common Stock, Restricted Stock Units and Deferred Stock Units. | | | B-7 | | 6.3
| | Rights as Stockholders. | | | B-8 | | 6.4
| | Restriction | | | B-8 | | 6.5
| | Lapse of Restrictions | | | B-8 | | 6.6
| | Repurchase of Restricted Common Stock | | | B-8 | | 6.7
| | Escrow | | | B-8 | | 6.8
| | Legend | | | B-8 | | 6.9
| | Conversion | | | B-8 | | | | ARTICLE 7. STOCK APPRECIATION RIGHTS
| | | B-9 | | 7.1
| | Award Agreement for SARs | | | B-9 | | 7.2
| | General Requirements | | | B-9 | | 7.3
| | Base Amount | | | B-9 | | 7.4
| | Tandem SARs | | | B-9 | | 7.5
| | SAR Exercisability. | | | B-9 | | 7.6
| | Value of SARs | | | B-9 | | 7.7
| | Form of Payment | | | B-9 | | | | ARTICLE 8. PERFORMANCE UNITS
| | | B-9 | | 8.1
| | Award Agreement for Performance Units | | | B-9 | | 8.2
| | General Requirements | | | B-9 | | 8.3
| | Performance Period and Performance Goals | | | B-9 | | 8.4
| | Payment With Respect to Performance Units | | | B-9 | |
| | | | | | | As of December 31, | | | | | 2022 | | | Expected cash proceeds generated by (used for) the transactions | | $ | 659,000 | | Reduction of revolver balance | | | (894,668 | ) | | | | | | Net decrease in cash from the transactions | | $ | (235,668 | ) | | | | | |
| | | B-iiA-4 Proxy Statement and Notice of 20222023 Annual Meeting | | |
TableReturn on Equity
Return on equity as measured by Normalized FFO is derived from amounts included in our U.S. GAAP financial statements. We use Normalized FFO as the numerator for the same reasons we present Normalized FFO, as discussed on page A-1. We use average total equity excluding the effect of Contentsaccumulated depreciation and amortization similar to the exclusion of depreciation and amortization from Normalized FFO. (continued)Return on equity measures the actual profitability we delivered related to the actual cost of the equity with which we have built our portfolio. Return on equity measured by Normalized FFO should not be considered a substitute for return on equity measured by net income and does not reflect the overall profitability of our business. The following tables reconcile return on equity measured by net income and return on equity measured by Normalized FFO (dollars in thousands):
| | | | | | | For the years ended December 31, | | Return on equity measured by net income | | | 2022 | | Numerator: | | | | | Net income attributable to MPT common stockholders | | $ | 902,597 | | | | | | | Denominator: | | | | | Beginning total equity | | $ | 8,445,671 | | Ending total equity | | | 8,594,407 | | Average total equity | | $ | 8,520,039 | | | | | | | Return on equity measured by net income | | | 10.59 | % | | | | | | | | | | For the years ended December 31, | | Return on equity measured by Normalized funds from operations | | | 2022 | | Numerator: | | | | | Normalized funds from operations(1) | | $ | 1,087,603 | | | | | | | Denominator: | | | | | Beginning total equity | | $ | 8,445,671 | | Accumulated depreciation and amortization | | | 993,100 | | Accumulated depreciation and amortization (real estate held for sale) | | | 113,996 | | | | | | | Adjusted beginning total equity | | | 9,552,767 | | | | Ending total equity | | | 8,594,407 | | Accumulated depreciation and amortization | | | 1,193,312 | | Accumulated depreciation and amortization (real estate held for sale) | | | - | | | | | | | Adjusted ending total equity | | | 9,787,719 | | Average adjusted total equity | | $ | 9,670,243 | | | | | | | Return on equity measured by Normalized funds from operations | | | 11.25 | % | | | | | |
| | | | | | | | | Page | | ARTICLE 9. OTHER STOCK-BASED AWARDS
| | | B-10 | | 9.1
| | Award Agreement for Other Stock-Based Awards | | | B-10 | | 9.2
| | General Requirements | | | B-10 | | 9.3
| | Calculation of Reserved Shares | | | B-10 | | 9.4
| | Dividend Equivalents | | | B-10 | | 9.5
| | Consideration | | | B-10 | | | | ARTICLE 10. DEFERRALS
| | | B-10 | | | | ARTICLE 11. ADMINISTRATION
| | | B-11 | | 11.1
| | Committee | | | B-11 | | 11.2
| | Duties and Powers of Committee | | | B-11 | | 11.3
| | Compensation; Professional Assistance; Good Faith Actions | | | B-11 | | | | ARTICLE 12. MISCELLANEOUS PROVISIONS
| | | B-11 | | 12.1
| | Transferability. | | | B-11 | | 12.2
| | Amendment, Suspension or Termination of this Plan. | | | B-12 | | 12.3
| (1) | Changes in Common Stock or Assets of the Company, Acquisition or Liquidation of the Company and Other Corporate Events.See reconciliation on page A-2
| | | B-12 | | 12.4
| | Continued Employment | | | B-13 | | 12.5
| | Tax Withholding | | | B-13 | | 12.6
| | Forfeiture Provisions | | | B-13 | | 12.7
| | Limitations Applicable to Section 16 Persons and Performance-Based Compensation | | | B-13 | | 12.8
| | Restrictive Legend | | | B-13 | | 12.9
| | Effect of Plan Upon Option and Compensation Plans | | | B-14 | | 12.10
| | Compliance with Laws | | | B-14 | | 12.11
| | Titles | | | B-14 | | 12.12
| | Governing Law | | | B-14 | | 12.13
| | Clawbacks | | | B-14 | | 12.14
| | No Excise Tax Gross-Ups | | | B-14 | |
| | | | | Proxy Statement and Notice of 20222023 Annual Meeting B-iiiA-5 |
MEDICAL PROPERTIES TRUST, INC.
Amended and Restated 2019 Equity Incentive Plan
Medical Properties Trust, Inc., a Maryland corporation (the “Company”), has established the Medical Properties Trust, Inc. Amended and Restated 2019 Equity Incentive Plan (the “Plan”) for the benefit of Employees, Consultants and Directors (each as defined herein) of the Company and MPT Operating Partnership, L.P., a Delaware limited partnership (“MPT OP”).
The purposes of this Plan are (a) to recognize and compensate selected Employees, Consultants and Directors who contribute to the development and success of the Company and its Affiliates and Subsidiaries (each as defined herein), (b) to attract and retain, Employees, Consultants and Directors, and (c) to provide incentive compensation to Employees, Consultants and Directors based upon the performance of the Company and its Affiliates and Subsidiaries.
This Plan became effective on the Effective Date (as defined below), when it was adopted by the Board of Directors subject to approval by the stockholders of the Company.
This Plan replaces the 2013 Plan (as defined below).
ARTICLE 1. DEFINITIONS
Wherever the following initially capitalized terms are used in this Plan, they shall have the meanings specified below, unless the context clearly indicates otherwise.
“2013 Plan” shall mean the Company’s 2013 Equity Incentive Plan.
“Affiliate” shall mean any entity that directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with the Company, including, without limitation, MPT OP.
“Award” shall mean the grant or award of Options, Restricted Common Stock, Restricted Stock Units, Deferred Stock Units, SARs, Performance Units or Other Stock-Based Awards under this Plan.
“Award Agreement” shall mean the agreement granting or awarding Options, Restricted Common Stock, Restricted Stock Units, Deferred Stock Units, SARs, Performance Units or Other Stock-Based Awards.
“Board” shall mean the Board of Directors of the Company, as comprised from time to time.
“Cause” shall mean (i) the conviction of the Participant of, or the entry of a plea of guilty or nolo contendere by the Participant to, a felony (exclusive of any felony relating to negligent operation of a motor vehicle and not including a conviction, plea of guilty or nolo contendere arising solely under a statutory provision imposing criminal liability upon the Participant on a per se basis due to the Company offices held by the Participant, so long as any act or omission of the Participant with respect to such matter was not taken or omitted in contravention of any applicable policy or directive of the Board), (ii) a willful breach of the Participant’s duty of loyalty which is materially detrimental to the Company, (iii) the Participant’s willful failure to perform or adhere to explicitly stated duties that are consistent with the terms of his or her position with the Company, or the Company’s reasonable and customary guidelines of employment or reasonable and customary corporate governance guidelines or policies, including without limitation, any business code of ethics adopted by the Board, or to follow the lawful directives of the Board (provided such directives are consistent with the terms of the Participant’s Employment Agreement, if any), which, in any such case, continues for thirty (30) days after written notice from the Board to the Participant, or (iv) gross negligence or willful misconduct in the performance of the Participant’s duties. No act, or failure to act, on the Participant’s part will be deemed “gross negligence” or “willful misconduct” unless done, or omitted to be done, by the Participant not in good faith and without a reasonable belief that the Participant’s act, or failure to act, was in the best interest of the Company. The Committee shall determine, in good faith, if a Participant’s service has been terminated for Cause.
“Change of Control” shall mean the occurrence of any of the following events: (a) any person, entity or affiliated group, excluding the Company or any employee benefit plan of the Company, acquiring more than 50% of the then outstanding shares of voting stock of the Company, (b) the consummation of any merger or consolidation of the Company into another company, such that the holders of the shares of the voting stock of the Company immediately before such merger or consolidation own less than 50% of the voting power of the securities of the surviving company or the parent of the surviving company, (c) the adoption of a plan for complete liquidation of the Company or for the sale or disposition of all or substantially all of the Company’s assets, such that after the transaction, the holders of the shares of the voting stock of the Company immediately prior to the transaction own less than 50% of the voting securities of the acquiror or the parent of the acquiror, or (d) during any period of two (2) consecutive years, individuals
| | | | | Proxy Statement and Notice of 2022 Annual Meeting B-1 |
who at the beginning of such period constituted the Board (including for this purpose any new director whose election or nomination for election by the Company’s stockholders was approved by a vote of at least a majority of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board.
“Code” shall mean the Internal Revenue Code of 1986, as amended.
“Committee” shall mean the Compensation Committee of the Board.
“Common Stock” shall mean the common stock, par value $0.001 per share, of the Company.
“Company” shall mean Medical Properties Trust, Inc., a Maryland corporation, or any business organization which succeeds to its business and elects to continue this Plan. For purposes of this Plan, the term Company shall include, where applicable and without limitation, MPT OP or such other Affiliate or Subsidiary that employs the Employee or has engaged the Consultant.
“Consultant” shall mean a professional or technical expert, consultant or independent contractor who provides services to the Company or an Affiliate or Subsidiary, and who qualifies as a consultant or advisor under Instruction A.1.(a)(1) of Form S-8 under the Securities Act of 1933, as amended.
“Deferred Stock Unit” shall mean a right to receive Common Stock awarded under Article 6 of this Plan.
“Director” shall mean any individual who is a member of the Board.
“Effective Date” shall mean May 26, 2022.
“Employee” shall mean any employee (as defined in accordance with the regulations and revenue rulings then applicable under Section 3401(c) of the Code) of the Company or an Affiliate or Subsidiary of the Company, whether such employee was so employed at the time this Plan was initially adopted or becomes so employed subsequent to the adoption of this Plan.
“Employment Agreement” shall mean the employment, consulting or similar contractual agreement entered into by the Employee or the Consultant, as the case may be, and the Company governing the terms of the Employee’s employment with or the Consultant’s engagement by the Company, if any.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
“Fair Market Value” of a share of Common Stock, as of a given date, shall be determined pursuant to Section 4.7.
“Good Reason” shall only apply, and shall only have the meaning, as contained in the Participant’s Employment Agreement. Any provision herein that relates to a Termination of Employment by the Participant for Good Reason shall have no effect if there is no Employment Agreement or the Employment Agreement does not contain a provision permitting the Participant to terminate for Good Reason.
“Incentive Stock Option” shall mean an Option which qualifies as an incentive stock option under Section 422 of the Code and which is designated as an Incentive Stock Option by the Committee.
“MPT OP” means MPT Operating Partnership, L.P., of which the Company is a limited partner and, through its wholly-owned limited liability company Medical Properties Trust, LLC, the sole general partner.
“Non-Employee Director” shall mean a Director who is not an Employee.
“Non-Qualified Stock Option” shall mean an Option that does not qualify as an Incentive Stock Option and/or which the Committee does not designate as an Incentive Stock Option.
“Other Stock-Based Award” shall mean an Award granted under Article 9 of this Plan.
“Option” shall mean an option to purchase shares of Common Stock that is granted under Article 4 of this Plan. An option granted under this Plan shall be either a Non-Qualified Stock Option or an Incentive Stock Option; provided, however, that Options granted to Non-Employee Directors and Consultants shall be Non-Qualified Stock Options.
“Participant” shall mean an Employee, Consultant or Director who has been determined as eligible to receive an Award pursuant to Section 3.2.
“Performance Units” shall mean performance units granted under Article 8 of this Plan.
| | | B-2 Proxy Statement and Notice of 2022 Annual Meeting | | |
“Permanent Disability” or “Permanently Disabled” shall mean the inability of a Participant, due to a physical or mental impairment, to perform the material services of the Participant’s position with the Company for a period of six (6) months, whether or not consecutive, during any 365-day period. A determination of Permanent Disability shall be made by a physician satisfactory to both the Participant and the Committee, provided that if the Participant and the Committee do not agree on a physician, each of them shall select a physician and those two physicians together shall select a third physician, whose determination as to Permanent Disability shall be binding on all parties.
“Plan” shall mean the Medical Properties Trust, Inc. Amended and Restated 2019 Equity Incentive Plan, as embodied herein and as amended from time to time.
“Plan Year” shall mean the fiscal year of the Company.
“Prior Plans” shall mean the 2013 Plan and the Company’s Second Amended and Restated 2004 Equity Incentive Plan.
“Restricted Common Stock” shall mean Common Stock awarded under Article 6 of this Plan.
“Restricted Stock Unit” shall mean a right to receive Common Stock awarded under Article 6 of this Plan.
“Retirement” or “Retire” shall, except as otherwise defined in the Participant’s Employment Agreement, mean a Participant’s Termination of Employment on or after his or her 65th birthday.
“Rule 16b-3” shall mean that certain Rule 16b-3 under the Exchange Act, as such rule may be amended from time to time.
“SAR” shall mean a stock appreciation right awarded under Article 7 of this Plan.
“Stock Award” shall mean an Award of Restricted Common Stock, Restricted Stock Units or Deferred Stock Units under Article 6 of this Plan.
“Stock Award Account” shall mean the bookkeeping account reflecting Awards of Restricted Stock Units and Deferred Stock Units under Article 6 of this Plan.
“Subsidiary” shall mean an entity in an unbroken chain beginning with the Company if each of the entities other than the last entity in the unbroken chain owns 50% or more of the total combined voting power of all classes of equity in one of the other entities in such chain.
“Termination of Employment” shall mean the date on which the employee-employer, consulting, contractual or similar relationship between a Participant and the Company is terminated for any reason, with or without Cause, including, but not by way of limitation, a termination of employment by resignation, discharge, death, Permanent Disability or Retirement, but excluding (i) termination of employment where there is a simultaneous reemployment or continuing employment of a Participant by the Company, and (ii) at the discretion of the Committee, termination of employment which results in a temporary severance of the employee-employer relationship. The Committee, in its absolute discretion, shall determine the effect of all matters and questions relating to a Termination of Employment (subject to the provisions of any Employment Agreement between a Participant and the Company), including, but not limited to all questions of whether particular leaves of absence constitute a Termination of Employment; provided, however, that, unless otherwise determined by the Committee in its discretion, a leave of absence, change in status from an employee to an independent contractor or other change the employee-employer, consulting, contractual or similar relationship shall constitute a Termination of Employment if, and to the extent that, such leave of absence, change in status or other change interrupts employment for the purposes of Section 422(a)(2) of the Code and the then applicable regulations and revenue rulings under said Section.
ARTICLE 2. COMMON STOCK SUBJECT TO PLAN
2.1 Common Stock Subject to Plan.
2.1.1 The Common Stock subject to an Award shall be shares of the Company’s authorized but unissued, reacquired, or treasury Common Stock. As of the Effective Date, and subject to adjustment as described in Section 2.2 and Section 12.3.1, the aggregate number of shares of Common Stock that may be issued under the Plan as Restricted Common Stock, Restricted Stock Units, Deferred Stock Units, Other Stock-Based Awards or pursuant to the exercise of Options and SARs is 28,900,000.
2.1.2 The maximum number of shares of Common Stock which may be awarded to any individual in any calendar year shall not exceed 5,000,000.
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2.1.3 No more than 28,900,000 shares of Common Stock may be issued in the form of Incentive Stock Options.
2.2 Add-back of Grants. If any Option or SAR granted pursuant to this Plan or the Prior Plans expires or is canceled without having been fully exercised or is exercised prior to becoming vested as permitted under Section 4.6.3 and is forfeited prior to becoming vested, the number of shares of Common Stock subject to such Option or SAR but as to which such Option or SAR was not exercised or vested prior to its expiration, cancellation or exercise may again be optioned, granted or awarded hereunder. If any shares of Common Stock awarded pursuant to this Plan or the Prior Plans as Restricted Common Stock, Restricted Stock Units, Other Stock-Based Awards or other equity award hereunder (other than Options or SARs) or as payment for Performance Units are forfeited by the Participant or withheld by or delivered to (either by actual delivery or attestation) the Company for tax withholding, such shares may again be optioned, granted or awarded hereunder. Shares of Common Stock which are (i) delivered by the Participant or withheld by the Company upon the exercise of any Option or SAR under this Plan in payment of the exercise price thereof or for tax withholding or (ii) subject to a SAR that are not issued in connection with the stock settlement of the SAR upon exercise thereof, may not be optioned, granted or awarded hereunder. In addition, upon the exercise of any SAR, the gross number of shares exercised shall be deducted from the total number of shares of Common Stock available for future issuance under the Plan. In the event the Company repurchases shares of Common Stock on the open market, such shares shall not be added to the shares of Common Stock available for issuance under the Plan. Notwithstanding the provisions of this Section 2.2, no shares of Common Stock may again be optioned, granted or awarded pursuant to an Incentive Stock Option if such action would cause such Option to fail to qualify as an Incentive Stock Option under Section 422 of the Code.
ARTICLE 3. ELIGIBILITY; GRANTS; AWARD AGREEMENTS
3.1 Eligibility. Any Employee, Consultant or Director selected to participate pursuant to Section 3.2 shall be eligible to participate in the Plan. Notwithstanding anything to the contrary in this Plan, the value of all Awards awarded under this Plan and all other cash compensation paid by the Company to any Non-Employee Director for service as a Non-Employee Director in any calendar year shall not exceed $1,000,000. For the purpose of this limitation, the value of any Award shall be its grant date fair value, as determined in accordance with FASB ASC 718 or successor provision but excluding the impact of estimated forfeitures related to service-based vesting provisions.
3.2 Awards. The Committee shall determine which Employees, Consultants and Directors, shall receive Awards, whether the Employee, Consultant or Director will receive Options, Restricted Common Stock, Restricted Stock Units, Deferred Stock Units, SARs or Performance Units or Other Stock-Based Awards, whether an Option grant is intended to be an Incentive Stock Option or a Non-Qualified Stock Option, and the number of shares of Common Stock subject to such Award.
3.3 Award Agreement. Upon the selection of an Employee, Consultant or Director to become a Participant and receive an Award, the Committee shall cause a written or electronic Award Agreement to be issued to such individual encompassing the terms and conditions of such Award, as determined by the Committee in its sole discretion; provided, however, that if applicable, the terms of such Award Agreement shall be subject to the terms of such Participant’s Employment Agreement, if any. Such Award Agreement shall provide for the exercise price for Options and SARs; the purchase price, if any, for Restricted Common Stock, Restricted Stock Units, Deferred Stock Units and Other Stock-Based Awards; the performance criteria for Performance Units; and the exercisability and vesting schedule, payment terms and such other terms and conditions of such Award, as determined by the Committee in its sole discretion. Each Award Agreement shall be executed (including through electronic acceptance) by the Participant and an officer or a Director (other than the Participant) of the Company authorized to sign such Award Agreement and shall contain such terms and conditions that are consistent with the Plan, including but not limited to the exercisability and vesting schedule, if any, as the Committee in its sole discretion shall determine. All Awards shall be made conditional upon the Participant’s acknowledgment, in writing in the Award Agreement or otherwise by acceptance of the Award, that all decisions and determinations of the Committee shall be final and binding on the Participant, his or her beneficiaries and any other person having or claiming an interest under such Award.
ARTICLE 4. OPTIONS
4.1 Award Agreement for Option Grant. Option grants shall be evidenced by an Award Agreement, pursuant to Section 3.3. All Award Agreements evidencing Incentive Stock Options shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 422 of the Code.
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4.2 Option Price. The price per share of the Common Stock subject to each Option shall be set by the Committee; provided, however, that (i) such price shall not be less than the par value of a share of Common Stock and shall not be less than 100% of the Fair Market Value of a share of Common Stock on the date the Option is granted, (ii) in the case of Incentive Stock Options granted to an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or any Subsidiary or parent corporation thereof (within the meaning of Section 422 of the Code), such price shall not be less than 110% of the Fair Market Value of a share of Common Stock on the date the Option is granted.
4.3 Qualification for Incentive Stock Options. The Committee may only grant an Incentive Stock Option to an individual if such person is an Employee of the Company or is an Employee of an Affiliate or Subsidiary as permitted under Section 422(a)(2) of the Code.
4.4 Change in Incentive Stock Option Grant. Any Incentive Stock Option granted under this Plan may be modified by the Committee to disqualify such Option from treatment as an Incentive Stock Option under Section 422 of the Code. To the extent that the aggregate Fair Market Value of shares of Common Stock with respect to which Incentive Stock Options (within the meaning of Section 422 of the Code, but without regard to Section 422(d) of the Code) are exercisable for the first time by a Participant during any calendar year (under the Plan and all other Incentive Stock Option plans of the Company) exceeds $100,000, such Options shall be treated as Non-Qualified Stock Options to the extent required by Section 422 of the Code. The rule set forth in the preceding sentence shall be applied by taking Options into account in the order in which they were granted. For purposes of this Section 4.4, the Fair Market Value of shares of Common Stock shall be determined as of the time the Option with respect to such shares of Common Stock is granted, pursuant to Section 4.7.
4.5 Option Term. The term of an Option shall be set by the Committee in its discretion; provided, however, in the case of Incentive Stock Options, the term shall not be more than ten (10) years from the date the Incentive Stock Option is granted, or five (5) years from such date if the Incentive Stock Option is granted to an Employee then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or any Subsidiary or parent corporation thereof (within the meaning of Section 422 of the Code). Such Incentive Stock Options shall be subject to Section 5.6, except as limited by the requirements of Section 422 of the Code and regulations and rulings thereunder applicable to Incentive Stock Options.
4.6 Option Exercisability and Vesting.
4.6.1 The period during which Options in whole or in part become exercisable and vest shall be set by the Committee and shall be as provided for in the Award Agreement. At any time after the grant of an Option, the Committee may, in its sole and absolute discretion and subject to whatever terms and conditions it selects, accelerate the period during which an Option becomes exercisable and vests.
4.6.2 In each Award Agreement, the Committee shall indicate whether the portion of the Option, if any, that remains non-exercisable and non-vested upon the Participant’s Termination of Employment with the Company is forfeited. In so specifying, the Committee may differentiate between the reason for the Participant’s Termination of Employment.
4.6.3 At any time on or after the grant of an Option, the Committee may provide in an Award Agreement that the Participant may elect to exercise part or all of an Option before it otherwise has become exercisable. Any shares of Common Stock so purchased shall be restricted Common Stock and shall be subject to a repurchase right in favor of the Company during a specified restriction period, with the repurchase price equal to the lesser of (i) the price per share paid by the Participant for the Common Stock, or (ii) the Fair Market Value of such Common Stock at the time of repurchase, or such other restrictions as the Committee deems appropriate. The Participant shall have, unless otherwise provided by the Committee in the Award Agreement, all the rights of an owner of Common Stock, subject to the restrictions and provisions provided in the applicable Award Agreement, including the right to vote such Common Stock and to receive all dividends and other distributions paid or made with respect to Common Stock.
4.7 Fair Market Value. The Fair Market Value of a share of Common Stock as of a given date shall be (i) the closing price of a share of Common Stock on the principal exchange on which shares of Common Stock are then trading, if any (or as reported on any composite index which includes such principal exchange), on such date, or if shares of Common Stock were not traded on such date, then on the next preceding date on which a trade occurred, or (ii) if shares of Common Stock are not publicly traded on an exchange, the Fair Market Value of a share of Common Stock as established by the Company acting in good faith in a manner not inconsistent with Section 409A of the Code and after consultation with independent advisors. The Fair Market Value as so determined by the Company in good faith and in the absence of fraud shall be binding and conclusive upon all parties hereto, and in any event the Participant agrees to accept and shall not challenge any such determination of Fair Market Value made by the
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Company. If the Company subdivides (by split, dividend or otherwise) its shares of Common Stock into a greater number, or combines (by reverse split or otherwise) its shares of Common Stock into a lesser number after the Company shall have determined the Fair Market Value for the shares of Common Stock subject to an Award (without taking into consideration such subdivision or combination) and prior to the consummation of the purchase, the Fair Market Value shall be appropriately adjusted to reflect such subdivision or combination, and the Company’s good faith determination as to any such adjustment shall be binding and conclusive on all parties hereto.
ARTICLE 5. EXERCISE OF OPTIONS
5.1 Exercise. At any time and from time to time prior to the time when any exercisable Option or portion thereof becomes unexercisable under the Plan or the Award Agreement, such Option or portion thereof may be exercised in whole or in part; provided, however, that the Company shall not be required to issue fractional shares of Common Stock and the Committee may, by the terms of the Option, require any partial exercise to be with respect to a minimum number of shares of Common Stock.
5.2 Manner of Exercise. An exercisable Option, or any exercisable portion thereof, may be exercised solely by delivery to the Company of all of the following prior to the time when such Option or such portion becomes unexercisable under the Plan or the Award Agreement:
5.2.1 A written notice signed by the Participant or other person then entitled to exercise such Option or portion thereof, stating that such Option or portion is being exercised, provided such notice complies with all applicable rules established by the Committee from time to time.
5.2.2 Such representations and documents as the Committee, in its absolute discretion, deems necessary or advisable to effect compliance with all applicable provisions of the Securities Act of 1933, as amended, and any other federal or state securities laws or regulations. The Committee may, in its absolute discretion, also take whatever additional actions it deems appropriate to affect such compliance including, without limitation, causing legends to be placed on certificates for shares of Common Stock and issuing stop-transfer notices to agents and registrars.
5.2.3 In the event that the Option shall be exercised pursuant to Section 12.1 by any person or persons other than the Participant, appropriate proof of the right of such person or persons to exercise the Option or portion thereof.
5.2.4 Full payment (in cash or by a certified check) for the shares of Common Stock with respect to which the Option or portion thereof is exercised, including the amount of any withholding tax due, unless with the prior written consent of the Committee:
5.2.4.1 payment, in whole or in part, is made through the delivery of shares of Common Stock owned by the Participant, duly endorsed for transfer to the Company with a Fair Market Value on the date of delivery equal to the aggregate exercise price of the Option or exercised portion thereof, provided, that shares of Common Stock used to exercise the Option have been held by the Participant for the requisite period of time to avoid adverse accounting consequences to the Company with respect to the Option;
5.2.4.2 with respect to Options that are not Incentive Stock Options, payment, in whole or in part, is made through the surrender of shares of Common Stock then issuable upon exercise of the Option having a Fair Market Value on the date of Option exercise equal to the aggregate exercise price of the Option or exercised portion thereof;
5.2.4.3 payment is made through a broker at the time required in accordance with procedures permitted by Regulation T of the Federal Reserve Board; or
5.2.4.4 payment is made through any combination of the consideration provided for in this Section 5.2.4 or such other method approved by the Committee consistent with applicable law.
5.3 Conditions to Issuance of Common Stock. The Company shall not be required to issue or deliver any certificate or other indicia evidencing ownership of shares of Common Stock purchased upon the exercise of any Option or portion thereof prior to fulfillment of all of the following conditions:
5.3.1 The obtaining of any approval or other clearance from any state or federal governmental agency which the Committee shall, in its sole discretion, determine to be necessary or advisable.
5.3.2 The lapse of such reasonable period of time following the exercise of the Option as the Committee may establish from time to time for reasons of administrative convenience.
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5.3.3 The receipt by the Company of full payment for such Common Stock, including payment of any applicable withholding tax.
5.3.4 The Participant agreeing to the terms and conditions of the Plan and the Award Agreement.
5.4 Rights as Stockholders. The holders of Options shall not be, nor have any of the rights or privileges of, stockholders of the Company in respect of any shares of Common Stock purchasable upon the exercise of any part of an Option unless and until certificates or other indicia representing such shares of Common Stock have been issued by the Company to such holders.
5.5 Ownership and Transfer Restrictions. The Committee, in its absolute discretion, may impose at the time of grant such restrictions on the ownership and transferability of the shares of Common Stock purchasable upon the exercise of an Option as it deems appropriate. Any such restriction shall be set forth in the Award Agreement and may be referred to on the certificates or other indicia evidencing such shares of Common Stock.
5.6 Limitations on Exercise of Options.
5.6.1 Vested Incentive Stock Options may not be exercised after the earliest of (i) their expiration date, (ii) twelve (12) months from the date of the Participant’s Termination of Employment by reason of his death, (iii) twelve (12) months from the date of the Participant’s Termination of Employment by reason of his Permanent Disability, or (iv) the expiration of three (3) months from the date of the Participant’s Termination of Employment for any reason other than such Participant’s death or Permanent Disability, unless the Participant dies within said three (3) month period. Leaves of absence for less than ninety (90) days shall not cause a Termination of Employment for purposes of Incentive Stock Options.
5.6.2 Non-Qualified Stock Options may be exercised up until their expiration date, unless the Committee provides otherwise in the Award Agreement.
ARTICLE 6. STOCK AWARDS
6.1 Award Agreement. Awards of Restricted Common Stock, Restricted Stock Units and Deferred Stock Units shall be evidenced by an Award Agreement pursuant to Section 3.3.
6.2 Awards of Restricted Common Stock, Restricted Stock Units and Deferred Stock Units.
6.2.1 The Committee may from time to time, in its absolute discretion, consistent with this Plan:
6.2.1.1 determine which Employees, Consultants and Directors shall receive Stock Awards;
6.2.1.2 determine the aggregate number of shares of Common Stock to be awarded as Stock Awards to Employees, Consultants and Directors;
6.2.1.3 determine the terms and conditions applicable to such Stock Awards; and
6.2.1.4 determine when the restrictions applicable to such Stock Awards, if any, lapse.
6.2.2 The Committee may establish the purchase price, if any, and form of payment for a Stock Award. If the Committee establishes a purchase price, the purchase price shall be no less than the par value of the Common Stock to be purchased, unless otherwise permitted by applicable state law.
6.2.3 Upon the selection of an Employee, Consultant or Director to be awarded Restricted Common Stock, the Committee shall instruct the Secretary of the Company to issue such Restricted Common Stock and may impose such conditions on the issuance of such Restricted Common Stock as it deems appropriate, subject to the provisions of Article 10.
6.2.4 Upon the selection of an Employee, Consultant or Director to be awarded Restricted Stock Units or Deferred Stock Units, the Committee shall instruct the Secretary of the Company to establish a Stock Award Account on behalf of each such Participant. The Committee may impose such conditions on the issuance of such Restricted Stock Units or Deferred Stock Units as it deems appropriate.
6.2.5 Awards of Restricted Common Stock and Restricted Stock Units shall vest pursuant to the Award Agreement.
6.2.6 A Participant shall be 100% vested in the number of Deferred Stock Units held in his or her Stock Award Account at all times. The term for which the Deferred Stock Units shall be deferred shall be provided for in the Award Agreement.
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6.3 Rights as Stockholders.
6.3.1 Upon delivery of the shares of Restricted Common Stock to the Participant or the escrow holder pursuant to Section 6.7, the Participant shall have, unless otherwise provided by the Committee in the Award Agreement, all the rights of an owner of Common Stock, subject to the restrictions and provisions of his or her Award Agreement; provided, however, that in the discretion of the Committee, any extraordinary distributions with respect to the Common Stock shall be subject to the restrictions set forth in Section 6.4.
6.3.2 Nothing in this Plan shall be construed as giving a Participant who receives an Award of Restricted Stock Units or Deferred Stock Units any of the rights of an owner of Common Stock unless and until shares of Common Stock are issued and transferred to the Participant in accordance with the terms of the Plan and the Award Agreement. Notwithstanding the foregoing, in the event that any dividend is paid by the Company with respect to the Common Stock (whether in the form of cash, Common Stock or other property), then the Committee shall, in the manner it deems equitable or appropriate, adjust the number of Restricted Stock Units or Deferred Stock Units allocated to each Participant’s Stock Award Account to reflect such dividend.
6.4 Restriction. All shares of Restricted Common Stock issued under this Plan (including any Common Stock received as a result of stock dividends, stock splits or any other form of recapitalization, if any) shall at the time of the Award, in the terms of each individual Award Agreement, be subject to such restrictions as the Committee shall, in its sole discretion, determine, which restrictions may include, without limitation, restrictions concerning voting rights, transferability, vesting, Company performance and individual performance; provided, however, that by action taken subsequent to the time shares of Restricted Common Stock are issued, the Committee may, on such terms and conditions as it may determine to be appropriate, remove any or all of the restrictions imposed by the terms of the Award Agreement. Restricted Common Stock may not be sold or encumbered until all restrictions are terminated or expire.
6.5 Lapse of Restrictions. The restrictions on Awards of Restricted Common Stock and Restricted Stock Units shall lapse in accordance with the terms of the Award Agreement. In the Award Agreement, the Committee shall indicate whether shares of Restricted Common Stock or Restricted Stock Units then subject to restrictions are forfeited or if the restrictions shall lapse upon the Participant’s Termination of Employment. In so specifying, the Committee may differentiate between the reason for the Participant’s Termination of Employment.
6.6 Repurchase of Restricted Common Stock. The Committee may provide in the terms of the Award Agreement awarding Restricted Common Stock that the Company shall have call rights, a right of first offer or a right of refusal regarding shares of Restricted Common Stock then subject to restrictions.
6.7 Escrow. The Company may appoint an escrow holder to retain physical custody of each certificate or control of each other indicia representing shares of Restricted Common Stock until all of the restrictions imposed under the Award Agreement with respect to the shares of Common Stock evidenced by such certificate expire or shall have been removed.
6.8 Legend. In order to enforce the restrictions imposed upon shares of Restricted Common Stock hereunder, the Committee shall cause a legend or restrictions to be placed on certificates of Restricted Common Stock that are still subject to restrictions under Award Agreements, which legend or restrictions shall make appropriate reference to the conditions imposed thereby.
6.9 Conversion. Upon vesting in the case of Restricted Stock Units, and upon the lapse of the deferral period in the case of Deferred Stock Units, such Restricted Stock Units or Deferred Stock Units shall be converted into an equivalent number of shares of Common Stock that will be distributed to the Participant, or in the case of the Participant’s death, to the Participant’s legal representative. Such distribution shall be evidenced by a stock certificate, appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company, or other appropriate means as determined by the Company. In the event ownership or issuance of the Common Stock is not feasible due to applicable exchange controls, securities regulations, tax laws or other provisions of applicable law, as determined by the Company in its sole discretion, the Participant, or in the case of the Participant’s death, the Participant’s legal representative, shall receive cash proceeds in an amount equal to the value of the shares of Common Stock otherwise distributable to the Participant, net of tax withholding as provided in Section 12.5.
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ARTICLE 7. STOCK APPRECIATION RIGHTS
7.1 Award Agreement for SARs. Awards of SARs shall be evidenced by an Award Agreement pursuant to Section 3.3.
7.2 General Requirements. The Committee may grant SARs separately or in tandem with any Option (for all or a portion of the applicable Option). The Committee shall determine which Employees, Consultants and Directors shall receive Awards of SARs and the amount of such Awards.
7.3 Base Amount. The Committee shall establish the base amount of the SAR at the time the SAR is granted. The base amount of each SAR shall be equal to the price per share of the related Option or, if there is no related Option, the Fair Market Value of a share of Common Stock as of the date of grant of the SAR.
7.4 Tandem SARs. Tandem SARs may be granted either at the time the Option is granted or at any time thereafter while the Option remains outstanding; provided, however, that, in the case of an Incentive Stock Option, SARs may be granted only at the time of grant of the Incentive Stock Option. In the case of tandem SARs, the number of SARs granted to an Employee, Consultant or Director that shall be exercisable during a specified period shall not exceed the number of shares of Common Stock that the Employee, Consultant or Director may purchase upon the exercise of the related Option during such period. Upon the exercise of an Option, the SARs relating to the Common Stock covered by such Option shall terminate. Upon the exercise of the SARs, the related Option shall terminate to the extent of an equal number of shares of Common Stock.
7.5 SAR Exercisability.
7.5.1 The period during which SARs in whole or in part become exercisable shall be set by the Committee and shall be as provided for in the Award Agreement. At any time after the grant of a SAR, the Committee may, in its sole and absolute discretion and subject to whatever terms and conditions its selects, accelerate the period during which the SAR becomes exercisable.
7.5.2 In each Award Agreement, the Committee shall indicate whether the portion of the SAR, if any, that remains non-exercisable upon the Participant’s Termination of Employment with the Company is forfeited. In so specifying, the Committee may differentiate between the reason for the Participant’s Termination of Employment.
7.6 Value of SARs. When a Participant exercises a SAR, the Participant shall receive in settlement of such SAR an amount equal to the value of the stock appreciation for the number of SARs exercised payable in cash, Common Stock or a combination thereof. The stock appreciation for a SAR is the amount by which the Fair Market Value of the underlying Common Stock on the date of exercise of the SAR exceeds the base amount of the SAR.
7.7 Form of Payment. The Committee shall determine whether the appreciation in an SAR shall be paid in the form of cash, Common Stock or a combination of the two, in such proportion as the Committee deems appropriate. For purposes of calculating the number of shares of Common Stock to be received, shares of Common Stock shall be valued at their Fair Market Value on the date of exercise of the SAR. If shares of Common Stock are received upon exercise of a SAR, cash shall be delivered in lieu of any fractional shares of Common Stock.
ARTICLE 8. PERFORMANCE UNITS
8.1 Award Agreement for Performance Units. Awards of Performance Units shall be evidenced by an Award Agreement pursuant to Section 3.3.
8.2 General Requirements. Each Performance Unit shall represent the right of the Participant to receive an amount based on the value of the Performance Unit, if performance goals established by the Committee are met. A Performance Unit shall be based on the Fair Market Value of a share of Common Stock or such other measurement base as the Committee deems appropriate. The Committee shall determine and set forth in the Award Agreement the number of Performance Units to be granted and the requirements applicable to such Performance Units. The Committee shall determine which Employees, Consultants and Directors shall receive Awards of Performance Units and the amount of such Awards.
8.3 Performance Period and Performance Goals. When Performance Units are granted, the Committee shall establish the performance period during which performance shall be measured (the “Performance Period”), performance goals applicable to the Performance Units (“Performance Goals”) and such other conditions of the Award as the Committee deems appropriate. Performance Goals may relate to the financial performance of the Company or its Subsidiaries, the performance of Common Stock, individual performance or such other criteria as the Committee deems appropriate.
8.4 Payment With Respect to Performance Units. At the end of each Performance Period, the Committee shall determine to what extent the Performance Goals and other conditions of the Performance Units are met, the value of the Performance Units (if applicable), and the amount, if any, to be paid with respect to the Performance Units. Payments with respect to Performance Units shall be made in cash, in Common Stock or in a combination of the two, as determined by the Committee.
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ARTICLE 9. OTHER STOCK-BASED AWARDS
9.1 Award Agreement for Other Stock-Based Awards. Other Stock-Based Awards shall be evidenced by an Award Agreement pursuant to Section 3.3.
9.2 General Requirements. Other Stock-Based Awards that may be granted under the Plan include Awards that are valued in whole or in part by reference to, or otherwise calculated by reference to or based on, shares of Common Stock, including without limitation: (i) convertible preferred stock, convertible debentures and other convertible, exchangeable or redeemable securities or equity interests, (ii) partnership interests in a Subsidiary or operating partnership, (iii) Awards valued by reference to book value, fair value or Subsidiary performance, and (iv) any class of profits interest or limited liability company interest created or issued pursuant to the terms of a partnership agreement, limited liability company operating agreement or otherwise by MPT OP or a Subsidiary that has elected to be treated as a partnership for federal income tax purposes and qualifies as a “profits interest” within the meaning of IRS Revenue Procedure 93-27 with respect to an Employee, a Consultant or a Director who is rendering services to or for the benefit of MPT OP or other Subsidiary, as applicable.
9.3 Calculation of Reserved Shares. For purposes of calculating the number of shares of Common Stock underlying an Other Stock-Based Award relative to the total number of shares of Common Stock reserved and available for issuance under Section 2.1 of the Plan, the Committee shall establish in good faith the maximum number of shares of Common Stock to which a Participant receiving such Award may be entitled upon fulfillment of all applicable conditions set forth in the relevant award documentation, including vesting conditions, partnership capital account allocations, value accretion factors, conversion ratios, exchange ratios and other similar criteria. If and when any such conditions are no longer capable of being met, in whole or in part, the number of shares of Common Stock underlying Other Stock-Based Awards shall be reduced accordingly by the Committee and the related shares of Common Stock shall be added back to the shares of Common Stock otherwise available for issuance under the Plan. Other Stock-Based Awards may be granted either alone or in addition to other Awards granted under the Plan. The Committee shall determine the Employees, Consultants or Directors to whom, and the time or times at which, Other Stock-Based Awards shall be made; the number of Other Stock-Based Awards to be granted; the price, if any, to be paid by the Participant for the acquisition of such Other Stock-Based Awards; and the restrictions and conditions applicable to such Other Stock-Based Awards. Conditions may be based on continuing employment (or other service relationship), computation of financial metrics and/or achievement of pre-established performance goals and objectives, with related length of the service period for vesting, minimum or maximum performance thresholds, measurement procedures and length of the performance period to be established by the Committee at the time of grant in its sole discretion. The Committee may allow Other Stock-Based Awards to be held through a limited partnership, or similar “look-through” entity, and the Committee may require such limited partnership or similar entity to impose restrictions on its partners or other beneficial owners that are not inconsistent with the provisions of this Article 9. The provisions of the grant of Other Stock-Based Awards need not be the same with respect to each Participant.
9.4 Dividend Equivalents. The Award Agreement in respect of an Other Stock-Based Award, or a separate agreement if required by Section 409A of the Code, may provide that the Participant shall be entitled to receive, currently or on a deferred or contingent basis, dividends or dividend equivalents with respect to the number of shares of Common Stock underlying the Award or other distributions from MPT OP or other Subsidiary, as applicable, prior to vesting (whether based on a period of time or based on attainment of specified performance conditions), as determined at the time of grant by the Committee in its sole discretion, and the Committee may provide that such amounts (if any) shall be deemed to have been reinvested in additional shares of Common Stock or otherwise reinvested.
9.5 Consideration. Other Stock-Based Awards granted under this Article 9 may be issued for no cash consideration.
ARTICLE 10. DEFERRALS
The Committee may permit a Participant to defer receipt of the payment of cash or the delivery of Common Stock that would otherwise be due to such Participant in connection with any Option or SAR, the lapse or waiver of restrictions applicable to Restricted Common Stock or Restricted Stock Units, the lapse of the deferral period applicable to Deferred Stock Units or the satisfaction of any requirements or objectives with respect to Performance Units. If any such deferral election is permitted, the Committee shall, in its sole discretion, establish rules and procedures for such deferrals, which may include provisions for the payment or crediting of interest or dividend equivalents, including converting such credits into deferred Common Stock equivalents and restricting deferrals to comply with the requirements of Section 409A of the Code. The Company may, but is not obligated to, contribute the shares of Common Stock that would otherwise be issuable pursuant to an Award to a rabbi trust. Shares of Common Stock issued to a rabbi trust pursuant to this Article 10 may ultimately be issued to the Participant in accordance with the terms of the deferred compensation plan or the Award Agreement.
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ARTICLE 11. ADMINISTRATION
11.1 Committee. The Plan shall be administered by the Compensation Committee of the Board. The Board may remove members, add members, and fill vacancies on the Committee from time to time, all in accordance with the Company’s Articles of Incorporation, bylaws, and with applicable law. The majority vote of the Committee, or for acts taken in writing without a meeting, by the unanimous written consent of the members of the Committee, shall be valid acts of the Committee. Appointment of Committee members shall be effective upon acceptance of appointment. Committee members may resign at any time by delivering written notice to the Board.
11.2 Duties and Powers of Committee. It shall be the duty of the Committee to conduct the general administration of this Plan in accordance with its provisions. The Committee shall have the power to interpret this Plan and the agreements pursuant to which Options, Restricted Common Stock, Restricted Stock Units, Deferred Stock Units, SARs, Performance Units and Other Stock-Based Awards are granted or awarded, and to adopt such rules for the administration, interpretation, and application of this Plan as are consistent herewith and to interpret, amend or revoke any such rules. Any such Award under this Plan need not be the same with respect to each Participant. Any such interpretations and rules with respect to Incentive Stock Options shall be consistent with the provisions of Section 422 of the Code.
11.3 Compensation; Professional Assistance; Good Faith Actions. Unless otherwise determined by the Board, members of the Committee shall receive no compensation for their services pursuant to this Plan. All expenses and liabilities that members of the Committee incur in connection with the administration of this Plan shall be borne by the Company. The Committee may employ attorneys, consultants, accountants, appraisers, brokers, or other persons. The Committee, the Company and the Company’s officers and Directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the Committee or the Board in good faith shall be final and binding upon all Participants, the Company and all other interested persons. No members of the Committee or Board shall be personally liable for any action, determination or interpretation made in good faith with respect to this Plan or any Awards made hereunder, and all members of the Committee and the Board shall be fully protected by the Company in respect of any such action, determination or interpretation.
ARTICLE 12. MISCELLANEOUS PROVISIONS
12.1 Transferability.
12.1.1 No Option, Restricted Common Stock, Restricted Stock Unit, Deferred Stock Unit, SAR, Performance Unit, Other Stock-Based Award or any right therein or part thereof shall be liable for the debts, contracts or engagements of the Participant or his successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means, whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect; provided, however, that nothing in this Section 12.1.1 shall prevent transfers by will, by the applicable laws of descent and distribution, pursuant to a qualified domestic relations order or as permitted in Section 12.1.2 below. The Committee shall not be required to accelerate the exercisabilty of an Award pursuant to a divorce or similar proceeding in the event Participant’s spouse is determined to have acquired a community property interest in all or any portion of an Award. Except as provided below, during the lifetime of the Participant, only he or she may exercise an Award (or any portion thereof) granted to him or her under the Plan. After the death of the Participant, any exercisable portion of an Award, prior to the time when such portion becomes unexercisable under the Plan or the applicable Award Agreement or other agreement, may be exercised by his or her personal representative or by any person empowered to do so under the deceased Participant’s will or under the then applicable laws of descent and distribution.
12.1.2 Notwithstanding the foregoing, the Committee may provide in an Award Agreement, or amend an otherwise outstanding Award Agreement to provide, that a Participant may transfer Non-Qualified Stock Options to family members, or one or more trusts or other entities for the benefit of or owned by family members, consistent with applicable securities laws, according to such terms as the Committee may determine; provided that the Participant receives no consideration for the transfer of a Non-Qualified Stock Option and the transferred Non-Qualified Stock Option shall continue to be subject to the same terms and conditions as were applicable to the Non-Qualified Stock Option immediately before the transfer and shall be exercisable by the transferee according to the same terms as applied to the Participant.
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12.2 Amendment, Suspension or Termination of this Plan.
12.2.1 Except as otherwise provided in this Section 12.2, this Plan may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Board; provided, however, no action of the Board or the Committee may be taken that would otherwise require stockholder approval as a matter of applicable law, regulation or rule, without the consent of the stockholders. Except as provided in Section 4.7, Section 12.3.1.5 or Section 12.3.2.5, in no event may the Board or the Committee reduce the exercise price of outstanding Options or SARs or effect repricing through cancellation and re-grants or cancellation of Options or SARs in exchange for cash or other Awards without prior stockholder approval. No amendment, suspension or termination of this Plan shall, without the consent of the Participant, impair any rights or obligations under any Award theretofore made to the Participant, unless such right has been reserved in the Plan or the Award Agreement. No Award may be made during any period of suspension or after termination of this Plan. In no event may any Award be made under this Plan after the tenth anniversary of the date of stockholder approval of the Plan, and no Incentive Stock Options may be granted after the tenth anniversary of the date of Board approval of the Plan.
12.2.2 Notwithstanding the foregoing, the Board or the Committee may take any action necessary to comply with a change in applicable law, irrespective of the status of any Award as vested or unvested, exercisable or unexercisable, at the time of such change in applicable law.
12.3 Changes in Common Stock or Assets of the Company, Acquisition or Liquidation of the Company and Other Corporate Events.
12.3.1 In the event that any stock dividend or extraordinary dividend (whether in the form of cash, other securities, or other property), recapitalization, reclassification, stock split, reverse stock split, reorganization, or other similar event affects the Common Stock such that an adjustment is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, the Committee shall, in such manner as it may deem equitable, adjust the following:
12.3.1.1 the maximum number of shares of Common Stock available for Awards;
12.3.1.2 the maximum number of shares of Common Stock subject to the Plan;
12.3.1.3 the number and kind of Company stock with respect to which an Award may be made under the Plan;
12.3.1.4 the number and kind of Company stock subject to an outstanding Award; and
12.3.1.5 the exercise price or purchase price with respect to any Award.
12.3.2 In the event of any merger, consolidation, split-up, spin-off, combination, repurchase, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, or exchange of Common Stock or other securities of the Company, the Committee in its discretion is hereby authorized to take any one or more of the following actions whenever the Committee determines, in its sole discretion, that such action is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to any Award or right under this Plan, to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles:
12.3.2.1 the Committee may provide, either by the terms of the Award Agreement or by action taken prior to the occurrence of such transaction or event and either automatically or upon the Participant’s request, for (i) the purchase of any such Award for the payment of an amount of cash equal to the amount that could have been attained upon the exercise of such Award or realization of the Participant’s rights had such Award been currently exercisable, payable, fully vested or the restrictions lapsed, or (ii) the replacement of such Award with other rights or property selected by the Committee;
12.3.2.2 the Committee may provide in the terms of such Award Agreement or by action taken prior to the occurrence of such transaction or event that the Award cannot be exercised after such event;
12.3.2.3 the Committee may provide, by the terms of such Award or by action taken prior to the occurrence of such transaction or event, that for a specified period of time prior to such transaction or event, such Award shall be exercisable, notwithstanding anything to the contrary in Section 4.6 or the provisions of such Award;
12.3.2.4 the Committee may provide, by the terms of such Award or by action taken prior to the occurrence of such transaction or event, that upon such event, such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar Awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices;
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12.3.2.5 the Committee may make appropriate adjustments in the number, type and kind of shares of Common Stock subject to outstanding Options, Restricted Common Stock, Restricted Stock Units, Deferred Stock Units, SARs, Performance Units and Other Stock-Based Awards and in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding Awards, and rights and awards which may be granted in the future; and
12.3.2.6 the Committee may provide either by the terms of an Award of Restricted Common Stock, Restricted Stock Units or Other Stock-Based Awards or by action taken prior to the occurrence of such event that, for a specified period of time prior to such event, the restrictions imposed under an Award Agreement upon some or all shares of the Restricted Common Stock or the Restricted Stock Units or Other Stock-Based Awards may be terminated, and some or all shares of such Restricted Common Stock or some or all of such Restricted Stock Units or some or all Other Stock-Based Awards may cease to be subject to forfeiture under Section 6.5 or Section 9.3 or repurchase under Section 6.6 after such event.
12.3.3 Subject to Section 12.7, the Committee may, in its sole discretion, at the time of grant, include such further provisions and limitations in any Award Agreement or certificate, as it may deem appropriate and in the best interests of the Company; provided, however, that no such provisions or limitations shall be contrary to the terms of the Participant’s Employment Agreement or the terms of this Plan.
12.3.4 Notwithstanding the foregoing, no action pursuant to this Section 12.3 shall be taken that is specifically prohibited under applicable law, the rules and regulations of any governing governmental agency or national securities exchange, or the terms of the Participant’s Employment Agreement.
12.4 Continued Employment. Nothing in this Plan or in any Award Agreement hereunder shall confer upon any Participant any right to continue his or her employment, consulting or similar relationship with the Company or an Affiliate, whether as an Employee, Consultant, Director or otherwise, or shall interfere with or restrict in any way the rights of the Company or an Affiliate, which are hereby expressly reserved, to discharge or terminate the relationship with any Participant at any time for any reason whatsoever, subject to the terms of any Employment Agreement entered into by the Participant and the Company or Affiliate.
12.5 Tax Withholding. The Company shall be entitled to require payment in cash or deduction from other compensation payable to each Participant of any sums required by federal, state or local tax law to be withheld with respect to the issuance, vesting, exercise or lapse of any restriction of any Option, Restricted Common Stock, Restricted Stock Unit, Deferred Stock Unit, SAR, Performance Unit or Other Stock-Based Award. The Committee may, in its sole discretion and in satisfaction of the foregoing requirement, require such Participant to elect to have the Company withhold shares of Common Stock otherwise issuable under such Award (or allow the return of shares of Common Stock) having a Fair Market Value equal to the sums required to be withheld; provided, however, that any shares of Common Stock withheld shall be no greater than an amount that does not exceed the Participant’s maximum applicable withholding tax rate for federal (including FICA), state and local tax liabilities or such lesser amount as is necessary to avoid liability accounting treatment. The Committee may also require the Company’s tax withholding obligation to be satisfied, in whole or in part, by an arrangement whereby a certain number of shares of Common Stock issued pursuant to any Award are immediately sold and proceeds from such sale are remitted to the Company in an amount that would satisfy the withholding amount due.
12.6 Forfeiture Provisions. Pursuant to its general authority to determine the terms and conditions applicable to Awards, the Committee shall have the right to provide, in the terms of such Award, or to require the recipient to agree by separate written instrument, that the Award shall terminate and any unexercised portion of such Award (whether or not vested) shall be forfeited, if (i) a Termination of Employment occurs prior to a specified date, or within a specified time period following receipt or exercise of the Award, (ii) the recipient at any time, or during a specified time period, engages in any activity in competition with the Company, or which is inimical, contrary or harmful to the interests of the Company, as further defined by the Committee or as specified in the Participant’s Employment Agreement, or (iii) the Company terminates the Employee’s employment with or without Cause.
12.7 Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of this Plan, any Option, Restricted Common Stock, Restricted Stock Unit, Deferred Stock Unit, SAR, Performance Unit or Other Stock-Based Award granted or awarded to any individual who is then or thereafter becomes subject to Section 16 of the Exchange Act shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act). To the extent permitted by applicable law, Options granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.
12.8 Restrictive Legend. All of the shares of Common Stock now outstanding or hereafter issued and/or owned shall be held and transferred subject to the terms of the restrictions herein contained and every certificate representing a share of Common Stock shall
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contain the following legend: “These shares are held subject to the terms of the Medical Properties Trust, Inc. Amended and Restated 2019 Equity Incentive Plan (the “Plan”) and such shares may only be transferred in accordance with the terms thereof. A copy of the Plan is available at the office of the Company.”
12.9 Effect of Plan Upon Option and Compensation Plans. The adoption of this Plan shall not affect any other compensation or incentive plans in effect for the Company. Nothing in this Plan shall be construed to limit the right of the Company (i) to establish any other forms of incentives or compensation for Employees, Consultants or Directors, or (ii) to grant or assume options or other rights otherwise than under this Plan in connection with any proper corporate purpose including but not by way of limitation, the grant or assumption of options in connection with the acquisition by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, partnership, limited liability company, firm or association.
12.10 Compliance with Laws. This Plan, the granting and vesting of Awards under this Plan and the issuance and delivery of shares of Common Stock and the payment of money under this Plan or under Awards awarded hereunder are subject to compliance with all applicable federal and state laws, rules and regulations (including but not limited to state and federal securities law and federal margin requirements) and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. Any securities delivered under this Plan shall be subject to such restrictions, and the person acquiring such securities shall, if requested by the Company, provide such assurances and representations to the Company as the Company may deem necessary or desirable to assure compliance with all applicable legal requirements. To the extent permitted by applicable law, the Plan shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.
12.11 Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Plan.
12.12 Governing Law. This Plan and any agreements hereunder shall be administered, interpreted and enforced under the laws of the State of Alabama, without regard to conflicts of laws thereof.
12.13 Clawback. Awards under the Plan shall be subject to the Company’s clawback policy, as in effect from time to time.
12.14 No Excise Tax Gross Ups. The Company will not enter into any agreements or arrangements on or after the Effective Date that provide for a gross up for excise taxes imposed by Section 4999 of the Code.
* * * * * *
The Medical Properties Trust, Inc. Amended and Restated 2019 Equity Incentive Plan was adopted by the Board of Directors on April 28, 2022 and approved by the stockholders of the Company on May 26, 2022.
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Signature of Stockholder Date: Signature of Stockholder Date: Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” ALL NOMINEES AND “FOR” PROPOSALS 2, 3 AND FOR “1 YEAR” ON PROPOSAL 4. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x Please detach along perforated line and mail in the envelope provided. 00033333333330340000 4 052523 ANNUAL MEETING OF STOCKHOLDERS OF MEDICAL PROPERTIES TRUST, INC. May 26,25, 2023 Important Notice Regarding Internet Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement, Annual Report and 2022 Form 10-K are available at www.medicalpropertiestrust.com Please sign, date and mail your proxy card in the envelope provided as soon as possible. GO GREEN e-Consent makes it easy to go paperless. With e-Consent, you can quickly access your proxy material, statements and other eligible documents online, while reducing costs, clutter and paper waste. Enroll today via www.astfinancial.com to enjoy online access. Important Notice Regarding Internet Availability of Proxy Materials1. To elect eight directors. O Edward K. Aldag, Jr. O G. Steven Dawson O R. Steven Hamner O Robert E. Holmes, Ph.D. O Sherry A. Kellett O William G. McKenzie O L. Glenn Orr, Jr. O D. Paul Sparks, Jr. FOR ALL NOMINEES WITHHOLD AUTHORITY FOR ALL NOMINEES FOR ALL EXCEPT (See instructions below) INSTRUCTIONS: To withhold authority to vote for the Annual Meeting: The Noticeany individual nominee(s), mark “FOR ALL EXCEPT” and Proxy Statement, Annual Report and 2021 Form 10-K are available at www.medicalpropertiestrust.com Please sign, date and mail your proxy cardfill in the envelope providedcircle next to each nominee you wish to withhold, as soon as possible. Please detach along perforated line and mail in the envelope provided. 00033333333330330000 6 052622 THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” ALL NOMINESS AND “FOR” PROPOSALS 2, 3AND 4. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HEREshown here: NOMINEES: THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY AND WILL BE VOTED IN ACCORDANCE WITH THE UNDERSIGNED’S INSTRUCTIONS SET FORTH HEREIN. UNLESS DIRECTION IS GIVEN TO THE CONTRARY, THIS PROXY WILL BE VOTED “FOR” ALL NOMINEES AND “FOR” EACH OF PROPOSALS 2 AND 3 AND 4. To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. FOR AGAINST ABSTAIN“1 YEAR” ON PROPOSAL 4. 1. To elect nine directors Edward K. Aldag, Jr. G. Steven Dawson R. Steven Hamner Caterina A. Mozingo Emily W. Murphy Elizabeth N. Pitman D. Paul Sparks, Jr. Michael G. Stewart C. Reynolds Thompson, III 2. To ratify the appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm for the fiscal year ending December 31, 2022.2023. 3. To approve, on a non-binding, advisory basis, the compensation of the Company’s named executive officers,officers. 4. To recommend, on a non-binding, basis. 4. To approve advisory basis, the Medical Properties Trust, Inc. Amended and Restated 2019 Equity Investment Plan.frequency of future advisory votes on executive compensation. With respect to any other item of business that properly comes before the annual meeting and at any adjournments or postponements thereof, the proxy holders are authorized to vote the undersigned’s shares in their discretion. Signature of Stockholder Date: Signature of Stockholder Date: Note: Please sign exactly as your names appear on this Proxy. When shares are held jointly, each holder sould sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.FOR AGAINST ABSTAIN 2 1 YEAR YEARS 3 YEARS ABSTAIN
0 ————————— 14475 PROXY MEDICAL PROPERTIES TRUST, INC. 20222023 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 26, 202225, 2023 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The 20222023 Annual Meeting of Stockholders of Medical Properties Trust, Inc. (the “Annual Meeting”) will be held at The UAB Collat School of Business, 710 13th Street South, Brimingham,Birmingham, Alabama 35233, on May 26, 2022,25, 2023, beginning at 10:30 a.m. Central Time. You can access directions to the Annual Meeting at www.medicalpropertiestrust.com. The undersigned hereby acknowledges receipt of the combined Notice of 20222023 Annual Meeting of Stockholders and Proxy Statement dated April 28, 2022,27, 2023, accompanying this proxy and to which reference is hereby made, for further information regarding the Annual Meeting and the matters to be considered and voted on by the stockholders at the Annual Meeting. The undersigned hereby appoints Edward K. Aldag, Jr. and R. Steven Hamner, and each of them, attorneys and agents, with full power of substitution, to vote, as the undersigned’s proxy, all the shares of common stock owned of record by the undersigned as of the record date and otherwise to act on behalf of the undersigned at the meeting and any adjournment thereof, in accordance with the instructions set forth herein and with discretionary authority with respect to any other business, not known or determined at the time of the solicitation of this proxy, that properly comes before such meeting or any adjournment thereof. The undersigned hereby revokes any proxy heretofore given and directs said attorneys and agents to vote or act as indicated on the reverse side hereof. (Continued and to be signed on the reverse side) 1.1 14475 |