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TABLE OF CONTENTS
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy
Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant ý
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Filed by a Party other than the Registrant o
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material under §240.14a-12
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COMMUNITY HEALTHCARE TRUST INCORPORATED
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(Name of Registrant as Specified In Its Charter)
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Not Applicable
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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(2)
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Aggregate number of securities to which transaction applies:
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(3)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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(4)
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Proposed maximum aggregate value of transaction:
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(5)
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Total fee paid:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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(3)
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Filing Party:
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Date Filed:
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March 20, 2020
Dear
Stockholder:
On
behalf of the Board of Directors, we cordially invite you to attend the 2020 annual meeting of stockholders of Community Healthcare Trust Incorporated, a Maryland corporation (the
"Company"). The annual meeting will be held beginning at 8:00 a.m., Central time, on Thursday, May 7, 2020 at the
principal offices of the Company, located at 3326 Aspen Grove Drive, Suite 150, Franklin, Tennessee 37067. The formal notice of the annual meeting appears on the next page. At the annual
meeting, you will be asked to:
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1.
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Elect
five directors, each to serve a one-year term expiring in 2021;
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2.
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Vote
to approve, on a non-binding advisory basis, a resolution approving the Company's compensation of its named executive officers;
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3.
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Vote
to approve, on a non-binding advisory basis, the frequency of a non-binding advisory vote on executive compensation;
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4.
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Ratify
the appointment of BDO USA, LLP as our independent registered public accountants for 2020; and
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5.
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Transact
such other business as may properly come before the annual meeting or any adjournment or postponement thereof.
The
accompanying proxy statement provides detailed information concerning the matters to be acted upon at the annual meeting. We urge you to review this proxy statement and each of the
proposals carefully. Your vote is very important. It is important that your views be represented at the annual meeting regardless of the number of shares of common stock you own or whether you are
able to attend the annual meeting in person.
On
March 20, 2020, we posted on the investor's relations page of our Internet website, http://investors.chct.reit, a copy of our
2020 proxy statement, proxy card and our annual report to stockholders. Also, on or around March 20, 2020, we mailed a notice (the "Notice") containing instructions on how to access our proxy
materials and vote online to our institutional stockholders who own our stock directly in their name and in the name of other stockholders.
You
may vote your shares on the Internet. If you request a paper copy of the proxy card or voting instruction form, we will mail you the paper copy and you may sign, date and mail the
accompanying proxy card or voting instruction form in the envelope provided with your proxy card. Instructions regarding the two methods of voting by proxy are contained on the Notice and on the proxy
card. As always, if you are the record holder of our stock, you may vote in person at the annual meeting. The accompanying proxy statement explains how to obtain driving directions to the meeting.
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On
behalf of our Board of Directors, I would like to express our appreciation for your continued interest in Community Healthcare Trust Incorporated.
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Sincerely,
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Timothy G. Wallace
Chairman of the Board, President, and
Chief Executive Officer
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Important Notice Regarding the Availability of Proxy Materials for
the Stockholder Meeting to be held on May 7, 2020:
Community
Healthcare Trust Incorporated's 2020 proxy statement, proxy card and annual report to
stockholders are available at http://investors.chct.reit.
Table of Contents
Community Healthcare Trust Incorporated
3326 Aspen Grove Drive, Suite 150
Franklin, Tennessee 37067
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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TIME
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8:00 a.m., Central Time, on Thursday, May 7, 2020
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PLACE
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Community Healthcare Trust Incorporated
3326 Aspen Grove Drive, Suite 150
Franklin, Tennessee 37067
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ITEMS OF BUSINESS
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1. To elect five directors, each to serve a one-year term expiring in 2021;
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2. To vote to approve, on a non-binding advisory basis, a resolution approving the Company's compensation of its named executive officers;
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3. To vote to approve, on a non-binding advisory basis, the frequency of a non-binding advisory vote on executive compensation;
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4. To ratify the appointment of BDO USA, LLP as our independent registered public accountants for 2020; and
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5. To transact such other business as may properly come before the annual meeting or any adjournment or postponement thereof.
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RECORD DATE
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You can vote if you are a stockholder of record as of the close of business on March 6, 2020.
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ANNUAL REPORT
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All of these documents are accessible on our Internet website, http://investors.chct.reit. You may request a paper copy of the proxy statement, the proxy
card, and our annual report to stockholders, which is not part of the proxy solicitation material.
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PROXY VOTING
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It is important that your shares be represented and voted at the annual meeting. You may vote your shares on the Internet or, if you request and receive written proxy materials, you may vote by signing,
dating and mailing the accompanying proxy card or voting instruction form in the envelope provided. Instructions regarding the two methods of voting are contained on the proxy card. The Notice has instructions regarding voting on the Internet. Any
proxy may be revoked at any time prior to its exercise at the annual meeting.
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By Order of the Board of Directors,
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W. Page Barnes
Secretary of
Community Healthcare Trust Incorporated
Franklin, Tennessee
March 20, 2020
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COMMUNITY HEALTHCARE TRUST INCORPORATED
PROXY STATEMENT
INDEX
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COMMUNITY HEALTHCARE TRUST INCORPORATED
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, MAY 7, 2020
We are furnishing this proxy statement to the stockholders of Community Healthcare Trust Incorporated in connection with the solicitation of proxies by its Board
of Directors for use at the annual meeting of stockholders of Community Healthcare Trust Incorporated to be held at 8:00 a.m., Central time, on Thursday, May 7, 2020, at 3326 Aspen Grove
Drive, Suite 150, Franklin, Tennessee 37067, as well as in connection with any adjournments or postponements of the meeting. This solicitation is made by Community Healthcare Trust
Incorporated on behalf of our Board of Directors (also referred to as the "Board" in this proxy statement). "We," "our," "us" and the "Company" refer to Community Healthcare Trust Incorporated, a
Maryland corporation.
We
have elected to provide access to our proxy materials and annual report over the Internet through a "notice and access" model. Accordingly, we are sending a Notice of Internet
Availability of Proxy Materials (the "Notice") to our stockholders of record as of March 6, 2020. All stockholders will have the ability to access the proxy materials on the website referred to
in the Notice or to request a printed set of the proxy materials. Instructions on how to request a printed copy by mail or electronically may be found on the Notice and on the website referred to in
the Notice, including an option to request paper copies on an ongoing basis. On March 20, 2020, we intend to make this proxy statement available on the Internet and, on or around
March 20, 2020, we intend to mail the Notice to all stockholders entitled to vote at the annual meeting. We intend to mail this Proxy Statement, together with a proxy card, to those
stockholders entitled to vote at the annual meeting who have properly requested paper copies of such materials, within three business days of such receipt.
This
proxy statement, proxy card and our annual report to stockholders are available at http://investors.chct.reit. This website address
contains the following documents: the Notice, the proxy statement and proxy card sample, and the annual report to stockholders. You are encouraged to access and review all of the important information
contained in the proxy materials before voting.
QUESTIONS AND ANSWERS REGARDING THE 2020 ANNUAL MEETING OF
STOCKHOLDERS
Who is soliciting proxies from the stockholders?
Our Board of Directors is soliciting your proxy. The proxy provides you with the opportunity to vote on the proposals presented at the annual
meeting, whether or not you attend the annual meeting.
What will be voted on at the annual meeting?
Our stockholders will vote on four proposals at the annual meeting:
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1.
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The
election of five directors, who are each to serve a one-year term expiring in 2021;
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The
approval of, on a non-binding advisory basis, a resolution approving the Company's compensation of its named executive officers;
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3.
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The
approval of, on a non-binding advisory basis, the frequency of a non-binding advisory vote on executive compensation; and
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The
ratification of the appointment of BDO USA, LLP as our independent registered public accountants for 2020.
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Your
proxy will also give the proxy holders discretionary authority to vote the shares represented by the proxy on any matter, other than the above proposals, that is properly presented
for action at the annual meeting.
How will we solicit proxies, and who bears the cost of proxy solicitation?
Our directors, officers and employees may solicit proxies by telephone, mail, facsimile, via the Internet or by overnight delivery service.
These individuals do not receive separate compensation for these services. Finally, in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (the "SEC"), we will
reimburse brokerage firms and other persons representing beneficial owners of our common stock for their reasonable expenses in forwarding solicitation materials to such beneficial owners.
Who can vote at the annual meeting?
Our Board of Directors has fixed the close of business on Friday, March 6, 2020, as the record date for our annual meeting. Only
stockholders of record on that date are entitled to receive notice of and vote at the annual meeting. As of March 6, 2020, our only outstanding class of securities was common stock, $0.01 par
value per share. On that date, we had 450,000,000 shares of common stock authorized, of which 21,906,352 shares were outstanding.
You
(if you, rather than your broker, are the record holder of our stock) can vote either in person at the annual meeting or by proxy, whether or not you attend the annual meeting. If
you would like to attend the annual meeting in person and need directions, please contact W. Page Barnes by e-mail at investorrelations@chct.reit or by telephone at 615-771-3052. You may vote your
shares on the Internet or, to the extent you request written proxy materials, by signing, dating and mailing the accompanying proxy card in the envelope provided. Instructions regarding the two
methods of voting by proxy are contained on the proxy card.
How many votes must be present to hold the annual meeting?
A quorum must be present to hold our annual meeting. The presence, in person or by proxy, of a majority of the votes entitled to be cast at the
annual meeting constitutes a quorum. Your shares, once represented for any purpose at the annual meeting, are deemed present for purposes of determining a quorum for the remainder of the meeting and
for any adjournment, unless a new record date is set for the adjourned meeting. This is true even if you abstain from voting with respect to any matter brought before the annual meeting. As of
March 6, 2020, we had 21,906,352 shares of
common stock outstanding; thus, we anticipate that the quorum for our annual meeting will be 10,953,177 shares.
How many votes does a stockholder have per share?
Our stockholders are entitled to one vote for each share held.
What is the required vote on each proposal?
Directors are elected by a plurality vote; the candidates up for election who receive the highest number of votes cast, up to the number of
directors to be elected, are elected. Stockholders do not have the right to cumulate their votes.
The
affirmative vote of a majority of the shares represented at the meeting and entitled to vote is required to approve, on an advisory basis, the say on pay vote. As an advisory vote,
this proposal is not binding upon us. However, the Compensation Committee of our Board of Directors, which is responsible for designing and administering our executive compensation program, values the
opinions
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expressed
by our stockholders and will consider the outcome of the vote when making future compensation decisions.
The
affirmative vote of a majority of the shares represented at the meeting and entitled to vote is required to approve, on an advisory basis, the frequency of future stockholder say on
pay votes. As an advisory vote, this proposal is not binding upon us. The Compensation Committee of our Board of Directors will consider the outcome of the vote when determining the frequency of
holding future stockholder say on pay votes.
The
proposal to ratify our appointment of BDO USA, LLP, or BDO, as our independent registered public accountants for 2020, is approved by our stockholders if the votes cast
favoring the ratification exceed the votes cast opposing the ratification.
How will the proxy be voted, and how are votes counted?
If you vote by proxy (either voting on the Internet or by properly completing and returning a paper proxy card that you receive upon requesting
written proxy materials), the shares represented by your proxy will be voted at the annual meeting as you instruct, including any adjournments or postponements of the meeting. If you return a signed
proxy card but no voting instructions are given, the proxy holders will exercise their discretionary authority to vote the shares represented by the proxy at the annual meeting and any adjournments or
postponements as follows:
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"FOR" the election of nominees Alan Gardner, Claire Gulmi, Robert Hensley, Lawrence Van Horn, and Timothy Wallace.
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"FOR" the resolution approving the compensation of the Company's named executive officers.
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"ANNUAL" vote on executive compensation.
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"FOR" the ratification of the appointment of BDO USA, LLP as our independent registered public accountants for
2020.
If
you hold your shares in broker's name (sometimes call "street name" or "nominee name"), you must provide voting instructions to your broker. If you do not provide instructions to your
broker, your shares will not be voted in any matter on which your broker does not have discretionary authority to vote, which generally includes non-routine matters. A vote that is not cast for this
reason is called a "broker non-vote." Broker non-votes will be treated as shares present for the purpose of determining whether a quorum is present at the annual meeting, but they will not be
considered present for
purposes of calculating the vote on a particular matter, nor will they be counted as a vote FOR or AGAINST a matter or as an abstention on the matter. Under the rules of the New York Stock Exchange
("NYSE"), which is the stock exchange on which our common stock is listed, the ratification of our appointment of our independent registered public accountants is considered a routine matter for
broker voting purposes, but the election of directors, the advisory (non-binding) vote on the compensation of our named executive officers, and the advisory (non-binding) vote on the frequency of
future stockholder votes on the compensation of our named executive officers are not considered routine. It is important that you instruct your broker as to how you wish to have your shares voted,
even if you wish to vote as recommended by the Board.
Can a proxy be revoked?
Yes. You can revoke your proxy at any time before it is voted. You revoke your proxy (1) by giving written notice to our Corporate
Secretary before the annual meeting, (2) by granting a subsequent proxy on the Internet, or (3) by delivering a signed proxy card dated later than your previous proxy. If you, rather
than your broker, are the record holder of your stock, a proxy can also be revoked by appearing in person and voting at the annual meeting. Written notice of the revocation of a proxy should be
delivered to the following address: W. Page Barnes, Community Healthcare Trust Incorporated, 3326 Aspen Grove Drive, Suite 150, Franklin, Tennessee 37067.
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PROPOSAL 1
ELECTION OF DIRECTORS
The persons listed below have been nominated by our Board of Directors to serve as directors for a one-year term expiring at the annual meeting
of stockholders occurring in 2021: Alan Gardner, Claire Gulmi, Robert Hensley, Lawrence Van Horn and Timothy Wallace. Each nominee has consented to serve on our Board of Directors. If any nominee were
to become unavailable to serve as a director, our Board of Directors may designate a substitute nominee. In that case, the persons named as proxies on the accompanying proxy card will vote for the
substitute nominee designated by our Board of Directors. The following lists each director nominated for election to serve as a director for a one-year term expiring at the annual meeting of
stockholders occurring in 2021, which includes a brief discussion of the experience, qualifications and skills that led us to conclude that such individual should be a member of our Board.
Qualifications of Directors
We believe that our Board of Directors consists of a diverse collection of individuals who possess the integrity, education, work ethic and
ability to work with others necessary to oversee our business effectively and to represent the interests of all stockholders, including the qualities listed below. We have attempted below to highlight
certain notable experience, qualifications and skills for each director nominee, rather than provide an exhaustive catalog of each and every qualification and skill that a director possesses. Each of
the nominees set forth below is currently serving as a director of the Company.
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Name
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Age
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Background, Qualifications and Skills
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Alan Gardner
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Mr. Gardner retired from Wells Fargo in October 2015. Prior to his retirement, he was a senior relationship manager in healthcare corporate banking. He primarily covered national healthcare companies
with market capitalization exceeding $5 billion, generally in the pharmaceutical, medical device and healthcare services sectors. Mr. Gardner has over 26 years of corporate and investment banking experience, with 20 years covering
healthcare companies. Prior to joining Wells Fargo (Wachovia) in March 2004, Mr. Gardner was head of healthcare for FleetBoston Financial from 2003 to 2004 and was a managing director for Banc of America Securities from 1996 to 2003. During his
career, Mr. Gardner has led a number of significant financing transactions for leading public healthcare companies. Mr. Gardner previously served as board member and president of Omni Montessori School in Charlotte, North Carolina, as
Charlotte Chapter chair for the Impact Angel Network ("IAN"). IAN is managed by RENEW, LLC, an investment advisory and management consulting firm based in Addis Ababa, Ethiopia and Washington D.C. and on the board of directors at Christ Lutheran
Church in Charlotte, North Carolina. Mr. Gardner earned a B.S. and M.S. from Virginia Polytechnic Institute and State University and an M.B.A. in finance and accounting from the University of Rochester. Mr. Gardner is our lead independent
director, and Mr. Gardner's commercial banking, capital markets and healthcare industry experience makes him a valuable resource to our Board of Directors.
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Name
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Age
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Background, Qualifications and Skills
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Claire Gulmi
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Ms. Gulmi served as Executive Vice President and Chief Financial Officer of Envision Healthcare, a $7 billion public company, the largest owner/operator of ambulatory surgery centers in the
United States and a leading provider of hospital based physician services, until her retirement in October 2017. Ms. Gulmi continued to serve as an advisor to Envision until September 2018. Prior to Envision's merger with AmSurg Corp in 2016,
Ms. Gulmi served as Executive Vice President and Chief Financial Officer of AmSurg starting in 1994. She was a member of the Board of Directors of AmSurg from 2004 until the merger in 2016. From 2015 to 2017, Ms. Gulmi served on the Board
of Directors and as the audit committee chair of Air Methods Corp, a $1.5 billion public company and the largest provider of air medical emergency transport services in the U.S. From 2001 to 2015 she served on the advisory board of the Bank of
Nashville. Ms. Gulmi has a BBA in Accounting and Finance from Belmont University. Ms. Gulmi is the past board chair of the YWCA of Nashville, serves on the boards of the Frist Center for the Visual Arts and Nashville Public Radio. She has
served as board chair for the Bethlehem Centers of Nashville and has served on the boards of the Girl Scouts, the American Heart Association and All About Women. Ms. Gulmi has been named by the Nashville Business Journal as one of its Healthcare
100, was one of the 2007 winners of the Nashville Business Journal's Women of Influence and in 2011 received the Nashville Business Journal's CFO Lifetime Achievement Award. Ms. Gulmi's over 30 years of experience in corporate finance,
accounting and healthcare makes her a valuable resource to our Board of Directors.
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Robert Hensley
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Mr. Hensley has more than 35 years of experience serving public and privately-held companies across a range of industries, including healthcare, insurance, real estate and private equity
capital funds. Mr. Hensley is also the founder of a private publishing company and the principal owner of two real estate and rental property development companies. Mr. Hensley was an audit partner with Ernst & Young from 2002 to
2003. Previously, he was with Arthur Andersen, where he served as an audit partner from 1990 to 2002 and was the managing partner of their Nashville office from 1997 to 2002. His significant experience includes mergers and acquisitions,
identification of enterprise and healthcare industry risks, corporate governance and forensic investigations and disputes. Since 2006, Mr. Hensley has served as a senior advisor to the healthcare and transaction advisory services groups of
Alvarez and Marsal, LLC ("A&M"). Mr. Hensley serves on the board of directors for Diversicare Healthcare Services, Inc. Mr. Hensley previously served as a director of Capella Healthcare from 2008 to 2015, Greenway Medical
Technologies from 2011 to 2013, HealthSpring, Inc. from 2006 to 2012 and Comsys IT Partners, Inc. and Spheris, Inc. from 2006 to 2010. Mr. Hensley earned a B.S. in accounting and a Master's of Accountancy from the University of
Tennessee and is a Certified Public Accountant. Mr. Hensley's financial accounting, healthcare industry and transactional experience makes him a valuable resource to our Board of Directors.
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Name
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Background, Qualifications and Skills
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Lawrence Van Horn
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Professor Van Horn has been an associate professor of Economics and Management and the Executive Director of Health Affairs at the Vanderbilt University Owen Graduate School of Management ("Owen") since
2006. Professor Van Horn is a leading expert and researcher on healthcare management and economics. His current research interests include nonprofit conduct, governance and objectives in healthcare markets and the measurement of healthcare outcomes
and productivity. His research on healthcare organizations, managerial incentives in nonprofit hospitals and the conduct of managed care firms has appeared in leading publications. Professor Van Horn consults for national consulting firms, providers,
managed care organizations, and pharmaceutical firms. Professor Van Horn also holds faculty appointments in the Vanderbilt University School of Medicine and Law School. Prior to his tenure at Owen, from 1996 to 2006, Professor Van Horn served as an
associate professor of economics and management at the William E. Simon Graduate School of Business at the University of Rochester where he was responsible for their graduate programs in health administration. Professor Van Horn began serving on the
board of directors of Quorum Health Corporation in January 2016. Professor Van Horn holds a Ph.D. from the University of Pennsylvania's Wharton School and a Master's in Business Administration, a Master's in Public Health and a B.A. from the
University of Rochester. Professor Van Horn's extensive knowledge and research into healthcare industry economics and governance as well as his unique experience with healthcare decision makers and business executives nationwide regarding healthcare
policy make him a valuable resource to our Board of Directors.
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Timothy Wallace
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Mr. Wallace has served as our Chairman, Chief Executive Officer and President since the formation of our Company in March 2014. Prior to founding our Company, from 2003 to 2014, Mr. Wallace
was co-founder, President and majority owner of Athena Funding Partners, LLC and related entities which were established in 2002 to provide financing solutions to the higher education industry for on-campus student housing facilities mostly in
rural areas. From 1993 to 2002, Mr. Wallace was a co-founder and Executive Vice President of Healthcare Realty Trust (NYSE: HR) ("HR"). Between HR's initial public offering in 1993 and his departure from HR in 2002, Mr. Wallace was integral
in helping to grow HR from $2,000 to over $2 billion in asset value. Mr. Wallace remained as a paid consultant to HR and was subject to a non-compete until 2008. Mr. Wallace was a senior manager at Ernst & Young from 1988 to
1993. Mr. Wallace began his career in 1980 with Arthur Andersen & Co. Mr. Wallace holds a Bachelor of Science in Business Administration and Masters in Business Administration, both from Western Kentucky University.
Mr. Wallace was selected to serve as Chairman because of his past public company experience, his experience in real estate, including acquiring healthcare real estate, and his role as Chief Executive Officer and President of our
Company.
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Each
of the persons listed above has been nominated by our Board of Directors to serve as directors for a one-year term expiring at the annual meeting of stockholders occurring in 2021.
Each
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nominee
has consented to serve on our Board of Directors. If any nominee were to become unavailable to serve as a director, our Board of Directors may designate a substitute nominee. In that case, the
persons named as proxies on the accompanying proxy card will vote for the substitute nominee designated by our Board of Directors.
Required Vote
Directors are elected by a plurality vote; the nominees who receive the highest number of votes cast, up to the number of directors to be
elected in that class, are elected.
Our Board of Directors unanimously recommends a vote "FOR" the election of each of the five
nominees for director to the Board of Directors.
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CORPORATE GOVERNANCE
Board Leadership Structure
Our Board of Directors currently consists of the following five directors: Alan Gardner, Claire Gulmi, Robert Hensley, Lawrence Van Horn and
Timothy Wallace, each for a one-year term. Our Board has affirmatively determined that each of Alan Gardner, Claire Gulmi, Robert Hensley, and Lawrence Van Horn is an "independent director" as defined
under the listing rules of the
NYSE, Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Company's Corporate Governance Guidelines.
The
Board considered the relationships between our directors and the Company when determining each director's status as an "independent director" under the listing rules of the NYSE,
Rule 10A-3 of the Exchange Act and the Company's Corporate Governance Guidelines, including the relationships listed below under "Certain Relationships and Related Party Transactions" The Board
determined that these relationships did not affect any director's status as an "independent director." Furthermore, we are not aware of any family relationships between any director, executive officer
or person nominated to become a director or executive officer.
Timothy
Wallace, our President and Chief Executive Officer, serves as Chairman of the Board of the Company, while Alan Gardner serves as "Lead Independent Director" of our Board. The
members of the Board who meet the definition of "independent director" under the listing rules of the NYSE select our lead independent director.
Mr. Wallace
serves as our Chairman because we believe this board structure results in a single voice speaking for the Company and presents a unified and clear chain of command to
execute our strategic initiatives and business plans. Also, the Chairman of the Board is expected to manage the Board in performing its duties and lead Board discussion. As our President and Chief
Executive Officer, Mr. Wallace is ideally positioned to provide insight on the current status of our overall operations, our future plans and prospects and the risks that we face. Thus, the
individual with the most knowledge about us and our operations is responsible for leading the Board's discussions. The Board retains the authority to separate the positions of chairman and chief
executive officer if it finds that the Board's responsibilities can be better fulfilled with a different structure.
Mr. Gardner
serves as our Lead Independent Director and provides an independent counterbalance to the Chairman, ensuring that all of our directors' concerns are addressed and
otherwise facilitating robust discussions among the entire Board (which, as noted above, is comprised almost entirely of "independent directors"). In terms of Board leadership, we view the lead
independent director as essentially a co-equal with the Chairman of the Board. Mr. Gardner has been a director since 2015 and was the second director to join the Board following
Mr. Wallace, which we believe adds weight to his independent voice on the Board. Also, at each meeting of our Board, Mr. Gardner leads the Board in an executive session (that is, a
meeting of only those directors who are "independent directors" under the listing rules of the NYSE) to discuss matters outside the presence of the Chairman and management. Our lead independent
director is selected on an annual basis by a majority of the independent directors then serving on our Board of Directors.
Our
Lead Independent Director Charter sets forth a complete description of the lead independent director's responsibilities. In general, the lead independent director is responsible
for:
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serving as liaison between the Chairman and our other independent directors;
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calling and presiding at executive sessions of the independent directors;
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serving as the focal point of communication to the Board of Directors regarding management plans and initiatives;
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ensuring that the management adheres to the Board of Directors' oversight role over management operations;
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providing the medium for informal dialogue with and between independent directors, allowing for free and open communication within that group;
and
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serving as the communication conduit for third parties who wish to communicate with our Board of Directors.
In
addition to these specific duties, we expect the lead independent director to familiarize himself with the Company and the real estate investment trust and healthcare industries in
general. He also is expected to keep abreast of developments in the principles of sound corporate governance.
The Board's Role in Risk Oversight
One of the key functions of our Board of Directors is to provide oversight of our risk management process. Our Board of Directors administers
this oversight function directly, with support from its three standing committeesthe Audit Committee, the Compensation Committee, and the Corporate Governance Committeeeach
of which addresses risks specific to their respective areas of oversight. In particular, our Audit Committee has the responsibility to consider and discuss our major financial risk exposures and the
steps our management has taken to monitor and control these exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken. The Audit
Committee also monitors compliance with legal and regulatory requirements and has oversight of the performance of our internal audit function. Our Compensation Committee assesses and monitors whether
any of our compensation policies and programs has the potential to encourage excessive risk-taking. Our Corporate Governance Committee monitors the effectiveness of our corporate governance
guidelines, including whether they are successful in preventing illegal or improper liability-creating conduct.
Each
committee meets regularly with management to assist it in identifying all of the risks within such committee's areas of responsibility and in monitoring and, where necessary, taking
appropriate action to mitigate the applicable risks. At each Board meeting, the committee chairman of each committee that met prior to such Board meeting provides a report to the full Board on issues
related to such committee's risk oversight duties, as applicable. To the extent that any risks reported to the full Board need to be discussed outside the presence of management, the Board meets in
executive session to discuss these issues.
We
believe the Board's approach to fulfilling its risk oversight responsibilities complements its leadership structure. In his capacity as Chairman of the Board, Mr. Wallace
reviews whether Board committees are addressing their risk oversight duties in a comprehensive and timely manner. Since he is also our Chief Executive Officer, Mr. Wallace is able to assist
these committees in fulfilling their duties by (1) requiring that our management team provide these committees with all requested reports and other information as well as with access to our
employees and (2) implementing recommendations of the various Board committees to mitigate risk. At the same time, Mr. Gardner, as our lead independent director, is able to lead an
independent review of the risk assessments developed by management and reported to the committees.
Our
Board held five meetings during 2019. In 2019, our directors attended all of our Board meetings and at least 75% of the meetings of the committees on which they served. The members
who are "independent directors" met in executive session four times during 2019.
We
do not have a policy requiring director attendance at our annual stockholder meeting. Mr. Wallace and Ms. Gulmi were the only directors of the Company to attend our 2019
annual stockholder meeting.
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Committees of the Board of Directors
Our Board of Directors has three standing committees: an Audit Committee, a Compensation Committee and a Corporate Governance Committee. The
principal functions of each committee are described below. We currently comply, and we intend to continue to comply, with the listing requirements and other rules and regulations of the NYSE and each
of these committees are comprised exclusively of independent directors. Additionally, our Board of Directors may from time to time establish certain other committees to facilitate the management of
our Company.
Audit Committee
Our Audit Committee consists of Mr. Gardner, Ms. Gulmi, and Mr. Hensley, all of whom are independent directors, with
Mr. Hensley serving as the chairman. Ms. Gulmi and Mr. Hensley each qualify as an "audit committee financial expert" as that term is defined by the applicable SEC regulations and
NYSE corporate governance listing standards. Our Board of Directors has determined that each of the Audit Committee members is "financially literate" as that term is defined by the NYSE corporate
governance listing standards. We have adopted an Audit Committee Charter, which details the principal functions of the Audit Committee, including oversight related to:
-
-
our accounting and financial reporting processes;
-
-
the integrity of our consolidated financial statements and financial reporting process;
-
-
our system of disclosure controls and procedures and internal control over financial reporting;
-
-
our compliance with financial, legal and regulatory requirements;
-
-
the evaluation of the qualifications, independence and performance of our independent registered public accounting firm;
-
-
reviewing the adequacy of our Audit Committee Charter on an annual basis;
-
-
the performance of our internal audit function; and
-
-
our overall risk profile.
The
Audit Committee is also responsible for engaging an independent registered public accounting firm, reviewing with the independent registered public accounting firm the plans and
results of the audit engagement, approving professional services provided by the independent registered accounting firm, including all audit and non-audit services, reviewing the independence of the
independent registered public accounting firm, considering the range of audit and non-audit fees and reviewing the adequacy of our internal accounting controls.
The
Audit Committee met six times in 2019. A copy of the charter of our Audit Committee is available on the investor relations webpage of our website, http://investors.chct.reit.
Compensation Committee
Our Compensation Committee consists of Mr. Gardner, Ms. Gulmi, and Mr. Van Horn, all of whom are "independent directors" as
defined in NYSE Rule 303A.02, with Ms. Gulmi serving as chairperson. Further, each member of the Compensation Committee is a "non-employee director" as defined in Rule 16b-3
promulgated under the Exchange Act. We have adopted a Compensation Committee Charter, which details the principal functions of the Compensation Committee,
including:
-
-
reviewing and recommending to our Board of Directors on an annual basis the corporate goals and objectives relevant to our chief executive
officer's compensation, evaluating our chief executive officer's performance in light of such goals and objectives and determining and approving the remuneration of our chief executive officer based
on such evaluation;
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-
-
reviewing and recommending to our Board of Directors the compensation, if any, of all of our other executive officers;
-
-
evaluating our executive compensation policies and plans;
-
-
assisting management in complying with our proxy statement and annual report disclosure requirements;
-
-
administering our incentive plans;
-
-
reviewing and recommending to our Board of Directors policies with respect to incentive compensation and equity compensation arrangements;
-
-
reviewing the competitiveness of our executive compensation programs and evaluating the effectiveness of our compensation policy and strategy
in achieving expected benefits to us;
-
-
evaluating and overseeing risks associated with compensation policies and practices;
-
-
reviewing and recommending to our Board of Directors the terms of any employment agreements, severance arrangements change in control
protections and any other compensatory arrangements for our executive officers;
-
-
reviewing the adequacy of its Compensation Committee Charter on an annual basis;
-
-
producing a report on executive compensation to be included in our annual proxy statement as required; and
-
-
reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors.
The
Compensation Committee met four times in 2019. A copy of the charter of our Compensation Committee is available on the investor relations webpage of our website, http://investors.chct.reit.
Corporate Governance Committee
Our Corporate Governance Committee consists of Messrs. Van Horn, Hensley and Gardner, all of whom are "independent directors" as defined
in NYSE Rule 303A.02, with Mr. Van Horn serving as chairman. We have adopted a Corporate Governance Committee charter, which details the principal functions of the Corporate Governance
Committee, including:
-
-
identifying, evaluating and recommending to the full Board of Directors qualified candidates for election as directors and recommending
nominees for election as directors at the annual meeting of stockholders;
-
-
developing and recommending to the Board of Directors corporate governance guidelines and implementing and monitoring such guidelines;
-
-
reviewing and making recommendations on matters involving the general operation of the Board of Directors, including Board size and
composition, and committee composition and structure;
-
-
evaluating and recommending to the Board of Directors nominees for each committee of the Board of Directors;
-
-
annually facilitating the assessment of the Board of Directors' performance as a whole and of the individual directors, as required by
applicable law, regulations and the NYSE corporate governance listing standards;
-
-
considering nominations by stockholders of candidates for election to our Board of Directors;
-
-
considering and assessing the independence of members of our Board of Directors;
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-
-
developing, as appropriate, a set of corporate governance principles, and reviewing and recommending to our Board of Directors any changes to
such principles;
-
-
periodically reviewing our policy statements; and
-
-
reviewing, at least annually, the adequacy of its Corporate Governance Committee Charter.
When
evaluating director candidates, the Corporate Governance Committee's objective is to craft a Board composed of individuals with a broad and diverse mix of backgrounds and
experiences and possessing, as a whole, all of the skills and expertise necessary to guide a company like us in the prevailing business environment. The Corporate Governance Committee uses the same
criteria to assess all candidates for director, regardless of who proposed the candidate. The Corporate Governance Committee considers whether the candidate possesses the following qualifications and
qualities:
-
-
independence for purposes of the NYSE rules and SEC rules and regulations, and a record of honest and ethical conduct and personal integrity;
-
-
experience in the healthcare, real estate and/or public real estate investment trust industry or in finance, accounting, legal or other
professional disciplines;
-
-
ability to represent the interests of all of our stockholders; and
-
-
ability to devote time to the Board of Directors and to enhance their knowledge of our industry.
The
Corporate Governance Committee met one time in 2019. A copy of the charter of the Corporate Governance Committee is available on the investor relations webpage of our website, http://investors.chct.reit. Our Corporate Governance Guidelines and Code of Ethics and Business Conduct are also available on the investor relations
webpage of our website, http://investors.chct.reit. If we make any substantive amendment to the Code of Ethics and Business Conduct or grant any waiver,
including any implicit waiver, from a provision of the Code of Ethics and Business Conduct to certain executive officers, we are obligated to disclose the nature of such amendment or waiver, the name
of the person to whom any waiver was granted, and the date of waiver on our website or in a report on Form 8-K filed with the SEC. Since the Company's inception, there have been no such
amendments or waivers.
The
current members of the Board propose nominees for election to the Board. In addition, the Corporate Governance Committee will also consider candidates that stockholders and others
recommend. Stockholder recommendations should be addressed to: W. Page Barnes, Corporate Secretary, 3326 Aspen Grove Drive, Suite 150, Franklin, Tennessee 37067. Your recommendations must be
submitted to us no earlier than October 21, 2020, nor later than 5:00 p.m., Eastern Time, on November 20, 2020, for consideration as a possible nominee for election to the Board
at our 2021 annual meeting.
The
Board has not adopted a formal procedure that you must follow to send communications to it, but it does have informal procedures, described below, which it believes adequately
facilitate stockholder and other interested party communications with the Board. Stockholders and other interested parties can send communications to the Board by contacting W. Page Barnes, our
Corporate Secretary, in one of the following ways:
-
-
By writing to Community Healthcare Trust Incorporated, 3326 Aspen Grove Drive, Suite 150, Franklin, Tennessee, 37067, Attention:
Corporate Secretary;
-
-
By e-mail to investorrelations@chct.reit; or
-
-
By phone at 615-771-3052.
12
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If
you request information or ask questions that can be more efficiently addressed by management, Mr. Barnes will respond to your questions instead of the Board. He will forward
to the Audit Committee any communication concerning employee fraud or accounting matters and will forward to the full Board any communication relating to corporate governance or those requiring action
by the Board of Directors. A stockholder may communicate directly with Mr. Gardner, the lead independent director, by sending a confidential letter addressed to his attention at 3326 Aspen
Grove Drive, Suite 150, Franklin, Tennessee, 37067.
Director Compensation
The Compensation Committee recommends the compensation for our non-employee directors; our full Board approves or modifies the recommendation.
Any modifications are implemented after the annual meeting. Directors who are also employees, currently only Mr. Wallace, receive no additional compensation for their service as a director, but
are reimbursed for any direct board related expenses. Annual compensation of non-employee directors may be a combination of cash and restricted stock at levels set by the Compensation Committee.
Cash compensation
Each non-employee director receives an annual retainer, and chairpersons of our board committees and the lead independent director receives
additional annual retainers. The annual retainers are payable after each annual meeting of our stockholders. The current annual cash retainer for service on our Board of Directors is $40,000 but may
be adjusted by the Compensation Committee based on an evaluation of director compensation at peer companies. Additionally, the chairpersons of the Audit Committee, the Compensation Committee and the
Corporate Governance Committee receive additional annual retainers of $15,000, $10,000 and $10,000, respectively, and our lead independent director receives an additional annual retainer of $17,500.
The Compensation Committee has not retained an independent compensation consultant to advise it with respect to director compensation of the Company since 2018. The most recent time the Board
increased the compensation of our non-employee directors for their service on, and in positions on Committees of, the Board of Directors was in February 2018, effective in May 2018.
Each
year, non-employee directors may elect to acquire shares of restricted stock with all or a portion of each of their retainers. These shares are issued 10 business days following the
date of our annual meeting of stockholders. The number of shares of restricted stock to be acquired is determined by dividing the total amount of annual retainer the director elected to use to acquire
shares by the average price of shares of common stock for the immediately preceding 10 trading days. Pursuant to the Company's Amended and Restated Alignment of Interest Program (the "Amended and
Restated Alignment of Interest Program"), each director who makes an election to acquire shares of restricted stock with all or a portion of their retainers will be awarded additional shares, at no
additional cost to the director, according to the following multiples:
|
|
|
|
|
Duration of Restriction Period
|
|
Restriction
Multiple
|
|
1 year
|
|
|
0.2x
|
|
2 years
|
|
|
0.4x
|
|
3 years
|
|
|
0.6x
|
|
Accordingly,
for example, if a non-employee director elects to acquire shares of restricted stock in lieu of cash compensation that is equivalent in value to 1,000 shares of common stock
and the director elected a three-year restriction period for such restricted stock, the non-employee director would receive the 1,000 shares of restricted stock plus an award of 600 shares of
restricted common stock for electing to subject his or her restricted stock to a three-year restriction period, resulting in a total
13
Table of Contents
receipt
of 1,600 shares of restricted stock, all of which would be subject to a three-year cliff vesting schedule whereby no shares vest until the third anniversary of the date of grant, at which time
100% of the shares of restricted stock will vest.
The
restriction period subjects the shares purchased by the director and the additional shares awarded by the Company to the risk of forfeiture in the event that a director voluntarily
resigns or is removed by the stockholders prior to the vesting of these shares. All unvested shares will be forfeited if such non-employee director voluntarily resigns or is removed by the
stockholders for any reason prior to vesting. During the restriction periods described above, the restricted shares may not be sold, assigned, pledged, or otherwise transferred. Subject to the risk of
forfeiture and transfer restrictions, non-employee directors have all rights as stockholders with respect to restricted shares, including the right to vote and receive dividends or other distributions
on such shares.
Stock Awards
Each non-employee director is also awarded an annual grant of shares of restricted stock. Our goal is to have a minimum of 60% to 75% of the
aggregate total compensation for our non-employee directors paid in the form of restricted stock having a restriction period of up to three years. Directors are not entitled to receive additional
shares through a restriction multiple for these awards.
For
2019, each non-employee director received an annual equity award of restricted stock with an aggregate market value of $75,000 at the conclusion of the 2019 annual stockholders'
meeting. These shares are subject to a three-year cliff vesting schedule whereby no shares vest until the third anniversary of the date of grant, at which time 100% of the shares of restricted stock
will vest.
2019 Director Compensation
The following table sets forth compensation paid during 2019 to each of our non-employee directors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned or Paid
|
|
|
|
|
|
|
|
Name(1)
|
|
Fees Paid
in Cash
|
|
Fees Paid
in Stock(2)
|
|
Stock
Awards(3)
|
|
All Other
Compensation
|
|
Total
|
|
Alan Gardner
|
|
$
|
|
|
$
|
57,500
|
|
$
|
112,148
|
|
$
|
|
|
$
|
169,648
|
|
Claire Gulmi
|
|
$
|
|
|
$
|
50,000
|
|
$
|
107,322
|
|
$
|
|
|
$
|
157,322
|
|
Robert Hensley
|
|
$
|
15,000
|
|
$
|
40,000
|
|
$
|
100,848
|
|
$
|
|
|
$
|
155,848
|
|
Lawrence Van Horn
|
|
$
|
|
|
$
|
50,000
|
|
$
|
107,322
|
|
$
|
|
|
$
|
157,322
|
|
-
(1)
-
Mr. Wallace
is our other director and is also a full-time employee whose compensation is discussed below under the section titled "Executive Officers" and
"Summary Compensation Table." Mr. Wallace receives no additional compensation for his service as a director.
-
(2)
-
This
column represents non-employee director annual retainer and additional annual retainer amounts, approximately 93% of which was paid in shares of our restricted
common stock in lieu of cash. All of the shares are subject to a three-year cliff vesting schedule whereby no shares vest until the third anniversary of the date of grant, at which time 100% of the
shares of restricted stock will vest, subject to the director's continuing service as a director of the Company.
-
(3)
-
Represents
the grant date fair value computed in accordance with FASB ASC Topic 718 of awards of restricted stock to the non-employee directors under the 2014
Incentive Plan, or the 2019 Director Awards. The dollar value of the 2019 Director Awards was based upon the grant date price of our common stock, which was $37.18 on May 16, 2019. This column
also includes the amount of the grant date value of the shares received in accordance with restriction multiples with respect to the deferral of director retainer amounts based on the price of our
common stock of
14
Table of Contents
$39.13
on the determination date, May 31, 2019. All of the shares are subject to a three-year cliff vesting schedule whereby no shares vest until the third anniversary of the date of grant, at
which time 100% of the shares of restricted stock will vest, subject to the director's continuing service as a director of the Company.
We
also reimburse our directors for expenses they incur in connection with their service on our Board, such as director education, travel and lodging expenses.
15
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis describes the material elements of the Company's named executive officer compensation program and
analyzes the compensation decisions made for our executive officers included in the Summary Compensation Table beginning on page 31 (the "named executive officers").
2019 Named Executive Officers
Our named executive officers for 2019 were:
Timothy
WallaceChief Executive Officer and President
David
DupuyChief Financial Officer and Executive Vice President
Page
BarnesChief Operating Officer and Executive Vice President
Leigh
Ann StachChief Accounting Officer and Executive Vice President
Because
only four individuals served as our executive officers at any time during 2019, we have only four named executive officers for 2019.
2019 Highlights
We believe that 2019 was a successful year for the Company. Our named executive officers continued to execute our business plan during 2019 and
built upon our operating and financial performance results achieved since we became a publicly traded company after our initial public offering in May 2015.
Our
operating and financial performance highlights in 2019 included:
-
-
Achieving net income of $0.37 per diluted share, FFO of $1.67 per diluted share and AFFO of $1.77 per diluted share, compared to net income of
$0.19 per diluted share, FFO of $1.53 per diluted share and AFFO of $1.62 per diluted share in 2018;
-
-
Acquiring fifteen (15) properties for an aggregate purchase price of approximately $152.0 million with estimated yields ranging
from 9.02% to 11.00%. These properties were approximately 99.5% leased with lease expirations through 2034;
-
-
Raising gross proceeds of $107.3 million under our at-the-market offering program;
-
-
Maintaining low leverage levels with a debt-to-total capitalization ratio (debt plus stockholders' equity plus accumulated depreciation) of
approximately 31.1%; and
-
-
Generating a year-over-year total stockholder return of approximately 48% (versus approximately 27% for the NAREIT All Equity REIT Index) for
the year ended December 31, 2019.
Reconciliations
of FFO and AFFO are provided in Appendix A beginning on page 46 of this Proxy Statement.
Comprehensive Compensation Policy
We believe that the compensation of our executive officers aligns their interests with those of the stockholders in a way that encourages
prudent decision-making, links compensation to our overall performance, provides a competitive level of total compensation necessary to attract and
retain talented and experienced executive officers and motivates the executive officers to contribute to our success.
16
Table of Contents
All
of our executive officers are eligible to receive performance-based compensation under the 2014 Incentive Plan as amended by Amendment No. 1 to the 2014 Incentive Plan,
Amendment No. 2 to the 2014 Incentive Plan, and Amendment No. 3 to the 2014 Incentive Plan (as so amended, our 2014 Incentive Plan).
We
use a combination of allowing the acquisition shares of restricted stock in connection with grants of restricted stock as the primary means of delivering long-term compensation to our
executive officers. Shares of restricted stock are forfeitable until the lapse of the applicable restrictions. We believe that restricted stock with long vesting periods align the interests of
executive officers and stockholders and provide strong incentives to our executive officers to achieve long-term growth in our business, grow the value of our common stock and maintain or increase our
dividends.
The
executive officers personally benefit from these efforts through their restricted stock, which pay dividends at the same rate as unrestricted stock and increase in value as the value
of unrestricted stock increases. However, the Company's executive officers essentially have to earn this equity compensation twice: the first time through their efforts to meet the initial performance
criteria necessary to receive the restricted stock; and the second time by continued service through the at-risk vesting period.
Substantially
all of our executive officers' compensation is tied to the value of our common stock since the officers have elected to receive restricted stock in lieu of cash
compensation. Therefore, if we have superior long-term operating performance, our executive officers, through their restricted stock, will eventually receive more value, due to increases in the price
of our common stock, than if they had been paid in cash. Conversely, if we have inferior long-term operating performance, our executive officers through their restricted stock will eventually receive
less value, due to decreases in the price of our common stock, than if they had been paid in cash.
Our
Compensation Committee determines the restrictions for each award granted pursuant to the 2014 Incentive Plan. Restrictions on the restricted stock may include time-based
restrictions, the achievement of specific performance goals or the occurrence of a specific event. Vesting of restricted stock will generally be subject to cliff vesting periods ranging from three to
eight years and will be conditioned upon the participant's continued employment, among other restrictions that may apply.
If
the performance goals are not achieved or the time-based restrictions do not lapse within the time period provided in the award agreement, the participant will forfeit his or her
unvested restricted stock.
Compensation Methodology
Compensation Committee's Governance
The Board established the Compensation Committee to carry out the Board's responsibilities to administer our compensation programs. The
Compensation Committee has the final decision-making authority for the compensation of our executive officers. The Compensation Committee operates under a written charter adopted by the Compensation
Committee and approved by the Board. The charter is available in the investor relations section of our website (http://investors.chct.reit).
Our
Compensation Committee has independent authority to engage outside consultants and obtain input from external advisers as well as our management team or other employees.
The
Compensation Committee may retain any independent counsel, experts or advisors that it believes to be desirable and appropriate. The Compensation Committee may also use the services
of the Company's regular legal counsel or other advisors to the Company. The Compensation Committee undertakes an independent assessment prior to retaining or otherwise selecting any independent
counsel, compensation consultant, search firm, expert or other advisor that will provide advice to it,
17
Table of Contents
taking
such factors into account and as otherwise may be required by the NYSE from time to time. On at least an annual basis, the Compensation Committee evaluates whether any work by any compensation
consultant to it raised any conflict of interest.
The
Compensation Committee retained FPL Associates ("FPL") as its independent compensation consultant in 2019 to advise it regarding market trends and practices in
executive compensation and with respect to specific compensation decisions. The Compensation Committee expects to meet at least annually with a compensation consultant to discuss executive
compensation trends. The consultant may also attend Compensation Committee meetings periodically. FPL met with the chair of the Compensation Committee in 2019, during and in which it provided a review
of recent trends and developments in executive compensation practices within the Company's industry and in general. FPL received a fee of $20,000 for its compensation consulting services provided to
the Compensation Committee in 2019 with respect to executive compensation.
Our
Chief Executive Officer typically attends Compensation Committee meetings, except for executive sessions (unless specifically requested by the Compensation Committee to be present).
No executive officer attends an executive session at which his or her compensation is considered. Our Chief Executive Officer may provide recommendations with respect to compensation for the executive
officers other than himself. The Compensation Committee considers these recommendations, but may approve, reject or adjust them as it deems appropriate.
Compensation Risk Assessment
The Compensation Committee believes its compensation policies and practices do not promote excessive risk-taking and are not likely to have a
material adverse effect on the Company. In particular, the Compensation Committee believes that the following factors mitigate excessive risk-taking by the named executive
officers:
-
-
The use of restricted stock, with long vesting periods during which the stock cannot be sold, provides an incentive to the named executive
officers to make decisions that contribute to long-term growth of the Company, the stability of NOI, and the delivery of dividends to stockholders.
-
-
The maximum potential cash and stock incentive payments are capped at levels such that total compensation would remain comparable within the
peer group.
-
-
The Compensation Committee retains broad discretionary authority to adjust annual awards and payments, which further mitigates risks associated
with the Company's compensation plans and policies.
Peer Group
For 2019, the Compensation Committee, based on FPL's recommendation, used the companies listed below as the peer group against
which to measure the Company's relative one-year and three-year TSR performance. The peer group is selected each year in accordance with the Amended and Restated Executive Officer Incentive Program.
The Amended and Restated Executive Officer Incentive Program provides a mechanism for determining the peer group, which the Compensation Committee believes provides for the most closely comparable
companies with respect to market capitalization and appropriate pay levels. In determining our peer group, all publicly-traded equity REITs are sorted by market capitalization. Additional criteria
used can include industry segment, asset base, externally/internally managed and years of operating history. The Compensation Committee, based on FPL's recommendations, makes
discretionary adjustments to include or exclude companies in
18
Table of Contents
the
peer group to capture the Company's closest competitors and to adjust for events such as mergers that might occur during the period. The following companies comprised the peer group for 2019:
|
|
|
Physicians Realty Trust
|
|
One Liberty Properties, Inc.
|
National Health Investors, Inc.
|
|
CatchMark Timber Trust, Inc.
|
LTC Properties, Inc.
|
|
MedEquities Realty Trust, Inc.
|
CareTrust REIT, Inc.
|
|
Sotherly Hotels, Inc.
|
Easterly Government Properties, Inc.
|
|
Wheeler Real Estate Investment Trust, Inc.
|
City Office REIT, Inc.
|
|
Plymouth Industrial REIT, Inc.
|
The
Compensation Committee determines the peer group each year and compares the compensation of the peer group for the year preceding the applicable year.
Material Components of Compensation
Elements of Pay
In 2019, the Company's compensation program for its named executive officers consisted of the following key
elements:
-
-
Annual base salaries;
-
-
Elective acquisition of restricted shares with corresponding restricted share grants, allowing named executive officers to increase their
ownership portion in the Company;
-
-
Performance based awards of cash, stock, or a combination of both; and
-
-
Perquisites and retirement benefits.
Annual Base Salary
Each of our named executive officers has an employment agreement that establishes his or her base salary. Adjustments to base salary are
determined by the Compensation Committee and are based upon a review of a variety of factors, including:
-
-
individual and Company performance, measured against quantitative and qualitative goals, such as growth, asset quality and other matters;
-
-
duties and responsibilities, as well as the named executive officer's experience;
-
-
the types and amount of each element of compensation to be paid to the named executive officer; and
-
-
salary levels of persons holding similar positions at companies included in our peer group.
19
Table of Contents
The
base salary of the Company's named executive officers for 2020 and 2019, before any elective deferral of cash for restricted stock, is as follows:
|
|
|
|
|
|
|
|
Named Executive Officer
|
|
2020
Base Salary
|
|
2019
Base Salary
|
|
Timothy G. Wallace
|
|
$
|
645,000
|
|
$
|
540,000
|
|
Chief Executive Officer and
|
|
|
|
|
|
|
|
President
|
|
|
|
|
|
|
|
David H. Dupuy
|
|
$
|
392,000
|
|
$
|
233,333
|
(1)
|
Executive Vice President and
|
|
|
|
|
|
|
|
Chief Financial Officer
|
|
|
|
|
|
|
|
W. Page Barnes
|
|
$
|
370,400
|
|
$
|
328,000
|
|
Executive Vice President and
|
|
|
|
|
|
|
|
Chief Operating Officer
|
|
|
|
|
|
|
|
Leigh Ann Stach
|
|
$
|
326,800
|
|
$
|
266,000
|
|
Executive Vice President and
|
|
|
|
|
|
|
|
Chief Accounting Officer
|
|
|
|
|
|
|
|
-
(1)
-
Mr. Dupuy's
base salary for 2019 is for the period beginning May 1, 2019 through December 31, 2019.
Pursuant
to the Amended and Restated Alignment of Interest Program described below, executive officers may elect to utilize any cash compensation they receive to acquire shares of
restricted stock. In the event that an executive officer elects to acquire shares of restricted stock, rather than cash compensation, the officer will be awarded shares of restricted stock pursuant to
the Amended and Restated Alignment of Interest Program, subject to a three-, five-, or eight- year cliff-vesting schedule, depending on the officer's election. Each executive officer who makes this
election will be awarded the
additional restricted common stock award at no cost to the officer, according to the multiple-based formula set forth on page 21 of this proxy statement.
2014 Incentive Plan
Awards may be made in the form of restricted stock or cash under our 2014 Incentive Plan. The purposes of the 2014 Incentive Plan are to attract
and retain qualified persons upon whom, in large measure, our sustained progress, growth and profitability depend, to motivate the participants to achieve long-term Company goals and to more closely
align the participants' interests with those of our other stockholders by providing them with a proprietary interest in our growth and performance.
Our
executive officers, non-executive officers, employees, consultants and non-employee directors may be eligible to participate in the 2014 Incentive Plan as determined by the
Compensation Committee. As of March 6, 2020, the number of shares of our common stock available for issuance under the 2014 Incentive Plan is 719,870.
The
2014 Incentive Plan is administered by our Compensation Committee, which interprets the 2014 Incentive Plan and has broad discretion to select the eligible persons to whom awards
will be granted, as well as the type, size and terms and conditions of each award, including the amount of cash or number of shares subject to awards and the expiration date of, and the vesting
schedule or other restrictions (including, without limitation, restrictive covenants) applicable to, awards. However, during a calendar year, no participant may receive awards intended to comply with
the performance-based compensation requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), which exceed 150,000 shares of common stock.
20
Table of Contents
Unless
the 2014 Incentive Plan is terminated earlier by our Board of Directors, the 2014 Incentive Plan will automatically terminate on March 31, 2024. Awards granted before the
termination of the 2014 Incentive Plan may extend beyond that date in accordance with their terms.
The
two distinct programs applicable to executive officers under the 2014 Incentive Plan are the Amended and Restated Alignment of Interest Program and the Amended and Restated Executive
Officer Incentive Program. In addition, we believe it is in the best interests of our stockholders to encourage all executive officers to increase their equity position in the Company to promote share
ownership and further align employee and stockholder interests and have therefore adopted stock ownership guidelines with respect to our executive officers and directors.
Amended and Restated Alignment of Interest Program
The Company's Amended and Restated Alignment of Interest Program, under the 2014 Incentive Plan, is designed to provide the Company's executive
officers with an incentive to remain with the Company and to incentivize long-term growth and profitability. The original Alignment of Interest Program was amended in November 2016 by the Company's
Board of Directors to, among other items, reserve 500,000 shares of the Company's common stock to be acquired by employees and directors pursuant to elections to acquire restricted stock with their
compensation.
Pursuant
to the Amended and Restated Alignment of Interest Program, executive officers may elect to acquire restricted stock in lieu of up to 100% of any compensation otherwise payable
in cash under their employment agreements. The executive officer must elect his or her participation level and the applicable vesting period for the upcoming year no later than December 31 of
the then-current year. The number of shares of restricted stock to be acquired will be determined as of January 15 of the year following the election or, if such date is not a trading day, on
the trading day immediately before January 15 by dividing the total of the named executive officer's elected deferred salary, cash bonus or other compensation by the average price of our common
stock for the 10 trading days immediately preceding the determination date. If the dollar amount of any reduced salary, cash bonus or other compensation has not been determined by January 15,
then the determination date will be the 10th business day following the date on which the amount of such cash compensation is fixed and determined. Payments of restricted stock in lieu of
compensation otherwise payable in cash will be made thereafter.
To
the extent an executive officer elects to acquire stock in lieu of cash compensation, the executive officer is entitled to receive an award of restricted stock pursuant to the Amended
and Restated Alignment of Interest Program, subject to a three, five or eight-year cliff vesting schedule, depending on each executive officer's election. Each executive officer who makes this
election is awarded the stock award at no cost to the executive officer, according to the following multiple-based formula:
|
|
|
|
|
Duration of Restriction Period
|
|
Restriction
Multiple
|
|
3 years
|
|
|
0.3x
|
|
5 years
|
|
|
0.5x
|
|
8 years
|
|
|
1.0x
|
|
Accordingly,
for example, if an executive officer elects to acquire shares of restricted stock in lieu of cash compensation that is equivalent in value to 1,000 shares of common stock
and the executive officer elected an eight-year restriction period for such restricted stock, the executive officer would receive the 1,000 shares of restricted stock plus an award of 1,000 shares of
restricted stock for electing to subject his or her restricted stock to an eight-year restriction period, resulting in a total receipt of 2,000 shares of restricted stock, all of which would be
subject to an eight-year cliff vesting schedule
21
Table of Contents
whereby
no shares vest until the eighth anniversary of the date of grant, at which time 100% of the shares of restricted stock will vest.
The
restriction period subjects the shares acquired by the executive officer and the additional shares awarded by the Company to the risk of forfeiture in the event that the executive
officer voluntarily terminates employment or is terminated for cause from employment with the Company, as those terms are described below, prior to the vesting of the shares. All unvested shares will
be forfeited if such executive officer voluntarily terminates employment or is terminated for cause prior to vesting. During the restriction periods described above, the restricted shares may not be
sold, assigned, pledged or otherwise transferred. Subject to the risk of forfeiture and transfer restrictions, executive officers have all rights as stockholders with respect to restricted shares,
including the right to vote and receive dividends or other distributions on such shares.
All executive officers have elected to take 100% of their base salary and acquire shares of restricted stock since the Company's initial public offering, or since
joining the Company as an executive officer.
Amended and Restated Executive Officer Incentive Program
We also have an Amended and Restated Executive Officer Incentive Program under the 2014 Incentive Plan pursuant to which our executive officers
may earn performance-based awards in the form of cash and/or restricted stock. Any awards under the Amended and Restated Executive Officer Incentive Program and its interpretation and operation are
subject to the discretion of the Compensation Committee.
The
Amended and Restated Executive Officer Incentive Program is designed to directly link compensation to performance. The Company believes that the combination of operating metrics and
shareholder return provides the best incentive structure for the growth of long-term shareholder value.
Through
the Amended and Restated Executive Officer Incentive Program, our named executive officers are rewarded for attaining targeted individual performance, targeted company
performance and relative TSR performance. For 2019, almost 80% of the aggregate total compensation for our named executive officers was paid in the form of performance-based compensation, all of which
was in restricted stock with cliff vesting periods of eight years.
The
Compensation Committee believes that this further demonstrates alignment of the interests of our named executive officers with that of the Company's shareholders.
Individual Performance Awards
The Compensation Committee grants awards of cash, stock, or a combination of both under the 2014 Incentive Plan based on each executive
officer's individual performance, and may determine all terms of the award, including to whom, and the time or times at which, individual performance awards may be granted, the number of shares, units
or other rights subject to each individual performance award, the exercise, base or purchase price of such individual performance award (if any), the time or times at which such individual performance
award will become vested, exercisable or payable, the performance criteria, goals and other conditions of the individual performance award, and the duration of the individual performance award.
In
2019, the Compensation Committee approved the payment of cash individual performance awards to the Company's executive officers in the aggregate of approximately $476,933. The
executive officers
each elected to acquire restricted shares of common stock in lieu of the cash bonuses, which based on their elections are subject to an eight-year cliff vesting schedule. Based on the eight-year
restriction period elected, the executive officers acquired an aggregate of 11,222 shares of restricted stock in lieu of their cash bonuses and were granted 11,221 additional shares based on the
restriction period elected.
All executive officers have elected to take 100% of their bonuses and acquire shares of restricted stock since the Company's initial public offering, or since
joining the Company as an executive officer.
22
Table of Contents
Company Performance Awards
The Compensation Committee judges the Company's performance under the Amended and Restated Executive Officer Incentive Program against targeted
metrics set in advance by the Compensation Committee.
Company
Performance Awards ("CPA") may be issued under the 2014 Incentive Plan based on specific Company performance targets. The Compensation Committee may determine, in its discretion,
the particular financial and/or operating metrics to be targeted, which may include, but are not limited to AFFO, payout percentages, etc. The measurement period is four consecutive quarters ending on
June 30 of each year or such date as the Compensation Committee may determine.
The
Compensation Committee anticipates that participants will have the opportunity to earn Company Performance Awards each year. The Company will generally target a maximum of two
performance metrics during any given measurement period and a maximum combined award for all such metrics of up to 50% of such participant's base salary.
The
Company currently combines several performance metrics and is based on a sliding scale of the attainment of AFFO required to reach prescribed payout ratios assuming an increasing
dividend rate.
To
date, no awards have been made by the Compensation Committee pursuant to a Company Performance Award. To the extent a Company Performance Award is earned, any cash award will be
available for participation in the Amended and Restated Alignment of Interest Program.
Total Shareholder Return Awards
Total Shareholder Return Awards ("TSRA") are based on the Company's total shareholder return, as measured against the Peer Group. The criteria
for awarding TSRAs are the Company's relative total shareholder return performance measured as a percentile, as compared to the total shareholder returns of the companies in the Peer Group. The
current measurement period is four and twelve consecutive quarters ending June 30 of each year.
The
Company generally targets a maximum TSRA for each executive officer of up to 200% of such executive officer's base salary. Executive officers have the opportunity to earn TSRAs each
year based on 1-year total shareholder return and 3-year total shareholder return. TSRAs are in the form of restricted stock with an eight-year cliff vesting period and are not available for the
Amended and Restated Alignment of Interest Program. The TSRA percentages range from 0% up to 100% of base salary depending on the relative total shareholder return versus the members of the peer
group. The number of shares are determined as of June 30th by dividing the total of the executive officer's TSRA by the average closing price of the common stock for the 10 trading days
immediately preceding June 30.
The
Company granted TSRAs in the form of restricted stock under the Amended and Restated Executive Officer Incentive Program to our executive officers in 2019 in the aggregate of 66,419
shares of common stock which will cliff vest in eight years.
Perquisites
The Company provides its executive officers with perquisites that it believes are reasonable, competitive and consistent with the Company's
compensation program for all employees. The Company believes that such perquisites help the Company to retain its personnel. In 2019, these perquisites included matching contributions in each
participating executive's 401(k) and a contribution for each participating executive's health savings account (HSA), calculated in the same manner as for all employees, as well as moving and
relocation expenses for Mr. Dupuy.
23
Table of Contents
Retirement Benefits
All named executive officers are eligible to participate in the Company's 401(k) plan, pursuant to which each participant may contribute up to
the annual maximum allowed under IRS regulations ($19,000 for 2019). All eligible participants over the age of 50 may also contribute an additional $6,000 per year to the plan in the form of catch-up
contributions. The Company provides a matching contribution of up to an annual maximum three and one-half percent for the first six percent of base salary contributed to the plan.
Compensation Governance Practices
Anti-Hedging Policy
The Company prohibits the hedging of Company securities by its executive officers and directors. None of the executive officers or directors
have entered into any hedging arrangements with respect to the Company's securities. In addition, restricted stock may not be sold, assigned, pledged or otherwise transferred.
At Risk Compensation
Since the Company's initial public offering or joining Company, as applicable, all named executive officers have elected to take 100% of their
compensation in restricted stock of the Company that cliff-vests in 8-years. Until such time that those shares vest, each named executive officer is at risk of forfeiting those shares, as well as
losing value of the shares should events occur, including management errors, that negatively impact the financial results or performance of the Company.
We
believe this compensation program aligns executive management with our stockholders, encourages appropriate long-term decision-making and effectively rewards or punishes executive
management for their decisions made.
Stock Ownership Guidelines
We believe that it is in the best interests of our stockholders to encourage all executive officers and directors to increase their equity
position in the Company to promote share ownership and further align stockholder interests with executive officers and directors. Accordingly, as set forth in the table below, we have adopted stock
ownership guidelines applicable to our executive officers and directors requiring each to hold common stock with a fair market value equal to a multiple of each officer's then current base salary or
each non-employee director's then current annual retainer, as applicable:
|
|
|
Position
|
|
Common Stock Ownership Multiple
|
Chief Executive Officer
|
|
5x Current Base Salary
|
Executive Vice President
|
|
3x Current Base Salary
|
Non-Employee Director
|
|
3x Current Base Annual Retainer
|
The
guidelines provide that all owned stock, both restricted and unrestricted, counts toward the ownership guidelines. All of our executive officers and directors were in compliance with
these guidelines as of March 6, 2020.
Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public companies for compensation over
$1 million paid to a corporation's chief executive officer and the three other most highly compensated executive officers (excluding the chief financial officer). In 2017 and prior tax years,
qualifying performance-based compensation was not subject to the deduction limit if certain requirements were met. Effective for tax years beginning on January 1, 2018, the tax reform
24
Table of Contents
legislation
informally known as the Tax Cuts and Jobs Act of 2017 repeals the performance-based compensation exception to the Section 162(m) $1 million deduction limit. The Company's tax
deduction for compensation expense in 2019 was not limited pursuant to Section 162(m) because no applicable officer's compensation, as determined for federal income tax purposes, exceeded the
applicable limit.
As a qualifying REIT, the Company does not pay federal income tax; therefore, the future unavailability of the Section 162(m) compensation deduction is not expected to result in any increase in
the Company's federal income tax obligations.
CEO Pay Ratio
Pursuant to rules adopted by the SEC under the Dodd-Frank Act, the Company is required to disclose the ratio of the annual total compensation
for its CEO to the median annual total compensation for its employees other than the CEO. The Company identified the median employee by examining its payroll records for 2019 for all individuals other
than the CEO that were employed by the Company at December 31, 2019. Compensation for employees that began employment during the year was annualized based on rate of pay applied to a full year.
As
of December 31, 2019, the Company had 25 employees. These employees are all employed at the Company's corporate office and are comprised of executive and non-executive
officers, asset management, accountants, and various other roles and responsibilities. At December 31, 2019, the Company identified its median employee as one making $105,761 per year. For
2019, the Company's CEO, Mr. Wallace, had an annual total compensation of $2,595,964. This amount is comprised of several components, as reflected in the Summary Compensation Table beginning on
page 31. Additional information concerning Mr. Wallace's total compensation is provided in the Compensation Discussion and Analysis section beginning on page 16 and in the
Executive Officers section beginning on page 28.
The
ratio of CEO pay to median employee pay at December 31, 2019 was 25:1. The table below illustrates the details of the calculation.
|
|
|
|
|
|
|
|
|
|
CEO to Median Employee Pay Ratio
|
|
Pay
|
|
Chief Executive Officer
and President
|
|
Median Employee
|
|
Salary
|
|
|
|
|
|
|
|
Cash
|
|
$
|
|
|
$
|
92,000
|
|
Salary stock
|
|
$
|
572,278
|
|
$
|
|
|
Bonus
|
|
|
|
|
|
|
|
Cash
|
|
$
|
|
|
$
|
10,000
|
|
Bonus stock
|
|
$
|
220,036
|
|
$
|
|
|
Alignment of Interest Stock
|
|
$
|
756,000
|
|
$
|
|
|
1-Year Total Shareholder Return Stock
|
|
$
|
444,358
|
|
$
|
|
|
3-Year Total Shareholder Return Stock
|
|
$
|
592,492
|
|
$
|
|
|
All Other Compensation
|
|
$
|
10,800
|
|
$
|
3,761
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,595,964
|
|
$
|
105,761
|
|
CEO to Media Employee Pay Ratio
|
|
|
|
|
|
25:1
|
|
Termination, Severance and Change-in-Control Arrangements
Under the terms of the Company's compensation plans and its employment agreements with the named executive officers, if employment is terminated
for any reason other than for cause, change-in-control or death or disability, the named executive officer is entitled to receive all accrued salary, bonus compensation, if any, to the extent earned,
whether or not vested without regard to such termination (other than defined contribution plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits
under any plans of the Company in which the named
25
Table of Contents
executive
officer is a participant to the full extent of the named executive officer's rights under such plans, full vesting of all awards granted to the named executive officer under the 2014
Incentive Plan, accrued vacation pay and any appropriate business expenses incurred by the named executive officer in connection with his or her duties hereunder, all to the date of termination. In
addition, the named executive officer will receive as severance compensation his or her base salary (at the rate payable at the time of such termination), for a period of 36 months, with
respect to Mr. Wallace, and 12 months, with respect to Mr. Dupuy, Mr. Barnes and Ms. Stach, from the date of such termination; provided, however, that if the named
executive officer is employed by a new employer during such period, the severance compensation payable to the named executive officer during such period will be reduced by the amount of compensation
that the named executive officer is receiving from the new employer. However, the named executive officer is under no obligation to mitigate the amount owed the named executive officer by seeking
other employment or otherwise. In addition to the severance payment, the named executive officer will be paid an amount equal to the greater of: (i) two times the average annual cash bonus, if
any, earned by the named executive officer in the two years immediately preceding the date of termination, without regard to any elective income deferral or conversion of such bonus into stock or any
other non-cash consideration; and (ii) two times the product of the named executive officer's base salary and 0.67 with respect to Mr. Wallace, and 0.33 with respect to Mr. Dupuy,
Mr. Barnes and Ms. Stach. Each named executive officer will be entitled to accelerated vesting of any accrued benefit under each deferred compensation plan. If a named executive officer
is terminated for disability, the terminated named executive officer will receive the benefits described above, all to the date of termination, with the exception of medical and dental benefits, if
any, which shall continue at the Company's expense through the then current one-year term of the employment agreement. If a named executive officer's employment terminates due to death, the terminated
named executive officer's estate will receive the benefits described above.
The
severance payment in the event of a change in control will consist of: (1) three times the terminated officer's annual base salary (at the rate payable at the time of such
termination), and (2) an amount equal to the greater of: (i) two times the average annual cash bonus, if any, earned by the terminated officer in the two years immediately preceding the
date of termination, without regard to any elective income deferral or conversion of such bonus into stock or any other non-cash consideration; and (ii) two times the product of the terminated
officer's base salary and 0.67 with respect to Mr. Wallace, and 0.33 with respect to Mr. Dupuy, Mr. Barnes and Ms. Stach. Such severance compensation shall be paid in a
lump sum promptly after the date of such termination, and in no event later than two and a half months after the end of the year in which such termination occurs. If the payments due to the
change-in-control result in an excise tax to the terminated officer, under Section 4999 of the Code, all change-in-control payments to the terminated officer may be limited to an amount that is
less than 300% of his or her average annual compensation. This limit would not apply in the event that the terminated officer's net after-tax benefits are greater after considering the effect of the
excise tax.
26
Table of Contents
COMPENSATION COMMITTEE REPORT
The following Compensation Committee Report does not constitute soliciting material and should not be deemed filed or
incorporated by reference into any other Company filing under the Securities Act or the Exchange Act, except to the extent the Company specifically incorporates this Report by reference
therein.
The
Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis contained in this Proxy Statement with management of the Company and, based on such review
and discussions, the Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.
Members
of the Compensation Committee:
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during 2019 were Claire Gulmi (Chair), Alan Gardner, and Lawrence Van Horn. In 2019, no member of the
Compensation Committee was an officer or employee of the Company or any of its subsidiaries or was formerly an officer of the Company or any of its subsidiaries, and no member had any relationship
requiring disclosure as a related person transaction under applicable SEC regulations.
27
Table of Contents
EXECUTIVE OFFICERS
The names, ages, positions and business experience of our executive officers, except for Mr. Wallace, are listed below. Because he is
also a member of our Board, information about Mr. Wallace appeared previously under Proposal 1Election of Directors beginning on page 4. All of our executive officers serve
at the discretion of the Board and are parties to employment agreements.
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
David H. Dupuy
|
|
51
|
|
Mr. Dupuy has served as our Executive Vice President and Chief Financial Officer since May 2019. From 2008 to 2019, Mr. Dupuy served as a Managing Director, Healthcare Investment Banking Group at SunTrust
Robinson Humphrey. From 2004 to 2008, Mr. Dupuy served as a Senior Vice President of the Healthcare Group at Bank of America. From 2000 to 2004, Mr. Dupuy served as a Vice President and Regional Director for KDA Holdings with responsibility
for consulting, financing, and development of outpatient medical facilities. Previously, Mr. Dupuy served as Chief Financial Officer and Founding Partner of LIFESIGNS Holdings, Inc., a provider of diagnostic healthcare services, from 1997
to 2000. Mr. Dupuy began his career in 1991 with Bank of America. Mr. Dupuy holds a Bachelor of Arts in Business Administration from Furman University and a Master of Business Administration from the Owen School at Vanderbilt
University.
|
W. Page Barnes
|
|
66
|
|
Mr. Barnes has served as our Executive Vice President and Chief Operating Officer since May 1, 2019. Prior to becoming Chief Operating Officer, Mr. Barnes served as our Chief Financial Officer since the
formation of our Company in March 2014. Mr. Barnes is responsible for financing and management activities. Prior to joining our Company, from 2005 to 2013, Mr. Barnes was a co-founder, Chief Financial Officer and Executive Vice
PresidentChief Development Officer for Haven Behavioral Healthcare where he was responsible for raising a $100 million private equity investment, negotiating four separate bank financings and the acquisition and/or development of 12
hospitals. From 1997 to 2005, Mr. Barnes served as Chief Financial Officer then Senior Vice PresidentFinance for Ardent Health Services and its predecessor Behavioral Healthcare Corporation. Prior to Ardent, Mr. Barnes began a banking
career with AmSouth Bank in 1990 as a Commercial Real Estate Relationship Manager and ended it in 1997 as Senior Vice President and Manager of the Healthcare Banking Department. Mr. Barnes holds a Bachelor of Science in Accounting from Auburn
University.
|
28
Table of Contents
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
Leigh Ann Stach
|
|
53
|
|
Ms. Stach has served as our Chief Accounting Officer since the formation of our company in March 2014 and as Executive Vice President since May 2019. Prior to her appointment as Executive Vice President in May,
Ms. Stach served as our Vice PresidentFinancial Reporting, and Chief Accounting Officer. From 2005 to 2013, Ms. Stach served as Vice PresidentFinancial Reporting at HR where she had responsibility for financial reporting and
coordinating due diligence materials for debt and equity offerings. In addition, she brought EDGAR and XBRL filings in-house and provided oversight of HR's compliance function and internal audit. Prior to that, from 1997 to 2005, Ms. Stach
served as Vice PresidentController at HR. From 1994 to 1997, Ms. Stach served as Assistant Controller at HR. Prior to HR, from 1991 to 1994, Ms. Stach was a senior accountantfinancial reporting at HCA. She began her career with
Hospital Corporation of America in 1988 as an internal auditor. Ms. Stach holds a Bachelor of Science in Accounting from Western Kentucky University.
|
Employment Agreements of our Named Executive Officers
We have entered into employment agreements with each of Mr. Wallace, Mr. Dupuy, Mr. Barnes, and Ms. Stach, which
became effective on May 28, 2015 for Mr. Wallace, Mr. Barnes, and Ms. Stach, and May 1, 2019 for Mr. Dupuy. The initial term of each of Mr. Wallace's,
Mr. Barnes', and Ms. Stach's employment agreements were through December 31, 2017, while the initial term of Mr. Dupuy's employment agreement was through
December 31, 2019. The term of each respective employment agreement automatically renews for successive one-year terms on December 31 of each calendar year. As amended on
January 3, 2020, the annual base salary of each of Mr. Wallace, Mr. Dupuy, Mr. Barnes and Ms. Stach under each of their employment agreements was increased for
fiscal year 2020 from $540,000 to $645,000, from $350,000 to $392,000, from $328,000 to $370,400 and from $266,000 to $326,800, respectively. In addition, Mr. Dupuy is to be awarded a grant of
5,000 shares of restricted common stock per year for three years, which began on May 1, 2019, vesting equally in 2027, 2028, and 2029.
On
March 11, 2019, the Company entered into an amended and restated employment agreement with Mr. Barnes in connection with his new role as Chief Operating Officer that
became effective on May 1,
2019. Other than related to Mr. Barnes' change in role, the compensation terms and other material terms of Mr. Barnes' employment with the Company remain unchanged. On May 1,
2019, the Company entered into an amended and restated employment agreement with Ms. Stach in connection with her new role as Executive Vice President that became effective on May 1,
2019. Other than related to Ms. Stach's change in role, the compensation terms and other material terms of Ms. Stach's employment with the Company remain unchanged.
The
base salaries are subject to annual increases as the Compensation Committee may approve in their discretion and other benefits generally available to other employees and our other
executive officers, and each will be eligible for an annual bonus for each calendar year during his or her respective employment based on a combination of his or her respective continued employment
with the Company and the achievement of certain performance goals established by our Board of Directors and our Compensation Committee.
29
Table of Contents
If
employment is terminated for any reason other than for cause, change-in-control or death or disability, the named executive officer is entitled to receive all accrued salary, bonus
compensation, if any, to the extent earned, whether or not vested without regard to such termination (other than defined contribution plan or profit sharing plan benefits which will be paid in
accordance with the applicable plan), any benefits under any plans of the Company in which the named executive officer is a participant to the full extent of the named executive officer's rights under
such plans, full vesting of all awards granted to the named executive officer under the 2014 Incentive Plan, accrued vacation pay and any appropriate business expenses incurred by the named executive
officer in connection with his or her duties hereunder, all to the date of termination.
In
addition, the named executive officer will receive as severance compensation his or her base salary (at the rate payable at the time of such termination), for a period of
36 months, with respect to Mr. Wallace, and 12 months, with respect to Mr. Dupuy, Mr. Barnes and Ms. Stach, from the date of such termination; provided,
however, that if the named executive officer is employed by a new employer during such period, the severance compensation payable to the named executive officer during such period will be reduced by
the amount of compensation that the named executive officer is receiving from the new employer. However, the named executive officer is under no obligation to mitigate the amount owed the named
executive officer by seeking other employment or otherwise.
In
addition to the severance payment, the named executive officer will be paid an amount equal to the greater of: (i) two times the average annual cash bonus, if any, earned by
the named executive officer in the two years immediately preceding the date of termination, without regard to any elective income deferral or conversion of such bonus into stock or any other non-cash
consideration; and (ii) two times the product of the named executive officer's base salary and 0.67 with respect to Mr. Wallace, and 0.33
with respect to Mr. Dupuy, Mr. Barnes and Ms. Stach. Each named executive officer will be entitled to accelerated vesting of any accrued benefit under each deferred compensation
plan.
If
a named executive officer is terminated for disability, the terminated named executive officer will receive the benefits described above, all to the date of termination, with the
exception of medical and dental benefits, if any, which shall continue at the Company's expense through the then current one-year term of the employment agreement. If a named executive officer's
employment terminates due to death, the terminated named executive officer's estate will receive the benefits described above.
The
severance payment in the event of a change in control will consist of: (1) three times the terminated officer's annual base salary (at the rate payable at the time of such
termination), and (2) an amount equal to the greater of: (i) two times the average annual cash bonus, if any, earned by the terminated officer in the two years immediately preceding the
date of termination, without regard to any elective income deferral or conversion of such bonus into stock or any other non-cash consideration; and (ii) two times the product of the terminated
officer's base salary and 0.67 with respect to Mr. Wallace, and 0.33 with respect to Mr. Dupuy, Mr. Barnes and Ms. Stach. Such severance compensation shall be paid in a
lump sum promptly after the date of such termination, and in no event later than two and a half months after the end of the year in which such termination occurs. If the payments due to the
change-in-control result in an excise tax to the terminated officer, under Section 4999 of the Code, all change-in-control payments to the terminated officer may be limited to an amount that is
less than 300% of his or her average annual compensation. This limit would not apply in the event that the terminated officer's net after-tax benefits are greater after considering the effect of the
excise tax.
Each
employment agreement contains customary non-competition and non-solicitation covenants that apply during the term and for 12 months following a termination upon a change in
control, so long as the payments to which the terminated officer is entitled as a result of his or her termination upon a change of control are made on a timely basis.
30
Table of Contents
COMPENSATION TABLES
Summary Compensation Table
The table below sets forth the compensation paid in fiscal years 2019, 2018, and 2017 to our principal executive officer and the three most
highly compensated executive officers. The four executive officers are referred to in this proxy statement as our named executive officers.
Each
of our named executive officers has agreed to take 100% of his or her salary, bonus and long-term incentive compensation in the form of restricted common stock under our 2014
Incentive Plan since such officers began their tenure with the Company. In compliance with the terms of the Amended and Restated Alignment of Interest Program described above, the election to acquire
stock, otherwise payable in cash, caused the named executive officers to be eligible to receive additional stock awards based upon a multiple described on page 21 of this proxy statement.
All
shares of restricted stock issued in lieu of cash compensation and any shares of restricted stock issued under the Amended and Restated Alignment of Interest Program are subject to a
vesting schedule whereby no shares vest until the third, fifth or eighth anniversary of the date of grant, at which time 100% of the shares of restricted stock will vest, subject to continued
employment.
The
following table sets forth the compensation of our named executive officers for the fiscal years 2019, 2018, and 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary
|
|
Bonus
|
|
|
|
|
|
|
|
Name and Principal Position
|
|
Year
|
|
Compensation
Paid in
Cash(1)
|
|
Compensation
Paid in
Stock(2)
|
|
Compensation
Paid in
Cash
|
|
Compensation
Paid in
Stock(3)
|
|
Stock
Awards(4)
|
|
All Other
Compensation(5)
|
|
Total(7)
|
|
Timothy G. Wallace
|
|
|
2019
|
|
$
|
|
|
$
|
540,000
|
|
$
|
|
|
$
|
216,000
|
|
$
|
1,829,164
|
|
$
|
10,800
|
|
$
|
2,595,964
|
|
Chief Executive Officer and
|
|
|
2018
|
|
$
|
|
|
$
|
458,167
|
|
$
|
|
|
$
|
183,267
|
|
$
|
1,606,543
|
|
$
|
|
|
$
|
2,247,977
|
|
President
|
|
|
2017
|
|
$
|
|
|
$
|
376,333
|
|
$
|
|
|
$
|
150,533
|
|
$
|
1,065,151
|
|
$
|
|
|
$
|
1,592,017
|
|
David H. Dupuy(6)
|
|
|
2019
|
|
$
|
|
|
$
|
233,333
|
|
$
|
|
|
$
|
23,333
|
|
$
|
1,115,165
|
|
$
|
11,279
|
|
$
|
1,383,110
|
|
Executive Vice President and
|
|
|
2018
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Chief Financial Officer
|
|
|
2017
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
W. Page Barnes
|
|
|
2019
|
|
$
|
|
|
$
|
328,000
|
|
$
|
|
|
$
|
131,200
|
|
$
|
1,111,109
|
|
$
|
8,930
|
|
$
|
1,579,239
|
|
Executive Vice President and
|
|
|
2018
|
|
$
|
|
|
$
|
271,167
|
|
$
|
|
|
$
|
108,467
|
|
$
|
950,883
|
|
$
|
|
|
$
|
1,330,517
|
|
Chief Operating Officer
|
|
|
2017
|
|
$
|
|
|
$
|
214,333
|
|
$
|
|
|
$
|
85,723
|
|
$
|
606,640
|
|
$
|
|
|
$
|
906,696
|
|
Leigh Ann Stach
|
|
|
2019
|
|
$
|
|
|
$
|
266,000
|
|
$
|
|
|
$
|
106,400
|
|
$
|
901,044
|
|
$
|
1,000
|
|
$
|
1,274,444
|
|
Executive Vice President and
|
|
|
2018
|
|
$
|
|
|
$
|
220,500
|
|
$
|
|
|
$
|
188,200
|
|
$
|
876,216
|
|
$
|
|
|
$
|
1,284,916
|
|
Chief Accounting Officer
|
|
|
2017
|
|
$
|
|
|
$
|
175,000
|
|
$
|
|
|
$
|
70,000
|
|
$
|
495,272
|
|
$
|
|
|
$
|
740,272
|
|
-
(1)
-
All
of our named executive officers agreed to acquire shares of restricted common stock in lieu of any cash compensation for the fiscal years ended
December 31, 2019, 2018 and 2017, as applicable.
-
(2)
-
The
amounts represent the annual base salary of each named executive officer set forth in the table pursuant to their employment agreements, 100% of which was used
to acquire shares of our restricted common stock in lieu of cash. The number of shares of common stock issued in 2019 was based on $29.78, which was the average price of our common stock for the
10 days preceding January 14, 2019, the determination date. The number of shares of common stock issued in 2018 was based on $26.99, which was the average price of our common stock for
the 10 days preceding January 16, 2018, the determination date. The number of shares of common stock issued in 2017 was based on $23.05, which was the average price of our common stock
for the 10 days preceding January 13, 2017, the determination date. All of the shares of our restricted common stock issued in lieu of cash compensation are subject to an eight-year
cliff vesting schedule whereby no shares vest until the eighth anniversary of the date of grant, at which time 100% of the shares of restricted stock will vest, subject to continued employment.
-
(3)
-
The
bonus amounts paid in each of the years 2019, 2018 and 2017 represent the annual bonus of each named executive officer set forth in the table pursuant to their
employment agreements, 100% of which was used to acquire shares of our restricted common stock in lieu of cash. The number of shares of common stock issued in 2019 was based on $42.50, which was the
average price of our common stock for the 10 days preceding August 15, 2019, the determination date. The number of shares of common stock issued in 2018 was based on $31.26, which was
the average price of our common stock for the 10 days preceding August 15, 2018, the determination date. The number of shares of common stock issued in 2017 was based on $25.18, which
was the average price of our common stock for the 10 days preceding August 28, 2017, the determination date. All of the shares of our restricted common stock issued in lieu of cash
compensation are subject to an eight-year cliff vesting schedule whereby no shares vest until the eighth anniversary of the date of grant, at which time 100% of the shares of restricted stock will
vest, subject to continued employment.
-
(4)
-
Represents
the aggregate fair value computed in accordance with FASB ASC Topic 718 of awards of restricted common stock to the named executive officers for the years
ended December 31, 2019, 2018, and 2017 under the 2014 Incentive Plan, as amended. The dollar values of the awards related to base salaries and bonuses for 2019, 2018, and 2017 are based on the
grant date value of such awards and the restriction multiples for cash compensation deferrals outlined in our Amended and Restated Alignment of Interest Program. Awards granted to our
31
Table of Contents
named
executive officers' in connection with their base salaries for 2019, 2018, and 2017, were based on grant date values of such awards of $30.67 per share, $25.95 per share, and $22.67 per share,
respectively. Awards granted to our named executive officers' in connection with their bonuses for 2019, 2018 and 2017, were based on grant date values of such awards of $42.90, $31.73 per share and
$25.96 per share, respectively. The dollar values of the awards related to the Company's total stockholder return performance, relative to its peer group, for the years ended December 31, 2019,
2018 and 2017, as outlined in the Executive Officer Incentive Program, are based on the grant date value of such awards of $42.90 per share, $31.73 per share and $24.88 per share, respectively. The
restricted share award of 5,000 shares of common stock granted to Mr. Dupuy upon becoming a named executive officer in 2019 was based on a grant date value of $36.29 per share.
-
(5)
-
Includes
employer contributions to the executive officer's health savings account (HSA) and 401(k), as well as moving and relocation expenses for Mr. Dupuy.
-
(6)
-
Joined
the Company as a named executive officer on May 1, 2019 and was awarded 5,000 shares of restricted stock.
-
(7)
-
A
significant portion of the named executive officer's compensation is performance based, as set forth in the following
table:
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Based Incentive Compensation
|
|
Name
|
|
Year
|
|
Total
Compensation
|
|
Bonus
Stock(1)
|
|
Alignment
of
Interest
Stock(2)
|
|
1 Year
Total
Shareholder
Return
Stock
|
|
3 Year
Total
Shareholder
Return
Stock
|
|
Total
Performance
Based
Incentive
Compensation
|
|
Percent of
Total
Compensation
|
|
Timothy G. Wallace
|
|
2019
|
|
$
|
2,595,964
|
|
$
|
216,000
|
|
$
|
884,164
|
|
$
|
405,000
|
|
$
|
540,000
|
|
$
|
2,045,164
|
|
|
78.8
|
%
|
|
|
2018
|
|
$
|
2,247,977
|
|
$
|
183,267
|
|
$
|
690,209
|
|
$
|
458,167
|
|
$
|
458,167
|
|
$
|
1,789,810
|
|
|
79.6
|
%
|
|
|
2017
|
|
$
|
1,592,017
|
|
$
|
150,533
|
|
$
|
500,651
|
|
$
|
282,250
|
|
$
|
282,250
|
|
$
|
1,215,684
|
|
|
76.4
|
%
|
David H. Dupuy(3)
|
|
2019
|
|
$
|
1,383,110
|
|
$
|
23,333
|
|
$
|
321,215
|
|
$
|
262,500
|
|
$
|
350,000
|
|
$
|
957,048
|
|
|
69.2
|
%
|
|
|
2018
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
2017
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
|
|
W. Page Barnes
|
|
2019
|
|
$
|
1,579,239
|
|
$
|
131,200
|
|
$
|
537,109
|
|
$
|
246,000
|
|
$
|
328,000
|
|
$
|
1,242,309
|
|
|
78.7
|
%
|
|
|
2018
|
|
$
|
1,330,517
|
|
$
|
108,467
|
|
$
|
408,549
|
|
$
|
271,167
|
|
$
|
271,167
|
|
$
|
1,059,350
|
|
|
79.6
|
%
|
|
|
2017
|
|
$
|
906,696
|
|
$
|
85,723
|
|
$
|
285,140
|
|
$
|
160,750
|
|
$
|
160,750
|
|
$
|
692,363
|
|
|
76.4
|
%
|
Leigh Ann Stach
|
|
2019
|
|
$
|
1,274,444
|
|
$
|
106,400
|
|
$
|
435,544
|
|
$
|
199,500
|
|
$
|
266,000
|
|
$
|
1,007,444
|
|
|
79.0
|
%
|
|
|
2018
|
|
$
|
1,284,916
|
|
$
|
188,200
|
|
$
|
435,216
|
|
$
|
220,500
|
|
$
|
220,500
|
|
$
|
1,064,416
|
|
|
82.8
|
%
|
|
|
2017
|
|
$
|
740,272
|
|
$
|
70,000
|
|
$
|
232,772
|
|
$
|
131,250
|
|
$
|
131,250
|
|
$
|
565,272
|
|
|
76.4
|
%
|
-
(1)
-
Each
executive officer has elected to take 100% of their salary and cash bonus in deferred stock with an 8-year cliff vesting.
-
(2)
-
Alignment
of interest stock grants per the Amended and Restated Alignment of Interest Program which is part of the Company's Incentive Plan.
-
(3)
-
Mr. Dupuy
joined the Company on May 1, 2019.
32
Table of Contents
Grants of Plan-Based Awards
The following table provides additional information relating to grants of plan-based awards made to our named executive officers during 2019.
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Grant date
|
|
All other
stock awards:
Number of
shares of
stock (#)(1)
|
|
Grant date
fair value
of share
awards (#)
|
|
Timothy G. Wallace
|
|
|
1/15/2019
|
|
|
18,133
|
|
$
|
556,139
|
|
|
|
|
8/15/2019
|
|
|
29,251
|
|
$
|
1,254,868
|
|
David H. Dupuy
|
|
|
5/1/2019
|
|
|
5,000
|
|
$
|
181,450
|
|
|
|
|
5/15/2019
|
|
|
6,359
|
|
$
|
235,665
|
|
|
|
|
8/15/2019
|
|
|
16,213
|
|
$
|
695,538
|
|
W. Page Barnes
|
|
|
1/15/2019
|
|
|
11,015
|
|
$
|
337,830
|
|
|
|
|
8/15/2019
|
|
|
17,768
|
|
$
|
762,247
|
|
Leigh Ann Stach
|
|
|
1/15/2019
|
|
|
8,933
|
|
$
|
273,975
|
|
|
|
|
8/15/2019
|
|
|
14,408
|
|
$
|
618,103
|
|
-
(1)
-
The
table below shows the number of restricted shares of common stock awarded to the named executive officers in 2019 pursuant to the 2014 Incentive Plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Awards
|
|
|
|
|
|
Name
|
|
Company
Match
Salary(#)
|
|
Company
Match
Bonus(#)
|
|
1 Year
Total
Shareholder
Return
Stock(#)
|
|
3 Year
Total
Shareholder
Return
Stock(#)
|
|
CFO
Grant(#)
|
|
Total
Stock
Awards(#)
|
|
Timothy G. Wallace
|
|
|
18,133
|
|
|
5,082
|
|
|
10,358
|
|
|
13,811
|
|
|
|
|
|
47,384
|
|
David H. Dupuy
|
|
|
6,359
|
|
|
549
|
|
|
6,713
|
|
|
8,951
|
|
|
5,000
|
|
|
27,572
|
|
W. Page Barnes
|
|
|
11,015
|
|
|
3,087
|
|
|
6,292
|
|
|
8,389
|
|
|
|
|
|
28,783
|
|
Leigh Ann Stach
|
|
|
8,933
|
|
|
2,503
|
|
|
5,102
|
|
|
6,803
|
|
|
|
|
|
23,341
|
|
Outstanding Equity Awards at December 31, 2019
The following table sets forth all outstanding equity awards held by each of our named executive officers at December 31, 2019.
|
|
|
|
|
|
|
|
Name
|
|
Number of Shares
or Units of
Stock That Have
Not Vested (#)
|
|
Market Value of
Shares or Units
of Stock That
Have Not
Vested ($)(1)
|
|
Timothy G. Wallace
|
|
|
184,832
|
(2)
|
$
|
7,921,900
|
|
David H. Dupuy
|
|
|
27,572
|
(2)
|
$
|
1,181,736
|
|
W. Page Barnes
|
|
|
105,549
|
(2)
|
$
|
4,523,830
|
|
Leigh Ann Stach
|
|
|
90,519
|
(2)
|
$
|
3,879,644
|
|
-
(1)
-
The
market value of unvested restricted common stock is calculated by multiplying the number of unvested shares of restricted common stock held by the applicable
named executive officer by the closing price of our common stock on December 31, 2019, which was $42.86.
-
(2)
-
These
shares of restricted common stock are subject to eight-year cliff vesting through 2027, subject to continued employment with the Company on the vesting date.
33
Table of Contents
Post-Employment Compensation
The tables below illustrate the compensation that would have been received by each of the named executive officers assuming the officer had been
terminated or had been eligible to retire and had elected to retire on December 31, 2019, and that any additional conditions to vesting of restricted stock awards under restricted stock award
agreements had been met.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy G. Wallace
Chief Executive Officer and President
|
|
Voluntary
Termination
|
|
Not for
Cause
Termination
|
|
Change-in-
Control
|
|
Death or
Disability
|
|
Retirement
|
|
Cash Severance Benefit(1)
|
|
$
|
|
|
$
|
2,343,600
|
|
$
|
2,343,600
|
|
$
|
|
|
$
|
|
|
Accelerated Vesting Of Restricted Stock(3)
|
|
$
|
|
|
$
|
12,531,278
|
|
$
|
12,531,278
|
|
$
|
12,531,278
|
|
$
|
12,531,278
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Value of Payments
|
|
$
|
|
|
$
|
14,874,878
|
|
$
|
14,874,878
|
|
$
|
12,531,278
|
|
$
|
12,531,278
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David H. Dupuy
Executive Vice President and Chief
Financial Officer
|
|
Voluntary
Termination
|
|
Not for
Cause
Termination
|
|
Change-in-
Control
|
|
Death or
Disability
|
|
Retirement
|
|
Cash Severance Benefit(2)
|
|
$
|
|
|
$
|
581,000
|
|
$
|
1,281,000
|
|
$
|
|
|
$
|
|
|
Accelerated Vesting Of Restricted Stock(3)
|
|
$
|
|
|
$
|
1,477,770
|
|
$
|
1,477,770
|
|
$
|
1,477,770
|
|
$
|
1,477,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Value of Payments
|
|
$
|
|
|
$
|
2,058,770
|
|
$
|
2,758,770
|
|
$
|
1,477,770
|
|
$
|
1,477,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W. Page Barnes
Executive Vice President and Chief
Operating Officer
|
|
Voluntary
Termination
|
|
Not for
Cause
Termination
|
|
Change-in-
Control
|
|
Death or
Disability
|
|
Retirement
|
|
Cash Severance Benefit(2)
|
|
$
|
|
|
$
|
567,667
|
|
$
|
1,223,667
|
|
$
|
|
|
$
|
|
|
Accelerated Vesting Of Restricted Stock(3)
|
|
$
|
|
|
$
|
7,091,744
|
|
$
|
7,091,744
|
|
$
|
7,091,744
|
|
$
|
7,091,744
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Value of Payments
|
|
$
|
|
|
$
|
7,659,411
|
|
$
|
8,315,411
|
|
$
|
7,091,744
|
|
$
|
7,091,744
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leigh Ann Stach
Executive Vice President and Chief
Accounting Officer
|
|
Voluntary
Termination
|
|
Not for
Cause
Termination
|
|
Change-in-
Control
|
|
Death or
Disability
|
|
Retirement
|
|
Cash Severance Benefit(2)
|
|
$
|
|
|
$
|
560,600
|
|
$
|
1,092,600
|
|
$
|
|
|
$
|
|
|
Accelerated Vesting Of Restricted Stock(3)
|
|
$
|
|
|
$
|
6,168,454
|
|
$
|
6,168,454
|
|
$
|
6,168,454
|
|
$
|
6,168,454
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Value of Payments
|
|
$
|
|
|
$
|
6,729,054
|
|
$
|
7,261,054
|
|
$
|
6,168,454
|
|
$
|
6,168,454
|
|
-
(1)
-
Represents
the annual base salary at December 31, 2019 for a period of 36-months from the date of such termination, payable in monthly installments.
-
(2)
-
Represents
the annual base salary at December 31, 2019 for a period of 12-months from the date of such termination, payable in monthly installments.
-
(3)
-
Based
upon the closing price of a share of the Company's Common Stock on the New York Stock Exchange on December 31, 2019 of $42.86.
34
Table of Contents
EQUITY COMPENSATION PLAN INFORMATION
The following table gives information about shares of our common stock that may be issued under our 2014 Incentive Plan as of
December 31, 2019.
|
|
|
|
|
|
|
|
|
|
|
Plan Category
|
|
Number of Securities
to be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights
|
|
Weighted Average
Exercise Price of
Outstanding
Options,
Warrants and
Rights
|
|
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation Plans
(Excluding Securities
Reflected in First Column)
|
|
Equity compensation plans approved by stockholders(1)
|
|
|
|
|
|
|
|
|
579,205
|
|
Equity compensation plans not approved by stockholders
|
|
|
|
|
|
|
|
|
277,262
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
856,467
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Our
2014 Incentive Plan automatically increases, on an annual basis, the number of shares of common stock available for issuance under the 2014 Incentive Plan to an
amount equal to 7% of the total number of shares of common stock outstanding on December 31 of the immediately preceding year. These annual increases are required because of the level of
restricted stock, versus cash, we utilize in our compensation methodology and was approved by a vote of our shareholders in 2017.
-
(2)
-
These
277,262 shares are reserved under our 2014 Incentive Plan for purchase by our employees and directors in exchange for the cash compensation. See "2014
Incentive Plan" beginning on page 20.
35
Table of Contents
PROPOSAL 2
NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, enables the Company's stockholders to vote to
approve, on a non-binding advisory basis, the compensation of the Company's named executive officers as disclosed in this proxy statement in accordance with the SEC's rules.
As
discussed in the Compensation Discussion and Analysis section of this proxy statement beginning on page 16, the Company's executive compensation policies are designed to align
the interests of the named executive officers with the interests of our shareholders, link executive compensation to the Company's overall performance, and attract, retain, and motivate our named
executive officers. The Board believes that its executive compensation programs have been effective at appropriately aligning pay and Company performance, promoting the achievement of the long-term
positive results in its
performance criteria, and enabling the Company to attract and retain talented executives within its industry.
The
Board is asking stockholders to indicate their support for the named executive officer compensation described in this proxy statement. This proposal, commonly known as a "say-on-pay"
proposal, gives stockholders the opportunity to express views on the Company's executive compensation for its named executive officers. This vote is not intended to address any specific item of
compensation, but rather the overall compensation of the Company's named executive officers and the policies and procedures described in this proxy statement. Accordingly, the Board asks stockholders
to vote "FOR" the following resolution:
RESOLVED, that the stockholders of Community Healthcare Trust Incorporated approve, on a non-binding advisory basis, the compensation of the named
executive officers as disclosed pursuant to Item 402 of Regulation S-K in the Company's proxy statement for the 2020 annual meeting of stockholders.
Although
this is an advisory vote that will not be binding on the Compensation Committee or the Board, the Board will carefully review the results of the vote. The Compensation Committee
will also carefully consider stockholders' concerns when designing future executive compensation programs.
Required Vote
The affirmative vote of a majority of the shares represented at the meeting and entitled to vote is required to approve, on an advisory basis,
the say on pay vote. As an advisory vote, this proposal is not binding upon us. However, the Compensation Committee of our Board of Directors, which is responsible for designing and administering our
executive compensation program, values the opinions expressed by our stockholders and will consider the outcome of the vote when making future compensation decisions.
Our Board of Directors unanimously recommends a vote "FOR" the resolution approving the compensation of the Company's named executive officers
36
Table of Contents
PROPOSAL 3
NON-BINDING ADVISORY VOTE ON THE FREQUENCY OF THE VOTE ON EXECUTIVE COMPENSATION
The Dodd-Frank Act requires the Company to include, at least once every six years, an advisory vote regarding the frequency of the non-binding
advisory vote on executive compensation. In casting their advisory vote, stockholders may choose among four options: (1) an annual vote, (2) a vote every two years (biennial),
(3) a vote every three years (triennial) or (4) to abstain from voting. The Board believes that an annual voting is most appropriate for the Company because it believes that it has
become standard within its industry and that an annual vote affords the stockholders greater opportunity to provide feedback to the management team of the Company and the Board. Like the advisory vote
on executive compensation, the advisory vote on the frequency of such vote is non-binding on the Compensation Committee of the Board. Although the vote is non-binding, the Company's Board and the
Compensation Committee will review the voting results and will respect the expressed desire of the Company's stockholders by implementing the option, if any, that receives a majority of votes cast.
Abstentions and broker non-votes will have no effect on the outcome of this advisory vote. A majority vote requires that one option receive more votes than the other two options taken together. If no
option receives the majority of votes cast, the Board will select the annual option to be in effect until the next vote on the frequency of the vote on executive compensation.
Required Vote
The affirmative vote of a majority of the shares represented at the meeting and entitled to vote is required to approve, on an advisory basis,
the frequency of future stockholder say on pay votes. As an advisory vote, this proposal is not binding upon us. Our Board of Directors will consider the outcome of the vote when determining the
frequency of holding future stockholder say on pay votes.
Our Board of Directors unanimously recommends a vote for an "ANNUAL" vote on executive compensation
37
Table of Contents
PROPOSAL 4
RATIFICATION OF THE APPOINTMENT OF BDO USA, LLP AS OUR INDEPENDENT
REGISTERED PUBLIC ACCOUNTANTS FOR 2020
General
We are asking our stockholders to ratify the selection of BDO USA, LLP as our independent registered public accountants for 2020.
Although current law, rules and regulations, as well as the charter of the Audit Committee, require the Audit Committee to engage, retain and supervise our independent registered public accountants,
we view the selection of the independent registered public accountants as an important matter of stockholder concern and thus are submitting the selection of BDO USA, LLP for ratification by
stockholders as a matter of good corporate practice.
The
Audit Committee appointed BDO USA, LLP to serve as our independent registered public accountants for the 2019 fiscal year and has appointed BDO USA, LLP to serve as our
independent registered public accountants for the 2020 fiscal year. A representative of BDO USA, LLP is expected to attend the annual meeting. If present, the representative will have the
opportunity to make a statement and will be available to respond to appropriate questions. BDO USA, LLP has served as our independent registered public accountants since 2015.
Audit and Non-Audit Services
Fees related to services performed for us by BDO USA, LLP in fiscal years 2019 and 2018 are as follows:
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
Audit Fees(1)
|
|
$
|
726,430
|
|
$
|
484,921
|
|
Audit-Related Fees(2)
|
|
|
19,066
|
|
|
|
|
Tax Fees
|
|
|
|
|
|
|
|
All Other Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
745,496
|
|
$
|
484,921
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Audit
fees include fees and expenses associated with the audit of our financial statements, the reviews of the financial statements in our quarterly reports on
Form 10-Q, and services provided in connection with registration statements and periodic reports filed with the Securities and Exchange Commission. Audit fees for 2019 include fees associated
with registration statements totaling $109,492 and fees related to auditing our internal control over financial reporting. Audit fees for 2018 include fees associated with registration statements
totaling $74,162.
-
(2)
-
Audit-related
fees for 2019 included fees associated with Rule 3-14 audits.
In
accordance with the procedures set forth in its charter, the Audit Committee pre-approves all auditing services and permitted non-audit and tax services (including the fees and terms
of those services) to be performed for us by our independent registered public accountants prior to their engagement with respect to such services, subject to the de minimis exceptions for non-audit
services permitted by the Exchange Act, which are approved by the Audit Committee prior to the completion of the audit.
Required Vote
The affirmative vote by a majority of the votes cast at the annual meeting is required for the ratification of the appointment of BDO
USA, LLP as our independent registered public accountants.
38
Table of Contents
Abstentions
will have no effect on this proposal. If our stockholders fail to ratify this appointment, the Audit Committee will reconsider whether to retain BDO USA, LLP and may retain that
firm or another firm without resubmitting the matter to our stockholders. Even if the appointment is ratified, the Audit Committee may, in its discretion, direct the appointment of a different
independent registered public accountant at any time during the year if it determines that such change would be in our best interests and in the best interests of our stockholders.
Our Board of Directors unanimously recommends a vote "FOR" the ratification of BDO USA, LLP as our independent registered public accountants for
2020.
39
Table of Contents
REPORT OF THE AUDIT COMMITTEE
The information provided in this section shall not be deemed to be "soliciting material" or to be "filed" with the SEC
or subject to its proxy regulations or to the liabilities of Section 18 of the Exchange Act. The information provided in this section shall not be deemed to be incorporated by reference into
any filing under the Securities Act of 1933, as amended, or the Exchange Act.
The
Audit Committee oversees our financial reporting process on behalf of the Board of Directors. Management has the primary responsibility for the preparation, consistency and fair
presentation of the financial statements, the accounting and financial reporting process, the systems of internal control, and the procedures designed to ensure compliance with accounting standards,
applicable laws and regulations. Management is also responsible for its assessment of the design and effectiveness of our internal control over financial reporting. Our independent registered public
accountants are responsible for performing an audit in accordance with the standards of the Public Company Accounting Oversight Board (United States), or PCAOB, and expressing an opinion on the
conformity of the financial statements of the Company with U.S. generally accepted accounting principles and expressing an opinion on the effectiveness of our internal controls over financial
reporting. The internal auditors are responsible to the Audit Committee and the Board of Directors for testing the integrity of the financial accounting and reporting control systems and such other
matters as the Audit Committee and the Board of Directors determine.
In
fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed with management the audited financial statements of the Company for the year ended
December 31, 2019 and management's assessment of the design and effectiveness of our internal control over financial reporting as of December 31, 2019. The discussion addressed the
quality, and not just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements.
The
Audit Committee reviewed and discussed with the independent public accountants their judgments as to the quality of our accounting principles and such other matters as are required
to be discussed with the committee under PCAOB auditing standards including, without limitation, the matters required to be discussed by PCAOB Auditing Standard No. 1301. In addition, the Audit
Committee received the written disclosures and the letter from the independent registered public accountants required by applicable requirements of the PCAOB regarding the independent registered
public accountants' communications with the Audit Committee concerning independence, discussed with the independent registered public accountants their independence from management and the Company,
and considered the compatibility of non-audit services with the auditors' independence.
The
Audit Committee discussed with our internal and independent registered public accountants the overall scope and plans for their respective audits. The Audit Committee met with the
internal and independent registered public accountants, with and without management present, to discuss the results of their examinations, their understanding of our internal controls, and the overall
quality of our financial reporting.
In
reliance upon the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors (and the Board has approved) that the audited financial
statements be included in our annual report to stockholders for filing with the SEC.
The
members of the Audit Committee are not professionally engaged in the practice of auditing or accounting and are not experts in the fields of accounting or auditing, including with
respect to auditor independence. Members of the Audit Committee rely without independent verification on the information provided to them and on the representations made by management and the
independent registered public accounting firm. Accordingly, the Audit Committee's oversight does not provide an independent basis to determine that management has maintained appropriate accounting and
financial
40
Table of Contents
reporting
principles, or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, the Audit Committee's
considerations and discussions referred to above do not assure that the audit of the Company's financial statements has been carried out in accordance with the standards of the PCAOB, that the
financial statements are presented in accordance with generally accepted accounting principles or that BDO USA, LLP is in fact "independent."
Audit
Committee:
Robert Hensley (Chairman)
Alan Gardner
Claire Gulmi
41
Table of Contents
BENEFICIAL OWNERSHIP OF SHARES OF COMMON STOCK
Directors, Executive Officers and Other Stockholders
As of March 6, 2020, we had 31 stockholders of record. Except as otherwise stated in a footnote, the following table presents certain
information regarding the beneficial ownership of our common stock as of March 6, 2020 by: (i) the persons known by us to own beneficially more than 5% of our common stock;
(ii) each of our directors, nominees for director and named executive officers; and (iii) all of our directors, nominees for director, and executive officers as a group. Each person
named in
the table has sole voting and investment power with respect to all of the common stock shown as beneficially owned by such person, except as otherwise set forth in the notes to the table.
The
SEC has defined "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 (1) the exercise of any option,
warrant or right, (2) the conversion of a security, (3) the power to revoke a trust, discretionary account or similar arrangement or (4) the automatic termination of a trust,
discretionary account or similar arrangement. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, our common stock subject to options or other
rights (as set forth above) held by that person that are currently exercisable or will become exercisable within 60 days thereafter, are deemed outstanding, while such shares are not deemed
outstanding for purposes of computing percentage ownership of any other person.
Unless
otherwise indicated, the business address of all the individuals and entities is c/o Community Healthcare Trust Incorporated, 3326 Aspen Grove Drive, Suite 150,
Franklin, Tennessee 37067. No common stock beneficially owned by any director or named executive officer has been pledged as security for a loan.
|
|
|
|
|
|
|
|
Name of Beneficial Owner
|
|
Number of Shares
Beneficially
Owned (#)
|
|
Percentage of
All Shares
(%)(1)
|
|
5% Stockholders
|
|
|
|
|
|
|
|
BlackRock, Inc.
|
|
|
3,215,961
|
(2)
|
|
14.7
|
%
|
The Vanguard Group, Inc.
|
|
|
2,173,776
|
(3)
|
|
9.9
|
%
|
The Bank of New York Mellon Corporation.
|
|
|
1,241,241
|
(4)
|
|
5.7
|
%
|
Cardinal Capital Management, LLC
|
|
|
1,198,032
|
(5)
|
|
5.5
|
%
|
Directors
|
|
|
|
|
|
|
|
Alan Gardner
|
|
|
30,446
|
|
|
*
|
|
Claire Gulmi
|
|
|
7,037
|
|
|
*
|
|
Robert Hensley
|
|
|
35,372
|
|
|
*
|
|
Lawrence Van Horn
|
|
|
19,439
|
|
|
*
|
|
Named Executive Officers
|
|
|
|
|
|
|
|
Timothy G. Wallace
|
|
|
760,756
|
|
|
3.5
|
%
|
David H. Dupuy
|
|
|
52,653
|
|
|
*
|
|
W. Page Barnes
|
|
|
207,635
|
|
|
*
|
|
Leigh Ann Stach
|
|
|
159,072
|
|
|
*
|
|
All Directors and Executive Officers as a Group (8 persons total)
|
|
|
1,272,410
|
|
|
5.8
|
%
|
-
*
-
Less
than 1% of the outstanding shares of common stock.
-
(1)
-
Based
on 21,906,352 shares of common stock outstanding on March 6, 2020.
42
Table of Contents
-
(2)
-
Based
on a Schedule 13G/A filed with the SEC on February 4, 2020, BlackRock, Inc. has sole voting power with respect to 3,166,327 shares of
common stock and sole dispositive power with respect to 3,215,961 shares of common stock. A subsidiary of BlackRock, Inc., BlackRock Fund Advisors, beneficially owns 5% or greater of the
outstanding shares of common stock reported on BlackRock's Schedule 13G/A. BlackRock, Inc. is located at 55 East 52nd Street, New York, New York 10055.
-
(3)
-
Based
on a Schedule 13G/A filed with the SEC on February 12, 2020, The Vanguard Group, Inc. has sole voting power with respect to 30,780 shares
of common stock, shared voting power with respect to 2,100 shares of common stock, sole dispositive power with respect to 2,142,801 shares of common stock and shared dispositive power with respect to
30,975 shares of common stock. As reported on The Vanguard Group Inc.'s Schedule 13G/A, Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of The Vanguard Group, Inc., is
the beneficial owner of 28,875 shares of common stock, and Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 4,005
shares common stock outstanding of the Company. The VanGuard Group, Inc. is located at 100 Vanguard Boulevard, Malvern, PA 19355.
-
(4)
-
Based
on a Schedule 13G filed with the SEC on February 5, 2020, The Bank of New York Mellon Corporation has sole voting power with respect to 1,227,122
shares of common stock, sole dispositive power with respect to 1,240,108 shares of common stock, and shared dispositive power with respect to 60 shares of common stock. As reported on The Bank of New
York Mellon Corporation's Schedule 13G, BNY Mellon IHC, LLC has sole voting power with respect to 1,170,352 shares of common stock and sole dispositive power with respect to 1,184,411
shares of common stock. MBC Investments Corporation has sole voting power with respect to 1,170,352 shares of common stock and sole dispositive power with respect to 1,184,411 shares of common stock.
Mellon Investments Corporation has sole voting power with respect to 1,109,009 shares of common stock and sole dispositive power with respect to 1,109,009 shares of common stock. The Bank of New York
Mellon Corporation, BNY Mellon IHC, LLC, MBC Investments Corporation, and Mellon Investments Corporation are located at 240 Greenwich Street, New York, New York 10286.
-
(5)
-
Based
on a Schedule 13G/A filed with the SEC on February 14, 2020, Cardinal Capital Management, LLC has sole voting power with respect to
945,464 shares of common stock and sole dispositive power with respect to 1,198,032 shares of common stock. Cardinal Capital Management, LLC is located at Four Greenwich Office Park, Greenwich,
Connecticut 06831.
43
Table of Contents
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Policies and Procedures for Related Person Transactions
Our Audit Committee has adopted a written policy governing the approval of related party transactions that complies with all applicable
requirements of the SEC and the NYSE concerning related party transactions. Under our policy, a related party transaction is a transaction between the Company and a related party (including any
transaction requiring disclosure under Item 404 of Regulation S-K under the Exchange Act), other than transactions available to all employees generally or involving less than $5,000 when
aggregated with similar transactions. "Related parties" include (i) an officer or director of the Company, (ii) a person who is an immediate family member of an officer or director;
(iii) an entity which is owned or controlled by an officer or director or an immediate family member of an officer or director, or an entity in which an officer or director or an immediate
family member of an officer or director is deemed to have a substantial ownership interest or control of such entity by virtue of such person owning more than 20% of such entity; and (iv) any
person known to be the beneficial owner of more than 5% of any class of the Company's voting securities. Members of an officer's or director's immediate family include such officer's or director's
spouse, child, stepchild, parent, stepparent, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law and any other person sharing the household of such
officer or director. For purposes of this policy, officers are defined as "executive officers" under applicable guidelines of the SEC. Additionally, a "Related Party" may be a person or entity that
proposes to enter into a transaction with the Company if the Audit Committee finds that such transaction would require disclosure under Item 404 of Regulation S-K.
Our
related party transaction policy is administered by our Audit Committee. At each fiscal year's first regularly-scheduled Audit Committee meeting, management or the Corporate
Governance Committee, as applicable, will provide the Audit Committee with detailed information concerning all related party transactions, if any, then known by management to be entered into or to be
continued by the Company for the fiscal year. Under the related party transactions policy, there is a general presumption that a related party transaction with the Company will not be approved by the
Audit Committee. However, the Audit Committee may approve a related party transaction if: (i) the Audit Committee finds that the transaction is on terms comparable to those that could be
obtained in arm's length dealings with an unrelated third party; and (ii) the Audit Committee finds that it has been fully apprised of all significant conflicts that may exist or otherwise
arise on account of the transaction, and it believes, nonetheless, that the Company is warranted entering into the related party transaction and has developed an appropriate plan to manage the
potential conflicts of interest. The Audit Committee will consider each proposed related party transaction and may approve the Company's entering into or continuing such related party transaction if
the transaction satisfies the guidelines set forth above.
Related Party Transactions
Pursuant to its authority and based on discussions with management and BDO USA, LLP, the Audit Committee has determined that there have
been no related party transactions requiring disclosure under Item 404(a) of Regulation S-K.
Legal Proceedings
We are not aware of any current legal proceedings involving any of our directors, director nominees, or executive officers and either the
Company or any of its subsidiaries.
44
Table of Contents
STOCKHOLDER PROPOSALS FOR THE 2021 ANNUAL MEETING
At the annual meeting each year, the Board of Directors submits to stockholders its nominees for election as directors. In addition, the Board
may submit other matters to the stockholders for action at the annual meeting. Stockholders may also submit proposals for action at the annual meeting.
Stockholders
interested in submitting a proposal for inclusion in our proxy materials for the 2021 annual meeting of stockholders may do so by following the procedures described in
Rule 14a-8 of the Exchange Act. If the 2021 annual meeting is held within 30 days of May 7, 2020, stockholder proposals must be received by Timothy Wallace at 3326 Aspen Grove
Drive, Suite 150, Franklin, Tennessee, 37067, no later than 5:00 p.m., Eastern Time on November 20, 2020 in order for such proposals to be considered for inclusion in the
proxy statement and form of proxy relating to such annual meeting.
Any
stockholder proposals (including recommendations of nominees for election to the Board of Directors) intended to be presented at the Company's 2021 annual meeting of stockholders,
other than a stockholder proposal submitted pursuant to Exchange Act Rule 14a-8, must be received in writing at our principal executive offices no earlier than on October 21, 2020, nor
later than 5:00 p.m., Eastern Time, on November 20, 2020, together with all supporting documentation required by our Bylaws. For more complete information on these requirements, please
refer to our Bylaws.
OTHER MATTERS
As of the date of this proxy statement, management does not know of any other matters to be brought before the annual meeting other than those
set forth herein. However, if any other matters are properly brought before the annual meeting, the persons named in the enclosed form of proxy will have discretionary authority to vote all proxies
with respect to such matters in accordance with their best judgment.
REGARDLESS OF THE NUMBER OF SHARES YOU OWN, YOUR VOTE IS IMPORTANT TO THE COMPANY. PLEASE SUBMIT A PROXY BY INTERNET OR, IF YOU REQUEST WRITTEN PROXY MATERIALS BY
RETURNING A COMPLETED, SIGNED AND DATED PROXY CARD OR VOTING INSTRUCTION FORM.
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
Upon written request of any record holder or beneficial owner of shares entitled to vote at the annual meeting, we will provide, without charge,
a copy of our Annual Report on Form 10-K. Requests should be mailed to W. Page Barnes, Corporate Secretary, 3326 Aspen Grove Drive, Suite 150, Franklin, Tennessee 37067. You may also
access our Annual Report on Form 10-K on the investor relations webpage of our Internet website, http://investors.chct.reit.
By
Order of the Board of Directors,
Timothy
Wallace
Chairman of the Board
March 20, 2020
45
Table of Contents
APPENDIX ARECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Funds from operations, ("FFO"), as defined by NAREIT, and adjusted funds from operations ("AFFO"), are important non-GAAP supplemental measures
of operating performance for a REIT. Because the historical cost accounting convention used for real estate assets requires straight-line depreciation except on land, such accounting presentation
implies that the value of real estate assets diminishes predictably over time. However, since real estate values have historically risen or fallen with market and other conditions, presentations of
operating results for a REIT that uses historical cost accounting for depreciation could be less informative. Thus, NAREIT created FFO as a supplemental measure of operating performance for REITs that
excludes historical cost depreciation and amortization, among other items, from net income, as defined by GAAP.
NAREIT
defines FFO as the most commonly accepted and reported measure of a REIT's operating performance equal to net income (computed in accordance with GAAP), excluding gains (or
losses) from sales of property and impairments of real estate, plus depreciation and amortization related to real estate properties, and after adjustments for unconsolidated partnerships and joint
ventures. NAREIT also provides REITs with an option to exclude gains, losses and impairments of assets that are incidental to the main business of the REIT from the calculation of FFO.
The
Company's AFFO is defined as FFO, excluding non-cash income and expenses, such as amortization of stock-based compensation, the effects of straight-line rent, and others. The Company
considers AFFO to be a useful supplemental measure to evaluate the Company's operating results excluding these income and expense items to help investors, analysts and other interested parties compare
the operating performance of the Company between periods or as compared to other companies on a more consistent basis.
Management
believes that net income, as defined by GAAP, is the most appropriate earnings measurement. However, management believes FFO and FFO per share to be supplemental measures of a
REIT's performance because they provide an understanding of the operating performance of the Company's properties without giving effect to certain significant non-cash items, primarily depreciation
and amortization expense. Historical cost accounting for real estate assets in accordance with GAAP assumes that the value of real estate assets diminishes predictably over time. However, real estate
values instead have historically risen or fallen with market conditions.
The
Company believes that by excluding the effect of depreciation, amortization, gains or losses from sales of real estate, impairment of real estate, and gains, losses and impairment of
incidental assets, straight-line rent and amortization of stock-based compensation, all of which are based on historical costs and which may be of limited relevance in evaluating current performance,
FFO and AFFO can facilitate comparisons of operating performance between periods. The Company reports FFO and AFFO per share because these measures are observed by management to be some of the
predominant
measures used by the REIT industry and by industry analysts to evaluate REITs and because FFO per share, as defined by NAREIT, is consistently reported, discussed, and compared by research analysts in
their notes and publications about REITs. For these reasons, management has deemed it appropriate to disclose and discuss FFO and AFFO per share. However, neither FFO or AFFO represents cash generated
from operating activities determined in accordance with GAAP and are not necessarily indicative of cash available to fund cash needs. FFO and AFFO should not be considered alternatives to net income
attributable to common stockholders or as indicators of the Company's operating performance or as alternatives to cash flow from operating activities as measures of liquidity. The table below
reconciles net income to FFO and AFFO.
46
Table of Contents
COMMUNITY HEALTHCARE TRUST INCORPORATED
RECONCILIATION OF FFO and AFFO
(Unaudited; Amounts in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
|
2019
|
|
2018
|
|
Net income
|
|
$
|
8,376
|
|
$
|
4,403
|
|
Real estate depreciation and amortization
|
|
|
22,377
|
|
|
19,661
|
|
Impairment of note receivable(1)
|
|
|
|
|
|
5,000
|
|
Income tax expense (benefit)(1)
|
|
|
1,321
|
|
|
(1,321
|
)
|
Gain from sale of depreciable real estate
|
|
|
|
|
|
(295
|
)
|
|
|
|
|
|
|
|
|
Total adjustments
|
|
|
23,698
|
|
|
23,045
|
|
|
|
|
|
|
|
|
|
Funds from Operations (FFO)
|
|
$
|
32,074
|
|
$
|
27,448
|
|
Transaction costs
|
|
|
|
|
|
57
|
|
Straight-line rent
|
|
|
(2,052
|
)
|
|
(1,292
|
)
|
Stock-based compensation
|
|
|
3,844
|
|
|
2,853
|
|
|
|
|
|
|
|
|
|
Adjusted Funds from Operations (AFFO)
|
|
$
|
33,866
|
|
$
|
29,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFO per Common Share-Diluted
|
|
$
|
1.67
|
|
$
|
1.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AFFO Per Common Share-Diluted
|
|
$
|
1.77
|
|
$
|
1.62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Common Shares Outstanding-Diluted(2)
|
|
|
19,164
|
|
|
17,943
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
In
the fourth quarter of 2018, the Company recorded a $5.0 million impairment related to its mezzanine loan with Highland Hospital and recorded a related tax
benefit and deferred tax asset of approximately $1.3 million. This deferred tax asset was impaired in the fourth quarter of 2019 and the tax benefit was reversed resulting in tax expense of
$1.3 million. The Company believes that the mezzanine loan is incidental to the main operations of the Company. As such, the Company has excluded the impairment of the note receivable and the
related tax impact from its calculation of FFO. The $5.0 million impairment on the loan and related tax benefit of $1.3 million recorded in 2018 was previously recognized as an
adjustment to AFFO rather than FFO for the year ended December 31, 2018 and has been reclassified as an adjustment to Funds from Operations rather than to Adjusted Funds from Operations for
2018 to conform to the current year presentation.
-
(2)
-
Diluted
weighted average common shares outstanding for FFO are calculated based on the treasury method, rather than the 2-class method used to calculate earnings per
share.
47
aNNuaL meeTiNg of sTocKhoLDeRs of commuNiTy heaLThcaRe TRusT may 7, 2020 iNcoRpoRaTeD iNTeRNeT - Access www.voteproxy.com and follow the on-screen instructions or scan the QR code with your smartphone. Have your proxy card available when you access the web page. Vote online until 11:59 PMESTthe day before the meeting. maiL - Sign, date and mail your proxy card in the envelope provided as soon as possible. iNpeRsoN - You may vote your shares in person by attending the Annual Meeting. 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. Please detach along perforated line and mail in the envelope provided IF you are not voting via the Internet. 20530040300000000000 0 050720 Incorporated approve, on a non-binding advisory basis, the compensation Regulation S-K in the Companys proxy statement for the 2020 annual 1 YEAR 2 YEARS 3 YEARS ABSTAIN non-binding advisory vote on executive compensation. 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. The boaRD of DiRecToRs RecommeNDs a VoTe "foR" The eLecTioN of aLL of The NomiNees foR DiRecToR, "foR" pRoposaL 2 aND 4, aND foR eVeRy 1 yeaR oN pRoposaL 3. pLease sigN, DaTe aND ReTuRN pRompTLy iN The eNcLoseD eNVeLope. pLease maRK youR VoTe iN bLue oR bLacK iNK as showN heRe x 1. To elect five (5) directors to the Board of Directors of the Company, each to serve a one-year term expiring in 2021. NomiNees: FOR ALL NOMINEESO Alan Gardner O Claire Gulmi WITHHOLD AUTHORITYO Robert Hensley FOR ALL NOMINEESO Lawrence Van Horn O Timothy Wallace FOR ALL EXCEPT (See instructions below) INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), mark FOR ALL EXCEPT and fill in the circle next to each nominee you wish to withhold, as shown here: FOR AGAINST ABSTAIN 2. To approve, on a non-binding advisory basis, the following resolution: ResoLVeD, that the stockholders of Community Healthcare Trust of the named executive officers as disclosed pursuant to Item 402 of meeting of stockholders. 3. To approve, on a non-binding advisory basis, the frequency of a FOR AGAINST ABSTAIN 4. To ratify the appointment of BDO USA, LLP as the Companys independent registered public accountants for 2020. 5. To transact such other business as may properly come before the annual meeting or any adjournments thereof. This pRoxy wheN pRopeRLy execuTeD wiLL be VoTeD as DiRecTeD heReiN by The uNDeRsigNeD sTocKhoLDeR. if No DiRecTioN is maDe, This pRoxy wiLL be VoTeD foR aLL NomiNees iN pRoposaL 1, "foR" pRoposaL 2 aND 4, aND foR eVeRy 1 yeaR oN pRoposaL 3. 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. Signature of Stockholder Date: Signature of StockholderDate: NoTice of iNTeRNeT aVaiLabiLiTy of pRoxy maTeRiaL: The Notice of Meeting, proxy statement, proxy card and annual report are available at http://investors.chct.reit/ compaNy NumbeR accouNT NumbeR pRoxy VoTiNg iNsTRucTioNs
- 0 COMMUNITY HEALTHCARE TRUST INCORPORATED proxy for annual meeting of stockholders on may 7, 2020 solicited on behalf of the board of Directors The undersigned hereby appoints Timothy G. Wallace and W. Page Barnes, and each of them, with full power of substitution and power to act alone, as proxies to vote all the shares of Common Stock which the undersigned would be entitled to vote if personally present and acting at the Annual Meeting of Stockholders of Community Healthcare Trust Incorporated, to be held May 7, 2020 at 8:00 a.m. Central Time at 3326 Aspen Grove Drive, Suite 150, Franklin, Tennessee 37067, and at any adjournments or postponements thereof, as follows: (continued and to be signed on the reverse side.) 14475 1.1
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